1 | 30 São Paulo, May 12, 2016 - Alupar Investimento S.A. (BM&FBovespa: ALUP11), discloses today its 1Q16 results. The quarterly information (ITR) and standardized financial statements (DFP) are presented in accordance with the accounting practices adopted in Brazil, in compliance with the provisions of Brazilian Corporate Law, International Financial Reporting Standards (IFRS) and the standards issued by the Accounting Pronouncements Committee (CPC). 1Q16 Conference Calls: May 13 Portuguese 03:30 p.m. (BRT) 02:30 p.m. (US EST) Phone: + 55 (11) 3193-1001 / + 55 (11) 2820-4001 Code: Alupar Replay: + 55 (11) 3193-1012 / + 55 (11) 2820-4012 Code: 8062424# English (simultaneous translation) 03:30 p.m. (BRT) 02:30 p.m. (US EST) Phone: +1 (786) 924-6977 Code: Alupar Replay: + 55 (11) 3193-1012 / + 55 (11) 2820-4012 Code: 8165809# IR Contact José Luiz de Godoy Pereira Luiz Coimbra Kassia Orsi Amendola Fernando Carvalho Pereira Tel.: +55 (011) 4571-2400 [email protected]Live Webcast: www.alupar.com.br/ri Price on 05/12/2016 ALUP11: R$13.90 Total no. of UNITS¹: 221,840,139 Market Cap: R$3.084 billion (1) Equivalent Units 1Q16 Highlights • Corporate Result (IFRS): In 1Q16, the adjusted Net Revenue reached R$ 372.7 million, 4.6% higher than the R$ 356.2 million in 1Q15. In 1Q16, EBITDA totaled R$ 311.2 million, compared to the R$ 316.0 million in 1Q15. In 1Q16, Net Income amounted to R$ 54.2 million, compared to R$ 76.0 million reported in 1Q15. • Regulatory Result: In 1Q16 Net revenue totaled R$ 377.9 million, 8.5% up on the R$ 348.2 million in 1Q15. In 1Q16, EBITDA totaled R$ 314.6 million, 4.1% up on the R$ 302.2 million in 1Q15. In 1Q16, Net Income amounted to R$ 45.0 million, compared to R$ 54.6 million in 1Q15. • In January 2016, the La Virgen HPP sold 10MW for USD 39/MWh, for a period of 3 years. • On April 13, 2016 the Company won Lots I and T of Auction 13/2015-ANEEL: o Lot I: The investment planned by ANEEL is R$ 284.9 million, with an Annual Permitted Revenue (RAP) of R$ 48.5 million, and must be implemented within 42 months after the concession contract has been signed. The transmission facilities are composed as follows: (i) Circuit 1 and circuit 2, double circuit, 230 kV João Câmara II - João Câmara III transmission line, 10 km long per circuit and; (ii) 500 kV João Câmara III substation - 500/230 kV (9+1Res) x 300 MVA. o Lot T: The investment planned by ANEEL is R$ 151.0 million and Annual Permitted Revenue (RAP) of R$ 28.1 million, and must be implemented within 36 months after the concession contract has been signed. The facilities are composed of the 345/138 kV Rio Novo do Sul Substation (6+1Res) x 133.33 MVA. • On April 20, 2016, the following was approved at the Annual General and Extraordinary Meeting: 1) Distribution of dividends amounting to R$ 175.0 million (equivalent to R$ 0.84 per Unit), relating to 88.1% of net income for the 2015 financial year; Ex - dividend from April 22, 2016; Payment of R$ 100 MM on July 29, 2016; Payment of R$ 75.0 MM during the 2016 financial year on a date to be set by the Board of Directors; 2) Capital increase in the Company of R$ 173.3 million, with the distribution of 40,618,617 new shares to be issued to shareholders and Unit holders at a rate of 6.50 new shares for every 100 existing shares. Ex - issued after April 22, 2016.
Transcript
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São Paulo, May 12, 2016 - Alupar Investimento S.A. (BM&FBovespa: ALUP11), discloses today its 1Q16 results. The quarterly information (ITR) and standardized financial statements (DFP) are presented in accordance with the accounting practices adopted in Brazil, in compliance with the provisions of Brazilian Corporate Law, International Financial Reporting Standards (IFRS) and the standards issued by the Accounting Pronouncements Committee (CPC).
Price on 05/12/2016 ALUP11: R$13.90 Total no. of UNITS¹: 221,840,139 Market Cap: R$3.084 billion
(1) Equivalent Units
1Q16 Highlights
• Corporate Result (IFRS): In 1Q16, the adjusted Net Revenue reached R$ 372.7
million, 4.6% higher than the R$ 356.2 million in 1Q15.
In 1Q16, EBITDA totaled R$ 311.2 million, compared to the R$ 316.0 million in 1Q15.
In 1Q16, Net Income amounted to R$ 54.2 million, compared to R$ 76.0 million reported in 1Q15.
• Regulatory Result: In 1Q16 Net revenue totaled R$ 377.9 million, 8.5% up on the R$ 348.2 million in 1Q15.
In 1Q16, EBITDA totaled R$ 314.6 million, 4.1% up on the R$ 302.2 million in 1Q15.
In 1Q16, Net Income amounted to R$ 45.0 million, compared to R$ 54.6 million in 1Q15.
• In January 2016, the La Virgen HPP sold 10MW for USD 39/MWh, for a period of 3 years.
• On April 13, 2016 the Company won Lots I and T of Auction 13/2015-ANEEL: o Lot I: The investment planned by ANEEL is R$ 284.9 million, with an Annual
Permitted Revenue (RAP) of R$ 48.5 million, and must be implemented within 42 months after the concession contract has been signed. The transmission facilities are composed as follows: (i) Circuit 1 and circuit 2, double circuit, 230 kV João Câmara II - João Câmara III transmission line, 10 km long per circuit and; (ii) 500 kV João Câmara III substation - 500/230 kV (9+1Res) x 300 MVA.
o Lot T: The investment planned by ANEEL is R$ 151.0 million and Annual Permitted Revenue (RAP) of R$ 28.1 million, and must be implemented within 36 months after the concession contract has been signed. The facilities are composed of the 345/138 kV Rio Novo do Sul Substation (6+1Res) x 133.33 MVA.
