Share price of EDP’s Brazilian unit up 66 pct since July

11 January 2006

Lisbon, Portugal, 11 Jan – Energias do Brasil, a unit of Portuguese state-controlled power utility EDP, has seen a 66 percent jump in its share price since being listed on Sao Paulo’s Bovespa stock exchange last July and is likely to see continued increase in value, media and financial analysts have reported.

Lisbon daily Diario de Noticias cited the research arm of the Portuguese BES banking group as giving Energias do Brasil a target share price of US$ 35.20, some 17 percent above the price listed on Monday.

Good company foundations and robust assets, coupled with gains from efficiency and growth in generating capacity are the main reasons for the company’s growing value, the BES consultancy adds.

Credit Suisse First Boston has already indicated a target price of 35 reais, identifying “diversity of assets, particularly in power distribution, a free-float of about 36 percent, high-value concessionaries, potential for operational improvements and sufficient cash balances for new acquisitions” as the main reasons for the firm’s strength.

However, CSFB identifies the federal government’s “Light for All” program, which could oblige utilities to provide power to less profitable city zones, as a potential dampener to profit margins at Energias do Brasil.

JP Morgan gives a more cautious share price target of 31 reais, noting “above average” improvements in distribution efficiency and consolidation of pre-tax profits for 2006. However, new regulatory conditions in 2006 could increase risks, the US investment bank warns.

BES research also identifies this risk of a reduced customer base in a liberalized market, currently being prepared by the Brazilian authorities due to consumer dissatisfaction at high energy tariffs. (macauhub)