Rede Energia SA: modeFinance Credit Report

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modeFinanceTM HeadquarterBuilding A - AREA Science ParkPadriciano 99 - 34149 Trieste - ItalyPh.: +39 040 375 5337Fax: +39 040 375 [email protected]

askMORETM is a registered mark of modeFinanceTM

REDE ENERGIA S.A.Tuesday, 27 November 2012

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D C CC CCC B BB BBB A AA AAA

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D C CC CCC B BB BBB A AA AAAnot

available

non return extremlypathological

pathological highdanger

weak sufficient adequate good very

strongextremely

strong

Company name REDE ENERGIA S.A.

Identification number Not available

Country Brazil

ZIP code and city 01311 936 - SAO PAULO

Address CERQUEIRA CESAR, 5 ANDAR

+55 11 3066 2021

www.gruporede.com.br

[email protected]

Legal form Not available

Account Consolidated

Incorporation date 1929

NACE 2 Sector 3511 - Production of electricity

Listed

Status Active

MORE Credit limit 8,200,000 e

31/12/2011 31/12/2010 31/12/2009

Turnover (th e) 3,248,684 3,043,787 2,026,852

Rating CCC CCC B

Probability of default 19.00% 19.00% 4.70%

Confidence Level 100% 100% 100%

Solvency ratios

Leverage ratio 19.74 8.63 9.34

Total asset/Total liabilities 1.05 1.12 1.11

Liquidity ratios

Current Ratio 0.61 0.82 0.86

Quick Ratio 0.60 0.81 0.85

Profitability and economic equili-

brium ratios

Return on investement ROI (%) 12.09 5.18 16.58

Return on equity ROE (%) -110.30 -28.09 1.80

Asset turnover 0.60 0.54 0.44

Interest paid weight 1.16 1.49 0.97

Gross Profit/Operating revenue 0.27 0.20 0.34

Interest Coverage ratios

EBIT interest coverage ratio 0.50 -0.23 0.41

Analysis and trend of financial

strength


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modeFinance TM srlVAT number [email protected]

Area Science Park,Padriciano 99. 34149 Trieste, ItalyTel. +39 040 3755337Fax +39 040 3756741

Sector Analysis

Company Healthy Balanced Vulnerable Risky

Solvency ratios

Leverage ratio 19.74 0.49 2.13 4.40 -3.45

Total asset/Total liabilities 1.05 3.01 1.47 1.18 0.97

Liquidity ratios

Current Ratio 0.61 2.20 1.11 0.80 0.41

Quick Ratio 0.60 1.74 0.97 0.73 0.40

Profitability and economic equilibrium ratios

Return on investement ROI (%) 12.09 14.97 5.86 2.22 -1.71

Return on equity ROE (%) -110.30 14.41 8.17 -2.29 -102.40

Asset turnover 0.60 0.46 0.37 0.32 0.24

Interest paid weight 1.16 0.04 0.31 0.60 -0.11

Gross Profit/Operating revenue 0.27 0.46 0.41 0.29 0.11

Interest Coverage ratios

EBIT interest coverage ratio 0.50 26.32 2.91 0.78 -0.72

Cash Conversion Cycle (days)

Days Sales Of Inventory (DIO) 2 15 18 16 22

Days Sales Outstanding (DSO) 85 42 41 29 29

Days Payable Outstanding (DPO) 38 17 31 20 19

Cash Conversion Cycle (DIO + DSO - DPO) 49 30 29 16 75

Numer of analyzed companies - 74 325 125 30

(Average) Rating CCC A BB B CC

The sector has been chosen according to:

international companies in the sector NACE 2 3511 with financial data of year 2011.