• On April 20, 2016, the following was approved at the Annual General and Extraordinary Meeting: 1) Distribution of dividends amounting to R$ 175.0 million (equivalent to R$ 0.84 per Unit), relating to 88.1% of net income for the 2015 financial year; Ex - dividend from April 22, 2016; Payment of R$ 100 MM on July 29, 2016; Payment of R$ 75.0 MM during the 2016 financial year on a date to be set by the Board of Directors; 2) Capital increase in the Company of R$ 173.3 million, with the distribution of 40,618,617 new shares to be issued to shareholders and Unit holders at a rate of 6.50 new shares for every 100 existing shares. Ex - issued after April 22, 2016.
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Key Consolidated Indicators
Key Indicators "CORPORATE LAW (IFRS)" R$ MM 1Q16 1Q15 Var.%
*Net Income / Units Equivalents (221,840,139). Considering Bonus Shares, the ratio of 6.5% included in the position of shareholders on April 27, 2016. ** Including Securities under Non-Current Assets ***Annualized EBITDA.
Notes: 1) “Adjusted” concept in the corporate law numbers: According to IFRS (ICPC 01 and IFRIC12), investments (Capex) by transmission companies must be recognized as revenue and cost. However, since we are dealing with investments and, in Alupar’s case, since there is no effect on the Company´s result (revenue and cost being equal, giving a zero margin), for analytical reasons we have disregarded this effect when analyzing the Company´s revenues. The three main effects are figures relating to Adjusted Net Revenue (Net Revenue less Infrastructure Revenue, or Capex), Adjusted Operating Costs (same as the Revenue concept), and Adjusted EBITDA Margin (EBITDA divided by Adjusted Net Revenue). 2) “Regulatory” concept: This refers to the figures in the regulatory financial statements of our subsidiaries, whose main difference is the non-application of ICPC 01 (IFRIC 12). ICPC 01 has a material impact on our transmission segment companies with the creation of the “Financial Assets” account and the elimination of the “Fixed Assets” account in the balance sheet and several changes in the presentation of “Revenue” in the Statement of Income.
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Overview
Alupar Investimento S.A. is a privately-held Brazilian holding company operating in the electricity transmission and generation
segments, whose corporate purpose is to construct and operate infrastructure projects related to the energy sector in Brazil
and other selected Latin American countries with economic, institutional and regulatory stability. Alupar is one of the largest
companies in the Brazilian transmission segment in terms of Annual Permitted Revenue (RAP) and the largest one under
private national control.
The Company´s ownership structure is shown below:
Alupar seeks to maximize shareholder returns through moderate financial leverage and a debt profile compatible with the
low-risk nature of its business, high revenue predictability and the strong operating cash flow typical of the electricity
transmission and generation segments.
Alupar’s corporate credit ratings reflect this solid capital structure and predictable strong cash flow: AA+ (bra) from Fitch
Ratings for national scale.
Fully committed to creating value for its shareholders and society as a whole, Alupar is a socially responsible company with substantial technical ability and strong financial discipline, enabling it to continue growing in a sustainable manner through the development of generation and transmission system projects.
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Transmission
Alupar retains an interest in 23 transmission system concessions, with a term of 30 years and a total extension of 5,723 km of
transmission lines, 5,523 km of which are in Brazil and 200 km in Chile. In Brazil, it is part of 22 such concessions, 18 of which
are operational and four are in the implementation phase, scheduled for commercial start-up between 2017 and 2019.
The main features of Alupar’s transmission assets are shown below:
Company Concession Term Beggining of Line RAP/RBNI RAP/RBNI RAP/RBNI Index
Begin End Operations Expansion (Cycle 2013-14) (Cycle 2014-15) (Cycle 2015-16)
Transmission - Combined Performance Analysis – Regulatory Net Revenue
In 1Q16, Net Revenue totaled R$ 294.9 million, 6.3% up on the R$ 277.4 million in 1Q15, due to: (a) Annual Permitted Revenue (RAP) adjustment, according to Resolution 1918 of June 23, 2015, which set an adjustment of 8.47% for contracts indexed to the IPCA and 4.11% for contracts indexed to IGP-M (General Price Index), as mentioned the table in the "Transmission" section (page 4); (a) transmission company ETSE partially starting operations in 4Q14 and totally starting operations in Feb/15, impact of R$ 2.6 million; (b) the Boa Vista substation starting operations (2Q15), under the responsibility of TNE, impact of R$ 1.2 million and; (c) RBNI da Transirapé starting operations in Mar/15, impact of R$ 0.3 million.
Cost of Services
Cost of Service totaled R$ 52.1 million in 1Q16, 10.1% up on the R$ 47.4 million in 1Q15. In the Cost of Services account, the R$ 1.4 million increase was due to: (a) non - programmed maintenance in the STN transmission line, impact of R$ 1.6 million and; (b) ETSE starting full operations (Feb/15) and Boa Vista substation (2Q15), under the responsibility of TNE, impact of R$ 0.3 million. In the Depreciation / Amortization account, the R$ 3.4 million increase was mainly due to: (a) ETSE partially starting operations in 4Q14 and totally starting operations in Feb/15, impact of R$ 1.4 million; (b) the Boa Vista substation starting operations (2Q15),
under the responsibility of TNE, impact of R$ 0.8 million; (c) RBNI da Transirapé starting operations, impact of R$ 0.3 million and; (d) an increase in the depreciation of the Transchile asset, due to an exchange variance impact of R$ 0.6 million. Operating Expenses
Operating Expenses totaled R$ 10.1 million in 1Q16, 5.9% lower than the R$ 10.8 million recorded in 1Q15. This variance is due to: (a) a reduction in the General and Administrative account was mainly due to the sponsorship of the Rouanet law in the transmission company EATE, which is usually done in the last quarter of the period, but in 2015 was done in the first quarter, impact of R$ 0.4 million and; (b) there was a reduction of R$ 0.5 million in the Personnel account due to the bonuses for the transmission companies EATE, ECTE and ENTE were accounted for in 1Q15.
