1 q07 financial and operating results presentation
- 1. Financial and Operating Results Presentation First Quarter, 2007
- 2. Agenda Highlights Operating Results Financial Results 2
- 3. Agenda Highlights Operating Results Financial Results 3
- 4. Highlights Financial Results • Net Revenues totaled R$195.1 million in the 1Q07, 13.6% up year-on-year. • EBITDA totaled R$77.0 million in the 1Q07 (EBITDA Margin of 39,5%), 13.8% up on the R$67.6 million recorded in the 1Q06. • Net Income in the 1Q07 was R$30.8 million, 245.2% up year-on-year. • CEMAR held a non-convertible debenture issue: • Amounting to R$267.3 million • Maturing in 2013 • At 105.8% of the CDI • With a national long-term rating of “A (bra)” assigned by Fitch Ratings • CEMAR obtained new tax incentive (accelerated depreciation) Operating Results • Energy Sales (MWh) growth of 8.3% over the 1Q06. • In the 1Q07, CEMAR’s DEC and FEC ratios fell by 36.8% and 22.7%, respectively, compared to the 1Q06. • The new CEO of CEMAR, Nuno Neves, took up office on March 12, bringing 15 years of corporate experience to the subsidiary’s management team. 4
- 5. Agenda Highlights Operating Results Financial Results 5
- 6. Customer Base Customer Base (thousands) Customer Base Breakdown 8.9% 8.9% Industrial 8.7% 0.7% 7.5% 7.2% Commercial 1,373 7.2% 1,349 1,327 1,307 Others 1,281 5.8% Residential 86.3% 1Q06 2Q06 3Q06 4Q06 1Q07 Customers %Chg. Y-O-Y • Growth of 7.2% in the customer base compared to the 1Q06 (91,200 new customers) 6
- 7. Energy Volume - CEMAR Energy Volume per Class Billed Energy (% per Class) CONSUMPTION CLASS (MWh) 1Q06 1Q07 % Chg. Others Residential 282,450 310,250 9.8% 24.2% Industrial 85,931 95,104 10.7% Commercial 137,979 144,146 4.5% Commercial Others (ex. own consumption) 163,124 175,600 7.6% 19.9% TOTAL 669,484 725,100 8.3% Energy Load (% Chg. MWh): Brazil, NE and CEMAR – 1Q07 vs. 1Q06 Industrial Residential 8.5% 13.1% 42.8% 3.8% 3.7% • Growth of 8.3% in billed energy volume over the 1Q06 • Strong growth in the residential Brazil - SIN Northeast CEMAR and industrial classes: 9.8% and 10.7% respectively 7
- 8. Energy Balance and Losses Energy Balance MWh Energy Balance (MWh) 1Q06 1Q07 % Chg. Required Energy * 966,627 1,052,179 8.9% Sales ** 670,665 726,269 8.3% Losses 295,962 325,910 10.1% * Includes own generation ** Includes energy sales to consumer classes, own consumption and supply to CEPISA Electricity Losses (LTM) 29.8% 29.6% 29.9% 29.8% 29.9% 1Q06 2Q06 3Q06 4Q06 1Q07 8
- 9. DEC and FEC DEC (Avg. Hours per Consumer – LTM) FEC (Avg. Frequency per Consumer – LTM) 15.5 1.1 36.8% 7,8 7.8 24.4% 9.8 0.9 5,9 5.9 2.4 Supplier Supplier 1.6 14.4 6.7 7.4 4.3 CEMAR CEMAR 1Q06 1Q07 1Q06 1Q07 Supplier DEC % Chg.: 118.2% Supplier FEC % Chg.: 77.8% CEMAR DEC % Chg.: -48.6% CEMAR FEC % Chg.: -35.8% Consistent improvement trend in service quality CEMAR DEC and FEC indices have improved 36.8% and 24.4% Y-O-Y in the 1Q07 9
- 10. Agenda Highlights Operating Results Financial Results 10
- 11. Net Revenues Net Revenues (R$ million) 13.6% 195.1 171.8 1Q06 1Q07 •Net Revenues increased by 13.6% in the 1Q07 •Good performance chiefly due to: a) 8.3% volume increase in energy sales b) the August 2006 tariff increase (14.58%) 11
- 12. Manageable Costs and Expenses R$ million 1T06 1T07 Var. Personnel 15.2 12.9 -15.4% Material 1.4 1.6 15.6% Services 13.4 16.4 22.3% Others 2.7 0.1 -95.8% PMSO 32.7 30.9 -5.3% PMSO (% of Net Revenues) 19.0% 15.9% -3.1 p.p. Provisions 1.9 9.9 428.1% Allowance for Doubtful Accounts and Losses 0.4 7.6 1806.3% Other Provisions 1.5 2.3 54.6% MANAGEABLE COSTS AND EXPENSES 34.6 40.9 18.3% MANAGEABLE COSTS AND EXPENSES (% Net Revenues) 20.1% 21.0% 0.9 p.p. •Manageable costs and expenses (PMSO - excluding provisions) totaled 15.9% of Net Revenues in the 1Q07, 3.1 p.p. down year-on-year •Personnel: year-on-year decline of 15.4% in the 1Q07 due to the 7.5% reduction in the number of employees and non-recurring restructuring expenses registered in the 1Q06 (R$3.9 million) •Allowance for Doubtful Accounts and Losses reached 2.7% of Gross Operating Revenues (GOR) in the 1Q07 – growth attributable to non recurring positive performance in the 1Q06 due to: •collections from public sector customers •CEMAR’s debt installment repayment campaigns 12
