1 q07 financial and operating results presentation
TRANSCRIPT
Financial and Operating ResultsPresentation
First Quarter, 2007
2
Agenda
Operating Results
Financial Results
Highlights
3
Agenda
Operating Results
Financial Results
Highlights
4
Highlights
Financial Results• Net Revenues totaled R$195.1 million in the 1Q07, 13.6% up year-on-year.• EBITDA totaled R$77.0 million in the 1Q07 (EBITDA Margin of 39,5%), 13.8% up on the
R$67.6 million recorded in the 1Q06.• Net Income in the 1Q07 was R$30.8 million, 245.2% up year-on-year. • CEMAR held a non-convertible debenture issue:
• Amounting to R$267.3 million• Maturing in 2013 • At 105.8% of the CDI• With a national long-term rating of “A (bra)” assigned by Fitch Ratings
• CEMAR obtained new tax incentive (accelerated depreciation)Operating Results
• Energy Sales (MWh) growth of 8.3% over the 1Q06.• In the 1Q07, CEMAR’s DEC and FEC ratios fell by 36.8% and 22.7%,
respectively, compared to the 1Q06.• The new CEO of CEMAR, Nuno Neves, took up office on March 12, bringing 15 years of
corporate experience to the subsidiary’s management team.
5
Agenda
Highlights
Operating Results
Financial Results
6
Customer Base
Commercial 7.2%
Industrial0.7%
Others 5.8%
Residential86.3%
• Growth of 7.2% in the customer base compared to the 1Q06 (91,200 new customers)
Customer Base (thousands) Customer Base Breakdown
1,2811,307 1,327 1,349
1,373
8.9% 8.7% 8.9%
7.5% 7.2%
1Q06 2Q06 3Q06 4Q06 1Q07Customers %Chg. Y-O-Y
7
Others24.2%
Residential 42.8%
Industrial13.1%
Commercial19.9%
Energy Volume - CEMAR
• Growth of 8.3% in billed energy volume over the 1Q06• Strong growth in the residential and industrial classes: 9.8% and 10.7% respectively
Energy Volume per Class Billed Energy (% per Class)
Energy Load (% Chg. MWh): Brazil, NE and CEMAR – 1Q07 vs. 1Q06
3.7%
3.8%
8.5%
Brazil - SIN Northeast CEMAR
CONSUMPTION CLASS (MWh) 1Q06 1Q07 % Chg.Residential 282,450 310,250 9.8%
Industrial 85,931 95,104 10.7%
Commercial 137,979 144,146 4.5%Others (ex. own consumption) 163,124 175,600 7.6%
TOTAL 669,484 725,100 8.3%
8
Energy Balance and Losses
Energy Balance
Energy Balance (MWh) 1Q06 1Q07 % Chg.Required Energy * 966,627 1,052,179 8.9%Sales ** 670,665 726,269 8.3%Losses 295,962 325,910 10.1%* Includes own generation
MWh
** Includes energy sales to consumer classes, own consumption and supply to CEPISA
Electricity Losses (LTM)
29.8% 29.6% 29.9% 29.8% 29.9%
1Q06 2Q06 3Q06 4Q06 1Q07
9
FEC (Avg. Frequency per Consumer – LTM)
6.74.3
0.9
1.6
1Q06 1Q07
Supplier
CEMAR
7,8
5,9
24.4%7.8
5.9
7.4
14.42.4
1.1
1Q06 1Q07
Supplier
CEMAR
DEC and FECDEC (Avg. Hours per Consumer – LTM)
Supplier FEC % Chg.: 77.8%
CEMAR FEC % Chg.: -35.8%
36.8%15.5
9.8
Supplier DEC % Chg.: 118.2%
CEMAR DEC % Chg.: -48.6%
Consistent improvement trend in service quality
CEMAR DEC and FEC indices have improved 36.8% and 24.4% Y-O-Y in the 1Q07
10
Agenda
Highlights
Operating Results
Financial Results
11
Net Revenues
171.8195.1
1Q06 1Q07
13.6%
•Net Revenues increased by 13.6% in the 1Q07•Good performance chiefly due to:
