3Q18 Results Presentation. October 30, 2018

Transcription

1 3Q18 Results Presentation October 30, 2018

2 Disclaimer The statements in this report with respect to the outlook for the businesses of ISA CTEEP ( ISA CTEEP, CTEEP, Company ), the estimates and their potential for growth constitute mere forecasts and were based on the expectations of management in relation to the future of the Company. These expectations are closely dependent on changes in the market, the overall economic performance of the country, the sector and the international markets, being subject to change. The financial information has been prepared according to Brazilian Securities and Exchange CVM and CPC standards and is in compliance with the international accounting standards (IFRS) issued by the International Accounting Standard Board (IASB). The Regulatory Result is shown in accordance with accounting practices adopted in Brazil. The main difference in relation to the corporate statements is the non-application of ICPC 01 (IFRIC 12). ICPC 01 has a material impact on the Financial Statements of the Company and its subsidiaries, above all in the recording of investments made in transmission assets and reflecting in the balance sheet accounts of Financial Assets and Fixed Assets, and in alterations in the structure and presentation of the Income Statements. The purpose of disclosing the Regulatory Result is merely to assist in the understanding of ISA CTEEP s business. The total of amounts may differ due to rounding. The Regulatory Result is audited at the end of each fiscal year only by the independent auditor. 2

3 Contents 3Q18 Results Greenfield Projects Status Tariff Review 3

4 3Q18 Highlights Financial Projects Operational Subsidiaries Regulation Growth Legal Strong cash flow from RBSE receivables Regulatory Result impacted by the readjustment of the Tariff Cycle (2018/2019): Net Revenue of BRL606 million, Adjusted EBITDA of BRL517 million with a margin of 85%, and Net Income of BRL192 million Organic growth with the execution of reinforcements and improvements at an investment of BRL48 million in 3Q18 Sustainable growth Conclusion of the acquisition of 50% of the capital stock of IESUL for BRL20 million CAPEX of BRL17 million in 3Q18 Public Hearing 41/2017 resumed with the publication of Technical Note 126/2018 which revised the proposal for reducing O&M revenue from 24% to 19% (+BRL40 million) Opening of Public Consultation 015/2018 to improve WACC calculation methodology Signature of the concession agreements for two lots for which successful bids were made at the Transmission Auction 02/2018 Projects on time with the challenging schedule Construction work at IE Tibagi and IE Itaúnas begun in September Favorable and final decisions at CARF for 2 processes with respect to a dispute over the privatization premium. Discussion involved a risk value of ~R$ 260 million 4

5 Regulatory Consolidated Net Revenue Net revenue positively impacted by the RBSE and inflation variation, partially offset by the full accounting of the adjustment installment for the 2018/2019 Revenue Cycle BRL million +92% 2, RBSE Revenue: BRL352 million in 3Q18 (+4% vs. 3Q17) 1, % ,244 Revenue from the uptime of the electricity grid: +19% vs. 3Q Q17 6 3Q M M18 Availability of Electric Network RBSE Others 5

6 O&M Costs and Consolidated General Expenses ex-depreciation Increase in recurring costs and expenses due collective bargaining agreement and lower capitalization BRL million % % Q17 3Q M17 9M18 Personnel: +6.7% vs. 3Q17 due collective bargaining agreement for 2018 (+2.86%) and change in the capitalization methodology in growth projects Others: settlement of IPTU for shared land in 3Q18, reimbursement for which not occurring simultaneously Personnel Materials Services Contingencies Others 6

7 Regulatory Equity Income 2018/2019 Revenue Cycle impacts the result for the subsidiaries with the adjustment installment amounting to BRL68 million +131% BRL million % Q17 3Q18 9M17 9M18 IE Madeira: decline in quarterly earnings due to the booking of the adjustment to the 2018/2019 Revenue Cycle (negative adjustment installment of BRL63 million). In the 9M18, the increment reflects the lower impact of the PA of the cycle 2018/2019 vs. 2017/2018 cycle and reduction of expenses with reversion of contingencies IE Garanhuns: net revenue reduction due to the impact of the tariff review in July In the 9M18, the decrease in revenue is due to the impact of the tariff review occurred in July 2017 Pre-operation subsidiaries: management expenses in the current phase of the IE Aimorés, IE Paraguaçú and ERB 1 projects. IE Madeira IE Garanhuns IENNE/IESUL IEAimorés/IEParaguaçú/ERB 1 7

8 Consolidated Regulatory Adjusted EBITDA Strong cash generation from RBSE receivables Adjusted EBITDA Margin 87% 85% 82% 91% BRL million +111% 1,884 Adjusted EBITDA: excludes equity income and other non-recurring and/or non-cash effects, as well as including the EBITDA of the jointly owned subsidiaries (weighted according to ISA CTEEP s share) +8% Q17 3Q18 9M17 9M18 8