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Sector Analysis - Graphs


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Balance Sheet

BALANCE SHEET (th e) 31/12/2011 31/12/2010 31/12/2009

Accounting practice IFRS IFRS Local GAAP

Exchange rate BRL - EUR 0.41578 0.44365 0.39885

Number of months 12 12 12

Total assets 5,378,497 5,607,932 4,656,074

Fixed assets 3,969,870 4,267,460 3,632,016

Intangible fixed assets 2,331,940 2,439,648 208,479

Tangible fixed assets 82,947 97,391 2,324,605

Other fixed assets 1,554,984 1,730,421 1,098,932

Current assets 1,408,627 1,340,472 1,024,058

Stocks 17,709 20,035 15,606

Debtors 754,195 645,760 537,647

Other current assets 636,722 674,677 470,805

Cash & cash equivalent 285,262 337,027 165,104

Shareholders funds 259,354 582,597 450,106

Capital 558,801 317,014 284,998

Other shareholders funds -299,447 265,583 165,108

Total liabilities 5,119,143 5,025,335 4,205,968

Non current liabilities 2,796,802 3,388,523 3,022,066

Long term debt 1,424,745 2,054,944 1,632,113

Other non-current liabilities 1,372,057 1,333,579 1,389,954

Current liabilities 2,322,341 1,636,812 1,183,902

Loans 1,129,278 763,043 453,016

Creditors 342,417 271,572 250,398

Other current liabilities 850,646 602,196 480,488

Total shareh. funds & liab. 5,378,497 5,607,932 4,656,074

NET DEBT (th e) 31/12/2011 31/12/2010 31/12/2009

Short term debts 1,129,278 763,043 453,016

Long term debt 1,424,745 2,054,944 1,632,113

Cash & cash equivalent 285,262 337,027 165,104

Net debt 2,268,761 2,480,961 1,920,024

31/12/2011 31/12/2010 31/12/2009

Working capital 429,487 394,223 302,855

Net Current Assets -913,715 -296,340 -159,844

31/12/2011 31/12/2010 31/12/2009

Days Sales Of Inventory (DIO) 2 2 3

Days Sales Outstanding (DSO) 85 77 97

Days Payable Outstanding (DPO) 38 33 45

Cash Conversion Cycle (DIO + DSO - DPO) 49 46 55


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Income Statement

INCOME STATEMENT (th e) 31/12/2011 31/12/2010 31/12/2009

Accounting practice IFRS IFRS Local GAAP

Exchange rate BRL - EUR 0.41578 0.44365 0.39885

Number of months 12 12 12

Sales 3,235,798 3,043,787 2,012,010

Revenues growth (%) 6 51 -

Other revenues +/- variation in inventories and contract in progress + Fixed assets

own construction capitalized12,886 0 14,842

Operating revenue / turnover 3,248,684 3,043,787 2,026,852

Total operating costs 2,870,710 3,144,987 1,724,081

Costs growth (%) -9 82 -

Service costs - 2,719,568 1,455,169

Material costs - 14,582 5,601

Costs of employees - 236,513 103,411

EBITDA 553,966 73,123 462,670

Depreciation 175,992 174,323 159,899

EBIT 377,975 -101,200 302,771

Financial P/L -479,939 -42,290 -277,140

Financial revenue 379,997 391,799 253,140

Financial expenses 859,936 434,088 530,280

Interest paid 752,348 434,088 746,316

P/L before tax -101,965 -143,490 25,632

Extr. and other P/L 17,857 2,663 -64,243

Extr. and other revenue - - -

Extr. and other expenses - - -

P/L before tax + Extr. and other P/L -84,107 -140,826 -38,611

Taxation 201,966 22,813 -46,723

P/L for period -286,073 -163,639 8,112

31/12/2011 31/12/2010 31/12/2009

Costs of Good Sold 2,364,118 2,449,974 1,340,905

Gross Profit 884,566 593,813 685,947

Other Operating Expenses 506,592 695,013 383,176

31/12/2011 31/12/2010 31/12/2009

Cash flow -110,081 10,684 168,011

Added value - 658,472 1,064,461

31/12/2011 31/12/2010 31/12/2009

Number of employees 7,716 7,100 -


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Evolutions and trends


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Qualitative information

Full overview The company, formerly known as Caiua Servicos de Eletricidade S. A., is a publicly quoted firm engaged in the

provision of electric services in Brazil. It was incorporated in the year 1929 and conducts its business from its

registered head office located in Sao Paulo. The company is listed on the Sao Paulo Stock Exchange under the

ticker symbol REDE3. The company is recognized as one of the largest Brazilian electricity firms. It is specializes

in distributing electricity to more than 6 million people in 578 municipalities in seven different Brazilian states,

such as Sao Paulo, Minas Gerais, Tocantins, Mato Grosso, Mato Grosso do Sul and Para. It distributes 18.500

gigawatts/hours per year through its 563 substations, which travels 15.00 km of transmission lines and 300.000 km

of distribution networks. The company serves customers in the residential, commercial, industrial, and municipal

sectors. The company’s mission is to provide electricity services by adopting social and environmental responsibility

practices aimed at the satisfaction of customers, employees, suppliers and shareholders, thus contributing to Brazil’s

development.

History Formerly known as Caiua Servicos de Eletricidade S. A.

Primary business line Engaged in the provision of electric services in Brazil.

Secondary business line Not available.

Main activity Services.

Secondary activity Not available.

Main products and services Electric services.

Size estimate One of the largest Brazilian electricity firms.

Strategy, organization and policy To provide electricity services by adopting social and environmental responsibility practices aimed at the satisfaction

of customers, employees, suppliers and shareholders, thus contributing to Brazil’s development.

Strategic alliances Not available.

Membership of a network Not available.

Main brand names Not available.

