Edp S.a. · EURONEXT:EDP
Edp — Energias de Portugal — Non-Deal Roadshow (November 2019)
40 slides from Edp's roadshow presentation, November 2019
Slide 1: EDP Networks Brazil
edp Networks Brazil November 2019
Slide 2: Disclaimer
This document has been prepared by EDP - Energias de Portugal, S.A. (the "Company") solely for use at the presentation to be made on this date and its purpose is merely of informative nature and, as such, it may be amended and supplemented. By attending the meeting where this presentation is made, o
Slide 3: Agenda
Agenda 1 | Context 2 | Distribution 3} Transmission
Slide 4: Context
Agenda 1 | Context
Slide 5: EDP business platforms and key figures
Renewables Wind Solar Hydro Networks Distribution Transmission Client Solutions & Energy Management Clients Trading Thermal Key figures (1) : Installed Capacity | 28.1 GW EBITDA | €3.3 Bn Net Profit | €0.5 Bn Employees | 11.6k Customers | 9.8 Mn % Weight EBITDA as of YE2018 1 All figures reported as
Slide 6: ~€0.6 Bn annual CAPEX in Networks
Growth, 2019-22 ~€0.6 Bn annual CAPEX in Regulated Asset Base to increase EBITDA to grow driven by investments in Networks 15% Brazil CAPEX, € Bn RAB1, € Bn EBITDA, € Bn2 2.4 6.0 1.1 5.2 0.7 0.85 ~40% ~25% of total CAPEX 0.6 1.1 2019-22 2018 2022 2018 2022 Note: figures as of Mar-18 (at Strategic Up
Slide 7: Distribution
Agenda 2 | Distribution
Slide 8: Distribution concessions in Brazil
1.5 Mn Concession State qualitative data clients Concession term: 11th highest nominal household Espírito income per capita in Brazil Santo July 2025 R$ 1,295 2018* 9.8 Revision: every 3 years 7th highest HDI in Brazil TWh Net RAB: R$2,581 million 0.740 2010* 1.8 Mn Concession State qualitative data
Slide 9: Distribution revenue components
Energy acquisition With limits of under and overcontracting, as well as penalties Component A Transmission “Pass-through” Sector levies Pass-through of regulated levies RAB remuneration Regulatory WACC x RAB Component B “Regulated Reintegration Annual depreciation rate x RAB revenues” Operational co
Slide 10: Real gains of 35-45%
R$ Mn REAL GAINS of + 35-45% +25% +35% +40% 843 2018 Regulated Market Efficiency 2022 Revenues 1 2 3 10
Slide 11: EBITDA gain drivers
Invest. in the period: R$ 1.8 bi Net Base x WACC Capital remuneration 2x Regulatory depreciation Already 1 Net RAB Growth: + 36% ensured Gross Regulatory x Dep. Rate EBITDA gains Base depreciation Growth in the volume of 2 Reduction in gap of losses Economy distributed energy In a good in relation t
Slide 12: Investments
1 R$ Mn 2,423 R$ Mn 2,581 ~2x ~2x Capex/ 2,015 Capex/ 1,544 1,667 RRQ¹ RRQ¹ 1,591 1,221 1,029 1,297 1,050 543 671 554 582 480 460 2nd PTRC2 3rd PTRC 4th PTRC 5th PTRC Next 5th PTRC 6th PTRC 7th PTRC 8th PTRC Next 2007 2011 2015 2019 Cycle 2007 2013 2016 2019 Cycle Investments 19.0% 15.0% 14.0% 15.0%
Slide 13: Credit to be received at end of concession
1 R$ Mn 953 EDP SP and EDP ES have a credit to be received at the end of the concession 257 related to investment in fixed assets 696 that were not recovered 632 20 42 51 These financial assets are valued based 27 62 on Asset Replacement Value (VNR), which is revised every 3/4 years based on RAB In
Slide 14: Peer comparison of investments
