2nd Annual Brazil Conference – Itaú Securities

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  • 1. 2nd Annual Brazil Conference – Itaú Securities May 2007
  • 2. Disclaimer This presentation may include forward-looking statements of future events or results according to regulations of the Brazilian and international securities and exchange commissions. These statements are based on certain assumptions and analysis by the company that reflect its experience, the economic environment and future market conditions and expected events, many of which are beyond the control of the company. Important factors that may lead to significant differences between the actual results and the statements of expectations about future events or results include the company’s business strategy, Brazilian and international economic conditions, technology, financial strategy, public service industry developments, hydrological conditions, financial market conditions, uncertainty of the results of future operations, plans, objectives, expectations and intentions, among others. Considering these factors, the actual results of the company may be significantly different from those shown or implicit in the statement of expectations about future events or results. The information and opinions contained in this presentation should not be understood as a recommendation to potential investors and no investment decision is to be based on the veracity, current events or completeness of this information or these opinions. No advisors to the company or parties related to them or their representatives shall have any responsibility for whatever losses that may result from the use or contents of this presentation. This material includes forward-looking statements subject to risks and uncertainties, which are based on current expectations and projections about future events and trends that may affect the company’s business. These statements include projections of economic growth and energy demand and supply, as well as information about the competitive position, the regulatory environment, potential opportunities for growth and other matters. Several factors may adversely affect the estimates and assumptions on which these statements are based. 2
  • 3. Geographical Presence In 2006, Energias do Brasil distributed 24 TWh to 3.1 million consumers LAJEADO PLANT PEIXE ANGICAL PLANT ENERSUL • Installed capacity: 250 MW • Installed capacity: 452 MW (adjusted for Energias do Brasil’s stake) • Distrib. energy: 3,126 GWh • Clients: 690 thousand • Municipalities: 73 • Concession area: 328,316 Km2 • N. inhabitants: 2.1 million CESA and ENERGEST PANTANAL ENERGÉTICA ENERGÉ • Installed capacity: 293 MW • Installed capacity: 31 MW ESCELSA COSTA RICA • Distrib. energy : 8,060 GWh • Installed capacity: 17 MW • Clients: 1,059 thousand • Municipalities: 70 BANDEIRANTE • Concession area: 41,241 Km2 • N. inhabitants: 3.2 million • Distrib. energy: 12,763 GWh Legend • Clients: 1,365 thousand • Municipalities: 28 Generation • Concession area: 9,644 Km2 Distribution • N. inhabitants: 4.4 million 3
  • 4. Current Organizational Structure Focus on transparency and competitiveness EDP Group Market 62.4% 37.6% 27.65% 1 60.0% 100.0% 100.0% 100.0% 100.0% Peixe Enertrade Lajeado Energest2 Bandeirante Enersul Angical 100.0% 51.0% 100.0% 100.0% CESA2 Pantanal Costa Rica Escelsa Energética3 Generation Commercialization Distribution Legend % of the Total Capital Notes: 1 Voting capital, also represents the percentage of installed capacity allocated to Energias do Brasil. Energias do Brasil holds 23.05% of its total capital 2 Includes Escelsa’s generation assets 3 Includes Enersul’s generation assets 4
  • 5. 1Q07 Results
