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ISA CTEEP – 2017 Results 1
ISA CTEEP – 2017 Results 2
ISA CTEEP ANNOUNCES 2017 RESULTS
São Paulo, February 26, 2018 – ISA CTEEP - Companhia de Transmissão de Energia Elétrica Paulista (“ISA CTEEP”, “Company”, B3: TRPL3 and TRPL4), announces its 2017 results. The information has been prepared in accordance with Brazilian Securities and Exchange Commission (CVM) standards and the applicable Accounting Statements Committee announcements (CPCs), and is in accordance with international accounting standards (IFRS) as published by the International Accounting Standard Board (IASB). In addition, the Company announces its Regulatory Results in accordance with the accounting practices accepted in Brazil. The main difference from corporate statements lies in the non-application of ICPC 01 (IFRIC 12). ICPC 01 has material impact on the Financial Statements of the Company and its Subsidiaries, particularly in terms of entries associated with investments in transmission assets, with reflections on the “Financial Assets” and “Property, Plant and Equipment” lines, and changes in the structure and presentation of Earnings Statements. The purpose of the disclosure of Regulatory Results is merely to assist in understanding ISA CTEEP’s business. Operational and financial information is provided in Brazilian Reais (R$). Their grand totals may vary because of rounding. Regulatory Results are audited by independent auditors only at the end of each fiscal year¹.
2017 HIGHLIGHTS
RBSE: validation of the final amount of the RBSE, for a total of R$4.1 billion (Dec/12), and beginning of the Annual Allowed Revenue (“RAP”) receipts in July 2017 (17/18 cycle at R$1.5 billion, with R$823.4 million impact in revenues and R$661.3 million impact in cash in 2017), pursuant to Ministry of Mines and Energy Ordinance No. 120/2017, ex- cost of equity (Ke) in compliance with a temporary court order. Maintenance of the Other Transmission Installations (“DITs”) and respective RAPs: Resolution No. 781/2017 excluded installations under the Company concession from the transfer proposal for DITs from electric power transmission companies to discos. ANEEL Auction 05/2016: Winning bidder for 5 lots, 1 of which in partnership with TAESA. Total projected ANEEL investment of R$3.2 billion (ISA CTEEP share of R$2.2 billion) and total RAP with a discount of R$396.3 million. IENNE Acquisition: Acquisition of IENNE’s remaining shares (75%). The amount of the acquisition was R$101.2 million. IENNE was consolidated into ISA CTEEP’s balance sheet in September 2017 as a wholly-owned subsidiary. Dividends from Subsidiaries: In 2017 R$63.8 million in dividends were received from subsidiaries Evrecy, IE Pinheiros, Serra do Japi and IEMG.
Distribution of Earnings: Changes in the minimum dividend rule to the larger amount between R$359 million and 25% of the net income for the period (IFRS), applicable as from the EGM’s resolution of December 18, 2017. Management proposes the payment of R$585.1 million in dividends to the shareholders for fiscal year 2017, corresponding to R$3.552019 per share for both classes of share with a payout of 43% (125% ex-RBSE). During fiscal year 2017, R$ 500.4 million was distributed to shareholders. Financial: Reduction of the average cost of debt from 11.4% p.a. in Dec/16 to 8.3% p.a. in Dec/17, maintaining Investment Grade rating by Fitch. Awards: named best energy company in Brazil by Exame magazine, and one of the “Best Companies to Work” by Great Place to Work (GPTW). 2018 Tariff Revision: Commencement of Public Hearing (PH) ANEEL No. 41/2017, for inputs on the regulation of the periodic revision of the RAPs for electric energy transmission installations. The PH’s first phase addressed rules for calculating the Regulatory Remuneration Base (“BRR”) and Other Revenues, as proposed in Technical Note No. 118/2017. The second phase of PH No. 41/2017 addressed regulatory operating costs (O&M) pursuant to TN No. 160/2017 and TN No. 164/2017 and (ii) the methodology and criteria for defining the weighted average cost of capital (WACC) for investments remuneration, as per TN No. 161/2017. ISA CTEEP made contributions to the two phases of the PH and awaits ANEEL’s position.
ISA CTEEP – 2017 Results 3
(R$ million) 20172017
ex-RBSE2016
2016
ex-RBSE2017 2016
Net Revenues 2,701.2 1,343.8 7,785.6 1,282.0 1,777.8 951.2
EBITDA 2,059.5 759.2 7,404.8 901.2 1,350.8 488.0
EBITDA Margin 76.2% 54.2% 95.1% 70.3% 76.0% 51.3%
Net Income 1,385.5 489.6 4,949.3 656.9 635.4 245.8
Net Margin 51.3% 36.4% 63.6% 51.2% 35.7% 25.8%
Raiting - Fitch AAA(bra)
Key Indicators Consolidated REGULATORYIFRS
Note: ¹ 2017 regulatory results have not yet been audited and will be reviewed by independent auditors (E&Y) until April 2018. Note: ² the table shows the consolidated net income before the controlling shareholders participation. For the purposes of payout calculation, it is considered Net Income minus participation in investment funds association with the IE Madeira and IE Garanhuns subsidiaries.
ISA CTEEP – 2017 Results 4
SUMMARY ISA CTEEP ......................................................................................................................................... 5 Economic-Financial Performance - IFRS ............................................................................................... 8
Economic-Financial Performance – Regulatory .................................................................................... 15 Investments ...................................................................................................................................... 24
Capital Markets ................................................................................................................................. 26
Attachments ...................................................................................................................................... 27 ▪ Attachment I – Balance Sheet IFRS ......................................................................................... 27 ▪ Attachment II – Income Statement IFRS (R$ thousand) ............................................................. 29
▪ Anexo III – Cash Flow IFRS (R$ thousand) ............................................................................... 30
▪ Attachment IV – Breakdown of Consolidated Debt (R$ thousand) ............................................... 31 ▪ Attachment V – Breakdown of Controlled Affiliates - (R$mil) ....................................................... 33
▪ Attachment VI – Subsidiaries ................................................................................................... 34 ▪ Attachment VII – Regulatory Balance Sheet .............................................................................. 35 ▪ Attachment VIII – Regulatory Income Statement ....................................................................... 37
▪ Attachment IX – Regulatory Indirect Cash Flow ......................................................................... 38 ▪ Attachment X – Regulatory Income Statement for Affiliates IEMadeira and IEGaranhuns (51% ISA CTEEP) ........................................................................................................................................ 39
ISA CTEEP – 2017 Results 5
ISA CTEEP
As one of the leading energy transmission concessionaires in the private sector in Brazil, ISA CTEEP is currently responsible for the annual transmission of about 25% of all electricity produced in the country, 60% of the energy consumed in the Southeast Region and nearly 100% in the state of São Paulo.
Through its activities and its wholly- and jointly-owned companies, ISA CTEEP has a footprint in 17 Brazilian states: Rio Grande do Sul, Santa Catarina, Paraná, São Paulo, Minas Gerais, Espírito Santo, Rondônia, Mato Grosso, Mato Grosso do Sul, Goiás, Tocantins, Maranhão, Piauí, Paraíba, Pernambuco, Alagoas and Bahia.
ISA CTEEP and its subsidiaries have an installed transformation capacity of 65,060 MVA with 18,642 kilometers of transmission lines, 25,795 km of circuits, and 126 substations up to 550 Kv.
The Company adopts market benchmarks such as the Dow Jones Sustainability Index (DJSI) and the Ethos Indicators for Sustainable and Responsible Business for guiding its sustainability initiatives. Since 2011, it has also been a signatory to the United Nations Global Compact, a formal commitment on the part of organizations worldwide for mobilizing actions around ten principles relating to Human Rights, Labor Rights, Environmental Protection and Combatting Corruption.
▪ Shareholding Structure
Controlled by ISA, a multi-Latin linear infrastructure systems company, CTEEP’s investors include Eletrobras, the largest electric energy group in Brazil, and more than 60 thousand individual and corporate shareholders from different countries. Those shareholders with more than 5% of common or preferred shares are highlighted below. Preferred shares are held 76% by domestic investors and 24% by foreign investors.
1.3%
51.9%
46,8%
35.8%
35.4%
28.8%
89.5%
9.8%0.7%
ISA Capital do Brasil Eletrobras Others
Common Shares – TRPL3 64,484,433 Common Shares (39% of total Capital Stock)
Preferred Shares – TRPL4 100,236,393 Preferred Shares (61% of total Capital Stock)
Total Capital Stock 164,720,826 Shares
ISA CTEEP – 2017 Results 6
▪ Corporate Structure
ISA CTEEP’s corporate structure comprises its wholly- or jointly-owned subsidiaries as shown below:
Fully
ConsolidatedEquity Method
Consolidation
IEMG
IE Tibagi (Lot 5**)
IENNE***Evrecy
IE
Pinheiros
Serra
do Japi
IE Aguapeí
(Lot 29**)
IE
Itaquerê(Lot 6**)
IE Itapura(Lot 25**)
Itaúnas(Lot 21*)
IESUL 50% +1
IE
Garanhuns51%
IE
Madeira51%
Aimorés50%
(Lot 4*)
Paraguaçú50%
(Lot 3*)
ERB50%
(Lot 1**)
(*) ANEEL Auction 013/2015 – Part II of 10/28/2016 (**) ANEEL Auction 05/2016 – 04/24/2017 (***) From September 2017
ISA CTEEP – 2017 Results 7
Operating Performance
▪ Operating Excellence
The Brazilian electrical system is formed by some isolated systems and by the National Interconnected System (SIN), which serves approximately 99% of the total system load. The coordination and control of SIN’s electric power generation and transmission installations are the responsibility of the National Electric System Operator (ONS) under the supervision and regulation of ANEEL (National Electric Energy Agency).
