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Companhia Energtica de Minas Gerais CEMIG (CIG) Q1 2016 Results – Earnings Call Transcript

Companhia Energtica de Minas Gerais CEMIG (NYSE: CIG ) Q1 2016 Earnings Conference Call May 17, 2016 10:00 AM ET Executives Antonio Carlos Velez Braga – IR Fabiano Maia Pereira – CFO Analysts Carolina Yamaguchi – JPMorgan Pedro Manfredini – Itaú BBA Carolina Carneiro – Santander Antonio Carlos Velez Braga Good morning everyone. My name is Antonio Carlos Velez Braga, Cemig’s Investor Relations Officer. We’ll now initiate our video webcast of Cemig’s results relative to the first quarter 2016 with the presences of Dr. Fabiano Maia Pereira, Chief Officer for Finance and Investor Relations; and Dr. Leonardo Magalhaes, Controller. This broadcast can be received by phone numbers 5511-2188-0155 or 5511-2188-0188, and also through our website ri.cemig.com.br. Let’s then begin our presentation. This first slide shows in a summarized way the results of first quarter 2016 as compared to the same quarter last year. Both revenues and EBITDA and net profit has seen reductions and the main factors affecting results in the quarter include a very important one, change in the allocation of supply in 2016. In 2015, we had as a seasonality factor, we allocated much more for the first semester and in this year, it’s exactly the opposite, less energy in the first half and more energy in the second half of 2016. And if you also add a reduction in average spot price, well, also the sales of gas, natural gas, Gasmig also saw a strong reduction in sales both to thermo plants and industry, the home market for us or resident market is growing, but still not to match two those first one. Also negative equity contribution from Renova had significant effect and because of this acknowledgement of Renova, it showed a negative result which Cemig consolidates directly or indirectly via Light companies that amounts to BRL152 million. Also along the comparison, we can say that we recognized in the first quarter ‘15 a fair value gain of Aliança business with Vale which implied a fair value gain of BRL735 million. And now I hand over to Dr. Fabiano Pereira, our Finance Officer. Fabiano Maia Pereira The quarter highlights. First, the Energy Ministry has set the criteria for indemnity of transmission assets. Leonardo will talk more about that later on. Also Taesa won the auction bid in one of the lots occurred recently. We capitalized Cemig D along the lines of lowering the leverage of the company, also capital increase in Renova through Cemig GT and also we summoned an EGM for later this month related to our negotiation with the banks with regard to FIP Redentor. Also our meeting, our annual Cemig-Apimec meeting is set for May 24 at the same venue. Good morning everyone. A little bit about indemnity of transmission. It’s known by the market that the Ministry of Energy defined criteria for updating and payment of transmission that was remain from the sector. We had been discussing with Aneel ever since 2013 with [indiscernible] These criteria go through the indemnification. The amounts in our balance by 31st March, 2016 is around BRL.1.90 billion as updated by GPM up to this point and according to this order of the Ministry, it was defined and updated by the IPCA. It was going to be remunerated based on the cost of capital which is around 10.44%. But this is just an estimate, initial estimate and it should be – it might be affected other calculations but it had relevant effect to the company showing revenues, financial revenues amounting to BRL500 million this quarter and I believe – we believe that it was really a gain for the sector, although it’s a long period for receiving eight years at least our cash is well defined and I think this was good news that came out in April. A little bit about the disclosed data as Velez had mentioned before. Consolidate net revenue saw a drop of almost 24%, lower volume electricity sold in the first quarter, also associated to the spot price, a little lower than in the previous year. Another point that also impact net revenue is the drop in supply. This situation has come all the way from last year. São Simão is now transferred to the quota regime and these are the main points I believe for revenues. As for operational expenses, we should stress again as we have been doing ever since last year the intention and the planning of the company things as reducing PMS and we keep on bringing it lower than inflation, also lower cost of purchasing supply due to a price drop and supervision that were kept us in the report [indiscernible]. Our main point is with regard to provision, I would like to add anything, well I think as we see the evolution of operation expenses of CEMIG, consolidated is we see our great effort to reduce costs and provisional amounts related to outsource services also highlighting a little increase in personnel. That’s one off effect because it had to do with this collective agreement with the employees and even if we had provisions to cover the effects of that agreement in November as it was signed, it had retroactive effects and it had some effects due to that. This will be diluted throughout the year as we expect 2016 agreement retroactive to 2015. We have seen increments – we’ve seen that part of this effect is associated to tariff impact, almost 50% last year and the other provision is associated to the age of