Transmissora Alianca de Energia Eletrica SA
BOVESPA:TAEE3
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Transmissora Alianca de Energia Eletrica SA
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Good morning, ladies and gentlemen. Welcome to the teleconference for the first quarter of 2018 for Taesa.
We would like to inform all participants that the presentation that will be given now is available for download at www.taesa.com.br/ri. [Operator Instructions]
Before starting, we would like to inform that any statements that may be done to the business perspectives of the company's financial targets, they are [ premises ] and assumptions of Taesa management and are solely based on currently available information.
Forward-looking statements are not a guarantee of performance because they involve uncertainties and refer to future events and depend on circumstances that may or may not occur.
Investors should understand that economic conditions, industry conditions and other operational factors may affect the results in the future of the company and may lead to results that differ materially from the forward-looking statements.
We would now like to turn the floor to Mr. Raul Lycurgo, who will begin the presentation. Sir?
Ladies and gentlemen, good morning to all of you. My name is Raul Lycurgo Leite, I'm CEO for Taesa. And today with me, we have all Taesa management represented by the Financial Director, Marcus Aucélio; Technical Director, Marco Faria; and the Director of Implementation and New Business, we have [indiscernible] representing [ José Ragone ].
In addition, of course, all our IR team is here with me today. Today, in Taesa teleconference, we will present and discuss the results for the first 3 months of 2018. I would like to thank you all for taking part in this call and for your interest in our company, and I hope you stay with us throughout the call and, of course, to take part in our question-and-answer session.
I would like to, before presenting the results, to reaffirm our commitment with the operational efficiency pillars and financial discipline and value generation for shareholders. Taesa history shows the commitment it has in keeping the quality of the operation.
If you look at the last year's availability rate of the company has usually been above the 99.95%, the first quarter for 2008 (sic) [ 2018 ] was not different. We reached the level of 99.97% of availability in our [ transmission lines ]. In addition, the relation [ PV/RAP ] was below 1% in the period, having recorded 0.8% of RAP, which means BRL 3.6 million. These figures show how much the company, especially Taesa's technical area, is extremely committed to the quality of the operation of the maintenance of our transmission lines. Our target is 100% availability of our lines and PV 0 is a mantra among all our collaborators. It's in our DNA that PV be 0.
In addition, we continue with an EBITDA margin very close to 90%. Despite the 50% drop in RAP in some of our concessions, we have maintained a sound generation of operational cash, which shows our operational excellence and our commitment to financial discipline.
Taesa history is evidence of the focus on sustainable growth, seeking assets that render returns which are attractive for the company, and we have started 2018 by showing our efforts and ability in maintaining our growth trajectory.
In March 2018, we closed the acquisition of direct and indirect participation of 49.99% of the total capital of IB SPE Transmissora de Energia Elétrica, a concessionary from the M Lot, which we won in the auction of 2016. Today, it's called [indiscernible] Diamantina. This operation represents an increase by BRL 32 million in RAP for the company and a total investment of BRL 368 million in the project. BRL 360 million is total CapEx for now, considering that 49.99%, we have half of this for Taesa. This asset is a strategic investment for Taesa because it will connect the Aimorés and Paraguaçu concessions to the SIN system and, obviously, our line as well.
Considering this acquisition, Taesa today has 35 concessions totaling RAP of BRL 2.9 billion. Among these, 8 concessions are in a phase of construction, which represents total investments of almost [ BRL 5 billion ], BRL 3.2 billion of which is Taesa's share.
The projects are developing within the schedule, and we are discussing with a [indiscernible] of the possibility of anticipating some of them, especially the greater ones, which have not yet a date to start operation in 2022. We continued to be very well positioned to capture opportunities of growth in the sector through our financial discipline and seeking and search for assets with attractive results.
Taesa will also participate in the next transmission auction, which will take place in the end of next month or maybe in the beginning of July at the [ ANEEL auction ]. This auction will be divided in 24 lots in 20 states and the Federal District, representing a total of 4,000 kilometers of transmission lines and an investment estimated at BRL 8.9 billion.
We have, since the beginning of the year, been working and analyzing all these 24 lots to see which one makes sense, so we can then design our participation strategy. I always like to reinforce that despite the increasing competitiveness in auctions, we will never let go of the returns that we aim at, and we will only win those that generate value to our shareholders.
