Citi: 10th Annual Brazil Equity Conference June 2017

Transcription

1 Citi: 10th Annual Brazil Equity Conference June 2017

2 Disclaimer This presentation may contain forward-looking statements, which are subject to risks and uncertainties, as they were based on the expectations of Company s management and on available information. These prospects include statements concerning the Company s current intensions or expectations for our clients. Forward-looking statements refer to future events which may or may not occur. Our future financial situation, operating results, market share and competitive positioning may differ substantially from those expressed or suggested by said forward-looking statements. Many factors and values that can establish these results are outside Company s control or expectation. The reader/investor is prevented not to completely rely on the information above. The words believe", can", predict", estimate", continue", anticipate", intend", forecast, possible and similar words, are intended to identify estimates. Such estimates refer only to the date in which they were expressed, therefore the Company has no obligation to update said statements. This presentation does not consist of offering, invitation or request of subscription offer or purchase of any marketable securities. And, this statement or any other information herein, does not consist of a contract base or commitment of any kind. 2

3 Overview of Grupo Energisa

4 CORPORATE PROFILE Highlights 112 years of experience in the Brazilian utilities sector th 6 largest 1 distribution group in Brazil R$ 7,6 billion 2 of Market Cap, listed on BMF&Bovespa Level 2 of Corp. Governance R$ 2, % % nd billion 1T17 Adj. EBITDA of Net Income as minimum Dividend Policy group in Perceived Quality Satisfaction Index by residential customers 3 Energisa s core investment strategy is the acquisition and operating turnaround of power distribution assets and opportunistic evaluation of generation and transmission 1 In Sales 2 On May 25, ISQP/ABRADEE - Brazilian Association of Electric Power Distribution Companies 4

5 GRUPO ENERGISA Grupo Energisa at a Glance Operations in all five regions of the country and relevant exposure to high growth markets 13 power distribution concessions Net Revenues (2016) R$10,4 billion Customers 6.6 million People Served (8.1% of Brazil s Population) 16.0 million Total Area Covered (19.1% of Brazil s Territory) 1,630 thousand Km 2 5

6 ENERGISA 112 years of experience in the Brazilian utilities sector Successful track-record of acquisitions and turnarounds 30x More Clients 6

7 ENERGISA #6 among the largest distribution companies and #5 largest among private companies Captive market + Free Clients (in TWh) th # de concessions Source: Companies reports 1 Considers 100% of AES Sul 2 Considers 100% of CELG (12.0 TWh) 7

8 Ownership Structure Botelho Family holds the Company s controlling stake since its foundation VC = Voting Capital TC = Total Capital (1) Potencial restructuring at Grupo Rede s holding companies to consolidate the ownership of Rede s assets. (2) Energisa holds 96.2% of Rede Energia. Orange percentages represents Energisa S.A. direct and indirect stake, adjusted by Rede s percentage. 8

9 Volume (million) Equity Market +65,1% Energisa entered the equity market through a well succeeded Re-IPO(R$ 1.5 billion) Re-IPO: demand of R$ 10.6 billion, 6x above the offer 07/28/16: Re-IPO ENGI11 performance 30, ADTV Aug/16 06/23/17: R$ 15.9 MN Jan/17-06/23/17: R$ 18.7 MN 25, ,00 15,00 R$/share R$/share Re-IPO: /23/17: ,00 50 Change 12 Months: % Re-IPO: % 0 01/04/ /05/ /06/ /07/ /08/ /09/ /10/ /11/ /12/ /01/ /02/ /03/ /04/ /05/ /06/2017 5,00 0,00 9 9

10 Key Operational Figures

11 Our main assets in a nutshell 13 power distribution concessions In April 2014, Energisa acquired Grupo Rede, the largest acquisition and financial / operational restructuring in the Brazilian distribution sector # Cities Customers ( 000) Area (km 2 ) Density Sales (GWh) Km Grid TD Km Grid TL # Subst. MVA 6,520 k Customers 788 Cities EMT EMS ECI EVP CFLO ETO ENA EBR EMG ENF EPB EBO ESE EMG , ,460 26,458 1, ENF , , ESE , ,054 25,982 1, EBO , , EPB 216 1,379 54, ,108 70,743 2, ,181 EMT 141 1, , , ,457 5, ,679 EMS , ,903 87,895 3, ,357 ETO , ,187 88,663 2, ,385 ESS* , ,953 30, ,262 Total DisCos 788 6,520 1,630, , ,964 17, ,891 *ESS: ECI, EVP, EBR, ENA and ELO (these 5 companies are under merger procedures) Employees 1 This acquisition doubled the number of customers and tripled Energisa s sales. 1 Including third parties GWh In Sales 11

