Eng vi encontro - cenários e estratégias - wilson
Transcript of Eng vi encontro - cenários e estratégias - wilson
Scenarios and strategies
Wilson FerreiraCEO of CPFL Energia
This presentation may contain statements that represent expectations about future events or results according to Brazilian and international securities regulators. These statements are based on certain assumptions and analysis made by the Company pursuant to its experience and the economic environment and market conditions and expected future events, many of which are beyond the Company's control. Important factors that could lead to significant differences between actual results and expectations about future events or results include the Company's business strategy. Brazilian and international economic conditions, technology, financial strategy, developments in the utilities industry, hydrological conditions, financial market conditions, uncertainty regarding the results of future operations, plans, objectives, expectations and intentions, among others. Considering these factors, the Company's actual results may differ materially from those indicated or implied in forward-looking statements about future events or results.
The information and opinions contained herein should not be construed as a recommendation to potential investors and no investment decision should be based on the truthfulness, timeliness or completeness of such information or opinions. None of the advisors to the company or parties related to them or their representatives shall be liable for any losses that may result from the use or contents of this presentation.
This material includes forward-looking statements subject to risks and uncertainties, which are based on current expectations and projections about future events and trends that may affect the Company's business.
These statements may include projections of economic growth, demand, energy supply, as well as information about its competitive position, the regulatory environment, potential growth opportunities and other matters. Many factors could adversely affect the estimates and assumptions on which these statements are based.
Disclaimer
Agenda
Strategic Planning Scenarios
CPFL’s Strategic Plan
Agenda
Strategic Planning Scenarios
CPFL’s Strategic Plan
Planning scenarios place strategic challenges in CPFL’s future
Main scenarios evaluated in the 2012-2017 Strategic Plan
Macroeconomic Scenario
Market Scenario
Regulatory Scenario
Competitive Scenario
1
2
3
4
Planning scenarios place strategic challenges in CPFL’s future
Macroeconomic Scenario
MarketScenario
Regulatory Scenario
Competitive Scenario
1
2
3
4
Main scenarios evaluated in the 2012-2017 Strategic Plan
We are estimating a world with low growth in the mature economies (effect of the crisis) and greater participation from the emerging economies1
2
3
Mature economies will have low growth, due to the financial crisis on the European continent and the uncertainties brought by the US “fiscal cliff”
The emerging countries will continue gaining importance on the world economy, led by China
PIIGS debt crisis – Portugal, Ireland, Italy, Greece and Spain –will continue contaminating the main economies of the region (France and Germany); however, there should be no more critical economic events
The austerity measures will contribute to reduce demand (and GDP growth) and will not be enough to restore confidence in the short term
1World: +4.2% p.a. Europe: +1.5% p.a. USA: +2.4% p.a.
China: +7.5% p.a.
2012: -0.5%2013: -0.3%
2014-2017: +1.9%
1) LCA Scenario.
We estimate Brazil with sustainable economic growth and monetary stability1
Growth of Brazilian GDP : average of 4.2% p.a. between 2013 and 20171
Inflation slightly higher than the target: average IPCA of 4.8% p.a. 2
Domestic market continues to stimulate growth between 2013 and 2017 (Payroll: 4.3%; Retail: 5.6%; Unemployment: 5.2%)3
Per capita income growth: +3.5% p.a. Low unemployment and economic growth will sustain the expansion of the middle class and poverty reduction4
Virtuous investment cycle: infrastructure, decline in the real interest rate, World Cup, Olympic Games and other measures to stimulate investments5
Institutional stability, low country risk and a comfortable level of reserves will keep the country attractive to external investment 6
1) LCA Scenario.