a) 8.3% volume increase in energy salesb) the August 2006 tariff increase (14.58%)
Net Revenues (R$ million)
12
Manageable Costs and Expenses
•Manageable costs and expenses (PMSO - excluding provisions) totaled 15.9% of Net Revenues in the 1Q07, 3.1 p.p. down year-on-year•Personnel: year-on-year decline of 15.4% in the 1Q07 due to the 7.5% reduction in the number of employees and non-recurring restructuring expenses registered in the 1Q06 (R$3.9 million)•Allowance for Doubtful Accounts and Losses reached 2.7% of Gross Operating Revenues (GOR) in the 1Q07 – growth attributable to non recurring positive performance in the 1Q06 due to:
•collections from public sector customers•CEMAR’s debt installment repayment campaigns
R$ million 1T06 1T07 Var.Personnel 15.2 12.9 -15.4%
Material 1.4 1.6 15.6%
Services 13.4 16.4 22.3%Others 2.7 0.1 -95.8%
PMSO 32.7 30.9 -5.3%PMSO (% of Net Revenues) 19.0% 15.9% -3.1 p.p.
Provisions 1.9 9.9 428.1%
Allowance for Doubtful Accounts and Losses 0.4 7.6 1806.3%Other Provisions 1.5 2.3 54.6%
MANAGEABLE COSTS AND EXPENSES 34.6 40.9 18.3%MANAGEABLE COSTS AND EXPENSES (% Net Revenues) 20.1% 21.0% 0.9 p.p.
13
EBITDA and EBITDA Margin
EBITDA (R$ million) and EBITDA Margin (% of Net Revenues)
67.6
77.0
39.4% 39.5%
1Q06 1Q07EBITDA EBITDA Margin
•EBITDA reached R$77.0 million in the 1Q07, 13.9% higher than the R$67.6 million recorded in the 1Q06
•EBITDA margin of 39.5%, stable year-on-year
13.9%
14
Income Tax and Social Contribution
Income Tax / Social Contribution (R$ million) 2006 1Q07Expense Income Tax/ Social Contribution (42.6) (18.4) (+) Reversal in Tax Provision 2005 (6.1) - ( - ) Deferred Tax Asset 19.1 9.1 ( - ) ADENE Incentive 10.8 2.7 = Tax / Cash Basis (18.7) (6.7) Earnings Before Tax 157.4 62.8 Effective Tax Rate (%) - Cash Basis 11.9% 10.6%
•Deferred tax assets and the tax benefits obtained from ADENE (Northeast Development Agency) lowered the income tax and social contribution disbursements to 10.6% of EBT in the 1Q07
15
Net Income
21.4
8.9
30.8
1Q06 Pro-Forma 1Q06 1Q07
43.9%
245.2%
1Q07 Net Income totaled R$30.8 million, 245.2% higher than the R$8.9 million recorded in the 1Q06
If we exclude non-recurring expenses related to the IPO, 1Q07 Net Income would have been 43.9% higher than in the 1Q06
Net Income (R$ million) 1Q06 – 1Q07
* 1Q06 Pro Forma Net Income excludes the non recurring IPO related expenses of R$12.5 million
16
Indebtedness
Gross Debt – 1Q07
•Gross debt reached R$897.6 million on Mar-31-07•R$267.3 million from the Non Convertible Debentures Issue•Release of a R$5.8 million tranche from the RGR financing line to fund sub-transmission investments•Release of R$28.0 million tranche from the BNB financing line
•Debt Profile: low average cost maintained, 13.2% p.a. in the last twelve months, or 95.3% of CDI, with average maturity of 8.7 years
Reference Avg. Spread (per year)
Avg. Due Date (month-year)
Avg. Maturity (in years)
Part. (%)
