Light S.A. Overview & Strategy. Rio de Janeiro 3Q18

Transcription

1 Light S.A. Overview & Strategy Rio de Janeiro 3Q18 1

2 Disclaimer This presentation may include declarations that represent forward-looking statements according to Brazilian regulations and international movable values. These declarations are based on certain assumptions and analyses made by the Company in accordance with its experience, the economic environment, market conditions and future events expected, many of which are out of the Company s control. Important factors that can lead to significant differences between the real results and the future declarations of expectations on events or business-oriented results include the Company s strategy, the Brazilian and international economic conditions, technology, financial strategy, developments of the public service industry, hydrological conditions, conditions of the financial market, uncertainty regarding the results of its future operations, plain, goals, expectations and intentions, among others, Because of these factors, the Company s actual results may significantly differ from those indicated or implicit in the declarations of expectations on events or future results. The information and opinions herein do not have to be understood as recommendation to potential investors, and no investment decision must be based on the veracity, the updated or completeness of this information or opinions. None of the Company s assessors or parts related to them or its representatives will have any responsibility for any losses that can elapse from the use or the contents of this presentation. This material includes declarations on future events submitted to risks and uncertainties, which are based on current expectations and projections on future events and trends that can affect the Company s businesses. These declarations include projections of economic growth and demand and supply of energy, in addition to information on competitive position, regulatory environment, potential growth opportunities and other subjects. Various factors can adversely affect the estimates and assumptions on which these declarations are based on. 2

3 Agenda The Company 3

4 119 Years of History Walking through Light history 1899 The Beginning Light began its activities, with the Parnaíba Hydroelectric Power Plant, alongside the Tiete river In order to operate in Brazil's capital city at that time, The Rio de Janeiro Tramway, Light and Power Co. was founded in Toronto and was authorized to operate in RJ 1905 Rio de Janeiro IPO Light s IPO, one of the first Publicly-held companies in Brazil State of RJ has acquired equity control, buying 82% of Light's share Nationalization Privatization Light was privatized and acquired by - Electricité de France, AES Corporation and Reliant Energy and CSN Light concluded its corporate reorganization process, giving rise to the holding company Light S.A., parent company of the three operational companies: (i) (ii) (iii) Light SESA (D) Light Energia (GT) Light Esco (Commercialization) Corporate Reorganization Change of Control Rio Minas Energia SA (RME) bought the control block from EDF International. RME was composed by CEMIG, Andrade Gutierrez, Pactual EP (posteriorly transferred to Equatorial) and Luce Brasil FIP The controlling group (52%) consists of Cemig 48% jointly with Banco do Brasil, Bco Votorantim, Bco Santander and BTG Pactual (who sold its stake in Nov/2017) Control Block /17 4

5 Ownership Structure CEMIG 100% 100% CEMIG RME LEPSA BNDESPAR 26.06% 10.90% 13.03% 9.39% Free Float 40.62% Former Controlling Block 49.99% 5

6 One of the Largest & Well-Positioned Utilities Companies in Brazil Private One-Stop Shop Utilities Companies in Brazil 1 1 Fully Integrated Generation (1.0 GW of Installed Capacity) + Distribution (21,073 GWh of Total Billed Market in 3Q18) + Commercialization (862 MWm Commercialized Energy in 3Q18) 2 Net RAB The second largest Net RAB in Brazil Net RAB (R$ bn) GDP Concession Area concentrated in the state of RJ, which has the 2 rd largest GDP in Brazil Largest States in Brazil by GDP (2016, R$ trillion) 2,0 0,6 0,5 0,4 0,4 0,3 Population 4 The city of Rio de Janeiro has the 2 nd largest population in Brazil, with over 6 million people SP RJ MG RS PR BA Largest Cities in Brazil by Population (2018, mn) 12,2 5 Consumers 4.5 million consumers and over 11 million people served 6,7 3,0 2,9 2,6 2,5 Sao Paulo Rio de Janeiro Brasilia Salvador Fortaleza Belo Horizonte Source: Companies earnings releases, IBGE, ANEEL 6

7 Agenda 3Q18 Results 7

8 Operational Highlights Billed Market - GWh Billed Market - GWh 1.5% 8.6% % % 3Q16 3Q17 3Q18 9M16 9M17 9M18 DEC - Hours (12 months) FEC - Times (12 months) -32.8% 11,42 10,28 7, % 6, % 5,54 4, % 3Q16 3Q17 3Q18 3Q16 3Q17 3Q18 5 th ANEEL Addendum = 9,80 hours 5 th ANEEL Addendum = 6,01 times 8

