Energy Company of Parana ADRELP

Morningstar Rating

Stock Research and Analysis

by Ryan McLean

State-dictated pricing has historically nullified Copel's competitive advantage as the sole power distributor in the economically dynamic Brazilian state of Parana. Despite the firm's underlying merits and a recent improvement in tariff policy, we remain Read more

Bulls Say

Copel's distribution business faces no competition in its service territories in the state of Parana.

Copel's own power generation consists almost exclusively of low-cost hydroelectric plants, which helps sustain operating margins.

The company has reduced foreign currency-denominated debt from almost half its total debt load to less than 10%, thus reducing its exposure to exchange fluctuations.

Copel discontinued its tariff discount program in 2006, promising instead to fully implement those tariffs granted by regulators.

Brazil's regulatory environment has become vastly more transparent and business-friendly in recent years. Read more

Bears Say

The state's 59% interest in Copel means that the government decides important operational and financial matters and may use Copel as a tool for furthering social and economic objectives instead of maximizing shareholder wealth.

Copel's exposure to Brazil's economic and political instability is greater than some of its utilities peers', given its relatively high concentration of industrial customers and the state's controlling interest.

Like other major Brazilian utilities, the company relies on hydro power for virtually all of its energy needs, exposing it to power shortages in the event of a widespread drought. Read more

Strategy

Copel is committing capital toward improving its transmission and distribution infrastructure, as well as building out generation, which it plans to expand by 20% through 2009. The company has made substantial Read more

Management

The state of Parana owns 59% of Copel's common shares and therefore has the ability to elect the majority of the board and control the appointment of senior management. In January 2003, the state of Parana elected Roberto Requiao as the new governor. Read more

Profile

Copel generates, transmits, and distributes electricity in the Brazilian state of Parana. The company operates 17 hydroelectric facilities and one thermoelectric plant with Read more

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