these debts and the company is taking internal measures involving these four issues and how to deal with that, so that it won’t be perpetuated into the coming semesters. And it was more significant in this quarter but it trends to down. We will see already in the next quarter efforts – result of efforts made by the company to reduce default and also costs associated to labor claims. Now about EBITDA that reflects what we’ve been saying so far, reduction in liquidation of spot prices, allocations in the first quarter as compared to last year, the same period. Fair value also increased 643 million or 735 million rather. And if you compare EBITDA to last year, the drop is 75%. These are the diagram by company that’s more like an EBITDA, a managerial EBITDA, it’s not accounting figure but to show the flow, the cash flow of each company of CEMIG, CEMIG GT, CEMIG D, Light and consolidation of Renova, Alianca also contributing to generation of cash of the company. With regard to consolidated net profit, we saw a drop – a 99% drop to 1.4 billion to nearly 500 million that has to do with Renova negative equity method contribution if you compared to last year also considering the stockholding transaction with Alianca that increased first quarter 2013. These are the two main points to be commented upon as for debt profile. During this first quarter, we proceeded to most of the rolling over of the company debt with maturity still to come in 2016. We can say from those 3.9 billion, 600 million have already been rolled over in April. This is partially as a result of the higher interest rate, Selic rate and leverage is now a little above what we saw last year also due to this dip in the figure that should be recovered along the year. As for the CEMIG GT, the debt maturing in 2016 is 2.9 billion, most of it in December. We had to assume that [indiscernible] granting and the banks that we are dealing are already negotiated the take out of that debt. A good deal of the debt is already rolled over to 2017, 2018 and 2019 and this remains our strategy to seek extended tenures to settle that debt. In terms of investments, what has been planned for the year is 4.7 billion, of what we have already done in the first quarter and has mostly to do with the auction that we won last year buying the grant of hydro plant. As for our cash, closer to the end of a quarter that was almost 2 billion, I think that’s more than 2 billion. That’s an important highlight and that helps us to go through this delicate moment from the macroeconomic point of view. Also the net effect of CVA and other financial operations, we have got more from the tariff than from CVA this quarter. Tariff flags also helped and Cemig distribution had less pressure from demand as compared to 2015, the prices were too high that will result in an additional CVA and this reduction of this pressure in the first quarter, we saw it as a positive phenomenon. We are concerned as said before with rolling over our debt and keeping it in tandem with our cash generation. It’s a stable profile, not very relevant variation from earlier this year. And BRL1.5 billion that we applied in our grants, concession granting that’s up to almost – more than BRL2 billion that protected us from many effects from last year. Our main concern is, we are protecting our cash flow and I think that in this year we will keep adequate levels and perhaps even reduce our leverage as we have today. So these were the highlights. Thank you. Question-and-Answer Session Operator [Operator Instructions] Our first question comes from Ms. Carolina Yamaguchi from JPMorgan. Carolina Yamaguchi Good morning. Thank you. What about the negotiation of the Jaguara and Miranda renewal, and the negotiations with the government, any new date, because it’s being canceled? Fabiano Maia Pereira Thank you, Carolina for your question. Negotiations are still ongoing. We are talking to the government seeking a solution to Jaguara, it’s already at the Supreme Court and to represent the others. We are giving it sometime because of this recent change in power and ministry, which we would resume the talks within short time. Operator Our next question comes from Mr. Marcelo Farah [ph] from UBS. Unidentified Analyst Good morning. Along the lines of this question, and about leverage 4.4 EBITDA, I understand that you must be keeping it below that level from the December position. Then what about the next stockholders meeting, it should be reduced to 4.14 [ph]. Is this really falling down over the year? EBITDA, due to the strong and if you compare with a new basis, our EBITDA, this will make it hard for you – even harder for you to comply. Perhaps, you should renew that and pay some extra to do that. In view of your super high leverage, do you still expect to come to some agreement? Fabiano Maia Pereira Yes, to the agreement, we understand that we have a good conditions reach an agreement. And as for the leverage, we have already mentioned in our last presentation, we mentioned that Cemig D is reassessing its portfolio, which allows us to reduce our debt within the mid-term. In addition, we should remember that specifically with regard to covenant, covenant is a statutory covenant, it’s red in December and as we submit the budget to our general meeting, we have already brought to them a request to keep that covenant a little above the statutory level. Unidentified Analyst Yes, in your remark, you said that, you