Planning scenarios place strategic challenges in CPFL’sfuture
MacroeconomicScenario
Market Scenario
Regulatory Scenario
Sompetitive Scenario
1
2
3
4
Main scenarios evaluated in the 2012-2017 Strategic Plan
Market Scenario | Energy Demand
1) Considers supply to ANDE and Manaus/Macapá connection to the North submarket as of July/2013 (1,284 MW average);2) Growth excluding Manaus/Macapá connection: 4.1%; Source: CPFL (OP); EPE; LCA
National Interconnected System (SIN) load grows at an average rate of 3.8% p.a. over the 2012-2031 period, with a highlight being the growth of the North (5.3% p.a.) and Northeast (4.5% p.a.) regions
CPFL Scenario (GW average)1
CPFL Scenario 2013-2017 2018-2021
Average GDP1 4.2% 3.7%
Average Growth2 4.2% 3.7%
Southeast / Center-West South Northeast North
Market Scenario | National Energy Balance
The system is in balance until 2016, despite the problems with the construction of Bertin and Multinerthermoelectric plants
Supply and Demand of the National Interconnected System (SIN)GW average
0.0% 4.8% 7.0% 6.1% 3.8% 3.4% 3.4% 0.1% -3.4% -6.8%
-1.0% 3.0% 4.3% 3.3% 1.1% -0.9% -0.7% -3.8% -7.2% -10.5%
Market Scenario | Expansion of supply will be mostly through hydroelectric sources, complemented by renewable sources and natural gas thermal plants
The expansion of supply will be mainly through hydroelectric plants supplemented by Natural Gas TPPs and Renewable Sources. Nuclear plants will play an important role in the second half of the 2020s
Expansion of Planned SupplyCPFL Scenario (GW average)
Planning scenarios place strategic challenges in CPFL’s future
MacroeconomicScenario
MarketScenario
Regulatory Scenario
CompetitiveScenario
1
2
3
4
Main scenarios evaluated in the 2012-2017 Strategic Plan
Regulatory Scenario | Pressure for tariff reductions | PM 579
• Government package for the reduction of energy tariffs on 2 fronts:
• Concession renewal: PM 579
• Reductions of electric sector charges
• Objective: to promote domestic industry competitiveness, once the correlation between the
reduction of energy costs and the promotion of development has been identified
• Benefits: generation of jobs, reduction of inflation and an increase in investments
• Breaking of market expectations versus breaking of contracts
• “(...) the regulatory, and even economic and development, logic is that the investments must beconducted with investors’ capital to be remunerated when the energy is made available forconsumption.” (Paulo Pedrosa, Abrace)
• Amount foreseen in indemnities is less than the market agents expected – indications that some
companies will not sign the new contract
Concessions renewal and tariff reduction
The Distribution sector’s tariffs were always pressured in order to achieve efficiency and lower tariffs, whereas the Generation and Transmission segments did not suffer the same regulations
Regulatory Scenario | Pressure for tariff reductions | PM 579
Industrial Tariffs1 (CPFL Piratininga) - [R$/MWh]2
1.3 2%
22.1 120%
-16.1 -41%
-2.2 -10%
7.4 6%
R$/MWh %
+5%
Generation
Transmission
Distribution
Sector charges
Taxes
3rd CRTP
(47%)
(8%)
(9%)
(9%)
(22%)
(7%)
(15%)
(47%)
(6%)
1st CRTP
(26%)
(8%)
(13%)
(47%)
2nd CRTP
(22%)
(15%)
1) Proxy of the industrial segment represented by the Average Tariff of Group A; 2) Real values in October 2011 | Source: CPFL Energia. Amount adjusted by IPCA.
• Sector charges and Taxes: increase in the tariff of R$23.4/MWh(120% and 2% respectively)
• Distribution: reduction of R$16.1/MWh due to the tariff reviews (-41%)
• Generation:Increase of R$7.4/MWhdue to tariff realignment (6%)
Impacts on the tariff
Xingó
Paulo A
fonso
I. Solt. - T. Irmãos
Itaparica
Jupiá
Marimbondo
Furn
as
Estreito
Três Marias
Volta Grande
Coru
mbá I
Porto C
olômbia
Jacu
í
Boa Esp
erança
Salto G
rande
Parigot de Souza
Passo R
eal
3,162
4,280 4,252
1,480 1,551 1,440 1,216
1,048
396 380 375 319 180 237 102 260 158
Amounts proposed by the PM 579
Distribution of O&M amounts of the projects with capacity above 100 MW
The average amount of O&M tariff is R$ 9.80/MWh and takes into account a profit margin of 10% (R$ 0.90/MWh). It is estimated that the amount of the final tariff (O&M, Sector Charges and
Network Use) will be R$ 27/MWh.