9 Regulatory Consolidated Financial Result Increase in financial expenses due to higher debt levels (BRL1.8 billion on 9/30/17 vs. BRL3 billion on 9/30/18) BRL million Cash 443 1, , Interest and charges on debt: increase in expenses due to higher leverage Income from financial investments: higher level of cash/cash equivalents in the period Other: non-recurring revenue of BRL53.8 million in 3Q17 with the Company s adherence to the PERT tax amnesty 3Q17 3Q18 9M M18 Income from financial investments Net monetary restatement Interest bearing Assets and Liabilities Interest and charges on loans Others 9

10 Regulatory Net Income 11% QoQ growth in the Net Income, excluding non-recurring effects BRL million +110% 839 RBSE receivables and inflation variation % /2019 Revenue Cycle had a major impact on the IE Madeira subsidiary results Increase in financial expenses due to greater leverage +11% T17-2 3T18 9M17-2 9M18 PERT Acquisitions* Current *3Q17: IENNE acquisition and 3Q18: IESUL acquisition 10

11 Cash Flow Strong Cash Generation BRL million Cash flow Consolidated 9M18 Initial Cash Balance (Dec/2017) 617 Operational activities 1,218 RAP receivables 2,422 Payment of State Law 4,819/58 (113) PMTO (441) Charges (103) Taxes and fees (613) Others 64 Investment activities (285) Received Dividends 5 CAPEX (290) Financing activities 55 Additional loans 1,208 Debt Payment (principal + interest) (322) Transactions of non controlling shareholders 11 Paid Dividends (843) Final Cash Balance (Sep/2018) 1,604 RAP receivables: includes RBSE revenue of BRL1,406 million SEFAZ Law 4,819: difference not reimbursed by SEFAZ PMTO: expenditures with personnel, MSO, executions and court escrow deposits Charges: CDE, Proinfa, R&D and inspection fees Taxes: Income / Social contribution taxes, PIS and COFINS and others Others: services and sharing of infrastructure Investments: reinforcements and improvements Capital injections: investments in preoperational subsidiaries Financing: debentures issuance in May, additional vehicle leasing and new Law 4131 loans. Non-controlling shareholders: jointly controlled subsidiaries that participate in investment funds (Madeira, Garanhuns, ERB1, Aimorés and Paraguaçú) 11

12 Consolidated Debt Solid debt position at competitive costs Maintenance of Investment Grade by Fitch: AAA (bra) Debt BRL (million) 09/30/ /31/2017 Chg (%) Gross Debt 2, , % Short-term Debt % Long-term Debt 2, , % Consolidated Availabilities 1, % Availabilities of ISA CTEEP and Subsidiaries 1, % Availabilities of Partially Owned Subsidiaries* % Additional USD150 million loan pursuant to Law 4131/62 with a 2-year term and swap to BRL Average cost of debt at 8.3% p.a. Full compliance with all covenants and requirements for all issues Consolidated Net Debt 1, , % *The Company's resources are concentrated in exclusive investment funds, which are also used for the subsidiaries and partially owned subsidiaries in a segregated manner, and refer to quotes of the investment funds with high liquidity, conversible in cash, regardless of the expiration of the assets in which they are allocated. 12

13 Greenfield Projects Status 13

14 Greenfield Projects Status Growth projects are on time and on budget with the challenging schedule 90% of contracting in the 10 projects being executed 35% of the work executed for the four projects under construction 35% of the projects already have issued Installation Licenses 17% of Revenue (RAP) under construction IE Itapura IE Tibagi IE Itaquere 14

15 TARIFF REVIEW 15

16 Tariff Review To guarantee economic-financial equilibrium of the 059/2001 concession contract, the aim is to achieve fair value for O&M Revenue (RAP) and for improvements of small dimension O&M ANEEL 41/2017 Public Hearing (3 rd Phase) Technical Note ( TN ) 126/2018 established the tariff review rules, specifically for operational costs (O&M) and investments in improvements of a small dimension New proposal considers a smaller reduction in O&M revenue from 24% (NT 164/17) to 19% (+BRL 40 MM) and staggered over a five year period Contributions sent to ANEEL on 10/15/18 WACC Public Consultations ANEEL 015/2018 suggests a single methodology for the sector In August, a Public Consultation opened for collecting suggestions for improving the methodology for calculating the WACC in accordance with TN 132/2018 Contributions send to ANEEL on 9/20/18 16

17 INVESTOR RELATIONS telephone: