Companhia Paranaense de Energia (COPEL) (ELP)

ELP 
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Companhia Paranaense de Energia (ELP)

Q2 2013 Earnings Call

August 16, 2013 10:00 am ET

Executives

Luiz Eduardo da Veiga Sebastiani - Chief Financial & Investor Relations Officer, Investment Portfolio Manager and Member of Disclosure Committee

Vlademir Santo Daleffe - Chief Distribution Officer

Solange Elizabeth Maueler Gomide

Analysts

Maria Carolina Carneiro - Santander, Equity Research

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

Sandra L. Boente - HSBC, Research Division

Lilyanna Yang - UBS Investment Bank, Research Division

Felipe Leal - BofA Merrill Lynch, Research Division

Fabiano Custodio

Presentation

Operator

Good morning, and thank you for waiting. Welcome to COPEL Paranaense Energy Company conference call to present the first half of 2013 results. [Operator Instructions]

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

Forward-looking statements are not a guarantee of performance. They involve risks, uncertainties and assumptions as they refer to future events 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 COPEL and lead to results to differ materially from those expressed in such forward-looking statements.

In this conference call, we have Mr. Luiz Eduardo Sebastiani, Finance and Investor Relations Officer. Presentation by the company management is available at COPEL website, www.copel.com.br/ri.

Now I'll give the floor to Mr. Luiz Eduardo Sebastiani.

Luiz Eduardo da Veiga Sebastiani

Good morning, everyone, and welcome to our first half of 2013 earnings conference call.

First, let me thank you all for participating in this conference call and highlight that it is always a great pleasure and it is important for the company to talk to those of you who track our company.

Unfortunately, our President, Mr. Lindolfo Zimmer, will not be with us today because right now, as we speak, the official inauguration ceremony of Cavernoso II Small Hydropower Plant is taking place, although the plant has already started commercial operations since July. It is worth reminding you that Cavernoso Small Hydropower Plant has 19 megawatts of installed power.

Talking about the highlights in the first half, we reported BRL 650 million net income, which is 29% higher than the first half last year. A large portion of this net income is the result of the energy allocation strategy that we adopted in our subsidiary, COPEL Generation and Transmission, in the first quarter, also our efforts to control costs, which has contributed for a better result for the company.

Let me also remind you that, today, we have with us our Distribution Director, Engineer Vlademir Daleffe. And also with us is superintendent of Investor Relations, Felipe Pessuti, our Manager; also our Accounting Officer, Adriano Fedalto [ph], our controller in stakes and participation; our Finance Manager, Carlos Lúcio. So we have our team of executives to answer your questions.

So I was talking about our net income. And also I want to speak about the transfer of funds from the CDE funds. As you all know, the last few months were marked by higher energy costs, which reflected in the costs of all distributors and led the authorities to adopt the Decree 7945, to use CDE economic development funds to offset through this transfer of energy -- of funds the higher costs of energy and charges incurred by the power industry.

During the first half, approximately BRL 570 million were approved for COPEL in order to offset these higher costs of energy and charges referring to monthly quota, and BRL 221 million referring to the good results of Portion A variation compensation accounts, which were approved during the tariff review of June 24. So talking about CDE funds related to an advance of amounts approved by ANEEL to cover for discount to tariff from May to November, in compliance with Resolution No. 1719 (sic) [ 1711 ] of May 29, 2013. ANEEL authorized an average adjustment of 9.55% in COPEL Distribuição rates and postponed BRL 256 million, which will be adjusted and included in the next tariff review.

Finally, we want to highlight the acquisition of 7 wind farms and a stake of 30% in Baixo Iguaçu Hydropower Plant, which will be built in Paraná. We will give you further details further on.

Now fourth slide to give you more details about the transfer of CDE funds. As we mentioned, the government issued Decree 7945, which calls for the transfer of CDE funds to cover for costs that came from exposure to short-term market, limited to the amount not met by quota allocation; b, hydrological risk of quotas; also System Service Charges - ESS, specifically referring to thermal dispatch out of merit order or for energy safety; in addition to the positive results of CVA, or Portion A variation compensation account, during the tariff review processes in March 2013. So the company received BRL 593 million from CDE to cover for energy expenses and charges, including the BRL 228 million approved in the tax review and received in the end of July, while we report BRL 99 million to be received related to May and June. However, Resolution No. 2701 of July 29, 2013, ANEEL approved BRL 76 million for this period. The difference of BRL 23 million between the amounts reported and the amounts received will be adjusted in the next period. So the amount effectively received in the first half was BRL 570 million, BRL 262 million allocated to offset energy costs and BRL 308 million refer to other charges.

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