JP Morgan Asia Pacific & Emerging Markets Equities Conference - London and NY
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Transcript of JP Morgan Asia Pacific & Emerging Markets Equities Conference - London and NY
September 2007
2
Disclaimer
This presentation may include forward-looking statements of future events or results according to regulations
of the Brazilian and international securities and exchange commissions. These statements are based oncertain assumptions and analysis by the company that reflect its experience, the economic environment and
future market conditions and expected events, many of which are beyond the control of the company.
Important factors that may lead to significant differences between the actual results and the statements ofexpectations about future events or results include the company’s business strategy, Brazilian and
international economic conditions, technology, financial strategy, public service industry developments,
hydrological conditions, financial market conditions, uncertainty of the results of future operations, plans,objectives, expectations and intentions, among others. Considering these factors, the actual results of the
company may be significantly different from those shown or implicit in the statement of expectations about
future events or results.
The information and opinions contained in this presentation should not be understood as a recommendation
to potential investors and no investment decision is to be based on the veracity, current events or
completeness of this information or these opinions. No advisors to the company or parties related to them ortheir representatives shall have any responsibility for whatever 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 oncurrent expectations and projections about future events and trends that may affect the company’s business.
These statements include projections of economic growth and energy demand and supply, as well as
information about the competitive position, the regulatory environment, potential opportunities for growth andother matters. Several factors may adversely affect the estimates and assumptions on which these
statements are based.
3
Geographical Presence
█ In 2006, Energias do Brasil distributed 24 TWh to 3.1 million customers
█ In 1H07, total installed capacity reached 1,043 MW
Generation
Distribution
PANTANAL ENERGÉTICA
COSTA RICA
ENERSUL
•Distrib. energy: 3,126 GWh
•Customers: 695 thousand
•Municipalities: 73
•Concession area: 328,316 Km²
•N. inhabitants: 2.1 million
• Installed capacity: 31.2 MW
• Installed capacity: 16.5 MW
LAJEADO PLANT
• Installed capacity: 250 MW
(adjusted for Energias do
Brasil’s stake)
PEIXE ANGICAL PLANT
• Installed capacity: 452 MW
CESA and ENERGEST
• Installed capacity: 294.1 MW
• To be constructed: 29.0 MW
ESCELSA
•Distrib. energy : 8,060 GWh
•Customers: 1,076 thousand
•Municipalities: 70
•Concession area: 41,241 Km2
•N. inhabitants: 3.2 million
BANDEIRANTE
•Distrib. energy: 12,763 GWh
•Customers: 1,352 thousand
•Municipalities: 28
•Concession area: 9,644 Km2
•N. inhabitants: 4.4 million
4
Generation Commercialization Distribution
Current Organizational Structure
EDP Group Market
Legend
% of the Total Capital
Notes:
1 Voting capital, also represents the percentage of installed capacity allocated to Energias do Brasil. Energias do Brasil holds 23.05% of its total capital
2 Includes Escelsa’s generation assets
