Companhia Paranaense de Energia - COPEL
Q1 2017 Earnings Call Transcript

Published: 16 May 2017

[Antonio Sergio de Souza Guetter:]

Good morning, everyone. I thank each one of you for participating in our call. I would like to start our talk by saying a few words about the current continuing economy scenario, which starts to give some signs of recovery at the beginning of this year. The electric charge of the National Interconnected System grew by 3.5% in the first quarter of 2017, explained in part by the improvement in industry confidence that went up almost 3% in March 2017, exceeding 90 point, the highest level since May 2014. These figures are driven by some factors which tend to encourage the economy

[Operator:]

Now we will start the question-and-answer session. [Operator Instructions] Mr. Thiago Silva from Banco Santander.

[Thiago Silva:]

Good morning everyone thank you for the call. My question has to do with the volume of the distribution company. Captive volume was impacted mainly by the migration of customers from captive to the free market. And I would like to know when, in your view, we could see a stabilization of this movement in the volume for the future. And the second question, related to cost. We see a performance of manageable cost in your release, that I would like to know if you have an internal program, an in-house program, mainly regarding personnel in this regard.

[Antonio Sergio de Souza Guetter:]

I will give this floor to the CEO of Copel Distribuicao.

[Maximiliano Andres Orfali:]

We already see a stabilization of this one, and we already start to reverse the process. We expect this to stabilize and maybe reduce. Regarding the cost, we have a very strong program to reduce our costs. We have a program that should have impact by the end of this year, and we do not intend to hire new people for these jobs that are being vacant. We would like to remind you that last year, we had a reduction of about 200 employees at Distribuicao, and we did not replace any of them, so they still are vacant. So this was a way of taking advantage of the program and not replace, that is to say, to take advantage of our voluntary redundancy program.

[Operator:]

[Operator Instructions] Our next question comes from Mr. Marcelo Sa from UBS. You may proceed.

[Marcelo Sa:]

Good morning thank you for the call. I would like to know if you can give us an update about your discussions about RBSE and if you have negotiated some solution with ABRAGE and ANEEL. Also, I would like to know if you have some relevant changes in the volume of contracted energy at Copel. And also about distribution, the market was higher than most people expected. I would like to know if there was a specific reason? The size of the growth in volume, do you believe this is recurrent for now on – from now on?

[Antonio Sergio de Souza Guetter:]

Could you please repeat your second question, the company ops?

[Marcelo Sa:]

I would like to know, in generation, if you have reduced the energy contracted amount.

[Antonio Sergio de Souza Guetter:]

[Indiscernible] Good morning Marcelo. In relation to your question about the RBSE, there are many different things involved, and all of them happening simultaneously when dealing with them, with this team in the judicial arena, ABRAGE is very much proactive, and Copel GeT is also apart from ABRAGE, and we're hiring two law firms in order to track the evolution of this subject and defend of the interest of transmission companies. And regarding the negotiation, this is a process underway and it's a rather interesting one. And this is being ordained by the Ministry of Mines and Energy. In order to sit at the table and discuss and evaluate all the most important agreements related to the subject, and then they – we have already scheduled a meeting with many players with the participation of ABRAGE, and ABRAGE and the Ministry of Mines and Energy trying to find a solution that may please all the parties. And we are very bullish bout this possibility. Regarding energy contracts, Copel already, at the end of 2016, had already foreseen the possibility of a low level of GSF for this year, especially after the second half. And therefore, we had already taken precautions last year in order to leave a reasonable amount of energy, about 15% of the energy contracted, in order to cope with this challenge. We had a plan and what we view is that we had a part of energy to be delivered in 2017, and that would be still in 2017. But already at the beginning of 2017, with the perspective of low GSF started to become more real, we changed that so Copel is very well positioned in order to cope with this difficulty that will happen end of May, of reduction of energy because of the low GSF. And the third question was about the reasons for the strong improvement with the Distribuicao. Maximiliano will be talking about that.

[Maximiliano Andres Orfali:]

What we can say is that we had no non-recurring items yet. And we worked very much focused on the reducing the ADA and with very good we didn’t note in the reduction of the allowance for doubtful accounts, the ADA. And we had a reduction of 200 in our headcount last year, and we are not replacing them, so this is another reason. So our personnel cost, we were almost able to absorb the adjustment of the last collective bargaining without having an increase in our payroll. I would say that these two factors ended up contributing for this result.

[Marcelo Sa:]

Thank you.

[Operator:]

Vitor Sousa from Brasil Plural.

[Vitor Sousa:]

Good morning, everyone. Thank you for the questions. I have a doubt about your debt. Could you give us a strong guidance regarding your leverage up to the end of the year? Is there a level of comfort that you have in mind in order to close the last quarter of 2017? I see that you have 2.3x, and I would like you to give us some color regarding what would be the optimal level to be achieved.

