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Delayed Bolsa de Valores de Sao Paulo  -  04:07:48 2023-02-03 pm EST
37.94 BRL   -1.25%
01/07Engie Brasil Energia S A : is to offset the CO2 emissions generated by the 2023 Spanta Universe Festival
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2022Vestas Secures 288 MW Wind Turbines Order from Engie in Brazil
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Engie Brasil Energia S A : Earning results video conference - 3Q22

11/09/2022 EST




NOVEMBER 09, 2022 - 11:00 A.M. (BRASÍLIA TIME)

RAFAEL BÓSIO: Hi, good morning! We are beginning the conference call on the third quarter results 2022 of ENGIE Brasil Energia. I am Rafael Bósio, the Company's investor relations manager. I would like to inform you that those currently connected are in listening mode. Later when we open the questions and answers session to participants, you may submit your questions via the Zoom Q&A tool. It is worth remembering that this videoconference is being recorded. We have also made available in our website www.engie.com.br/investidoresthe files for the presentation and the results release as well as the ITR and other documents filed with the CVM where more detailed analysis of the financial statements for the quarter, operational results, progress with the implementation of our projects among other highlights of the period, are published.

Before proceeding further, I would like to clarify that eventual statements that may be made during this conference call with respect to the outlook for the Company's businesses should be treated as forecasts, contingent on the economic scenario for the country, performance and electric sector regulations as well as other variables, and, therefore subject to change.

With me today are Eduardo Sattamini, Chief Executive and Investor Relations Officer and Marcelo Malta, Chief Financial Officer, who will also comment on the performance of ENGIE Brasil Energia in the third quarter of 2022. We would remind you that journalists wishing to ask questions should do so via e-mail, sending their questions to the Company's Press Relations office.

Now I would like to hand over to Eduardo Sattamini. Please you may go ahead Sattamini.

EDUARDO SATTAMINI: Hi, good morning to all. It is a pleasure that I can be here again for one more quarter, having survived these nine months and the elections, we are all still alive. So let us move on to our presentation and slide 05, please.

Good, first let's talk about the highlights, financial highlights. Adjusted Ebitda reported a year-on-year decrease of 15.7%, albeit there is a very important aspect which you will

see on the right-hand side of the slide, more or less in the middle, recognition of GFOM in the third quarter 2021 totaling R$ 372 million. If we exclude this GSF factor - which is a recurring result, although randomly booked in that quarter, we would have seen an Ebitda with an 8% improvement in the third quarter rather than 4.8% only and in the first nine months up 13.2%. This is indicative that the company continues its results growth trajectory, and this also is reflected in the first line on the right side, when we look at the increase of revenue as a result of enhanced prices and sales volume. The price increase was slightly below inflation for the period, so the increase was mainly because we have a higher volume due to the better hydrology we are seeing in 2022. When we look back at 2021, this was the most critical year for hydrology in Brazil since measurements of the reservoir affluence series began. And in 2022, we are having very positive hydrology. So, this makes the volume available for sale in the short term greater, depressing short-term sales prices. This is the cause of this small reduction which we can see here in relation to the increase in the twelve-month price and inflation. We can also see clearly that the results of the CCEE are very positive, exactly for this question of volumes due to hydrology. When we turn to the result, we have a result which is 17.2% greater year-on-year, 19.2% up if we compare the nine-month period for successive years. If we exclude the GFOM effect, we would be talking about a year-on-year increase for the third quarter of 97%. Basically, the inflationary effect on our debt. And here we make a correlation also on the right-hand side of the slide with the financial result R$ 387 million positively higher than the same quarter in 2021. Other important points here for us to highlight include the increase in energy volume purchased and the increase - I mean decrease in volumes of coal purchased, the consumption of fuel, basically coal. Coal, the reduction of coal, basically is a reflection of the sale of Jorge Lacerda, of the Jorge Lacerda plants and also the maintenance work at Pampa Sul, which continued through to the middle of August, so there was no dispatch for part of the time and no consumption of coal at Pampa Sul in the third quarter. So, we had R$ 83 million less fuel consumption. On the other hand, when we look at Jorge Lacerda, where we have an agreement to purchase energy, linked to the asset disposal, we have R$ 236 million higher purchases of energy. 70% of this value relates to CTJL, to the Jorge Lacerda Thermoelectric Complex.

