Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ___X___ Form 40-F _______
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes _______ No___X____
Summary of the main points of attention (1/3) | ||
The content below presents the main points of attention identified during the accounting due diligence procedures. Accordingly,, it does | ||
not include all matters identified and discussed in the due diligence report, and, therefore, must be read jointly with the whole report in | ||
order to provide a comprehensive understanding of the matters identified. |
| |
1 Financial position | We understand that those factors may impair the obtainment of an | |
The Company has incurred in consecutive losses (R$ 4.9 billion in 2016 | EBITDA on a recurring and normalized basis, making it more difficult, | |
and R$ 2.3 billion in 2015), reaching an accumulated loss of R$ 13.9 | therefore, to compare the historical periods. | |
billion as of Dec-16 and a net shareholders' equity of R$ 9.3 billion. | 2 Impairment/onerous contract | |
In addition, we identified an adjusted net indebtedness (after our | ||
adjustments and reclassifications) as of Dec-16 of R$ 9.9 billion and | The concessions of the Eletrobras distribution companies expired in | |
negative adjusted EBITDA for 2016 of R$ 1.2 billion. | 2015. Although Decree no. 8461, of June 2, 2015, provides for the | |
According to the management, the main reasons for the Company’s | extension of the electric energy distribution concessions, on June 22, | |
2016, the 165th Extraordinary General Shareholders’ Meeting of | ||
current financial situation are: | ||
Eletrobras decided not to extend the concessions of its controlled | ||
- | Significant value of assets in service not yet included in the | |
“armored” basis [base blindada], resulting in a tariff below the one | companies of power distribution. | |
necessary to cover the operating costs; | Accordingly, the Company started to operate as a public utility | |
- | Geographical characteristics, extensive areas, and low concentration | Company, on a temporary basis, until the earlier of the assumption by a |
of population in the company’s area of operation, generating | new concessionaire or December 31, 2017. | |
operating costs higher than the levels defined by the regulatory | As a consequence, considering that the Company has power purchase | |
agency for purposes of definition of the subsidies to be received; | agreements in force for periods going beyond December 31, 2017, a | |
- | Delay in the receipt of subsidies (CCC, CDE, CVA, among others); | provision for impairment of the fixed assets was registered in 2016, in |
- | High level of client default and technical and operating losses; | the amount of R$ 63 million, as well as an additional provision for |
onerous contract in the amount of R$ 813 million. | ||
- | Late payment to suppliers and other liabilities (as a consequence of | |
the items above), generating cash unbalance and increase in | In the management’s view, after conclusion of the privatization | |
expenses with financial charges and arrears penalties. | process, associated with a program to bring back the company’s | |
We should stress that the Company’s current financial position, | financial health, those provisions may be reversed, not necessarily | |
associated with the tariff gap (e.g., significant volume of assets in | generating a future cash expenditure. | |
service not yet included in the “armored” basis), with reduction in the | ||
investment level during the period of provision of the services, among | ||
other factors, may result in additional risks for the Company, mainly in | ||
the last fiscal years. |
Privatization of the Eletrobras System Distribution Companies | 10 agosto 2017 |
PwC | 3 |
Summary of the main points of attention (2/3) | |
The contents below presents the main points of attention identified during the accounting due diligence procedures. Accordingly, it does | |
not include all matters identified and discussed in the due diligence report, and, therefore, must be read jointly with the whole report in | |
order to provide a comprehensive understanding of the matters identified. | |
3 Lawsuit against all distribution | 4 Deverticalization Process |
companies | |
With the interconnection of the isolated system of the northern region, | |