[Antonio Sergio de Souza Guetter:]

About our leverage, we intend to be under the limit of our 3.5x. So our forecast is to have this up to the end of the year. And I would like now to turn the floor over to Adriano.

[Adriano Rudek de Moura:]

Good morning. Well, this is a point of attention of the whole management of the company. We have already published our information also regarding this event and the way we intend to deal with that. And we have – we must have an efficient cost management and also in the debt profile. I believe all these events together make Copel have the conditions to keep within our target.

[Vitor Sousa:]

So have you a more adequate so far for the next 2 months. But can you give any figure? That is to say, can you give me a number? Or you don't have this kind of target.

[Antonio Sergio de Souza Guetter:]

As I said, we want to be below 3.5, and our objective is to stay at 3.3. [Audio Gap]

[Vitor Sousa:]

Another question about management [indiscernible] to the CFO position. What are you expecting to change at COPEL with this regard?

[Antonio Sergio de Souza Guetter:]

[Inaudible] And he has a very good relationship with foreign banks. And we also have foreign partners. So he has a lot of knowledge in this area and he's very experienced in funding and accounting. And I'm sure that he's going to add a lot of help to us also regarding the review of our own assets. But also, it's the impairment with the key project with the potential [indiscernible]. But certainly, we will be reviewing our portfolio as you said yourself. Adriano will add to that.

[Adriano Rudek de Moura:]

Good morning. Good morning, everybody. Adding to what he said, regarding this year, we sold two projects. And also, we saw a massive cash generation of higher to the amount that was posted in December, so in the first quarter. It reflects the amount that we got at PP&E, were drawn to our results in the first quarter. Impairment cash on every single year, changing the assumptions then sometimes, and we'd have to review this we think it's something that we monitor on an ongoing basis. But in the first quarter it was the complement of the sales already realized in December, and that shows the recoverability of this amount of BRL30 million, that's what's focused now.

[Vitor Sousa:]

Thank you.

[Operator:]

Pedro Manfredini from Itau BBA.

[Pedro Manfredini:]

Just an update regarding payments in the states. Could you give us an update about that? The interpreter apologizes but the sound was very bad.

[Antonio Sergio de Souza Guetter:]

It’s a pleasure to talk to you. Well, there's nothing new on the front there because the state is paying the PLD again.

[Pedro Manfredini:]

Thank you.

[Operator:]

Arlindo Carvalho from Credit Suisse.

[Arlindo Carvalho:]

Good morning. About your indexes, we saw that you have BRL10.7 billion maturing now in the short run. And I would like to know if you intend to roll this over and how do you see this matter.

[Antonio Sergio de Souza Guetter:]

Adriano Fedalto will answer your question.

[Arlindo Carvalho:]

Good morning.

[Adriano Fedalto:]

Good morning, everyone. In fact, we have a relevant amount that will be maturing the next few months and also 2018. And what we have been seeing the correct contact with the banks and that institutions are very comfortable in terms of the capacity of rolling over Copel's debt. So we are very comfortable regarding this, regarding our capacity to extend the maturity, and we have all the right positions to roll them over in the next few months.

[Arlindo Carvalho:]

What is the level of cost you see for that? Will it be different from in [indiscernible]? Can you give us a figure?

[Adriano Fedalto:]

Well, you can see that in our financial statements, because we have already published this information last night, and the most recent operation that we've signed was a promissory note at 117% of the CDI.

[Arlindo Carvalho:]

Thank you.

[Operator:]

[Operator Instructions] Pedro Manfredini, you may proceed.

[Pedro Manfredini:]

Has the company intend to make a debenture issuance? And the interpreter apologizes because the sound is circulated here in the translation booth. We apologize.

[Antonio Sergio de Souza Guetter:]

At Copel G&T, we have not issued in infrastructure debenture yet. And all the projects that you mentioned, [indiscernible] and the wind farm et cetera, they are under the umbrella of Copel G&T. And there could be an issuance of infrastructure debentures in the future. We – in the next few months, when this opportunity arises, we intend to issue also an infrastructure debenture at Copel G&T. We made only one, which was in Copel Telecom. And Copel G&T has a lot of backup energy for this kind of security. And we should go towards that in the next operations that we might avail.

[Pedro Manfredini:]

Thank you very much. I appreciate it.

[Operator:]

[Operator Instructions] As there are no more questions, we would like to give the floor back to Mr. Sergio de Souza Guetter for his final remarks.

[Antonio Sergio de Souza Guetter:]

Thank you very much for your interest in our call. And I would like to say that I'm very bullish about the results of the first quarter. I believe that the market has shown a very fast recovery and a major one. So once again, I thank you very much for following our call, and I will – I expect to see you all in our next call. Thank you very much, and have a good day.

[Operator:]

Copel's conference call is closed. We thank you for participating and wish you all a very good day. Thank you.