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Roadshow - Europa'

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  • 1. Summary 2007 Results Investment Case CPFL Energia 2
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  • 10. CPFL Energia’s Estimated Capex CPFL Energia will invest R$ 5 billion in the next 5 years 11
  • 11. Summary 2007 Results Investment Case CPFL Energia 12
  • 12. CPFL Energia’s investment case combines current portfolio growth… Competitiveness + Strategic Positioning = Sustainability Current portfolio • Organic growth and market-share leader (13.8%) Distribution • Operational efficiency: outperforming the Reference Company costs • Gains from acquired companies’ integration 13
  • 13. Private group leader in the distribution market - High market growth Concession Area Sales – 2007 8.3% 12.4% 6.0%1 CPFL Energia’s 5.7% Brazil energy sales in 2007 South 5.4% Southeast 5.3% had higher growth 5.0% than Brazil, Southeast and South regions2 13.5% 12.5% 4.8% 27.7% 11.1% 17.2% 6.9% 6.9% -1.9% 4.4% 2.8% 15.2% Residential Commercial Industrial Rural Others TUSD With acquisitions Without acquisitions 1) Excluding the acquisition of the additional stake in RGE and the acquisitions of CPFL Santa Cruz and CMS Energy Brasil 14 2) Comparative between CPFL Energia and Southeast and South Regions, considering the distribution companies of each region only
  • 14. Market growth with scale gains and operating efficiency DISTRIBUTION Growth by IPO – Sep/041 Organic Growth Dec/07 Var. % Acquisition Municipalities (#) 523 - 45 568 8.6% Distribution Network (km) 165,8272 15,332 14,196 196,749 18.6% Customers (thousand) 5,411 459 350 6,256 15.6% Concession Area Sales 33,2483 4,282 2,866 46,475 39.8% (GWh/year) Market Share 12.2% 0.8% 0.8% 13.8% 1.6 p.p. Gains from acquired companies’ integration • Organizational restructuring • IT optimization: software’s licenses and support and programming services • Improvement in the quality of services and operational management • Cost of debt, banking taxes and insurance costs reduction • Centralization and optimization of processes: synergy and productivity gains in operational and • Tax credit’s optimization administrative processes (supply, human resources • Delinquency recovery and infrastructure) 15 1) Considers 100% of RGE, except for Concession Area Sales 2) Data basis: Jun 2004 3) Considers 67.07% of RGE
  • 15. Market growth with scale gains and operating efficiency 16
  • 16. Market growth with scale gains and operating efficiency 17
  • 17. CPFL Energia’s investment case combines current portfolio growth… Competitiveness + Strategic Positioning = Sustainability Current portfolio • Organic growth and market-share leader (13.8%) Distribution • Operational efficiency: outperforming the Reference Company costs • Gains from acquired companies’ integration • High installed capacity growth • High EBITDA margin Generation • Long term energy contracted at attractive prices • Addition of 150 MW in 2008 (+9.4%) and 436 MW in 2010 (+ 25.1%) 18
  • 18. 19
  • 19. CPFL Energia’s investment case combines current portfolio growth... Competitiveness + Strategic Positioning = Sustainability Current portfolio • Organic growth and market-share leader (13.8%) Distribution • Operational efficiency: outperform the Reference Company costs • Gains from acquired companies integration • High installed capacity growth • High EBITDA margin Generation • Long term energy contracted at attractive prices • Addition of 150 MW in 2008 (+9.4%) and 436 MW in 2010 (+ 25.1%) • Market share leader: 23% • Expertise in free market sales and Value Commercialization Added Services • Consistent results 20
  • 20. Captive and Free Market’s Sales Evolution in Brazil 21
  • 21. Commercialization business is CPFL’s key differential Operations based on competitiveness and sustainability • 23% market-share Market • 91 clients in the free market in 2007 leader • 17 clients outside the Group’s concession area • No fixed assets Free Market Energy Sales (GWh)1 9,334 2007 8,951 Success in 7,120 free market 3,372 + 165% 438 2004 2005 2006 2007 2004 Contribution to the • 2007 EBITDA margin of 35.5% Group’s results2 • 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 Small Growth prospects Power Plants • Diversification and expansion of value-added services (200 projects with sales of R$ 49 million in 2007) 22 1) Including CPFL Sul Centrais Elétricas sales to free market 2) Don't consider eliminations
