apre 2 t06
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TRANSCRIPT
August 11, 2006August 11, 2006
2nd quarter 2006 Results2nd quarter 2006 Results
Highlights
Market
Tariff Adjusment and Operating Performance
Financial Performance
Debt Profile
Cash Flow
Highlights
Operating Performance
Bilateral Contract
Financial Performance
Conclusion
4
HighlightsHighlights
Subsequentevents
2Q06•Consolidated Net Debt reduction of 12% in the last 12 months and conclusion of the early liquidation of renegotiated debt•Adjusted EBITDA of R$ 1,253.6 million in 1H06 and R$ 671.2 million in 2Q06 – increases of 15.7% and 15.3% compared to equivalent periods of 2005•Net profit of R$ 227 million in 1H06 (R$ 107 million higher than 1H05 figure) and R$ 201.9 million in 2Q06 (R$ 176.8 million higher than 1Q06 figure)
•Tariff Adjustment – 11.45% (07/04/2006)•Rating increased by S&P in 07/07/2006 (national scale –from “BBB” to “BBB+”) •Approved in Extraordinary General Meeting (07/11/2006) the creation of new class B of Eletropaulo’s preferred shares that will offer 100% of tag along
1Q06•Adjusted EBITDA of R$ 582.4 million and net profit of R$ 25.1 million •Compliance to the new rules of BOVESPA’s Level 2
•Increase of tag along from 70% to 80%•Board of Directors with at least 20% of independent members
5
Consumption Comparison in Consumption Comparison in GWhGWh
NOTE: Charts do not consider own consumption
1,1821,663
619
1,654
680
2,434
1,902
2,9523,209
2,433
Residential Industrial Commercial Public Sectorand Others
FreeConsumers
2Q05 2Q06
7,968
9,1509,578
7,924
Billed Market Total Market
8.7%
-8.9%
-12.5%39.9%
-0.6%
4.7%
RESIDENTIAL 307.3 306.1 - 0.4%
INDUSTRIAL 219.6 242.5 + 10.5%
COMMERCIAL 272.1 281.0 + 3.2%
OTHERS 210.4 230.5 + 9.5%
TOTAL 267.3 279.1 + 3.9%
2Q06 Variation %2Q05
Average Tariff R$/MWh
6
Retention of Potentially Free ConsumersRetention of Potentially Free Consumers
1,654
1,182
641479
750 806964
1,312 1,4071,500
1930
3848 54
78 8495 99 106
1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06
Free Consumers (GWh) TUSD (R$ million)
Captive Consumers
81%
Free Consumers17%
Potentially Free Consumers
2%
Captive Market Evolution* (GWh)Increase of 5.3% (12 months)
Captive Consumers X Free% Total Market – 2Q06
7,6217,4657,4537,3156,9987,0767,0166,718 6,983 7,261
1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06
Net Revenues with TUSD X Free Consumers consumption
* Excluding all current free consumers from all previous periods
7
3.7%6.3% 4.5% 2.5% 3.6% 4.8%
7.5%7.6% 12.1%
11.8% 7.3%1.6% 9.9%
-4.3%
1.6%1.7%
16.9%
1999 2000 2001 2002 2003 2004 2005 2006
Part B Part A PIS/COFINS IGPM
Tariff EvolutionTariff Evolution
2.1%
18.6%
11.6%
14.3%17.6%
11.1%
13.8%
11.5%
2006 Tariff Adjustment by Consumption Class IndexLow voltage -1.91%High voltage 8.26%
A2 (88 to 138 kV) 4.57%A3a (34.5 kV) 6.20%A4 (2.3 to 25 kV) 9.08%
8
Operating HighlightsOperating Highlights
Collection Rate -% over Gross Revenue
Loss Evolution (%)
7.9 7.3 7.8 6.6
13.5 12.9 13.412.2
5.65.65.65.6
2004 2005 1H05 1H06
Technical Losses Commercial Losses
99.097.799.097.5
2004 2005 1H05 1H06
-9%
+1.4%
Fraud combat:
239 thousand inspections and 33 thousand frauds detected
Cost of R$ 29 million
