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, and welcome -- for waiting. We would like to welcome everyone to the third Q earnings conference call of Taesa. [Operator Instructions] Before proceeding, let me mention that forward-looking statements about this conference call relating to business prospects and financial operating goals that are based on the beliefs and assumptions of management of Taesa and on information currently available to the company. Forward-looking statements are not a guarantee of performance. They involve risks, uncertainties and assumptions because they relate to future events, and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Taesa and could cause those results to differ materially from those expressed in such forward-looking statements.
Now I would turn the call to Mr. Raul Lycurgo, who will make his presentation. Please sir, you have the floor.
Good morning. First of all, I would like to thank your participation and interest for the results of the third Q 2018. I would like to invite you to follow us in our presentation and take part in our Q&A session at the end. Mr. Marcus Aucélio will be with us, our [ IR ] Director; and [ José Ragone ], business -- new Business Development Implementation. It's important to bring forth Taesa's commitment for these strategic pillars: sustainable growth, operating efficiency and value generation for our shareholders. These pillars are part of our daily life in all the levels of the company. Our decisions always follow these pillars and through them, Taesa was able to build its success story. And currently, it is one of the largest companies in electric power in Brazil.
In operating efficiency, we go on having very high rates of availability in uptime with a variable portion of around 1% of RAP, and due to the efforts of our team to operate and maintenance the assets.
In terms of inorganic growth, we are in the quest for new opportunities in the Brazilian transmission market, whether through greenfield projects or through acquisitions in the secondary market. In greenfield, we will have a transmission auction, which is currently being offered for bidding, but we will certainly participate in a competitive way based on our financial discipline and in the return to our shareholders. The auction is set for the 20th of the month, in theory. But last 6 of November, this auction was included in [ Neo's ] agenda for the meeting and it was removed from the agenda. So we're waiting for the follow-up of this auction. But I want to reinforce that we will be participating and ready for this greenfield auction. In terms of our position, I would like to mention the Eletrobras auction participation, which was held on September 10. We presented bids for [ 4 lots ] and we are waiting for the conclusion of all the [ stages for staying ] in the invitation to bid. If we're able to get the [ 4 lots ], we will have an additional 70 million RAP for the company. It's important to mention that our enterprises in construction are advancing within the forecast, and we will give more details during the presentation.
I would also like to mention the distribution in the 4 -- in the 9 months of this year in the amount of BRL 562 million, in dividend and interest on equity. Again, for BRL 130 million in the same period last year.
Now I will give the floor to our Financial Director, Marcus Aucélio, and he will mention and share with you the main results of Taesa's third Q.
Thank you, Raul. Good morning to all. We would like to start with the Slide #2 -- 3, where we have the main highlight in third Q 2018.
Our net income in IFRS obtained BRL 267.7 million, with an increase of 175% year-over-year.
IGP-M was once more the major factor for our net profit, and in the accumulated index was 3.1% vis-à-vis a deflation of what -- 3% in the same period last year. This impacted directly in the restatement of revenue and as well as the equity method result.
In terms of our history of payments to shareholders, the distribution of BRL 241 million in dividends was approved yesterday. Payment will be carried out on November 22.
In terms of the regulatory results, our net revenues were BRL 362.2 million, with a decrease of 13.2% as compared to third Q 2017 due to the cut of 50% of the RAP, which was foreseen in some power concessions. For the same reason, our regulatory results were better also in 14.5% as compared to year-over-year.
As expected, net margins dropped 1.3 p.p., closing the period at 85.6%. Again, and it's not possible to offset all the RAP cuts due -- with the cost reductions, but our expenses decreased 4.4%. And this shows the company's diligence in controlling all the lines of expenses in core. Despite having great net income with high margins, we also had a very solid cash generation with approximately BRL 1.5 billion in cash with a substantial growth in the real comparison and all the sequential.
Net debt were closed in BRL 2.2 million with a reduction vis-à-vis last year, and the GDP EBITDA closed at 5.5x in the period.
In EBITDA, our company maintained its solid financial situation with the robust financial indices, and this has enabled us to maintain the maximum distribution of proceeds to our shareholder.
In terms of financing or CapEx, we concluded our fifth debentures issuance in June [ BRL 556 million ] at a cost of IBCA of 5.9% year, and this is regarding the Janauba Paraguaçu project.
In September, we closed the BNB financing contract for Janauba in the amount of BRL 698 million at a EBITDA plus 2% cost per year for 20 years term.
Before going, or giving the floor to Cristiano, I would like to communicate in our friends who are with us today, that we informed today a technical note, explaining all the differences between the 2 types of accounting used in the transmission industry in Brazil. We explain in this note the effects on the result in cash flow. In transmission, we also speak about the macroeconomic impact and the effect of the RAP cut in the regulatory results. In this technical note, we shared 2 important conclusions. First, the cut of 50% of RAP in category 2 concessions does not impact Taesa's net profit, which is placed in IFRS, and which was the base for the distribution of proceeds, and the drop in regulatory revenue in the next few years as the result of this RAP cost. And this was done at the company's cash flow, but it will not impact the distribution of proceeds to shareholders. We suggest that you read this technical note and replace all of our [ I -- things ] to shed more information on the subject.
Now we give the floor to Cristiano, our RI Manager.
Thank you. And now we go to Slide 4. We want to state that we will mention the net revenue in [ RIS ] with an annual growth of 87.6%. The main factor here, as reported, was the drafting potential of the company and the financial ability, as Raul and Marcus already mentioned, with an expressive substantial increase of 5.49% per year, but the IGPCA were was even higher. I will speak about this further on.
For BRL 3.5 million was the revenue after the Miracema project and also due to some succession events. Due to the provisioning for the last demonstration, in our daily effort, I want to mention our daily effort to refer to this situation, and this was due to the 1% of RAP and this compared to the results we have last quarter.
Now going to Slide 5. We'd like to share with you the macro impact and mentioning that the monetary restatement impacted this. It's interesting to realize that one year ago, we recorded lower inflation level, IGP but they had 4 months of deflation. From there on, we had a significant increase in IGP-M, which we followed according to our size. And this impacted the revenue in monetary restatement, and this is followed by us every quarter. And this quarter, we mentioned BRL 105 million and compared to BRL 149 million in the same period last year. It's important to mention our IGP-M position and most of them is category due to the correlation of the higher position of IGP-M in monetary restatement. And these category 2 assets are older. And here, we mentioned the category 3 as well. And all of our category 3 projects with this monetary restatement of IGP-M will reduce it accordingly.
Depreciation and amortization in IFRS this cost also 37.7% higher year-over-year. You can see in the graph that this increase was basically due to Miracema and also here. It is important to mention that the building cost construction [ court ] costs didn't affect this in IFRS, but only mentioned by the construction revenue.
Going to Slide 7, we only mentioned the cost on PMSO, personnel material outsourcing and other expenses. And here, like Marcus mentioned in the beginning, we have a 14.1% increase year-over-year. And basically, we see a decrease practically in all the cost lines. Here, we have 12.7% reduction in this cost line, mainly what we mentioned in last Q2 to a rescission from the current hiring regime. And here, we are anticipating the rescission to have this Social Security benefit and also the capitalization from the assets being built. This [ over ] offsets the general revenue cost. Here, we have a 2.4% decrease due to lower expenses with travel and here, on 3 quarter 7 -- as compared to 3 quarter '17, and this is due [ to some extent ] decline.
So going back that to explanations on Slide 7, the reduction here of 2.4% due to lower expenses with traveling and surveillance and here is the result compared. And here in this reduction of BRL 2.4 million, this -- and this has been generating savings to the company.
In Slide 8, we speak about the equity method under IFRS with a very positive result for the company. And in this quarter, we have an [ expressive ] growth due to increasing IGP-M and which impacted all the companies invested jointly. Naturally, without mentioning CTEEP, we had higher results increasing the revenues from the monetary restatement of financial assets and decrease in the financial results due to the payment of the second issuance of [indiscernible] debentures in October last year and the drop in CDI.
The financial results here on Slide 9 show a 63.1% total [ total ] increase against the 47.7% in 3Q '17. This is also due to the monetary restatement and an increase the difference in the IPCA and also due to the increase in IPCA [ using ] the compared method interest a decrease due to the lower growth that impacted CDI and the credit agreement negotiation and the lower CDI.
Slide 10, we conclude the presentation of IFRS. I won't [ delve ] here but it's important to see that is clear here that net income grow due to the growth in net income and also in the equity methods here and due to the IPCA.
Now regulatory [ net ] revenues. The operating revenue was BRL 462.1 million and with a decrease of 13.2% in net revenue last year. Here, you have 3.2% -- 13.2%. These were due to the concessions of lower [ transition in 3T17 ], which reached the [ 16th year ] of operations this year and in the cycles 2018 in 2019. [ 3T and ] others had a decrease of BRL 3.9 million in the variable portion expands that the reversion of provision of [ best events. ]
It's very clear to see these notes here the main impact, and we can see this clearly in the graph. The regulatory EBITDA also dropped naturally. We see here in this slide, the EBITDA decreased, which impacted the net result, which was offset but improved maintain our cost. And the margin here, which was 85.6%, and the managerial regulatory EBITDA with a margin of 86.6%.
