CPL - CPFL Energia S.A. (CPL) Q2 2023 Earnings Call Transcript

2023-08-11 20:00:25 ET

CPFL Energia S.A. (CPL)

Q2 2023 Earnings Call Transcript

August 11 2023, 10:00 AM ET

Company Participants

Carlos Cyrino - Director of IR

Gustavo Estrella - CEO

Conference Call Participants

Victor Cunha - Itau BBA

Presentation

Carlos Cyrino

Good morning to everyone. You're all welcome to one more presentation of the results of the CPFL Energy. Today we're going to talk about the results of the First Quarter of '23. I'm Carlos Cyrino, Director of Investor Relations. And today I'll be master of ceremonies of our event.

We have Gustavo Estrella with us, our CEO, and the other executives of the company. The presentation will be in Portuguese with interpretation for English. All you have to do is click on the bottom globe and choose English. If you want to see the presentation in English, you can find it on the website of CPFL Energia.

I'd also like to inform all the participants that at the end of the presentation, we will start the questions and answers. All the questions will be made live. To request this, click on the button, raise hands, which you can also find at the bottom part of the platform. I remind you that this event is being recorded.

I'm going to give the floor now to Gustavo Estrella to start the presentation of the results.

Gustavo Estrella

Hello, good morning to everyone. Thank you for being president of our call for the second quarter of 2023. Here in the first slide, we're going to talk about our results. EBITDA with a growth of 7.2%, BRL3.54 million, accumulated of the first semester, a growth of almost 20% -- 19.9%, reaching BRL6,584 million profit [1.7] (ph) with 2% negative. We had a non-recurring effect due to the recognition of a fiscal credit of a debt that we had in CPFL transmission. So the variation shows up now in this semester, we would have a growth of almost 7% as well.

In the variation of the semester, we have 19.5% with BRL2,800,000. Net debt BRL23 billion with a leverage of 1.72 times of the EBITDA. Remembering always that today we have 3.75 dividends, I think which is approved in the administration that we had said in the beginning of the year. The declaration of complementary dividends referring to 2022 in CPFL with -- we declare here our dividend of BRL903 million, which corresponds to BRL0.78 per share.

Let's move to the next slide. Here we have some important highlights, which are positive, and the tariff revision of our distributors, we concluded the revision of RGE June '23 with the positive effect of 1.1% for our consumers and an increase of 1.2% in Parcel B. And in RGE we have a regulatory revenue of BRL11 billion.

Piratininga also this revision process for the month of October. We have a base of preliminary net RAB of BRL3.9 billion. Some important recognitions in consumer satisfaction, CPFL Santa Cruz is in first place, and in second place RGE, Consumer Satisfaction Awards. So again, Santa Cruz first, and RGE second.

Let's go to the next slide. Here we have a distribution of energy sales. We see the load in the concession area 1.3% lower than 2022. And sales, negative variation of 0.1%. When we look for consumer class, residential class was a growth of 2.2%. It's important to highlight, even though we have distributed generation, we have the positive impact of the increase of the revenue mass in the first semester that brought a positive effect in the consumption of energy, whether it be commercial or residential.

The industry, which was a concern with the negative -- we can feel the resilience of the industry to recover the consumption of energy. When we look in the different classes of consumption of the industry, we see performance, which is positive in food. This corresponds to almost 20% of the industrial consumption, but we see several other sectors metal, paper and pulp. These have a negative performance varying from 4% to 5% drop. So we see a negative perspective for the industry up to the end of the year, possibly with a consumption below than the consumption verified in 2022.

Let's move to the next slide. When we look at the performance of the semester, it's similar to what we saw in the second semester. Drop of 0.6% in the concession, 0.7% in sales in the concession area. The effects are very similar, residents going up as affected also -- and the commercial class also, and industry, the accumulated with a drop of 1%.

Let's move to the next slide. Here is a slide about delinquency. This is an important number here. As you know, we come with a robust process of energy cuts over 200,000 per month. We see the positive impact in the reduction of delinquency, 0.73%, it's a decrease of 35% in relation to '22. So this is very positive. We start to get close to the levels pre-pandemic in delinquency and this number really is very important.

Now let's go to the next slide. This is another good piece of news. We have a sequence of reduction of total losses in our distributors. We know the challenge about the regulatory losses. So this is one more quarter, so from 8.76% to 8.19%, 8.19% in the third quarter -- the second quarter. As you can see in the lower part too of the four distributors below the regulatory rates. I think this is a challenge that we still have especially Paulista and Piratininga to go in quest of these rates in the next semester.