Retroactive Energy negotiated + Energy Added – 135 GWh (R$ 64 million)
Regularization of Clandestine Connections:
38 thousand regularizations – Revenue of R$ 26 million
Investment – R$17 million
Collection Rate (current bills)
Public Sector: 102.6%
Private Sector: 98.8%
Increase of monthly average of cuts from 75 thousand to 111 thousand (1H05x1H06)
9
CapexCapex 2Q062Q06R$ R$ millionmillion
76
32
49
217
330
404
70
355297
186
33
1611
92 81
2003 2004 2005 1Q06 2Q06
Capex Self Financed
R$ 173 million invested in the first semester of 2006
10
ResultsResultsR$ millionR$ million
1,055.9
1,561.5
348.0408.0348.0365.8157.6168.5 188.9 157.6
1,055.91,036.41,243.4
1,561.51,633.31,777.7
2Q05 2Q06 1Q06 2Q06Operating Expenses Sector Charges Electricity + Transport
Gross Revenue Operating Expenses EBITDA
• Increase over 1Q06: increase of 1.4% of billed market and 2.8% of total market
• Reduction over 2Q05:
• Conclusion of Tariff Review Process 2003 (additional revenue of R$ 106.9 million in 2Q05)
• Revenue’s reversal of R$ 35 million in 2Q06 (devolution to tariff of the increase in Pis/Cofins taxes applied to Initial Contracts)
• Reduction over 1Q06: decrease of 50% in “Other Operating Expenses”
• Reversal of contingency with an impact of R$ 13.8 million in the result
• Reduction over 2Q05: decrease of 25.2% in energy purchased costs
• Change in the energy purchase mix, with higher volume acquired in auctions
• Adjusted EBITDA 2Q06:– Liability Expenses - FCESP: R$
60.6 million
– RTE: R$ 82.2 million
– Provision - RTE: R$ 5.0 million
-12.2% -4.4%
635.7737.1 730.7
2911.2 2744.2 2711.4
2007.11980.62007.12275.5
737.1
2744.2
2Q05 2Q06 1Q06 2Q06
Net Revenue Deductions from Operating Revenue
+1.2%-5.7%
671.2582.4
671.2
523.3423.8523.3571.6
147.972.6158.6
147.9
644.2
33.4% 33.4%29.4%
28.3%
2Q05 2Q06 1Q06 2Q06EBITDA Adjust Adjusted EBTIDA Margin
4,2% 15,3%
11
ResultsResultsR$ millionR$ million
(126.1)(121.7)(126.1)
(77.9)
2Q05 2Q06 1Q06 2Q06
• Negative variations stemmed from:
• The financial revenues’ reduction in the period:
– The reduction of Selic rate from 19.75% in 2Q05 to 16.50% in 1Q06 and 15.25% in 2Q06, that decreased regulatory assets’ remuneration
– The regulatory assets’ balance reduction on which the Selicremuneration is applied
• Lower Real appreciation against the dollar (0.4% in 2Q06, compared to 11.8% in 2Q05 and 7.2% in 1Q06) -collaborated to reversals of monetary variation expenses of R$ 229 million in 2Q05 and R$ 85 million in 1Q06
• Net Profit’s increase in the quarter:• Operating Expenses’ reduction
• IR/CS expenses reduction (71% over 1Q06 and 84% compared to 2Q05)
Financial Result Net Profit
61.9%
3.7%
201.9
25.1
201.9
136.8
2Q05 2Q06 1Q06 2Q06
705.0%
47.7%
12
IGP-DI45.05%
CDI/Selic40.26%
Others/R$0.13%
Libor3.33%
Fixed Rate11.22%
Consolidated Debt Consolidated Debt R$ millionR$ million
Creditors X Indexes – 2Q06
Gross Debt – R$ 4, 877 million
Short Term X Long Term
4,8774,8775,256
4,2564,828
2Q05 2Q06 1Q06 2Q06LT ST Net Debt
4,256
77%
23%
73%
27%
77%
23%
76%
24%
4,4114,774
--3.5%3.5%
• Pension Fund - R$ 2,196 million
• Private Creditors - R$ 2,127 million
• BNDES - R$ 554 million
--11.9%11.9%
* Exchange Rate Conversion on 06/30/2006 - US$ 1.00 = R$ 2.1643
