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Companhia Paranaense de Energia (ELP - Analyst Report), also known as COPEL, reported its financial results for the fourth quarter and fiscal year 2011 on March 26. Net income in the quarter increased 21.4% year over year to R$181.9 million (US$101.1 million), or R$0.66 per share (US$0.33 per ADR).

In the fiscal year, net earnings escalated 17.2% year over year to R$1,157.7 million (US$693.2 million), or R$4.23 per share (US$2.53 per ADR). Results in the year improved from tax benefits related to IOE payment.


Net operating revenues in the fourth quarter increased 10.8% year over year to R$2,093.6 million (US$1,163.1 million) due to higher sales volume.

Revenue increased on a year-over-year basis in all the categories mentioned below: 7.8% for Electricity sales to final customers; 11.1% for sales to distributors; 9.9% for use of main transmission grid; 27.3% for construction revenue; 13.4% for telecommunications revenue and 28.5% for distribution of piped gas. However, revenue from other sources declined 41.1% year over year.

In the fiscal year 2011, net revenue jumped 12.7% year over year to R$7,776.2 million (US$4,656.4 million).


During the quarter, operating costs and expenses went up 2.5% year over year to R$1,937.1 million (US$1,076.2 million), due primarily to a rise in expenses in almost all the categories except for a 1.6% decline registered in expenses incurred for the use of main transmission grid, 20.6% decline in provisions and reversals and 52.2% decline in other operating costs and expenses.

The company recorded hike in the following categories: 5.6% increase in electricity purchased for resale, 17.6% hike in personnel and management and 34.2% in natural gas and supplies for the gas business.

EBITDA increased by 128.8% year over year to R$301.6 million (US$167.6 million) with an EBITDA margin of 14.4% versus 7.0% in the year-ago quarter.

Balance Sheet

Exiting the fourth quarter of 2011, COPEL’s cash and cash equivalents plummeted 29.6% sequentially to R$1,049.1 million (US$564.0 million) compared with R$1,490.5 million (US$814.5 million) in the previous quarter. Loans, financing and debentures, net of current portion also dipped marginally by 0.6% to roughly R$2,058.0 million (US$1,106.5 million).

Cash Flow

Net cash flow from operating activities in the fiscal year 2011 was R$1,147.9 million (US$687.4 million), down 8.0% year over year while capital spending was R$821.9 million (US$492.2 million), up 132.6% year over year.

For the fiscal year 2012, COPEL plans to spend approximately R$2,257.4 million, with roughly 47.4% on Generation and Transmission, 48.9% on Distribution and 3.7% on Telecommunications.

Companhia Paranaense de Energia is a fully integrated electric utility of Brazil engaged in the generation, transmission, and distribution of electricity to the State of Paraná. The provincial government of the State of Paraná controls 58.6% of the shares of COPEL. The company faces stiff competition from Cia Energetica de Minas Gerais (CIG - Analyst Report) and Enersis S.A. (ENI - Snapshot Report).

We currently maintain a Neutral recommendation on the stock.

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