Morgan Stanley B I r t iilt U uttiili o ti nes al C P o r r e p s o e ra ntte at A iocc n ess Day

Transcription

1 Morgan Stanley Brazil Institutional Utilities Presentation Corporate Access Day January

2 Important Notice 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 One of the largest private utilities companies in Brazil A Distribution: Total Energy Sold ( 000 GWh - Private Companies)¹ B Distribution: Net RAB (R$ bn - Private Companies)¹ C Generation: Installed Capacity (GW - Private Companies)¹ 3 CPFL 57,0 Light 10,4 4 CTG 8,3 AES Neoenergia 42,8 38,5 Cemig 2 AES 9,8 9,0 Engie CPFL AES Tiete 3,3 2,7 7,0 Enel Energisa 35,0 28,5 ampla 8,5 4 th EDP Eneva 2,3 2,2 Light 25,9 6 th coelba 6,8 Neoenergia 1,6 EDP Iberdrola 24,4 15,7 cpfl paulista celpa 6,1 5,9 Enel Brookfield CPFL Renovaveis 1,3 1,1 1,1 Equatorial 2 14,9 3,9 Light 1,0 11 th Source: Companies, ANEEL and Abradee Note: 1 Does not consider state-owned companies, as of Considers 100% of CELG (energy sold not considering free market) 3 Considers 100% of AES Sul 4 Considers 100% of Duke s assets in Brazil 5 Considers most recent public Net RAB for each company 3

4 Well positioned in the distribution & generation segments Distribution Generation + Commercialization Light SESA A B Light LightCom Total Billed Market 25,850 GWh (2016) Clients 4.4 mm People Served 11 mm Area Coverage 11,000 sq. km Net RAB R$ 8.47 bn Municipalities Served 31 Generation SP 1 Amazônia Energia 2 Renova 3 Guanhães Energia 4 HPP Ilha dos Pombos RJ Rio Paraíba do Sul SHPP Paracambi 6 Complexo de Lajes 7 HPP Santa Branca 8 HPP Itaocara I Installed Capacity 1,024 MW 1 Assured Energy 648 MWavg 2 Commercialized Energy 5,711 GWh in 2016 # of HPPs 7 4 Average Sales Price R$ 200 / MWh 3 Notes: MW of total installed capacity are in full control of the company 2 Proportional to Light s stake 3 Considers the average price for the period, net of taxes 4 Considers only HPPs in which Light has full control 4

5 Tariff review anticipation (March 2017) Tariff Review - Mar 17 Tariff Readjustment - Nov 16 Pass-Through of Energy Losses Non-Technical Technical Special Obligations and Specific Targets 36.06% 6.34% % 5.40% According to 3rd Cycle Tariff Review Regulatory Asset Base (RAB) R$ billion Gross Net * 8.37* Regulatory EBITDA R$ billion Parcel B e Irrecoverable Revenues - R$ billion Base Date for the Tariff Review 03/15/2017 (next in 2022) 11/16/2018 (next in 2023) End of Concession June 4, 2026 June 4, 2026 *Updated by IPCA for nov/2016 5

6 Tariff review anticipation: Impact on Light EBITDA Regulatory Wins Impacts Impact on Light s EBITDA 1 Enhanced Regulatory Framework Tariff Flags Higher regulatory WACC R$ mn 2016 OTR 2017 PTR Δ (=) Parcel B 2,535 2, (+) Operational Costs (+) Irrecoverable Revenues Incorporation of high complexity of the concession on the tariff review Increase of regulatory losses and delinquency for purposes of the tariff review (+) Remuneration 932 1, (+) Depreciation (QRR) (+) Annuities (BAR) Tariff review anticipation Increase of approx. R$ 600mm in EBITDA starting in 2017 and approx. R$ 450mm in cash generation (+) Remuneration over Special Obligation (-) Other Revenues (47) (76) (30) (-) Productivity (32) (31) 1 4 Incorporation of investment made for the Olympic Games on the tariff review Increase of approx. R$ 0.8 billion in RAB (=) Loss Pass-through 1,118 1, %Total Losses / Grid Load 17.5% 20.0% 2.5% Total Impact on a 12-month EBITDA 602 The EBITDA improvement will by achieved by Light without increasing the average tariff to consumers when combining the effects of the last two tariff reviews Note: 1 Calculations consider RAB gross of R$ 15,78bn and RAB net of R$ 8,47bi ; X factor: Pd = 1,01% (for 2017); Xt = -0,84% (from 2018 to 2021); Q = 0,09% (for 2017) ; Table presented above does not consider the gain regarding the elimination of the fine attributable to the not met goal of non technical losses from Aug/16 to Aug/17 6

