Companhia Paranaense de Energia - COPEL (ELP) on Q1 2021 Results - Earnings Call Transcript
Operator: Good afternoon, and thank you for waiting. Welcome to Companhia Paranaense de Energia COPEL Earnings Call to discuss the results of the first quarter of 2021. All participants are in a listen-mode during the company’s presentation. Before proceeding, we inform that forward-looking statements that might be made during this conference call related to Copel business outlooks, projections, operating and financial projections, our goals and they are all based on beliefs and assumptions of the company’s management and on information currently available to the company. Forward-looking statements are no guarantee 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. General economic conditions, industry conditions and other operating factors may also affect the future results of Copel and could cause results to differ materially from those expressed in such forward-looking statements.
Daniel Slaviero: Good afternoon, everyone. Thank you very much for participating in this conference. I hope that all of you and your families are doing well and are healthy. And despite of facing a very challenging environment, we are very pleased to bring to you the results of this first quarter, which once again superceded our expectations and have a sound and consistent growth. In this quarter, as broadly published in our notices to the market, specifically in our last call, we dedicated great efforts in our agenda to improve the governance in the company. In addition, to the new committees to have the board in April 29, we had our annual Shareholders meeting, which increased the number of minority representatives going from two to three seats. They are Leila Larian, Marco Antonio Bologna and Andre Weber, which are here with us in this call today. I would like to welcome them and to say that we’ll keep on moving on in the path of Copel. The Board of Directors Chair is still Marcel Malczewski, I already know him. He’s a great businessman and a great entrepreneur. Here, we have our EBITDA. We reached BRL1.4 billion, a 13% increase and net income of almost BRL800 million, 50% up. As we have been saying these results are thanks to a seamless execution of our business plan with focus in core business of energy efficiency improvement and discipline and capital allocation always aiming to generate more value to the company. Moura is going to go into the details about the performance of our business units. But I want to stress the extraordinary work of Copel generation and transmission. There was a growth of 41% in its EBITDA compared to the first quarter of 2020. This is mainly thanks to generation, but also, we had efficiency in cost management and the strategy of energy commercialization and also a result of our equity income coming from our transmission companies, Mata de Santa Genebra, with relevant shares here yesterday. And the committee for electric sector monitoring lifted limits for TPP dispatches therefore, we can expect good results for UEGA over the year. Something else, the market is following up. It’s reprofiling of the RBSE of the transmission companies when it was extended by the regulatory walk of 7.71. This is going to bring compeller return at present value, over BRL80 million and also the primary calculations of CCEE for GSF will point to a figure that is closed to BRL1.3 billion that probably will be posted in the second quarter.
Adriano Rudek de Moura: Thank you, Daniel. Good afternoon, everyone. I also thank you very much for being here with us for this conference call. It is with great pleasure that we bring to you another quarter with sound and consistent financial results. We ended 2020 with historical results. And we started 2021 and very well at the same pace with EBITDA and net income that are unprecedented for the first quarter. And this is thanks to an execution of sustainable growth, capital allocation discipline and also efficiency improvement in all our businesses. The EBITDA of BRL1.4 billion and a net income of most of BRL800 million growth of 19% and 56%, respectively. There are some factors that have contributed to these better results. One of them is the growth of over 30% in the electric energy supply, specifically because of the commercialization of UEGA of 609 gigawatt hour in the quarter. Also, we had a growth of almost 80% and the sale of energy by Copel delivery or free market, reaching 5,199 gigawatt hour and the availability of the electrical network grid, we had an increase of almost 8%. This was affected by the growth of 2.6% in the grid market and the periodic a review of transmission and the tariff adjustment applied to the other transmission contracts were also very positive. Another highlight is the increase in the results in our equity income over BRL60 million, specifically because of the commercial – full commercial operation of Mata de Santa Genebra in mid of last year. And also and also Matrincha, which also started its operation in the second half of 2020.
Operator: First question from Marcelo Sa, Itau.
Marcelo Sa: Good afternoon, everyone. Congratulations on the results. I have two questions. First, I would like to understand what is your expectation about the revisions – the preliminary revision. Is there anything that you are trying to address there? And another question is, your leverage is very low. You do not – you still have the dividend cash there. So it will increase a little bit, right? So – but then in any way, it’s low. And I understand that now the company probably will start looking at growth. I remember that the few times that we have talked, it looks like I wanted to focus in M&A and brownfield. I would like to understand your expectation about growth. If that’s really what you want to focus on or if you have anything relevant to happen this year?
Daniel Slaviero: Marcelo. Thank you very much. About the reviews or the revisions, both in the remuneration base of 8.3. We don’t expect to have any seeing major changing, we should be in the same level, and we would like to maintain the 100% compliance there with ANEEL. We are doing everything to follow-on those lines. We are very cautious me, Max, we’re very cautious about the subject. So that all investments can comment on the space and be remunerated for us and the company. About the tariff adjustment. Also, there was a preliminary figure of 9.67%. And we see a huge effort on an ANEEL’s side to use several instruments in order to have a low impact for consumers right now. I think this is a right measure to be taken. Right now, we already have a part of that is posting. But recently, we have the degree of Itaipu, this could be a deferred amount. And we believe ANEEL might use it. But I don’t think there is going to be a significant variation in the process. But that could vary a little bit more. But within that error margin, just remember that as approved in the bylaws, this will be implemented right after ANEEL confirms the date of June 24. Anything else?
