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Edited Transcript of CPRE3.SA earnings conference call or presentation 15-May-20 1:00pm GMT

Q1 2020 CPFL Energias Renovaveis SA Earnings Call

SAO PAULO May 25, 2020 (Thomson StreetEvents) -- Edited Transcript of CPFL Energias Renovaveis SA earnings conference call or presentation Friday, May 15, 2020 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Futao Huang

CPFL Energias Renováveis S.A. - VP, Member of Executive Board & Director

* Yuehui Pan

CPFL Energias Renováveis S.A. - CFO

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen. I would like to welcome everyone to the CPFL Renováveis conference call to discuss the results of the first quarter of 2020. Today, we have with us the Executive, Mr. Futao Huang, CEO of CPFL Renováveis; and Mr. Pan, Chief Financial and Investor Relations Officer of CPFL Renováveis and other officers of the company.

Due to the COVID-19 pandemic, all officers are connected from their home. Thus, we apologize in advance if there is any disconnection. Moreover, we reinforce that we work to reestablish communication as soon as possible.

This call is being broadcast simultaneously through the Internet on the website www.cpflrenovaveis.com.br/ir. In that address, you can also find a banner through which the presentation will be available for download.

(Operator Instructions) It's important to mention that this teleconference is being recorded.

Before proceeding, let me mention that forward-looking statements are being made under the safe harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of CPFL Renováveis' management and on information currently available to the company. Forward-looking statements are not guarantees 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 in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of CPFL Renováveis and could cause results to differ materially from those expressed in such forward-looking statements.

Now I'll turn the conference over to Mr. Huang.

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Futao Huang, CPFL Energias Renováveis S.A. - VP, Member of Executive Board & Director [2]

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Yes. And everyone, can you hear me?

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Operator [3]

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Yes, we can hear, sir.

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Futao Huang, CPFL Energias Renováveis S.A. - VP, Member of Executive Board & Director [4]

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Okay. Let's me start. Good morning, everyone. Regarding the highlights of first quarter of '20, our generation was 1,001 gigawatts hour in first quarter '20, 14.6% lower when compared to fourth quarter '19 mainly due to the generation of wind farm and the small hydros.

Net revenue in first quarter of '20, totaling BRL 385 million, 15.1% higher when compared to first quarter '19. In terms of EBITDA, in first quarter of '20 was BRL 223 million, an increase of 16% compared to first quarter of '19. In terms of the net results in first quarter '20 was a loss of BRL 29 million, a reduction of a 16 -- 68.3% in relation to the loss recorded in fourth quarter '19.

We -- currently, we also had the registration of delisting tender offer with the CVM on April 27, 2020. The auction will be occurred on June 10, 2020, according to the notice released on May 6, 2020.

Now we go to the energy generation for the first quarter of '20 by source. We saw a reduction of 14.6%, less 171 gigawatt hour in energy generation in first quarter '20 compared to fourth quarter '19. Biomass generation increased by 37.6% in first quarter '20, plus 22 gigawatt hours when compared to first quarter '19, mainly due to the expansion of Baía Formosa generation period and anticipation of the Buriti generation.

The generation of small hydro decreased by 19.2% in first quarter '20, minus 95 gigawatt hours when compared to the generation in first quarter '19 due to the worsening inflow. And we can see in the chart, mainly in the Southern region and in the state of Mato Grosso, we can see this chart, the total small hydro flow, we decreased 9 -- 8.9% compared with the same period of last year, especially both south of -- southern region, the water inflow decreased 66% compared with the same period of last year. Mato Grosso state, the water inflow decreased 24% compared with last year.

In terms of our wind generation, we decreased by 16% in first quarter '20, 99 gigawatt hours when compared to generation in first quarter '19 due to the lower speed of wind in Ceará and Rio Grande do Norte despite the great availability and the great speed of the wind in Rio Grande do Sul.