1 (%) 15.0 10.0 4.0 4.0 4.6 2.0 0.3 0.4 0.6 EDP ES DisCo 1 EDP SP DisCo 2 DisCo 3 DisCo 4 DisCo 5 DisCo 6 DisCo 7 Careful evaluation of investments concluded Consistency of technical, regulatory and accounting basis Previous inspection of Fixed Assets in Service Training of business teams Harnessing
Slide 15: ANEEL regulatory WACC revision
1 8.09% WACC to be defined: annual update 8.09% WACC to be defined: annual update WACC already defined ANEEL is currently revising the Regulatory WACC: the public hearing is still opened and companies can send contributions until December 2nd. The agency plans to update the WACC annually, and use th
Slide 16: Total losses
2 8.89 8.73 8.43 8.05 7.03 Total 5.51 5.50 5.59 Losses 5.62 4.06 [%] 3.38 3.23 2.84 2.43 2.97 2016 2017 2018 Sep-19 ANEEL target (Dec-19) Technical losses Non-technical / Commercial losses Increase in 13.88 12.97 9M19 mostly 11.94 12.36 due to 11.42 temperature Total 8.60 effect 8.30 7.53 7.72 7.06
Slide 17: Quality indicators vs peers
2 21.84 22.83 17.66 13.59 10.75 6.61 4.68 4.71 2.24 0.87 -1.60 -0.98 -5.26 -9.29 -11.08 -12.79 EDP ES EDP SP (1st) (2nd) 17 Source: Abradee
Slide 18: Loss reduction initiatives
2 Inspection, with insourcing of inspection activities Telemetering for clients with high levels of demand Meter Replacement for more advanced ones Project “Boa Energia”, reinforcing engagement with communities Centralized Metering system Public Lighting Recount to prevent unbilled energy 18
Slide 19: Collection results
2 R$ Mn (+) Revenue (fine/interest 125 114 + fee to reconect) (+) Tariff recognition 62 51 (-) Opex collection -28 -20 (-) PECLD1 -85 -91 Result +74 +54 1 Provision on estimated losses for doubtful accounts 19
Slide 20: Efficiency and productivity initiatives
3 Centralized dispatch FSA project Productivity management Tree pruning truck Optimization of readings’ route New RFP New RFP for Call Center New RFP for service agencies Video customer support 20
Slide 21: R&D program
3 1 1 R&D EDP - EDP Brasil Distribution Research and Development Program 21
Slide 22: Celesc stake and peer multiples
Acquisition of a stake in Celesc in 2018 Not only a financial position: 3 seats in the board (out of 11) and 1 seat in executive position Strategic partnerships in Santa Catarina Average 2.5x 2.3x 2.2x 2.1x 1.6X 0.8x Celesc Eletropaulo CPFL Celg-D AES Sul ¹ Note: qualitative data extracted from the
Slide 23: EBITDA improvement levers
OPEX PECLD Others Market Losses Regulated EBITDA EBITDA Telemetering Positioned in Productivity Debt Metering shield regions with increase negotiation Irregularity growth Operation Routine inspections potential optimization collection Meters Free consumers Automation automation replacement retention
Slide 24: Transmission
Agenda 3} Transmission
Slide 25: Transmission lots
Espírito Santo Lot 24 113 Km and 1 substation Operational start-up: Dec/18 Maranhão 11 Lot 7 123 Km and 1 substation 7 Under construction Maranhão Lot 11 203 Km and 1 substation Under construction 24 18 São Paulo - Minas Gerais Lot 18 375 Km Under construction 21 Q Santa Catarina* Lot 21 484.5 Km an
Slide 26: Transmission business characteristics
Regulated by the Federal Government, with stable track record Concession attributed through auctions 30-year contracts, with Allowed Revenue (RAP) adjusted by inflation Payment based on availability, regardless of the transported energy volume Low counterparty risk, as Allowed Revenue (RAP) is paid