We can now move on to the next slide where we list other non-financial highlights. Important was that in September, the Company signed the agreement to sell the Pampa Sul Thermoelectric Plant in Candiota. In this case, satisfactory performance of the conditions precedent is contingent for closing to take place as well as approval of the BNDES, the anti-trust authority CADE, some internal elements and this, you as analysts are going to notice, the reclassification from an asset to an asset to be sold with some modifications in the lines of account classification. This is going to have a certain impact on the configuration of the balance sheet which will be noted by the analysts. We saw a reasonable volume of sales in the quarter, 88 average megawatts for future delivery between 2023 and 2026, indicating our activity continues apace. Remember, we have a policy - and you are going to see more later on - of energy sales throughout the year, for

future years, with the purpose of having a very high level of contracting as the end of the year draws near. And this is the strategy which we continue to pursue despite our awareness that there is downward pressure on prices at present, we are successfully managing to sell at reasonable levels. On the right of the slide, we mention the signature of the wind turbine supply contract with Vestas do Brasil, a total of 188 wind turbines to be used for installing the Serra do Assuruá Wind Complex. This is ENGIE's largest wind park to be implemented in a single phase in the world at a total capacity of 846 megawatts. When we talk clusters, we have a larger cluster in Bahia, where Umburanas and Campo Largo (Campo Largo I and II) are situated, today with approximately 1.2 GW installed but Assuruá as a single project, is the largest we have ever developed here in Brazil and ENGIE's largest in the world.

Let's move on to slide 07 where we also highlight the contracting of suppliers for the Gavião Real project. Gavião Real is the substation connected to our Serra Pelada substation, the bid for which we won at the last transmission auction; being related to our existing asset, we were able to give a reasonable discount in function also of this proximity of the synergies we have there on the ground. With this and the closing of these supply contracts, we guarantee price and an adequate term compatible with the assumptions we employ in our business plan, permitting us to calibrate our bid at the auction which took place in the last quarter. We also had an important event in this quarter which was the Ministry of Mines' Ordinance allowing high voltage consumers to sign up to the free market as from January 2024. An important event, one for which we had been waiting, and which will leverage our position as a retail trading company, increasing the return on all that investment we have been making in digitalization for the creation of sales platforms and channels and which we expect to be totally up and running from 2024. We already have our platforms but deploying and using these platforms more effectively with the large potential volume of clients expected to join the free market. We are talking today of the order of 15 thousand consumer units in the free market. With this decision, we are going up to about 120, 130 thousand units. And with these numbers, we will need this digitalization, all this automation in our sales process so that we can handle the management of these clients, not only the sales process, but also management of the client, back-office and so on. On the right-hand side, we cite the Transparency Trophy. Every year we guarantee the quality of our statements had we have been recognized with this award which we call the Oscar of Domestic Accounting and organized by Anefac- Fipecafi. And the last important highlight on this page is the approval of the distribution of complementary dividends for the first half of this year. We had already decided on the distribution of 55%, but now understanding that the Company's financial situation is conducive to increasing the payout by a further 45%, allowing us to reach 100% of the distributable net profit in the first half of 2022. Payout date will be decided in due course by the Executive Board, the dividend distribution being approved at this last meeting of the Board of Directors. Thus, once more we are combining the growth of our activities with dividends, a unique characteristic of ENGIE in the energy generation, transmission

and infrastructure market in Brazil.

On page 08, we showcase the endorsement of ENGIE Brasil Energia and ENGIE S/A of the Corporate Knights and Global 100 Council initiative for companies which have committed to combating climate change and supporting the Paris Agreement. This is in line with what we have been demonstrating to be a leader in ESG in the Brazilian market and we are going to continue doing so. And on the right-hand side, we have the approval in the change in denomination of the administrative office of the Company to the People, Processes and Sustainability Office, also strengthening the sustainability pillar of our businesses in the direction of more adequate, more up to date governance and sustainability. Finally, we mention the Inside ENGIE event, to take place on December 7 from 9 in the morning and open to all via web and with the onsite participation of institutional investors and market analysts. With about 270 thousand shareholders of ENGIE Brasil Energia, unfortunately we are unable to invite all and cater for all at our headquarters in Florianópolis, so this answers some inquiries we have received during the past few weeks from people asking why some of the shareholders are unable to take part in loco. They can take part of course but due to lack of space, they will have to do so via web. We are very grateful for the interest and would encourage individual investors to participate via the web.

