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MarketScreener Homepage  >  Equities  >  Bolsa de valores de Sao Paulo  >  Companhia Paranaense de Energia - COPEL    CPLE6   BRCPLEACNPB9

COMPANHIA PARANAENSE DE ENERGIA - COPEL

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Brazil Utilities Hold Out for More; Tuesday Deadline for License Renewals May Pass

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12/04/2012 | 01:51pm EDT

--Leading power generators have said they won't renew licenses, scotching government plan to reduce prices by 20%

--Analysts say Tuesday deadline to get desired price drop may be pushed back

--Brazil will have to offer higher payment as it is unlikely to convince states to lower taxes

   By Paulo Winterstein 

SAO PAULO--Several key Brazil electric power utilities said they won't renew electric-power-generation licenses by a Tuesday deadline, meaning the government may fall short of its goal of lowering prices by 20% next year.

The administration of Brazil President Dilma Rousseff wants to bring down prices to help improve competitiveness of the broader economy, but the power firms balked at the massive revenue cuts they would have to accept in order to renew licenses that will start to expire in 2015.

The government now faces the prospect of pushing back Tuesday's deadline for agreeing to the new terms, or finding additional tax cuts for the electric-power industry if it wants to meet its goal.

The government has already sweetened the offer once, late last week, but it wasn't enough to convince Cesp (>> CESP - Companhia Energetica de Sao Paulo), Copel (>> CIA PARA ENG'A'CP) and Celesc (>> Centrais Eletricas de Santa Catarina SA) to sign up. That means 5% of total generation capacity will continue operating at current price levels next year.

The better terms did persuade directors of CTEEP, who changed their minds and said they would after all accept renewal after the new compensation was announced last Friday. A fifth company, Cemig (>> Companhia Energetica Minas Gerais), was trying to cut a last-minute deal.

"It wouldn't surprise me if the government delayed until at least tomorrow the signing of contracts" to give it more time to negotiate with Cemig and Cesp, both of which left the door open for renewal should terms improve, said Pedro Galdi, head of research at Sao Paulo brokerage SLW.

The licenses up for renewal represent about 20% of Brazil's total installed capacity of more than 110 gigawatts.

The government controls Eletrobras (>> Centrais Eletricas Brasileiras SA), the country's single largest power-generation company, and therefore secured the renewal of a large portion of the power-generation licenses--despite the hefty cost that Eletrobras will pay. Together with some tax cuts to be implemented, the government said it already guaranteed a 15% reduction in customer prices. With the adherence of smaller utilities, Mr. Galdi said the price cut is close to 17% or 18%.

Finance Minister Guido Mantega on Tuesday reaffirmed the government's commitment to a 20% drop next year. Analysts said the government may need to engineer additional tax cuts to get the full reduction.

One possibility would be to reduce the state value-added tax, ICMS, which could be part of a separate, simultaneous discussion over leveling ICMS across the country. Those conversations, however, are complex and contentious.

"I think it'll take a war of secession to resolve this problem," said Alexandre Furtado, an analyst at Lopes Filho brokerage. "What's left is for the government to give in some more. Unless it pushes back the deadline it's not going to get what it wants."

Write to Paulo Winterstein at

paulo.winterstein@dowjones.com

Stocks mentioned in the article
ChangeLast1st jan.
CENTRAIS ELETRICAS BRASILEIRAS S.A. 0.94% 36.44 End-of-day quote.29.36%
CENTRAIS ELÉTRICAS DE SANTA CATARINA S.A. -0.05% 43.33 End-of-day quote.-13.11%
CESP - COMPANHIA ENERGÉTICA DE SÃO PAULO -1.33% 28.96 End-of-day quote.32.84%
COMPANHIA ENERGÉTICA DE MINAS GERAIS - CEMIG 0.22% 13.9 End-of-day quote.0.07%
COMPANHIA PARANAENSE DE ENERGIA - COPEL -21.40% 27.51 End-of-day quote.0.00%
COMPANHIA PARANAENSE DE ENERGIA - COPEL 0.04% 49.9 End-of-day quote.63.34%
EURO / BRAZILIAN REAL (EUR/BRL) 0.09% 4.6099 Delayed Quote.2.49%
GOLDMAN SACHS GROUP INC. 0.31% 206.46 Delayed Quote.23.21%
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Financials (BRL)
Sales 2019 15 230 M
EBIT 2019 2 849 M
Net income 2019 1 603 M
Debt 2019 9 130 M
Yield 2019 3,12%
P/E ratio 2019 8,56x
P/E ratio 2020 7,55x
EV / Sales2019 1,49x
EV / Sales2020 1,42x
Capitalization 13 567 M
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Mean consensus OUTPERFORM
Number of Analysts 13
Average target price 54,71  BRL
Last Close Price 49,90  BRL
Spread / Highest target 30,3%
Spread / Average Target 9,64%
Spread / Lowest Target -25,7%
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Managers
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Daniel Pimentel Slaviero Chief Executive Officer & Director
Marcel Martins Malczewski Chairman
Adriano Rudek de Moura Chief Financial Officer
Leila Abraham Loria Independent Director
Olga Stankevicius Colpo Independent Director
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