Now let's go to the next slide. This is about generation, the PLD is aligned with previous semesters through to this positive numbers and the low consumption of energy, the increase -- modest increase of load. We have [Technical Difficulty] PLD, which should go until the end of the year. Low energy prices that for sure will go beyond 2023. We see the GSF aligned with 2022, 98% versus 94% of 2022. As for wind generation, we've had a improvement in our wind farms. So we've had a growth of 12% in generation, basically due to the improvement of the wind performance. As we can see here on the right side, the availability aligned with 2022. So this growth is an increase of winds in this period.

Now let's go to our results of the second quarter. EBITDA growing 7.2%. We have a negative effect of -- in distribution of BRL43 million. It's the variation of the asset of BRL166 million. As you can see, the IPCA is half of the IPCA of 2022. And this gives us a negative reflex, and the correction of our financial assets. We also have a variation, the operational resources in BRL48 million. This is still from the inflation of the last months. So this is the private pension plans, and this is the result, BRL48 million. And a positive concession financial asset tariff revisions with an important positive number of BRL60 million.

The market in general has a positive effect due to the mix and the increase of the low [tential] (ph) classes, residential and commercial. So, an improvement of mix, and an improvement of tariffs brought a positive impact of BRL53 million in this period. The [Technical Difficulty] as we said positive BRL31 million, and other revenues with an impact of BRL25 million. The main effect of the results come from generation and the main effect still is the consolidation effect of the participation of that hydraulic Enercan project.

We acquired this after the privatization effect last year. And we are the -- one of the largest shareholders of this project. So we go through the IFRS, and we consolidate this bringing an impact, positive BRL132 million in our results. Besides this, we also have the increase of the wind performance that brought a positive result with BRL44 million.

Next slide still about results. In the segment of transmission, we have two important results, an increase of margin, BRL27 million readjustments of tariffs and the integration process of CPFL transmission, which is important with the reduction of operational costs bringing us BRL16 million, with personnel reduction.

We also had the transmission lines with an impact of BRL15 million -- here we have a positive effect in our trading of BRL15 million in service segment in general an increase of BRL8 million, especially from our fintech Alesta contributing positively with our results in the quarter.

Now besides the effects of the EBITDA, we have negative effect in our results -- financial results, BRL36 million coming from the -- as financial results. BRL122 million, reminding us that is non-cash of BRL56 million, and also negative effects of interest and fines of BRL40 million. We have a positive effect with the reduction of expansions with our net debt BRL104 million this quarter and the prepayment of the AFD debt with the acquiring of CPFL Transmission plus BRL36 million comparing '22 to '23. The effects on the taxes, as I said, we have the recognition of the fiscal credit in 2022. So BRL103 million, this brings this negative impact of 1.2% in our profit. This -- not considering this, we will have a growth of almost 7% compared to the net profit of 2022.

Let's go to the next slide on the comparison of the results of the first semester. Important growth in the EBITDA of our distributors with BRL445 million, especially due to the impacts of the tariff revisions, whether it be the correction of the remuneration or the positive impacts in the increase of our Parcel B.

In generation one more, the impact of Enercan and the impacts of the wind farms bringing positive results and the effects of the reduction of personnel and also the Sul I and Sul II projects. When we look at the profits, BRL1,093 million. We have impact of the financial results coming from the sectorial variations and the effect in the income tax.

Now let's talk about leverage and dividends. We -- this is stable in relation to the first semester with a debt of BRL23.2 million. The dividends -- complementary dividends, which is BRL903 million or BRL0.78 per share, the shares trade ex from 18th of August. So this will be paid out up to 31st December of 2023.

And the next slide here we can see a positive perspective about the indebtedness. We see a stability in the first semester, and we will -- since this is 73% indexed to the CDI up to the end of the year, we will reduce our financing costs due to the variation of the interest rate, about -- here we can see that our cash position is very robust. This covers 2023-24 and a bit of '25. This is always an important topic with CPFL. We have a robust position and perspective of access to the market with good conditions. So we have no short-term pressure to access the market. We will do this as we have good conditions and lower costs.

Next slide. Here we see investment program, CapEx, even though it is lower than it was in 2022, it is explained here because of the end of the cycle of the tariff revision in the main distributors in 2022, beginning of 2023. So this reduction was already expected in our investment program, but still we have an investment program over BRL5.2 billion expected to 2023, led by the distribution segment, which has already delivered BRL1.8 billion in the first semester. Another program comes from CPFL Transmission with almost BRL300 million investment with the expectation a bit over BRL500 million up to the end of 2023.

Lastly, I would like to talk about our agenda ESG. We have two very important programs. The first is the Electricians School where we educate and train these electricians that join CPFL. We can see here with over 2,500 contracted in 51 training centers, it's a growing participation in electricians. So in 2020, there were 18 women, which corresponded to a little over 2,000 -- 2%, sorry. So July '23 we have 177 women, which corresponds to 10.3% of the contracted professionals. This is an internal process that we have of women electricians more and more in collaborators.

