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TRANSCRIPT
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Summary
2007 Results
Investment Case CPFL Energia
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CPFL Energia will invest R$ 5 billion in the next 5 years
CPFL Energia’s Estimated Capex
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Summary
2007 Results
Investment Case CPFL Energia
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Competitiveness + Strategic Positioning = Sustainability
CPFL Energia’s investment case combines current portfolio growth…
Current portfolio
Distribution
• Organic growth and market-share leader (13.8%)
• Operational efficiency: outperforming the Reference Company costs
• Gains from acquired companies’ integration
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Private group leader in the distribution market - High market growth
Concession Area Sales – 2007
6.0%1
Brazil5.4%
5.7%
Southeast5.0%
8.3%
South5.3%
CPFL Energia’senergy sales in 2007 had higher growth
than Brazil, Southeast and South
regions2
12.4%
With acquisitions Without acquisitions
Residential6.9%
13.5%
Commercial6.9%
12.5%
Industrial-1.9%4.8%
Rural4.4%
27.7%
Others2.8%
11.1%
TUSD15.2%
17.2%
1) Excluding the acquisition of the additional stake in RGE and the acquisitions of CPFL Santa Cruz and CMS Energy Brasil2) Comparative between CPFL Energia and Southeast and South Regions, considering the distribution companies of each region only14
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Market growth with scale gains and operating efficiency
1) Considers 100% of RGE, except for Concession Area Sales 2) Data basis: Jun 2004 3) Considers 67.07% of RGE
DISTRIBUTION
Gains from acquired companies’ integration
• Organizational restructuring
• Improvement in the quality of services and operational management
• Centralization and optimization of processes: synergy and productivity gains in operational and administrative processes (supply, human resources and infrastructure)
• IT optimization: software’s licenses and support and programming services
• Cost of debt, banking taxes and insurance costs reduction
• Tax credit’s optimization
• Delinquency recovery
1.6 p.p.13.8%0.8%0.8%12.2%Market Share
33,2483
5,411
165,8272
523
IPO – Sep/041
4,282
459
15,332
-
Organic Growth
2,866
350
14,196
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Growth by Acquisition
46,475
6,256
196,749
568
Dec/07
39.8%Concession Area Sales (GWh/year)
15.6%Customers (thousand)
18.6%Distribution Network (km)
8.6%Municipalities (#)
Var. %
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Market growth with scale gains and operating efficiency
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Market growth with scale gains and operating efficiency
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Competitiveness + Strategic Positioning = Sustainability
CPFL Energia’s investment case combines current portfolio growth…
Current portfolio
Generation
Distribution
• High installed capacity growth
• High EBITDA margin
• Long term energy contracted at attractive prices
• Addition of 150 MW in 2008 (+9.4%) and 436 MW in 2010 (+ 25.1%)
• Organic growth and market-share leader (13.8%)
• Operational efficiency: outperforming the Reference Company costs
• Gains from acquired companies’ integration
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Competitiveness + Strategic Positioning = Sustainability
CPFL Energia’s investment case combines current portfolio growth...
