Saturday, May 23, 2015

Seeking Alpha: Can Capex And Catch-Up Tariffs Support A Higher Price At Copel?

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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