9 Financial Highlights (1/2) Net Revenue - R$ MN 35.0% Net Revenue - R$ MN 31.8% % % 3Q16 3Q17 3Q18 9M16 9M17 9M18 PMSO - R$ MN -0.8% PMSO - R$ MN 3.7% % % 3Q16 3Q17 3Q18 9M16 9M17 9M18 9

10 Financial Highlights (2/2) EBITDA - R$ MN EBITDA - R$ MN 7.7% 34.4% % % 3Q16 3Q17 3Q18 9M16 9M17 9M18 Net Earnings - R$ MN Net Earnings - R$ MN % % Q16 3Q17 3Q18 9M16 9M17 9M18 10

11 EBITDA per Segment EBITDA per Segment R$ Million EBITDA per Segment R$ Million 34.4% 7.7% % (14) (4) (2) 3Q16 3Q17 3Q % (26) -11 9M16 9M17 9M18 Distribution Generation Commercialization Services 11

12 Free Cash Flow R$ Million 9M17 9M18 CVM EBITDA (+/-) Equity Income (+/-) Other Operating Revenues (expenses) Adjusted EBITDA (-) Income Tax and Social Contribution (177) (107) (-) Interest (469) (337) (-/+) Accounts Receivable (250) (381) (-/+) Financial assets and Liabilities of the sector (365) (632) (-/+) Suppliers (-/+) Others (100) (100) Cash From Operations (CFO) 164 (93) (-) Capex (417) (508) (-) Minority Investments (134) (77) Free Cash Flow to Firm (FCFF) (387) (678) (-) Amortization (29) 793 Free Cash Flow to Equity (FCFE) (416) 115 (-) Dividends - (30) Operational Improvement Lower Cost of Debt Pass through on next Tariff Review 9M17 9M (22) (46) Excluding the Financial assets and Liabilities of the sector 12

13 Agenda Investment Highlights 13

14 Drivers to create value for Light s shareholders 1 Positive Outlook for Brazilian and Rio de Janeiro Economies 2 Wellpositioned Regulatory Environment 4 Healthier Debt Profile 3 Potential Operational Upsides 14

15 1 Positive Outlook for Brazilian and Rio de Janeiro Economies Retail-focused distribution concession in Brazil s 2 nd largest metropolitan area Lower interest rates driving growth¹ Consumed energy by client segment 9M18 LTM (GWh) GDP Brazil 13,6% SELIC Interest Rate - AoP 14,2% 15% 16% 11,0% 8,4% 9,9% 65% 48% 6,5% 7,1% +17 p.p. 3,0% 2,6% 20% 36% 0,5% 1,0% 1,4% Light Brazil E 2019E -3,5% -3,5% Industrial Commercial & Residential Others Light s consumer market concentration in residential and commercial segments provide a more stable, predictable and resilient cash flow generation when compared to sector average in Brazil Note: 1 BCB November 16 th,

16 2 Well-Positioned Regulatory Environment (1/2) Distribution: Anticipation of 4 th tariff review cycle to positively impact EBITDA Nov 13 Nov 18 Previous Periodic Tariff Review ( PTR ) 3 rd Cycle Annual Tariff Adjustments Anticipation Mar 17 PTR 4 th Cycle Mar 22 New PTR 4 th Cycle Annual Tariff Adjustments PTR 4 th Cycle th Cycle Improvements Impacts Incorporation of capex associated with Olympic Games Incorporation of complexity of the concession in the tariff review Increase of approx. R$ 0.8 billion in RAB Increase of regulatory losses and delinquency recognized in tariff 1 Higher regulatory WACC From 7.5% to 8.09% Tariff Review anticipation generated a total impact on a 12-month EBITDA of approx. R$ 600 mm for Light SESA Note: 1 Regulatory non-technical losses increase from 30.11% to 36.06% (over low voltage market) and technical losses from 5.4% to 6.34% (over grid load). Also, regulatory delinquency increased from a fixed value of R$ 100 mm to 1.4% Gross Revenues. 16

17 2 Well-Positioned Regulatory Environment (2/2) Distribution: Robust regulatory framework assures neutrality of non-manageable costs and efficiency incentives Parcel A (Non-manageable costs) 100% Pass-through to clients Parcel B (Manageable costs) Parameters set by ANEEL for every tariff cycle Return on Capital (Settled by ANEEL in Mar 17) Efficiency (Actual vs. Regulatory) Regulatory Asset Base (Light SESA: R$ 8.47 bn) Energy Losses Tariff = Energy / Transmission Costs Sector Charges Taxes + x WACC (Real terms, after taxes) (4th Cycle: 8.09%p.y.) + +/- Delinquency OPEX Regulatory Depreciation (Light SESA: R$ 605 mm) (-) Penalties and Contingencies = Regulatory EBITDA (Light SESA: R$1.66 bn) 17