- 13. EBITDA and EBITDA Margin EBITDA (R$ million) and EBITDA Margin (% of Net Revenues) 39.4% 39.5% 13.9% 77.0 67.6 1Q06 1Q07 EBITDA EBITDA Margin •EBITDA reached R$77.0 million in the 1Q07, 13.9% higher than the R$67.6 million recorded in the 1Q06 •EBITDA margin of 39.5%, stable year-on-year 13
- 14. Income Tax and Social Contribution Income Tax / Social Contribution (R$ million) 2006 1Q07 Expense Income Tax/ Social Contribution (42.6) (18.4) (+) Reversal in Tax Provision 2005 (6.1) - ( - ) Deferred Tax Asset 19.1 9.1 ( - ) ADENE Incentive 10.8 2.7 = Tax / Cash Basis (18.7) (6.7) Earnings Before Tax 157.4 62.8 Effective Tax Rate (%) - Cash Basis 11.9% 10.6% •Deferred tax assets and the tax benefits obtained from ADENE (Northeast Development Agency) lowered the income tax and social contribution disbursements to 10.6% of EBT in the 1Q07 14
- 15. Net Income Net Income (R$ million) 1Q06 – 1Q07 43.9% 30.8 245.2% 21.4 8.9 1Q06 Pro-Forma 1Q06 1Q07 1Q07 Net Income totaled R$30.8 million, 245.2% higher than the R$8.9 million recorded in the 1Q06 If we exclude non-recurring expenses related to the IPO, 1Q07 Net Income would have been 43.9% higher than in the 1Q06 * 1Q06 Pro Forma Net Income excludes the non recurring IPO related expenses of R$12.5 million 15
- 16. Indebtedness Gross Debt – 1Q07 Avg. Spread Avg. Due Date Avg. Maturity Part. Maturity R$ million Total % Reference (per year) (month-year) (in years) (%) 6-month LIBOR 0.8% pa Apr-18 11.0 0.7% Short Term 51.0 5.7% IGP-M (2 years) 12.0% pa Jun-09 2.2 8.1% Long Term 846.6 94.3% IGP-M (9 years) 12.7% pa Jan-16 8.8 19.8% 2008 46.9 5.2% IGP-M (17 years) 4.4% pa Jan-24 16.8 14.5% TJLP 4.2% pa Jul-13 6.2 0.2% 2009 64.6 7.2% Fixed Rate (R$) 11.9% pa Mar-17 9.9 10.4% 2010 53.3 5.9% RGR 6.2% pa Feb-17 9.8 5.5% 2011 123.6 13.8% Fixed Rate (US$ 6.8% pa Jun-20 13.1 0.9% After 2011 558.3 62.2% FINEL* 9.8% pa Jan-16 8.8 6.5% CDI 105.4% of CDI May-13 6.1 33.4% Total 897.6 100.0% *FINEL is a sectorial index representing 20.0% of IGP-M •Gross debt reached R$897.6 million on Mar-31-07 •R$267.3 million from the Non Convertible Debentures Issue •Release of a R$5.8 million tranche from the RGR financing line to fund sub- transmission investments •Release of R$28.0 million tranche from the BNB financing line •Debt Profile: low average cost maintained, 13.2% p.a. in the last twelve months, or 95.3% of CDI, with average maturity of 8.7 years 16
- 17. CEMAR’s New Debentures •On March 28, CEMAR sucessfully placed its 3rd public issuance of non convertible debentures Key Terms Description Offering Type Non Convetible Debentures Offering Size R$267.3 million Offering Best Efforts Placement Term 6 years Cost 105.8% of CDI Primarily for the prepayment of CEMAR’s Use of Funds costlier debt Bookrunners UBS Pactual and Itaú BBA 17
- 18. 18 Gross Gross 897.6 897.6 Debt Debt Net Net Regulatory Regulatory 96.5 96.5 Assets Assets Cash and Cash and Cash Eq. Cash Eq. 434.8 270.5 CEMAR CEMAR Cash and Cash and Cash Eq. Cash Eq. 190.3 190.3 EQTL EQTL Net Debt Consolidated Net Debt (R$ million) Net Debt 1Q07 176.0 1Q07 340.3 Consolidated Net Debt Pro Forma* - (R$ million) Net Debt Gross Gross 587.0 587.0 Debt Debt Net Net Regulatory Regulatory 63.1 63.1 Assets Assets Cash and Cash and Cash Eq. Cash Eq. 176.9 284.4 CEMAR CEMAR Cash and Cash and Cash Eq. Cash Eq. 190.3 190.3 EQTL EQTL Net Debt Net Debt 1Q07 1Q07 156.7 49.2 Ownership Adjusted Net Debt (R$ million) Consolidated Net Debt Pro Forma* - (R$ million)
- 19. Consolidated Net Debt Consolidated Net Debt (R$ million) and Net Debt / EBITDA (LTM) 1.6 1.5 0.7 331.9 0.5 305.0 0.3 0.3 179.8 176.0 105.1 105.0 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 Net Debt Net Debt / EBITDA (LTM) 19