12 Energy Sales Energy consumption tends to rebound faster during economic recoveries Sales increased at an average annual compounded growth rate of 4.3% in , compared with 2.8% for all of Brazil in the same period CAGR Brazil: 2.8% p.a. CAGR Energisa: 4.3% p.a. CAGR Pioneers: 3.4% p.a. CAGR Acquired: 4.8% p.a. Total Sales (Captive + Free Market) 15, , , GWH % -5,0 y/y% ,0-14,111 15,037 13,981 14,756 15,809 16,696 17,804 18,413 19,577 20,666 21,464 22,919 23,983 25,684 27,482 29,004 29,019 28, % 5.3% -7.9% 3.5% 4.7% 7.4% 4.4% 3.4% 5.9% 3.0% -1.1% 8.2% 4.2%.2.5% 3.4% 2.6% -2.3% -0.9% -15,0 12

13 Energy Sales Increase of 1.6% in 5M17 TOTAL SALES (GWh) SALES BY CONSUMPTION CLASS (GWh) 12,073 1, % 12,269 1,907 Adding unbilled sales : +1.7% +1.6% +0.7% % -1.0% % % 59 12,269 10,628 10,363 12, Free Market Captive Market Jan-May/16 Jan-May/17 Jan-May/16 Residential Commercial Industrial Rural Others Jan-May/17 % GROWTH BY REGION Jan-May/16 x Jan-May/ TOTAL SALES (GWh) +3.5% 2,361 2, % GROWTH BY REGION May/16 x May/ ,054 2, North Northeast Midwest South/Southeast May/16 May/ N NE MW S/SE 13

14 Total Losses 130 GWh reduction in non-technical losses, reversing the upward trend experienced between 2015 and 2016 TOTAL LOSSES (GWH) 12 months 12,27% 12,35% 12,53% 12,38% 12,15% 4,139 4,139 4,218 4,150 4, Dec-16 Mar-17 Aneel 1,100 1,083 1,178 1, Disco GWh GWh % % EMG ENF ESE EBO EPB EMT 1,446 1, EMS ETO ,039 3,056 3,040 3,048 3,118 South/Southeast Companies Caiuá EDEVP EEB CNEE CFLO Energisa 4,150 4, Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Non-technical Losses Technical Losses % Total Losses over Required Energy 14

15 Collection and Delinquency Despite the economic crisis, Energisa manages to control delinquency indicators COLLECTION RATE Discos 12 Months DELINQUENCY RATE Discos 12 Months 97.58% 97.58% 1.01% Includes provision reversions in the amount of R$ 99.1 mn (EMT) 0.19% mar-16 mar-17 mar-16 mar-17 Collection Rate: LTM Collection / LTM Billing Delinquency Rate = Provision for Doubtful Accounts / Billed Consumption 15

16 Service Quality Indicators (LTM 1Q17) Significant overall improvement among concessions, except for the DEC indicator in ETO DEC (LTM) 23,92 27,35 DEC (hours) Regulatory DEC 11,52 11,06 12,78 13,12 17,64 25,30 12,28 36,20 8,52 9,80 6,95 11,98 4,25 15,50 11,95 6,80 EMG ENF ESE EBO EPB EMT EMS ETO ESS FEC (LTM) 19,81 19,48 FEC (times) Regulatory FEC 9,35 9,80 9,29 9,91 11,17 9,23 8,76 13,82 14,30 6,70 6,56 7,11 2,76 7,13 5,90 5,54 EMG ENF ESE EBO EPB EMT EMS ETO ESS Lowest level in history 16

17 Service Quality Indicators 2 nd group in Perceived Quality Satisfaction Index (ISQP) by residential customers +4,9% 82,0 78,2 +6,8% 83,8 78,5 78,7 +9,3% 86,2 85,9 78,9 +5.4% % ,4 Energisa Rede Energia Brazil (Average) Ranking ISQP 2 nd 8 th 2 nd 6 th 1 st 2 nd 2 nd 2 nd 17