are considering selling assets for sufficient or stock holding in Taesa could be considered. What exactly on your mind, selling some assets or what? Fabiano Maia Pereira Yes, we are looking at other assets as well, fundamentally assets we have no control over that. Our company’s planning includes focusing on these cases and put them on sale. Of course, to grow the profit to the company. As for the hydro plants auction, what’s the next step for a solution to pay some bonuses or precisely that point is still being negotiated. Unidentified Analyst Thank you. Excellent. Operator Our next question comes from Mr. Pedro Manfredini from Itaú BBA. Pedro Manfredini I have a question on the line of this investment within Cemig, talk about that. It’s a long time, what has evolved in the recent months, we understand that this would be a unique opportunity perhaps to sell assets that you don’t control. What has really evolved over the last six months with that regard? Also another question, related to that, why is it that you took a contrary position instead of disinvesting, you had injected more capital into an order, that’s going against the market trends, putting more money in a company that will not generate cash in the short run. Renova would be perhaps one of the assets to be disinvested given what we’ve heard in some of the media, relationships with Light and Renova and perhaps CEMIG should follow suit and terminate its participation? Fabiano Maia Pereira Well, Pedro, first of all, we must be aware of the fact that CEMIG is a large company with a very complex government. So in recent months, we had very strong work, tried to convincing people internally to the correctness of our strategy. Some projects have already been approved by our board and we’re still negotiating. For Renova negotiations, specifically that contrary to what I’ve just said, in Renova, we’re co-controllers or co-owners. We have an interest to see that it keeps strong and gets stronger. That is not to be mixed with I had said before. So any discussions going on about the portfolio, you have Alianca, you have pretty highly leverage balanced. It was said some time ago that there was this possible arrangement with Light, but you have got to launch it in San Antonio, which is I’m not sure if it’s Alianca, but any other possibilities in perhaps Alianca could absorb some of these assets in the reduced leverage of CEMIG. Well, the strategic planning with Alianca, we’re discussing that with our partners there. We are convinced that they’re an excellent business with a great potential for growth in brownfield rather than Greenfield. We look at Belo Monte, sometimes along that greenfield that will take a while to start generating cash. That’s not the way to follow by Alianca in principle. Pedro Manfredini Very clear. Thank you. Thank you for the answers. Operator Our next question comes from Ms. Carolina Carneiro, Santander. Carolina Carneiro Good afternoon. I’d like to hear your comments on cost performance, especially in the distribution, despite the fact that you have reduced part of the agreement you had for profit sharing, we saw that there was this pressure on supply. I would like to understand better, is cost profile working on any better way to improve cash generation? Thank you. Fabiano Maia Pereira At CEMIG, we’re looking strongly. We have structured resources to reduce the levers of the company. We are focusing now on productivity and operational efficiency. We’ve just completed an internal effort and we’re receiving with that into the next years. We expect that to increase substantially, some studies already demonstrate that this is possible and this is one of the points that we’ve been dealing with. We have additional budget approved by the board taking reduction in that provision. We are seeking also strong reduction in the specific point. Carolina Carneiro That’s all right. If you allow me one more question only, about the impact on the volume of the distributor, especially involving an important industrial client, we have seen that with other distributors, if you see any movement, any expectations from the market with regard to distribution volume for this year. Fabiano Maia Pereira If I’m not mistaking next week, in our general assembly meeting, we’ll produce that to you. Can you wait until there? Carolina Carneiro Yes. Thank you. Operator [Operator Instructions] We now close the Q&A session. I’d like to hand over the floor to our Chief Officer for Finance and Investor Relations, Dr. Fabiano Maia Pereira for his final remarks. Please, Dr. Fabiano, you may proceed. Fabiano Maia Pereira My final message is here, I’d like to reinforce our willingness of our top management, our board, our employees to reduce leverage and to improve operational efficiency. Our focus for the upcoming years and as we’ve said last year, some analysts predicted that we wouldn’t be able to deliver, but we did deliver and we will keep on delivering. That’s our main message. Thank you and see you next time. Operator The video webcast with first quarter 2016 results of CEMIG is now closed. We thank you all for participating. Good afternoon. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited. 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Companhia Paranaense de Energia’s (ELP) CEO Luiz Fernando Leone Vianna on Q4 2015 Results – Earnings Call Transcript

