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Latin Energy 2005December, 2005
Latin Energy 2005December, 2005
• Shareholding Structure
• Concession Area
• Market and Operational Performance
• Tariff Adjustment
• Financial Results
• Conclusion
3
Shareholding StructureShareholding Structure
0.73% PN
100.00%
AESAES BNDESBNDES
BrasilianaBrasiliana
Minorities Fed. Gov.
Minorities
49.99% ON
100.00% PN50.01% ON
98.26%
1.74%
62.85% PN 77.81% ON
AES Transgás AES Elpa
7.38% PN
2.16% ON
29.05% PN
BNDES
20.03% ON
4
Concession AreaConcession Area
• Largest electricity distribution company in Latin America in terms of revenue
• Net Revenue in 2004 – R$ 7,394 million
• Density of billed energy consumption: 7,220 MWh/Km2
• Attractive concession area in Brazil• Demographic density
• Solid economic base
Brazil Eletropaulo %
Km² 8,547,403 4,526 0.05%
Population 184,434,438 16,062,101 8.71%
Energy Distributed (GWh/year) 320,772 35,341 11.02%
5
Consumer Market ProfileConsumer Market Profile
32.0%
24.7%
26.9%
9.3%7.1%
9m 2004 - GWh 9m 2005 - GWh
32.5%
21.1%
26.4%
7.3%
12.7%
40.7%
20.4%
29.9%
1.5%7.5%
41.2%
19.2%
3.3%
29.8%
6.6%
9m 2004 – R$ 9m 2005 – R$
cons
umpt
ion
reve
nue
Residential
Industrial
Commercial
Others
TUSD
Consumption- GWh
1800.0
2200.0
2600.0
3000.0
1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05
6
Consumption in GWhConsumption in GWh
NOTE: Charts do not consider own consumption
2,433 1,8691,982
3,458
8,417
6,4907,064
8,819
5,7437,175
Residen
tial
Indus
trial
Commerc
ial
Other
TUSD
9m 2004 9m 2005
4.8%
-11.5%1.6%
-18.5%
24,404
27,17826,273
23,720
Market Billed Market Billedwith TUSD
9m 2004 9m 2005
85.0%
3.4%-2.8%
7
Retention of Potentially Free ConsumersRetention of Potentially Free Consumers
3.1%
13.4%
83.5%
Captive Consumers Free Consumers Potentially Free Consumers
Captive Consumers X Free% total load of concession area of 2005 (e) 36,511 GWh
Net Revenues with TUSD - R$ million
1930
3848
54
7884
1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05
8
Energy SupplyEnergy Supply
2003 2004 2005
Auction
Other bilateral contracts
Bilateral contract withTietê
Initial contracts
Itaipu
2003 2004 2005
Auction
Other bilateral contracts
Bilateral contract withTietê
Initial contracts
Itaipu32%32% 32%32% 31%31%
60%60%
51%51%
19%19%
7%7%15%15%
21%21%
2%2%
27%27%
2%2%1%1%
GWhGWh
• Initial Contracts end by January 2006
9
Loss Reduction Loss Reduction –– YTD 2005YTD 2005
• 370 thousand inspections • Revenue recovery of R$ 86.8 million (billed value) • Annual recovery perspective of 320 GWh (agreements)
Losses
7.93% 7.75% 7.41%
13.01%13.35%13.53%
2004 1H05 3Q05
Commercial Total
10
Tariff AdjustmentsTariff Adjustments
Annual AdjustmentTariff Adjustment Rate
Periodic ReviewTariff Repositioning
VPA + VPB (IGPM +/- X)Revenue
(Required Revenue – Deductions from Required Revenue)Actual Revenue
Review 2003 Review 2007Review 2007Privatization 1998
Annual Adjustment (Factor X = 0 in the first 4 years)
0 1 2 3 4 5 6 7 8 0 1 2 3 4 5 6 7 8 9 109 10YearYear
Annual Adjustment(Factor X = 0)
2.12%2.12%
11
3.7%6.3% 4.5% 2.5% 3.6% 4.8%
7.5%7.6% 12.1%
11.8% 7.3%1.6%
-4.3%1.7%
16.9%7.1%
-10%
-5%
0%
5%
10%
15%
20%
1999 2000 2001 2002 2003 2004 2005
Parcel B Parcel A PIS/COFINS IGPM
Tariff EvolutionTariff Evolution
Adjustment
2.12%
6.4%
X Factor = 2.43%
18.6%
11.6%
14.3%17.6%
11.1%
13.8%
12
R$ 9,885R 8,275Gross remuneration base
R$ 42TOTAL
R$ 99R$ 426R$ 327Depreciation
R$ 4,771R$5,242Net remuneration base
(R$ 81)R$ 814R$ 895Remuneration
R$ 24R$ 24-Additional O&M costs
4.31%3.95%Depreciation rate
17.07%17.07%Remuneration rate
VariationPresentPreviousItem – R$ thousand
Completion of Tariff Review 2003Completion of Tariff Review 2003
• Authorized increase in adjustment rate from 10.95% to 11.65%• R$ 42 million added to the remuneration granted for tariff year 2003-2004
• The accrued value amounted R$ 106.9 million, with an impact on 2Q05 results
• Recovery of resources will take place during tariff year 2005-2006
R$ 42
R$ 106.9
13
Net Revenues
ResultsResultsin R$ millionin R$ million
Adjusted EBITDA = EBITDA + RTE + all payments made by the Company with respect to pension fund obligations.
