COPEL (ELP) Upgraded to Outperform

Companhia Paranaense de Energia (ELP) remains better positioned than many of its U.S. and emerging market utility peers, given the growing demand for electricity and a strongly favorable outlook for the Brazilian economy. We expect the Brazilian economy to outperform the more developed economies of Europe, the U.S. and Japan in the years ahead.

Being a state-owned company, COPEL’s managerial decisions are sometimes influenced by political issues. Nevertheless, the company’s strong balance sheet, strict control over cost and continuous investments to increase internal generation capacity motivate us to upgrade our recommendation to Outperform. We strongly believe that the company’s results will improve in the medium term due to its continued investments in internal generation capacity. Our $26.00 target price is based on 12.7X 2010 earnings per ADR.

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