Companhia Paranaense de Energia (COPEL) (NYSE: ELP ) Q4 2015 Earnings Conference Call March 18, 2016, 09:00 AM ET Executives Luiz Fernando Leone Vianna – Chief Executive Officer Luiz Eduardo da Veiga Sebastiani – Chief Financial Officer and IR Officer Gilberto Mendes Fernandes – Officer of Business Management Jonel Nazareno Iurk – Business Development Officer Antonio Sergio de Souza Guetter – President of Copel Distribuição Ricardo Goldani Dosso – Chief Executive Officer of Copel Renováveis. Analysts Carolina Carneiro – Banco Santander Miguel Rodrigues – Morgan Stanley Lilyanna Yang – UBS Operator Operator Good morning and thank you for waiting. Welcome to the Companhia Paranaense de Energia Copel Call to present the Fourth Quarter 2015 Earnings. I would like inform you that all participants will be in a listen-only mode during the company’s presentation. And following, we’ll start our Q&A, when further instructions will be given [Operator Instructions]. Before we continue, we would like to make clear that any statements made during this conference call involving Copel’s business outlook or financials and operating forecast and this constitute to beliefs and assumptions of the company’s management and information currently available. Forward-looking statements are not guarantees of performance and involve risks, uncertainties and assumptions given that they refer to future events and, thus are dependent on circumstances, which may or may not occur. The general economic conditions, industry conditions and other operating factors could come to affect strategic performance of Copel, and lead to results that the materially different from those expressed in such forward-looking statements. We have presented with us at this call Mr. Luiz Fernando Leone Vianna, CEO of the company, Mr. Luiz Eduardo da Veiga Sebastiani, CFO and IR Officer, Mr. Gilberto Mendes Fernandes, Manager of Business or Officer of Business Management, Mr. Jonel Nazareno Iurk, Business Development Officer and Mr. Antonio Sergio de Souza Guetter, President of Copel Distribuição and Mr. Ricardo Goldani Dosso, CEO of Copel Renováveis. The presentation will be followed on the company’s website www.copel.com/ir. Now, we would like to ask Mr. Luiz Fernando Vianna, the company’s CEO. Please Mr. Vianna, you may proceed. Luiz Fernando Leone Vianna Good morning. Thank you very much. Good morning analyst, the press, investors and all the interests in our Copel. And welcome to our call on the results of the fourth quarter 2015. Thank you for all those, who follow us. And I would like to say that [indiscernible] very much to talk to you. I wish to talk first of all about the events, which was significant in 2015. Especially which contribute throughout the rebalancing of the electric sector. First of all, let’s talk about generation, and today we see it in new status with much news about floods during the consequences. Last year, the situation was totally different, the hydrologic prices reached its peak and our [reservoirs] (Ph) hit the lowest level, historic level shrinking the capacity for hydro generation, which was a 15% below, we expected in 2015 and really because for the purchase of energy and it was very difficult to adjust the coverage of the contracts of those who have water as their main source of energy. All this problem is because the agents of the sector mobilized to make possible – to re-access the hydrological risk a solution which brought a little bit of relief for the cost of generators and contributed to mitigated risks that much costs up in the period of critical hydrology and the dispatch – a thermal dispatch. Copel offered to re-access the hydrological risk of the CCEAR. For Copel GeT and Mourão with a recognition of 134.7 million in the fourth quarter to recover cost for the purchase of energy. On the side of the distribution, [indiscernible] of the Brazilian economic crisis which are reflects for the consumption of energy contributed to a drop of 0.7% of the captive markets of Copel Distribution in 2015, the result is negative. However, it is much better than that of Brazil as a whole, which dropped 1.7% clearly showing a greater resilience of the Parana economy even in an economically adverse the situations which Brazil finds itself. The drop in the consumption of energy also come from the so called [indiscernible] which began to be present with the introductions of the tariff flag and the extraordinary tariff review carried out in the beginning of 2015 in April. These mechanisms which got significant readjustments for consumers, were essential to make the tariffs more adequate to the reality and the cost to protect us and consequently adjusted greatly weaker cash position of the distribution. In 2015 Copel Distribuição receives 960 million through the tariff flag resulted which we use to knock off cost for the purchase of energy and charges. Another significant drop was the conclusion of the process of review of the distributors concessions. In December, we sign the fifth addendum to the contract of concession of Copel Distribuição which extends the concession until July of 2045 and it brings about new conditioning factors of financial economic and quality efficiency to be complied with this year. And talking about Copel Distribuição, [indiscernible] has a new CEO in 2016, Mr. Antonio Sergio de Souza Guetter, a carrier employ of Copel, Mr. Guetter is a Civil Engineer and helps the position of CFO and IR and in 2014 and many other executive job throughout