18.5
28.9
19.9
32.3
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
Costs of Services Rendered Depreciation / Amortization
Operating Costs (R$ MM)1Q15
1Q16
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EBITDA and EBITDA margin
EBITDA amounted to R$ 265.7 million in 1Q16, 6.8% up on the R$ 248.7 million in 1Q15. This variance is due to: (a) R$ 19.0 million increase in gross revenue, mainly due to the RAP adjustment, as explained previously. The EBITDA margin reached 90.1% in 1Q16, 0.4 p.p. up on the 89.7% reported in 1Q15.
Net Income
Net Income amounted to R$ 151.0 million in 1Q16, 10.3% up on the R$ 136.8 million in 1Q15.
It was impacted by: (a) an increase of 17.0 million in the EBITDA, due to an increase in the Gross Revenue of the transmission companies; (b) an increase of R$ 3.6 million due to depreciation and amortization, as explained in the cost of the services; (c) an increase of R$ 1.7 million in the Financial Result, due to (i) an increase in the average rate of interbank deposits ("CDI"), which was at 3.20% in 1Q16, compared to 2.76% in 1Q15 and; (ii) an increase in the long term interest rate ("TJLP"), which was at 1.88% in 1Q16, compared to 1.38% in 1Q15 and; (d) a reduction of R$ 2.5 million in the IRPJ / CSLL, due mainly to accounting changes as a result of adopting law 12.973 - Art. 69, section IV.
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Transmission - Combined Income and Revenue Analysis – Corporate Law (IFRS)
With the adoption of IFRS, the Revenue for Provision (RAP – PV) was replaced by 3 new revenue categories: Infrastructure
Revenue, Power Transmission Revenue (O&M) and Revenue from Remuneration of the Concession Asset.
Consequently, transmission company balance sheets now contain a Financial Asset account, the transactions of which are
set forth according to the following example:
Financial Asset on December 31, 2015
+Infrastructure Revenue from 01/01/2016 to 03/31/2016
+Financial Asset Remuneration from 01/01/2016 to 03/31/2016
+O&M Revenue from 01/01/2016 to 03/31/2016
-RAP from 01/01/2016 to 03/31/2016
-Residual Value received from 01/01/2016 to 03/31/2016
=Financial Asset on March 31, 2016
Asset Remuneration
Investment volume (CAPEX) in the transmission companies
Revenue that remunerates the operational and maintenance
costs of the transmission assets
The remuneration rate of a given transmission asset multiplied by the balance of its financial asset
Transmission
Revenue
Infrastructure Revenue
Note on residual value: if there is an inflow of funds related to possible indemnification
resulting from the termination of the concession, this amount will also reduce the Financial
Assets. In Alupar´s case, its subsidiaries’ concessions have exceptionally long terms, the first of
which matures in November 2030.
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Adjusted Net Revenue
Totaled R$ 293.3 million in 1Q16, 2.1% lower than the R$ 299.4 million reported in 1Q15. This variance is due to a R$ 6.6 million reduction in Remuneration Revenue of Concession Assets, which totaled R$ 284.0 million in 1Q16 compared to R$ 290.6 in 1Q15, this reduction is due mainly to the transmission company TNE, which reported a R$ 9.4 million reduction in Remuneration Revenue of Concession Assets, as a result, of the Protocol with ANEEL requesting the amicable return of the concession.
Net Income
Totaled R$ 170.5 million in 1Q16, 7.0% lower than the R$ 183.3 million reported in 1Q15.
Net income in the quarter was impacted by a R$ 7.1 million decrease in EBITDA, due to: (a) the protocol with ANEEL requesting the amicable return of the TNE concession. Considering the protocol, the IFRIC 12 was adopted only for the goods used (Boa Vista Substation) and IFRIC 12 was adopted for the entire enterprise in 1Q15, with an impact of R$ 9.6 million and; (b) a R$ 1.3 million increase in EBITDA for the transmission company Transchile, due to increased profits due to the exchange rate.
Net income was also impacted by: (a) R$ 0.7 million in the account depreciation and amortization, due to exchange rate variances on the transmission company Transchile; (b) of R$ 1.7 million increase in the Financial Result, which is due to (i) an increase in the average rate of interbank deposits ("CDI"), which was at 3.20% in 1Q16, compared to 2.76% in 1Q15 and; (ii) an increase in the long term interest rate ("TJLP"), which was at 1.88% in 1Q16, compared to 1.38% in 1Q15 and; (c) R$ 3.3 million increase in IRPJ / CSLL, mainly due to accounting changes as a result of adopting law 12.973 - Art. 69, section IV.
Operating Indicators – Transmission
Alupar's transmission companies recorded a consistent operating performance throughout 1Q16, maintaining physical availability above 99.85%.
183.3 170.5
(7.1) (0.7) (1.7) (3.3)
Net Income 1Q15 EBITDA Depreciation /Amortization
FinancialResult
Income Tax andSocial Contribution
Net Income 1Q16
Net Income Composition 1Q16 (R$ MM)
The line’s physical availability is an operational indicator that
demonstrates the percentage of hours the line was available
during a given period.
VP shows the impact of unavailability on the
company’s results
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Projects in Progress:
TNE: Transnorte Energia is a company formed by the partnership between Alupar (51%) / Eletronorte (49%) to implement a transmission system that will connect the state of Roraima to the National Interconnected Grid System (SIN), via the Lechuga substation, in the state of Amazonas, covering approximately 715.0 km of 500 kV line, in a double circuit, with two new substations, the Equador substation - 500 kV, to be installed in the city of Rorainópolis (RR) and the Boa Vista substation - 500/230 kV - 800 MVA, located in the city of Boa Vista (RR). This project has a documented and justified change in its implementation schedule, due to its environmental licensing process, especially with regard to a study of the indigenous component. On September 2, 2015, the consortium filed an application with the ANEEL (National Electric Energy Agency) to amicably terminate concession contract 003/2012 – ANEEL due to the failure of FUNAI to issue a conclusive statement as to the viability of the project with regard to the indigenous component. However, on November 6, 2015, funai submitted an official non-environmental obstacle statement to IBAMA. In view of the receipt of this communication, on December 9, 2015, IBAMA issued a Prior License for the project. Currently, the consortium is aiming to redress the finances of the concession, which is indispensable for the project to be implemented. We emphasize that the Boa Vista substation has been in commercial operation since May 2015, generating revenues equivalent to 4% of the Venture's total Annual Permitted Revenue (RAP).