The sector’s consolidated regulatory framework is set out under Law 10,848/2004, governing the rules for the functioning and the activities of electricity generation, transmission, distribution and commercialization. Compliance with these rules is subject to ANEEL inspection. ISA CTEEP is remunerated according to the uptime of its assets through the Annual Allowed Revenue (RAP). Consequently, any downtime in its assets may result in reduced remuneration for the Company via a discount from revenue due from operations.
ISA CTEEP is benchmark in the sector in terms of performance and constantly pursues improved levels of efficiency, closely tracking operating indicators. Among these, of particular importance is Expected Energy Not Supplied (IENS), the percentage between total expected energy not supplied relative to all events in the year and total energy demand supplied by the Company.
The Company also adopts world-class benchmarks such as the indicators used in The International Transmission Operations & Maintenance Study (ITOMS) program. ISA CTEEP is the only Brazilian company to be a component of this program - designed to measure the performance of transmission companies in several different countries, assessing their performance in relation to the levels of service and cost. The company is a benchmark in the ITOMS in various aspects, among these, the cost of substations and transmission lines maintenance.
The following indicators summarize ISA CTEEP’s operating performance from 2013 to 2017.
Asset Uptime
2013 2014 2015 2016 2017
Transmission lines Transformers Reactors
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
ISA CTEEP – 2017 Results 8
Economic-Financial Performance - IFRS
▪ Gross Operating Revenue
On September 30, 2016, the amount relating to the existent system (“SE”) installations was recalibrated and booked to the accounts in line with the conditions in MME Ordinance 120/2016 and ANEEL Technical Note 336/2016. This had an effect on Gross Revenue (Remuneration of the Concession Assets) in the amount of R$7,328.5 million in 2016. The explanation for the variation between 2017 and 2016 will not consider this extraordinary impact (ex-RBSE).
Consolidated Gross Operating Revenue ex-RBSE was R$1,554.7 million in 2017, up 7.5% from 2016 “ex-RBSE”, due mainly to a 43.8% increase in revenue from infrastructure.
2017 2016 Δ% 2017 2016 Δ%
Infrastructure 225.1 164.3 37.0% 247.1 171.9 43.8%
Operation and
Maintenance865.2 809.3 6.9% 880.9 835.8 5.4%
Compensation Asset
Concession249.3 239.1 4.3% 400.6 424.7 (5.7%)
Others 29.6 26.9 10.2% 26.1 23.4 11.4%
Total 1,369.1 1,239.5 10.5% 1,554.7 1,455.8 6.8%
Remuneration RBSE
Concession Assets1,495.8 7,318.5 (79.6%) 1,495.8 7,318.5 (79.6%)
Total 2,864.9 8,558.0 (66.5%) 3,050.5 8,774.3 (65.2%)
Gross Revenue
(R$ million)
Company Consolidated
Revenue from Infrastructure - Revenue from the implementation of infrastructure for electricity transmission services under the concession services agreements is recognized when expenditures are incurred.
Consolidated Infrastructure Revenue amounted to R$247.1 million in 2017, up 43.8% from 2016’s R$171.9 million. This was mainly due to the progress in reinforcement projects for replacing transformer banks, upgrading and substitution of circuit breakers and switch gear at the Taubaté, Bauru and Milton Fornasaro substations.
Revenue from Operating and Maintenance Services – In 2017, consolidated Revenue from Operating and Maintenance services amounted to R$880.9 million, up 5.4% from 2016’s R$835.8 million .
The increase is mainly justified by (i) a R$51.2 million positive variation in IGPM/IPCA index from the 2016/2017 to the 2017/2018 RAP Cycles, (ii) an increase in Energy Development Account (CDE) tariffs to free consumers of R$19.4 million, (iii) startup of new projects in the amount of R$8.7 million, offset by (iv) reduction in the prorating of the system surplus of R$28.5 million and (v) a variable share in the amount of R$9.2 million.
Revenue from Remuneration of Concession Assets – Revenue from Remuneration of Concession Assets is recognized at the effective rate of interest on the balance of investments. The effective rate of interest is that which equals future estimated cash inflows over the financial asset’s lifetime and the same asset’s initial book value.
Consolidated Revenue from Remuneration of Concession Assets excluding the RBSE effect amounted to R$400.6 million in 2017, down 5.7% from 2016 ex-RBSE, at R$424.7 million. This is mainly a reflection of the adjustment to the 2017/2018 RAP cycle in the amount of R$91.7 million in 2017, from R$163.2 million in 2016, and the restatement of the financial asset.
Other Revenues - Revenues relate to leasing income from telecoms companies and from maintenance and technical analysis services contracted by third parties. In 2017, these revenues were R$26.1 million, up 11.4% from 2016’s R$23.4 million, due mainly to a 44% increase in technical analysis services rendered to telephony companies.
ISA CTEEP – 2017 Results 9
▪ Deductions from Operating Revenue
Deductions from consolidated operating revenue were R$349.3 million in 2017, taking into account the deferred PIS and COFINS provisions of R$138.4 million for the remuneration of the RBSE concession asset.
In 2016, deductions were R$988.7 million, with the effects of deferred PIS/COFINS provision in the amount of R$814.9 million, generated by the booking of the rights inherent to SE installations, according to the criteria provided in ANEEL Technical Note 336/2016.
▪ Net Operating Revenue
Consolidated Net Operating Revenue in 2017 was R$2,701.1 million, due mainly to the remuneration of the RBSE concession asset in the amount of R$1,357.4 million over the period. Ex- RBSE, the consolidated net revenue for 2017 was R$1,343.7 million, up 5.8% from the ex-RBSE Consolidated Net Revenue for 2016 at R$1,282.5 million.
1,079.0 1,079.01,184.6
2017 2016ex-RBSE
1.343,7
6,503.5
203.1
2016
203.51.172,0
171,7
2017ex-RBSE
7,785.6
1,282.51,357.4
2,714.5
172.5
5.8%
RBSE
Subsdiaries
Company
1,079.0 1,079.01,184.6
2017 2016ex-RBSE
1.343,7
6,503.5
203.1
2016
203.51.172,0
171,7
2017ex-RBSE
7,785.6
1,282.51,357.4
2,714.5
172.5
5.8%
RBSE SubsdiariesCompany
R$ million
ISA CTEEP – 2017 Results 10
▪ O&M and Infrastructure Costs and Expenses
O&M costs and expenses in 2017 were R$498.2 million, up 4.7% from 2016’s R$475.8 million.
The change in costs and expenses mainly reflects the increase in personnel costs and expenses as a result of: (i) the structural change in the work force, which aims at increasing the Company's efficiency; (ii) the collective bargaining agreement in the period; (iii) of the change in accounting criteria for investments in the new projects for expenses that were previously capitalized, with no impact on cash disbursements. The increase was partially offset by the reversal of R $ 26.1 million in contingency expenses.
The reversal in contingencies is due to the higher number of reductions in labor-claims contingencies as a result of labor court decisions that are more beneficial to the Company, for a positive impact of R$13.3 million on results. Civil-law contingencies, in turn, produced a positive impact of R$12.7 million due to the reversal of provisions for legal proceedings arising from favorable legal developments and the reduction of the amounts involved after a prognosis review.
The following table shows the breakdown in O&M costs and expenses for the period:
2017 2016 Δ% 2017 2016 Δ%
Perssonel (291.2) (265.1) 9.8% (302.5) (275.2) 9.9%
Services (15.9) (12.8) 24.3% (17.2) (13.1) 31.3%
Material (123.0) (117.6) 4.6% (130.8) (125.0) 4.6%
Depreciation (8.8) (8.3) 5.8% (9.6) (9.1) 5.9%
Contingencies 26.1 (1.5) (1788.8%) 26.1 (1.5) (1871.3%)
Others (60.5) (52.5) 15.3% (63.3) (51.9) 23.6%
Total (473.2) (457.9) 3.4% (498.2) (475.8) 4.7%
Costs and
expenses O&M
(R$ millions)
ConsolidatedCompany
Consolidated infrastructure costs were R$225.4 million in 2017, up 44.2% from 2016’s R$156.4 million. The change is in line with the increase in infrastructure revenues stemming from the increased execution of reinforcement projects, mainly at the Controlling Company.
2017 2016 Δ% 2017 2016 Δ%
Total (204.2) (149.0) 37.0% (225.4) (156.4) 44.2%
Costs and expenses
infrastructure
(R$ millions)
Company Consolidated
ISA CTEEP – 2017 Results 11
▪ Other Operating Revenues (Expenses)
The other operating revenues (expenses) reported an expense of R$55.0 million, an increase of 96.9% compared to 2016 when the expense was R$27.9 million, mainly due to a provision R$57.2 million for the reversal of Existing System installations pursuant to Article 5 of Resolution ANEEL No. 762/2017. This was partially offset by the result of an advantage in the acquisition of IENNE for the amount of R$5.0 million. In 2016, the amount reflects largely the constitution of the liability to cover a collection from Eletrobras for reimbursement of part of the NI amount worth R$24.4 million.