18 3 Operations Opportunity to Yield Results (1/5) Enhancement in management of losses focusing in Non-Risk Areas Difference between losses and regulatory pass-through 12 months Non Technical Losses and Grid Load Breakdown by Area (GWh, 3Q18) 12 months p.p p.p p.p p.p. 23,2% 22,5% 21,9% 19,9% 23,2% 20,6% Operational Losses 11% 47% 16,5% 16,5% Regulatory Pass-Through 89% 53% Dec-15 Dec-16 Dec-17 Sep-18 Grid Load Non Techical Losses Total Losses Grid Load Regulatory Pass-Through Risk Areas Possible Areas 18

19 CPFL Piratininga Copel EDP SP Energisa SE CPFL Paulista AES Eletropaulo RGE Celesc Elektro Cosern RGE Sul CEB CEMIG Enel CE Light NRA Target¹ Energisa MS Energisa PB EDP ES Coelba Energisa TO Energisa MT Light NRA Current² Celpe Cemar Enel RJ Light³ ED Alagoas Celpa ED Rondônia ED Piauí 3 Operations Turn-Around Yielding Results (2/5) Feasible target in losses in non-risk areas Losses analysis Light S.A. (3Q18) vs. comparable concessionaires loss (2017¹) (%) Total Losses / Grid Load Current Risk Areas 80.3% Non-Risk Areas 16.1% Target Risk Areas 80.3% Non-Risk Areas 13.2% Light s Goal 7,3 8,4 8,9 9,0 9,2 9,6 9,7 9,8 10,2 10,4 10,7 11,4 12,2 12,5 13,2 13,4 13,4 13,9 14,1 14,7 15,2 16,1 16,6 18,0 19,4 23,2 26,7 28,3 29,3 30,7 Total 23.2% Total 20.6% Targeted reduction in total losses is feasible when compared to the other players Note: 1 Light target in non-risk areas 2 Light current in non-risk areas 3 Light current total losses 19

20 3 Operations Turn-Around Yielding Results (3/5) Losses Strategy Evolution to reach regulatory level Phase 4 Analytical Intelligence Phase 3 Key Indicators Balance Phase 1 Electronic Metering Phase 2 Market Discipline Market Discipline (recurring customers) Media OPEX Intensive High volumes of past consumption (REN) Collection REN vs payment capacity equilibrium Greater segmentation of targets Losses Bad Debt Maximize program s profitability Charge consumer surplus to REN 898 thousand electronic meters 64% of the telemetry charge CAPEX intensive already recognized in RAB 20

21 3 Operations Turn-Around Yielding Results (4/5) Increase of the Collection Rate Collection Rate (Considering Overdue Installments) Total Collection Rate (Considering Overdue Installments) 9M17 9M18 102,3% 98,2% 99,8% 100,7% 97,3% 98,5% 98,4% 101,3% 97,6% 98,6% 93,1% 104,0% 98,3% 97,6% 102,8% 99,1% 92,0% Total Total Total VarejoVarejo Retail Grandes Large Grandes Clientes Clients Clientes Poder Public Público Poder Sector Público 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 21

22 3 Operations Turn-Around Yielding Results (5/5) Balancing the Provisions Level Recovery Energy - REN GWh Allowance for doubtful accounts/gross Revenue (%) 12 Meses ,5 1,3 1,8 3,1 2,8 2,7 3,0 2,0 2,3 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 REN 12 Months REN Quarterly Basis 22

23 4 Healthier Debt Profile Amortization of Consolidated Debt - R$ MN Average Maturity: 3.2 years (Disclosed in 3T18) Amortization of Consolidated Debt - R$ MN Average Maturity: 3.4 years (Pro-Forma: Including Light SESA 15ª Debenture) Cash After Cash After 2023 Net Debt (R$ MN) & Net Debt/EBITDA - covenants (x) Cost of Debt (%) ,03% 15,42% 14,11% 13,97% 11,90% 10,72% 10,39% 10,56% 3,21 3,32 3,57 8,59% 9,54% 9,33% 11,23% 8,70% 7,83% 5,75% 5,77% 1Q18 2Q18 3Q Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 23

24 Contacts Luis Fernando Paroli Santos CEO, Director of Business Development and Investor Relations Fernanda Crespo Head Of Participations and Investor Relations and Energy Business & Power Purchase fernanda.crespo@light.com.br Marcio Loures Penna Investor Relations Coordinator marcio.loures@light.com.br ri.light.com.br 24