CPFL Energia S.A. (CPL)

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CPFL Energia S.A. (CPL)

Q2 2013 Earnings Call

August 15, 2013 1:00 pm ET

Executives

Wilson Pinto Ferreira - Chief Executive Officer

Analysts

Vinicius Canheu - Crédit Suisse AG, Research Division

Presentation

Operator

Good afternoon, and thank you for waiting. Welcome to CPFL Energia Second Quarter 2013 Earnings Conference Call. Today with us, we have Mr. Wilson Ferreira Junior, CPFL Energia's CEO and other executives of the company. This conference call is broadcast live on the Internet at CPFL Energia Investor Relations website at www.cpfl.com.br/ir, where this presentation is available for download. [Operator Instructions] This call is being recorded.

Before proceeding, let us mention that forward-looking statements made during this conference call regarding CPFL Energia business prospectives, forecasts, operating and financial targets are based on the beliefs and the assumptions of the company's management, as well as on information currently available.

Forward-looking statements are not a guarantee of performance and involve risks, uncertainties and assumptions as they refer to future events that depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors can also affect the future performance of CPFL Energia and lead to results that may differ materially from those expressed in such forward-looking statements.

Now I'll give the floor to Mr. Wilson Ferreira Junior. You may begin.

Wilson Pinto Ferreira

Thank you. Good afternoon, everyone, analysts, investors, all of you with us in this second quarter results conference call. We have a presentation. Let me begin on Page #3 with the highlights of the second quarter. We still have growing energy sales outside the group. All in all, activities, generation, conventional generation, renewable energy, we are growing and we will be talking about this.

Energy sales were up 2.6% in the concession area. We've had some important events which have had an impact in the second quarter, and they correspond to the conclusion of the third cycle of tariff review of the group.

Let me remind you, the 2 largest distributors, the CPFL Leste Paulista and RGE, that have 5-year cycles of tariff review, they have concluded the cycle now in the second quarter, which has impacted our results. We've had the IPO of CPFL Renováveis of the last July 19. The acquisition, which was already disclosed during the IPO of Rosa dos Ventos wind farms 13.7 megawatts using part of the inflows from the IPO already.

Also disbursement from the sector fund, CDE, BRL 125 million, which was dispersed in the second quarter. We continue very strong in our investments. CapEx was BRL 498 million according to our growth plan, and because of the results we are reporting, we declared interim dividends related to the first half of 2013 in the amount of BRL 363 million.

Also we've maintained our rating AA+ on national scale, with a stable outlook by Standard & Poor's. This is for CPFL Energia. This is relevant information at this time. And also we have received a few awards. One was from Exame magazine, the Largest and Best Companies. Then also Abradee Awards, which recognizes the best companies in Brazil. And ISTOÉ Dinheiro magazine, where we were considered one of the 50 companies that do good in the Management category.

Now opening the call, I'd like to talk about energy sales first because it is something very relevant to evaluate the performance of our companies, beginning from sales in the concession area by our distributors. As you can see on the top left, we've grown 2.6%. This is the growth we are reporting. This is the stabilization of the captive market, but also great migration of consumers from the captive to the free market.

So if you look at this behavior measured by the energy consumption in the USD tariff, we've had a growth of 11.1%. It's also relevant to talk about sales by consumption segment. We will further elaborate on that during our presentation referring to the improvement in the evolution of the industrial segment. It was growing approximately 1% per quarter, but in the last quarter, it's grown 2.7%, so it's one of the highlights in terms of additional volume in our concession areas. Let me also remind you we've had important growth in the residential area, 4.2%.

Now in the lower left chart, total energy sales, not only captive which we've already reported, but also commercialization, conventional generation outside the group, growing 25.4% quarter-on-quarter and highlight to the behavior of CPFL Renováveis.

Now a few projects have already started their operations, we will further elaborate on that. We've had a growth of 63.4%. On the right-hand side, we have the performance in the concession area. CPFL is slightly below the growth of Brazil. Brazil is growing very fast in the northeast, but we can see that in the southeast where the regional growth was 1.2%. Our 7 distributors have grown 2.3%.

Actually, it is showing the -- how vibrant our company is. In the south, where we have a more industrialized region with exports to Argentina, right now a bit restricted, but still, we've had a growth of 4.4% at RGE compared to a growth of 5% in the GDP of the south of Brazil.

Now Slide #5 is quite important. As we usually do, we make a comparison between the IFRS reported value on the first column, and next, our management results. It makes it easier for our analysts to conduct their analysis. You can use this incorporating -- because it incorporates a few effects that I will now explain.

Read the rest of this transcript for free on seekingalpha.com