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 conference call to announce the results of the fourth quarter of 2018 for Taesa. We inform the participants that the following presentation is available for download at www.taesa.com.br/ri. [Operator Instructions]
Before we continue, we would like to clarify that these statements that will be made during this call relative to the company's prospects, projections and operating and financial targets are based on the beliefs and of premises of Taesa's management and are based on information currently available for the company. Future considerations are not a guarantee of future performance and they involve risks, uncertainties and calamities. They refer to future events and they may, therefore, not occur. Investors must understand that these economic conditions may affect the future results of the company and may lead to different results, different than those expressed in this call.
Now I would like to ask Mr. Raul Lycurgo to start his presentation.
Good morning, everyone. First of all, I would like to thank all the participants of this call. We are now announcing the results of quarter 4 2018, and I would like to invite you to take part in our question-and-answer session at the end.
In this call, we also have other representatives of Taesa's Board. Dr. Marcus, our Finance Director and IR Director; Marco Faria, our Technical Director; [indiscernible] our new Business Director and then the rest of the team.
2018 was a year of great achievement for Taesa. We reaffirmed our very successful growth trajectory always based on financial discipline, operational efficiency and the rigorous evaluation of potential new assets, trying to acquire only those that will bring a lot of attractive returns for the company.
In terms of acquisitions, in March 2018, we finished the acquisition of EDTE with a stake of 24.95% and 50.10% through the Norte de Energia company where Taesa has 49.9% stake. I also highlight our participation in the auction of Eletrobras in September 2018 where the company bought Lot M of Transmineiras and also Eletrobras share in Brasnorte. Also in December 2018, Taesa celebrated a contract buying 4 assets of Ă‚mbar Energia, 100% SĂŁo JoĂŁo Transmissora, 100% of SĂŁo Pedro Transmissora, 51% of Triangulo Mineiro Transmissora and 51% of VSB, Vale do SĂŁo Bartolomeu Transmissora. All of these acquisitions will bring BRL 212.6 million of the RP -- RAP of the company and an approximate investment of BRL 1.5 billion.
Regarding the greenfield projects, Taesa participated of the 04/2018 (sic) [ 004/2018 ] auction in December last year and it won Lot 12, currently called Sant'Ana Transmissora de Energia. This was an investment -- a CapEx investment of BRL 610 million and a RAP of BRL 58.9 million.
It is also worth mentioning that we have 9 projects under construction. They represent a total of BRL 5 billion in investment and a total RAP of BRL 905 million. Of this total, BRL 584 million will be added to Taesa's revenue. I must also add to this number, the implementation of a new bank of capacitor in our line. This is a reinforcement with a CapEx of BRL 234 million and an additional RAP of BRL 33 million. The implementation time line is December 2019.
Our main priority at the moment is to deliver all these projects on time, seeking to gain efficiency, optimize the CapEx, seeking better financing conditions and even anticipating the delivery of some of these projects to better leverage the returns of these investments.
Regarding our operational efficiency, the availability rate of our transmission lines accumulated -- for the accumulated in 2018 was 99.92% and the PV for the same period represented only 1% of the RAP of the company, which reinforces Taesa's commitment to always maintain very high quality in the operation and maintenance of its assets.
We will continue to study all the growth opportunities that we have in the Brazilian market. We have to be very agile considering this rapidly transforming macroeconomic environment and this very competitive transmission industry. We have vast experience in this industry. We have vast coverage throughout the country, and Taesa also knows very well the risk of our business, and we are prepared to continue this very successful trajectory. And we will continue to pursue financial discipline, sustainability of our business and most importantly, value generation to our shareholders.
Now I would like to pass the microphone to our Finance Director, Marcus Aucélio.
Thank you, Raul. Good morning, everyone. We will now start our results presentation. We will start on Slide #3 with a highlight of 2018. Quarter 4 2018, we had a net income IFRS of BRL 327.1 million, an increase of 17.8% when compared with the same period last year. In 2018, we had a profit of BRL 1,071,000,000, a growth of 75% in comparison with '17. The main factors impacting the profit in quarter 4 in the year of 2018 were 2 factors. The adoption of IFRS 15 or the CPC 47 and the higher inflation rate. The IGP-M increased 9% in the year and the 0.86% adjustment had a very strong influence in the monetary restatement revenues of contractual assets with an impact of BRL 370 million. This had an impact also in our equity method. For the adoption of the IFRS 15, this had a positive result of BRL 116.9 million with no impact in the company's cash.