3 Includes Enersul’s generation assets
Peixe Angical
Enersul
Escelsa
Enertrade BandeiranteLajeado Energest2
Costa RicaPantanal
Energética3CESA2
62.4% 37.6%
100% 100%
100%
100%100%60%27.65% 1
100%51%100%
5
Chair: Independent
1 Apptd. by Minority1 Apptd. by Controlling
Chair: Chairman of the Board
CEOCFO
Chair: Chairman of the Board
1 Independent1 Apptd. by Controlling
Chair: Independent
1 Apptd. by Minority1 Apptd. by Controlling
Board of Directors
Corporate Governance
Board Committees
5 members appointed by controlling
shareholder, including Chairman of the Board (CEO and CFO are also
members of the Board)
2 members
appointed by minority
shareholders
2 independent
members
Audit Supervisory Compensation
Corporate
Governance and
Sustainability
Composition
Distribution
7
Distribution Assets
8
Operating Performance
Volume of Energy Distributed
(GWh)
Energy Distributed by Customer Class
(% of Total Volume Distributed)
2005 2006 1H06 1H07
12,315 12,763
6,354 6,543
7,6398,060
4,028 4,234
3,1083,126
1,556 1,635
12,41111,938
23,94823,061
Bandeirante EnersulEscelsa
2005 2006 1H06 1H07
69% 62%
62% 62%
30% 36%
36% 37%
1%
2% 1%
12,41111,938
23,94823,061
End Customers OtherEnergy in Transit
1%
+3.8% +3.8%
+4.0% +4.0%
9
Market Profile Volume – 1H07
Bandeirante
(GWh)
Enersul
(GWh)
Escelsa
(GWh)
Energias do Brasil
(GWh)
Residential Industrial Commercial Rural and other Energy in transit
21%
18%
13%12%
36%
18%
12%
12%
16%
42%29%
14%20%
24%
13%20%
22%
12%7%
39%
6,542.6 1,635.0 4,233.7 12,411.3
10
Market Profile Revenues – 1H07
Bandeirante
(R$ MM)
Enersul
(R$ MM)
Escelsa
(R$ MM)
Energias do Brasil*
(R$ MM)
Residential Industrial Commercial Rural and other Energy in transit
35%
26%
18%
8%
13%5%
24%12%
21%38%
16%
33%
16%
16%19%
35%13%
12%
20%
20%
1,224.8 518.3 787.2 2,526.8
Note: Data in R$ refers to Revenue net of ICMS Tax, RTE, Own Consumption and ECE/EAE, but including Low Income. * Only the Distribution Business is considered
11
0.76
0.93 0.780.92
Efficiency Indicators
DEC (hours) FEC (x)
TMA (minutes) Productivity (‘000 clients / employee)
9.2
11.811.0
8.8 8.3
13.6
10.1
8.1
12.0
9.1
13.8
Bandeirante Escelsa Enersul
2005 2006 1H06 1H07
6.6
8.7 9.2
5.56.3
10.4
6.0 6.2
9.9
5.46.2
10.0
Bandeirante Escelsa Enersul
160139
98
172
119 112
187
112 103
155144
120
Bandeirante Escelsa Enersul
1.07
0.89
1.29
1.061.07
0.90
1.24
1.06
Bandeirante Escelsa Enersul
2005 2006 1H06 1H07 2005 2006 1H06 1H07
2005 2006 1H06 1H07 2005 2006 1H06 1H07 2005 2006 1H06 1H07
2005 2006 1H06 1H07 2005 2006 1H06 1H07 2005 2006 1H06 1H07
2005 2006 1H06 1H07 2005 2006 1H06 1H07 2005 2006 1H06 1H07
7.8
12
Project Vanguarda
█ Organizational structure implemented before IPO allowed capture of
synergies among Bandeirante, Escelsa and Enersul
Vanguarda Phase 2
Vanguarda Phase 1
– Establishment of standard policies and procedures among 3 companies
– Reduction in personnel: Voluntary Dismissal Program
• Cost fully booked in june/06: R$ 52 million
• Estimated reduction in personnel after conclusion: 16%
– Development of standard IT platforms
– Redesign of critical processes (Lean methodology)
Capture
of
Synergies
13
Bandeirante Escelsa Enersul
Jun
05
Jun
06
Jun
07
0.951.31
2.52
1.401.13
2.42
1.88
1.211.28
Jun
05
Jun
06
Jun
07
Jun
05
Jun
06
Jun
07
Curbing Losses
█ In 1H07, R$ 38 million were invested in actions aimed at cutting down
commercial losses (R$ 13 million in Opex and R$ 25 million in Capex).