7 Targets agreed with ANEEL are in line with management s strategic planning Covenants agreed with ANEEL Corporate Governance DEC / FEC (Quality Indicators) Covenants agreed with ANEEL are more flexible than the current covenants of debt Requirement of a High level of corporate governance DEC (hours) 12 Months For 2018: 18,15 18,70 11,99 11,39 9,80 12,35 12,61 11,70 10,28 8,23 8,14 8,02 7,84 Net Debt (EBITDA QRR) 1 (0.8 x SELIC) Actual DEC Actual Set/2017 For 2019 onwards: Net Debt (EBITDA QRR) 1 (1.11 x SELIC) Light SESA is a subsidiary of Light S.A., company listed at the highest level of corporate governance in BM&FBOVESPA ANEEL Results Plan (2016 and 2017) and New Goals 5th amendment (2018 onwards) FEC (times) 12 Months 6,36 5,99 6,01 5,72 5,43 5,15 4,86 QRR = regulatory depreciation 8,39 8,40 6,60 6,44 6,48 5, Actual FEC Actual Set/2017 ANEEL Results Plan (2016 and 2017) and New Goals 5th amendment (2018 onwards) 7

8 Short-term challenges Combat against energy losses Strengthening collection initiatives & delinquency combat Debt management Update on strategy for non-core assets 8

9 1 Strategic remodeling of Losses Program Losses 12 months - GWh 27% 26% 25% 46,4% 41,6% 42,2% 40,7% 43,7% 39,6% 37,5% 37,7% 38,4% 50% 45% 40% 24% 23% 22% 23,9% 22,6% 23,7% 23,2% 23,9% 22,5% -1.9pp 21,9% 21,8% 22,0% 35% 30% 25% 19,89% 21% dez/12 dez/13 dez/14 dez/15 mar/16 dez/16 mar/17 jun/17 set/17 20% Total Losses / Grid Load Non-technical losses / Low Voltage Market Regulatory Target (Mar/17 Mar/22) 9

10 C P F L P I R A T I N I G A C O P E L E D P - SP E N E R G I S A - SE C P F L P A U L I S T A AES E L E T R O P A U L O R G E C E L E - SC E L E K T R O C O S E R N R G E S U L C E B C E M I G E N E L C E C E L G E N E R G I S A M S E N E R G I S A P B E D P E S C O E L B A E N E R G I S A T O E N E R G I S A M T C E L P E C E M A R C E E E E N E L R J L I G H T ( ) L I G H T ( ) L I G H T ( ) E D A L A G O A S C E L P A E D R O N D Ô N I A E D P I A U Í E D A M A Z O N A S 1 Strategic remodeling of Losses Program (Cont d) 3Q17 GWh - 12 months Sensitivity Analysis 36,380 3,807 (10%) 32,573 (90%) Grid Load Risk areas 5,566 2,791 (50%) 2,775 (50%) Non-Tchnical Losses Possible areas (Based on 3Q17 figures) Non-technical Losses / Grid Load Technical Losses / Grid Load Keeping total losses in risk areas at current levels Total Losses / Grid Load Risk Areas 73.3% 8.0% 81.3% Possible Areas 8.2% 4.7% 12.8% Total 15.0% 5.0% 20.0% Targeting total losses in risk areas at 100% Risk Areas 92.0% 8.0% 100.0% Possible Areas 6.0% 4.7% 10.6% Total 15.0% 5.0% 20.0% CHART LOSSES PERCENT AG E O F T HE G LOBAL SY ST EM 2017 (REF. 2016) 40,0 Even in the worst case scenario (risk areas with 100% losses), to reach regulatory losses, the index in possible 26,7 28,3 29,8 30,7 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 12,9 13,4 13,4 13,9 14,1 14,7 15,2 16,6 18,0 18,1 19,4 22,0 22,5 23,2 areas would still be above other peers Light s Regulatory Losses (20.0%) Source: SIG of ABRADEE and Light 10