18 Key Financial Figures

19 Financial Highlights R$ millions Change 1Q16 LTM 1Q17 LTM Change Net Revenue 10,797 10, % 10,783 10, % PMSO 1,953 1, % 2,001 1, % Adjusted EBITDA 1,977 2, % 1,867 2, % EBITDA margin (%) 16.7% 17.5% 1.45 p.p. 17.3% 20.7% 3.36 p.p. Net Income % % Shareholder's Equity 3,318 4, % 3,334 4, % Market Cap 3,839 6, % 4,070 8, % Net Debt 6,230 6, % 6,563 6, % Enterprise Value 10,069 12, % 10,633 14, % EV/EBITDA x x 19

20 PMSO (Personnel, Material, Services and Others) 4.5% reduction as a result of the costs and expenses optimization strategy CONSOLIDATED PMSO (R$ MN) 1Q17 Personnel, Material, Services and Others (R$ MN) Acquired Companies -5.4% IPCA (14-16): 17,5% % % % +7.0% Q16 PMSO + inflation Inflation 1Q16 Reported PMSO Personnel + Pension Plan Material Services Others 1Q17 PMSO EMT EMS ETO ESS Personnel: reduction in dismissal costs; Pension Fund: provision for actuarial balance adjustment in ESE and EPB; Services: insourcing of preventive and corrective maintenance. 20 (1) 2016 Inflation (IPCA).

21 EBITDA EBITDA AND ADJUSTED EBITDA (R$ MN) 30.5% ADJUSTED EBITDA EXCLUDING NON-RECURRING EFFECTS (R$ MN) % Q16Adjusted Arrears EBITDA surcharge revenue 1Q16EBITDA Net Revenue Uncontrol. costs PMSO Provisions Other 1Q17EBITDA exp./revenue Arrears 1Q17Adjusted surcharge EBITDA revenue 1Q16EBITDA Non-recurring 1 1Q17EBITDA 1 Non-recurring effects in 1Q17: R$ 21.9 MN (sale of aircraft), R$ 6.9 MN (compensatory costs), and R$ 18.4 MN (VNR revenue). Non-recurring effects in 1Q16: R$ 51.1 MN (VNR revenue) 21

22 Net Income NET INCOME(R$ MN) 5.1% Net INCOME EXCLUDING NON-RECURRING EFFECTS (R$ MN) % Q16 Net Income EBITDA Financial Expenses Taxes Depreciation 1Q17 Net Income 1Q16 Earnings 1Q17 Earnings Non-recurring 1 1 Non-recurring net effects in 1Q17: R$ 18.6 MN (sale of aircraft), and R$ 4.6 MN (dismissal costs) 22

23 Leverage Cash coverage: 1.7x short term amortization (12 months) DEBT 4,1 x 4,2 x 3,2 x 2,9 x 2,8 x 2,569 DEBT AMORTIZATION SCHEDULE (R$ MN) Avg. Term: 6.9 years 6,563 7,015 5,856 6,022 6,061 1,452 1,598 1, ,559 Mar-16 Jun-16 Net Debt Sep-16 Dec-16 Mar-17 Net Debt/Adjusted EBITDA LTM Cash in Mar/ GROSS DEBT BY INDEX (R$ MN / % ) 2022 After2022 GROSS DEBT COST (p. a.) SELIC 486,1 TJLP 6,4% 563,6 7,4% BRL 336,0 4,4% 11,79% 14,54% 14,31% 14,53% 14,58% 13,93% 12,85% 1% in debt cost: ~R$ 60 mn in interest expenses TR 828,8 10,9% CDI(1) 3.871,6 51,2% 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 IPCA 1.492,3 19,7% 23

24 Investments Average investments of R$ 1,3 bi in the last 4 years DISCOS CAPEX (R$ MILLION) Avg. 1,274 1, % 1, CAPEX GUIDANCE (R$ MN) EMT ,166 1, % EMS ETO EPB ESS ESE EMG EBO ENF Total: 1, T16 1T17 Special Obligations Non-electric assets Electric assets 24