Our financial discipline is a mantra, as the "PV be 0." In addition, we are on the lookout for opportunities with M&A. It is well-known that there'll be an auction in the June of the minority participation of [ Eletrobras ] in 11 [ SPEs ] of transmission. Among these, Taesa is a partner in 5. [ ETAU, Brasnorte, Transudeste, Transleste and Transirapé ]. I highlight that because we are partners here, we have the right of preference in purchasing a part in equity in Eletrobras in these 5 assets, and this is based on our shareholders' agreement. And this puts us in a very favorable position in the auction. We are now waiting for the next stages, so we can take part in this auction.
I now give the floor to our Financial Director and IRO, Marcus Aucélio, who will comment the main highlights of the results in the first quarter of 2018.
Thank you, Raul. Good morning, everyone. I would like to comment on Slide 3, where we present the main highlights for the first quarter of 2018.
First of all, I would like to stress that 7.9% growth in our net income in IFRS, which is the base for the distribution of dividend when we compare with the first quarter of 2017. Our net income totaled BRL 217 million this quarter. The 2 main motives that explain this improvement is the financial net result that dropped 26.7% year-on-year due to a smaller debt volume and the drop in CDI.
In the [indiscernible] equivalent, we have seen an increase of 19.7% compared to the first quarter of '17, which is explained by the better results of our TBE group and also due to our direct participation in the [ Transmineiras ], which were 3 concessions which we acquired in November of last year.
On April 26, the shareholders meeting approved the net income for 2017 with a payout of BRL 159 million in dividends, which means BRL 0.46 per unit of Taesa. The payout will take place tomorrow. And it's important to highlight that with this payout, in 2017, remains at 91.5%.
Additionally, yesterday, our board approved, based on the results of the first quarter of 2018, the distribution of dividends totaling BRL 188.1 million, which is BRL 0.55 per unit and has also approved the distribution of JCP totaling BRL 65.8 million based on the results of April and this has totaled now that we will pay on 23 of May BRL 250 million.
In the regulatory results, we continue to present a sound cash generation. Our net debt for the company is at BRL 2.1 billion, 9.5% lower than the debt in the end of 2017. And this position of cash has increased 43.6% in this quarter, 43% growing from BRL 631 million at the end of December 2017 to BRL 906 million at the end of March. With this, the ratio of net debt/EBITDA is at 1.3x.
As Raul mentioned earlier, the leverage levels, we are very well positioned to capture new opportunities, both in M&As as well as greenfield and even to honor our needs of investments in the 2 projects that are underwork -- underway. Our net regulatory revenue is at BRL 418.6 million in the quarter, having dropped by [ 4.7% ] as a result of some of our [ cuts ] in the RAP. And our income for the first quarter is BRL 373.4 million, dropped by 5.4% compared to the same period of 2017, and our EBITDA margin continues to be above 89%.
As Raul has already stated, it's -- among the highlights of the first quarter is our consistent operational performance, the conclusion of the M Lot, which is [ Diamantina de Transmissão de Energia ] and also the 8 projects that are underway, and we are constantly doing everything so they fall under the schedule and also within our CapEx as well.
Now I'll give the floor to Cristiano Grangeiro, who is our IRO and who will give you further light on the results for the first quarter.
Thank you, Marcus. Good morning, everyone. We are now on Slide 4, where we talk about net revenues in IFRS, totaling in the quarter BRL 316.7 million, 4.7% lower compared to the first quarter of last year. The main factors responsible for this variation is a drop by [ 15.4% ] in the remuneration of financial assets. This is natural because of lower balance of assets, and this also is a reflex of the RAP. In addition, IGP-M accumulated for the last 12 months recorded a deflation of 0.42%, and this meant a monetary correction, which is negative for the period and consequently reduced the balance for financial assets.
And with a lower balance, the remuneration will be lower as well. On the other hand, we saw an increase of 11.2% in monetary correction for financial assets, which minimize the impacts of the drop in remuneration revenues.
It's worth highlighting that the cuts by 50% in RAP in concessions of those 2 categories does not result in a drop in IFRS income, because RAP is an amortization of the financial assets and does not impact directly on revenue.