• Market share leader: 23%
• Expertise in free market sales and Value Added Services
• Consistent results
Current portfolio
Generation
Distribution
Commercialization
• Organic growth and market-share leader (13.8%)
• Operational efficiency: outperform the Reference Company costs
• Gains from acquired companies integration
• High installed capacity growth
• High EBITDA margin
• Long term energy contracted at attractive prices
• Addition of 150 MW in 2008 (+9.4%) and 436 MW in 2010 (+ 25.1%)
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Captive and Free Market’s Sales Evolution in Brazil
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• 23% market-share
• 91 clients in the free market in 2007
• 17 clients outside the Group’s concession area
• No fixed assets
Commercialization business is CPFL’s key differential
• 2007 EBITDA margin of 35.5%
• 11% of Group’s EBITDA in 2007 (R$ 357 million)
• 13% of Group's Net Income in 2007 (R$ 241 million)
• Expansion of alternative energy source market: biomass and SmallPower Plants
• Diversification and expansion of value-added services (200 projects with sales of R$ 49 million in 2007)
Free Market Energy Sales (GWh)1
1) Including CPFL Sul Centrais Elétricas sales to free market 2) Don't consider eliminations
Marketleader
Success in free market
Contribution to the Group’s results2
Growth prospects
Operations based on competitiveness and sustainability
2004 2006
3,372
9,334
2005
438
7,120
2007
8,951
2004
2007
+ 165%
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Competitiveness + Strategic Positioning = Sustainability
Differentiated Corporate Governance: Level III ADR and Novo Mercado
CPFL Energia’s investment case combines current portfolio growth…
• Market share leader: 23%
• Expertise in free market sales and Value Added Services
• Consistent results
• Differentiated Corporate Governance: Level III ADR and Novo Mercado
• Listed in the main indexes: MSCI, Ibovespa, IEE and others
• Free Float above 25%
• Wide analysts coverage: 25 institutions issuing reports
Current portfolio
Generation
Distribution
Corporate Governance
Commercialization
• Organic growth and market-share leader (13.8%)
• Operational efficiency: outperforming the Reference Company costs
• Gains from acquired companies’ integration
• High installed capacity growth
• High EBITDA margin
• Long term energy contracted at attractive prices
• Addition of 150 MW in 2008 (+9.4%) and 436 MW in 2010 (+ 25.1%)
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43,7%
23,7% 23,9%
9,1%-2,6%-4,6%
IBOVESPA IEE CPFE3
CPFL Energia’s – Daily average volume
CPFL Energia presents a
substantial increasein daily averagevolume in 2007
CPFL Energia : Investment Opportunity
Shares Performance - NYSE1Shares Performance - Bovespa1
+363%
MSCI Indexes
1) Closing price adjusted for dividends
2007 1Q08 2007 1Q08 2007 1Q08
+132%
+160%
7,027
3,506
3,521
2005
17,270
8,128
9,141
2006
+58%
+116%
32,561Total
12,807NYSE - ADR
19,755Bovespa - ON
2007
6,4%
63,9%52,6%
12,0%-4,7%-7,6%
Dow Jones DJ Br 20 CPL
2007 1Q08 2007 1Q08 2007 1Q08
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Dividend Policy: minimum 50% of
Net Income in semi-annual
basis
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Competitiveness + Strategic Positioning = Sustainability
Differentiated Corporate Governance: Level III ADR and Novo Mercado
• Market share leader: 23%
• Expertise in free market sales and Value Added Services
• Consistent results
• Differentiated Corporate Governance: Level III ADR and Novo Mercado
• Listed in the main indexes: MSCI, Ibovespa, IEE and others
• Free Float above 25%
• Wide analysts coverage: 25 institutions issuing reports
Current portfolio
Generation
Distribution
Corporate Governance
Commercialization
• Organic growth and market-share leader (13.8%)
• Operational efficiency: outperforming the Reference Company costs
• Gains from acquired companies’ integration
• High installed capacity growth
• High EBITDA margin
• Long term energy contracted at attractive prices
• Addition of 150 MW in 2008 (+9.4%) and 436 MW in 2010 (+ 25.1%)
New portfolio
Distribution
• Strategic distribution's companies
• “Big bang”
• “Beach head”
CPFL Energia’s investment case combines current portfolio growth with acquisition opportunities
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Spreading proposes consolidation opportunities
Distributors (#) 64
2007
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376.9
Clients (million)
Distributed Energy (TWh)
Distribution Business:
Brazilian market has 64 distribution’s companies
Market Breakdown
The 5 largest groups have 50% of market-share
State-owned companies: 34%
Private Company: 66%