▪ Equity Income
Equity income in 2017 reported R$124.8 million in revenues, down 53.4% from 2016’s R$267.7 million.
The reduction of the subsidiary IE Madeira results is mainly due to the decrease in net revenue because of the adjustment in RAP 2017/2018 cycle and of the provision for variable parcel (PV), in the amount of R$35.0 million, as a consequence of the delay in starting up the substation, partially offset by positive impact on the financial result, due to the reduction of interest and charges on the debt and reduction in deferred income tax expenses by the revision of the SUDAM benefit effective tax rate.
The drop in subsidiary IEGaranhuns’s results is mainly due to the increase in costs and expenses explained by its first full year in operation, and to the reduction in net revenue as a consequence of the adjustment in RAP 2017/2018 cycle and the negative impact of the tariffs revision (9% drop in RAP). This was partly offset by a reduction in deferred income tax expenses because of the SUDENE benefit review on tax rate.
The amount shown for the Aimorés, Paraguçú and ERB subsidiaries relates to administrative expenses during the pre-operational phase of the projects.
46.9
138.6
207.9
-17.8
2017
12.9
2016
4.2-0.2
267.7
124.8
-53.4%
IE Madeira IENNE/IESUL
IE Garanhuns Aimorés/Paraguaçú/ERB1
(R$ million)
ISA CTEEP – 2017 Results 12
▪ Financial Result
The consolidated financial result amounted to expenses of R$66.2 million in 2017, from R$109.9 million in expenses in 2016.
This variation is mainly a reflection of the non-recurring R$53.8 million reduction in interest and charges from adherence in 3Q17 to the Special Tax Regularization Program – PERT, booked in the “other” line, combined with a reduction in interest and charges on debentures due to the partial settlement, in December 2016, of the 1st issue (2nd series) and the 3rd issue; and the lower average cost of debt, which dropped from 11.4% p.a. in December 2016 to 8.3% p.a. on December 31, 2017.
2017 2016 Δ% 2017 2016 Δ%
Interest Receivable 18.6 42.8 (56.5%) 44.1 68.0 (35.1%)
Monetary (net) (31.8) (34.0) (6.4%) (32.0) (33.9) (5.6%)
Interest and expenses on
loans (103.9) (126.9) (18.1%) (122.2) (143.8) (15.0%)
Others 44.1 (0.0) - 43.9 (0.3) -
Total (73.0) (118.2) 38.2% (66.2) (109.9) (39.8%)
Financial Result
(R$'million)
Company Consolildated
▪ Income Tax and Social Contribution The Company sets aside a monthly provision for income tax and social contribution payments against net income on an accrual basis. The Controlling Company and subsidiary IENNE are taxed according to the real profit regime while the other operational controlled companies (IEMG, IE Pinheiros, Serra do Japi and Evrecy) are taxed according to their presumed profit. Results from the implementation of infrastructure for electricity transmission services and remuneration of the concession asset (ICPC 01) are recognized on an accrual basis and taxed on a cash (effective receipt) basis, in accordance with the tax legislation. Consolidated income tax and social contribution generated an expense of R$595.6 million in 2017, reflecting the constitution of deferred income tax and social contribution of R$461.5 million due to the restatement of the financial asset associated with accounts receivable from RBSE, which will be included into the taxable base as they are effectively received. Starting in July 2017, the Company began paying IR/CSLL (current) on RBSE revenues. The effective rate in 2017 was 30%.
In 2016 IR/CSLL expenses were R$2.333.9 million, due mainly to the constitution of R$2,211.2 million in provision for deferred IR/CSLL, reflecting the impact of the booking of the RBSE.
ISA CTEEP – 2017 Results 13
▪ Net Income Net Income in 2017 was R$1,385.5 million, due to the R$895.9 million impact from remuneration of the RBSE concession asset. Ex this effect, net income would have been R$489.6 million, down 25.5% from 2016. This is mainly due to the drop in equity income results and the provision for the reversal of discontinued RBSE installations, partly offset by the non-recurring effects of adherence to the PERT and contingencies reversal.
656,9 489,6
656,9
2016ex-RBSE
2016
4,292.4
2017ex-RBSE
895.9
2017
4,949.3
1,385.5
489,6
-25,5%
RBSE
▪ EBITDA and EBITDA Margin
In accordance with ICVM 527/12, Consolidated EBITDA in 2017 was R$2,059.5 million and the margin was 76.2%. Excluding the remuneration from the RBSE concession asset and the provision for discontinued installations, EBITDA was R$759.2 million in 2017, with 54.2% EBITDA margin. The 15.8% drop in EBITDA ex-RBSE from 2016 reflects the poorer performance of subsidiaries IE Madeira and IE Garanhuns.
(R$ million)
ISA CTEEP – 2017 Results 14
2017 2016 2017 2016
Net Income 1,365.5 4,932.3 1,385.5 4,949.3
Income tax and social contribuition 586.9 2,324.1 595.6 2,333.9
Financial Results 73.0 118.2 66.2 109.9
Depreciation and Amortization 11.4 10.8 12.2 11.6
EBITDA ICVM 527/12 2,036.7 7,385.4 2,059.5 7,404.8
EBITDA Margin ICVM nº 527/12 80.5% 97.4% 76.2% 95.1%
RBSE 1,300.2 6,503.6 1,300.2 6,503.6
EBITDA ex-RBSE 736.5 881.8 759.2 901.2
Margem EBITDA ex-RBSE 59.9% 81.7% 54.2% 70.3%
EBITDA
(R$ million)
Company Consolidated
ISA CTEEP – 2017 Results 15
Economic-Financial Performance – Regulatory
The Company began to receive RAP receivables from the RBSE according to the conditions of Ordinance 120/2016 and TN 336/2016.
▪ Gross Operating Revenue – Regulatory
In 2017, Consolidated Gross Operating Revenue was R$2,039.4 million, up 85.5% from 2016’s R$1,099.5 million. The increase is due to the R$823.4 million impact on RAP because of the July 2017 commencement of RBSE receipts as provided in Ordinance 120/2016 and TN 336/2016. Revenues in 2017 were also affected by RAP 2017/2018 adjustment and the entry into operation of new investments in reinforcements generating R$49.0 million in additional RAP in 2017.
2017 2016 Δ% 2017 2016 Δ%
The electrical
Interconnection
Revenues
1,034.1 931.5 11.0% 1,189.9 1,076.1 10.6%
RBSE 823.4 0.0 - 823.4 0.0 -
Others 29.6 26.9 10.2% 26.1 23.4 11.4%
Total 1,887.1 958.4 96.9% 2,039.4 1,099.5 85.5%
Gross Revenue
(R$ million)
Company Consolidated
▪ Deductions from Operating Revenue – Regulatory
Deductions from operating revenue were R$261.5 million in 2017, up 76.4% from 2016’s R$148.3 million. This was mainly due to PIS and COFINS and sectoral charges of R$76.2 million associated with the RAP from the RBSE, which billings began in July 2017.
ISA CTEEP – 2017 Results 16
▪ Net Operating Revenue –Regulatory
Consolidated Net Operating Revenue in 2017 was R$1,777.8 million, up 86.9% from 2016’s R$951.2 million. This was mainly due to the beginning of the receipts flow from RBSE in July, for an impact of R$747.2 million in 2017. Net Revenue also increased due to the RAP 2017/2018 adjustment and startup of new investments.
820.7891.4 891.4
130.5139.2 139.2
2016
951.2
747.2
2017ex-RBSE
2017
1,030.6
1,777.8
86.9%
RBSE SubsidiariesCompany
(R$ million)
ISA CTEEP – 2017 Results 17
▪ O&M Costs and Expenses – Regulatory
O&M costs and expenses ex-depreciation in 2017 were up 3.0% from 2016, reaching R$ 483, million.
The change in costs and expenses mainly reflects the increase in personnel costs and expenses as a result of: (i) the structural change in the work force, which aims at increasing the Company's efficiency; (ii) the collective bargaining agreement in the period; (iii) of the change in accounting criteria for investments in the new projects for expenses that were previously capitalized, with no impact on cash disbursements. The increase was partially offset by the reversal of R $ 26.1 million in contingency expenses.
The reversal in contingencies is due to the higher number of reductions in labor-claims contingencies as a result of labor court decisions that are more beneficial to the Company, for a positive impact of R$13.3 million on results. Civil-law contingencies, in turn, produced a positive impact of R$12.7 million due to the reversal of provisions for legal proceedings arising from favorable legal developments and the reduction of the amounts involved after a prognosis review.
O&M costs and expenses in 2017 were up 53.4% from 2016, reaching R$811.2 million. This was mainly due to the recognition of R$ 249.7 million in depreciation of the RBSE, which takes account of the 96-installment (8-year) payment of the accumulated depreciation from January 2013 to June 2017.
Below is a breakdown of O&M cost and expenses for the period:
2017 2016 Δ% 2017 2016 Δ%
Personnel (291.1) (265.3) 9.7% (302.3) (275.2) 9.8%
Material (13.0) (13.3) -2.5% (13.6) (13.7) -1.1%
Services (122.2) (118.0) 3.6% (130.0) (124.3) 4.6%
Contingencies 27.0 (1.5) -1845.7% 26.1 (1.5) -1872.5%
Others (61.3) (52.5) 16.8% (63.3) (54.2) 16.8%
Sub Total (460.6) (450.6) 2.2% (483.0) (468.9) 3.0%
Depreciation (295.5) (33.2) 791.1% (328.2) (60.1) 446.5%
Total (756.1) (483.7) 56.3% (811.2) (528.9) 53.4%
Cost and Expenses
(R$ millions)
Company Consolidated
ISA CTEEP – 2017 Results 18
▪ Equity Income – Regulatory
Equity Income in 2017 was R$18.3 million in revenues, down 39.4% from 2016’s R$30.2 million.
The reduction of the subsidiary IE Madeira results is mainly due to the decrease in net revenue because of the adjustment in RAP 2017/2018 cycle and of the provision for variable parcel (PV), in the amount of R$35.0 million, as a consequence of the delay in starting up the substation, partially offset by positive impact on the financial result, due to the reduction of interest and charges on the debt and reduction in deferred income tax expenses by the revision of the SUDAM benefit effective tax rate.
The drop in subsidiary IEGaranhuns’s results is mainly due to the negative impact of the tariff review that changed WACC from 6.61% to 4.62% and reduced RAP by 9%, and to the increase in costs and expenses explained by its first full year in operation.
The amount shown for the Aimorés and Paraguçú subsidiaries relates to administrative expenses during the pre-operational phase of the projects.
12.18.1
21.4
11.7
-3.3
30.2
20172016
-0.5-1.0
18.3
-39.4%
IENNE/IESULIE Madeira
IE Garanhuns Aimorés/Paraguaçú/ERB1
(R$ million)
ISA CTEEP – 2017 Results 19
▪ Other Operating Revenues (expenses) – Regulatory
Results show other operating revenues of R$35.3 million, mainly due to the recognition of the acquisition of a controlling stake in IENNE equivalent to 75% of equity stock, in the amount of R$38.4 million, which took place in 3Q17. The company paid Isolux and Cymi, for 50% and 25% stakes in IENNE’s equity stock, the amount of R$101.2 million, which corresponds to the offered price with inflation restatement. Because of the transaction, ISA CTEEP became the controlled of 100% of IENNE’s operations ever since the Regulator’s approval on September 29, 2017.
▪ Net Income – Regulatory
Net income in 2017 was R$635.5 million, up 158.5% from 2016, due mainly: (i) to the commencement of RBSE RAP receipts in the amount of R$329.8 million, (ii) the acquisition of the controlling interest in IENNE (R$38.4 million), (iii) adherence to the PERT (R$ 31 million) and (iv) the reversal of contingencies (R$26.1 million).
245.8
635.5
20172016
158.5%
(R$ million)
ISA CTEEP – 2017 Results 20
▪ EBITDA ND EBITDA Margin ICVM 527/12 – Regulatory
In accordance with ICVM 527/12, Consolidated EBITDA in 2017 was R$1,350.8 million in 2017, up R$862.8 million from 2016’s R$488 million EBITDA. This was mainly the result of the commencement of RBSE RAP receipts. EBITDA margin in 2017 was 76%. Ex-RBSE’s RAP, EBITDA in 2017 was R$603.6 million, up R$115.6 million from 2016.
3Q17 2016 3Q17 2016
Net Income 615.5 228.8 635.4 245.8
Income tax and social contribuition 310.8 62.2 318.7 69.7
Financial Results 72.8 118.2 66.0 109.9
Depreciation and Amortization 297.9 35.6 330.6 62.5
EBITDA ICVM 527/12 1,297.0 444.8 1,350.8 488.0#REF! #REF! #REF! #REF!
EBITDA Margin 79.2% 54.2% 76.0% 51.3%
RBSE 747.2 0.0 747.2 0.0
EBITDA ex RBSE 549.8 444.8 603.6 488.0
EBITDA ex RBSE Margin 61.7% 54.2% 58.6% 51.3%
EBITDA
(R$ million)
Company Consolidated
ISA CTEEP – 2017 Results 21
▪ IFRS vs Regulatory Net Income (ex RBSE)
In accordance with IFRS principles, investments are recorded as a financial asset to be settled over the course of the concession, generating construction revenue and cost. When restated, the financial asset generates revenue from infrastructure remuneration. Under the regulatory accounting methodology, investments are treated as PP&E, depreciated in line with their lifetime while revenue (RAP) is recognized according to sales over the concession period.
The main differences between IFRS and Regulatory consolidated results in 2017 are as follows:
1,385.5
635.5
923.4
231.0
318.6
106.5
90.6
276.9
Infrastructure and O&M Costs
IFRS Net Income
Net operating revenue
DepreciationAmortization
Equity Income
Other OperatingExpenses/Income
IR /CSLL
Regulatory Net Income
-54.1%
Net Operating Revenue: Reversal of Infrastructure Revenue of R$247.1 million and Infrastructure Remuneration Revenue of R$1,896.4 million, combined with recognition of Regulatory RAP of R$1,132.4 million and the reversal of Deferred PIS and CONFINS of R$87.8 million, for a total negative adjustment of R$923.4 million.
Infrastructure and O&M Costs: Reversal of Infrastructure and O&M implementation costs of R$231 million.
Depreciation and Amortization: Inclusion of depreciation and amortization expense for regulatory Property, Plant and Equipment of R$318.6 million.
Equity Income: Adjustments to subsidiaries for the adoption of IFRIC 12 criteria, affecting mainly the booking of Infrastructure and Concession Asset (financial asset) revenues.
Income tax and Social Contribution: Reversal of deferred IR and CSSL on IFRS adjustments. As from 2015, the taxable base for collecting income tax and social contribution is according to IFRS principles whereby deferred taxes on infrastructure and remuneration results from the concession asset are recognized on an accrual basis and taxed on effective receipt.
ISA CTEEP – 2017 Results 22
Capital Structure
▪ Debt
Increased indebtedness is a consequence of the optimization of the Company’s capital structure to support its growth cycle. Funding was raised as follows: (i) 5th issue of infrastructure debentures of R$300 million, in March 2017; (ii) international credit agreement pursuant to Law 4131/1962, in the amount of R$160 million, in July 2017; (iii) the contracting of R$ 152 million with BNDES in August and November 2017, for the acquisition of machinery and equipment for the implementation of the Investment Plan for 2016 and 2017; and (iv) 6th Infrastructure Debentures issue of R$ 350 million in December 2017.
ISA CTEEP’s consolidated cash and cash equivalents amounted to R$ 616.6 million on December 31, 2017, up 81.0% from December 31, 2016’s R$ 340.6 million. This increase is mainly due to the commencement of cash receipts from RBSE in July 2017 and the volume of funding raised in the period.
Therefore, net consolidated debt was R$1,326.3 million, up 98.0% from net debt at yearend 2016.
Debt 1,943.0 1,010.4 92.3%
Short-term Debt 451.4 264.0 71.0%
Long-term Debt 1,491.5 746.4 99.8%
Cash ISA CTEEP and 100% 401.7 161.9 148.1%
Net Debt 1,541.3 848.4 81.7%
Availability jointly controlled* 214.9 178.7 20.3%
Net Debt Consolidated 1,326.3 669.8 98.0%
Debt
(R$ million)Δ%20162017
(*) The Company's funds are concentrated in exclusive investment funds that are also used for investments of controlled and jointly controlled subsidiaries and quotas in liquid investment funds that can be promptly converted into cash, regardless of the maturities of the assets allocated to them.
The company is duly compliant with the covenants and requirements set forth in each issue. Additional information on financial indicators are available in Attachment IV to this document.
The average cost of debt dropped from 11.4 % p.a. on December 31, 2016 to 8.3% p.a. on December 31, 2017. IPCA in 2017 was 2.95% and CDI was 6.99%. The consolidated debt’s average maturity on December 31, 2017 was 3.3 years, from 3.4 years at the end of 2016.
Below is the consolidated debt amortization schedule (Controlling Company and Wholly- and Jointly-controlled Subsidiaries), the breakdown of their respective financing liabilities and respective indexers. The Net Debt/EBITDA indicator is set at 3.0x for 2018, 2019 and 2020.
ISA CTEEP – 2017 Results 23
30.9%
50.6%
18.4%
49.9% 50.1%
391.40
42.3
389.6
192.2
40.1 40.1
450.6
40.1
60.1
37.7
38.5
30.8
30.7 26.8
107.0
25.1
2018 2019 2020 2021 2022 2023 2024 to 2028 2029 to 2033
Company Subsidiaries
65.2
557.6
428.1
223.0
70.8 66.980.0
451.5
BNDES - TJLP Debêntures - CDI/IPCA Others
R$ million
2017 Debt 2016 Debt
ISA CTEEP – 2017 Results 24
Investments
In 2017, ISA CTEEP, its wholly- and jointly-controlled subsidiaries invested a total of R$294.9 million, as follows (i) R$197.9 million in reinforcements, new connections, modernization and improvements that generate additional revenues for the company; (ii) R$85.4 million in investments via subsidiaries for the completion of work in progress, as well as any improvements, reinforcements that will contribute to generate additional revenues for the Company; and (iii) R$11.6 million in corporate and telecommunications projects.