I would like now to go to Slide 5 to show how the inflation rate impacted positively the revenues in monetary correction for the financial assets in this quarter. It's worth noting that for correction of the assets, we use inflation with rates of 1-month difference. In the charts on the top half, we show the evolution of the inflation rate for the quarter. And we -- it's worth noting that the [ macroeconomical rate ] reached their lowest levels. IGP-M, for instance, recorded a deflation in few quarters in a row for last year, as you can see. And with this, the monetary collection revenue for 2017 was negative in BRL 23.2 million and it was still BRL 360 million lower than the one recorded for 2016.
However, if you look at the developments of inflation rates in the last quarter, we see there is an increase every quarter, and this reflects a constant increase in the revenue for monetary correction as you can see on the bottom half of the slide. Therefore, when we look -- when we compare the first quarter of this year to the first quarter of last year, we see a growth in IGP-M as well as in IPCA, and as a result, the monetary correction income also grew by almost BRL 7 million in this period.
It's worth noting that in the [ clients' assets ] that our exposure of our concessions is IGP-M because most of them is in category 2. This exposure is proof that the correlation of the charts on the top half and on the bottom half, it's visible when we compare these charts that there is a development that we see in the monetary correction, which is in line with the evolution of the IGP-M on the charts.
Going on to Slide 6. We present the costs, expenses and the depreciation [ of the ] amortization in IFRS. In the first quarter of 2018, the cost totaled BRL 65.2 million, which is in line with what was recorded in the same quarter of last year. The cost with personnel reduced by [ 2.9% ] due to amount in holidays and other legal contributions, and this will be corrected in the following semester. The material line also had a drop to 9.2%, which is explained by the decrease in cost of the Mariana works. There was an increase of 12% in third-party services due to legal fees and consulting for software and licensing in TI -- in IT.
On Slide 7, the results of [indiscernible] equivalents in IFRS in the concessions of Taesa had a growth of almost 20% compared year-on-year. This performance is due to the TBE, which has -- which [ is a part of a ] large share of the total results in our participation in addition to the increase in the monetary correction revenues due to the macroeconomic indexes. Since the end of the year, TBE recorded a [ wrong ] comparison metric, a lower financial result of over 50% as what happens because of the lower volume in the debt and the drop in CDI.
Additionally, with the conclusion with [ Transmineiras ] deal, the results of the subsidiary influenced the performance of the line in [indiscernible] equivalents as Marcus Aucélio mentioned previously.
Going on to Slide 8, we represent the financial results for Taesa. This is a consolidated figure totaling [ BRL 51.9 million ], a drop by almost 27% against BRL 70.9 million recorded in the same period of 2017. Basically, the impact on this line was due to the lower growth level of the debt [ due to ] liquidation of a series of debentures at the end of 2017, [ as well as a fall ] in CDI, which for this quarter was 3.24% in this -- 1.76% in this quarter against 3.24% in this first quarter of 2017.
Now going on to Slide 9. We have net income for the first quarter totaling [ BRL 217.3 million ], presenting an increase of almost 8% year-on-year. As Marcus pointed out, this positive performance in the income is due to a better financial results and the growth in the [indiscernible] equivalent clients. This growth affected positively the macroeconomic rate and has corrected assets that we have and has a direct impact in net income. And therefore, these effects will [ offset ] by a drop in the remuneration of financial assets, reducing the net income of IFRS. I would like to highlight that the dividend payout that was approved, as Marcus mentioned, totaling BRL 188.1 million. And this is the maximum distribution possible for the income in the quarter. The date for the payout is May 14 and [ date ex 15 ] and we'll pay them on the 23rd of May.
We'll now go to Slide 10 to present the regulatory results. Net operational income in Taesa closed the quarter at BRL 418.6 million, a reduction of 4.7% compared to the same period of 2017. If we consider the participation in the invested companies and [ colligated ], the total would be BRL 530.3 million. This negative variation is explained by the cut in the RAP in the category 2 concessions, which began operating on the 16th year. The TSM concession attained a 16th year in operation in this cycle and having an impact in the cuts of the RAP, and the ETEO attained a 16th year of operation in the previous cycle, having a total impact in the cut of 50% on the RAP in the current cycle.
Another reason that there was a lower impact was the PV, which is explained by the occurrence of the automatic shutdown of Novatrans in November 2017 and the reversion of PV in the first quarter of 2017.