his carrier in Copel and [indiscernible] Copel. I’m quite sure that Mr. Guetter will greatly contribute to the continuity of the business particularly at this moment in which then renew concessions is imposing new challenges. On our next slide, I would like to say that in 2015 we kept up to pace and we once again surpass the total of R$2 billion in investments. For 2016, the number is even larger, we plan to invest R$3.2 billion and part of this amount will be [emerged] (Ph) through generation, including the construction of wind farms and the payment of the concession of the Governador Parigot de Souza plant which was won back in November of last year. With this new concession contract already signed, Copel generational transition will operate it and maintain the plant paying the plant until 2046. Adding in 2016, a revenue of the service fees of 130 billion a year. And as from 2017, the seismic revenue, we will also announce the revenue from the sale of energy 30% of the total of the energy at this plant which will the Copel will be able to sell. We also won the right of building and operating three substations and 230 kilometers of transition lines in Parana and Santa Catarina. These projects were won without a discount and when operational will add R$19 million to Copel GeT work and still regarding ongoing project in January of this year and we’ll recognize 626 days with a responsibility for the hydroelectric plant Baixo Iguaçu and [indiscernible] already other obligation selling from the delay. And in 2018, we will have the first turbine coming online. And finally, I would like to say that in January of this year, Copel Comercialização was establish, which has as an objective reinforce the position of Copel in this market allowing for greater agility and also flexibility in the commercialization of sale of energy. The subsidiary will add in a segment with potential of growth and will be able to sell both conventional energy and energy with incentive. Now I would to ask Luiz Eduardo Sebastiani, our CFO and IR Officer, who will going to further details on the earnings of the period. Luiz Eduardo da Veiga Sebastiani Thank you so much, Mr. Vianna. Good morning and thank you once again for participating in this call of results. I would like to start with some remarks about the company’s leverage level. As you can see on slide five, the Copel’s debt level measured by the net debt over EBITDA ratio grew in the last few years and 2.8 times at the end of 2015, in-spite of the growth our indicator is that with adequate systems [indiscernible] covenant was 3.5 times. It’s also important to remember that the increase is connected to our robust program of investments as mentioned by our president. And also we have to mention the important part is developed towards BNDES and this will allow the financial support necessary to implement several projects of the company that we are already using and having ahead of us. As we have already told the market in January, we are working on the issuance of 300 million in debentures for wind farm Brisa Potiguar which will be underwritten by the BNDES and BNDESPAR. These debentures have differentials for the term of 16 years and the fact that will be split into two series. One will be paid to the long-term interest rate and the other is for the adjusted consumer price index and will be an important reduction of financial costs. And with all these earnings and details, we would like to talk about something non-recurring index which had an impact on the company, especially in the fourth quarter. The most relevant of that has to do with legal question and we had an important progress in our mitigation with [indiscernible] engineering. In October 2015, the superiors of the court announced a sentence of the Justice Court of Paraná, which sentenced Copel to pay 540 million regarding execution of work for the low hydroelectric plant about regarding the bypass of the Jordão River. Based on this decision, the company has revised this loss of estimated from the suit and recognize a reversion of 210 million in the fourth quarter 2015. Another important events was the test of impairments in the assets of generation, which led to reversion 66 million recognized in 2014 motivated by better hydrologic conditions, which increased the outlook of generation for 2015. And we also had a renegotiation of the hydrologic risks, which led us to reversion of 135 million of cost for the purchase of energy that already as mentioned by our CEO. Slide six. Showing the earnings, the operating results which grew 6% in 2015 surpassing the total of 14.7 billion, the main motive for this expansion was a growth of 32% in the revenue on the delivery to end customers, reflex of the readjustment supply to the tariff to Copel Distribuição during 2015. Again which we had two adjustments were necessary to deal with the increases of cost with charges of energy. On the other hand, the revenue of delivery to use the utility, which shows a great part of sales of the Copel GeT and [indiscernible] Araucária Thermoelectric had a reduction of 15% in 2015 reflecting a reduction of the stock price. And the revenue from availability had a growth of 7% reflecting this effect of this ratios partially impacted by the retraction of the good market of the distributor. On the item other operating revenues has increased to 33%, particularly the expansion of the client based of Copel Telecom and [indiscernible]. In the next slide we have detailed the cost and the operating expenses, which totaled almost 13 billion in 2015 and amount 5% above that was [indiscernible] in 2014, which stems to a great extent to the increase of across both for retail, which rose 19% year-on-year. This increase reflects the higher cost of the acquisition of Itaipu Energy, which rose significantly due to the reinvestment of the tariff or depreciation and the readjustment of contracts by inflation and the end of the transfer of resources from CDE and the ACR accounts. And we had more expenses with the charge against the good use and the greater dispatch of the thermal plant. Management’s costs went up 14% because of more expenses with personnel and third-party services and inflation, and the necessary costs to [indiscernible] Copel quality standards and we had a great quantity of the good periods, climate events throughout the year in Parana. Now this line of provisions and reversion show the reduction of 83% of for the period due to the reversions of the litigation of [indiscernible] and impairment already mentioned. Slide 8 shows the details for 10% of amount above the booked in 2014 totaling 2.6 billion in 2015 with the margin of 18% over the operating revenues. The first generation of Copel generating plant which accounts for 68% for the consolidated EBITDA, Copel Distribuição accounts for 12% and Copel Telecom 4% the other group companies which account for 16% and the main contribution came from the Thermoelectric Araucária. Regarding the EBITDA Copel GeT closed 2015 with the margin of 61% Distribuição was 3% and Telecom 37%. As we had many extraordinary efforts in the period, we presents on Slide 9 the adjusted EBITDA of the group and the main subsidiaries. On Copel GeT notwithstanding the effect of renegotiations of ESS or the reverse of the litigation of [indiscernible] and the impairment test EBITDA would have been 17% lower than booked in 2014. And the main reason for this drop is a greater deficit of [hydroelectric] (Ph) generation and lower spot price compared to last year, but the distributor is considering that only the investment in the pictorial assets and liabilities, which was booked in 2014. 2015 EBITDA was 36% lower reflecting market attraction greater cost with the service of third-parties and with provision for several events. Notwithstanding these events, consolidated EBITDA would be 20% less than in 2014 and the plant has actually exposed to lower dispatch of the Araucária. Slide 10 will show the consolidation net income of Copel, 1.3 billion in 2015, 5% lower than that of 2014, analyzing the results of [indiscernible] with the Copel Distribuição registered an income of 206 million, a drop of 53% in comparison to 2014 an year where have the register of the total assets driving results. Copel GeT closed the period with income of 1 billion, 51% higher than that of the previous year and Copel Telecom had a profit of [55 million] (Ph) a drop of 7% year-on-year. These were our highlights and we are now [indiscernible] for questions. Thank you very much. Question-and-Answer Session Operator Thank you very much. We’ll now go on to Q&A [Operator Instructions] Our first question comes from Carolina Carneiro from Santander. Carolina Carneiro Good morning and thank you for the call. My question has to do with the cost performance. Even without reversions with provision and with furthermore plants that you mentioned in your release. We see particularly on the item other costs, we will have a significant improvement regarding other causes. So what led to the second performance of other costs and leaving aside the provisions reversions? Just to give us an idea what would be the cost performance especially in the distribution. Unidentified Company Representative Hello Carolina, I would like to ask [Technical Difficulty] manager, who will answer your questions. Unidentified Company Representative Hello Carolina. Yes, in the fourth quarter regarding other costs. We worked hard to review everything which we had in fact to review all our costs and this was a result and assets receivable and accounts receivable and [indiscernible] growth was directly with process and we want to receive these as soon as possible these outstanding assets. Carolina Carneiro And you already talked about these discussion about tariff review I’m sure. So could you give us a little idea about the expectation and what can we expect for the first number to be from date and when do you think this will be done and how much? Antonio Sergio de Souza Guetter Hello Carolina, this is Antonio from distribution. Thank you for your questions about the tariff review. What I can tell you is asset base has doubled from 4800. And now as of next we will be checking out the numbers. And regarding the revision, product revision the numbers have already been handed over to ANEEL, they will annualize them and then they will give them back to us, submit them back to us. This would be on the 23. Carolina Carneiro Thank you. Operator Our next question from [indiscernible] from Itaú. Unidentified Analyst I have two questions. The first regarding the reversion of provision, because of some changes in the plants and hydrological risks. So what would be the driver for additional revision of this provision about 800 million and expectations. So I think in 2015, still 2016 will be – spot market will it drive some additional reversion of these 