Slide 13, we speak about the profile of debt amortization. Here, we have in the 3Q 2018 BRL 380.3 million and 82% of the debt is impacted by [ Prazo da Dívida ] and the remaining by CDI.
And our cash position here is almost BRL 1.5 billion net debt over EBITDA. And also, with the operating cash generation in the -- this quarter, [ consequently ] net debt attained BRL 2.2 billion and improving 3.5% against the previous quarter. The ratio here, net debt EBITDA is 1.5% more. In average debt maturity, 3.2 years.
Now I would like to speak about the projects under construction on Slide 14. We see here that we have 8 projects under construction, with the BRL 5 billion investment RAP 584 CapEx days of 3,164. All the projects -- and getting into important financial aspects of each, you see here in the graph. But I will mention some important pages up to the moment.
Slide 15, now the last slide. You will see that last June, we acquired a preliminary license for EDTE. In September, we had some advancements in the [ sudden ] tax benefit for Miracema, preliminary license at Janaúba, and we conclude the BNB financing agreement for also for Janauba and with a very attractive rate. And also in September, we were able to attain preliminary license for ERB1 230kV. And last month, October, we also got preliminary licenses for Aimorés and Paraguaçu, and all the projects are in a very positive ongoing status, and we are here at your service to inform more details on them.
Now we put ourselves at your disposal as we [ share ] for any other information.
[Operator Instructions] Carolina Carneiro from Crédit Suisse has a question.
My question is on the bidding of the auction, which took place on December 20. And I would like to understand, how do you understand this removal from the agenda, and does this have anything to do with the loss of Paraguaçu that went over its term? Or do you think that there is a motivation related to the regulatory act, regarding the selling price of the auction? Or was it caused by the [ walking steps ] of the auction? Can we [ wait ] something similar to what we saw in the last auction in terms of the returns for this other loss?
Carolina, thank you for your question. Well, on our side, we do not have any explanation for the removal from the agenda of this auction, and maybe next week, we will have already some information. And maybe, they will include it in the bidding process, or we think that it could be a situation similar to what we saw in the last auction. So we don't know exactly what will happen. But certainly, some adjustments from them on the bidding process per se. We don't expect to see any changes in these. But we have to wait a few weeks to see what ANEEL's position on the auction.
I would like to repeat one question. In terms of these financing lines that you and other companies are getting from BNB, and they are quite attractive. But I would like to note what the size of the portfolio that you have and can we expect to see the lines that you have already finished building? Would you be looking for financing for them, or just to make use of this rate that is quite interesting? Well, this is just to give me an idea of the available resources size.
Well, Carol, this is Marcus Aucélio. Well, the BNB credit lines are a result of the Fundo [indiscernible]. There is something around BRL 13 million. And I think that they made available one line for -- one line of credit for electricity power overall. In our assessment, we will have to wait, the new government to office to see if their positioning vis-à-vis these financing with subsidies. We are working now with what we have in this line, and we want to have the contract already executed like happened in Janauba, we already have executive conference and the conditions that they were signed executive. We are working with this financing line, believing that we have Aimorés, Paraguaçu also in this area of [indiscernible] for the -- [ entitled ] for the financing, and we're thinking on how to take these financing offers. But we think that we will still have time to sign with BNB for these concessions, if we define that we would want the refinancing with BNB.
[Operator Instructions] Mr. Thiago Silva from Santander Investment has a question.
I have a question regarding the fiscal incentive. I would like to have an overview from you on this renewal, if you've already filed the request, and which are the lines that will benefit from this if it happens?
This is Marcus Aucélio. In terms of the fiscal incentive and benefits, we already filed for fiscal benefits for Miracema, Janaúba, Aimorés and Paraguaçu, and we had results on the incentive for Miracema and our [ prospectus are for ] Janauba is about to be published to have the benefit published. And I also believe that by the end of December, we will also have [ Paraguaçu Armada ]. So this was the submissions that were filed 10th May. And we suppose that these are in the finishing moments of the analysis. So we believe that these incentives will be approved by the competent institution.
To make it clear, you hope that all of them, you expect all of them to be renewed?
Well, we filed the request for the new projects, which is Aimorés, Paraguaçu and Miracema in general were the 4 -- are the new projects. And besides, we have 2 renewals, so we believe that the 4 projects will have the benefits renewed by December 2018.
[Operator Instructions] The fact that there are no more questions, I will turn over to Mr. Raul Lycurgo for final consideration. The floor is your, sir.
On behalf of all of Taesa's team, I would like to thank you all for participating in this conference call, and I also want to thank our over 500 workers and thank you for your effort in our results. Your efforts have [ still ] impacted at our results. Thank you all and have a nice day.
Thank you. This concludes today's Taesa earnings conference call. You may disconnect your lines at this time.