A public civil action was filed by the National Consumers Association – | the Company needed to deverticalize its operation in the capital of the |
ANDECO against all Electric Energy Concessionaires in the country | State of Amazonas (and in some cities of the metropolitan region), |
with respect to prevention and remediation of collective damages | segregating the electricity generation and transmission operations from |
against consumers, with a request for preliminary injunction in order | its distribution operation. |
for the companies to refrain from charging the claimed losses from the | As to its corporate documents, the transition took place on June 1, |
consumers in the electricity bills, including pro rata, as well as the | 2015, when its assets and liabilities directly related to the generation |
losses sustained due to billing or measurement errors, theft, and fraud | and transmission operations were transferred (by means of capital |
in the period from 2010 to 2014. ANDECO also pursues the annulment | increase) to the wholly-owned subsidiary Amazonas Geração e |
of all ANEEL Resolutions that allow the collection and inclusion in the | Transmissão de Energia S.A. (“AmGT”), specifically created for that |
bills of sums related to non-technical and technical losses. The value of | purpose. |
the matter is R$ 27 billion, but the amount charged from Amazonas | |
Energia is R$ 10.9 billion. | The last stage of the deverticalization process, still pending approval by |
some of the Company's creditors, consists in transferring the equity | |
The plaintiff maintains that, notwithstanding ANEEL’s authorization, | stake held in AmGT to some Company of the Eletrobras Group, but |
the prorated billing of non-technical losses (fraud, theft, measurement | there is not an estimated date yet to complete the process. |
and billing errors, and supply without measurement) is groundless and, | |
therefore, the distribution companies must indemnify the regular | In our view, completion of that procedure is extremely important for a |
consumers in twice as much (double indemnification provided for in | successful privatization of the Company, and should be discussed in |
the law) the amounts charged in the period from 2010 to 2014, | detail with its legal advisors. |
according to their respective balance sheets. It also pursues the | |
annulment of all ANEEL Resolutions that allow the collection and | |
inclusion in the bills of sums related to non-technical and technical | |
losses. | |
This lawsuit was classified by the Company’s lawyer as with risk of | |
possible loss. Due to the relevance of the case, we recommend that you | |
further develop the discussions with the legal area about the potential | |
risks that this matter involves. | |
Privatization of the Eletrobras System Distribution Companies | 10 agosto 2017 |
PwC | 4 |
Summary of the main points of attention (3/3) | |
The contents below presents the main points of attention identified during the accounting due diligence procedures. Accordingly, it does | |
not include all matters identified and discussed in the due diligence report, and, therefore, must be read jointly with the whole report in | |
order to provide a comprehensive understanding of the matters identified. | |
5 Operation “Lava-Jato” | 6 Tax and labor exposures |
In response to investigations within the scope of Operation Car Wash about | It is important to stress that, during our works, we identified |
irregularities involving employees, contractors, and suppliers of the | several procedures adopted by the Company that may result in |
Eletrobras Group companies, in 2015 the Company started and internal and | questioning and assessments by the labor and social security and |
independent investigation (conducted by an outside consultant), in view of | the federal, state, and municipal tax authorities. In what respects |
the risk of those irregularities affecting some of Eletrobras’s investments. | such procedures, the respective value of the contingencies that |
In October 2016, the independent investigation completed the stage whose | may potentially emerge if they are identified and questioned |
goal was to identify wrongful acts that could cause any relevant distortions | corresponds to R$ 13.3 billion. Please note that there are other |
in the Company’s financial statements. During that stage, instances of | non-quantified adjustments. |