As I said, in terms of availability, we increased mainly in southern wind farm in Ceará. We can see the change regarding the availability. In Ceará beach, we improved 7.12% compared with the same period of last year.

In Rio Grande do Norte, we improved 1.1% compared with the same period of last year. In Rio Grande do Sul beach, we improved 2.2%. But actually, southern wind farm, we improved 8.8%. The total wind availability we improved 3.2% compared with the same period of last year.

That's all what I want to highlight, please. Thanks.

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Operator [5]

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(Operator Instructions)

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Yuehui Pan, CPFL Energias Renováveis S.A. - CFO [6]

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Sorry. I think we still not disclosed the financial numbers, right?

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Operator [7]

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Mr. Pan, you can proceed.

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Yuehui Pan, CPFL Energias Renováveis S.A. - CFO [8]

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So it's not the time for the Q&A, right?

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Operator [9]

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Right, sir. You can proceed your presentation.

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Yuehui Pan, CPFL Energias Renováveis S.A. - CFO [10]

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Should I proceed now?

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Operator [11]

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Yes, please.

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Yuehui Pan, CPFL Energias Renováveis S.A. - CFO [12]

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Okay. For the first quarter of 2020, we have the revenue of around 51% of increase. That is BRL 50 million. And this BRL 50 million (inaudible) on the strong hydro and small hydropower plants. This is another strategy of physical guarantee of the contracts, partially offset by the GSF exposure at BRL 47 million. The biomass source, BRL 17 million, and the wind farm wind source is negative BRL 14 million. That's because of the lower wind farms generation, partially offset by hedge operations set out at PLD price in the holding company.

And we have EBITDA that is around a BRL 30 million increase in the margin; and the small hydropower plants, PPA seasonality contributed BRL 54 million; biomass seasonality and a higher generation of BRL 15 million. Inflation over energy contracts trending at BRL 12 million; GSF and the secondary, negative BRL 29 million; lower wind farm generation, negative BRL 25 million. And we have a contribution of BRL 1 million from the PMSO.

And in terms of the net losses, we have around 68% of drop in the net loss. And that benefited from the financial results that is the BRL 39 million, that reduction of the indebtedness and also in costs in the CDI. And we have a gain of BRL 11 million in terms of the mark-to-market.

And let's go to next slide. Okay. Next slide, we have indebtedness of the company. We see on Slide 6, the leverage at the end of the first quarter was 2.8x with a net debt of BRL 3.4 billion. The drop in leverage shows the company's maturity which, as the projects start operating and become more mature, this indicator decreases.

On March 31, we have a gross debt of BRL 5 billion and average term was 4.47 years. And we observed in the company's debt structure that 59% is invest to TJLP, and the second largest participation, 25% is linked to CDI. And this is the debt we have with the financial institutions.

The cost of the gross debt shows a reduction in the nominal rate of 6.7%, showing the results of the company's debt management work with the exchange of more expensive debt for cheaper debt in addition to a drop in the Selic. And we raised BRL 120 million in the first quarter with an average cost of around a CDI plus 0.8% and average tenure of 4 years.

And this is the end of our presentation. And just say thanks to all the investors. We are at -- the company is at a special time and also the whole world is at a special time. And -- but we are still confident that we can conquer the life and succeed.

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Operator [13]

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(Operator Instructions) Ladies and gentlemen, I would like to invite Mr. Pan to proceed with his closing statements. Please go ahead, sir.

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Yuehui Pan, CPFL Energias Renováveis S.A. - CFO [14]

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Okay. So guys, if you don't have any questions, we would close this session. And -- but again, we appreciate all the time we got together. We are at the digital phase, but we really appreciate and really cherish the experience we have with you together in the capital market. So we believe, in this way, we can contribute more value to shareholders, and we will continue to deliver clean and cheaper energy to the market through our -- to the community and appreciate your participation. Thank you.

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Operator [15]

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That does conclude the CPFL Renováveis audio conference for today. Thank you very much for your participation. Have a good day.