Main domestic country Brazil.

Main foreign countries or regions Not available.

Main production sites Not available.

Main distribution sites Not available.

Main sales representation sites Not available.

Main customers Residential, commercial, industrial, and municipal sectors.


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Auditor/Advisor/Bank

name type address

DELOITTE TOUCHE TOHMATSU - AUDITO-

RES INDEPENDENTES

Auditor -

KPMG AUDITORES INDEPENDENTES Auditor -

Board

name date of birth nationality function

Mr. Mauricio Aquino Halewicz - - Chairman

Sharehoders (the first twenty shareholders ordered by Direct %)

EMPRESA DE ELETRICIDADE VALE PARANAPANEMA S/A. Rating:

Country ISO code BR Operating Revenue (MIL $) 49.33

NACE Rev. 2, Core code - Total Assets (MIL $) -

Direct % MO Number of Employees 4

Total % - Information date 2012/05

Address : Not available

DENERGE DESENVOLVIMENTO ENERGETICO SA Rating:

Country ISO code BR Operating Revenue (MIL $) -


Direct % 14.83 Number of Employees 0



BNDES PARTICIPACOES S.A. BNDESPAR Rating: BBB


NACE Rev. 2, Core code - Total Assets (MIL $) 59532.11

Direct % - Number of Employees 0




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Subsidiaries (the first twenty subsidiaries ordered by Direct %)

CAIUÁ - DISTRIBUIÇÃO DE ENERGIA S/A. Rating:




Total % 100.00 Information date 2010/12

COMPANHIA NACIONAL DE ENERGIA ELETRICA Rating:





EMPRESA DE DISTRIB DE ENERGIA VALE PARANAPANEMA SA Rating:



Direct % 100.00 Number of Employees -


QMRA PARTICIPACOES S.A. Rating:





TANGARÁ ENERGIA S/A. Rating:





REDE POWER DO BRASIL S.A. Rating:





EMPRESA ENERGÉTICA DE MATO GROSSO DO SUL S.A. - ENERSUL Rating: BBB





REDE DE ELECTRICIDADE E SERVIÇOS SA Rating:






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COMPANHIA FORÇA E LUZ DO OESTE. Rating:





EMPRESA ELETRICA BRAGANTINA SA Rating:





COMPANHIA DE ENERGIA ELÉTRICA DO ESTADO DE TOCANTINS CELTINS. Rating:





CENTRAIS ELETRICAS DO PARA S.A. CELPA Rating: CCC





VALE DO VACARIA ACUCAR E ALCOOL S/A. Rating:





CENTRAIS ELETRICAS MATOGROSSENSES SA - CEMAT Rating: BB



Direct % MO Number of Employees -


COMPANHIA TÉCNICA DE COMERCIALIZAÇÃO DE ENERGIA. Rating: CCC



Direct % MO Number of Employees 6



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ASKMORE rating guide

General vision A credit rating is an opinion of the general creditworthiness of an obligor (issuer rating), or the creditworthiness of

an obligor in respect of a specific debt security, or other financial obligation (issue rating), based on relevant risk

factors.

The Multi Objective Rating Evaluation (MORE) model is essentially used to assess the level of distress of industrial

companies by using data included in financial statements.

The basic idea of the model is to analyze a set of financial and economic ratios in a predictive corporate bankruptcy

model with the purpose of creating a fundamental credit rating model for each industrial sector. Results of the

model are obtained by applying newly developed numerical methodologies, drawing together financial theory,

data mining and engineering design methodologies. The heart of MORE is a multi dimensional and multi objective

algorithm that produces a classification of each company, by taking into account any attributes (such as sector and

country) characterizing a firm.

The model gives the opportunity to assign a rating to a company even without considering a complete data analysis

and allows to process quality information. It induces a better understanding of a company’s strength and weakness

thanks to sophisticated data mining tools and taking into account the analyst knowledge.

The MORE rating vision is to look at the fundamental economics of the company. The main idea is to evaluate the

rating observing every aspect of the economical and financial behavior of the company: better is the equilibrium

between the different aspects, better will be the final rating.

This is done studying, evaluating and aggregating the most important sections of the financial and economic

behavior of a company such as: profitability, liquidity, solvency, interest coverage and efficiency.


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Rating scale

Rating class Rating macro class Assessment

AAA

Healthy

The company’s capacity to meet its financial commitments is extremely strong. The company shows an excellent

economic and financial flow and fund equilibrium.

AAThe company has very strong creditworthiness. It also has a good capital structure and economic and financial

equilibrium. Difference from AAA is slight.

AThe company has a high solvency. The company is however more susceptible to the adverse effects of changes in

circumstances and economic conditions than companies in higher rated categories.