Marcelo Sa: Yes, that’s it.
Daniel Slaviero: Now about leverage, yes, it is very long. And according to all the proteins, and we already mentioned both GSF and telecom deal are not posted to our balance sheet yet. We are moving toward the second quarter now, and everything points to a very low leverage. And in our policy, this shows that we are at that level, that our policy determines up 65%. That’s a very good perspective. That’s adequate for our investors profile. But I mentioned in the call and Compel day and also in the policies filed at that we have the assumptions and the guidelines and our team there, the team of new businesses, Casio and his team. We are working on it. We are analyzing the options. Always considering a lot of discipline, but we are working hard in the last few months to analyze the opportunity. So we believe that in the next few months, we can have something if that really moves forward and works out. But what our policies stated, and I don’t want to be repetitive here. After Copel distribution, we have the renewable assets, wind and solar and we have a preference for brownfield. And that have synergy with us, of course. So we see ourselves with an average size of assets for each source, we have a minimum size so that we can look at them and dive into them. And also not only the ANEEL transmission auctions that will happen ahead. There is a lot that has a lot of synergy with our structure here in Parana. And also in the countryside of Sao Paulo, but we also have C3 that will open the data room of theirs in the next week. So we will keep on looking at that, but all is working on governance and guarantee the right returns for the company and for our shareholders.
Marcelo Sa: Great. Thank you very much, Daniel. In the beginning of the presentation, you said that you didn’t have much information about what the shareholders of the company will do in this potential secondary offer. I remember, that the BNDES had stated that they expected to place this offer up to June, that would be their idea. Did they tell you anything about timing? About the size of the offering, if they’re going to sell more or less share of it? What are they telling you? Or they are not telling you anything?
Daniel Slaviero: Marcelo, as I said, this is the main topic. The topic of the moment, but they have not said anything. What they always say is that this is part of a larger strategy, a broader strategy of the divestment of the been BNDES power portfolio. So – but they don’t have any indication in and anything that will depend on the market. We see that the utilities sector as a whole is having a hard time. And I’m sure this is under the radar as well so that they can understand that as the right condition. What we know is what I mentioned. It’s registered and instead, we are waiting on the side of shareholders, specifically BNDES, what they expect is the size and everything. But what we know is that they have a lot of experience on the market. And just to conclude, and I don’t want to repeat myself once again. But Copel in case this offering happens Copel is not thinking about primary offers, neither leveraging business plan. This is not under our own radar.
Operator: We just received a message via chat. This question comes from about the water crisis we are going through, how this is going to affect the company’s results in 2021?
Daniel Slaviero: Okay. So let’s talk about this, how this water crisis affecting Copel and the whole national electric system? Well, William, we have seen that the water crisis is worsening. Is getting worse. Considering September of 2020 and April of 2021. This is the world history of the national integrated system that we have seen since we started registering that figure in March of April 2021, which is considered the period was the fourth a worst one. And April of this year was the worst in history. So we see it as a difficult situation because the level of the reservoir is low in the south region. We have it a little bit better. We have a favorable condition here. The mentioned our energy generation was good, it was qualified. So we did have a positive balance with the energy optimization tariffs of MRE. In terms of sales strategy, we developed seasonalization so that we could bring down our risk specifically for a low GSF in January and a high spot price. So we see – we worked with a seasonalization to protect it. And also, we have a strategy to buy energy throughout the year. In order to offset the exposure that we have in some months, considering energy prices that we found to be enough for the strategy. So really, this is a difficult environment with a lot of volatility, but we have a strategy we are very efficient there, and we are always moving toward mitigating this impact and to have a good assets generation and good results.
Operator: There is another question coming via chat from Mr. Allison, how is delinquency and this because of the pandemic?
Daniel Slaviero: Max, can you answer that?
Adriano Rudek de Moura: Thank you very much for your question. This delinquency, both in 2020. Well, in 2020, it was very close and even a little bit lower than what we had in 2019. The first quarter now also, it was stable with no major changes. So we have a lot of actions being taken specifically to try to balance out of that and for consumers that are in difficulty, but we realized that there are no significant changes. Remember, right, that this is 1.5%. And so this is one of the lowest delinquency rates in Brazil. And this also is thanks to the fact that we are in Parana at the state and because of the economic profile of our consumers as well. So as Max mentioned, we haven’t seen major changes around – and our historical base has been 1.5%, and there are – we haven’t seen major changes around it. So we’ll be here for one more minute to see if there any additional questions, whether by via chat or here on this call. So if you don’t have any questions, can I – just a little more? And if there are no further questions, we can end the call.
Operator:
Daniel Slaviero: If there are no further questions, I would like to thank you very much for your participation. I would like to say that we have here with us, Andre, with us, our new Board member, Andre, welcome, once again, on behalf of all the top executives here, I would like to say that we are very proud of this result. All the numbers we are able to achieve. We have a great expectation for 2021 for Copel. I think also, we have had a dividend yield over two digits. That’s a positive result, and we are continuing on this historical series of results. So in 2020, we had the best results in our history, and we believe that with all the future events, we’ll keep on having these we believe that we’ll continue generating value and growing this company, a company that is so relevant for Parana, for Brazil and the electrical system. Thank you very much. Have a nice afternoon and nice rest of the week.
Operator: Ladies and gentlemen, Copel’s conference call for the results of the first quarter of 2021 has ended. Statements in English on this transcript were spoken by an interpreter present on the live call.