25 Dividends 35% minimum Dividend Policy Dividends 0,80 0,69 0,82 0,70 0,40 Payout (%) % 90% % 71% 54% 35% R$/Unit Dividends (R$ MN)

26 Regulatory Agenda

27 Industry Overview Distribution Sector s Conditions Stable Regulatory Framework Established model, with legally binding concession contracts Long term concessions: usually 30-year contracts, which tend to perpetuity Regulatory Mechanisms to Ensure Attractive Returns Metrics based on benchmark benefit efficient distribution companies Annual tariff adjustments, in addition to rate review cycles as well as extraordinary tariff adjustments Potential increase in the current Regulatory WACC Dialogue with Regulators Aiming at Methodological Improvements Focus on financial and economic equilibrium Implemented mechanisms with positive impact on distribution companies: Extraordinary tariff adjustments in 2002 and 2015 Tariff flags system in

28 Excellence in Regulatory Management Unique understanding of the regulatory management model, which maximizes the Company s EBITDA, increases RAB and delivers efficient control of opex and losses Regulatory EBITDA vs. Actual EBITDA (R$ MN) SUM OF THE DISCOS PIONEERS ACQUIRED 1, % 1, ,233 1, % , , % Regulatory EBITDA Adjusted EBITDA 1T17 LTM Regulatory EBITDA CAIMI Adjusted EBITDA (LTM) Non-recurring 1 Regulatory EBITDA Adjusted EBITDA (LTM) 28

29 Regulatory Agenda Regulatory agenda in a nutshell 3 rd Tariff Cycle 4 th Tariff Cycle Annual RAB Tariff Discos Year RAB (R$mn) Year (R$mn) Hike Concession End Caiuá May 2045 Nacional May 2045 Bragantina May 2045 Vale Paranapanema May 2045 Energisa Minas Gerais June 2045 Energisa Nova Friburgo June 2045 Força e Luz do Oeste June 2045 Energisa Tocantins July 2020 Energisa Borborema Feb Energisa Paraíba August 2031 Energisa Sergipe April 2027 Energisa Mato Grosso , April 2027 Energisa Mato Grosso do Sul , April 2027 RAB changes between 3 rd and 4 th cycles 1 (%) ETO D2 D3 D4 D5 D6 42 D7 41 D8 40 EBO 33 D10 24 D11 23 ENA 20 EBR 20 D14 15 ECI 14 D16 14 EVP 10 D18 8 D19 6 D20 5 EMG 5 ELO 4 D23 4 ENF 2 D D27 D28 D29-6 D of May/17 29

30 Regulatory Agenda EPB preliminary tariff review. Final data will be released in August/17. RAB (R$ MN) Parcel B (R$ MN) +9.3% +21.0% 1, , RAB* (3th Cycle) Growth RAB (4th Cycle) Parcel B* (3th Cycle) Opex Delinquency Annuities EBITDA Other Revenues Parcel B (4th Cycle) Total CAPEX (2013-1T17): R$ 618,5 milhões Regulatory EBITDA: +34% Annuities: + 53% *As of Jul/17 30

31 Opportunities

32 Shared Services Center First took place in April 1 st Wave HR 2 nd Wave 3 rd Wave Apr/17 Oct/17 Apr/18 Supply chain Accounting IT Financial services Telecom Billing employees support points Tangible Intangible Personnel reduction (consolidated figures) Tax credit (holding level) Lower marginal growth Cost Accelerating synergies for future acquisitions Corporate areas focusing on strategic matters 32

33 Transmission Auction Energisa begins presence in transmission Blocks that benefit the distribution companies within the Group: system safety supply to critical areas quality improvement synergies EMT EMS 26 3 Extension: 272 km State: Goiás Block 03 ANEEL s Capex: R$ million Ceiling RAP: R$ 58.8 million Proposed RAP (bid): R$ 36.7 million (discount of 37.6%) Construction period: 48 months Beginning of operation: Until August, 2021 Facilities: TL 230 kv Rio Verde Norte - Jataí - CD, C1 and C2, with 136 km; SE 500/230 kv Rio Verde Norte (new courtyard 230 kv) - (6+1 Res) x 224 MVA. Purpose: Reinforcement of the service provision in the state of Mato Grosso do Sul, and improvement of system s trustworthiness and quality Extension: 592 km State: Pará Block 26 ANEEL s Capex: R$ million Ceiling RAP: R$ 65.8 million Proposed RAP (bid): R$ 46.3 million (discount of 29.6%) Construction period: 54 months Beginning of operation: Until February, 2022 Facilities: TL 230 kv Xinguara II - Santana do Araguaia C1/C2, CD, with 296 km; SE 230/138 kv Santana do Araguaia (new courtyard 230 kv) - 2x150 MVA and phase-shifting transformer Purpose: Reinforcement of the energy supply for the region of Santana do Araguaia, and improvement of the quality and trustworthiness of the service provision in the northeast of Mato Grosso 33