Slide 27: Auction winners and competitors
104 3,844 3,740 CPFL 11,723 Neoenergia Engie 867 3,948 102 6,806 1 2 3 4 Equatorial Energisa 26,838 CTEEP Alupar Sterlite 2,645 8,461 5,942 2,780 4,924 2,086 State grid 1 2 3 4 5 6 Brookfield 4,470 Pátria 2,003 2,467 RAP/CAPEX ANEEL 1 2 27
Slide 28: Capex and construction ahead of schedule
R$ Bn in nominal terms 3.9 20.0 Auction 13/2015 in 12.4 months 1.4 2nd stage Average 2.5 15.5 12.6 Auction 05/2016 in months Total Capex Completed Remaining up to 2022 by Sep-19 investment Average ¹ Aneel Transmission Projects Monitoring Report 28
Slide 29: RAP and start-up schedule
Licensing COD RAP Jan Jan Jan Jan Jan Jan Jan Jan (R$ Mn)¹ 2018 2019 2020 2019 2020 2021 2022 2023 Feb Oct Dec Aug 24 100% Jul Feb Apr Aug 72 16% Feb Feb Aug Aug 33 78% Oct Feb Mar Aug 222 37% Oct Feb Sep/Dec¹ Aug 186 43% Jun Dec 46 583 COD ANEEL Additional Licensing EDP Licensing ANEEL COD EDP Anti
Slide 30: Infrastructure funding sources
16.6% In 2017, BNB and the capital markets became attractive sources for infrastructure funding Post-2017, there was major growth in the infra debentures 7.5% 5.0% market (+ 6x Net Equity of the Funds) 2.9% 2016 2017 2018 2019 - YTD 73 Infrastructure Debentures Total NE BNB 24.1 # Funds 62 BNDES TJL
Slide 31: 1 Considering default bônus.
1 Considering default bônus. 31
Slide 32: Transmission EBITDA evolution
579 502 117 23 2019e 2020e 2021e 2022e Regulatory RAP O&M revenue Interest EBITDA EBITDA IFRS Lots 11 and 21 Lots 07, 18 start-up and Q start- up 1 Real RAP | 2 Example using lot 24 (Espírito Santo) as reference 32
Slide 33: Construction, funding and transmission
(R$ Mn) 3.0 2.5 Construction ahead of schedule 2.0 Funding optimization 1.5 Transmission 1.0 0.5 Distribution 0.0 2016 2017 2018 2019 2020 2021 2022 1 Source Bloomberg, Adjustad for Component A Offsetting Account – CVA and Book Value 33
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Slide 35: Corporate structure
51.2% 100% 100% 23.6% 100% Generation Retail and companies trading companies 35
Slide 36: EBITDA by business
7% 5% 34% Networks 23% 37% Networks 34% 1% 14% 24% 21% Distribution Transmission Thermal Hydro Retail 36
Slide 37: Cost of equity and debt formulas
𝑘𝑒 = 𝑟𝑓 + 𝛽 𝑟𝑚 − 𝑟𝑓 + 𝑟𝐷 𝑘𝑑 = 𝑑𝐵𝑅 + 𝑐𝑒𝐵𝑅 𝛽• 𝑑𝐵𝑅• 𝑟𝑖 − ∆𝑟𝑓 ;• • 𝑟𝑚 − ∆𝑟𝑓 • • 𝐶𝑃𝐼 𝑑𝐵𝑅• 𝑟𝑓• 𝑟𝐷 • 𝛽 • 37
Slide 38: Tariff reset formula
For the tariff reset we have 2 components: Component A and Component B. RR = VPA + VPB RR = Requested Revenue VPA = total amount of the component A VPB = total amount of the component B The component A is a “pass through”. It includes the expenses with energy purchase (energy supply), transportation
Slide 39: Modelling Component B
The market usually does not model the Component A, as it should be net = zero. It commonly models the component B considering: Administration, Operation and Maintenance Costs = Operational costs adjusted by inflation+ Non-recoverable expenses: historical % for projected losses x Estimated revenue An
Slide 40: IRR and WACC for transmission
IRR (1) WACC* Regulatory: without margin Regulatory with Margin Note: (1) Return Rate – “Goal Seek” CapEx without Margin (2) CapEx with Margin (Difference) (2) Without margin apropriate in the construction (all returns alocated as funding). (+) Financial Returns - Project IRR (+) Financial Returns -
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