6-month LIBOR 0.8% pa Apr-18 11.0 0.7%IGP-M (2 years) 12.0% pa Jun-09 2.2 8.1%IGP-M (9 years) 12.7% pa Jan-16 8.8 19.8%IGP-M (17 years) 4.4% pa Jan-24 16.8 14.5%TJLP 4.2% pa Jul-13 6.2 0.2%Fixed Rate (R$) 11.9% pa Mar-17 9.9 10.4%RGR 6.2% pa Feb-17 9.8 5.5%Fixed Rate (US$ 6.8% pa Jun-20 13.1 0.9%FINEL* 9.8% pa Jan-16 8.8 6.5%CDI 105.4% of CDI May-13 6.1 33.4%*FINEL is a sectorial index representing 20.0% of IGP-M
Maturity R$ million Total %
Short Term 51.0 5.7%Long Term 846.6 94.3%
2008 46.9 5.2%
2009 64.6 7.2%
2010 53.3 5.9%
2011 123.6 13.8%
After 2011 558.3 62.2%
Total 897.6 100.0%
17
CEMAR’s New Debentures
•On March 28, CEMAR sucessfully placed its 3rd public issuance of non convertibledebentures
Key Terms Description
Offering Type Non Convetible Debentures
Offering Size R$267.3 million
OfferingPlacement Best Efforts
Term 6 years
Cost 105.8% of CDI
Use of Funds Primarily for the prepayment of CEMAR’s costlier debt
Bookrunners UBS Pactual and Itaú BBA
18
Net DebtConsolidated Net Debt (R$ million) Ownership Adjusted Net Debt (R$ million)
Consolidated Net Debt Pro Forma* - (R$ million)
96.5
434.8
176.0
897.6
190.3
Gro
ss
Deb
t
Net
Reg
ulat
ory
Ass
ets
Cas
h an
dC
ash
Eq.
CEM
AR
Cas
h an
dC
ash
Eq.
EQTL
Net
Deb
t1Q
07
96.5
270.5
340.3
897.6 190.3
Gro
ssD
ebt
Net
Reg
ulat
ory
Ass
ets
Cas
h an
dC
ash
Eq.
CEM
AR
Cas
h an
dC
ash
Eq.
EQTL
Net
Deb
t1Q
07Consolidated Net Debt Pro Forma* - (R$ million)
284.4587.0
63.1
49.2190.3
Gro
ssD
ebt
Net
Reg
ulat
ory
Ass
ets
Cas
h an
dC
ash
Eq.
CEM
AR
Cas
h an
dC
ash
Eq.
EQTL
Net
Deb
t1Q
07
176.9
587.0
63.1
156.7
190.3
Gro
ssD
ebt
Net
Reg
ulat
ory
Ass
ets
Cas
h an
dC
ash
Eq.
CEM
AR
Cas
h an
dC
ash
Eq.
EQTL
Net
Deb
t1Q
07
19
Consolidated Net Debt
Consolidated Net Debt (R$ million) and Net Debt / EBITDA (LTM)
305.0 331.9
179.8105.1 105.0
176.0
1.6 1.5
0.70.3 0.3
0.5
4Q05 1Q06 2Q06 3Q06 4Q06 1Q07
Net Debt Net Debt / EBITDA (LTM)
20
CAPEXCEMAR’s CAPEX* (R$ Million)
8.712.8
18.18.3
1.9
3.8
2.2
2.9
1Q06 1Q07
Others
Equipaments and Systems
Network Expansion
Network Maintenance
16.7% 31.5
27.0
•CEMAR* Direct Capex totaled R$31.5 million in the 1Q07•For 2007 we expect CEMAR’s CAPEX to reach approximately R$180.0 million
* excluding Direct Investments in the Light for All Program
21
PLPT (Luz Para Todos – “Light for All” Program)
30.935.4
1Q06 1Q07
• By the end of March 2007, CEMAR had connected 111,800
additional customers through the PLPT
PLPT Direct Investments (R$ million)
Connected Customers
14.6%
50,82462,443
80,577
103,067 111,826
1Q06 2Q06 3Q06 4Q06 1Q07
22
101.0107.2
1Q06 1Q07
53.457.1
1Q06 1Q07
25.722.7
1Q06 1Q07
998
1,176
1Q06 1Q07
-11.7%
Efficiency Indices
EBITDA (R$) per Consumer : 1Q06 – 1Q07
Clients per Employee: 1Q06 – 1Q07
EBITDA (R$) per MWh: 1Q06 – 1Q07
7.1%6,1%
17.8%
* Excluding provisions and restructuring expenses
PMSO* per Clients: 1Q06 – 1Q07
23
Dividends
The OSM of April 5, 2007, approved dividend payments of R$107.8 million (R$1.64/UNIT).This was 98.2% more than the 2006 dividend pay-out of R$54.4 million ($ 1.03/UNIT).Dividend payments began on May 7, 2007.