overbilling were identified with respect to bid rigging, due to the practice of | |
cartel and bribes that would have been paid by certain contractors and | |
suppliers since 2008. | |
Accordingly, the Company recorded, on December 31, 2016, a write-off in | |
the investment recorded according to the equity accounting method in the | |
subsidiary AmGT, in the amount of R$ 67.166, representing undue | |
payments in prior periods in AmGT’s project Mauá 3, as ascertained in such | |
investigation process. | |
According to the management, it is not possible to accurately determine the | |
period in which those irregularities happened, but the Company has not | |
identified any contracts after December 31, 2015 that may have been | |
affected by the overpricing scheme. | |
Note that the irregularities identified are related to the subsidiary AmGT, | |
and up to the present date no adjustment was identified that needs to be | |
made in the Company’s accounting balances. | |
Privatization of the Eletrobras System Distribution Companies | 10 agosto 2017 |
PwC | 5 |
Exhibit I – Adjusted EBITDA (1/8) | |||||
The content below presents the main points of attention identified during the accounting due diligence procedures. Accordingly,, it does not | |||||
include all matters identified and discussed in the due diligence report, and, therefore, must be read jointly with the whole report in order to | |||||
provide a comprehensive understanding of the matters identified. | |||||
The table on the left displays the Company’s quality of earnings | |||||
Quality of earnings | (EBITDA) analysis for the fiscal years ended on December 31, 2015 | ||||
FY15 | FY16 | (FY15) and December 31, 2016 (FY16). | |||
In R$ thousand | (Audited) | (Audited) | |||
Net revenue | 2,620,767 | 2,669,848 | The adjustments suggested were calculated based on the information | ||
Net profit (loss) | (2,344,048) | (4,967,813) | provided by the Company's management. Those adjustments were made | ||
Add-backs (reversions) | 1,358,301 | 2,084,204 | as a result of our analysis, according to financial and management | ||
Financial results | 1,210,594 | 1,957,349 | information prepared by the Company’s management. | ||
Depreciation / amortization | 147,707 | 126,855 | |||
IR and CSLL | - | - | The EBITDA corresponds to the net profit subtracted of certain | ||
Reported EBITDA | (985,747) | (2,883,609) | reclassification items, such as net financial results, taxes and social | ||
% on net revenue | (38%) | (108%) | |||
contributions on the earned income (Income Tax (IRPJ) and Social | |||||
Reclassifications | 107,062 | 1,170,854 | |||
1 | Reclassification of AmGT's equity accounting result | 241,322 | 347,317 | Contribution on Net Profit (CSLL)), depreciation and amortization. | |
2 | Reclassification of the provision for onerous liabilities | 16,463 | 812,694 | We should stress that the Company’s current financial position, | |
3 | Reclassification of impairment provisions | 417 | 63,131 | ||
4 | Reclassification of the new replacement value | (151,140) | (52,287) | associated with the tariff gap (e.g., significant volume of assets in service | |
Accounting adjustments | 1,796,115 | (1,276) | not yet included in the “armored” basis), with the investment level | ||
5 | Electricity for own consumption | NQ | (1,276) | during the period of provision of the services, among other factors, may | |
6 | Exclusion of the AmGT financial impact | 1,796,115 | NQ | result in additional risks for the Company, mainly in the last fiscal years. | |
Normalization adjustments | 78,923 | 577,045 | |||
7 | Financial impacts due to write-off of CCC credits by ANEEL | NQ | 521,590 | We understand that those factors may impair the obtainment of an | |
8 | Normalization of expenses with PCLD | 64,352 | 85,110 | EBITDA on a recurring and normalized basis, making it more difficult, | |
9 | Normalization of the revenue from excess demand and excess | 14,570 | (29,655) | therefore, to compare the historical periods. | |
of reactive power | |||||
Tax and labor adjustments | (2,607) | (18,940) | Comments on the adjustments identified are detailed below and in the | ||
10 | Tax, labor, and social security impacts | (2,607) | (18,940) | next pages of this summary. | |
Adjusted EBITDA | 993,745 | (1,155,925) | |||
% on net revenue | 38% | (43%) | Reclassification adjustments | ||
Non-quantified adjustments | NQ | NQ | 1. Reclassification of AmGT’s equity accounting result: refers | ||