Of the total projects portfolio, 194 were energized in 2017 with investments of R$167.0 million and RAP of R$49.0 Million. The associated RAP increased by 17% due mainly to the revision of the Prices Bank in the 2017/2018 tariffs cycle.
2018 Investment Plan is of up to R$679.5 million, as follows (i) R$220.0 million in reinforcements, new connections, modernization and improvements at the Controlling Company; (ii) R$440.4 million in investments via the new subsidiaries and for the completion of work under way of the original IEMadeira and IEGaranhuns projects, in addition to reinforcements and improvements to the other subsidiaries; and (iii) R$19.1 million in capitalization of labor and corporate projects.
Capex
R$ (million)
2017
Budget 2017 ∆%
2018
Budget
266,6 183,5 -31% 191,8
73,4 14,4 -80% 28,2
16,2 11,6 -29% 19,1
Subtotal CTEEP 356,2 209,4 -41% 239,0
Operational 125,7 56,3 123,1
Pre-operational 31,9 29,1 317,4
IE Itaúnas (Lot 21)* 100% 9,1 5,2 -43% 75,2
IE Aimorés (Lot 3)* 50% 12,6 2,2 -83% 17,6
IE Paraguaçu (Lot 4)* 50% 10,2 2,8 -72% 27,9
ERB (Lot 1)** 50% 0 7,1 n.a 18,3
IE Tabagi (Lot 5)** 100% 0 1,2 n.a 16,4
IE Itaquerê (Lot 6)** 100% 0 9,2 n.a 109,0
IE Itapura (Lot 25)** 100% 0 0,2 n.a 21,8
IE Iguapeí (Lot 29)** 100% 0 1,1 n.a 31,3
Subtotal Subsidiárias 157,6 85,4 -46% 440,4
513,8 294,9 -43% 679,5 TOTAL
SUBSIDIARIES (Total investments weighted by the participation of CTEEP)
ISA CTEEP
Complementary Projects and
New Connections
Improvements
Others
(*) ANEEL Auction 03/2015 of 10/28/2016 (**) ANEEL Auction 05/2016 of 04/24/2017
ISA CTEEP – 2017 Results 25
▪ Growth Projects – Status
The evolution of the eight new SPEs is highlighted in the table below, with estimates of progress in the stages. The investments in the pre-operational subsidiaries are on budget and on time, according to challenging schedule, which considers a reduction in the average term of around 12 months for start-up.
IE Paraguaçú
(Lot 3) 50%
Bahia
Minas Gerais505.6 110.1
Presumed
Profit02/10/17 60 months 3Q19 ✓ ✓ ✓
IE Aimorés
(Lot 4)50% Minas Gerais 341.1 74.0
Presumed
Profit02/10/17 60 months 3Q19 ✓ ✓ ✓
IE Itaúnas
(Lot 21)100% Espírito Santo 297.8 48.7 Real Profit 02/10/17 60 months 3Q18 ✓ ✓ ✓
ERB
(Lot 1)50% Paraná 1,936.5 267.3
Presumed
Profit08/11/17 60 months 1Q20 ✓ 1Q18 ✓
IE Tibagi
(Lot 5)100%
São Paulo
Paraná134.6 18.4 Real Profit 08/11/17 48 months 4Q18 ✓ 1Q18 ✓
IE Itaquerê
(Lot 6)100% São Paulo 397.7 46.2 Real Profit 08/11/17 48 months ✓ ✓ 1Q18 ✓
IE Itapura
(Lot 25)100% São Paulo 125.8 10.7 Real Profit 08/11/17 42 months ✓ ✓ ✓ ✓
IE Aguapeí
(Lot 29)100% São Paulo 601.9 53.7 Real Profit 08/11/17 48 months 1Q19 2Q18 1Q18 ✓
4,341.0 629.1
REIDI
Authorization
Debentures
Authorization
Auction
03/2015
10/28/2016¹
Auction
05/2016
04/24/2017
Basic Project
Protocol
Total
Profit
Regime
12/31/2017
Contract
signature
Implementation
Deadline ANEEL
Environmental
License (LI)Auctions Subsidiiaries
% ISA
CTEEPLocation
Investiment
ANEEL²
(R$ MM)
RAP
(R$ MM)
¹ RAP considers inflation restatement for the 2017/2018 cycle according to REH-ANEEL No 2,258/2017, 06/27/2017
² Consider ANEEL investment for 100% of the project on the base date of the auction
ISA CTEEP – 2017 Results 26
Capital Markets
On December 31, 2017, the Company’s equity stock was represented by 64,484,433 common shares (TRPL3) and 100,236,393 preferred shares (TRPL4), for 164,720,826 shares traded on the São Paulo Stock Exchange (B3). The 2017 closing prices of ISA CTEEP’s common and preferred shares (B3: TRPL3 e TRPL4) were R$58.77 and R$66.90, respectively. The Company’s market value on December 31, 2017 was R$10.5 billion and free float was 64% of all shares.
Over the course of 2017, CTEEP’s preferred shares posted average trading volume at B3 of R$24.4 million, down 10.9% from 2016. The total traded volume of TRPL4 for the year was R$6,005 million. Average daily trades with preferred shares were 2,077, down 20.5% from 2016’s average. CTEEP’s preferred shares logged 510.9 thousand trades in 2017.
-20%
-10%
0%
10%
20%
30%
Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17
TRPL3 TRPL4 IBOVESPA IEEX
10.0%
26.9%
3.1%
-0.4%
0
20
40
60
80
Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17
Trade Financial - 12/31/2017(R$ million)
Total R$6,005 Million Daily Average / Day R$ 24.4 Million
-
2,000.00
4,000.00
6,000.00
Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17
Trade Volume - 12/31/2017(units)
Total Trade: 510,910 Daily: 2,077
Source: Economática
ISA CTEEP – 2017 Results 27
Attachments
▪ Attachment I – Balance Sheet IFRS
Assets (R$' 000) 12/31/2017 12/31/2016 12/31/2017 12/31/2016
Cash and Banks 3,031 1,609 6,585 4,524
Financial Investments 346,287 124,479 610,066 336,138
Trade Account Receivable 1,746,061 1,091,764 1,924,928 1,221,016
Inventory 34,896 35,796 37,639 37,723
Recoverable taxes and conbtributions 11,725 8,248 14,162 8,563
Prepaid Expenses 4,604 10,104 4,607 10,303
Others 47,131 60,054 45,722 62,077
2,193,735 1,332,054 2,643,709 1,680,344
Long-Term Assets
Trade Account Receivable 9,690,468 9,222,081 11,213,952 10,225,808
Amounts Receivable from the State Finance Secretariat 1,312,791 1,150,358 1,312,791 1,150,358
Tax benefit - incorporated goodwill 0 0 0 0
Pledges and Escrow 66,389 70,166 66,414 70,175
Inventory 32,388 25,438 37,034 32,512
Deferred taxes 0 0 0 0
Others 8,107 1,570 37,187 13,572
11,110,143 10,469,613 12,667,378 11,492,425
Investments 3,089,974 2,757,784 1,880,845 1,826,930
Property, Plant and Equipment 22,782 25,424 22,879 25,457
Intangible Assets 16,493 18,219 37,362 41,843
3,129,249 2,801,428 1,941,086 1,894,231
Total Assets 16,433,127 14,603,095 17,252,173 15,067,000
COMPANY CONSOLIDATED
CURRENT ASSETS
NON-CURRENT ASSETS
ISA CTEEP – 2017 Results 28
Liabilities and Shareholders' Equity 12/31/2017 12/31/2016 12/31/2017 12/31/2016
Loans and Financing 209,511 32,872 268,589 71,679
Bonds 182,852 192,368 182,852 192,368
Suppliers 66,114 39,279 69,923 41,482
Taxes, Fees and Contributions 86,118 28,373 90,502 30,053
Taxes installments 57,997 17,540 57,997 17,540
Regulatory Charges 14,973 12,598 16,550 12,751
Interest on Shareholders' Equity 3,112 139,946 3,112 139,946
Provisions 35,108 32,562 36,344 33,610
Amounts Payable - Fundação CESP 2,056 5,495 2,056 5,495
Others 52,852 49,715 61,179 53,047
710,693 550,748 789,104 597,971
Long-Term Liabilities
Loans and Financing 393,002 279,689 690,541 432,472
Bonds 801,007 313,931 801,007 313,931
Taxes installments 0 119,857 0 119,857
PIS and COFINS 1,032,436 945,480 1,147,381 989,445
Income tax and social contribuition 2,308,785 2,068,537 2,418,125 2,106,603
Regulatory Charges 50,378 29,374 54,250 32,509
Provisions for Contingencies 121,553 153,035 121,553 153,035
Others 30,556 24,053 30,556 24,053
4,737,717 3,933,956 5,263,413 4,171,905
Minority interest 0 0 214,939 178,733
Paid-up Capital 3,590,020 2,372,437 3,590,020 2,372,437
Capital Reserves 0 1,217,583 0 1,217,583
Revenue Reserves 7,394,031 6,527,704 7,394,031 6,527,704
Profits / Losses 0 0 0 0
Advance for future capital increases 666 666 666 666
10,984,717 10,118,390 10,984,717 10,118,390
Total Liabilities and Shareholders' Equity 16,433,127 14,603,094 17,252,173 15,066,999
CURRENT LIABILITIES
NON-CURRENT LIABILITIES
SHAREHOLDERS' EQUITY
COMPANY CONSOLIDATED
ISA CTEEP – 2017 Results 29
▪ Attachment II – Income Statement IFRS
Operating revenue 2,864,941 8,558,047 (66.5%) 3,050,502 8,774,336 (65.2%)
Construction 225,082 164,290 37.0% 247,126 171,902 43.8%
Operation and Maintenance 865,174 809,280 6.9% 880,901 835,786 5.4%
Financial 1,745,059 7,557,589 (76.9%) 1,896,406 7,743,248 (75.5%)
Others 29,626 26,888 10.2% 26,068 23,400 11.4%
Deductions from Operating Revenue (335,479) (975,449) (65.6%) (349,309) (988,720) (64.7%)
Net operating revenue 2,529,462 7,582,598 (66.6%) 2,701,193 7,785,616 (65.3%)
Cost and Expenses (677,474) (606,876) 11.6% (723,673) (632,208) 14.5%
Personnel (302,994) (285,520) 6.1% (315,320) (295,948) 6.5%
Material (171,537) (85,711) 100.1% (186,476) (86,643) 115.2%
Services (159,733) (173,317) (7.8%) (173,819) (183,406) (5.2%)
Others (43,210) (62,328) (30.7%) (48,058) (66,211) (27.4%)
Gross Revenue 1,851,988 6,975,722 (73.5%) 1,977,520 7,153,408 (72.4%)
Equity 228,307 426,824 (46.5%) 124,806 267,706 (53.4%)
Other Operating Expenses/Income (54,958) (27,939) 96.7% (55,006) (27,939) 96.9%
Previous to the Net Financial Income and Taxes 2,025,337 7,374,607 (72.5%) 2,047,321 7,393,175 (72.3%)
Financial Results (72,966) (118,152) (38.2%) (66,215) (109,929) (39.8%)
Interest Receivable 18,609 42,785 (56.5%) 44,147 68,032 (35.1%)
Monetary (net) (30,153) (33,989) (11.3%) (30,357) (33,902) (10.5%)
Interest and expenses on loans (103,922) (126,939) (18.1%) (122,227) (143,799) (15.0%)
Others 42,500 (9) (472322.2%) 42,222 (260) (16339.2%)
Operating Income 1,952,371 7,256,455 (73.1%) 1,981,105 7,283,246 (72.8%)
Income tax and social contribuition (586,859) (2,324,143) (74.7%) (595,645) (2,333,912) (74.5%)
Current (346,610) (71,797) 382.8% (354,491) (79,301) 347.0%
Deferred (240,249) (2,252,346) (89.3%) (241,154) (2,254,611) (89.3%)
Net Income Before Minority Interest 1,365,512 4,932,312 (72.3%) 1,385,460 4,949,334 (72.0%)
Minority interest 0 0 0 (19,948) (17,022) 17.2%
Net Income 1,365,512 4,932,312 (72.3%) 1,365,512 4,932,312 (72.3%)
Results
(R$ '000) 2017 2016 Δ% 20162017
Company Consolidated
Δ%
ISA CTEEP – 2017 Results 30
▪ Attachment III – Cash Flow IFRS (R$ thousand)
2017 2016 2017 2016
Net Cash by operating activities 448,839 207,055 568,818 329,464
Cash provided by operating 1,546,237 387,951 1,690,367 596,529
Net Income 1,365,513 4,932,312 1,385,461 4,949,334
Update of Accounts Receivable Law 12.783 -SE 0 (7,318,492) 0 (7,318,492)
PIS and COFINS Deferred 86,956 837,739 9,627 840,423
Depreciation and amortization 8,873 8,313 87,778 9,061
IR and CSLL deferred 240,249 2,252,346 241,154 2,254,611
Lawsuits (49,809) (63,749) (49,809) (64,041)
Residual value of permanent asset disposals and donations 260 5,319 260 5,340
Tax benefit - Goodwill 36 18 19 18
Active amortization of concession in the acquisition of the subsidiary 2,490 2,490 2,490 2,490
Reversal of the loss provision in a Controlled Company (2,195) (2,276) (2,195) (2,276)
Equity (228,307) (426,824) (124,806) (257,706)
Interest and monetary and exchange variations on assets and liabilities 127,213 160,737 145,413 177,749
Result of acquisition of control (5,042) 0 (5,042) 0
Changes in Assets -1,123,888 -191,754 -1,152,658 -271,686
Trade accounts receivable (1,122,684) (205,384) (1,160,553) (279,070)
Inventories (6,050) 5,501 (4,438) (84)
Taxes and contributions to offset (3,379) (3,320) (3,316) (2,800)
Pledges and restricted deposits 6,777 215 6,761 222
Other 1,448 11,234 8,888 10,046
Changes in Liabilities 26,490 10,858 31,109 4,621
Suppliers 26,835 7,455 27,395 6,532
Taxes and social charges payable 57,768 1,548 59,683 1,636
Taxes installments - Law 11,941 (86,777) (16,927) (86,777) (16,927)
Regulatory charges payable 19,917 (12,170) 20,423 (11,856)
Provisions 2,546 3,734 2,668 3,853
Amounts payable - Cesp (3,439) (649) (3,439) (649)
Other 9,640 27,867 11,156 22,032
Cash flow of investment activities -312,719 170,569 -412,458 100,999
Financial Investments (221,808) 106,376 (237,724) 103,916
Minority interest 0 0 (19,948) (17,085)
Purchase of property, plant and equipment (1,235) (5,745) (1,303) (5,767)
Intangible assets (3,552) (5,718) (4,038) (5,721)
Investments (149,924) (2,394) (149,924) (2,394)
Dividends 63,800 78,050 0 28,050
Cash purchased in business combination 0 0 479 0
Cash flow of financing activities -134,698 -379,135 -154,300 -422,074
News loans 962,500 150,407 962,500 150,407
Loan payments (including interest) (298,647) (332,767) (346,849) (375,706)
Dividends paid (636,118) (109,710) (636,118) (109,710)
Capital Increase 0 97,373 28,600 97,373
Amounts receivable - State Finance Department (162,433) (184,438) (162,433) (184,438)
Change in Cash -1,422 -1,511 2,060 -1,611
Opening Balance of Cash and Cash Equivalents 1,609 3,120 4,524 6,135
Closing Balance of Cash and Cash Equivalents 3,031 1,609 6,584 4,524
Cash Flow of operating activitiesCompany Consolidated
ISA CTEEP – 2017 Results 31
▪ Attachment IV – Breakdown of Consolidated Debt (R$ thousand)
FUNDING CHARGES MATURITY 2017 2016
TJLP + 1.8% year 15/03/29 214,231 231,010
3.50% year 15/01/24 61,926 72,291
4.00% year 15/08/18 51 128
6.00% year 15/11/19 4,418 6,723
TJLP 15/03/29 9 1,918
TJLP + 2,6% a.a 15/03/32 155,607 0
2nd Issuance IPCA + 8.1% year 15/12/17 0 22,306
Single Series 116% CDI 02/07/14 169,441 334,547
4th Issuance - Single Series IPCA + 6.04%year 07/15/2021 155,185 149,447
5th Issuance - Single Series IPCA + 5,0373%aa 15/02/24 309,119 0
6th Issuance - Single Series 105,65% CDI 13/12/20 350,115 0
4131_BTMU Law VC+Libor 3M+0.28year 17/07/18 166,026 0
Eletrobras 8% year 15/11/21 111 154
Leasing - - 134 336
1,586,372 818,860
IEMG TJLP + 2.4% year 15/04/23 27,908 32,786
5.5% year 15/05/26 30,589 33,965
TJLP + 2.6% year 15/01/21 30,993 41,043
3.5 year 15/04/23 9,660 11,471
TJLP + 2.1% year 15/02/28 5,526 6,005
TJLP + 1.9% year 15/05/26 32,142 35,577
TJLP + 1.5% year 15/05/26 27,776 30,743
8,50% a.a.* 19/05/30 182,674 0
CDI + 1,35% a.a - 9,348 0
356,616 191,590
1,942,988 1,010,450
BNDES
IENNE
TOTAL SUBSIDIARIES
Total Consolidated (R$ mil)
TOTAL CTEEP:
Debentures CTEEP
Banks CTEEP
BNDES
SERRA DO JAPI
PINHEIROS
ISA CTEEP – 2017 Results 32
Net Debt 12/31/2017
(consolidated with jointly-owned
subsidiaries)
2,590 Net Det 12/31/2017 1,326 Net Det 12/31/2017 1,326
Adjusted Ebitda¹ last 12 months 1,505 Adjusted Ebitda² last 12 months 1,295 Adjusted Ebitda² last 12 months 1,295
Net Debt/Adjusted Ebitda
12/31/2017 1.72
Net Debt/Adjusted Ebitda
12/31/2017 1.02
Net Debt/Adjusted Ebitda
12/31/2017 1.02
Net Debt/Adjusted Ebitda
12/31/2016 3.1
Net Debt/Adjusted Ebitda
12/31/2016 1.39
Shareholders’ Equity 12/31/2017 11,090 Financial Result³ 12/31/2017 66 Financial Result³ 12/31/2017 66
Net Debt / Net Debt + SE
12/31/2017 0.19
Adjusted Ebitda /Financial
Result 12/31/2017 19.55
Adjusted Ebitda /Financial
Result 12/31/2017 19.55
Net Debt / Net Debt +SE
12/31/2016 0.18
Adjusted Ebitda /Financial
Result 12/31/2016 4.39
BNDES
(annual verification)
Infrastructure Debentures
(4th and 5th issue)
International Credit - Law 4131
(quarterly verification)
Simple Debentures
(quarterly verification)
¹ excluding mainly the effects of IFRS, considering RAP revenues, and consolidating affiliates by equity equivalence.