11 1 Losses in concession area Losses in Concession Area: Total Losses / Grid Load (12M Set/17) Main Neighborhoods/ Municipalities Centro-Sul: Centro, Copacabana, Botafogo, Tijuca, Barra da Tijuca. VALE DO PARAÍBA OESTE BAIXADA LESTE CENTRO SUL Leste: Méier, Madureira, Cascadura, Penha, Ilha do Governador. Oeste: Jacarepaguá, Campo Grande, Santa Cruz, Bangu, Seropédica, Itaguaí. Baixada: Duque de Caxias, Belford Roxo, Nova Iguaçu. Vale: Volta Redonda, Barra Mansa, Barra do Piraí, Três Rios. LIGHT CENTRO- SUL LESTE OESTE BAIXADA VALE % TOTAL LOSSES / GL 22.00% 9.32% 37.94% 41.35% 37.58% 13.36% GRID LOAD (GWh) 36,380 7,027 5,693 6,284 5,657 1,670 Regional Losses: grid load except free consumers, concessionaires and measured consumption 11

12 1 New strategy focused on managerial measures Non-Technical Losses Strategy Practices (Now x Before) Process driven in Possible Areas" Clients with higher purchase power and high conversion ratio Inspections based on reports and suspicious consumption ( Intelligence Center ) Average of 55,000 inspections / month with a hit ratio of 70% 63% of total consumption is remotely monitored, allowing more successful inspections Now Current Focus Commercial Officer (dedicated for losses) and Engineering Officer (quality and supply) Electronic meters installation in high income clients (less capex; more management) Differentiated bonus for executives and field teams Media used for amplifying Operations effects Partnership with Police Forces and local police stations for fraud inspection Previous Focus Capital intensive approach with installation of electronic meters and smart grid in risky areas Clients with lower purchase power and no past due recovery energy Before No Department focused on combat of losses and responsible in charge didn t have previous experience in the sector No clear goals aligned to bonuses The Company didn t implement campaigns proactively on the media nor actions integrated with police forces Unified Distribution Department Smart grid and electronic meters installation in favelas (capex intensive) Differentiated bonus only for executives Limited and punctual support of media Limited support from Police forces for risk areas access 12

13 2 Significant improvement in collection rates despite unfavorable economic scenario 99.1% 98.5% 98.7% 98.3% Collections - % (12-Months) 96.5% 94.1% 93.9% 96.2% 90.7% 90.6% 100.3% 100.2% 100.3% 91.4% 98.1% 99.3% Total Retail Large Consumers Public Sector 3Q16 2Q17 3Q17 Without REN Bad Debt Provision Evolution - R$ Million PCLD/Gross Revenue - 12 Months (%) REN Evolution - R$ Million 3,1% * ,8% 1,2% 1,0% 1,0% 1,0% 1,1% 1,3% 1,3% 1,3% ,8% * Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 * Until 3Q17. 13

14 3 Debt management Debt Amortization Schedule (R$ mm)¹ Debt Amortization Schedule in 2018 (R$ mm) Duration: 2.27 years Q17 3Q17 4Q After Q18 2Q18 3Q18 4Q18 Net Debt, Net Debt / EBITDA and EBITDA / Interest Net debt (R$ mn) Net Debt / EBITDA EBITDA / Interest 3,50x 3,23x 3,29x 2,56x 2,95x 3,10x Mar-17 Jun-17 Set-17 Note: 1 Considering only principal 14

15 4 Update on strategy for non-core assets Renova Itaocara Guanhães Paracambi Norte Energia / Belo Monte 15

16 CONTACTS Felipe Sá Head of Participations and Investor Relations felipe.sa@light.com.br Fabio de Lucena IR Manager fabio.lucena@light.com.br Marcio Loures Penna IR Specialist marcio.loures@light.com.br Camilla Gonzaga IR Analyst camilla.gonzaga@light.com.br ri.light.com.br