COPEL: A Long-term Player with Strong Portfolio - Analyst Blog

On Jun 25, 2014, we issued an updated research report on Companhia Paranaense de Energia ELP, or COPEL. The company is well-positioned to gain from rising electricity demand in Brazil. According to the Ministry of Mines and Energy's (MME) 10-year plan, the country is likely to witness a 5.9% annual hike in electricity demand till 2019.

In the light of a reviving Brazilian economy, the government is making huge infrastructural investments. These investments can only bode well for the electricity companies in the country. Further, efforts are being made to enhance the country's total installed capacity for electricity generation to 167 megawatts MW by 2019.

To meet the growing electricity needs, COPEL has planned investments worth roughly R$2.6 billion for 2014 aimed at improving its electricity generation capacity.

Notably, the company has recently signed an agreement with Voltalia Energia do Brasil Ltda to acquire a 49% stake in the latter's São Miguel do GostosoWind Farm complex. The complex is situated in the state of Rio Grande do Norte and has four wind farms, with installed electricity generation capacity of 108 MW. The deal, currently subject to regulatory approvals, will be advantageous for COPEL upon completion.

Moreover, COPEL is committed towards rewarding its shareholders through dividend payments. In May 2014, the company paid the remaining dividend amount of R$235.5 million for 2013. The dividend included R$0.82 paid per common share, R$1.28 per Class A preferred share and R$0.90 per Class B preferred share.

The Zacks Consensus Estimate is pegged at $2.00 for 2014 and at $2.22 for 2015, reflecting year-over-year growth of 16.3% and 10.8% respectively. Also, earnings are anticipated to increase by 10.4% in the next five years.

COPEL presently has a $4.1 billion market capitalization and carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the electric utility industry include Dynegy Inc. DYN, Black Hills Corporation BKH and NRG Energy, Inc. NRG. All these stocks sport a Zacks Rank #1 (Strong Buy).