CPFL Energy SA ADRCPL

Morningstar Rating

Stock Research and Analysis

by Ryan McLean

We think CPFL Energia, Brazil's largest private power distributor, offers an attractive means for risk-tolerant investors to benefit from the country's economic stabilization and growth. Although volatility and risks are associated with emerging-markets Read more

Bulls Say

CPFL's operating income is regulated by the Brazilian government, providing the company steady and predictable cash flow.

As Brazil's largest private power distributor, CPFL enjoys sustainable competitive advantages relating to scale and its natural monopoly status.

The fragmented Brazilian utilities market offers large and experienced players like CPFL opportunity to build scale advantages through acquisitions.

The firm plans to grow its generation capacity of 1,700 megawatts by one third during the next two years, helping stabilize supply. Read more

Bears Say

About 23% of CPFL's debt is denominated in foreign currencies, implying additional vulnerability to a depreciation of the Brazilian real.

About one fourth of regulated revenue corresponds to customers who are or will be free to migrate out of CPFL's system and purchase power from competitors.

RGE's more rural service territory will entail longer billing cycles and greater energy losses.

Although Brazil's economy has strengthened, there are lingering economic and political concerns. Latin American financial markets are volatile. Read more

Strategy

CPFL aims to improve its operating efficiency by investing in new systems that monitor assets and prevent thefts. CPFL's commercialization program, which purchases and sells electricity in competitive Read more

Management

Three shareholders command a combined 72% interest in CPFL Energia. VBC Energia owns 28%, 521 Participacoes owns 31%, and Bonaire Participacoes owns 13%. These groups represent other energy and industrial companies, as well as pension funds for employees Read more

Profile

CPFL Energia generates, transmits, and distributes electricity in Brazil. The company serves 6.4 million customers in the states of Sao Paulo and Rio Grande do Sul. In total, Read more

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