Other considerations | (47,331) | (639,348) | to the reversion of AmGT’s equity accounting results, classified as | ||
Source: Audited financial statements and Pw C analyses | operating expenses in the period. We understand that those values | ||||
should not impact the recurring EBITDA values in the period, since | |||||
the asset is not within the perimeter of the deal. | |||||
Privatization of the Eletrobras System Distribution Companies | 10 agosto 2017 | ||||
PwC | 6 |
Exhibit I – Adjusted EBITDA (2/8) | |||||
The content below presents the main points of attention identified during the accounting due diligence procedures. Accordingly,, it does not | |||||
include all matters identified and discussed in the due diligence report, and, therefore, must be read jointly with the whole report in order to | |||||
provide a comprehensive understanding of the matters identified. | |||||
2.Reclassification of the provision for onerous liabilities: we | |||||
Quality of earnings | have identified that, in 2016, the Company recognized a provision for | ||||
FY15 | FY16 | onerous contracts in the total amount of R$ 812m in connection | |||
In R$ thousand | (Audited) | (Audited) | |||
Net revenue | 2,620,767 | 2,669,848 | with: (i) losses in the realization of the intangible (non-bifurcated) | ||
Net profit (loss) | (2,344,048) | (4,967,813) | assets higher than the recorded balances, in the total amount of R$ | ||
Add-backs (reversions) | 1,358,301 | 2,084,204 | 758.7m; and (ii) excessive burden in the power purchase and sale | ||
Financial results | 1,210,594 | 1,957,349 | agreement held with the subsidiary AmGT, as a result of the | ||
Depreciation / amortization | 147,707 | 126,855 | suspension of the natural gas supply to UTE Aparecida (own | ||
IR and CSLL | - | - | |||
generator) in the total amount of R$ 53.9 million. We understand | |||||
Reported EBITDA | (985,747) | (2,883,609) | |||
% on net revenue | (38%) | (108%) | that those sums are not of a recurring nature for the business and | ||
Reclassifications | 107,062 | 1,170,854 | suggest they be excluded for purposes of normalized EBITDA | ||
1 | Reclassification of AmGT's equity accounting result | 241,322 | 347,317 | analysis. | |
2 | Reclassification of the provision for onerous liabilities | 16,463 | 812,694 | ||
3 | Reclassification of impairment provisions | 417 | 63,131 | 3. Reclassification of impairment provisions: we suggest the | |
4 | Reclassification of the new replacement value | (151,140) | (52,287) | reversion of the impacts from the recognition and/or reversion of the | |
Accounting adjustments | 1,796,115 | (1,276) | provision for recoverability of the intangible assets (impairment), | ||
5 | Electricity for own consumption | NQ | (1,276) | considering that those values are purely accounting entries which do | |
6 | Exclusion of the AmGT financial impact | 1,796,115 | NQ | not directly impact the Company’s cash flow generation. | |
Normalization adjustments | 78,923 | 577,045 | |||
7 | Financial impacts due to write-off of CCC credits by ANEEL | NQ | 521,590 | 4. Reclassification of the new replacement value: monetary | |
8 | Normalization of expenses with PCLD | 64,352 | 85,110 | restatement of the assets base of the concession, expected to be paid | |
9 | Normalization of the revenue from excess demand and excess | 14,570 | (29,655) | to the Company after the concession period; since those sums are | |
of reactive power | purely accounting entries, without a direct impact on the Company’s | ||||
Tax and labor adjustments | (2,607) | (18,940) | |||
10 | Tax, labor, and social security impacts | (2,607) | (18,940) | cash generation, we suggest they be excluded for purposes of | |
Adjusted EBITDA | 993,745 | (1,155,925) | normalized EBITDA analysis. | ||
% on net revenue | 38% | (43%) | |||
Non-quantified adjustments | NQ | NQ | Accounting adjustments | ||
Other considerations | (47,331) | (639,348) | 5. Electricity for own consumption: the Company recognized an | ||
Source: Audited financial statements and Pw C analyses | accounts receivable related to the costs resulting from electricity for | ||||
its own consumption. We understand that such amount should be | |||||
accounted for as administrative expense in the income for the fiscal | |||||
year. | |||||
Privatization of the Eletrobras System Distribution Companies | 10 agosto 2017 | ||||