The cost and expenses increased 112%, 58.6% due to the higher investments in projects under construction, namely reinforcements and improvements. The equity method in the year 2018 was BRL 301.3 million, a year-on-year increase of 78.7%. This was also a consequence of the higher macroeconomic indexes and the effects of the adoption of the CPC 47 and also our direct stake in Transmineiras.
It's important to note that in order to reflect the operational reality of our business, we excluded the noncash effect of the results of the adoption of the CPC 47 for the payment of dividends. Therefore, we will consider the adjusted net income of BRL 954 million with build dividends of 89.9%. This represents profit to be distributed of BRL 858.1 million. Of this total, BRL 800.9 million were already distributed in 2018, and we have an outstanding amount to be paid of BRL 57.2 million or BRL 0.17 per unit.
Now let's move on to the regulatory results. The revenues in the quarter 4 were BRL 332 million and the year BRL 1,526.7 million, with a reduction of 25.5% when we compare the same quarter of 2017 and 12% year-on-year. These variations can be explained mainly due to the 50% cut of the RAP in some of our concessions. Our regulatory EBITDA in quarter 4 was also reduced from -- was -- had a reduction of 33.9% in the quarter and 50 -- 15% reduction year-on-year due to our legal contingencies of BRL 14 million with nonrecurrent effects on our results. So the EBITDA margin was 78.4% in the quarter and 85.5% in the year. If we exclude the nonrecurring events, the EBITDA margin would be 83.7% in quarter 4 and 86.6% in 2018. This is very much in line with our budget.
The company ended the year with a gross debt of BRL 3.27 billion, a reduction of 11.9%, and our total cash balance was BRL 823.8 million. The net debt was BRL 2.4 billion and the net debt-EBITDA ratio was 1.7x. Even with the drop in the EBITDA, the company is maintaining its financial solidity with very robust financial indexes and a solid cash position, which has allowed us to maintain our maximum distribution of dividends to our shareholders. As mentioned by Raul, in 2018, we had very positive achievement for the company, which is very much in line with our strategy towards growth and creation of value to our shareholders. Thus, we expect to go back to the same level of revenue before we started to see that 50% drop in the RAP of our concessions for Category 2, and we expect to go back to a higher EBITDA margin level.
Now Slide #4. Here, we see the concept based on the construction margin after the adoption of IFRS 15 or CPC 47. In the previous model, before we adopted IFRS 15, investments were recognized as financial assets at amortized cost and the rate that we used was the rate known as RAP, which was very much in line with the tier concept. Now with the new methodology, the IFRS revenues now reflect the contractual assets and no longer the financial assets. So the main changes with the adoption of the new method were 5. First, the discount rate is now the market rate at the time of the auction and this rate is fixed after the start of operation until the end of the concession. Taesa chose to use this market rate, the real rate at the time of the auction, so at the time of each of the auction, each of the development as the project rate that will be applicable only to the companies built by the company or the companies under construction.
Regarding the concession for which we made acquisitions, we made no changes to the fees -- to the rates used. And contractual assets are calculated month -- on a monthly basis based on the future growth of receivables based on the project rate, so the real rate from ANEEL used for each auction. The efficiencies generated in projects under construction are accounted for as construction margin in the revenue, which is calculated based on the difference between the present net value of the RAP and the future cost of construction at the time of the start of operation, as shown in this illustration here. So the construction revenue is calculated based on the construction cost for the construction margin in the pre-operational period and the remuneration is calculated based on the project rate and the balance of the contractual assets and the result is considered only after the start of operation. And the anticipation with supplier now impacts the results as construction cost. In the previous method, this was only calculated in the equity as financial asset. And finally, these adjustments in the accounting method do not have any impact in the company's cash. And this is accounted for in our financial calculations. After December 31 -- everything that started after December 31, they were entered in our special reserves, BRL 113.4 million. For the contractual assets for the 2018 fiscal year, they were recorded in our financial statements, BRL 116.9 million and 5.8% were in our legal reserves account and BRL 111.1 million in our special reserves. The amounts accounted for in the special reserves account will be futurely distributed as dividends.