7551.060 1.272
963 827
1.3771.2561.343 1.4721.672
23,2% 22,9% 22,6% 23,5% 22,1%
2002 2003 2004 9m04 9m05
Adjusts EBITDA Adjusted EBITDA Margin
(871)
86 6
(12)
(204)
2002 2003 2004 9m04 9m05
(1.265)
24
(453) (434)(319)
2002 2003 2004 9m04 9m05
5.8006.462
7.430
5.370
6.257
2002 2003 2004 9m04 9m05
Adjusted EBITDA Margin
Financial Results Profit / Loss
490
400412
293 550
14
Negative Impacts Negative Impacts –– 3Q053Q05
Provision - Agreement signed with MGSP R$ thousand
MGSP debt balance provision (346.369)Financial Expenses - Present Value Adjustment Reversal 55.227Tax Effects (34%) - Credit 98.988Reversal of Tax Credit (36.143)
Net Effect on the Result (228.297)
increase in Pis/Cofins' taxes - Agreement with AES Tiet R$ thousand
Pis/Cofins payment to AES Tietê (43.692)Tax Effects (34%) - Credit 14.855
Net Effect on the Result (28.837)
Other impacts - 3Q05 R$ thousand
Allowance for doubtful debts - Other Municipal Governments (23.953)Present Value Adjustment - Other Municipal Governments (9.102)IPTU tax – MGSP – Monetary Correction (9.444)Diferred Amortization - Debt downpayment (15.992)Tax Effects (34%) - Credit 19.887Reversal of Tax Credit (14.810)
Net Effect on the Result (53.414)
Total - Net Effect on the Result (310.548)
2005 results were also affected by the recognition of R$256 million (9 months) in connection with ourpension fund obligations
In 2006, our results will still be affected by the remaining recognition of approximately R$340 million
15
186
370
203
297
33
3236
2003 2004 YTD 2005 2005
Capex Self Financed
Total 203
Total Recorded 239
Capex – YTD05
88
23
Loss Recovery 12
Personnel 53
Others 26
Customer Service and System Expansion
Maintenance
Self Financed 36
CAPEX CAPEX –– YTD 2005 YTD 2005 R$ millionR$ million
16
Consolidated IndebtednessConsolidated IndebtednessR$ millionR$ million
5,278 5,284 5,280
71%
23% 26%
29%
77% 74%
0%
50%
100%
2003 2004 3Q05ST LT
Short Term vs. Long Term
2,338
Debentures
BondsReprofilingOthers
Debt Evolution
46970
335 522 367
1,972
159
132
905506
474
144
444
43
9956
158285
9349
Dow-npayments
YTD05 4Q05 2006 2007 2008 2009 2010-17
R$ BNDES US$ *
Effective payments
Amortization Schedule
0%
50%
100%
2003 2004 3Q05
Local Currency Hedge Foreign Currency
3%
35%
62%
17%
83%
R$5,278 R$5,284
8%
90%
R$5,2802%
Hedging Strategy
1.4241.779 1.993
762
1.102 949
765
501
3.0912.403
253
819
2003 2004 3Q05
FCESP CVA/RTE Private Creditors
5,278 5,284 5,280
* Conversion rate on 09/30/2005 US$ 1,00 = R$2,2222
17
BONDS (June 2005)
2005 Debt Issuances2005 Debt Issuances
• Principal: R$ 474 million
• Tenor: 5 years
• Interest rate: 19.125% p.a.
• Interest and Amortization:
• semiannual interes, bullet principal
Debentures (September 2005)
• Principal: R$ 800 million
• Tenor: 5 years
• Interest rate: CDI +2.90% p.a.
• Interest and Amortization:
• Semiannual interest, Annual Principal
• Grace period: 23 months
Down payments made to banks
• Bonds: 50% R$237,030,000
• Debentures: 90% R$720,000,000
Basis: September 2005
DEBENTURES (September 2005)
Before Issuances
After Issuances
Before Issuances
After Issuances
Private Creditors’ Debt
128.1% CDI 126.7% CDI 1.58 years 2.75 years
Total Debt w/o FCESP
117.8% CDI 117.0% CDI 1.41 years 2.05 years
Total Debt 102.1% CDI 101.9% CDI 3.12 years 3.43 years
Average Cost Average Life
18
Financial StrategyFinancial Strategy
D2003
B2005
Ratings – International Scale
B –2004
• Successful issuances
• Estimates of growth in operating revenues and cash flow
• Expected decrease in debt servicing
• Better outlook for the electric sector
S&PFitch Ratings
19
ConclusionConclusion
• Affected by extraordinary events, the company had a loss of R$ 204 million on the 9 months of 2005
• Future Upsides: • Reduce in commercial losses
• Financial Strategy: Increase duration and decrease costs of debt
• Better results:
• No recurring provisions in regards to the City Government of São Paulo
• In 2007 the Pension Fund liability will be fully recognized in the Balance Sheet
The statements contained in this document relative to the Company’s business prospects, operating and financial result projections, and growth potential are mere forecasts based on the expectations of Company Management about the future. Such expectations are highly dependent on market shifts and on the performance of Brazil’s economy, the electricity sector and the international market. They are therefore subject to change.
Latin Energy 2005December, 2005
Latin Energy 2005December, 2005
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