² excluding mainly the effects of IFRS, considering RAP revenues.
³ financial revenue/financial expense
The main covenants to which ISA CTEEP must submit are as follows:
Financing contracts with BNDES (valid for 2017) must abide by maximum financial indicators of: Net Debt/BNDES Adjusted EBITDA ≤ 3.5 and Net Debt/(Net Debt + Equity Capital) ≤ 0.6, at the end of each fiscal year. For the purposes of commuting and proving the foregoing indices, the Company must consolidate all controlled and jointly controlled companies (pro-rata its stake), as long as has a stake of 10% or higher.
The 1st Debentures issue must abide by the covenants of the deed, as follows: Net Debt/Consolidated Adjusted EBITDA ≤ 3.5 and Debentures Adjusted EBITDA /Financial Income ≥ 3.0, computed quarterly.
The 3rd Debentures issue requires full compliance with the covenants provided in BNDES financing contracts.
The 4th Debentures issue must abide by the covenants provided in the deed, as follows: Net Debt/Adjusted EBITDA < 3.5 and Adjusted EBITDA/Financial Income > 1.5 until the determination for reference date June 30, 2017; beginning with the determination to be made for reference date September 30, 2017, the indicator will become > 2.00.
The 5th Debentures issue must abide by the covenants provided in the deed, as follows: Net Debt/Adjusted EBITDA < 3.5 and Adjusted EBITDA/Financial Income > 1.5 until the determination for reference date June 30, 2017; beginning with the determination to be made for reference date September 30, 2017, the indicator will become > 2.00.
The 6th Debentures issue must abide by the covenants provided in the deed, as follows: Net Debt/Adjusted EBITDA < 3.5 and Adjusted EBITDA/Financial Income > 2.0 starting from the determination to be made for reference date March 30, 2018.
The Credit Agreement (4131) requires the following covenants for the duration of the transaction, to be determined quarterly: Net Debt/Adjusted EBITDA < 3.5 and Adjusted EBITDA/Net Interest Expense ≥ 2.0.
ISA CTEEP – 2017 Results 33
▪ Attachment V – Breakdown of Controlled Affiliates - (R$ thousand)
Company BankFinal
Maturity
Total
12/31/17
CTEEP's
Participation
ITAÚ BBA 03/18/25 508,079 259,120
BNDES 02/15/30 1,380,489 704,049
BASA 07/10/32 304,993 155,546
Gross Debt 2,193,560 1,118,716
Disponibilidades 159,994 81,597
Net Debt 2,033,566 1,037,1190.0
12/15/23 85,226 43,465
12/15/28 198,213 101,089
Gross Debt 283,439 144,555
Disponibilidades 47,547 24,249
Net Debt 235,892 120,3061/0/1900
05/15/25 9,034 4,517
02/15/28 14,668 7,334
Gross Debt 23,702 11,851
Disponibilidades 2,589 1,294
Net Debt 21,113 10,5570.0
2,500,702 1,275,122
TOTAL Net Debt (R$ million) 2,290,571 1,167,981
TOTAL Gross Debt (R$ million)
IE MADEIRA
51% ISA CTEEP
IEGARANHUNS
51% ISA CTEEPBNDES
IE SUL
50% ISA CTEEPBNDES
ISA CTEEP – 2017 Results 34
▪ Attachment VI – Subsidiaries
Subsidiaries State(s)Start of
Operation
RAP
(R$ million)Shareholding
Interligação Elétrica Minas Gerais Minas Gerais dez/08 17.2 CTEEP 100%
Interligação Elétrica Pinheiros São Paulo (*) 56.4 CTEEP 100%
Interligação Elétrica Serra do Japi São Paulo mar/12 55.6 CTEEP 100%
Evrecy Espirito Santo nov/08 12.8 CTEEP 100%
Itaúnas Espirito Santo fev/22 47.2 CTEEP 100%
Interligação Elétrica Norte e Nordeste Tocantins jan/11 42.9 CTEEP 100%
Tabagi São Paulo/Paraná ago/22 18.4 CTEEP 100%
Itaquerê São Paulo ago/22 46.2 CTEEP 100%
Itapura São Paulo ago/22 10.7 CTEEP 100%
Aguapeí São Paulo ago/22 53.7 CTEEP 100%
Interligação Elétrica Sul Rio Grande do Sul (***) 18.2 CTEEP 50% / + 1 ação / CYMI 50%
Paraguaçu Bahia e Minas Gerais fev/22 106.6 CTEEP 50% / TAESA 50%
Aimorés Minas Gerais fev/22 71.4 CTEEP 50% / TAESA 50%
Interligação Elétrica Madeira Rondônia / São Paulo (****) 515.5 CTEEP 51% / Furnas 24,5% / Chesf 24,5%
Interligação Elétrica Garanhuns Pernambuco dez/15 81.6 CTEEP 51% / Chesf 49%
ERB 1 Paraná fev/22 267.3 CTEEP 50% / TAESA 50%
(*) Lot H - The Araras, Getulina and Mirassol substations went into operation on September 5, 2010, March 10, 2011 and April 17, 2011, respectively.
Lot E - The Piratininga II substation began operations on December 26, 2011.
Lot K – The Atibaia II substation (Auction 004/2008) began operations on January 8, 2013. The Itapeti substation (Auction 004/2011) began operations on August 9, 2013.
(***) Lot F - Nova Santa Rita – Scharlau transmission line and the Scharlau substation was made commercially operational on December 6, 2010.
Lot I - The Forquilhinha substation went into operation on October 10, 2011. The Jorge Lacerda B – Siderópolis transmission line went into operation on August 21, 2012. The Joinville Norte - Curitiba transmission line was scheduled to begin operations in the second half of 2015.
(***) Lot D – Coletora Porto Velho – Araraquara 2 Transmission Line commenced commercial operations on August 01, 2013.
Lot F - The Inverter and Rectifier stations (Concession Agreement 015/2009) went into provisional commercial operations on May 12, 2014. As from the date of the Concession Agreement, the assets were declared free of pending proprietary impediments in August 2014. However, because of pending impediments on the part of other agents (with respect to incomplete joint studies of integrators in the ONS electronic studies simulator), a reducing factor equivalent to 10% of the revenue under the agreement has been used. Full commercial operations and the issue of Definitive Release Instrument by the ONS are expected for the end of 2018.
On June 30, 2017, a meeting of the Board of Directors of Eletrobras approved the transfer of shareholdings held by CHESF and Furnas in IEMadeira to Eletrobras Holding. The effective transfer of the shareholding stakes are contingent on authorization of the regulators and/or financial agents.