BBB

Balanced

Capital structure and economic equilibrium are considered adequate. The company’s capacity to meet its financial

commitments could be affected by serious unfavourable events.

BBA company rated BB is more vulnerable than companies rated BBB. Furthermore the company faces major ongoing

uncertainties or exposure to adverse business, financial, or economic conditions.

B

Vulnerable

The company presents vulnerable signals with regards to its fundamentals. Adverse business, financial, or economic

conditions will be likely to impair the company’s capacity or willingness to meet its financial commitments.

CCC

A company rated CCC has a dangerous disequilibrium on the capital structure and on its economic and financial

fundamentals. Adverse market events and an inadequate management could affect with high probability the

company’s solvency.

CC

Risky

The company shows signals of high vulnerability. In the event of adverse market and economic conditions, the

company’s strong disequilibrium could increase.

CThe company shows considerable pathological situations. The company’s capacity to meet its financial

commitments is very low.

D The company has not any longer the capacity to meet its financial commitments.


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Fundamental Credit Rating Ratios

Analysis area Ratio Assessment

Solvency ratios

Leverage ratioThis measures the level of total liabilities of the company in comparison

with equity.

Assets to debtThis indicates company’s solvency. The company shows a level of deficit

when the value of this ratio is under one unit.

Financial ratios Fixed Assets coverage ratioThis is calculated only for holdings. It measures the capital structure i.e.

whether a company covers the fixed assets with long term capital.

Liquidity ratios

Current ratioThis measures whether a company has sufficient short-term assets to cover

its short-term liabilities.

Quick ratioThis compares current liabilities only to those assets that can be readily

turned into cash.

Profitability and economic ratios

Return on Investement(ROI)This measures the profitability of company investments without regard to

the way the investment is financed.

Return on Equity(ROE) This measures the profitability of the equity.

Asset turnover

This indicates the investments turnover with regards to sales. The level

assumed from the ratio depends on the sector in which the company

operates.

Profit margin This indicates the profitability of sales.

Interest coverage ratio Interest Paid coverage

This indicate the ability of the company to cover interest expenses through

the economic margins (Gross profit and EBIT) and through the cash flow

from operating activities.


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MORE Credit Limit, Probability of default and Confidence Level

MORE Credit Limit MORE Credit limit is the estimation of the amount of maximum credit that is possible to assign on a commercial

relationship with the analyzed company with an outlook of one year.

modeFinance used the following values associated with the company analyzed while computing the credit limit:

• Size;

• Years in Business;

• Average number of suppliers;

• Liquidity of the company and the comparison with its sector;

• The funds dedicated to be paid to suppliers;

• The likelihood that a company may pay its debts in the next 12 months (MORE Ratings).

The credit limit in this report is merely a suggested value of commercial credit limit calculated on the basis of annual

public data. This value should be reviewed by paying attention to the Confidence Level value and by using other

information such as other business information, news... etc; and private information such as the relationship with

client, history of payments, guarantees and the knowledge of the sector.

Probability of default e Confidence

Level

In addition to the MORE Rating, modeFinance also estimates the probability of default and provides a level of

confidence. The probability of default is the degree of certainty (in quantitative terms) that the company will go

into default.

As the probability of default is strongly affected by the economic climate that the company is operating in,

companies in the same MORE class will not necessarily have the same probability of default.

The MORE model can produce a MORE rating even if there is missing data by using an associated confidence level:

Confidence =

∑Available Information∑

Total Information

The level of confidence does not indicate financial confidence in the company. It is a reflection of the variations in

availability of financial data across Europe due to filing regulations and suggests the degree of financial detail the

MORE rating is able to take into account for each company.

For companies with fully populated records a confidence level of 100% would be applied: companies where no

financial data is provided, 0%. This puts the MORE rating in a context for the user and aids interpretation.


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Notes and disclaimer

NOTES modeFinance has based the present analysis on the company available financial statements, coming from one or

more of the following sources: local providers, Commercial Register (Companies House), websites, modeFinance’s

database etc.

DISCLAIMER All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any

form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of

the publisher modeFinance. The facts of this report are believed to be correct at the time of publication but cannot

be guaranteed. Please note that the findings, conclusions and recommendations that modeFinance delivers will

be based on information gathered in good faith from both primary and secondary sources, whose accuracy we

are not always in a position to guarantee. As such modeFinance can accept no liability whatever for actions taken

based on any information that may subsequently prove to be incorrect.

Contacts

Company modeFinance

Products MORE rating

Where AREA Science Park

34149 Trieste, via Padriciano 99 - ITALY

Info [email protected]

web www.modefinance.com

Phone +39 040 3755337

Rede Energia SA: modeFinance Credit Report

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Transcript of Rede Energia SA: modeFinance Credit Report