ELTE (Lot C): ELTE is an SPE composed of a public service utility to transmit electricity through substations Domênico Rangoni
345/138 kV and Manoel da Nóbrega 230/88kV, in addition to 38 km of transmission line. The development will be connected
to the Brazilian National Grid and will strengthen distribution grids, as well as meeting the increasing demand for electricity in
the Baixada Santista area, composed of nine cities (Bertioga, Cubatão, Guarujá, Itanhaém, Mongaguá, Peruíbe, Praia Grande,
Santos and São Vicente).
This project has a justified change in its implementation schedule regarding the environmental licensing process. Although ELTE has tried to obtain the Environmental Licenses from the State of São Paulo Environmental Agency ("Companhia Ambiental do Estado de São Paulo - CETESB"), the environmental licensing process has been extended for reasons outside ELTE's control, which has changed the schedule planned for in concession contract 016/2014.
A Preliminary License for the 345/138 kV Domenico Rangoni substation and its respective transmission lines was due to be issued in October 2015; however, since Fundação Florestal and the licensing agency CETESB has not made any statements, the preliminary license has not yet been issued.
Additionally, the Preliminary License for the 230/88 kV Manoel da Nobrega substation and its transmission line was also due to be issued in October 2015. It still has not been issued because public agencies, such as the Fundação Florestal, CONDEPHAAT and FUNAI, have not made any statements, along with the licensing agency CETESB.
Transmission Companies being
Implemented
Extension (km)
RAP (R$ MM)
Estimated Investment
(R$ MM)
Investment Made (R$ MM)
Estimated Start-up
(Regulatory)
Estimated Start-up (Management)
TNE* 715 155.2 1,260.0** 293.9 2015 2018
ELTE 38 31.4 262.0 6.8 2017 2017
ETVG – RBNI - 5.2 41.0 38.1 2016 2016
TME - RBNI - 5.3 42.7 1.0 2017 2017
Lote I 20 48.9 284.9 - 2019 2019
Lote T - 28.1 151.0 - 2019 2019
* Total investment. This project is 51% owned by Alupar and 49% by Eletronorte.
** Initial investment in the amount of R$ 969.0 in September 2011, updated by the IPCA consumer price index.
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Lot I: Public service utility to transmit electricity through the 230 kV transmission Line João Câmara II - João Câmara III circuit 1 and circuit 2 in a double circuit with a 10 km length per circuit and the 500 kV substation João Câmara III - 500/230 kV (9+1Res) x 300 MVA. Located between the municipalities of Parazinho and João Câmara, in the State of Rio Grande do Norte. The development will be connected to the Brazilian National Grid and will strengthen the transmission network in the Eastern area of the Northeastern region, in order to take potential wind power expected for this region. The implementation period is 42 months from the date the concession contract has been signed.
Lot T: Public service utility to transmit electricity through substation Rio Novo do Sul - 345/138 kV (6+1Res) x 133.33 MVA. Located between the municipalities of Rio Novo do Sul and Itapemirim, in the State of Espírito Santo. The project will be connected to the Brazilian National Grid and will supply southern Espirito Santo, assuring it complies with criterion n-1 of the Basic network and of the Basic Network of the Border by 2022. The implementation period is 36 months from the date the concession contract has been signed.
Generation - Combined Performance Analysis – Corporate Law (IFRS) The figures below reflect the combined results (100%) of all the generation subsidiaries in which Alupar holds an interest, as
presented in Note 35 to the 1Q16 financial statements, under Information by Segment.
Unlike in the transmission segment, the adoption of ICPC 01 has had no material effects on the corporate figures vis-à-vis the
regulatory figures. Thus, the regulatory and corporate performance analyses are basically the same.
Key Indicators "CORPORATE LAW (IFRS)"
R$ MM 1Q16 1Q15 Var.%
Net Revenue 116.8 85.4 36.7%
Operating costs (22.3) (12.5) 78.5%
Depreciation / Amortization (18.3) (15.3) 19.7%
Energy Purchase (22.9) (0.0) -
Operating Expenses (8.4) (5.1) 64.7%
EBITDA (CVM 527) 63.2 67.8 (6.9%)
Ebitda Margin 54.1% 79.4% (25.3 p.p)
Financial Result (26.7) (18.3) 45.9%
Net Income / Loss 13.5 28.0 (51.8%)
Net Debt* 1,683.3 1,219.3 38.1%
Net Debt / EBITDA** 6.7 4.5
* Includes Securities under Non-Current Assets
**Annualized EBITDA
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Net Revenue
Net Revenue totaled R$ 116.8 million in 1Q16, up 36.7% compared to R$ 85.4 million recorded in 1Q15. This increase is due to: (a) completion of motorization of Ferreira Gomes HPP on 04/30/2015, positive impact of R$ 26.3 million; (b) start of Energias dos Ventos Wind Farm CCEARs in Jan/16, positive impact of R$ 17.5 million; (c) adjustment of energy sale contracts, which are indexed to inflation (IPCA / IGP-M) and; (d) negative impact of R$ 13.7 million due to the seasonalization strategy adopted by the Company, considering that in 2015, the Company concentrated the allocation of the assured energy in the 1Q15, generating an extraordinary revenue of R$ 21.5 million.