34 Transmission Auction Diversification of Energisa s portfolio with an adequate profitability Investments Capex optimization (average discount of 15% compared to the Auction Tender Document) Capex schedule: 16% in / 38% in 2019 / 46% in Vinci Energies: international publicly held group present in 52 countries and active in Brazil EPC supplier Deadline Tax benefit Full Turn Key model EPC supplier incurs drilling, quantitative and price risk in a contract 100% tied to the Brazilian Inflation Index Robust guarantees package, performance, technical, engineering global insurance and civil liability insurance Upside: EPC contract contains a bonus clause in the case of an earlier beginning of operation and penalties in the case of delays. REIDI benefit embedded in the CAPEX SUDAM benefit (block 26) Infrastructure Debentures and/or long term funding (BNDES or equivalent alternatives) Funding Market conditions for interest rates and duration Limited leverage considering the nature of the operations (reference of 75%) Leverage The result of this Auction does not compromise the Company s covenants 34

35 Opportunities Strategy: operational gains and possible M & A In-house Opportunities Acquired companies integration/synergies Costs control opportunities Losses reduction Improvement of quality indicators/lower penalties paid Improvement in capital structure Investments in electric assets RAB increase External Opportunities Brazilian economic recovery Inflation and interest rates reduction Energy consumption increase Eletrobras discos privatization Opportunistic assets evaluation (generation and transmission) 35

36 Why Energisa? Best-in-class operations with opportunities for improvements at recently-acquired discos 36

37 Thank you Maurício Perez Botelho CFO and IRO Alexandre Nogueira VP of Regulation and Strategy Mariana Rocha IR Manager investidores.grupoenergisa.com.br

38 Appendix

39 Energy Sales Growth per company 39

40 Energy Sales Jan/17 Feb/17 Mar/17 Apr/17 May/17 Captive + Free Mkt chg. (1) (%) Captive + Free Mkt + Uninvoiced chg. (1) (%) Captive + Free Mkt chg. (1) (%) Captive + Free Mkt + Uninvoiced chg. (1) (%) Captive + Free Mkt North Energisa Tocantins (ETO) Northeast Energisa Paraíba (EPB) , Energisa Sergipe (ESE) Energisa Borborema (EBO) Midwest 1, , , , , , , , , , Energisa Mato Grosso (EMT) , Energisa Mato Grosso do Sul (EMS) South-Southeast Energisa Minas Gerais (EMG) Energisa Nova Friburgo (ENF) , Caiuá Vale Paranapanema (EDEVP) Bragantina Nacional (CNEE) Força e Luz do Oeste (CFLO) Total (Distribuidoras) 2, , , , , , , , , , chg. (1) (%) Captive + Free Mkt + Uninvoiced chg. (1) (%) Captive + Free Mkt chg. (1) (%) Captive + Free Mkt + Uninvoiced chg. (1) (%) Captive + Free Mkt chg. (1) (%) Captive + Free Mkt + Uninvoiced chg. (1) (%) (1) Change over the same period of the previous year Jan-May/17 Captive + Free Mkt chg. (1) (%) Captive + Free Mkt + Uninvoiced chg. (1) (%) North Energisa Tocantins (ETO) Northeast 3, , Energisa Paraíba (EPB) Energisa Sergipe (ESE) Energisa Borborema (EBO) Midwest 5, , Energisa Mato Grosso (EMT) Energisa Mato Grosso do Sul (EMS) South-Southeast 2, , Energisa Minas Gerais (EMG) Energisa Nova Friburgo (ENF) Caiuá Vale Paranapanema (EDEVP) Bragantina Nacional (CNEE) Força e Luz do Oeste (CFLO) Total (Distribuidoras) 12, ,