PwC | 7 |
Exhibit I – Adjusted EBITDA (3/8) | ||||||||
The content below presents the main points of attention identified during the accounting due diligence procedures. Accordingly,, it does not | ||||||||
include all matters identified and discussed in the due diligence report, and, therefore, must be read jointly with the whole report in order to | ||||||||
provide a comprehensive understanding of the matters identified. | ||||||||
Quality of earnings | 6. | Exclusion of the AmGT financial impact: in Jul-15, the power | ||||||
FY15 | FY16 | generation and transmission activities performed by Amazonas | ||||||
In R$ thousand | (Audited) | (Audited) | Distribuidora were segregated from its distribution activities | |||||
Net revenue | 2,620,767 | 2,669,848 | (“Deverticalization”) by means of a corporate reorganization process, as | |||||
Net profit (loss) | (2,344,048) | (4,967,813) | referred to above. Since the generation operations had an impact on the | |||||
Add-backs (reversions) | 1,358,301 | 2,084,204 | FY15 income for the fiscal year (between January and June-15), we | |||||
Financial results | 1,210,594 | 1,957,349 | ||||||
Depreciation / amortization | 147,707 | 126,855 | suggest those balances to be excluded from the recurring EBITDA (see | |||||
IR and CSLL | - | - | table below with details on the adjustment). | |||||
Reported EBITDA | (985,747) | (2,883,609) | It is important to note that, due to the Company’s financial restrictions | |||||
% on net revenue | (38%) | (108%) | ||||||
held with BR Distribuidora, the O&M contract (gas and oil) executed to | ||||||||
Reclassifications | 107,062 | 1,170,854 | ||||||
1 | Reclassification of AmGT's equity accounting result | 241,322 | 347,317 | meet AmGT’s supply needs is still registered under AmD. Since the | ||||
2 | Reclassification of the provision for onerous liabilities | 16,463 | 812,694 | definition of the new business model related to this contract is still | ||||
3 | Reclassification of impairment provisions | 417 | 63,131 | uncertain, it is not possible to determine the financial impacts in FY16 | ||||
4 | Reclassification of the new replacement value | (151,140) | (52,287) | |||||
resulting from the costs incurred with that contract. | ||||||||
Accounting adjustments | 1,796,115 | (1,276) | ||||||
5 | Electricity for own consumption | NQ | (1,276) | |||||
6 | Exclusion of the AmGT financial impact | 1,796,115 | NQ | |||||
Normalization adjustments | 78,923 | 577,045 | ||||||
7 | Financial impacts due to write-off of CCC credits by ANEEL | NQ | 521,590 | FY15 | ||||
8 | Normalization of expenses with PCLD | 64,352 | 85,110 | In R$ thousand | Generation | Distribution Total | ||
9 | Normalization of the revenue from excess demand and excess | 14,570 | (29,655) | Net revenue | 1,071,770 | 1,548,997 | 2,620,767 | |
of reactive power | ||||||||
Tax and labor adjustments | (2,607) | (18,940) | Costs / Expenses | (2,867,885) | (485,163) | (3,353,048) | ||
10 Tax, labor, and social security impacts | (2,607) | (18,940) | EBITDA | (1,796,115) | 1,063,834 | (732,281) | ||
Adjusted EBITDA | 993,745 | (1,155,925) | (-) Depreciation / Amortization | (76,203) | (83,648) | (159,851) | ||
% on net revenue | 38% | (43%) | ||||||
(+/-) Financial income | (1,008,850) | (201,744) | (1,210,594) | |||||
Non-quantified adjustments | NQ | NQ | ||||||
Other considerations | (47,331) | (639,348) | (+/-) Other participations | - | (241,322) | (241,322) | ||
Source: Audited financial statements and Pw C analyses | Net profit | (2,881,168) | 537,120 | (2,344,048) | ||||
Source: ICS2015 | ||||||||
Privatization of the Eletrobras System Distribution Companies | 10 agosto 2017 | |||||||
PwC | 8 |
Exhibit I – Adjusted EBITDA (4/8) | |||||||
The content below presents the main points of attention identified during the accounting due diligence procedures. Accordingly,, it does not | |||||||
include all matters identified and discussed in the due diligence report, and, therefore, must be read jointly with the whole report in order to | |||||||
provide a comprehensive understanding of the matters identified. | |||||||
Normalization adjustments | |||||||
7. Financial impacts due to write-off of Fuel Consumption | |||||||
Quality of earnings | |||||||
Account (CCC) credits by ANEEL: by means of ANEEL | |||||||
FY15 | FY16 | ||||||