~ 330k inspections in 1H07
~ 148k frauds identified
~ R$ 17 MM in revenues recovered
~ 700k inspections scheduled for 2007
Bandeirante’s delinquency rate in
1H07 affected by R$ 11.7 MM provision
for non-transfer of revenue by
collection agent
Commercial losses (% of energy distributed - last 12 months)
Delinquency (%)
Bandeirante Escelsa Enersul EDB
Jun
05
Jun
06
Jun
07
3.84.24.1
2.3 2.42.2
5.0 5.46.0
6.6
7.8
5.9
Jun
05
Jun
06
Jun
07
Jun
05
Jun
06
Jun
07
Jun
05
Jun
06
Jun
07
14
Grid Expansion
Grid Modernization
Automation, Telecom and IT
Actions to curb losses
TOTAL
Capex
•Excludes Capex for Universalization Program.
Capex Breakdown* (R$ MM)
2007 E
130
58
22
66
466
2005
109
122
92
323
2006
128
116
132
376
2007E
164
153
149
466
Bandeirante EnersulEscelsa
Other114
Vanguarda Project78
15
“Luz Para Todos” Program
█ In 1H07, R$ 26 million were invested in the “Luz Para Todos” Program
10%
40%
10%
10%
15%
35%
15%
65%
55.5
46.3
Escelsa
CDE RGR Own resources State Gov.
Enersul
Investments in the LPT Program – 2007E
(R$ MM)
New connections
(*units until August 17, 2007)
461
2,048
3,852
431
2,684
8,534
11,908
858
4,000
11,000
4,0085,479
9,860
2,3003,399
6,717
2004 2005 2006 2007* 2007E 2008E
Bandeirante EnersulEscelsa
Note: Bandeirante – LPT Program concluded in 1H07. Total investment in 2007 was R$ 3.5 million.
16
Tariff Readjustment Mechanism
Parcel A (non-manageable costs)
Energy Purchases Transmission CostsSectorial
Taxes
x x
Parcel B (manageable costs)
Return on Investment Regulatory Depreciation
Net
Regulatory Asset Base
Rate of
Return
Efficient Operating Costs
Gross
Regulatory Asset Base
Depreciation
Rate
Reference
Company
17
Review 1 Review 2X=0; infl. =0 X>0; infl. =0
Su
pp
ly C
ha
rge
s
Time
Tariff Review Process
T1
T3
T2
EFFICIENCY
GAINS
18
Financial Adjustments
2006 Financial Adjustments to be excluded
Energy Purchase
Sectorial Taxes
Transmission Charges
Return on Investment
Assets Reinstatement
Reference Company
Other Revenues
Escelsa’s Tariff ReviewBreakdown of Tariff Readjustment Index - August 2007
-2.59%
Parcel
Tariff
Realignment Rate
-1.40% A
-0.89%
Average tariff
readjustment
-6.92%
-1.07%
Parcel
-9.62%
-0.74% B
0.08%
Variation in
Accounts of Financial Nature
-0.31%
-2.70%
4.76%
-7.46%
X Factor = 1.45%
19
Bandeirante’s Tariff ReviewPreliminary Figures
Average tariff
readjustment
-11.97%
Gross RAB R$ 2,694 MM
Net RAB R$ 1,287 MM
Model Company R$ 237 MM
Delinquency R$ 12 MM
Regulatory Depreciation 4.62%
Required Revenue* R$ 1,976 MM
X Factor: -1.51%
• Net of Other Revenues
Generation
21
+25MW **
4th Engine
+50MW *
Installed Capacity
* Capacity added in 2006** Startup of operations in 1Q07
Lajeado
Peixe Angical
+452MW *
Suiça
Alegre
Jucu
Fruteiras
Paraíso
Viçosa
Rio Bonito
São João
Mascarenhas
Mimoso
São João I
São João II
Coxim
Costa Rica
Corumbá
Installed capacity and Assured Energy
(MW / Average MW)
2005 2006 2007E
Installed Capacity Assured Energy
1,0431,018
516
334
631 645
22
