Teleconference 1Q15 Results May 20, 2015

Transcription

1 Teleconference 1Q15 Results May 20, 2015 Operator: Good morning, and thank you for waiting. Welcome to CESP teleconference that will present the results for the first quarter of CESP s Board of Directors and advisors are present in this teleconference. We d like to inform this teleconference is being recorded and all participants are connected as listeners only. Later, we ll have a question-and-answer session with analysts and investors, and after that, we ll answer questions from media vehicles, when further instructions will be provided. If you require any help from the operator during the teleconference, please, press star zero. Questions should be made via telephone only. This event is also broadcasted in real time on the internet, via webcast, on ri.cesp.com.br, where the respective presentation is found. The slide presentation will be controlled by the speakers. This teleconference is simultaneously broadcasted in English for the company s foreign investors. The participants listening to this teleconference in English can also ask questions during the question-and-answer session. The replay of this teleconference will be available a few hours after it ends. Before we proceed, we want to explain that statements made during this teleconference related to CESP s business perspectives, projections and operational and financial goals, are beliefs and assumptions of the company s board of directors, as well as currently available information. Future considerations are not guarantees of performance as they involve risks, uncertainties and assumptions, because they refer to future situations and, therefore, depend on circumstances that may or may not occur. Investors should understand general economic conditions, industry conditions and other operational factors may affect CESP s future performance and lead to results that significantly differ from those presented in the future. Now, CESP s executive directors will speak. Please, proceed. Almir Martins: Good morning, I m Almir Martins, Financial Director and Director of Investor Relations. Thank you for your participation in CESP s teleconference about the results for the first quarter of We have here at the table Mr. Mauro Arce, President, and the advisors. Let s start the presentation with slide number 2. 1

2 It shows energy revenues had a 50% reduction in 1Q15 versus 1Q14, reaching R$ 933 million. Sales in ACR - Regulated Contracting Market the grey portion in the chart, reached R$ 247 million. In ACL - Free Contracting Market the red portion in the chart, sales reached R$ 649 million. The revenue from CCEE Electric Energy Trading Board the black portion in the chart reached R$ 36 million, with considerable reduction in relation to 1Q14, even with the company presenting an expressive amount of energy not included in the contract (about average 640 MW in the quarter), and which the company intended to liquidate at CCEE for PLD prices. But CESP, just as all hydroelectric power generation companies, has had continued impact of the water crisis in the country, resulting in average GSF (Generation Scaling Factor) of in the first quarter of 2015, versus in the same period in As seen in the table below, on the left, CESP ended up supplying the MRE, with 1,467 GWh at the Optimization Energy Tariff, and liquidating only 63 GWh in the Spot Market for PLD prices, completely changing the scenario in 1Q14, when the company liquidated 1,523 GWh for PLD prices. The impact on revenue in this environment was also worsened by ANEEL s decision to reduce the PLD adopted starting in January Just for the records, the New Plan of Electric Sector Accounts came into effect this year, and it reclassified some expenses in the deductions from revenue, among other changes. Then, we see below, on the right, the deductions from revenue totaling RS 160 million, 26.5% lower than in 1Q14. Thus, the net revenue reached R$.780 million, including the amount from other revenues. In slide 3, on the left, we see the amount of energy sold in gigawatt per hour, by segment. It totaled 7,023 GWh in the first quarter of 2015 versus 8,830 GWh in 1Q14, a 20.5% reduction in the total amounts sold, a result of, first, reduced hydroelectric power generation, as required by the ONS (the Operator of the National Electricity System, and the water crisis in the country, which affected the GSF. This fact reduced the guaranteed power output of all hydroelectric power generation companies in the country, and in this context, CESP had a reduced amount of energy to trade. On the right side, we see the average sale price of megawatt decreased 36.3% when compared to 1Q14, reaching R$ , especially due to the CCEE sales, where the average sale price in the Spot market decreased to R$ The average prices of contracts were R$ , due to the correction of contractual prices and expiry of old contracts of lower prices. Slide 4 shows, on the left, the average levels of reservoirs from the southeast/central west subsystem. Despite the low levels of reservoirs in comparison to previous years, the light blue line indicates the level of 33.5% at the 2