Moving on to slide 09, about our ESG indicators, a new element that we have introduced this year and an important one to be discussed with our investors. We continue along the trajectory of renewable installed capacity, and in 2023 it is our expectation that with the sale of Pampa, we can reach 100% of renewable energy in our portfolio, although we have been steadily increasing over these last few years the percentage of renewable energy in the portfolio. The intensity of emissions has obviously reduced, reduced for two reasons, the sale of Jorge Lacerda and second, the maintenance stoppage at Pampa Sul, which also had an influence on total emissions. And besides total emissions, also water withdrawal, since water capture is mainly necessary for our thermoelectric plants which have either been sold or are in the process of being sold. As to women in our labor force, we have also been making investments and growing and increasing the opportunity for women to take up positions in the Company as part of an affirmative hiring policy. Recently, we have been working two important projects that we consider fundamental, namely the insertion of women in the operational area of the Company. It is the area where there is the least presence of women, although we are running with specific projects for training and hiring female labor for plant operations as engineering trainees. Thus, for female operators, both technical and engineering, there are programs specifically aimed at achieving diversity as in the administrative part of the Company - where we have a nearly fifty-fifty ratio -, although in the operational area, only approximately 20%. So, we want to increase this percentage and for this reason it is critical that we have affirmative policies in place. As for investments in social responsibility, we have a target of using 100% of tax break resources. This therefore is our target for our social responsibility area. And we have been successful in reaching this target year after year, obviously as a function of profit, that is

book profit, the volume of resources, and this sometimes varies with... sorry, not book profit, taxable profit, and this varies sometimes with exchange rate fluctuations, etc. Thus, we hold off allocating these resources until the moment nearest to the fourth quarter. We select work and choose the projects throughout the entire year so that we can then allocate the resources adequately in the right amounts for maximum and efficient use of the resources.

Let's go to slide 11, energy commercialization, with nothing much which is new here. The message that we gave at the outset of our conversation in the highlights that we sold 88 average megawatts of uncontracted energy, continues to be our strategy, that of gradual energy sales for one year in the future with a view to always having a reasonable level of contracted volume for the year ahead. You can see in the left side of the energy balance there that we have 11% in 2022, 13% in 2023, 20% in 2024, representing a very reduced available energy volume when we consider that despite the favorable hydrology in 2022, we traversed very bad periods of hydrology which, although not necessarily, could arise in future years. So, we need to have energy backup if only due to our major dependence, our large dependence on hydropower in our portfolio. This dependence is declining as we grow in other renewable sources such as wind and solar. However, we still have a highly significant percentage of hydropower in our portfolio.

Going back to this slide here, sorry, on the question of sales to free customers, we have the distribution between economic sectors, with two important segments for us, which are food and steel. But the overall view is that we have limited the specific risk of any one industrial segment so that we are not exposed to a particular segment and are not subject to systemic problems.

Let's go to the next slide and a continuation of commercialization strategy. We had been experiencing major expansion in consumer units, free consumers and volumes to these markets. However, with the hydrology crisis in 2021, we had to reduce a little volume allocated to free customers. Even so, we were obliged to maintain a certain standard in terms of customer numbers. And we expect that in the next few years with the opening up of the high voltage market as a result of the Ministerial Ordinance, that we shall see significant growth in these clients, and this is what we are preparing for. We currently serve about 2.5 thousand consumer units. We are talking not only about a market of 15 thousand consumer units being attended but 120, 130 thousand units able to operate in high voltage, consuming conventional energy. Our market share is about 10% while our generation is somewhere in the region of 6%, indicative of our strength in the market, in the free market, our commercial strength. 35% of our sales revenue comes from the free market and that means that we have 65% of our revenues derived from the regulated market, with long-term agreements made in the era of major hydroelectric power plants and some also concluded during the period of the early wind auctions, but nor forgetting our share in the transmission business. Thus, we have part of our portfolio dedicated to

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ENGIE Brasil Energia SA published this content on 09 November 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 November 2022 14:25:05 UTC.

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Sales 2022 11 663 M 2 276 M 2 276 M
Net income 2022 2 547 M 497 M 497 M
Net Debt 2022 16 418 M 3 203 M 3 203 M
P/E ratio 2022 11,9x
Yield 2022 7,66%
Capitalization 30 956 M 6 040 M 6 040 M
EV / Sales 2022 4,06x
EV / Sales 2023 4,24x
Nbr of Employees 1 216
Free-Float 31,3%
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Technical analysis trends ENGIE BRASIL ENERGIA S.A.
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 13
Last Close Price 37,94 BRL
Average target price 45,57 BRL
Spread / Average Target 20,1%
EPS Revisions
Managers and Directors
Eduardo Antonio Gori Sattamini CEO & Investor Relations Officer
Marcelo Cardoso Malta Chief Financial Officer
MaurÝcio Stolle Bńhr Chairman
JosÚ Luiz Jansson Laydner Chief Operation Officer
Dirk Achiel Marc Beeuwsaert Independent Director