Volume of Energy Sold
(GWh)
Volume of Energy Produced
(GWh)
Operating Performance
2005 2006 1H06 1H07 2005 2006 1H06 1H07
2,756
2,352
3,929
4,747
1,486
2,0532,409
2,655
+62.1%
+42.6%
+29.3%
+101.8%
23
Contracting Schedule
2008 2012 2013 2014 2015 2016
Energy Available for Sale
(Average MW)
11
2009 2010 2011
11 11 11 11
45
83
130
151
Average Price
R$ 81.4/MWh(2Q07)
24
█ Construction to start upon granting of Installation License: – PCH Santa Fé: +29 MW (startup estimated for 2009)– Estimated capex: R$ 120 MM
█ Power upgrades: + 50 MW– Approved by ANEEL: +25 MW– Under Study: +25 MW
█ Coal-fired thermal plants in partnership with MPX Mineração e Energia: + 525 MW (50% of each of the following projects)– UTE Maranhão: + 350 MW– UTE Pecém: + 700 MW– Estimated capex: 50% of US$ 1.9 bi
█ Small Hydro Plants (PCHs): + 438 MW– Projects expected to be concluded and presented to ANEEL in
1Q08: +212 MW– Projects expected to be concluded and presented to ANEEL in mid
2008: +226 MW– Estimated capex: R$ 100 – 120 MM / plant
█ Feasibility Studies for 7 medium sized hydro power plants: +590 MW
24
Growth Opportunities
Commercialization
26
Short-term Price Outlook
(R$ / MWh)
Energy Prices
History CCEE official
Note: January 2002 price affected by energy rationing
50
100
150
200
250
300
Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07
27
Operating Performance
Volume of Energy Commercialized
(GWh)
Number of Large Customers
(Units)
2005 2006 1H06 1H07
3,812
5,509
2,754 3,031
2,567
3,6123,503
6,7026,379
Others ENBR Companies
2005 2006 1H06 1H07
5243
63 64
1,193
581749
+5.1%
+3.1%
+20.9%
+1.6%
Enertrade’s
Market Share as
of Jun 07: 8.24%
1H07: Financial Performance
29
Financial PerformanceDistribution
2005 2006 1H06 1H07
2,0251,695
4,1464,071
Net Revenues
(R$ MM)
Bandeirante EnersulEscelsa
2005 2006 1H06 1H07
454
333
829801
2005 2006 1H06 1H07
174
78
332361
Ebitda
(R$ MM)
Net Income
(R$ MM)
49% 49%
48% 48%
31%
31%31%
21% 20%
21%21%
34%46%
44% 42%
33%
31%34%
35%21%
25%
24%
43%41%
11%
42%
37%
15%
22%
30% 30%
43%
45%
42%44%
14%
+1.8%
+19.5%
+3.5%
+36.3%
-7.9%
+123%
30
Financial PerformanceGeneration
2005 2006 1H06 1H07
268
194
458
173
Net Revenues
(R$ MM)
Energest EDP LajeadoEnerpeixe
2005 2006 1H06 1H07
193
101
273
101
2005 2006 1H06 1H07
85
54
131130
Ebitda
(R$ MM)
Net Income
(R$ MM)
45%28%
31% 31%
51%
44%
52%55%
21%
24%
17%
49%29%
41%26%
46%
25%
56%
51%
25%
33%
17%
40%50%
45%13%
41%
30%
40%
87%
19%
19%
15%
+165%
+38.4%
+170%
+91.5%
+0.8%
+56.6%
31
2005 2006 1H06 1H07
2428
3
54
2005 2006 1H06 1H07
1821
9
48
Financial PerformanceCommercialization
Net Revenues
(R$ MM)
Ebitda
(R$ MM)
Net Income
(R$ MM)
2005 2006 1H06 1H07
298252
495431
+14.9%
+18.2%
-93.7%
-12.6%
-81.0%
-15.2%
32
EBITDA Margin
EBITDA 1H07 x 1H06
Ebitda
(R$ MM)
444
650
2
109
11819
(13)(29)
June/06 Enertrade Generation Distribution Accounting
and other
op.
expenses
Contingencies Bad
debt
June/07
28.6%23.4%
33
Manageable Expenses
R$ million 2007 2006 Chg.