800 million. And my second question is the energy commercialization. You know that you have an excess for this year and this would increase in the next few years. So could you give us an idea of what the company is expected to re-contract this year. What you have in review? And if you allow me a third question, question of reclassifying, as all distributional companies are doing, this value that you gave us for the first quarter [indiscernible] of the variation, does this refer to all of 2015 or early for the fourth quarter. Unidentified Company Representative Hello [indiscernible] our results for the first question accounting manager. Unidentified Company Representative Hello [indiscernible]. First of all our provision for thermal, we work with the best estimates for our responsibilities, which still has to be analyzed by ANEEL. So to the objective, I would say that this variable regarding responsibility and then to the future bring some reversion higher reversion that we’ve seen in 2015. We are working hard on this negotiation on the discussion within ANEEL and the variable can bring something positive here. Regarding the third question and regarding reclassification of the exchange problem with Itaipu most distribution companies have done – do and this reflects the whole year of 2015 not just the fourth quarter. Mr. Vienna will talk about your second question about commercialization. Luiz Fernando Leone Vianna [indiscernible] well the commercialization company was to tell the purpose, the tell purpose that we have contracted and to act as a shield of keeping customers from our captive market from going to the pre-market. If consumer in terms intends to go from our captive market and we are noticing such a search, a difficulty, or we are not seeing other consumers are seeking out our commercialization company. Next one, we will have the first auction for selling energy. Unidentified Analyst And the commercialization strategy if you could break down this information please, whether it would be prudent now of a short-term product or during this medium long-term or are you really focused more short-term one year or 24 months? Unidentified Company Representative [indiscernible] we intend to focus on medium long-term, this results mean that we will have no interest in the short-term but the focus will be on medium long-term. Thank you very much. Operator Our next question comes from Miguel Rodrigues from Morgan Stanley. Miguel Rodrigues Good morning. Could you talk about the realization with the distributors so what are your plans to keep the quality metrics and what kind of investment will be needed to keep these metrics to transition period. Luiz Fernando Leone Vianna Thank you, Miguel Rodrigues. I would like to ask Ricardo Dosso, CEO of Copel Distribuição to take the floor. Ricardo Goldani Dosso Hello Miguel. The issue of the new metrics for distributors needs to be very focused on these items. Our strategy is to use as soon as possible investments in technology. We have used the benchmark to adapt our technology as fast as possible and the technologies which has already been tested throughout the world the best possible. And also the budgets for the program which that we have is such that we will be [indiscernible] the most difficult point and about the return as quickly as possible and run no risk to be exposed to long-term issues. We have a bit of leeway on first and second year to do the necessary investments to go and see the continuity of the concession for the further years and we are also coming with an estimate of what the official investment would be. And this would be integrated into the addendum as just been discussed and in operating cost how much operating costs would be needed to reach – to achieve our objective. The investments is about R$500 million for the next few years, but for 2016, 2017, 2018 this will be greater investments again to improve the quality of the grids. Miguel Rodrigues And operating costs will there the additional costs? Ricardo Goldani Dosso Yes, obviously investments in quality of the grid automatically brings – well bring debentures cost reduction. And we have to consider when possible outsourcing and I have said that we have to do a surgical analyses and attract problem generally in more rural areas where they generate high maintenance costs. So we have to use these investment to get a return [indiscernible] and we have an immediate cost reduction, also plan like therefore reducing our fleet, if we have – as I mentioned probably grids. Operator Our next question comes from Lilyanna Yang from UBS. Lilyanna Yang Thank you for this opportunity. I have two questions. First of all, the project of transmission lines. Why such a delay before coming into operation and the investments seems to be more or highly individual guidance? Second question about demand, what about the demand for the regulated sector? [Technical Difficulty]. Luiz Eduardo da Veiga Sebastiani Good morning Lilyanna this is Veiga speaking. I will ask President Mr. Vianna to take the floor. Luiz Fernando Leone Vianna In fact, we have a delay the transmission lines, it causes [indiscernible] the environment causes, what have bought these delays? We have greater concentrated our resources human, financials and now we will have at the end of the month we will start working on these lines. So finally, we will solve this. For the investment point of view, this is quite