On Slide 11, we present the regulatory EBITDA, which is the ideal metric to demonstrate the capacity of class generation capacity. In the first quarter, EBITDA consolidated was at BRL 373.4 million, presenting a drop by 5.4% year-on-year and an EBITDA margin of 89.2%. If we consider the invested companies in the entire group and the [ colligated ] EBITDA for the quarter would be BRL 474.5 million with a margin of 89.4%.
In order not to repeat myself, the EBITDA performance is a reflex of the results and cost that we explained in previous slide. However, it's worth noting and highlighting that in regulatory calculations, take a look on the IFRS, the investment in projects accounted are booked as a movable asset and, therefore, do not go into the operational expenses. And this difference in cost and IFRS and regulatory is only in terms of the material depreciation and amortization.
Going on to Slide 12. You can see the debt breakdown. Gross debt is at BRL 3.1 billion with an average term of 2.9 years, 87% of which due in the long term. 78% of the debt is currently in debt by the IPCA and the rest by CDA -- CDI. Our average cost is less than 90% of the CDI.
Our cash position is BRL 906 million at the end of March, 44% higher than the cash generated in the last quarter of last year. This is due to the strong cash generation capacity of the company associated to the nonoccurrence of great disbursement such as the payout of dividends and amortization of debt. In addition, we received BRL 50 million in terms of dividends on behalf -- on some TBE. Consequently, the net debt reached BRL 2.2 billion, a drop by 19% in the year-on-year comparison and almost 10% in a sequential comparison.
With this, as Marcus said, the EBITDA net debt ratio dropped to 1.3x against the 1.5x recorded in 2017. It's worth noting that the [ speed for the company ] is able to deleverage, and we see this as part [ -- briefly ] is that is a very competitive differential for Taesa and puts us in a very favorable position to assess new opportunity for growth.
Before we finish the presentation, I'll give the floor back to Marcus Aucélio, our Financial Director and IRO, so he can give his final remarks. Thank you.
Concerning the projects that are underway or we have in work, I would like to highlight that after the acquisition of Diamantina, which took place in March, we have 8 projects that are underway and they have full commitment of Taesa and 5 of which are done with partners, with other important partners and 3 projects [ which dwell ] together with [indiscernible].
So we have these 8 projects that represent almost BRL 5 billion in investment and generate an RAP of BRL 888 million. And this means that our participation represents an investment totaling BRL 3.1 billion, and this will generate a RAP for the company of BRL 573 million. All these 8 in Mariana, there is a date and it's likely to be concluded in 2019.
I would like to highlight that we achieved all the license for installations with 4 months in advance of the scheduled time and this enabled us to start the work and the construction both for the transmission lines as well. And the other projects, we are still on the stage of acquiring the licenses for the environmental issues. And after this, we'll see that if there is [ another perspective ] that we will have any delay in this, and this will all go under estimated CapEx for the company when we participated in the auctions. So this is what I had to say.
To finalize this presentation, I'd like to give you over to the operator, so we can start the question-and-answer session.
[Operator Instructions] Our first question comes from Andre Sampaio from Santander.
I'd like to make a very simple question actually. I would like to know if you can give more detail on the provisioning of charges concerning the holidays that you mentioned, vacations actually, when you mentioned staff. And what would be -- how is it corrected in the next quarter?
Andre, this is Marcus Aucélio. In fact, when we look at our system, which is [indiscernible] that handles all our payment sheets. In terms of provisioning, we had a problem and this was around BRL 2 million less in this quarter. We now have noted this, and we had already closed the balance sheet in our foreign auditors, external auditors instead of reopening the balance sheet. The decision was for us to forward this based on the external auditors, and we'll do this correction in the next quarter. And so that's how we will have a corrected amount, and it will impact BRL 2 million more, which we were not able to insert in the accounts in this first quarter.
Our next question comes from [ Marcelo Sá ] from UBS Bank.
This is Marcelo actually. I have 2 questions. I like to understand if it makes sense, if we see the estimates of the IFRS income that you can pay around 10% in total dividends in terms of 2018, since -- although the RAP has dropped, the [indiscernible] does not, so it would still be possible? And the other question is, would like to understand what you see in terms of the competition scenario for the next auction? Do you believe the other competitors that will be stronger or weaker? Or do you estimate it will be similar to what happened in the last auction?