ISA CTEEP – 2017 Results 35
▪ Attachment VII – Regulatory Balance Sheet
Assets (R$' 000) 12/31/17 31/12/16 12/31/17 31/12/16
Cash and Banks 3,031 1,609 6,585 4,524
Financial Investments 346,287 124,479 610,066 336,138
Trade Account Receivable 275,468 72,351 210,469 83,117
Inventory 16,088 14,773 18,831 16,700
Recoverable taxes and conbtributions 11,725 17,216 14,162 17,531
Income taxes and social contribution 0 23,518 0 23,518
Prepaid Expenses 4,604 10,104 4,607 10,303
Overdue controlled 3,944 18,340 903 18,041
Others 48,539 47,166 60,870 49,486
709,686 329,556 926,493 559,357
Long-Term Assets
Trade Account Receivable 20,329 9,117 20,329 9,117
Amounts Receivable from the State Finance Secretariat 1,312,791 1,150,358 1,312,791 1,150,358
Deferred taxes 0 229,085 0 229,085
Pledges and Escrow 66,389 70,166 66,414 70,175
Others 7,594 1,570 36,674 13,572
1,407,103 1,460,296 1,436,208 1,472,307
Investments 2,049,722 1,830,195 1,173,378 1,203,699
Property, Plant and Equipment 6,255,909 5,816,651 7,441,984 6,554,702
Intangible Assets 79,568 82,427 118,686 110,936
8,385,199 7,729,273 8,734,048 7,869,337
Total Assets 10,501,988 9,519,125 11,096,749 9,901,001
COMPANY CONSOLIDATED
CURRENT ASSETS
NON-CURRENT ASSETS
ISA CTEEP – 2017 Results 36
Liabilities and Shareholders' Equity 31/03/17 31/12/16 31/03/17 31/12/16
Loans and Financing 209,511 32,872 268,589 71,679
Bonds 182,852 192,368 182,852 192,368
Suppliers 66,114 39,279 69,923 41,482
Instrumentos financeiros derivativos 0 0 0 0
Taxes, Fees and Contributions 86,118 37,341 90,502 39,021
Taxes installments - Law 11,941 57,997 17,540 57,997 17,540
Regulatory Charges 14,973 12,613 16,550 12,766
Interest on Shareholders' Equity 3,112 139,946 3,112 139,946
Provisions 35,108 32,562 36,344 33,610
Amounts Payable - Fundação CESP 2,056 5,495 2,056 5,495
Others 52,852 49,713 61,179 53,047
710,693 559,729 789,104 606,954
Long-Term Liabilities
Loans and Financing 393,002 279,689 690,541 432,472
Bonds 801,007 313,931 801,007 313,931
Taxes installments - Law 11,941 0 119,857 0 119,857
Deferred Taxes 831,111 1,056,505 831,111 1,056,505
Regulatory Charges 50,378 29,543 54,250 32,510
Provisions 121,553 153,035 121,553 153,035
Especial Liabilities - Reversal/Amortization 24,053 24,053 24,053 24,053
Others 327,579 0 327,579 0
2,548,683 1,976,613 2,850,094 2,132,363
Monority Interest 0 0 214,939 178,733
Paid-up Capital 3,590,020 2,372,437 3,590,020 2,372,437
Capital Reserves 666 1,217,583 666 1,217,583
Revenue Reserves 1,994,141 1,127,646 1,994,141 1,127,814
Reavaliation Reserves 2,301,266 2,264,451 2,301,266 2,264,451
Advance for future capital increases 0 666 0 666
Accumulated profits and losses (643,481) 0 (643,481) 0
7,242,612 6,982,783 7,242,612 6,982,951
Total Liabilities and Shareholders' Equity 10,501,988 9,519,125 11,096,749 9,901,001
CURRENT LIABILITIES
NON-CURRENT LIABILITIES
SHAREHOLDERS' EQUITY
COMPANY CONSOLIDATED
ISA CTEEP – 2017 Results 37
▪ Attachment VIII – Regulatory Income Statement
2017 2016 Δ% 2017 2016 Δ%
Operating revenue 1,887,081 958,419 96.9% 2,039,364 1,099,483 85.5%
Eletrical Network Usage 1,857,455 931,531 99.4% 2,013,296 1,076,083 87.1%
Others 29,626 26,888 10.2% 26,068 23,400 11.4%
Deductions from Operating Revenue (248,523) (137,712) 80.5% (261,532) (148,298) 76.4%
Net operating revenue 1,638,558 820,707 99.7% 1,777,832 951,185 86.9%
Cost and Expenses (756,085) (483,723) 56.3% (811,211) (528,916) 53.4%
Personnel (291,055) (265,285) 9.7% (302,268) (275,181) 9.8%
Material (12,967) (13,293) (2.5%) (13,600) (13,746) (1.1%)
Services (122,207) (117,967) 3.6% (129,993) (124,277) 4.6%
Others (329,856) (87,178) 278.4% (365,350) (115,712) 215.7%
Gross Revenue 882,473 336,984 161.9% 966,621 422,269 128.9%
Equity 81,294 99,136 (18.0%) 18,271 30,152 (39.4%)
Other Operating Expenses/Income 35,329 (26,947) (231.1%) 35,281 (26,947) (230.9%)
Previous to the Net Financial Income and
Taxes999,096 409,173 144.2% 1,020,173 425,474 139.8%
Financial Results (72,795) (118,152) (38.4%) (66,043) (109,929) (39.9%)
Interest Receivable 18,609 42,785 (56.5%) 44,147 68,032 (35.1%)
Monetary (net) (29,982) (33,989) (11.8%) (30,186) (33,902) (11.0%)
Interest and expenses on loans (103,922) (126,939) (18.1%) (122,227) (143,799) (15.0%)
Others 42,500 (9) (472322.2%) 42,223 (260) (16339.6%)
Operating Income 926,301 291,021 218.3% 954,130 315,545 202.4%
Income tax and social contribuition (310,824) (62,236) 399.4% (318,705) (69,738) 357.0%
Current (346,610) (71,797) 382.8% (354,491) (79,299) 347.0%
Deferred 35,786 9,561 274.3% 35,786 9,561 274.3%
Net Income Before Minority Interest 615,477 228,785 169.0% 635,425 245,807 158.5%
Minority interest 0 0 0 (19,948) (17,022) 100.0%
Net Income 615,477 228,785 169.0% 615,477 228,785 169.0%
Result
(R$ mil)
Company Consolidated
ISA CTEEP – 2017 Results 38
▪ Attachment IX – Regulatory Indirect Cash Flow
CONTROLADORA CONSOLIDADO
Caixa Líquido Atividades Operacionais 783,555 915,425
Caixa Gerado nas Operações 848,406 984,277
Lucro Líquido 615,477 635,425
Depreciações e amortizações 295,519 328,177
Tributos diferidos (35,786) (35,786)
Provisão para contingências (49,806) (49,821)
Valor residual de ativo permanente baixado 3,593 5,634
Amortização de ágio 37 37
Amortização de ágio Evrecy 2,390 2,390
Resultado de equivalência patrimonial (81,295) (18,272)
Reversão da perda em controlada em conjunto (2,195) (2,195)
Resultado de aquisição de controle (39,289) (39,289)
Juros e variações cambiais sobre ativos e passivos 127,210 145,426
Variações nos Ativos -212,398 -220,518
Concessionárias e Permissionárias (214,329) (213,588)
Almoxarifado Operacional (1,315) (2,131)
Tributos Compensáveis (3,379) (3,316)
Cauções e depósitos vinculados 6,777 6,761
Despesas antecipadas 5,500 5,696
Serviços em curso 602 843
Crédito com controladas (797) 1,945
Outros (5,457) (16,728)
Variações nos Passivos 147,547 151,666
Fornecedores 26,835 24,598
Obrigações Sociais e Trabalhistas 57,769 59,684
Impostos parcelados - Lei nº 11.941 (86,777) (86,777)
Encargos regulatórios 19,733 20,239
Provisões 2,546 2,668
Valores a Pagar Funcesp (3,439) (3,439)
Obrigações vinculadas à concessão do serviço 121,240 121,240
Outros 22,191 26,004
Fluxo de caixa das atividades de investimentos -647,435 -730,465
Transações com acionistas não controladores 0 (19,948)
Compras de imobilizado (341,715) (354,159)
Aplicações financeiras (221,808) (237,724)
Investimento (147,713) (119,113)
Caixa adquirido em combinação de negócio 0 479
Dividendos recebidos 63,801 0
Fluxo de caixa das atividades de financiamento -134,698 -182,899
Adições Empréstimos 962,500 962,500
Pagamentos Empréstimos (principal) (220,352) (250,123)
Pagamentos Empréstimos (juros) (78,295) (96,725)
Valores a Receber - Secretaria da Fazenda (162,433) (162,433)
Dividendos Pagos (636,118) (636,118)
Variação de Caixa e Equivalentes 1,422 2,061
Caixa e equivalentes de caixa no ínicio do exercício 1,609 4,524
Saldo Final de Caixa e Equivalentes 3,031 6,585
Fluxo de Caixa das Atividades Operacionais2017
ISA CTEEP – 2017 Results 39
▪ Attachment X – Regulatory Income Statement for Affiliates IEMadeira and IEGaranhuns (51% ISA CTEEP)
Operating revenue 452.7 508.9 -11.1%
Deductions from Operating Revenue (65.1) (64.7) 0.6%
Net operating revenue 387.6 444.2 -12.7%
Cost and Expenses (42.0) (115.1) -63.6%
Depreciation (136.4) (70.0) 94.9%
Gross Revenue 209.3 259.1 -19.2%
Operating Expenses 0.0 0.0 0.0%
Financial Results (175.8) (195.6) -10.1%
Operating Income 33.5 63.5 -47.3%
Income tax and social contribuition (10.6) (21.6) -
Net Income 22.9 41.9 -45.4%
CTEEP Participation 11.7 21.4 -45.4%
Result
(R$ millions)20162017 Δ%
IE MADEIRA
(*)Includes transmission line and substation infrastructure projects, operating in areas covered by the Amazon Regional Development Authority - SUDAM, with benefits granted in the months of December 2014 and December 2015, respectively. Tax break eligibility covers a ten-year period with a 75% reduction of income tax and other charges.
Operating revenue 85.8 104.5 -18%
Deductions from Operating Revenue (13.1) (13.3) -1%
Net operating revenue 72.7 91.2 -20%
Cost and Expenses (14.6) (24.8) -41%
Depreciation (24.7) (15.9) 55%
Gross Revenue 33.4 50.4 -34%
Operating Expenses 0.0 0.0 0%
Financial Results (18.1) (23.8) -24%
Operating Income 15.3 26.6 -42%
Income tax and social contribuition 0.5 (2.9) -118%
Net Income 15.8 23.7 -33%
CTEEP Participation 8.1 12.1 -33%
2016Result
(R$ millions)2017 Δ%
IE GARANHUNS
Includes transmission line and substation infrastructure projects operating in areas covered by Northeast Regional Development Authority - SUDENE with benefit granted in December 2016. Tax break eligibility covers a ten-year period with a 75% reduction of income tax and other charges.