  • 22. CPFL Energia’s investment case combines current portfolio growth… Competitiveness + Strategic Positioning = Sustainability Current portfolio • Organic growth and market-share leader (13.8%) Distribution • Operational efficiency: outperforming the Reference Company costs • Gains from acquired companies’ integration • High installed capacity growth • High EBITDA margin Generation • Long term energy contracted at attractive prices • Addition of 150 MW in 2008 (+9.4%) and 436 MW in 2010 (+ 25.1%) • Market share leader: 23% • Expertise in free market sales and Value Commercialization Added Services • Consistent results • Differentiated Corporate Governance: Level III ADR and Novo Mercado Corporate Governance • Listed in the main indexes: MSCI, Ibovespa, IEE and others • Free Float above 25% Differentiated •Corporate Governance: Level IIIissuing reports Wide analysts coverage: 25 institutions ADR and Novo Mercado 23
  • 23. CPFL Energia : Investment Opportunity Shares Performance - Bovespa1 Shares Performance - NYSE1 43,7% 63,9% 52,6% 23,7% 23,9% 9,1% 12,0% 6,4% -4,6% -2,6% -7,6% -4,7% 2007 1Q08 2007 1Q08 2007 1Q08 2007 1Q08 2007 1Q08 2007 1Q08 IBOVESPA IEE CPFE3 Dow Jones DJ Br 20 CPL CPFL Energia’s – Daily average volume 2005 2006 2007 CPFL Energia presents a Bovespa - ON 3,521 +160% 9,141 +116% 19,755 substantial increase NYSE - ADR 3,506 +132% 8,128 +58% 12,807 in daily average volume in 2007 Total 7,027 17,270 32,561 +363% MSCI Indexes 24 1) Closing price adjusted for dividends
  • 24. Dividend Policy: minimum 50% of Net Income in semi-annual basis 25
  • 25. CPFL Energia’s investment case combines current portfolio growth with acquisition opportunities Competitiveness + Strategic Positioning = Sustainability Current portfolio New portfolio • Organic growth and market-share leader (13.8%) • Strategic distribution's Distribution • Operational efficiency: outperforming the companies Reference Company costs • Gains from acquired companies’ integration Distribution • “Big bang” • “Beach head” • High installed capacity growth • High EBITDA margin Generation • Long term energy contracted at attractive prices • Addition of 150 MW in 2008 (+9.4%) and 436 MW in 2010 (+ 25.1%) • Market share leader: 23% • Expertise in free market sales and Value Commercialization Added Services • Consistent results • Differentiated Corporate Governance: Level III ADR and Novo Mercado Corporate Governance • Listed in the main indexes: MSCI, Ibovespa, IEE and others • Free Float above 25% Differentiated •Corporate Governance: Level IIIissuing reports Wide analysts coverage: 25 institutions ADR and Novo Mercado 26
  • 26. Brazilian market has 64 distribution’s companies Distribution Business: Distribution Market Share1 % 2007 Distributors (#) 64 CELESC 4.8% Clients (million) 61 COPEL 6.7% EdB 5.7% ENDESA 4.2% Neoenergia Distributed Energy (TWh) 376.9 7.3% Ashmore Energy 3.7% CEMIG Companhia Energética 8.6% Market Breakdown Brasiliana Others 33.1% Energia 12.1% The 5 largest groups have 50% of market-share CPFL Energia 13.8% State-owned companies: 34% Private Company: 66% Spreading proposes consolidation opportunities 1) 1Q07 27 Source: Aneel
  • 27. Opportunities in distribution business in SP State Distribution companies in SP State Rationale São Paulo State Map • Scale gains, with optimization of infrastructure and administrative and operational processes • Efficiency gains, with implementation of the CPFL standards Key indicators – 2007 Net Revenue Market share Customers R$ billion % # million Eletropaulo 7,1 12,1 5,7 Elektro 2,3 3,7 2,0 Grupo CPFL Eletropaulo Bandeirante Bandeirante 2,0 3,0 1,4 Elektro Grupo Rede Grupo Rede 3,3 4,8 3,2 28
  • 28. Opportunities in distribution business: cooperatives and private network Cooperatives of Eletrification Breakdown of Cooperatives by Region South 34% Northeast Southeast 33% 18% Mid-West North 14% 1% 5 states with larger number of 125 cooperatives in Brazil: SP and RS cooperatives States concentrate 26% of this market 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 29 Source: Atlas de Energia Elétrica do Brasil – Aneel, 2005
  • 29. CPFL Energia’s investment case combines current portfolio growth with acquisition opportunities Competitiveness + Strategic Positioning = Sustainability Current portfolio New portfolio • Organic growth and market-share leader (13.8%) • Strategic distribution's Distribution • Operational efficiency: outperforming the companies Reference Company costs • Gains from acquired companies’ integration Distribution • “Big bang” • “Beach head” • High installed capacity growth • High EBITDA margin Generation • Long term energy contracted at attractive prices • Existing assets • Addition of 150 MW in 2008 (+9.4%) and 436 MW in 2010 (+ 25.1%) • New energy auctions • Alternative sources: • Market share leader: 23% Generation SPP and biomass • Jirau and Belo Monte • Expertise in free market sales and Value Commercialization Added Services HPPs • Consistent results • Differentiated Corporate Governance: Level III ADR and Novo Mercado Corporate Governance • Listed in the main indexes: MSCI, Ibovespa, IEE and others • Free Float above 25% Differentiated •Corporate Governance: Level IIIissuing reports Wide analysts coverage: 25 institutions ADR and Novo Mercado 30