Marcelo, I'll answer your first question on dividends. We -- what we've seen in this first quarter, we had a macroeconomic scenario, which is a little better than what we had in Brazil. So there is an improvement in the projections, especially for IGP-M and also for CDI, which will impact the results for the company and at the IFRS. So for the future, it will really depend on the macroeconomic indicators because in terms of our cost -- highest cost is with personnel, and we have been adopting a policy in -- when we addressed salaries, we do an average of -- based on our revenue and we have a high productivity policy as well. So it really depends on the macroeconomic indexes for the next quarters and months.
This is Raul, Marcelo. Okay, I will answer your second question. Our expectation for the ANEEL auction is that the lots that are the smaller lots, we expect a competition very similar to the one that took place in last year. In bigger lots, we see what may happen is what happened in the previous auction, that the ones that had already made a bid in a certain way, they backed off a bit, so therefore that may happen again in this [ ANEEL ] auction for the June period.
Okay. And just a last question, since I'm here. In the development of these projects that are in construction, you've been speaking to the end deal, right? I mean, you had a very attractive rate of inflation, plus 2. How is your process to obtain financing? Is it feasible? Is it doing well? Are the financial and funding that you are having is okay to obtain credit lines? Or is it more complicated?
Our strategy in terms of our lots that have a large area in SUDENE. We are working with [indiscernible] for the 3 projects that we have. We have a position that we are -- [ actually that ] we have done all [ DMV ], that's pretty comfortable with the model. They are -- that they assess and the percentage and the financing. But now we are waiting for licenses, so we can actually sign the agreement. Around the licensing, we'll have a forecast that the licenses come out in the end of May and June and Paraguaçu and [ Mariana ] probably around August or September. So as of the licenses, we will sign the agreements. We are still waiting the license, the previous license, the preliminary license at the time of the agreement. So that's our status.
Our next question comes from Bruno Pascon from Goldman Sachs.
I have a question concerning the debt. The company has had a very positive management in terms of company debt. And recently, there was a company in the sector that issued green bonds at very attractive rates. I just wanted to understand the rollout of the debt strategy, if we look at this. And is there an idea of cost? Is there room to reduce the costs, the average cost of the company due to the extremely comfortable situation of Taesa today?
Concerning our debt strategy, Bruno, first of all, we have a debt, which is [ 4.21 ], which we captured with [ Citibank ] in April of 2016. This debt is due in September 2019. And if we obtain an approval of the board, so we can roll this debt for 7 years or 5 years based on negotiation with Citibank at a rate based on the CDI. So we are rolling the debt that will be due next year. And we will increase the debt maturity to a period which is higher than the average we have now. Therefore, this year, concerning the cash and the needs of rolling out the debt. We don't see a need there. What we are planning possibly is to take advantage of this opportunity when [ those who issue ] debentures for infrastructure so we can allocate them to the project. Our last issuance of the debentures, we did it for 7 years at an IPCA plus 4.1% rate. So we believe that we will go to the market to do this, to issue this for the project because the need would happen in the first quarter of 2019. So we are working in terms of improving the debt profile and to lengthen the maturity. Today, it's 8.8% a year and the real cost around 4.4%. If we compare this to the CDI percentage, we are around 90% of the CDI. So what the company does is to present and take advantage of the windows of opportunity, so we can issue at a very low cost for the company.
[Operator Instructions] Since there are no further questions, I would like to give the floor over to Raul Lycurgo for his last remarks. Sir?
Ladies and gentlemen, thank you very much for taking part in this conference call. I would like to thank Andre Sampaio, Marcelo, Pascon for taking part in this Q&A and this is excellent for the company to have the opportunity to clarify and to talk directly to the audience. Thank you for the confidence you have in us in terms of the continuity of our strategy. I would like to stress that our main strategic pillars are operational efficiency, financial discipline and generation of value for the shareholders. We'll continue to make efforts in these pillars. And I also cannot help mentioning all the teams in Taesa, which have done a great job and are very hard-working in terms of building a company which is increasingly more profitable. [ And this is what writes ] our success story. Thank you, all. And have a good day.
Thank you. The conference call for the first quarter of 2018 is now closed. Please disconnect.