Die Aussichten in Brasilien

COPEL's Big Near-Term Potential
Posted Fri Aug 22, 11:18 am ET
Posted By: Claudio Freitas, CFA

We are keeping our Buy recommendation on Companhia Paranaense de Energia, or COPEL (ELP). The company's second quarter results were positive, and the short-term outlook is also positive due to the company's various investments.

In addition, the Brazilian business environment remains encouraging; the energy consumption in Brazil is still heated; and the short-to-medium-term outlook for energy consumption in Brazil is very encouraging. Moreover, becoming a part of the São Paulo Stock Exchange's Level 1 of Corporate Governance will enhance the positive aspects of the company. Finally, COPEL shares are trading at an attractive valuation.

COPEL's second quarter net revenue reached US$820.6 million. During the quarter, total power consumption billed by COPEL grew 5.5%. The company has a strong balance sheet with a net debt of US$206.4 million.

Presently, COPEL is trading at a P/E of 6.9x our 2008 estimated earnings. We believe the company's valuation looks highly attractive when compared to other international electric utilities and the industry mean of 16.1x, mainly considering that the outlook for the Brazilian economic growth is positive for the following quarters and the positive tariff correction in 2009. Also, the Brazilian economic plans for increasing investments in the electric energy sector are both positive signs for COPEL.

All considered, we still think there is a huge upside potential for the stock in the short term, and the company should trade closer to the BOVESPA's average. Our target price assumes a P/E of 10x 2008 EPADR estimate, close to the company's historical standards and the BOVESPA's average. Our target price is US$26.50.

http://www.zacks.com/stock/news/14363/COPEL%27s+Big+Near-Term+Potential

http://www.theledger.com/article/20081009/NEWS/810090398/1410?Title=Brazil_Is_Poised_to_Become_Oil_Superpower

Brazil Is Poised to Become Oil Superpower

By BRADLEY BROOKS
The Associated Press

Published: Thursday, October 9, 2008 at 9:50 p.m.
Last Modified: Thursday, October 9, 2008 at 9:50 p.m.

RIO DE JANEIRO, Brazil | Four miles under the ocean's surface off Brazil's lush coast lie billions of barrels of recently discovered light crude - a treasure that could transform the country into an oil superpower.

President Luiz Inacio Lula da Silva called it "a gift from God" and pledged to end chronic poverty and to narrow the country's broad gap between the rich and the poor.

But before rhetoric becomes reality, Brazil must first get to the underwater reserves, among the world's deepest, and then manage a massive influx of wealth - a formidable task that has left other national economies awash in corruption and even greater gaps between the rich and poor.

Jockeying for a cut of the proceeds has already begun.

Military officials are calling for increased military spending, stressing the need for a nuclear submarine program and new fighter jet fleet to protect the oil from rivals.

The nine fields discovered in the past year are thought to hold between 50 billion and 80 billion barrels of light crude - more than four times Brazil's current proven reserves. With the find, Brazil could supply all of its own needs for nearly a century or become one of the world's top oil exporters.

http://www.dailytimes.com.pk/default.asp?page=2008\10\11\story_11-10-2008_pg3_5

Saturday, October 11, 2008

view: Brazil’s oil rush —James Onnig Tamdjian

Brazil will no longer be able to condemn the US for not signing environmental treaties, or point a finger at China for its massive output of pollution. Oil, it seems, will not only transform Brazil’s economy, but its very role in the world

Brazil is poised to take its place among the world’s petro-powers. Estimates of its newfound oil reserves place it in eighth place among oil-producing nations, ahead of Nigeria as well as Brazil’s rival for influence in Latin America, Venezuela. Such newfound wealth is normally a source of celebration. But Brazil’s President Luiz Inácio Lula da Silva, perhaps fearing the infamous “resource curse” that has blighted the development of so many countries blessed with mineral wealth, is determined that the new oil wealth not be turned into “nonsense”.

In 2007, huge oil deposits were discovered off Brazil’s coast. Modest estimates put these reserves at around 30 billion barrels. Crédit Suisse and other investment banks say that 50 billion barrels are available.

The discovery is the result of a strategic policy maintained through successive Brazilian administrations, something unusual in Latin America. In 1989, when the Iraq-Iran war sent shivers among oil-consuming nations, Brazil began to explore for energy both within and beyond its 200-nautical-mile protected zone. The size of the oceanic areas involved was enormous, thus earning the term “Blue Amazonia”.

The discoveries are the largest oil reserves discovered in the ocean in recent years. For a while, the US tried to question Brazil’s ownership by trying to force a discussion of the “internationalisation” of the oceans and their mineral resources. But the UN would have none of it, and Brazil’s ownership was recognised.

Lula’s government has thought long and hard about how to manage the oil wealth, and has devised a unique programme. First of all, it wants to spread the wealth by pursuing a new model of regional integration through energy and infrastructure. It is planning to create a fund, backed 70 percent by Brazilian financial resources, that will be dedicated to projects such as rehabilitating roads in Uruguay and Paraguay in order to enhance its neighbours’ capacities and correct economic imbalances.

