Companhia Paranaense de Energia (ADR) (ELP), CPFL Energia S.A. (ADR) (CPL), Companhia Energetica Minas Gerais (ADR) (CIG): Three Electricity Picks From Brazil

Companhia Energetica Minas Gerais (ADR) (NYSE:CIG), also known as Cemig, constructs and operates systems that produce, transform, transmit, distribute, and sell electric power.

The company’s first-quarter results were impressive. Net earnings increased 37% and revenue 15% year over year. Long-term growth for Companhia Energetica Minas Gerais (ADR) (NYSE:CIG) looks bright as well, backed by government’s plans to improve the industry’s infrastructure.

For Companhia Energetica Minas Gerais (ADR) (NYSE:CIG)’s area of operation, the Brazilian Energy Research Institute EPE expects a 4.5% average consumption growth from 2011 to 2021. This should mean better profits for the company. Companhia Energetica Minas Gerais (ADR) (NYSE:CIG)’s $1.58 billion investments in hydro plants, wind farms, and distribution services should help realize them.

However, government interference and dependence on hydro sources for electricity could become higher risks for the company. Margin was impacted by a 7% increase in expenses this quarter, partially offsetting the revenue increase. So, this stock has to be carefully watched.

My conclusion

Companhia Paranaense de Energia (ADR) (NYSE:ELP) is well-positioned in its home state. I find it hard to think that the company will manage to successfully expand in the short-term. Meanwhile it is an interesting stock to consider and buy, but do not expect outstanding returns.

CPFL Energia S.A. (ADR) (NYSE:CPL) is an attractive option for risk-tolerant investors who would like to benefit from Brazil’s economic stabilization and growth. The company’s solid is backed by its steady cash flow, so even if growth moderates, CPFL Energia S.A. (ADR) (NYSE:CPL) should provide gains.

If Companhia Energetica Minas Gerais (ADR) (NYSE:CIG)’s growth drivers do not follow the Brazilian recovery and expenses keep increasing, I would not invest in the company. For now, I would monitor the company’s results very closely.

The article 3 Electricity Picks From Brazil originally appeared on Fool.com and is written by Louie Grint.

Louie Grint has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Louie is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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