recent we have investments realized up to now of [1.560 billion and 64 million] (Ph). In this is market share, a higher market share would established 38.3%. So it’s very important to say that even CapEx is above the quarter, we are still well below the CapEx foreseen by ANEEL. But I think the most important thing is coming into operation of design from next month. Thank you. Could you repeat the second question please? Lilyanna Yang Give us some idea of what the growth of demand would be for the next year, for the next quarters. And you said Copel has rolled an auction to sell energy. So why not use your virtualization strategy and especially your special grant and why not buy energy by bilateral with your commercialization company? Luiz Fernando Leone Vianna First of all the question of the auction, we have a legal point, which we have to make this sale of energy even if it is to our own grant. This is not what to be done otherwise, but we have to give transparency, there are some requirements which we have to comply with. Now obviously our clients obviously they have special treatment. Thank you. Operator [Operator Instructions] If there are no more questions, I would like to ask our speakers to make their final remarks. Luiz Fernando Leone Vianna I would like to thank you all very much for coming. And we said, 2015 was a very difficult year and we are very pleased to be able to come to the end of this year in a very positive situation. My message is that we believe that 2016 will be even more difficult, the challenges would be even greater, but we also believe that we will have a good year for our Copel. Once again, I wish to thank you all and I wish you a good weekend. Thank you. Operator Copel call is now closed. Thank you all for your participation and have a good day. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. 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Courage Required To Ride Out Volatile Markets

By Brian Levitt, Senior Investment Strategist As investors contend with the worst start to a year for the equity markets in recorded history, we focus on one of our favored principles of sound investing: Courage. Winston Churchill once said, “Courage is rightly esteemed to be the first of human qualities because it is the quality which guarantees all others.” Anything in life worth achieving requires consistent courage and fortitude. Investing is no different. Today’s market news and challenges, while daunting and significant, pale in comparison to events of the past such as the Great Depression, two world wars, 9/11, and the 2008 financial crisis. Every generation faces challenges that often appear both unique and overwhelming at the time but when viewed through the sobering lens of history are judged to be neither (Exhibit 1). Markets historically continue their inexorable climb. Why? Because in spite of our challenges and shortcomings, the human race is remarkably resilient and people are masterful inventors and innovators who always strive to create a better place for themselves and society at large. Financial markets have always reflected the improving human condition. Fact: Corrections Happen Often Market corrections happen fairly often, even in good years. 1 From 1981 to 2015 the S&P 500 Index experienced at least a 5% intra-year decline every year but one (1995). The average annual correction over the past 34 years has been 14.4%! In spite of these declines, equities posted positive total returns in 29 of the last 35 years, with an annualized return of more than 11%. As Exhibit 2 illustrates, volatility does not equal loss, unless of course you sell. History shows it doesn’t take very long for market corrections (declines of greater than 10% but less than 20%) to reverse and return to prior peaks. The mean time to market recovery has only been 107 days, 2 or shorter than the National Football League season, which always seems to go by way too fast (Exhibit 3). While true bear markets (declines of greater than 20%) do take longer to recover, it should still be of little consequence to long-term investors. A $10,000 investment made 50 years ago, on January 1, 1966, would be worth over $2.2 million today, even with all the corrections and bear markets of the last half-century. In the words of the Greek philosopher Plato, “Courage is knowing what not to fear.” It remains sound advice for investors, who should have the courage to know not to fear market swings. Compelling wealth management conversations is a program designed to help provide philosophical and historical context and perspective to keep investors “buckled in” and stay the course during uncertain times (and when have times not been uncertain), while providing a framework to help identify the best opportunities going forward. Click to enlarge 1 Source: Bloomberg, 12/31/15. Past performance does not guarantee future results. 2 Source: Ned Davis Research, 12/31/15. Past performance does not guarantee future results. 3 Source: Bloomberg 12/31/15. Past performance does not guarantee future results. Mutual funds are subject to market risk and volatility. Shares may gain or lose value. Carefully consider fund investment objectives, risks, charges, and expenses. Visit oppenheimerfunds.com or call your advisor for a prospectus with this and other fund information. Read it carefully before investing. OppenheimerFunds is not affiliated with Seeking Alpha. ©2016 OppenheimerFunds Distributor, Inc.