  • 6. Operating Performance Volume of Energy Distributed (GWh) Volume of Energy Produced (GWh) 3.0% 104% 5,966 6,143 1,469 793 823 2,037 2,105 720 3,136 3,214 1Q06 1Q07 Bandeirante Escelsa Enersul 1Q06 1Q07 Technical and Commercial Losses Volume of Energy Commercialized (GWh) 2.4% 12.6% 13.2% 12.9% 13.0% 1,657 1,697 4.1% 3.9% 4.0% 4.1% 303 235 8.5% 9.3% 8.9% 8.9% 1,354 1,462 Jun/05 Mar/06 Dec/06 Mar/07 1Q06 1Q07 Technical Commercial Other ENBR Group companies 6
  • 7. Financial Performance Net Revenues (R$ million) EBITDA (R$ million) 13.0% 20.2% 339 1,114 2% 986 10% 282 27% 11% 11% 6% 7% 16% 82% 79% 71% 78% 1Q06 1Q07 1Q06 1Q07 Distribution Generation Commercialization Distribution Generation Commercialization EBITDA by Business Segment Net Income (R$ million) 28.9% 128 Business Segment 1Q07 1Q06 % 99 Distribution 246.1 223.1 10.3% Generation 94.5 47.4 99.5% Commercialization 6.6 17.6 -62.7% Obs: Consolidated EBITDA considers intercompany eliminations 1Q06 1Q07 7
  • 8. EBITDA 1Q06 x 1Q07 (R$ million) EBITDA (R$ million) +18 -10 +63 -7 -5 -23 +2 339 +19 282 1Q06 Distribution Commerc. Contingencies Opex Other 1Q07 EBITDA Generation Tariff * Bad Debt EBITDA Margin Margin 28.6% 30.4% * Enersul’s tariff readjustment and change in Bandeirante’s RAB 8
  • 9. Costs and Expenses Manageable costs should be reduced as result of efficiency programs Costs and Expenses Breakdown of Manageable Expenses Breakdown 1Q07 st Manageable Expenses 1 Quarter % R$ million 2007 2006 Non- Personnel 69.8 70.8 -1.0 -1.4% Manageable manageable costs costs Material 9.7 8.1 1.5 18.6% R$ 549 million R$ 226 million (29%) Third Party Services 78.6 67.3 11.3 16.8% (71%) Provisions 36.5 21.6 14.9 68.9% Other 31.7 19.9 11.8 59.4% Total 226.2 187.7 38.5 20.5% R$ 775 million Third Party Services Provisions Other + R$ 3.0 MM: O&M + R$ 10.5 MM: + R$ 6.0 MM: shortfall Peixe Angical labor in reconciliation of contingencies accounts between + R$ 5.5 MM: Market Note: ENBR and Investco 1 Depreciation and amortization were excluded growth 9
  • 10. Financial Result (R$ million) Financial Revenues – Reduction in remuneration of regulatory assets due to fall in Selic basic interest rate Financial Expenses – End of interest capitalization on Enerpeixe’s debt Financial Result (R$ million) 1Q07 1Q06 Var.% Financial Revenues 62.5 69.8 -10.5% Financial Expenses (99.7) (91.0) 9.6% Net FX Result (20.2) (17.6) 14.8% Net result from SWAP operations (39.7) (54.7) -27.4% FX gains (losses) 19.5 37.1 -47.5% Total (57.4) (38.8) 48.1% 10
  • 11. Investments and Indebtedness Indebtedness – 1Q07 (R$ million) Total Debt Index Net Debt evolution (Mar/07) 3% 1.8x 3,126 1.6x* (734) 33% Net Debt / Ebitda (542) 1,850 1,879 60% 4% US$ TJLP Gross Debt (-) Cash and (-) Regulatory Net Debt Net Debt ** Fixed rate Floating rate Mar.07 Marketable Assets and Mar.07 Dec.06 Securities Liabilities ** Includes Selic, CDI, IGP-M and INPC Investments* – excluding “Luz para Todos” (R$ million) Universalization Program - 658 including “Luz para Todos” (R$ million) 192 105 466 76 22 54 16 2007 (E) 1Q07 (A) Distribution Generation 2007 (E) 1Q07 (A) * Does not include interest capitalization and/or new generation projects 11
  • 12. Growth & Value Creation
  • 13. Growth & Value Creation Our strategy to become a benchmark in the Brazilian utilities sector relies based on 4 pillars Operating Efficiency Growth in Generation EDP Group expertise Financial Discipline 13
  • 14. Value Creation OPEX Program New Organizational Structure Focused on transparency and competitiveness EDP Group Market 62.4% 37.6% Lajeado 27.65% 1 Peixe 60.0% Angical 100.0% Energest2 100.0% Enertrade 100.0% Bandeirante Enersul 100.0% IT Projects . Aliança 100.0% 51.0% 100.0% 100.0% Pantanal CESA2 Costa Rica Escelsa Energética3 Generation Commercialization Distribution Legend % of the Total Capital . Integração Notes: 1 Voting capital, also represents the percentage of installed capacity allocated to Energias do Brasil. Energias do Brasil holds 23.05% of its total capital 2 Includes Escelsa’s generation assets 3 Includes Enersul’s generation assets 3 Project Vanguarda - . SitBrasil Phase 1 • Redundancy Program Corporate 2006/7 Restructuring Project Vanguarda – Phase 2 2006 2005 Annualized savings resulting from Project Vanguarda – ~ R$ 68.4 MM Phase 1 14