Amortization Schedule - Current
13
• Gross Debt: reduction of 7% (R$ 380 million)
• Net Debt: reduction of 12% (R$ 572 million)
• Foreign Currency: reduced from 12% to 3% of total
• Hedge: 79% of foreign currency debt
• Borrowing of R$ 300 million of CCB’s - amortization of remaining balance of renegotiated debt (R$ 235 million) and liquidation of its swaps
CDI +6.84%
CDI +2.90% CDI +
2.50% CDI +1.82%
Bonds 8th Debenture 9th Debenture CCB
Consolidated Debt Consolidated Debt R$ millionR$ million
Interest rates evolution
--17.4%%
--1.6%--1.4%%
112.0%
100.8% 100.4%
3.81 3.9
2.05
2Q05 1Q06 2Q06Avg cost - %CDI Avg Life - years
Average Cost and Average Life
RatingS&PS&P
Indebtedness Highlights – last 12 months
National Scale
International Scale
DDD
BB
BBB
D
B -
B +
‘03
‘04
‘05
BBB+‘06
B +
National Scale
International Scale
DDD
BB
BBB
D
B -
B +
‘03
‘04
‘05
BBB+‘06
B +
14
CashCash FlowFlow
Eletropaulo - Consolidated Cash Flow (Million) 1Q06 2Q06 1H06
Initial Cash 492 356 492
Operating cash generation 687 653 1,340
Investments (101) (88) (189)
Net Financial Expenses (196) (85) (281)
Net Amortization (245) (45) (290)
Pension Fund Expenses (134) (108) (242)
Income Tax (147) (67) (214)
Free Cash (136) 261 125
Final Cash 356 617 617
15
ConclusionConclusion
• Net profit of R$ 227.0 million in 1H06, representing an increase of R$ 107.0 million compared to 1H05 net profit
• Adjusted EBITDA of R$ 1,253.5 million, 17.2% higher than 1H05’ figure• Debt evolution in the last 12 months:
• Reduction of 11.9% of consolidated net debt• Reduction of 10.3% of average cost • Increase of average life from 2 to 4 years• Foreign currency debt reduced from 12.2% to 3.3%• Conclusion of the pre-payment of March 2004 renegotiated debt
• Operating Highlights in the last 12 months:• Loss reduction of 9.0%• Collection rate increased 1.4%
• Corporate Governance Differentiated Standards:• Creation of new class B of preferred shares with 100% of tag along and
convertibility ratio of 1:1 for current preferred shareholders
16
17
Highlights 1H06Highlights 1H06
1Q06
2Q06
• Best Public Utility in 2005 according to Exame Magazine’s Melhores e Maiores Ranking
• Best Public Held Company in 2005 according to the Platinum List of the Forbes Brasil
• EBITDA: R$ 269 million in the 2Q06 and R$ 543 million in the 1H06
• Net Income: R$ 153 million in the 2Q06 and R$ 306 million in the 1H06
• Starting in Jan/06, 100% of assured energy is sold through the bilateral contract with Eletropaulo
• EBITDA = R$ 274 million
• Net Income = R$ 153 million
Subsequent Events• Readjustment of the price of the bilateral contract with
Eletropaulo in 0.9%
• Reversal of the allowance recorded related to penalties determined by CCEE in November and December/05 (R$ 3.9 million)
18
Caconde197.2
Euclides267.8
Limoeiro77.4
Ibitinga366.1
Bariri301.0
Barra Bonita299.5
Água Vermelha3,891.2
Promissão573.0
Nova Avanhandava757.6
Mogi Guaçu18.2
MRE/CCEE*1,191.9
Eletropaulo - Bilateral5,557.0
Energy BalanceEnergy Balance–– 1H061H06
Energy Generated x Billed Energy in GWh
*After deducing own consumption and transmission losses, the difference is addressed to the Energy Reallocation Mechanism – MREand to the Chamber of Energy Marketing – CCEE..
