Seeking Alpha: Cemig Making Do, But Still Needs A Favorable Concession Decision

I wasn't very eager to own Brazilian utility company Cemig (NYSE:CIG) back in October of 2014 and the 13% decline in the share price since then (even with a sizable rally since March) hasn't really improved my view of the shares. Granted, Cemig shares haven't really done any worse than the iShares MSCI Brazil Index (NYSEARCA:EWZ) or fellow utilities like Copel (NYSE:ELP), Electrobras (NYSE:EBR), or AES Tiete (OTCPK:AESAY), but the company has a growing debt burden and the uncertainties over major concessions threaten an important source of incremental earnings potential.

I am still concerned that greenfield projects may not be priced to generate attractive enough returns for the long term. With that, I just don't see a lot of value in these shares today. I will note, though, that a strongly positive decision on the plant concessions could still add more than $3/ADR (at current exchange rates) to fair value and Brazilian authorities have been making more industry-friendly decisions lately. Last and not least, currency can have a big impact on the value of these shares and a strengthening of the Brazilian real could offer upside independent of the underlying fundamentals.

Follow this link for more:
Cemig Making Do, But Still Needs A Favorable Concession Decision

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?