Alupar Investimento SA

BOVESPA:ALUP4

Earnings Call Transcript 2021-Q2

[Operator]

Good afternoon, ladies and gentlemen. Welcome to the conference call of Alupar to discuss the results concerning the second quarter 2021. Audio and slides of the conference call [indiscernible], then Luiz Coimbra, our RI Manager will go over the numbers and then we are going to open for the Q&A for those who would like to add with any specific point.

[José de Godoy Pereira, executive]

Now let me share with you the highlights for 2021. First of all, we had our Shareholders General Meeting now on April 27. Dividends -- we're informed dividends will be distributed amounting to BRL 0.84 per unit, equivalent to BRL 0.28 per share totaling the amount of BRL 246,151,000. This amount will be distributed in 3 installments, May 31, already paid; August 30, the second; and then the third one on November 30.

The second relevant point that we also had in the company during this quarter was in April. The exit of FI-FGTS, it was a relevant shareholder of the company and had an interest paid, about 12% of capital or 35,152,000 units of interest of the company. The company had a follow-on then on April 20, 2021, the price was set at BRL 25.50 per unit, which is equivalent to 3.2% premium compared to the weighted average price of the trading floor in the past 60 days before the definition of the price. It's a very important relevant issue because FI-FGTS had already announced, for a number of years, the intention to sell the shares of Alupar as well as having intention of selling other shares. It was part of their schedule. So it means that the company liquidity has increased in a very relevant way, thanks to the year exit.

The third point, which is also relevant and occurred in the second quarter was the beginning of the operation of the hydroelectric plant of La Virgen in Peru. There are 3 machines currently in operation, full operation, totaling -- total installed capacity of 93 megawatts.

Let me now address the status of projects, projects which are already under construction. There are 3 of them under construction. The first one of TSM. It's a line that connects Rio de Janeiro to So Paulo. This project has already progressed to 84% of its physical development and a number of other activities such as line, receiving material equipment, metallic structures. They are all at 100% full execution.

The second project that is also under construction is ESTE. It's also a project that we have with [ EBTE ]. It's an association with TAESA. It's a project that has completed 82% of its physical construction portion of the other items, 100% fully executed material, hiring, land, regulation and all the other items have already covered 100%.

The third project in execution is TCC, it's a transmission line connecting Bogota to Pereira in Colombia. This project has been advancing in terms of land. The license has not been granted yet. It's lagging behind. There was a very relevant impact felt by COVID on land -- the permit release. But we are quite optimistic at obtaining this license shortly. Regardless of that, we have advanced wherever we can, specifically in terms of land use, we've already covered 84% of the properties fully acquired.

Let me now hand it over to Luiz Coimbra so that he and share with you the numbers, and then we can open for Q&A for all of those who would like to make clarifications. Thank you all very much.

[Luiz Coimbra, executive]

Good afternoon, everyone. Thank you for participating in Alupar's Second Quarter Results Call.

I'm going to start my presentation on Slide 8. I'm going to share the highlights here in IFRS, and then I'll move on to a more detailed explanation of regulatory affairs. Starting on Slide 8, net revenue totaled in this quarter, BRL 1.330 -- BRL 1.337 billion, 27.1% growth over the same period last year. This variation is explained by indexation in the amount of BRL 559.4 million, which was impacted mainly by the increase in IGP-M, which recorded [ 27.6% ] from June last year to May this year.

EBITDA totaled BRL 1.130 billion, over BRL 446 million, which were obtained in the second quarter 2020. The main impact from this calculation is an increase of BRL 262 million in revenue from transmission lines, which I have just explained, and the reduction of BRL 389.9 million in cost of infrastructure due to few investments in this quarter because of the beginning of operational 3 transmission stations, TPE, ETB and TCC. The graph of profit, we can see BRL 332 million in the quarter, over BRL 79 million, which were obtained in the same period last year. The main impact here was the increase of BRL 683.4 million that we had in EBITDA.

Now moving on to Slide 9. We can go into regulatory numbers. Starting here by revenues. Net revenues of BRL 579 million, 35.9% higher than BRL 426 million from second quarter last year. Basically, the main impact here were the increase of BRL 128 million in sales of these transmission units because of the beginning of the commercial operations of TPE, TCC and ETB. There was also BRL 52 million increase from generation, especially because of the increase of PLD in this quarter, which for our plan was on average BRL 222 million over BRL 68 million on average presented in the second quarter last year.

EBITDA totaled BRL 479 million in the quarter, increasing 49% compared to BRL 322 million, observing the second quarter last year. With the main impact of BRL 181 million that we had in sales, as I've just mentioned.

Now checking the chart of net income, it totaled BRL 79.8 million, 58.2% higher than BRL 50.4 million, which were observed in the same period last year. The main impact on profit, and I think the first relevant calculation BRL 157.2 million increase in EBITDA, which I have just explained. The second one was an increase of BRL 132.9 million in financial results, primarily due to increase of BRL 104.2 million in financial expenses of the 3 transmission plants that started operating, TPE, TCC, and ETB.

Moving on to the next slide, we can see indebtedness of holding. The controlling company had BRL 653.3 million in debt, BRL 163.5 million, below the BRL 816.8 million, which were observed in December 2020. This reduction is due to amortization, the sixth issuance of debentures that matured in April this year. Indebtedness of the holding now is just one single path, the seventh issuance of debenture, 100% indexed by CDI for maturity in the years of 2024 and 2025.

