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Edited Transcript of TRPL4.SA earnings conference call or presentation 6-Nov-19 1:00pm GMT

Q3 2019 CTEEP Companhia de Transmissao de Energia Eletrica Paulista Earnings Call

Sao Paolo Nov 25, 2019 (Thomson StreetEvents) -- Edited Transcript of CTEEP Companhia de Transmissao de Energia Eletrica Paulista earnings conference call or presentation Wednesday, November 6, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Alessandro Gregori Filho

CTEEP - Companhia de Transmissão de Energia Elétrica Paulista S.A. - Financial & IR Director and Member of Executive Board

* Cesár Augusto Ramírez Rojas

CTEEP - Companhia de Transmissão de Energia Elétrica Paulista S.A. - CEO, Member of Executive Board & Director

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen. Welcome to the ISA CTEEP conference call, which will present the results for the third quarter 2019. We would like to inform you that this event is being recorded. (Operator Instructions) The audio file and the slides of this conference call are being presented simultaneously on the Internet at www.isacteep.com.br/ir. At this address, you can also find the presentation for a follow-up and download.

Before proceeding, we would like to clarify that any forward-looking statements made during this conference call regarding the business prospects of ISA CTEEP financial and operational projections and goals are the beliefs and premises of the company's management as well as information currently available. They involve risks, uncertainties as they refer to future events and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions as well as industry conditions and other operating factors may affect the future performance of ISA CTEEP and lead to results that differ materially from those expressed in such considerations.

With us today, we have Mr. Cesár Ramírez, CEO; and Mr. Alessandro Gregori Filho, CFO and IRO.

Now I would like to turn the call over to Mr. Cesár Ramírez, who will start the presentation. You may proceed, sir.

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Cesár Augusto Ramírez Rojas, CTEEP - Companhia de Transmissão de Energia Elétrica Paulista S.A. - CEO, Member of Executive Board & Director [2]

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Good morning. Thank you. I would like to thank you all for joining us. In this call today, we're going to present our financial results for the third quarter of 2019. So we're following now a consistent trajectory of generating value. One of the milestones of the quarter was the operation of our plant and -- that we achieved in the first auction. Also, we achieved important acknowledgment as the best company of the energy sector, and now that values our management.

Now I would like to present and give the floor to Alessandro Gregori Filho, our CFO. Alessandro, he will share with you the details of the third quarter.

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Alessandro Gregori Filho, CTEEP - Companhia de Transmissão de Energia Elétrica Paulista S.A. - Financial & IR Director and Member of Executive Board [3]

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Good morning, everyone. Let me begin with the presentation on Slide #3 with the highlights of the quarter. We had a cash generation of BRL 507 million and we had net revenue of BRL 659 million, adjusted EBITDA of BRL 566 million, with a 78% margin and net income of BRL 415 million. IE Madeira is granted TLD and is now entitled to collect 100% of RAP. We now show reinforcement and improvement of projects associated with RAP, investment of BRL 78 million in 2019. We continue investing in greenfield projects. BRL 413 million has been invested throughout the year and BRL 193 million in the third quarter. We have invested 25% of this amount and we have the installation licenses issued for 3 subsidiaries: Itapura-Lorena, Itaúnas and Ivaí. We have a Bill No. 4,636 that proposes to exchange Ke to WACC to update financial component of RBSE. Then we would like to highlight in terms of proceeds, the approval of the distribution of BRL 517 million. And in the first 9 months of the year, the company has deliberated the payout of BRL 887 million.

In Slide #4 you can see our financial results, the consolidated regulatory net revenue. It grew by 9% in the third quarter and 18% in the first 9 months of the year. And we have new investment projects. There was a reduction of 15% in the third quarter.

You can see costs and expenses in the following slide. We have an increase of 23% in the third quarter and 26% in the first 9 months because there was an increase in expenditures with our personnel. In services, higher expenses with network maintenance and contingencies in 2018 as a result of change in prognosis and review of amount. In the first 9 months of the year, also, we have 16% in terms of nonrecurring expenses.