1) 1Q07Source: Aneel
Distribution Market Share1 %
COPEL 6.7%
CELESC 4.8%
EdB 5.7%
ENDESA 4.2%
Ashmore Energy3.7%
Others 33.1%
CPFL Energia 13.8%
Brasiliana Energia 12.1%
CEMIG Companhia Energética 8.6%
Neoenergia7.3%
Distribution Market Share1 %
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Opportunities in distribution business in SP State
Distribution companies in SP State Rationale
São Paulo State Map
Grupo RedeElektro
Eletropaulo
Grupo CPFLBandeirante
• Scale gains, with optimization of infrastructure and administrative and operational processes
• Efficiency gains, with implementation of the CPFL standards
Key indicators – 2007
4,8
3,0
3,7
12,1
Market share
%
3,23,3Grupo Rede
1,42,0Bandeirante
2,02,3Elektro
5,77,1Eletropaulo
Customers
# million
Net Revenue
R$ billion
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29 Source: Atlas de Energia Elétrica do Brasil – Aneel, 2005
Cooperatives of Eletrification Breakdown of Cooperatives by Region
South34%
Northeast33%
Southeast18%
Mid-West14%North
1%
5 states with larger number of
cooperatives
Private Network
• Into CPFL’s concession area there are 35,000 Km of private network (equivalent to 17% of CPFL Energia’s total network)
• Potential investment: R$ 400 million
• Additional amount to the reference company
125 cooperatives in Brazil: SP and RS States concentrate 26% of this market
Opportunities in distribution business: cooperatives and private network
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Competitiveness + Strategic Positioning = Sustainability
Differentiated Corporate Governance: Level III ADR and Novo Mercado
• Market share leader: 23%
• Expertise in free market sales and Value Added Services
• Consistent results
• Differentiated Corporate Governance: Level III ADR and Novo Mercado
• Listed in the main indexes: MSCI, Ibovespa, IEE and others
• Free Float above 25%
• Wide analysts coverage: 25 institutions issuing reports
Current portfolio
Generation
Distribution
Corporate Governance
Commercialization
• Organic growth and market-share leader (13.8%)
• Operational efficiency: outperforming the Reference Company costs
• Gains from acquired companies’ integration
• High installed capacity growth
• High EBITDA margin
• Long term energy contracted at attractive prices
• Addition of 150 MW in 2008 (+9.4%) and 436 MW in 2010 (+ 25.1%)
New portfolio
Distribution
• Strategic distribution's companies
• “Big bang”
• “Beach head”
CPFL Energia’s investment case combines current portfolio growth with acquisition opportunities
Generation
• Existing assets
• New energy auctions
• Alternative sources: SPP and biomass
• Jirau and Belo Monte HPPs
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Generation Companies (#) 1,695
1Q08
108,852Installed Capacity (MW)
Generation Business:
Brazilian market has 1,600 generation companies. The public sector concentrates 70% of these assets
Market Breakdown
The 5 largest groups have 50% of the market
State-owned companies: 70%
Private Company: 30%
Source: AneelMarket breakdown: Acende Brasil
Others 35%
Chesf 10%
Furnas 9%
Eletronorte 9%
CESP 7%Itaipu 7%
Cemig 6%
Tractebel 6%
Copel 4%
AES Tietê 3%
Duke 2%
CPFL Energia 2%
Generation Market Share %
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New HPP’s projects opportunities
Hydroelectric projects qualified by EPE in the last auctions that can be bid by ANEEL in the next New Energy Auctions :
• Higher knowledge about the project
• Better valuation of engineering and environmental risks
• Longer term to analysis and project economic feasibility
CPFL analyses with advance and in details the generation projects that will be bid by ANEEL – main benefits:
93,0Verde River/GOHPP Salto do Rio Verdinho
108,0Verde River/GOHPP Salto
80,0Paraiba do Sul River/RJHPP Barra do Pomba
50,0Paraiba do Sul River/RJHPP Cambuci
350,0Iguaçu River/PRHPP Baixo Iguaçu
65,0Claro River/GOHPP Caçu
90,0Claro River/GOHPP Barra dos Coqueiros
60,0Chopin River/PRHPP São João
53,3Chopin River/PRHPP Salto Grande
45,0Chopin River/PRHPP Cachoeirinha
Instaled Capacity (MW)RiverProjects
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Small Power Plants
Discarded projects because didn’t reach the economic feasibility: high investments, PPA's already signed with unattractive prices or impracticable environmental requirements
It was established partnership to studies and implementation of SPPs in the South Region
Green Field Projects
CPFL has analyzed around 70 SPP’s projects in
Southeast, South and Center-West regions
4 feasible in short term: 76 MW (CPFL’s stake)Technical studies and
enrollment in ANEEL for 10 projects
Feasible projects in the short term are in progress.