Source: Based on APINE data
Capacity (MW)
O&M (R$/MWh)
CCEAR NE
Itaipu
+Proinfa
CCEAREE
RA
Adjustment in the contracting level of the distribution companies
CCEAR NE
Itaipu+
Proinfa
CCEAREE
RA
CCEAR NE
Itaipu+
Proinfa
2012 2013Before the PM
CCEAR NE
Itaipu+
Proinfa
CCEAR EE
RA
2013After the PM
CCEARs Reduced
AngraEE
Quotas
(1) Situation in the case there is no allocation of quotas (shutdown CCEARs recontracted in the A-1 as Reposition Amount - RA)
(3) CCEAR EE parcel ballasted by TPPs with renewed concessions will be reduced
(4) EE Quota is allocated to the Distribution resource and the RA is absorbed. Momentarily, over-contracting is generated
CCEAR NE
Itaipu+
Proinfa
Angra
CCEAR EE
(5) Frustration of the thermoelectric projects absorbs an eventual excess of quotas
2013 After the
PM Quotas
2013After the PM
Final Compositionof the Resource
The maintenance of the contracting level is not guaranteed. There is a provision for dealing with an imbalance upon contracting, although it still must be regulated
(2) Reposition Amount (RA) will be reduced from the Angra I and II quotas (REN 505/2012)
Angra
Source: Based on APINE data
Contracting Level
1 2 3 4
8.6 GW med
10.2 GW avg
1.5 GW avg
11.4 GW med
CCEAREE
BILATERAL BILATERAL BILATERAL BILATERAL BILATERAL
CCEAR EE
Itaipu+
Proinfa
Angra
CCEAR NE
5BILATERAL
CCEAR NE
Itaipu
+Proinfa
CCEAREE
RA
Adjustment in the contracting level of the distribution companies
CCEAR NE
Itaipu+
Proinfa
CCEAREE
RA
CCEAR NE
Itaipu+
Proinfa
2012 2013Before the PM
CCEAR NE
Itaipu+
Proinfa
CCEAR EE
RA
2013After the PM
CCEARs Reduced
Angra EE Quotas
(1) Situation in the case there is no allocation of quotas (shutdown CCEARs recontracted in the A-1 as Reposition Amount - RA)
(3) CCEAR EE parcel ballasted by TPPs with renewed concessions will be reduced
(4) EE Quota is allocated to the Distribution resource and the RA is absorbed. Momentarily, over-contracting is generated
CCEAR NE
Itaipu+
Proinfa
Angra
CCEAR EE
(5) Frustration of the thermoelectric projects absorbs an eventual excess of quotas
2013 After the
PM Quotas
2013After the PM
Final Compositionof the Resource
The maintenance of the contracting level is not guaranteed. There is a provision for dealing with an imbalance upon contracting, although it still must be regulated
(2) Reposition Amount (RA) will be reduced from the Angra I and II quotas (REN 505/2012)
Angra
Source: Based on APINE data
Contracting Level
1 2 3 4
8.6 GW med
10.2 GW avg
1.5 GW avg
11.4 GW med
CCEAREE
BILATERAL BILATERAL BILATERAL BILATERAL BILATERAL
CCEAR EE
Itaipu+
Proinfa
Angra
CCEAR NE
5BILATERAL
CPFL Energia requested Aneel to renewal all the expiring concessions
PM 579 | Expiration schedule of CPFL Energia’s concessions
HPP Serra da Mesa
HPP Foz do Chapecó
HPP Barra Grande
HPP Castro Alves
HPP Monte Claro
HPP 14 de Julho
HPP Campos Novos
HPP Luis Eduardo
Magalhães
CPFL Piratininga
CPFLPaulista
RGE
19 SHPPs (CPFL
Renováveis)
1 TPP (Carioba)
Distribution
CPFL Santa Cruz
CPFL Jaguari
CPFL Sul Paulista
CPFL Leste Paulista
CPFL Mococa
Generation
SHPP Rio do Peixe (I/II)
SHPP Macaco Branco
2039203620352032202820272015 …
~3%EBITDACPFL
Energia
<1% Installed capacityCPFL
Energia
PM 579 | Expected Effects
Segment For the sector For CPFL
• Tariff = operational cost + spread
• Amortization of the non-depreciated amounts calculated by the New Replacement Value (VNR)
• Long-term concessions (expiring as of 2032)
• Exposure: almost no impact (<1% of installed capacity)
• Cost of O&M lower than the band presented by the PM 579
• New quality rules and requirements being detailed by ANEEL
• Changes in energy contracting due to the allocation of quotas
• Renewed energy (cheaper) will destined exclusively to regulated market
• Restriction of conventional energy liquidity on the 2013-15 horizon
• Migration A4: from 6 months to 5 years
• More competitive environment for the commercialization segment, pressure on margins
Conventional Generation
Distribution
Commercialization
• Limited impact in view of the low exposure of assets whose concessions are expiring in 2015