- 20. CAPEX CEMAR’s CAPEX* (R$ Million) 16.7% 31.5 27.0 2.9 1.9 Others 2.2 3.8 Equipaments and Systems 18.1 8.3 Network Expansion Network Maintenance 12.8 8.7 1Q06 1Q07 •CEMAR* Direct Capex totaled R$31.5 million in the 1Q07 •For 2007 we expect CEMAR’s CAPEX to reach approximately R$180.0 million * excluding Direct Investments in the Light for All Program 20
- 21. PLPT (Luz Para Todos – “Light for All” Program) PLPT Direct Investments (R$ million) 14.6% 35.4 30.9 1Q06 1Q07 Connected Customers 103,067 111,826 • By the end of March 80,577 2007, CEMAR had 62,443 connected 111,800 50,824 additional customers through the PLPT 1Q06 2Q06 3Q06 4Q06 1Q07 21
- 22. Efficiency Indices Clients per Employee: 1Q06 – 1Q07 PMSO* per Clients: 1Q06 – 1Q07 17.8% 1,176 25.7 -11.7% 22.7 998 1Q06 1Q07 1Q06 1Q07 EBITDA (R$) per Consumer : 1Q06 – 1Q07 EBITDA (R$) per MWh: 1Q06 – 1Q07 6,1% 107.2 7.1% 57.1 101.0 53.4 1Q06 1Q07 1Q06 1Q07 * Excluding provisions and restructuring expenses 22
- 23. Dividends The OSM of April 5, 2007, approved dividend payments of R$107.8 million (R$1.64/UNIT). This was 98.2% more than the 2006 dividend pay-out of R$54.4 million ($ 1.03/UNIT). Dividend payments began on May 7, 2007. Dividends (R$MM e R$/UNIT) Paid - 2006 and 2007 1.64 107.8 1.03 54.4 05/06 06/07 Dividends (R$ Million) R$/UNIT 23
- 24. Equatorial’s Share Performance – EQTL11 Equatorial’s UNIT’s total return outperformed the overall market and electricity sector index Price Movement: EQTL11, Ibovespa and IEE (31/03/06 = 100) 150 Price Evolution 140 (3/31/06 = 100 to 2/5/07): Price Evolution 130 EQTL11: 37.9%, 120 EQTL11 Total Return (Div. R$1.64/UNIT): 49.2% 110 IBOV: 30.3%, 100 IEE: 27.9% Avg. Traded Volume: 90 2006 - R$3.1 million, 80 Last 60 days - R$4.5 million; 02/02/07 07/21/06 08/18/06 09/15/06 10/13/06 11/10/06 12/08/06 01/05/07 03/02/07 03/30/07 04/27/07 06/23/06 03/31/06 04/28/06 05/26/06 Last 30 days - R$5.1 million EQTL11 IBOV IEE Average Daily Traded Volume – Monthly Basis (R$ Million) 8.1 7.3 4.6 4.9 4.1 3.0 3.1 1.6 1.9 2.0 1.4 2.1 0.8 Oct-06 Nov-06 Aug-06 Apr-06 Apr-07 Jun-06 Jul-06 Dec-06 May-06 Jan-07 Feb-07 Mar-07 Sep-06 24
- 25. Contact Leonardo Dias CFO and Investor Relations Officer Arnaldo Faissol Investor Relations Manager Phone1: +55 (98) 3217-2245 Phone2: +55 (98) 3217-2113 Email: ri@equatorialenergia.com.br Website: http://www.equatorialenergia.com.br/ri 25
- 26. DISCLAIMER This document may contain prospective statements, which are subject to risks and uncertainties, as they were based on the expectations of Company’s management and on available information. These prospects include statements concerning the Company’s current intensions or expectations for our clients; this presentation will also be available on our website www.equatorialenergia.com.br/ri and also in the IPE system at the Brazilian Security Exchange Commission – CVM. Forward-looking statements refer to future events which may or may not occur. Our future financial situation, operating results, market share and competitive positioning may differ substantially from those expressed or suggested by said forward-looking statements. Many factors and values that can establish these results are outside Company’s control or expectation. The reader/investor is prevented not to completely rely on the information above . The words “believe", “can", “predict", “estimate", “continue", “anticipate", “intend", “forecast" and similar words, are intended to identify affirmations. Such estimates refer only to the date in which they were expressed, therefore Company has no obligation to update said statements. This presentation does not consist of offering, invitation or request of subscription offer or purchase of any marketable securities. And, this statement or any other information herein, does not consist of a contract base or commitment of any kind. 26