We issued an updated research report on Companhia Paranaense de Energia ELP or COPEL on Aug 28, 2015. The company is one of the largest integrated electricity utilities in Brazil, with a generation capacity of roughly 5,557 megawatt (MW), 99% of which is hydroelectric.
The Brazilian electricity market is the largest in South America, apart from being one of the most promising industries in Brazil. Growing infrastructural developments in Brazil, we believe, will call for increased electricity supply, which will boost the company’s business in the quarters ahead.
To leverage this situation, COPEL is working diligently for improving its generation capacity as well as services, having planned an investment of R$2.5 billion for 2015. Of the total amount, nearly 52.5% will be used for the Generation and Transmission business, 31.7% for the Distribution business, 4.3% for the Telecommunications business and 11.5% for other businesses. In addition, COPEL’s expansionary efforts, such as acquisition of 100% stake in Santos Wind Farm Complex, and rights to build and operate transmission lines by GeT subsidiary in 2014, will support profitability in the quarters ahead.
Despite these positives, COPEL, however, is not immune to risks arising from near-term headwinds. Huge debt levels, amounting to R$6 billion at the end of second quarter, increase the company’s financial obligations and hence, limit profitability growth. In addition, rising costs and expenses hurt the company’s margins and profitability.
Moreover, being a state-owned entity, governmental interference causes delay in execution of COPEL’s regular operations. Further, the company’s huge dependence on rainwater to source majority of its hydroelectric power can pose risks in the event of an unpredictable, lower-than-average rainfall.
With a market capitalization of $2.4 billion, COPEL presently carries a Zacks Rank #3 (Hold). The above-mentioned positives and negatives justify the stock’s investment value. Also, the company’s competitors continue to perform better, having gained high investment rankings. Such stocks include Brookfield Infrastructure Partners L.P. BIP, Empresa Nacional de Electricidad S.A. EOC and Alliant Energy Corporation LNT. While both Brookfield Infrastructure and Empresa Nacional de Electricidad sport a Zacks Rank #1 (Strong Buy), Alliant Energy Corporation carries a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
COPEL-ADR PR B (ELP): Free Stock Analysis Report
BROOKFIELD INFR (BIP): Free Stock Analysis Report
ALLIANT ENGY CP (LNT): Free Stock Analysis Report
ENDESA-CHILE (EOC): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research