TOTAL
6,748.9
BILLED
6,748.9
82.3%57.7%
1.1%
2.9%
4.0%
4.4%
4.5%
5.4%
8.5%
11.2%
0.3%
17.7%
19
2.8%
2.2% 2.3% 2.5%
1.6%
2.2%
3.0%
95.7%97.2% 96.8% 94.2% 96.1%
90.9% 92.6%
2000 2001 2002 2003 2004 2005 1S06*
Failure Index Equivalent Availability Factor
Generation and ReliabilityGeneration and Reliability
AES Tietê’s assured energy is 1,275 MW average
1H06: generation was 22% over the assured energy. During the last 20 years, AES Tietê has generated an average of 18% above the assured energy
Failure Index (FI) and Equivalent Availability Factor (EAF) figures exceed the requirements established by the National Eclectic Energy Agency - ANEEL: 2.9% for (FI) and 92.8% for EAF.
Average of 6.8 years of operations without accidents requiring the removal of personnel from the worksite
Failure Index x AvailabilityFailure Index x Availability
*Annualized
0.5Bariri2.9Euclides da Cunha3.2Caconde4.3Promissão5.8Barra Bonita5.9Limoeiro7.9Água Vermelha8.5Nova Avanhandava11.4Mogi-Guaçu18.0Ibitinga
Period Without Accidents –Years
Plant
GenerationGeneration
1,617 1,619 1,581 1,5021,040
1,258 1,392 1,363 1,467 1,554
122%115%123% 120% 123% 117%
81%98%
109% 107%
1997 1998 1999 2000 2001 2002 2003 2004 2005 1S06
Generation - MW Average Generation / Assured Energy
20
Bilateral ContractBilateral Contract
• Initial Contracts ended December 31, 2005
• Starting in January 2006, 1.268 MW (100% assured energy) is sold through the bilateral contract with Eletropaulo
Price readjusted by the IGP-M variation in JulyCurrent Price = R$ 133.87 / MWh, readjusted in 0.86% in July 2006Maturity: December 2015 Collateral: receivables
Average Revenue Average Revenue –– R$/ R$/ MWhMWh133.9
45.9 48.854.0
73.6
94.4
119.6
2000 2001 2002 2003 2004 2005 BilateralContract
21
Operational ProvisionOperational Provision
PIS and Cofins• In June 2006, Aneel published Technical Note, reaffirming its understanding of the PIS
/ Cofins taxation rules and determined that the amounts paid in excess due to the application of non-cumulative taxation rules to the initial contracts should be returned.