  • 15. Generation – Installed Capacity (MW) 1.043 MW 1.018 MW Mimoso S. João I Peixe Angical Mascarenhas Lajeado +452MW * 4th Eng. +50MW * Coxim S. João II 516 MW Suiça Alegre Costa Rica São João: +25MW** Jucu Fruteiras Corumbá Paraíso Viçosa Rio Bonito * Capacity added in 2006 ** Startup of commercial operations in April 07 15
  • 16. Creating Growth Opportunities Participation in energy auctions Acquisition of existing assets Coal and biomass thermal plants: preliminary studies PCHs under construction: +29 MW (Santa Fé) Power upgrades: +50 MW (under study) 19 PCHs projects to be presented to ANEEL: +438 MW Feasibility studies for 7 hydro power plants: +590 MW (235 MW in partnership with Eletronorte) Authorization to build coal-fired thermal plant: +350 MW (UTE Maranhão) 16
  • 17. PCH (Small Hydro Plant) Projects Permits to exploit PCHs are granted based solely on approval of projects presented (no auction) Energias do Brasil is currently working on 19 PCH projects Total Capacity State # of Projects (MW) ES 4 74 ES/MG 4 100 SP 3 66 MS 3 65 GO 5 133 Total 19 438 – Average cost per project: R$ 0.55 million – Estimated conclusion of projects and filing at ANEEL: Feb/08 – Estimated time for grant of permit: 3-4 months after filing of projects, conditional to approval of projects presented 17
  • 18. Feasibility studies for Hydro Power Plants Concessions for Hydro Power Plants are sold in public auctions Energias do Brasil currently has 7 feasibility studies for hydro power plants under way Total Capacity State # of Projects (MW) TO* 2 235 MS 3 215 MG 2 140 Total 7 590 * Studies developed in partnership with Eletronorte – Total estimated cost of studies: R$ 12.8 million (development costs are fully refunded by acquirer of concession) – Estimated conclusion of projects and filing at ANEEL: Aug/08 – Time for inclusion of studies in energy auctions is arbitrated by ANEEL 18
  • 19. Maranhão Thermal Power Plant In April 07, Energias do Brasil acquired the rights for Maranhão Thermal Plant project (UTE Maranhão) The project has been granted Preliminary Environmental License and is registered for the next new energy auction, scheduled for June 07 – Installed capacity: 350 MW – Estimated total investment: under analysis – Estimated time for conclusion of works: 42 months after granting of Installation License 19
  • 20. Generation – Contracting Schedule Potential to resell at attractive prices Contracting Schedule * Prices in Recent Auctions 126,77 121,81 114,28 Current Price: R$76/MWh 106,95 83,13 75,46 37% 67,33 41% 41% 41% 57,51 86% 100% 63% 59% 59% 59% 14% 2006-2011 2012 2013 2014 2015 2016 ... 2005-08 2006-08 2007-08 2008-08 2008- 2009- 2010- 2011- Contracted Energy Uncontracted Energy H30 H30 H30 H30 Old Energy Auction New/Botox Energy Auction New/Botox * Total assured capacity of 609 average MW (1,018 MW of installed capacity) 20
  • 21. Corporate Governance 9 Board members (2 independent and 2 appointed by minority shareholders) 4 Board Committees Audit Sustainability & Corp.Gov. Supervisory Remuneration Business Policies Code of Ethics Sarbanes-Oxley Transparency (Dividends/Negot./ Disclosure) 21
  • 22. Market Capitalization 2005 Best Listed Honorable Ranked #1st Finalist Member in Company Mention Listed Company 2006 Volume R$ Th. Market Capitalization: R$5.4 billion 210 70,000 200 +100% 60,000 190 180 +99% 50,000 170 +92% 160 40,000 150 +81% 140 30,000 130 20,000 120 110 10,000 100 90 0 7/12/2005 9/6/2005 11/4/2005 1/3/2006 3/3/2006 5/3/2006 6/29/2006 8/24/2006 10/23/2006 12/21/2006 2/23/2007 4/23/2007 Volume R$ ENBR3 ENBR3 Ibovespa IEE IBX Updated until April 30, 2007 22
  • 23. www.energiasdobrasil.com.br May 2007