• Larger assets will begin to expire as of 2027 (CPFL Paulista/RGE)
Besides pressure to reduce tariffs, quality and technology have been focal points
Topics that will be on the sector’s radar in the upcoming years
Regulatory Scenario | Other regulatory agenda topics
• Electronic Meters and Intelligent Networks
• DER/FER regulation – Commercial quality control indicators
• DER (Average Duration of Response to Complaint) – average time to solve
complaints
• FER (Average Frequency of Response to Complaint) – frequency of occurrence
of a complaint for every thousand consumer units
• Methodology of the 4th Tariff Review Cycle
Planning scenarios place strategic challenges in CPFL’s future
Macroecomic scenario
Marketscenario
Regulatoryscenario
Competitivescenario
1
2
3
4
Main scenarios evaluated in the 2012-2017 Strategic Plan
With the Brazilian electricity market growing, competition in the sector has been getting tougher
The Brazilian electricity market is notable in the world due to its growth and investment opportunities1
Major international players continue to be highly interested in remaining and boosting their business in Brazil, as a result of the crisis in United States and Europe2
The very attractive market has increased competition, whether through acquisition of assets or in disputing auctions3
Large domestic companies have continued their strategy of diversification and may use indemnification funds (PM 579) for growth4
Some agents could erroneously interpret the recent measures as an increase in the institutional risk for the sector5
Agenda
Strategic Planning Scenarios
CPFL’s Strategic Plan
CPFL’s corporate ambition
To be the leader of the domestic electric sector, focusing
on excellence, maximizing value for shareholders and
guaranteeing the sustainability of business
CPFL 2017 AMBITION
10.8%5.1% 7.0% 8.1% 5.1%
17.7%
4.4%9.0%
4.2%
0.8%
2.0%
-0.1% -3.3%-1.6%
-14.4%
-3.9%-9.2%
-14.6%
Total Shareholder Return | History
Note: 1) TSR = shareholder IRR – Market cap values in Sep/2007 and Sep/2012; 2) Amounts corrected by the IGP-M (Dec/2011) | Source: Economatica
The results of shares performance and the dividend policy resulted in CPFL’s TSR being above the market average over the past few years
Total Shareholder Return1 | 2007 – 20122 | % p.a.
6.93.5
7.1
11.63.3
-10.3
-0.2
0.5
4.8
For the next few years there is an estimate of reduction in the average TSR of the electric sector due to the macroeconomic stabilization and decline in the cost of capital
Dividends
Share appreciation
CPFL’s Strategic PlanStrategic Guidelines | 2013-2017
Focus on PerformanceInnovation of processes
Strategic Growth1 2
CPFL’s Strategic PlanTransformation | Culture and Behavior
Projects were implemented seeking gains in efficiency and productivity
Project Description Objectives
• Installation of intelligent meters and remotely commanded switches/reconnectors
• Intelligent dispatching of teams seeking optimal operating
• Application of the smart grid concept
• Productivity and efficiency gains
• Transformation of management profile focusing on new skills
• Annual benefit of around R$ 106 million
• Transfer of the transactional corporate activities to the CPFL Shared Services Center
• Implementation of the Zero Base Budget methodology
• Efficiency gains facing the regulatory challenges
• Improvements in the organization’s budgeting process and cost culture
• Annual average gains of R$ 50 million in 5 years
Tauron ProgramSmart Grid
CSCShared Services
Center
ZBBZero Base Budget
• Increase in operational productivity and efficiency
• Reduction of corporate costs
• Sustenance of Group’s growth at a lower incremental cost
Focus on PerformanceInnovation of processes
Strategic Growth1 2
CPFL’s Strategic PlanStrategic Guidelines | 2013-2017
CPFL’s Strategic PlanStrategic Growth Avenues | DistributionEfficiency Benchmarking | ANEEL Methodology
Companies with MORE than 400,000 clients | In %
Companies with LESS than 400,000 clients | In %
CPFL’s Strategic PlanStrategic Growth | Distribution