Now on Slide #6, the regulatory equity income. We had an equity income of BRL 39 million in 2018, and in 2019, BRL 43 million. IE Madeira had a better result in 2019. And we had the RAP readjustment of cycle between 2018 and 2019, it explains the variation.

On Slide 7, we can see the consolidated regulatory adjusted EBITDA that also reflects the cash generation of the company. And for adjusted EBITDA, we stood at BRL 566.2 million, 9.4% in relation to the previous period. And year-to-date, we had the amount of BRL 1.780 billion. And for adjusted EBITDA Ex-RBSE margin, we stood at 54.9% in the third quarter, 1.9 bp higher than the previous period.

On Slide 8, we have the financial results. And you can see that the consolidated had a 29% reduction in comparison to the previous quarter, which was driven to the higher expenses with monetary net variations and also the SWAP operations under Law 4,131. In the 9 first months of the year, we had an increase of 26% in comparison to the previous period of the year, and we have the cost related to SWAP operations and also the increase of some interest and charges on loans.

Moving on to Slide 9, we can see the net income of the company. We saw the RAP readjustment by inflation. And we also have the entry in operation of new projects playing a part in this. And also higher result of equity income, and we also include the tax benefit from interest on shareholder's equity payment. And this all drove the net income to reach BRL 415 million for the quarter and BRL 889 million year-to-date, that means a 6% increase in relation to the same period of the previous year.

Now we move on to Slide 10, we have the information about the cash flow of the company. And the company generated nearly BRL 1.4 billion in cash. Out of this value, BRL 437 million were related to investment activities and BRL 440 million are associated with financing activities. Out of these, BRL 370 million are associated with the dividends that were paid to shareholders. And I would like to draw your attention to the effective cash generation, which is BRL 1.2 billion.

Moving on to Slide 11, we will talk about the leverage potential of the company. And here, we have the honor to report the favorable results. So we can see the tables providing details of the figures reached in 2019 in comparison to 2018. And this was mainly due to the operating cash generation during the period. And we also highlight the efforts in the investments for the improvement of the company. The net debt of the company reached BRL 1.9 billion versus BRL 2.3 billion reported in December 2019. And we can see that we -- the company stands at a very comfortable position and the estimate is that this stability will be maintained. And the average cost of the debt is 7.1% per year, which is very positive. And we have also established covenants and requirements for all issues, that are -- which are being fully complied with. In terms of investments, we can see that they amounted to 497 in total, we have been investing very heavily, and BRL 413 (sic) [413] are for greenfield projects. And we have also invested in the Itapura project and these investments has been going on along the semester

On Slide 13, we have details about Itapura subsidiary project. And so we had CapEx inferior to the reference CapEx. This was related to Bauru substation. And the suppliers we hired were SIEMENS for engineering, equipment and commissioning, and IBL for civil and electromechanic activities. And the financing was based on debentures. And we have sustainable growth projects considering CapEx and the deadlines, and we have also looked at the efficiency in operations, and also financial efficiency, looking for means of financing, which are competitive and sustainable.

On Slide 14, we have information related to the proceeds to shareholders. And the amount will reach BRL 517 million. The shares are being traded ex-dividend. So the payout will be equivalent to 100% of the income.

Well, with this, I close the presentation. And I turn the floor to the operator to open the Q&A session.

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Operator [4]

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(Operator Instructions) We close the Q&A session. At this time, I would like to turn the call over to Mr. Cesár Ramírez for his final considerations.

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Cesár Augusto Ramírez Rojas, CTEEP - Companhia de Transmissão de Energia Elétrica Paulista S.A. - CEO, Member of Executive Board & Director [5]

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Thank you again. I would like to clarify that we are available to answer any questions you might have by any channels of the communication we have with the Investor Relations team. Thank you very much for attending this conference.

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Operator [6]

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ISA CTEEP conference call is over. We'd like to thank you for your participation, and have a good day. Thank you.