Now Slide #5. It's important to highlight the relevance of the macroeconomic indices for our historical results, especially due to the impact they had in the fourth -- the third -- the fourth quarter of 2018. When we look at the IGP-M and the IPCA in 2018, 2017, the IGP-M was 9.68% in 2018. So there was a deflation of 0.86% in 2017. And the IPCA was higher in 2018, it was 4.05% against 2.83% in 2017. The impact of these indices in our monetary restatement revenues in 2018 was positive, BRL 278 million against a negative result in 2017.
On Slide #6, it's important to highlight the net income, the IFRS net income in 2018, BRL 1,071,000,000, a growth of 65.3% year-on-year, so BRL 423 million higher than the same period in 2017. As I already mentioned in the previous slide, this strong performance of our net income is due to the positive impact in our monetary restatement revenues, a growth of BRL 370 million and also the consequences of the higher inflation rate and the adoption of the CPC 47. It's important to mention that the net income to be considered for the payment of dividends will be the adjusted net income, BRL 974.4 million, not considering the noncash effect of BRL 160.9 million generated by the accounting change. From the adjusted net income of BRL 974 million, BRL 858.8 million will be vest into the payment of dividend, a payout of 89.9%.
In the last slide, we have our 9 projects under construction. These projects are currently ongoing, under management of Taesa and our partner. A total of 9 projects representing an RAP of BRL 964 million. Of these BRL 964 million, BRL 643 million refers to our participation with an investment of more than BRL 5.5 billion, being managed by -- and BRL 3.8 billion of these BRL 5.5 billion are being managed by Taesa.
The prelim license of EDTE, Janaúba, Aimorés, Paraguaçu, they were all issued in 2018, but we're still waiting for the previous license for Sant'Ana and for the 500kV licenses of Ivai. These are the most recent projects that we started. The installation licenses for EDTE and Mariana were issued in 2018. And in Mariana, we have already obtained our operational license as well. In 2018, all the tax benefits for SUDAM and SUDENE were approved. Miracema and Janaúba were approved in September 2018, Aimorés and Paraguaçu were issued in October 2018. One important item are the financing conditions that we were able to obtain for these projects. On July 13, we issued BRL 525.7 million debentures -- infrastructure debentures here to be used as equities in the project with a 7-year maturity period. In September 2018, we signed a financing contract in the amount of BRL 700 million approximately with a cost of an IPCA plus 3 or -- 2% or 3% per year for 20 years. In the end of December, we were able to sign a loan contract for EDTE with very low interest and a 10-year period. And in February 2019, we issued the first debenture for Energia Janaúba BRL 224 million and IPCA was 4.5% per year for 14.5 years.
This was our presentation for quarter 4 2018 and the year 2018, and now we will open for questions.
[Operator Instructions] The first question is from Vitor Sousa.
My question is about the company's strategy for new acquisitions in the secondary market. After your recent acquisitions, are you still looking for new assets? Do you see new opportunities? Some players that bought Lots in the recent auctions, they are now moving to the secondary market. So what is the company's take for the coming year? Are you looking for these opportunities? Or do you think the recent acquisitions will be sufficient?
Good morning, Vitor. Thank you for your question. Yes, we are indeed looking for new opportunities. We are focusing on looking for new opportunities in the brownfield market. Recently, the minister informed that in 2019 we will have one single auction in December '19, and he estimates that this auction will be 1,700 kilometers of lines. So this is a great opportunity for us to focus on the delivery of the projects that we have ongoing. And also, we intend to strongly focus on our M&A area, which has always been one of our strengths.
[Operator Instructions] There are no more questions. Now Mr. Raul Lycurgo will make his final considerations.
Ladies and gentlemen, once again, I'd like to thank you all for participating in this conference call, especially our investors. A lot of credibility and the trust that we received from our investors is due to the consistency in the execution of our strategy. We always value the most -- the generation of true value to our shareholders. And for nearly a decade, we have been building this story of excellence and consistency. We would also like to thank our team who has been working tirelessly to build this very profitable and robust company. We are building a story of success and a solid company with a very sustainable future.
Thank you all and have a great day.
Thank you. This conference call to announce the results of quarter 4 2018 of Taesa is now closed. Thank you and have a great day.