Brazilian integrated electric utility Companhia Paranaense de Energia ELP or COPEL recently announced that it has acquired Lot B1 from the Hydroelectric Plant Concession Contracting Auction, held a couple of days earlier.
As revealed, COPEL’s generation and transmission subsidiary, Copel Geracao e Transmissao (COPEL GeT), participated in the auction that was held under the Allocation of Assured Energy and Power Quotas regime. Acquisition of Lot B1 implies that COPEL GeT will now operate the Gov. Pedro Viriato Parigot de Souza Hydroelectric Power Plant. The hydro plant has an installed electricity production capacity of 260 MW.
In 2016, COPEL GeT will have to allocate 100% of the energy produced to the assured energy quota regime, while this percentage will be reduced to 70% thereafter.
The transaction will require COPEL to pay a granting fee of R$574.8 million, with the first payment of R$373.6 million due by Dec 31, 2015 and the second payment of R$201.2 million within 180 days from the date of signing the agreement. In return, the company will earn service provision revenues of R$130.9 million, including R$46 million in generation asset management costs and return from granting fee of R$84.9 million.
COPEL is one of the largest integrated electricity utilities in Brazil. We believe growing infrastructural developments in Brazil will, subsequently, call for increased electricity supply, which will boost the company’s business in the quarters ahead. To leverage this situation, the company is working diligently toward improving its generation capacity as well as services.
With a market capitalization of $2.2 billion, COPEL presently carries a Zacks Rank #3 (Hold). Better-ranked companies in the electric utility industry include Huaneng Power International, Inc. HNP, Korea Electric Power Corp. KEP and Ameren Corporation AEE. While both Huaneng Power International and Korea Electric Power sport a Zacks Rank #1 (Strong Buy), Ameren Corporation carries a Zacks Rank #2 (Buy).
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