Fall in profitability likely to trigger
operating rearrangements toward more
efficiency; we assess which companies
could benefit the most
􀀗 Consolidation and higher investments
are expected based on the new tariff
cycle; we calculate the potential impact of
three large upcoming deals: Cesp, Jirau,
and Brasiliana
􀀗 CPFL Energia is our main
recommendation: its story combines
growth, value and momentum
As a natural consequence of the regulatory tariff review process
– which in the end seeks to capture economies of scale and
efficiency gains, translating into tariff reductions – the quest for
operational improvements is likely to become one of the main
themes for the Brazilian distributors.
We believe that other developments will also be relevant short
and medium term drivers for utilities and should be considered
when analyzing a relative valuation:
Consolidators likely to be favored. The strong tariff
reductions applied as a result of the revision process may work
as a trigger for M&A activity. This may happen in addition to
the Cesp privatization and the auctions of Jirau and Brasiliana.
The more efficient, the better valued. In our view, efficiency
per se becomes an important topic to be monitored in terms of
relative valuation since it paves the way for higher returns.
Growth matters. Demand growth is likely to require more
investment now that the system does not rely on overcapacity.
We think this should translate into expansion of asset bases and
thus higher remuneration in the future.
CPFL Energia seems to be better positioned to take advantage
of these three opportunities. We are initiating coverage of CPFL
Energia (Overweight, target price BRL42 per share), Energias
do Brasil (Overweight, target price BRL34 per share), and
Eletropaulo (Neutral, target price BRL150 per thousand shares).

目录

After the fall 4
Revisiting the review 6
Opportunities on the screen 10
Valuation 17
Company profiles 21
CPFL Energia 22
Energias do Brasil (EdB) 35
AES Eletropaulo 45
Financial models 51
Disclosure appendix 56
Disclaimer 59