The conclusion of the Basic Projects and Environmental Studies is
estimated to 2008, when they will be submitted to the ANEEL’s and
FEPAM’s/IBAMA’s approval
Estimated investment:
R$ 285 million
Technical studies and
enrollment in ANEEL
OK
Basic projects and
environmental studies
(necessary for the previous license)
ANEEL’s and Fepam’s/ IBAMA’sApproval
2008 2008/09
Installation License and construction of the SPP´s
24 months(e)
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Small Power Plants
Existing Assets
Feasibility Studies of Guaporé and Andorinhas
SPP’s repowering:
Addition of 4,2 MWmedium:R$ 5 million/year
CPFL Jaguariúna:9 SPP’s in São Paulo
and Minas Gerais States
SPPs didn’t have assured energy approved by the Government (MME) –they are included in the distribution
Installed capacity: 24,283 MW
Estimated assured energy for this SPPs (according to some studies): around 8.97 MWmedium
ANEEL’s approval expectation: 1H08
Annual estimated generation revenue: R$ 10 million
7.41
5.00
2.41
Forecast
Assured Energy (MWmedium)Installed Capacity (MW)
SPP
5.281.081.18Total
3.780.620.67Guaporé
1.500.460.51Andorinhas
ForecastCurrentCurrent
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Jirau and Belo Monte HPP
2nd largest HPP in BrazilAuction(e): 2H09/2010
2nd HPP in Madeira ComplexAuction: May 12th/08
Belo Monte HPP
State: Pará
Installed capacity: 11,182 MW
Viability Studies: Eletronorte
CAPEX(e): R$ 37 bi
Jirau HPP
State: Rondônia
Installed capacity: 3,300 MW
Assured energy: 1,966.4 MWmedium
Commercial operation (1st turbine): 48 months
Construction period: 90 months
CAPEX(e): R$ 11 bi
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Competitiveness + Strategic Positioning = Sustainability
Differentiated Corporate Governance: Level III ADR and Novo Mercado
• Market share leader: 23%
• Expertise in free market sales and Value Added Services
• Consistent results
• Differentiated Corporate Governance: Level III ADR and Novo Mercado
• Listed in the main indexes: MSCI, Ibovespa, IEE and others
• Free Float above 25%
• Wide analysts coverage: 25 institutions issuing reports
Current portfolio
Generation
Distribution
Corporate Governance
Commercialization
• Organic growth and market-share leader (13.8%)
• Operational efficiency: outperforming the Reference Company costs
• Gains from acquired companies’ integration
• High installed capacity growth
• High EBITDA margin
• Long term energy contracted at attractive prices
• Addition of 150 MW in 2008 (+9.4%) and 436 MW in 2010 (+ 25.1%)
New portfolio
Distribution
• Strategic distribution's companies
• “Big bang”
• “Beach head”
CPFL Energia’s investment case combines current portfolio growth with acquisition opportunities
Generation
• Existing assets
• New energy auctions
• Alternative sources: SPP and biomass
• Jirau and Belo Monte HPPs
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