  • 30. Brazilian market has 1,600 generation companies. The public sector concentrates 70% of these assets Generation Business: Generation Market Share % 1Q08 Generation Companies (#) 1,695 Installed Capacity (MW) 108,852 Others 35% CPFL Energia 2% Chesf 10% Duke 2% AES Tietê 3% Furnas 9% Market Breakdown Copel 4% Tractebel 6% Eletronorte 9% Cemig 6% The 5 largest groups have 50% of the market CESP 7% Itaipu 7% State-owned companies: 70% Private Company: 30% Source: Aneel 31 Market breakdown: Acende Brasil
  • 31. 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 : Projects River Instaled Capacity (MW) HPP Cachoeirinha Chopin River/PR 45,0 HPP Salto Grande Chopin River/PR 53,3 HPP São João Chopin River/PR 60,0 HPP Barra dos Coqueiros Claro River/GO 90,0 HPP Caçu Claro River/GO 65,0 HPP Baixo Iguaçu Iguaçu River/PR 350,0 HPP Barra do Pomba Paraiba do Sul River/RJ 80,0 HPP Cambuci Paraiba do Sul River/RJ 50,0 HPP Salto Verde River/GO 108,0 HPP Salto do Rio Verdinho Verde River/GO 93,0 CPFL analyses with advance and in details the generation projects that will be bid by ANEEL – main benefits: • Higher knowledge about the project • Better valuation of engineering and environmental risks • Longer term to analysis and project economic feasibility 32
  • 32. Small Power Plants Green Field Projects Discarded projects because didn’t reach the economic feasibility: high CPFL has analyzed around investments, PPA's already signed with unattractive prices or 70 SPP’s projects in impracticable environmental requirements Southeast, South and It was established partnership to studies and implementation of SPPs in Center-West regions the South Region Technical studies and Estimated investment: enrollment in ANEEL for 4 feasible in short term: 76 MW (CPFL’s stake) R$ 285 million 10 projects Feasible projects in the short term Basic projects ANEEL’s and Installation are in progress. Technical and Fepam’s/ License and studies and environmental The conclusion of the Basic Projects IBAMA’s construction enrollment in studies and Environmental Studies is Approval of the SPP´s ANEEL (necessary for the estimated to 2008, when they will previous license) be submitted to the ANEEL’s and 24 OK 2008 2008/09 FEPAM’s/IBAMA’s approval months(e) 33
  • 33. Small Power Plants Existing Assets SPPs didn’t have assured energy approved by the Government (MME) – they are included in the distribution CPFL Jaguariúna: Installed capacity: 24,283 MW 9 SPP’s in São Paulo Estimated assured energy for this SPPs (according to some studies): around and Minas Gerais States 8.97 MWmedium ANEEL’s approval expectation: 1H08 Annual estimated generation revenue: R$ 10 million Assured Energy Installed Capacity (MW) SPP (MWmedium) Feasibility Studies of Addition of Current Forecast Current Forecast Guaporé and Andorinhas 4,2 MWmedium: Andorinhas 0.51 2.41 0.46 1.50 R$ 5 million/year SPP’s repowering: Guaporé 0.67 5.00 0.62 3.78 Total 1.18 7.41 1.08 5.28 34
  • 34. Jirau and Belo Monte HPP Jirau HPP Belo Monte HPP State: Rondônia State: Pará Installed capacity: 3,300 MW Installed capacity: 11,182 MW Assured energy: 1,966.4 MWmedium Viability Studies: Eletronorte Commercial operation (1st turbine): 48 months CAPEX(e): R$ 37 bi Construction period: 90 months CAPEX(e): R$ 11 bi 2nd HPP in Madeira Complex 2nd largest HPP in Brazil Auction: May 12th/08 Auction(e): 2H09/2010 35
  • 35. CPFL Energia’s investment case combines current portfolio growth with acquisition opportunities Competitiveness + Strategic Positioning = Sustainability Current portfolio New portfolio • Organic growth and market-share leader (13.8%) • Strategic distribution's Distribution • Operational efficiency: outperforming the companies Reference Company costs • Gains from acquired companies’ integration Distribution • “Big bang” • “Beach head” • High installed capacity growth • High EBITDA margin Generation • Long term energy contracted at attractive prices • Existing assets • Addition of 150 MW in 2008 (+9.4%) and 436 MW in 2010 (+ 25.1%) • New energy auctions • Alternative sources: • Market share leader: 23% Generation SPP and biomass • Jirau and Belo Monte • Expertise in free market sales and Value Commercialization Added Services HPPs • Consistent results • Differentiated Corporate Governance: Level III ADR and Novo Mercado Corporate Governance • Listed in the main indexes: MSCI, Ibovespa, IEE and others • Free Float above 25% Differentiated •Corporate Governance: Level IIIissuing reports Wide analysts coverage: 25 institutions ADR and Novo Mercado 36