1) Large companies: market higher than 1TWh (Source: ANEEL 2009)
Regulatory RemunerationImprovement in macro scenario
leads to smaller returns
Higher efficiency in capital allocation
Brazil 3 largest distribution companies
have a 34% market share
Consolidation and gains in scale being reverted into
productivity
Fragmented MarketRelevant number of small
companies concentrated in the South and Southeast regions
Sector consolidation opportunities
32large
31small 21
North/NortheastCenter-West
42South/Southeast
-
- - -42 100 257
686 803 835 1,297
1,537 1,715 1,934 2,094
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Ativos da privatização Brownfield Greenfield
Estimated growth in Generation | Installed capacity (MW)
CPFL Energia: Conventional Generation + Renewables
2009 2011
CPFL RenováveisTPP Bio FormosaTPP Bio BuritiJantus wind farm
2012
Santa Clara wind farmAtlântica wind farmTPP Bio Ipê e Bio PedraTPP Ester
2014
1,737 MW 2,644 MW 2,948 MW
CAGR 2000-14e = 25% p.a
Semesa Baesa
Enercan Ceran
Foz ChapecóEpasaBaldin
CreationCPFL Renováveis
Ranking | Generators in BrazilEBITDA (12M3Q12) | R$ billion
CPFL Strategic Plan | Strategic Growth | Generation
Privatization assets
Duke
EDP
CPFL
AES Tietê
Cemig
Cesp
Tractebel
Eletrobras
0.8
1.2
1.5
1.9
2.4
3.1
7.2
SpainBrazil France Germany
0.01% of solar radiation = worldwide demand for energy – Brazil: radiation ≈
two times the developed nations
Solar energy is abundant and variability is low
5 countries → 88% of installed capacity (31 GW ) - Brazil still taking
its first steps
SpainGermany Italy USAJapan
Photovoltaic solar energy is still little exploited in the world
Brazil
• Current capacity in operation in Brazil: 2,578 kW (10 plants)
• Just between 10/31 and 11/05 some 1.0 GW in projects were requested
CPFL – Tanquinho Plant
• 1st Solar Plant in the state of São Paulo
• Possibility of redesign of the energy matrix and development of a new industry
• 5,380 photovoltaic panels
• Photovoltaic Plant with connection to Medium Voltage (1,05 MWp) and connection in Low Voltage (0.075 MWp)
Solar Energy | Outlook
49.7%
11.2% 10.0% 10.4% 7.2%
2,4001,850 1,650
1,250
CPFL Brasil is in an advantageous position to confront the challenges
Competitive Client (#)Greater than 3 MW
Number of free clients in Brazil
Source: Aneel and CCEE
Dec/08 Dec/09 Dec/10 Dec/11
CAGR: 4.1% CAGR: 45.1%
Special Client (#)0.5 to 3 MW
• Diversified portfolio and large energy volume
• Renowned team of market specialists
• Governance and firm finances
• Culture of structured risk management in place
• Ballast already contracted
Aug/12 Dec/08 Dec/09 Dec/10 Dec/11 Aug/12
CAGR: 29.6%
Sales agents (#)
Number of sellers
CPFL’s Strategic PlanStrategic Growth | Energy Commercialization
456 446 485 514 570
192 219
455587
857
2008 2009 2010 2011 2012
51 6283
107144
In 2012 the service operations were consolidated and the companies are ready to reach their growth potentials
• Modernization of network construction (CCM)
• Construction of the largest solar power plant in the
country (Tanquinho)
• Consolidation of the group’s call center operations and the
startup of negotiations with the market
• Creation of CPFL TotalSolid growth plan through 2017
2012 Highlights
nect serviços
CPFL’s Strategic Plan | Strategic Growth | Services
CPFL in 2017
Leadership among private companies in the electric sector, with a diversified portfolio in different businesses related to Energy
COMMERCIALIZATION
• Leadership in commercialization of renewable energy on the free market
• Maximize profitability, given the new market conditions
GENERATION
• Operational Excellence, with the greatest profitability of the sector
• Growth in installed capacity in hydro and thermal plants
• Leader in renewable sources (> 4 GW by 2020)
DISTRIBUTION
• Market leader, with up to 30% of the market share in Brazil
• Operational excellence, using innovation and new technologies
SERVICES
• Strong growth of sales
• Strong integration with the Group’s other businesses and clients
Scenarios and strategies
Wilson FerreiraCEO of CPFL Energia