These are not easy times for power utilities in Brazil, as low
reservoir levels and weak rainfall have undermined hydropower generation
and the government tries to strike a balance between the needs of the
utilities (sustainable economic returns) and the needs of consumers and
businesses. While I'm not fond of Cemig (NYSE:CIG)
due to its exposure to uncertain concession decisions, higher debt, and
questionable greenfield investment decisions, I'm more favorably
inclined toward Copel (NYSE:ELP).
I'm
looking for Copel to benefit from "catch up" tariffs that were deferred
by vote-grubbing politicians and I think the company's greenfield capex
allocation strategy across fossil fuel, hydro, and wind assets will
create a better portfolio down the road. There are clearly problems with
the Colider plant and Copel may find itself in a worse position
relative to spot prices as the year rolls on, but I think the
fundamental value here is more appealing and less dependent upon the
kindness of regulators.
Continue here:
Can Capex And Catch-Up Tariffs Support A Higher Price At Copel?
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