3 end of April 2015, which may prevent, according to our evaluation, a possibility of energy rationing this year. In the chart on the right, the light blue line shows PLD reached the ceiling determined by ANEEL of R$ in the four first months of 2015; this ceiling was lower in relation to that in force in 2014 of R$ In the lower portion of the slide, we see the average PLD in the quarter from CCEE, R$ in 1Q15 and R$ in 1Q14. Slide 5 shows the operational expenses were similar when comparing 1Q15 to 1Q14 and totaled R$ 385 million. From total expenses, 82.5%, the red portion in the chart, can be classified as nonmanageable and 17.5% as manageable. Manageable expenses, the grey portion, had a 10.8% reduction. The items of greater influence on such reduction, indicated on the right side of the chart, were: expenses with personnel, minus 8.3% and the retirement incentive program, which had the provision of R$ 6 million in the first quarter of Regarding non-manageable expenses, the amount of R$ 42 million was reported, related to the energy purchased from CCEE, due to systemic factors in the quarter (MRE and GSF). Slide 6 shows adjusted EBITDA of R$ 575 million in 1Q15, 61.0% lower than the same period in The margin in 1Q15 was 73.8% versus 89.6% in the first quarter of This chart shows how the adjusted EBITDA is constituted, for a better understanding. In the next, slide 7, we see the financial result obtained in 1Q15 was minus R$ 207 million, 527% greater than the amount of minus R$ 33 million in 1Q14. The financial revenues totaled R$ 48.5 million, 66.5% increase in relation to 1Q14, due to greater cash availability. The total financial expenses in 1Q15, including debt charges and other financial expenses, were R$.82.5 million, 76.8% higher than in 1Q14, due to income tax on remittances abroad, regarding the payment of Bonus Series 8, paid off in January The monetary variations totaled minus R$ 21.8 million in 1Q15. The exchange variations totaled minus R$ million in 1Q15, due to a 20.8% appreciation of US dollar in relation to Real (Brazilian currency) in this period. For a better understanding, the right side of the slide shows the dollar behavior and the revenues and exchange expenses for both periods. Slide 8 shows the financial debt on March 31, 2015 was R$ 1,818.1 million, 34.6% lower than on December 31, 2014, especially due to the payment of Bonus Series 8 in January

4 The debt in foreign currency was US$ million, representing 46.5% of the company s total debt. This debt in foreign currency corresponded to R$ 845 million. In the lower right side, we see the cash resources at the end of March 2015 totaled R$ billion, with net debt of R$ 117 million for this period. Slide 9 shows the debt profile and its due dates for the following years. In 2015, the amount of R$ billion was already paid, R$ 978 million of which referred to the payment of Bonus Series 8, from our program of Medium-Term Bonds, and the amount of R$ 495 million still has to be paid during the year, by December Post-2015 debt basically refers to FIDC IV, it is the last FIDC, with monthly due dates until 2017, and the obligation with BNDES, in foreign currency, payable every two months by Slide 10 shows that, based on the debt position in 2014, of R$ billion, we have R$ 114 million of monetary correction and interest; net provisions of R$ 57 million, due to a reclassification of lawsuits by our lawyers; and effective cash disbursement of R$ 22 million for lawsuits. On March 31, 2015, the balance was R$ billion, a 1.3% variation. Our presentation ends here. Thank you for your participation. Let s start now the question-and-answer session. ==================================================================== Operator: Ladies and gentlemen, we ll start now the question-and-answer session. To ask a question, please press star 1 (*1). To remove your question from the queue, press hash (#). After the questions from the analysts, we ll have the questions from media vehicles. Remember, to ask a question, press star 1 (*1). Once again, to ask a question, press star 1 (*1). Mr. Vinícius Tsubone, from UBS, would like to ask a question. Vinícius Tsubone, UBS: Hi, good morning, thank you for the call. I d like to have an update on the compensation for Três Irmãos, how this process is now. Thank you. Almir Martins: Vinícius, good morning. The indemnification for Três Irmãos is legally comprised of two installments, one installment we call uncontroversial amount, of around R$ billion, granted in 2015, I mean, in This amount has been corrected until now. It is a difference we request, because we understand we have the right to a larger indemnification that this one. The most significant amount of the indemnification, the main value, will be decided after a legal analysis, which will take years, we are considering around five years for this lawsuit. And what CESP has requested separately is that the payment of this uncontroversial amount, which the Federal Government has agreed to pay in seven years in monthly payments, should start. At the end of April, we had some changes in this process, indicated in the explanatory notes in our financial statements as 4