Another topic, which is important, we opened our first School of Automation to technical auxiliary for wind farms in the town of Joao Camara where all our wind farms are in the State of Rio Grande do Norte we have this course as Technical Assistant in Maintenance of Wind Farms. This course is closed. And we hope that this will be a recurring program from now on.

Well, ladies and gentlemen, I think this was the main information. I am available with my team for the questions and answers. Thank you very much.

Carlos Cyrino

Thank you, Gustavo, for the presentation. Before we open the session of questions and answers, I would ask you to fill out the satisfaction form with a QR code that shows up in the screen. It's very important for us to improve and develop our materials. So please fill out the form, it's very quick.

Question-and-Answer Session

A - Carlos Cyrino

Now we're going to start the questions and answers. They will be responded in the orders that they arrive. The answers will be done live, just click on the raise hands button, which is in the bottom part of the platform. So we already have some questions here. The first question comes from [Julia] (ph) of Santander Bank. Good morning. Please proceed with your question.

Unidentified Analyst

Well, thank you very much for the question. I'd like to know about dividends, additional dividends in 2022. So I'd like to know what your expectation is about the payout in 2023?

Gustavo Estrella

Hi, Julia. Thank you for your question. Well, I think it's always a challenge to balance our growth with the payment of dividends. We're doing this in 2023 without a load beyond our investment program of BRL5.2 billion. It's a robust program of investments, but aligned with balancing our growth. We believe that we can pay these dividends referring to 2022. This analysis is done in a recurring manner. So the challenge is the same, without a perspective of large investments, the expectation is continuing, the maintenance of the payment of dividends, the way that we're doing it now in 2022.

Unidentified Analyst

Thank you very much for the response.

Carlos Cyrino

Thank you, Julia. Now let's go to the next question, Itau BBA, Victor Cunha. Victor, go ahead and ask your question.

Victor Cunha

Hello, everyone. Hello, Cyrino. Hello, Estrella. Thank you for the call. I would like more details about the comment about the payment of -- how are these dividends paid? Is it the perception of risk. What do you take into account? If you could please elaborate a bit more on this topic.

Carlos Cyrino

Just one minute, Victor. Gustavo's computer has -- we're waiting for the computer to adjust itself. Just one second. And you'll have your answer.

Gustavo Estrella

Hello, can you hear us?

Carlos Cyrino

Yes, just one minute because Gustavo has lost his connection. He is back again. Could you repeat the question?

Victor Cunha

Hello, Estrella. In the beginning of the call, you said that CPFL would no longer be in the process of [indiscernible] if you could elaborate this point and about the payment of extraordinary dividends referring to last year. Is it a perception of risk of the assets? What is the base of CPFL about this decision?

Gustavo Estrella

Well, in relation to the dividends, one thing has nothing to do with the other. We had a perspective of following up with the [indiscernible]. So we paid out these dividends at this time. So Victor, I think the idea is to evaluate internally our strategy of growth and new investments. Not only [indiscernible] but any other large asset at this moment and evaluate the scenario, the risks, the moment, and the certainty of each one of the processes. I think it's natural to evaluate that at this moment of uncertainty, especially in this segment of distribution in certainty about renovation, so we decided not to follow up in this process. And once more re-evaluate how to follow this inorganic process of growth from now on.

This is valid for transmission, distribution, given the regulatory scenario. And transmission with all the channels that we've found of being competitive in the auctions. I think this reflection is very important. And the idea is to follow with a dividend payments of 2022, and I think the discussions, the internal, strategic discussions that we have is the time to reflect, understand the alternatives that we have and follow as we always had, always getting assets with controlled risk, and that give us profit. That is the goal, based on finances, but also looking at the risks and opportunities that we have for each asset that we acquire.

Victor Cunha

Thank you very much.

Carlos Cyrino

Thank you, Victor. I don't see any other question here. I will then end the session of questions and answers. If there is any question or any doubt, we are available to answer anything later on.

Before giving the final words to Gustavo, and to end, I would like to remind you that next Tuesday, we will do a Investor Education. We're going to bring regulatory topics for distribution, and you can still register. It's going to be in Sao Paulo near Faria Lima with [Jotacar] (ph). I think it will be very easy for you to go there and listen to this. And those who have not responded the satisfaction research, this always helps us to improve more and more.

So I'm now going to give the floor to Gustavo for the final considerations and the closure of this event.

Gustavo Estrella

Well, as my final comments, I would like to thank the participation of each one of you, and once more say that this is one more good results delivery in the quarter, we're firm in our investment plan BRL5.2 billion, but always with a focus on distribution and transmission, always going after operational efficiency, maintaining a balance between growth and dividend payment, and this is the plan of always taking robust and stable results to everyone.

So thank you. I thank you all for your presence and I wish you a wonderful day.

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