The chart below shows a breakdown of generator Revenues:
REVENUES FROM GENERATORS / TRADING Invoiced Average Gross Revenue
Energy (GWh) Price (R$/MWh) (R$ million)
1. Long Term - Revenues of Bilateral Contracts 792.5 154.8 122.7 1.1 ACR (Long Term Contract) 477.6 138.4 66.1 1.2 ACL (Short Term Contract) 314.9 179.7 56.6
2. SPOT / CCEE - Seasonalization 4.2
3. TAXES (ICMS) 1.9
4. OTHERS (0.4)
4. TORAL GROSS GENERATION 128.4
5. TRADING 99.4 158.1 15.7
7. TOTAL GENERATION / TRADING 144.1
8. ELIMINATION 30.3
9. GENERATION CONSOLIDATED 113.8
Cost of Services
Cost of Services totaled R$ 63.3 million in 1Q16, against the R$ 27.6 million in 1Q15. This increase is explained by: (a) an increase of R$ 3.1 million in Depreciation / Amortization due exclusively, completion of motorization of Ferreira Gomes HPP in Apr/15 and start operation at the Pitombeira Wind Farm (authorization in Mar/16); (b) an increase of R$ 22.9 million in the Purchase of Energy due to: (i) purchase of 73.3 GWh to cover energy from the Energia dos Ventos wind farms because the CCEAR started in Jan/16, impact of R$ 17.8 million; (ii) purchase of 73.5 GWh in the Queluz and Lavrinhas SHPPs to cover assured energy allocated for the second half of 2016 due to seasonalization, impact of R$ 3.1 million and; (iii) negative exposure in the CCEE, impact of R$ 2.0 million and; (c) increase of R$ 9.9 million in the Cost of Services Rendered account, due to: (i) amortization of hydrological risk, due to the adherence of the GSF Insurance in the ACR (Regulated Environment), impact of R$ 1.5 million; (ii) legal counsel, impact of R$ 2.6 million and; (iii) full operation of Ferreira Gomes HPP, in April 2015, impact of R $ 4.4 million.
Operating Expenses
Operating Expenses totaled R$ 8.6 million in 1Q16, against the R$ 5.3 million in 1Q15. This variance is due to: (a) an increase of R$ 2.0 million in general and administrative expenses, due to (i) the implementation of the La Virgen HPP and the Morro Azul SHPP (Risaralda) totaling R$ 3.2 million in 1Q16 compared to R$ 2.2 million in 1Q15 and (ii) full operation of Ferreira Gomes HPP, impact of R$ 1.1 million and; (b) an increase of R$ 1.2 million in
personnel and management costs, due to: (i) the implementation of the projects mentioned above, impact of R$ 0.6 million and; (ii) full operation at the Ferreira Gomes HPP, impact of R$ 0.3 million.
3.90.0
6.62.1
15.013.8
22.9
6.52.0
18.1
0.0
5.0
10.0
15.0
20.0
25.0
Cost of ServicesRendered
Energy Purchase Charges ofElectric Grid -
CUST
Hydro Resources- CFURH
Depreciation /Amortization
Operating Costs (R$ MM)
1Q15
1Q16
3.02.1
0.3
(0.1)
5.0
3.3
0.3
0.0(1.0)
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
General andAdministrative
Personnel andManagement
Depreciation /Amortization
Others
Operating Expenses (R$ MM)
1Q151Q16
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EBITDA and EBITDA margin
In 1Q16, EBITDA amounted to R$ 63.2 million, compared to R$ 67.8 million in 1Q15. In turn, the EBITDA margin stood at 54.1%, compared to 79.4% in the same period in 2015. The EBITDA was impacted by: (a) increase of R$ 35.0 million in the Gross Revenue, due to: (i) the ending of the motorization of Ferreira Gomes HPP in Apr/15, impact of R$ 26.3 million and (ii) start of Energias dos Ventos Wind Farm CCEARs in Jan/16, impact of R$ 17.5 million; (b) increase of R$ 9.8 million at the Operating Costs, mainly due to (i) costs related to the renegotiation of the hydrological risk, impact of R$ 1.5 million and (ii) full operation of Ferreira Gomes HPP in Apr/15, impact of R$ 4.4 million and; (c) an increase of R$ 22.9 million for Energy Purchased for Resale owning to (i) start of the Wind Farms CCEARs in jan/16, impact of 17.8 million; (ii) energy purchase to cover the seasonalization of Queluz and Lavrinhas SHPPs, impact of R$ 3.1 million and; (iii) negative exposure in CCEE, impact of R$ 2.0 million.
Net Income - Generation
The generation segment showed a profit of R$ 13.5 million in 1Q16 compared to R$ 28.0 million in 1Q15. This variance is explained by: (a) decrease of R$ 4.7 million in EBITDA, as explained previously; (b) increase of R$ 3.0 million in depreciation / amortization and; (c) increase of R$ 8.4 million in the financial result. It is worth mentioning that these variances are due to the Ferreira Gomes HPP completing motorization in Apr/15, which had a R$ 2.7 million impact on depreciation / amortization and a R$ 10.7 million on the financial result.
Operating Indicators – Generation
Availability was less than 100% because of routine shutdowns for annual preventive maintenance of the equipment and contractual maintenance scheduled with the supplier.
Below is the Company's energy balance, showing the impact of the GSF of 38.3 GWh in 1Q16, besides a negative exposure on the CCEE of 121.7 GWh, due to the seasonalization strategy adopted by the Company.
*Excludes Energia dos Ventos Wind Farms
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Projects in Progress:
Generation Companies
Installed Capacity
(MW)
Assured Energy (MW)
Estimated Investments
(million)
Investments Completed
(million)
Estimated Start-up
(Regulatory)
Estimated Start-up (Management)
Energia dos Ventos 98.7 47.7 R$ 480.5 R$ 480.5 2016 2016
Energia dos Ventos: Energia dos Ventos is a cluster established to implement ten wind farms in the municipalities of Aracati and Fortim in Ceará, resulting from the sale of 204.4 MW in the 07/2011 auction held in December 2011 by ANEEL. However, in October 2014, Alupar won the bid for the sale of the interests held by Furnas in the Aracati Complex, comprising five wind farms, Energia dos Ventos I, II, III, IV and X. In March 2015, Alupar had concluded the acquisition of the equity interest of each of the companies of the Aracati Complex, with the conclusion the company holds 99.99% of the equity interest of each of the companies. Additionally, on August 31, 2015, the Company announced that the sale of Fortim Complex to Furnas had been completed. With this process complete, it ends the partnership with this company in ANEEL auction A-5 No. 007/2011. Construction work on the five farms were completed in August 2015. Wind turbines were assembled on the five farms, being, Pitombeira (27.3 MW), in December 2015, Ventos do Horizonte (16.8 MW) in January 2016, Santa Catarina (18.9 MW) in February 2016 and; Goiabeira (23.1 MW) and Ubatuba (12.6 MW) in March 2016. It is important to mention that all five wind farms listed already have operating licenses.