Balanced economic development — national and regional — is essential for Brazil. Indeed, Lula’s government is planning ways to ensure that the benefits gained from oil and gas are not limited to São Paulo, Rio de Janeiro, Minas Gerais, Parana, and other regions of the developed coast. It thinks it is essential to locate refineries, industries, and additional energy-generating units in parts of the country that are both suited for such development and in need of it. An additional benefit of dispersing these productive resources will be greater interaction with Brazil’s South American partners.

Brazil’s new oil reserves will certainly affect regional geo-politics. Mexico’s oil fields are diminishing, which means that it may need to look for external supplies. Tensions in the Middle East, and growing rivalry between the US and Venezuela, will make Brazil an attractive supplier.

Brazil is already testing its appeal as an energy power through the actions of its powerful state energy company, Petrobras, which is now as active in Africa as it is in Argentina. Indeed, Petrobras is now producing 100,000 barrels a day in both Angola and Nigeria, with the oil marketed locally.

But the discoveries place Brazil at a crossroads. Oil revenues can be controlled by the state to be used, in part, for social programmes, as in Venezuela. Or private capital can be granted a bigger say, and trust placed in the market to provide for society.

This ongoing debate has impeded decisions on the future of deep wells in Blue Amazonia. Lula’s administration has even thought about creating a new national oil company to deal only with the new fields. But this idea has created confusion among Brazil’s trading partners and investors, and does not appear to be making headway.

There is an even more complex question. Brazilian growth will soon to rest on the shoulders of a product that is the main source of global warming. Indeed, Brazil’s embrace of an oil-fired future reverses its longstanding policy of reliance on bio-fuels.

So Brazil is on a collision course with the future. The size of the new oil reserves adds even more weight to Brazil’s growing global influence. But it will no longer be able to condemn the US for not signing environmental treaties, or point a finger at China for its massive output of pollution. Much less will Brazil be able to demand from its neighbours a commitment to sustainable development. Oil, it seems, will not only transform Brazil’s economy, but its very role in the world. —DTPS

--
James Onnig Tamdjian, a geographer, is Professor at the Albert Sabin Institute in Ribeirao Preto and the Institute Clio, which trains young diplomats for Brazil’s Ministry of Foreign Affairs

http://www.guardian.co.uk/business/feedarticle/7849622
Brazil expects oil investment as costs attractive

Reuters
Friday October 10 2008

By Andrei Khalip and Shrikesh Laxmidas

LISBON, Oct 10 (Reuters) - Brazilian Energy Minister Edison Lobao said proposed changes to the country's oil regulations will not scare investors away as extraction costs will be "absolutely competitive".
Lobao cited estimates from state-run oil company Petrobras putting crude production costs for the so-called subsalt reserves deep under the ocean floor at $40-50 per barrel, which makes them attractive even after the recent drop in oil prices.
"It is absolutely competitive ... Investment will continue to flow like it does in Norway, we will have a queue of candidates," he told Reuters on Friday in an interview on the fringes of a Brazil-Portugal business meeting in Lisbon.
He said the cost, which includes the government take, compares to $32 per barrel for project in Brazil that are easier to drill.
"Only there you can extract 5,000-20,000 barrels (per day), and in subsalt you can get 100,000 barrels for each company," he said.
Petrobras last November announced a recoverable reserves estimate for the giant subsalt field of Tupi of between 5 billion and 8 billion barrels. It has since made other promising discoveries.
Some experts say the subsalt belt off Brazil's coast may hold over 70 billion barrels of light crude and natural gas.
COORDINATING AGENCY
Lobao said his proposal to create a 100 percent state-owned company to manage the huge reserves, which lie under a thick layer of salt, would create a sort of a coordinating agency rather than a producing company and should not scare Petrobras stockholders or investors.
"The idea is to have a state entity that coordinates the whole system. It's like an agency, it would have oil companies as service providers, either through tenders or simply calling upon them to provide services for adequate payment, 5 percent of oil extracted, 10 or 12 percent," he said.
He said the existing oil market regulator, the National Petroleum Agency (ANP) had a different function and could not keep the proceeds from oil production by law, so a new body was needed.
"That new company would be like a sovereign fund and the money could be divided with the federal government to apply in education, healthcare and so on."
Lobao said the new company was still only a proposal, which would figure among five or six other proposals when they are presented to President Luiz Inacio Lula da Silva this month.
Other possible measures include increasing taxes and royalties on oil exploration and production for future contracts. Lobao reiterated the government's position that existing concession contracts will be left intact.
Lula can impose new royalties and increase government take from oil projects via a decree, but Lobao's proposal for a new body would require Congressional approval, he said. (Reporting by Andrei Khalip, editing by Anthony Barker)

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