Personnel 155.9 197.4 -41.5 -21.0%
Material 19.7 19.9 -0.3 -1.3%
Third-party services 163.3 136.0 27.3 20.0%
Provisions 78.5 37.0 41.5 112.1%
Other 54.3 40.1 14.3 35.6%
Total 471.7 430.4 41.2 9.6%
Chg.%1
st Half
Expenses
1,621.1
1,149.4
(71%)
471.7
(29%)
Note: Depreciation and amortization were excluded
+ R$ 30.5 MM: allowance for bad debt (including R$
11.7 MM due to the non-transfer of revenues from a collection agent and R$ 6.0 MM in receivables from Ampla)
+ R$ 11.0 MM: civil and labor contingencies
Non-manageable expenses
Manageable expenses
Expenses Breakdown – 1H07
(R$ MM)
Provisions
Breakdown of Manageable Expenses
34
R$ million 1H07 1H06 Chg.%
Financial Revenues 119.3 137.5 -13%
Financial Expenses (189.3) (188.8) 0%
Net FX Result (28.9) (34.5) -16%
Net Result from Swap Operations (77.9) (73.4) 6%
FX gains (loss) 49.1 38.9 26%
TOTAL (98.9) (85.8) 15%
Financial Result
█ The decrease in financial revenues reflects mainly the reduction in the
return on regulatory assets due to the fall in SELIC interest rate
35
Indebtedness
*** Includes Selic, CDI, IGP-M and INPC
* Includes R$ 5.5 million of deposits related to debt with BNDES
** Ratio: Net Debt / EBITDA 12 months
Indebtedness – 1H07
(Net Debt Evolution - R$ MM)
Total Debt Index (Jun/07)
Average Cost of Debt2Q07: 11.3%
1,8891,850
Long
Term
2,286
(425)
(698)
Short Term726
Gross DebtJun/07
(-) Cash and
Marketable Securities *
(-) Regulatory Assets and Liabilities
Net DebtJun/07
Net DebtMar/07
3,012
Net Debt / Ebitda
(Jun/07)
59%34%
5%2%
US$
Fixed rate
Long Term Basic Interest Rate (TJLP)
Floating rates ***
2,345
1,7021,879 1,850
1,889
3.0
1.9 1.81.6 1.5
2004 2005 2006 Mar/07 Jun/07
Net Debt (R$ MM) Net Debt / Ebitda (x) **
36
Debt Maturity ScheduleJun/07 vs Jul/07*
█ Escelsa: Debentures Issuance in Jul/07
– R$250 Million
– Term: 7 years
– Interest and Principal grace period: 5 years
– Rate: 105% of CDI
* Debentures issuance was concluded on July, 2007
After Debentures issuance and Senior Notes repaymentAs of June 30, 2007
Decrease in short-term debt
Extension of average term
Decrease in average cost
Debt Maturity Schedule
(R$ MM)
131124158
179
491512529
698
583
307
Cash
Jun/07
2007 2008 2009 2010 2011 2012 2013 2014 After 2014
131
207241
262
491512529
307
2007 2008 2009 2010 2011 2012 2013 2014 After 2014
220
37
Capex
Capex Breakdown*
(R$ MM)
2006
375
217
592
466
192
658
2007E
173
19
192
1H07
Distribution Generation
* Does not include Universalization Program
38
Stock Performance in 2007
Market Capitalization: R$ 5.7 billion
(ENBR3 x Indexes Performance)*
80
90
100
110
120
130
140
12/28/2006 1/22/2007 2/16/2007 3/13/2007 4/7/2007 5/2/2007 5/27/2007 6/21/2007 7/16/2007
13.813.515.4
7.210.4
8.3
Jan 07 Feb 07 Mar 07 Apr 07 May 07 Jun 07 Jul 07
5.5
Daily Average Volume
(R$ MM)
ENBR3 = 8.5%
IBOV = 21.8%
IEE = 21.9%
IBX = 21.5%
* Updated until July 31, 2007
www.energiasdobrasil.com.br
September 2007