Risaralda: Risaralda is an SPE established in October 2011 to develop and implement three SHPPs (Morro Azul, Guatica I and Guatica II) in Colombia, with a total installed capacity of 28 MW. SHPP Morro Azul had its implementation project optimized, which unfeasible Guatica I and II. In February 2014, construction started on Morro Azul SHPP, with an installed capacity of 20.2 MW, and commercial operations are scheduled to start in 1H16. The metal structure for the machine room and roofing was assembled in 1Q16, the overhead crane was commissioned and the penstock bifurcation structure was assembled. Activities started on the substation area and progressed 20% in the period. Transmission line activities continued and progressed 85%. Then the spillway and connecting substation concreted. Construction work on the water intake was finished and work on the assembling the screen, gate and hydraulic central structure were started.
Verde 08: Verde 08 is an SPE constituted to develop and implement the Verde 08 SHPP, located in the municipality of Santa Helena de Goiás, in the state of Goiás, with an installed capacity of 30.0 MW and assured energy of 18.7 MW. The ANEEL 06/2013 auction sold 70% of the energy for 30 years, to be delivered as of January 2018 at R$130.00/MWh (data: August, 2013), adjusted throughout the concession by the IPCA consumer price index. We highlight that the SHPP has an installation license (LI) since March, 15.
Água Limpa: Água Limpa is an SPE constituted to develop and implement Antônio Dias SHPP, located in the municipality of Antônio Dias, in the state of Minas Gerais, with an installed capacity of 23.0 MW and assured energy of 11.9 MW. The ANEEL 10/2013 auction sold 50% of the energy for 30 years, to be delivered as of May 2018 at R$138.00/MWh (data: December, 2013), adjusted throughout the concession by the IPCA consumer price index.
La Virgen: La Virgen is an SPE constituted to implement La Virgen HPP, with an installed capacity of 84.0 MW and assured energy of 49.3 MW, located in the province of Chanchamayo, Peru, to be developed in accordance with Generation Concession Contract 253-2005 of October 7, 2005 and Transmission Concession Contract 313-2008 of June 11, 2008, entered into with the Ministry of Mines and Energy. In 1Q16, the excavation of a 5.4 km long adduction tunnel was completed, an important milestone in the project. Concreting the powerhouse progressed 70%. In the transmission line, construction work progressed and the towers started to be assembled. The manufacture of electromechanical equipment was on schedule. Assembly of the electromechanical equipment has started for the penstock and overhead crane. Additionally, in January/16, 10MW was traded to a non-regulated customer for USD 39/MWh, for a period of 3 years.
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Analysis of Consolidated Results – IFRS
Net Operating Revenue
Alupar and its subsidiaries reported Adjusted Net Revenue of R$ 372.7 million in 1Q16, compared to R$ 356.2 million reported in 1Q15. When we analyze the Company's Net Revenue for IFRS, we can see that it totaled R$ 381.6 million in 1Q16, compared to R$ 376.1 million in 1Q15. However, this increase of Adjusted Net Revenue higher than the increase of Net Revenue was due solely to the fact that, according to IFRS, the entire volume of investments (Capex) by our transmission companies is recognized as revenue. Because these are investments and have no effect on the Company's results (the same amount of revenue is excluded in the Cost - Infrastructure Cost). We exclude its effect on the Company's revenue for analytical purposes, as detailed below:
The 4.6% variance in Adjusted Net Revenue in 1Q16 is explained by the increase of R$ 20.4 million in Energy Supply Revenue, due to: (a) motorization completed of Ferreira Gomes HPP on 04/30/2015; (b) start of CCEAR for Energia dos Ventos wind farms in Jan/16; (c) seasonalization strategy and; (d) adjustment of energy sale contracts, which are indexed to inflation (IPCA / IGP-M), as detailed in the “Generation Segment” section.
The Company's Net Revenue calculated in accordance with IFRS totaled R$ 381.6 million in 1T16, compared to R$ 376.1 million in 1T15. This increase is explained, along with the factors mentioned above, by a reduction of R$ 10.9 million in Infrastructure Revenue, mainly due to, the conclusion of the transmission company ETSE in Feb/15 and the reinforcement (RBNI) of the transmission company Transirapé in Mar/15. For more information about changes in Infrastructure Revenue (CAPEX), go to the "Investments" section further on.
Adjusted Net Income (R$ MM)
1Q16 1Q15 Var. %
Energy Transmission Revenue 26.0 26.4 (1.6%)
Infrastructure Revenue 8.9 19.8 (55.2%)
Remuneration of Concession Assets 270.2 267.6 1.0%
Energy Supply 113.8 93.4 21.8%
Gross Revenue - IFRS 418.9 407.3 2.8%
Deductions 37.3 31.3 19.4%
Net Income - IFRS 381.6 376.1 1.5%
Exclusion of Infrastructure Revenue 8.9 19.8 (55.2%)
Adjusted Gross Revenue 410.0 387.5 5.8%
Adjusted Net Revenue 372.7 356.2 4.6%
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Cost of Services In 1Q16, Cost of Services totaled R$ 73.2 million, 14.5% up on the R$ 63.9 million in 1Q15. This variation is due to: (a) increase of R$ 11.2 million in the Cost of Services Rendered, owning to (i) amortization of the hydrological risk, due to the adherence to GSF insurance, impact of R$ 1.5 million; (ii) legal counsel, impact of R$ 2.6 million; (iii) full operation of Ferreira Gomes HPP, in Apr/15, impact of R$ 4.4 million; (iv) non-programmed maintenance of the transmission company STN, impact of R$ 1.6 million and; (v) full operation of ETSE (Feb/15), impact of R$ 0.1 million; (b) increase of R$ 6.2 million in Energy Purchased for Resale, due to (i) purchased energy regarding to the seasonalization of Queluz and Lavrinhas SHPPs, impact of R$ 3.1 million and; (ii) negative accounting at CCEE, impact of R$ 2.0 million; (c) increase of R$ 3.0 million in the line Depreciation and Amortization, because of the termination of the motorization of Ferreira Gomes HPP in Apr/15 and the start of Pitombeira Wind Farm (authorization in Mar/16), impact of R$ 3.0 million and; (d) decrease of R$ 10.9 million in the Infrastructure Cost due to the conclusion of transmission company ETSE in Feb/15 and the reinforcement of the transmission company (RBNI) Transirapé in Mar/15, impact of R$ 17.8 million. The cash cost in 1Q16, not considering infrastructure costs (investment) and depreciation / amortization, corresponds to 12.4% of the Adjusted Net Revenue, compared to 8.1% in 1Q15.