5 subsequent events. Then, we had at the end of April a favorable decision to CESP, where the judge clearly stated the Federal Government should start the payments, but on the following day, a magistrate cancelled this decision, due to an appeal from the Federal Government. Some days after that, still in April, we filed a new claim, with our new arguments. We haven t received any answer, then we have to wait a little more for court decision. Vinícius Tsubone, UBS: I understand, thank you. Operator: Mr. André Sampaio, from Santander, would like to ask a question. André Sampaio, Santander: Good morning, thank you for the call. I d like to know if there is any development in terms of investment plan, the company s vision for the future. Almir Martins: Good morning, André. No, we have no news, in fact, we ve conducted many studies and we ve had many talks, but no decision about it. Then, we have no news in this aspect. André Sampaio, Santander: Ok, thank you. Operator: Remember, to ask a question, press star 1 (*1). Once again, to ask a question, press star 1 (*1). We ll start now the question-and-answer session for media vehicles. To ask a question, please press star 1 (*1). To remove your question from the queue, press hash (#). Mr. Maurício Godoy, from Agência Canal Energia, would like to ask a question. Maurício Godoy, Agência Canal Energia: Good morning Almir, how are you? Well, I d like to know, Almir, in fact, I d like to have an update about the situation yesterday Cemig had, in your teleconference, indicated that it was negotiating with the MME to keep the concessions for the three plants: Jaguara, Miranda and São Simão, still in discussion. I don t remember exactly if you or Dr. Arce said that if that really happened, then CESP could perhaps following the same path. Have you made any action in this sense, or not? How about this situation? And how do you see this possibility from the MME to allow that? Almir Martins: Good morning, Maurício. We still don t have any news regarding Cemig. I know there have been talks, but the news, if you can call it news, is that the Ministry of Mines and Energy requested ANEEL to conduct, in September or by September, the auction to select the future operators for all those plants whose concessions have expired or are about to expire. There s a directive from the MME with an appendix, which includes around 18 plants from Cemig. And they include our two plants, Ilha Solteira and Jupiá. Then, ANEEL will organize an auction, start a public hearing, then we don t have news about that. We will operate Ilha Solteira and Jupiá, temporarily, until this auction is conducted. Maurício Godoy, Agência Canal Energia: And do you intend to participate in this auction the government will conduct, or not? Is the intention, the decision, to end the concession and forget the asset for good? Mauro Arce: Maurício, Mauro Arce speaking. Well, we were asked by the Ministry of Mines and Energy if we could keep operating them, until these auctions of concessions are held. We answered positively, that was one week ago, but we haven t received any 5

6 answer. I understand that, as they asked and we answered yes, we will continue. But as we haven t received any official answer about that, a confirmation, we understand they have to notify us. Because our date is July 7, until then, they can. Then, we are prepared to operate until a bid is conducted, but we have to wait for an official answer from the Ministry. Maurício Godoy, Agência Canal Energia: But do you intend to participate in this auction to change the operator, so you can become the operators of the plants, after the auction? Are you prepared to participate in this auction too? Mauro Arce: So far, only the auction for Três Irmãos has been conducted. And there, an auction was conducted with Furnas participating as a minority partner, for CESP to participate as a minority partner, it needs the Assembly s consent to change the legislation, we ve already submitted a request. That would be a possibility, operating through a Special Proposal Entity. And then, evidently, it will depend on what will be defined in the auction, the scope of this concession, how much will be paid, because we don t know this amount in advance. Then, we can t say no, or yes, we will analyze the best way to participate. Maurício Godoy, Agência Canal Energia: That s right, then, thank you, Dr. Arce. Operator: Mr. André Magnabosco, from Agência Estado, would like to ask a question. Please, Mr. André, proceed. André Magnabosco, Agência Estado: Good morning Mauro, good morning Almir, good morning everyone. In fact, I have two questions. The first one, we are talking about the company s expansion plan, I d like to know if that consulting contracting process was forgotten, as it had a deadline for last year, it was for the end of the year, beginning of And now we see the government indicating, submitting a text to the Assembly requesting a change in the legislation to allow the company to participate in SPEs as a minority partner, but that is, the talk about consulting has disappeared. I d like to know if this project has been forgotten, or if it somehow will guide CESP s steps. The second question, also about the expansion and SPEs. Three weeks ago, the Secretary of Energy of São Paulo spoke about a project, in fact, he has frequently spoken about this model of SPE, of CESP being a driver of investments in the state, and he spoke about a concession of a thermal power plant, with EMAE as a partner, in a land of EMAE. What do you expect for CESP s growth, is there any change in the profile of projects? Does CESP tend to focus more on renewable energy? I know it still depends on this approval of the SPE project by the Assembly, but what do you see today for the future of CESP? Significant changes, perhaps a focus on wind power, sugarcane biomass, something in this aspect? Almir Martins: Good morning André, that s Almir speaking. The consulting process, I ve said that very often, it follows the legislation and the standards from Law 8,666. The last stage of the process was the announcement of the winner. We published the result, there was a period for claims and appeal. Indeed, a bidder filed an appeal, and then you have a period for that winner to submit counterarguments, and that happened. Now, we are analyzing this process, we haven t ended the consulting process, ok? About the future of CESP, it is perhaps related to the government s plans, the Secretariat of Energy, and the consulting work. We still have no definition about 6

