Skip to Content
Stock Strategist Industry Reports

Head South of the Border for Utilities With Growth, Yield, and Moats

We think Latin America holds better investment opportunities than its northern neighbor.

Mentioned: , , ,

We are enthusiastic about the opportunities that Latin American utilities present to investors relative to their U.S. utilities peers. While we forecast U.S. utilities to experience anemic 1% annual electricity sales growth over the next few years, faster population growth and wealth creation in South America should drive premium demand growth rates. We think concerns tied to slowing economic growth in Brazil and other South American countries create an opportunity for longer-term investors to capture this growth at discounted levels.

The South American utilities we cover have the greatest exposure to the Brazilian and Chilean economies. Over the past three years, Brazil and Chile have grown at an average GDP of 3.6% and 3.4%, respectively. The U.S. Energy Information Administration's prediction that South American economies will grow 3.1% through 2035 syncs up well with our annual electricity demand growth expectation of 3%-4% across the continent. There may be some near-term risk that infrastructure projects are delayed or electricity demand growth falls short of our assumptions, given poor economic data as of late--Brazil's GDP grew just 2.8% in 2011 and industrial production fell 3.4% in January. However, we think this risk is immaterial to these companies' long-term fundamental outlook.

Andrew Bischof does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.