Operating Expenses In 1Q16, Operating Costs stood at R$ 16.5 million, compared to R$ 12.3 million reported in 1Q15. This variance in the period is due to: (a) increase of R$ 0.6 million in General and Administrative, mainly due to implementation of the La Virgen HPP and the Morro Azul SHPP, impact of R$ 1.0 million and; (b) a decrease of R$ 3.5 million in the Equity Pickup, mainly because of a decrease in profit from TNE that amounted to R$ 1.1 million in 1Q16 compared to R$ 7.4 million in 1Q15, impact of R$ 3.2 million. Importantly, the reduction of profit in the period is due to the Protocol with ANEEL requesting the amicable return the TNE concession, which in 1Q16 applying IFRIC 12 was adopted only for goods used (Substation Boa Vista) and in 1Q15 IFRIC 12 was adopted for the entire development.
Cost of Services R$ (MM)
1Q16 1Q15 Var. %
Cost of Services Cost of Services Rendered 31.5 20.3 55.2%
Energy Purchased for Resale 6.2 0.0 -
Charges of Electric Grid - CUST 6.5 6.6 (1.5%)
Hydro Resources – CFURH 2.0 2.1 (4.8%)
Infrastructure Cost 8.9 19.8 (55.2%)
Depreciation / Amortization 18.1 15.1 20.1%
Total 73.2 63.9 14.5%
Operating Expenses R$ (MM) 1Q16 1Q15 Var. %
Operating Expenses
General and Administrative 10.0 9.4 6,9%
Personnel and Management 12.8 13.1 (2.3%)
Equity Pickup (7.7) (11.2) (31.2%)
Others 0.1 - -
Depreciation / Amortization 1.3 1.1 18.2%
Total 16.5 12.3 34.1%
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EBITDA
In 1Q16, EBITDA amounted to R$ 311.2 million, compared to R$ 316.0 million reported in 1Q15. In turn, the Adjusted EBITDA margin, excluding Infrastructure Revenue stood at 83.5%, compared to 88.7% in the same period last year. This variance in EBITDA, is due to: (a) an increase of R$ 20.4 million in revenue from Energy Supply, because of (i) termination of the motorization of Ferreira Gomes HPP in Apr/15; (ii) start of the CCEARs of the Energia dos Ventos Wind Farms in Jan/16; (iii) seasonalization strategy and; (iv) adjustment of energy sale contracts, which are indexed to inflation (IPCA / IGP-M); (b) increase of R$ 11.1 million in the Operating Costs, due to (i) amortization of the hydrological risk due to the adherence to the GSF Insurance in the Regulated Environment; (ii) legal counsel; (iii) full operation of Ferreira Gomes HPP, in Apr/15; (iv) non – programmed maintenance at STN and; (v) full operation of ETSE in Feb/15; (c) increase of R$ 6.2 million in the line Energy Purchased for Resale, due to (i) energy purchase due to the seasonalization of Queluz and Lavrinhas SHPPs and; (ii) negative exposure in the CCEE and; (d) decrease of R$ 3.5 million in the Equity Pickup, mainly due to the reduction of profit in the TNE because of the the Protocol with ANEEL requesting the amicable return the concession; as detailed in the “Transmission Segment” and “Generation Segment” section.
The chart below shows the breakdown of EBITDA:
EBITDA (R$ MM)
1Q16 1Q15 Var. %
Adjusted Gross Revenue 410.0 387.5 5.8%
Deductions (37.3) (31.3) 19.4%
Adjusted Net Revenue 372.7 356.2 4.6%
Operating Costs (40.0) (29.0) 37.9%
Energy Purchase (6.2) - -
Operating Expenses (23.0) (22.4) 2.6%
Equity Equivalence 7.7 11.2 (31.2%)
EBITDA 311.2 316.0 (1.5%)
EBITDA Margin 83.5% 88.7% (5.2 p.p)
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Financial Result
The Financial Result totaled R$ 109.5 million in 1Q16, compared to R$ 86.9 million in the same period last year.
This variance in the financial result was mainly due to an increase of R$26.8 million in financial expenses, which is due to: (i) an increase in the average interbank deposit rate ("CDI"), which is applied to 34.6% of the Company's consolidated debt, which was 3.20% in 1Q16, compared to 2.76% in 1Q15; (ii) an increase in the long term interest rate ("TJLP"), which is applied to 25.1% of the Company's consolidated debt, which was 1.88% in 1Q16, compared to 1.38% in 1Q15; (iii) funding by the Holding Company of R$ 250.0 million in April/2015, with interest equivalent to the IPCA + 7.33% p.a. and; (iv) an increase in financial expenses of the Ferreira Gomes HPP due to it starting commercial operations in Jan/15, given that in 1Q15, expenses and interest were capitalized and in 1Q16 they became included in the Results of the Company, impact of R$ 10.8 million.
Net Income
In 1Q16, Net Income amounted to R$ 54.2 million, compared to R$ 76.0 million reported in 1Q15.
This variance is due to: (a) decrease of R$ 4.8 million in EBITDA, as detailed above; (b) increase of R$ 3.2 million in Depreciation / Amortization, mainly due to the termination of the motorization Ferreira Gomes HPP in Apr/15 and the startup of the Pitombeira Wind Farm (authorization in Mar/16); (c) increase of R$ 22.6 million in the Financial Result as detailed in the "Financial Result" section and; (d) decrease of R$ 11.5 million in % of minorities, mainly due to the increase of capital in Foz do Rio Claro and São José HPPs and the reduction of the income registered in these generators, due to the seasonalization strategy.