Moving on to Slide 11, we can show you consolidated debt. And our gross debt totaled BRL 9.281 billion, cash position of BRL 1.791 billion, totaling debt of BRL 7.490 billion. Looking closer at the debt profile, there had been no significant changes. Most of our debt still results of 54%, and it has been indexed by IPCA followed by CDI with 26%. And currency debt with debt related to projects that are currently being implemented in Colombia and Peru and as this quarter amounting to 11% of total indebtedness of the company.

Next slide now, we can show the data amortization schedule. So consolidated debt profile has remained quite elongated. 38% of maturities are concentrated after 2026. The holdings has the maturity of the seventh issuance of debentures distributing the years of 2024, 2025 and transmission generation assets have maturities distributed throughout the years is according to the expectation of operating cash generation of each of the assets. In this quarter, when we look at the breaches, we can see that we have captured an average, for TCE, amounting to 40 -- $45 million. This loan was taken to pay the bridge that matured in April. It was, to some extent, a rollout of debt. At TCE, we already have a long-term funding contract fully signed, but the lease of resources is conditioned to the issuance of the installation license.

Now the next slide of the presentation, with the last slide, I would like to show you the performance of our company's share. Year-to-date, based on the price last year. So Alupar, last -- yesterday, Alupar's shares represented a devaluation of 4.45% compared to a devaluation of electric energy index of 4.97%. Analyzing financial volume, year-to-date, BRL 21.8 million is the average per day of negotiation, an amount which is higher than BRL 20.3 million year-to-date same period last year. And since the divestments of FI, on average, it has been BRL 25.2 million trade.

With that, I close my presentation, and now we can open for the Q&A session.

[Operator]

The first question comes from Guilherme Lima of Santander.

[Guilherme Lima, analyst]

I have 2 questions. First, [ T&E ], if you could give us an update and correlate with some elements of the privatization of Eletrobrs. And the second question about growth. Are you analyzing some transmission assets in the market such as [ a south gate ]? Are you going to be part of the transmission auction at the end of the year? And how have you been analyzing the potential and the profit of this renewable energy projects, considering the payout of dividends, it seems to make sense in the short term. What is your take on it?

[José de Godoy Pereira, executive]

Presenting -- first of all, concerning D&A, we have an ongoing process. I think that is part of Eletrobrs law. It does not change the cycle of the project. This project had been already been considered a national defense project, and there is no need for a license. But there is a problem with indigenous communities. We cannot succeed in having the project without having the agreement of these indigenous populations. That's a practical issue. It's no use simply getting there going into their indigenous reserved area and so on. We have to do it with the agreement of the local population.

This week, for example, we are going to have a meeting with the indigenous leaders. It's moving on and we believe that we can succeed. Said that there is still a number of conditions that we have to meet. It depends on an amendment of our concession contract. It still has to be concluded. There is still a number of points to be discussed.

The second question concerning the payout of dividends. Based on cash generation increase, we want to have an increase in dividend payout. It's a natural consequence. Concerning cost of generation and implementation of projects, there had been some pressure on costs. Costs went up. And that's something general for renewable energy, nonrenewable and are just impacted by the boom of commodity prices and also the increase of foreign exchange with the dollar. So this is something that is going to impact the price of energy. Those who have sold the energy considering the market would be profitable, may be impacted. This is something that we've been observing in terms of impact on prices. The trend is to have higher prices because of all the problems that we've been experiencing in terms of what a reserve was in some key states. So the risk aversion curve is most probably going to increase applying additional pressure to prices, so that prices would rise. So these are the key points in my opinion. I hope I have answered your questions.

[Operator]

[Operator Instructions] Next question was on to webcast [ Roselle Diaz ] from [ Banco do Brasil ].

[Unknown Analyst]

Is there going to be a change in the commercialization strategy that increase the volume of energy as ACL commercialization in the past 3 quarters or did you agree in terms of available energy with a high PLD?

[José de Godoy Pereira, executive]

There haven't been major changes. What we try to do is to have seasonality of our physical guarantee so that we can guarantee the operation of our plans. And we also purchase energy in the market to maximize our gains, but always within the volumes of energy available to have an appropriate [ hatch ] and deal with the risk. So that is what we do in terms of spot price. This is our strategy, and we've been sticking to it.

[Operator]

The next question has also been asked through the webcast by Gustavo.

[Gustavo Miele, analyst]

How will Alupar take a position in view of the great competitiveness in transmission auctions?

[José de Godoy Pereira, executive]

Well, we are going to maintain our participation. This is our strategy. And whenever we come across opportunities, we are going to embrace a project. And if there is no opportunity, fine. We have some other avenues of growth, some other opportunities, but we are always going to try to have the best capital allocation.

[Operator]

[Operator Instructions] The next question was asked through webcast, Daniel.

[Daniel Travitzky, analyst]

Could you please give us a preliminary idea about your TBE strategy if the sale of TAESA by CEMIG becomes a reality?

[José de Godoy Pereira, executive]

There is no definition there because TAESA has also a number of issues to be defined. We have already talked about that, and we are considering all possibilities. And we are open to discuss all the alternatives, of course. The impression I have is that I don't know whether TAESA's selling process is attracting as much attention as was initially thought. But we are open to the possibilities to do the better -- the best for TAESA, for ourselves, just the best for everyone involved.

[Operator]

[Operator Instructions] We now close the Q&A session. I would like now to invite Jos Luiz to make his closing remarks on behalf of the company.

[José de Godoy Pereira, executive]

Thank you all very much for your participation this afternoon. Our company is open to provide any additional clarification. Our Investor Relations team is here to answer any questions you might have about the company or the industry. Thank you all very much. See you next time.

[Operator]

The conference call of Alupar is closed now. Thank you very much for your participation. Have a good afternoon.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]