Companhia Paranaense de Energia (COPEL) (ELP)

ELP 
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Companhia Paranaense de Energia (ELP)

Q1 2013 Earnings Call

May 17, 2013 9:00 am ET

Executives

Luiz Eduardo da Veiga Sebastiani - Chief Financial & Investor Relations Officer and Investment Portfolio Manager

Vlademir Santo Daleffe - Chief Distribution Officer

Analysts

Marcelo Britto - Citigroup Inc, Research Division

Antonio Junqueira - Banco BTG Pactual S.A., Research Division

Lilyanna Yang - UBS Investment Bank, Research Division

Sergio Tamashiro - Banco Safra SA, Research Division

Presentation

Operator

Good morning, and thank you for waiting. Welcome to the Companhia Paranaense de Energia COPEL's Conference Call for the presentation of the first quarter 2013 results. [Operator Instructions] Before we proceed, I would like to say that any statements made during this conference call involving COPEL's business outlook or financial and operating forecasts and targets constitutes the beliefs and assumptions of the company's management and the information currently available. Forward-looking statements are not guarantees of performance and involve risks, uncertainties and assumptions given that they refer to future events and thus, are dependent on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors could come to affect the future performance of COPEL and lead to results that are materially different from those expressed in said forward-looking statements.

Participating on this call this morning are Mr. Luiz Eduardo Sebastiani, CFO and [ph] IR; and Vlademir Daleffe, Distribution Officer of the company. This presentation, which will be delivered by the management of COPEL, can be followed on the company's site, www.copel.com/ri.

And now we would like Mr. Luiz Eduardo Sebastiana to take the floor. Mr. Sebastiani, you have the floor.

Luiz Eduardo da Veiga Sebastiani

Good morning, and welcome to the COPEL's conference call presenting the first quarter 2013 earnings. I would like to thank you, all, for tuning in, to listen to our call and say that this is very important to us, and this is a very important moment for us, too.

Unfortunately, our CEO is not present today. He is traveling, but we have with us a very important person also, Vlademir Daleffe, who's our Distribution Officer, who took this job at the beginning of April. And he has already -- he is a career employee of COPEL. He's been with COPEL for a long time, and he was Distribution Officer in 2010, and came back to this position with a mission to align our distributor and assigned by our CEO to align our distributor with the new cost reality.

So this is very important to COPEL in our situation [ph] between the financial department and reality, in the distribution company with so much -- so many challenges.

Talking about the highlights of the first quarter, we reported a net income of BRL 399 million, as you can see on our slide, which is 25% higher than the first quarter of last year. So year-on-year, we had a good growth, 25%.

And much of this income is a result of the strategy adopted by our subsidiary, COPEL Geração e Transmissão, COPEL GeT, which allocated the energy which was available in spot marketing, resulting in a revenue of BRL 390 million from the spot market and the more consolidated [ph] situation. And the first quarter also was important for the increase of virtags [ph] energy, which was led to the cost of [indiscernible] . And also this increase in prices led the government to issue the Decree 7945 which held as an objective compensate [ph] through the transfer of resources from the energy development account for the energy and charges relative to the current situation of the electric sector. COPEL received BRL 204 million to offset these costs from the first quarter. We would also like to say something about COPEL's commitment to cost control since it is starting to address the first results that it delivered in the first quarter. Now let's detail these facts. On the first slide, we can see that we have a defined vision by the company. And now the finance department with the company and COPELs distribution, we are stringently controlling costs.

So COPEL GeT has, in the first quarter of 2013, gone to the spot market's one contracted energy, 9% of our offshore energy, guaranteeing a revenue of BRL 390 million. But as described on Slide #4, besides the effect of this allocation, the average price of energy commercialized by COPEL GeT increased considerably as from the beginning of 2013.

And this increase occurred in view of the strategy adopted by the company of reallocating energy, which was contracted in the regulated environment to the free environment, which offers better and more attractive margins. And also because of the average price of sales, this leads to the reallocation to the free market for the energy allocated in 2005 and 2012, about 900 megawatts on average.

And also, we can see here the actual level of prices should keep steady in the next few years, reminding that the amounts shown are current until March and will be readjusted according to inflation.

Regarding the contracting of energy, our focus continues in prioritizing allocation to the free market. We are focused now on the allocation of available energy in the next few years. And the commercialization that we do will always be through auctions.

On Slide 5, we can see the CDE results or funds transfer. And as we have mentioned, the government issued Decree #7945, which designed the transfer of energy development, the current funds, to control the exposure to spot market, limited to the amounts not included in the currency allocation; and secondly, to cover the system service charges, ESS, which refer particularly to the dispatch of thermal units that are outside of the order of priority.

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