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We recently upgraded our recommendation on Brazilian electric utility, Companhia Paranaense de Energia (ELP - Analyst Report), also known as COPEL from Neutral to Outperform.

Why the Upgrade?

The world economy is on the revival path after the lows it experienced post the 2008 crisis. Emerging nations are speeding their way to recovery and are projected to grow 5.3% in 2013 and 5.7% in 2014, according to the International Monetary Fund (IMF).

Brazil, which is among those nations with bright growth prospects, is worth mentioning here. Government spending has been accelerated to improve the country’s infrastructure. Also, growing trade relations with other economies as well as huge foreign direct investments bode well for the country.

Talking of the electricity industry in Brazil, demand is growing with energy consumption projected to rise by 5.9% annually, according to the Ministry of Mines and Energy's (MME) ten-year plan till 2019. Plans have been made to enhance Brazil’s total installed capacity for electricity generation from 112 megawatts to 167 megawatts by 2019.

For COPEL, the long-term growth prospects are very bright. To leverage benefits from the apparent demand growth, the company is making serious efforts to improve its generation capabilities and improve its services.

Apart from its core business, COPEL has expanded its reach in other businesses including telecommunications, natural gas, engineering, water, and sanitation services.

Other Stocks to Consider

COPEL is a fully integrated electric utility of Brazil engaged in the generation, transmission, and distribution of electricity to the State of Paraná. The company currently has a $4.4 billion market capitalization.

Stocks, other than COPEL, worth a look in the industry are CPFL Energia S.A. (CPL - Snapshot Report), with a Zacks Rank #1 (Strong Buy) while ALLETE, Inc. (ALE - Snapshot Report) and DTE Energy Company (DTE - Analyst Report), each has a Zacks Rank #2 (Buy).

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