• AES Tietê took the following measures:Made a formal inquiry to the Secretariat of the Federal Tax Office to confirm the taxation rules applicable to the Company;Initiated administrative proceedings at Aneel, requesting that the reimbursements to the distribution companies be suspended until the Company has obtained a reply to its inquiry from the Secretariat of the Federal Tax Office;Requested court injunctions to suspend the effect of Aneel’s resolutions concerning the reimbursement until the Secretariat of the Federal Tax Office has produced a reply to the inquiry made by AES TietêRegistered an allowance of the amount to be reimbursed to the distribution companies as corresponding tax credit is still a matter of controversy (R$ 15,3 million)
RTE• Provision referring to the monetary correction of the balance of the credits to receive
from energy distributors regarding the RTE (R$ 9.7 million, in the 1H06)
22
37
2525
36 49 17 241714
2624
1112
16
2019
22
54
40
142
61
96
190
1H05 1H06 2Q05 2Q06
538
698
268349
1H05 1H06 2Q05 2Q06
ResultsResultsR$ millionR$ million
• Increase in the volume of energy sold through the bilateral contract – 100% of assured energy since January / 2006
• Price readjustment occurred in July 2005: from R$ 117.59/MWh to R$ 132.73/MWh
• Power Purchase - Transmission fees - increase in volume of sales through bilateral contract
• Provisions – R$ 25.0 million in the 1H06 related to monetary correction of RTE (R$ 9.7 million) and allowance for PIS / Cofins levied on the initial contracts (R$ 15.3 million)
Net RevenueNet Revenue Costs and Operational ExpensesCosts and Operational Expenses
Power Purchase
OthersOperational Expenses
Royalties Provisions
30%30%34%34%
30%30%59%59%
23
427543
223269
83.4%77.7%
79.5%77.1%
1H05 1H06 2Q05 2Q06(75)
(47)
(34)(24)
1H05 1H06 2Q05 2Q06
153113
306
210
43.8%39.1%
43.8% 42.3%
1H05 1H06 2Q05 2Q06
ResultsResultsR$ millionR$ million
• Increase in financial income: more funds invested in securities
• Decrease in financial expenses in 1H06: reduction in the IGP-M, from 1.8% in the 1H05 to 1.4% 1H06
• Increase in volume of energy sold through the bilateral contract
• Improvement in the financial results
Financial ResultsFinancial Results Net IncomeNet Income
• Increase in volume of energy sold through the bilateral contract
• Decrease in EBITDA margin due to the increase in the operational provisions
EBITDAEBITDA
27%27%
20%20%
37%37%
30%30%
45%45%
35%35%
24
DebtDebt
Net Debt Net Debt –– R$ billionR$ billion Breakdown of Financial InvestmentsBreakdown of Financial Investments
Cash availability = R$ 776.7 million (jun06)
Federal T Bonds (Ba3)
88%
Foreign Bonds - US$ - (Aa3)
6%
Foreign Bonds - US$ - (Aa1)
5%
Prived Bonds (A3)1%
1.1
1.4
0.6
0.9
1.3
0.7
1.1 1.10.6x
1.1x1.4x
2.0x
3.2x3.3x3.0x
0.7x
2000 2001 2002 2003 2004 2005 1H05 1H06
Net Debt (R$ million) Net Debt / EBITDA
Creditor Amount - R$ million Maturity Terms Collateral
Eletrobras 1,405.8 May-13 IGP-M + 10% p.y. ReceivablesFunCesp III 20.4 Nov-17 IGP-DI + 6% p.y. Receivables
25
CAPEXCAPEX
Increase Capacity Requirement: waiting decision of ANEEL and São Paulo StateGovernmentCapex – 1H06: R$ 11.1 million:
Bariri: re-equipping and modernization of the Generating Unit 2Reforestation
Reducing the expected capital expenditure for 2006: R$ 43.7 million
CapexCapex –– 1H061H06CapexCapex –– R$ millionR$ million
11.1
43.7
27.5
21.9
12.4
30.537.5
17.7
2000 2001 2002 2003 2004 2005 1S06 2006Revised
68%
25%
7%
Equipment Environmental Others
26
DividendDividend
Dividend Payment: Payout of 100% of the net income reported in the 1H6: R$ 305.5 million
R$ 3.06 for 1,000 common sharesR$ 3.36 for 1,000 non voting shares
Payment in August 29, 2006
11.8%
13.6%
12.3%
6.6%
12.4%
14.1%
13.4%
11.4%
1S06*
2005
2004
2003
Votting Non Votting* annualized
PayPay--out Ratioout Ratio Dividend YieldDividend Yield
100.0%
96.9%
95.0%
95.0%
1S06
2005
2004
2003 185.6 million
276.9 million
538.9 million
305.5 million
27
ConclusionConclusion
Generation was 22% higher than assured energy;
Operational Excellence: FR and EAF above ANEEL requirements;
Assured energy completely sold in the long term;
EBITDA of R$ 542.5 million in 1H06 – increase of 26.9% compared with the same period of 2005;
Net Income of R$ 305.5 million in the 1H06, 45.2% higher than the 1H05 – net margin of 43.8% in the semester.