7 the focus. The Secretariat of Energy has said that we will be partners, in something that eventually makes sense for the Government of the state of São Paulo. Mauro Arce: To complement, regarding this topic, your statement about what Secretariat Meirelles informed, this project involving the thermal power plant has been considered by EMAE, because EMAE has approved its bylaws and in the law previously approved by the Legislative Assembly, it can participate in processes as one SPE, even as a minority partner. Then, this subject of thermal power plants has been discussed with EMAE, and CESP hasn t participated in it. CESP has participated in small hydroelectric plants, we have a small hydroelectric plant at Rio Pardo, where we had a defined project and we resumed this process. In a technical perspective, we already made contact with the regulatory agency, etc., this is a possibility, and evidently, it depends on the approval of the law project the State Government submitted to the Assembly, proposing a change in this law that governs CESP in particular. André Magnabosco, Agência Estado: Mauro, I m sorry to interrupt you, but to complement and understand it better, will CESP continue these projects even without this consulting process? I d like to understand, because we ve followed all these bureaucratic steps of this consulting process, and the fact that it has been stopped for a long time, but it seems the government is trying to speed it up. The government instructs CESP to speed up this growth process of the company, even without this consulting process. I d like to understanding, the consulting work, is it going to determine the next steps of CESP, or is CESP making these next steps now, even without the conclusion of the consulting contracting process? Mauro Arce: CESP has not ended it, since we have the appeals being analyzed for the consulting contracting process. That is one thing. The other thing is, there was a decision, and that is of public domain, regarding the distribution of dividends, and CESP has made a distribution, we are paying it now at the end of May, one payment next week, half of this dividend that is still due. Then, indeed, the resources for investments are low, then, it s important to go on, and this is a decision of the government, to change the legislation. That was the proposal and we are waiting without prejudice to this very slow process, unfortunately, to hire this consulting service. There is always someone with an appeal, you have deadlines to be observed. The process is very bureaucratic for that. Then, we are not, as you said, we are not standing still, we are doing what we can do, using the mechanisms we have today. When we say: are we going to wait until a consulting contracting problem is solved to take any action? We are going ahead in what is possible, but now there s an essential point here, the State of São Paulo is the largest sugarcane producer, and the energy production through biomass is very interesting, in both technical and economic aspects. And the State, somehow, has worked in this direction, participating and helping the private initiative, promoting the private initiative to make it happen. But we are waiting for the law while we see if we can overcome this high number of obstacles for consulting contracting process, which significantly delays the process. André Magnabosco, Agência Estado: And this biomass market, is it a market you should consider after the SPE process is concluded, or not? 7

8 Mauro Arce: Yes, then, I guess it s easier if you have a partnering process with other players from the private initiative, and sometimes as a minority partner and that somehow would reduce a little this obligation of having a bid according to Law 8,666. André Magnabosco, Agência Estado: That s ok, thank you Mauro, thank you Almir. Operator: Mr. Roberto Alerigi, from Reuters, would like to ask a question. Roberto Alerigi, Reuters: Hi, good morning. In fact, this is just a complement. You were asked about specific plants, today controlled by CESP, but in the company s possible interest in participating in the auction, can other plants also be evaluated by the company, considering the high number of small hydroelectric plants? And could you explain a little better the question of SPE, I didn t understand it very well, is CESP not allowed, by law, to make the SPE participate in auctions, is that right? Thank you. Almir Martins: Good morning, Roberto, Almir. The Brazilian legislation determines that, the State legislation repeats that, a state-owned company, to participate in another partnership, or to create other companies, requires a change in the legislation. That is required by law. The companies usually request this authorization in general terms, SABESP has it, EMAE has it, and for CESP, that was not requested in the past because CESP was in a privatization process or something similar still in progress. But now, there is this possibility to participate in a new investment, and for this purpose, a legislative authorization is required. We are discussing here about participating in the auction and we will evaluate the conditions of Ilha Solteira and Jupiá. Then, I don t see the company s intention to become the operator of other plants, besides those two. Roberto Alerigi, Reuters: Thank you. Operator: Remember, to ask a question, press star 1 (*1). Once again, to ask a question, press star 1 (*1). We end here the question-and-answer session. CESP will provide the final considerations now. Almir Martins: Thank you for your participation. Our financial statements and release or results are available on our investor relations website (ri.cesp.com.br) and our IR team can be contacted according to the information in the last slide. Thank you. Operator: CESP s teleconference ends here. Thank you for your participation. Have a nice day. 8