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Investments
Total investments made in our companies amounted to R$ 139.1 million in 1Q16, with R$ 8.9 million being invested in the transmission segment, R$ 127.2 million in the generation segment and R$ 3.0 million in new business development, compared to R$ 214.5 million in 1Q15, when R$ 19.8 million was invested in the transmission segment, R$ 192.9 million was invested in the generation segment and R$ 1.8 million in new business development.
The volume invested in 1Q16 reflects the implementation of the La Virgen HPP and the Morro Azul SHPP (Risaralda), Energia dos Ventos Wind Farms and RBNI in the ETVG transmission company.
Investiments (R$ MM)
1Q16 1Q15
Transmission 8.9 19.8
ETSE - 14.7
Transirapé 1.1 4.1
ELTE 1.2 0.9
ETVG 6.5 0.1
Outros 0.1 -
Generation 127.2 192.9
Ferreira Gomes 0.1 19.5
Energia dos Ventos 34.7 137.3
La Virgen 65.0 7.4
Morro Azul 10.0 12.5
Antônio Dias 0.7 1.0
Verde 08 1.8 0.6
Outros 14.9 14.6
Holding 3.0 1.8
Total 139.1 214.5
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Indebtedness Holding Company:
In Mar/2016, the Holding Company's net debt amounted to R$ 691.9 million, R$ 33.3 million higher than the R$ 658.6 million in Dec/2015. This variance is explained mainly by: (a) monetary variation and estimates of charges on debentures emissions in the holding and; (b) capital contributions made in the projects in progress.
The Holding Company's gross debt totaled R$ 861.9 million in Mar/16, 2.9% up from R$ 837.6 million in Dec/2015. The Holding Company's gross debt consists almost entirely of debentures (97.0%), 18.3% of which are indexed to CDI and 81.7% to IPCA, approximately 27.8% of them mature after 2021. For more information on the Holding Company's Debt, go to Note 23 "Loans and Financing" and Note 24 "Debentures" in the 1Q16 Financial Statements.
The Holding Company's debt profile is shown below:
861.9691.9
170.0
Gross Debt Cash Net Debt
Total Debt Mar/16
837.6 658.6
179.1
Gross Debt Cash Net Debt
Total Debt Dec/15
12%
88%
Holding Debt Profile Mar/16
Short Term Long Term
5%95%
Holding debt Profile Dez/15
Short Term Long Term
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Consolidated:
Alupar and its subsidiaries' gross debt amounted to R$ 4,726.1 million in Mar/16, 2.1% or R$ 97.7 million up on the R$ 4,628.4 million in Dec/2015. Net debt in Mar/16 was R$ 3,979.1 million, R$ 76.8 million up on the R$ 3,902.3 million in Dec/2015. This variance is due to: (a) release of an installment, in the amount of COP 22,000,000,000, that refers to the funding done by Risaralda in November 2014, in a total amout of COP 88,000,000,000, with the Corpbanca Bank, impact of R$ 26,1 million; (b) release of R$ 151.5 million (1st installment), in March / 16, of the total amount contracted with the BNDES of R$ 261.3 million and; (c) appreciation of the real against the dollar, closing the 1Q16 at R$ 3.56 / US$ 1 and R$ 3.90 / US$ 1 on the 4Q15, impact of R$ 43.6 million.
Short-term debt in Mar/16 amounted to R$ 1,165.7 million, compared to R$ 1,112.9 million in Dec/2015.
In 1Q16, Alupar and its subsidiaries have cash and cash equivalents of R$ 747.0 million, R$ 21.0 million up on the R$ 726.0 million in Dec/2015.
The Holding Company accounts for R$ 861.9 million of the consolidated debt, as detailed above, the other R$ 2,972.9 million is allocated to the operating companies, which have cash outflows compatible with their respective cash generation and the other R$ 891.3 million relates to project implementation with R$ 117.6 million allocated to the Morro Azul SHPP (Risaralda), R$ 364.8 million allocated to Alupar Peru / La Virgen to implement the La Virgen HPP and R$ 383.7 million allocated to the Aracati Complex (Energia dos Ventos) and R$ 25.2 million invested in the implementation of reinforce ETVG.
Of the total debt, R$ 1,664.2 million corresponds to financing infrastructure projects (project finance) obtained from development banks.
In 1Q16, issued debentures accounted for R$ 2,552.6 million or 54% of the total debt. Debentures issued by the Holding Company amounted to R$ 836.5 million and those issued by the subsidiaries EATE, ECTE, ENTE, ETEP, STN, Ferreira Gomes, Transirapé, Transleste, Transudeste and Energia dos Ventos amounted to R$ 1,716.1 million.
Foreign currency debt amounted to R$ 484.1 million or 10.2% of the total debt, with R$ 1.7 million corresponding to financing from development banks in a basket of currencies and R$ 482.4 million to implement generation projects in Peru and Colombia.
4,726.1
3,979.1
747.0
Gross Debt Cash Net Debt
Total Debt Mar/16
4,628.4
3,902.3
726.0
Gross Debt Cash Net Debt
Total Debt Dez/15
25%75%
Consolidated Debt profile Mar/16
Short Term Long Term
24%76%
Consolidated Debt Profile Dec/15
Short Term Long Term
Of 25% of the short-term debt, 52% or R$ 604.4 million
is for bridging loans.
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Alupar's consolidated debt profile is quite favorable, compatible with the low risk involved in the Company's businesses, highly predictable revenues and strong operating cash generation of the electric power transmission and generation segments.
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Capital Market Alupar was listed on the São Paulo Stock Exchange - BM&FBOVESPA on April 23, 2013. Its UNITS are traded under the ticker ALUP11 and each UNIT comprises one common share and two preferred shares.
Alupar’s UNITS were traded in all trading sections since its listing, with average daily traded volume of R$ 3.5 million. On May 12, 2016; Alupar’s market cap was R$ 3,084 billion.