Dividends (R$MM e R$/UNIT) Paid - 2006 and 2007
54.4
107.8
1.03
1.64
05/06 06/07
Dividends (R$ Million) R$/UNIT
24
Equatorial’s Share Performance – EQTL11Equatorial’s UNIT’s total return outperformed the overall market and electricity sector index
Price Evolution
(3/31/06 = 100 to 2/5/07):
EQTL11: 37.9%,
EQTL11 Total Return (Div. R$1.64/UNIT): 49.2%
IBOV: 30.3%,
IEE: 27.9%Avg. Traded Volume: 2006 - R$3.1 million,
Last 60 days - R$4.5 million; Last 30 days - R$5.1 million
Price Movement: EQTL11, Ibovespa and IEE (31/03/06 = 100)
Average Daily Traded Volume – Monthly Basis (R$ Million)
7.3
3.01.6 0.8
1.9 2.03.1
1.4 2.1
8.1
4.1 4.6 4.9
Apr
-06
May
-06
Jun-
06
Jul-0
6
Aug
-06
Sep-
06
Oct
-06
Nov
-06
Dec
-06
Jan-
07
Feb-
07
Mar
-07
Apr
-07
80
90
100
110
120
130
140
150
03/3
1/06
04/2
8/06
05/2
6/06
06/2
3/06
07/2
1/06
08/1
8/06
09/1
5/06
10/1
3/06
11/1
0/06
12/0
8/06
01/0
5/07
02/0
2/07
03/0
2/07
03/3
0/07
04/2
7/07
Pric
e Ev
olut
ion
EQTL11 IBOV IEE
25
Contact
Leonardo DiasCFO and Investor Relations Officer
Arnaldo FaissolInvestor Relations Manager
Phone1: +55 (98) 3217-2245Phone2: +55 (98) 3217-2113
Email: [email protected]: http://www.equatorialenergia.com.br/ri
26
DISCLAIMER
This document may contain prospective statements, which are subject to risks and uncertainties, as they were based on the expectations of Company’s management and on available information. These prospects include statements concerning the Company’s current intensions or expectations for our clients; this presentation will also be available on our website www.equatorialenergia.com.br/ri and also in the IPE system at the Brazilian Security Exchange Commission – CVM.Forward-looking statements refer to future events which may or may not occur. Our future financial situation, operating results, market share and competitive positioning may differ substantially from those expressed or suggested by said forward-looking statements. Many factors and values that can establish these results are outside Company’s control or expectation. The reader/investor is prevented not to completely rely on the information above .The words “believe", “can", “predict", “estimate", “continue", “anticipate", “intend", “forecast" and similar words, are intended to identify affirmations. Such estimates refer only to the date in which they were expressed, therefore Company has no obligation to update said statements. This presentation does not consist of offering, invitation or request of subscription offer or purchase of any marketable securities. And, this statement or any other information herein, does not consist of a contract base or commitment of any kind.