In R$ thousand | (Audited) | (Audited) | Resolution no. 2202, the 2017 approved budget for the CDE/CCC did | ||||
Net revenue | 2,620,767 | 2,669,848 | not consider the renegotiated values for 2014 and 2015 of the | ||||
Net profit (loss) | (2,344,048) | (4,967,813) | distribution companies Amazonas, CERON, Acre, and Boa Vista. The | ||||
Add-backs (reversions) | 1,358,301 | 2,084,204 | distribution companies filed a request for reconsideration of those | ||||
Financial results | 1,210,594 | 1,957,349 | amounts, and the expectation is that the balance remains as a write- | ||||
Depreciation / amortization | 147,707 | 126,855 | |||||
IR and CSLL | - | - | off until ANEEL reprocesses the CCC account in the period from July | ||||
Reported EBITDA | (985,747) | (2,883,609) | 2009 to June 2016. Considering that this is a non-recurring expense | ||||
% on net revenue | (38%) | (108%) | (prior periods provision), we are suggesting it be excluded for | ||||
Reclassifications | 107,062 | 1,170,854 | purposes of EBITDA analysis. Please note that a portion of the | ||||
1 | Reclassification of AmGT's equity accounting result | 241,322 | 347,317 | adjusted amount should impact the FY15 EBITDA. However, since | |||
2 | Reclassification of the provision for onerous liabilities | 16,463 | 812,694 | there was not enough information, it was not possible to quantify | |||
3 | Reclassification of impairment provisions | 417 | 63,131 | ||||
4 | Reclassification of the new replacement value | (151,140) | (52,287) | that impact. | |||
Accounting adjustments | 1,796,115 | (1,276) | 8. Normalization of expenses with Provision for Doubtful | ||||
5 | Electricity for own consumption | NQ | (1,276) | Accounts (PCLD): we note that the PCLD is automatically and | |||
6 | Exclusion of the AmGT financial impact | 1,796,115 | NQ | ||||
systemically calculated, following the criteria established by | |||||||
Normalization adjustments | 78,923 | 577,045 | |||||
7 | Financial impacts due to write-off of CCC credits by ANEEL | NQ | 521,590 | Eletrobras, and that such criteria tends to be more conservative than | |||
8 | Normalization of expenses with PCLD | 64,352 | 85,110 | those established by ANEEL. Since those provisions are not of a | |||
9 | Normalization of the revenue from excess demand and excess | 14,570 | (29,655) | financial nature and their variations are not historically constant, we | |||
of reactive power | understand that, for purposes of normalized EBITDA, it must be | ||||||
Tax and labor adjustments | (2,607) | (18,940) | |||||
10 | Tax, labor, and social security impacts | (2,607) | (18,940) | considered only the impacts from losses resulting from payments | |||
Adjusted EBITDA | 993,745 | (1,155,925) | from clients that effectively materialized in the period; accordingly, | ||||
% on net revenue | 38% | (43%) | we suggest the reversion of the PCLD in the period. | ||||
Non-quantified adjustments | NQ | NQ | |||||
In R$ thousand | FY15 | FY16 | |||||
Other considerations | (47,331) | (639,348) | |||||
Source: Audited financial statements and Pw C analyses | Net revenue | 2,620,767 | 2,669,848 | ||||
PCLD / Losses result | (133,215) | (204,728) | |||||
Proposed adjustment | 64,352 | 85,110 | |||||
Losses in the period | (68,862) | (119,618) | |||||
% of losses on net revenue | 3% | 4% | |||||
Privatization of the Eletrobras System Distribution Companies | 10 agosto 2017 | ||||||
PwC | 9 |
Exhibit I – Adjusted EBITDA (5/8) | |||||||
The content below presents the main points of attention identified during the accounting due diligence procedures. Accordingly,, it does not | |||||||
include all matters identified and discussed in the due diligence report, and, therefore, must be read jointly with the whole report in order to | |||||||
provide a comprehensive understanding of the matters identified. | |||||||
Quality of earnings | 9.Normalization of the revenue from excess demand and | ||||||
FY15 | FY16 | excess of reactive power: the revenues earned with excess | |||||
In R$ thousand | (Audited) | (Audited) | demand and excess of reactive power must be accounted for as | ||||
Net revenue | 2,620,767 | 2,669,848 | “Obligations Related to the Electric Power Utility Service,” which | ||||
Net profit (loss) | (2,344,048) | (4,967,813) | will be amortized starting on the next cycle of tariff review, after | ||||
Add-backs (reversions) | 1,358,301 | 2,084,204 | its recognition. However, the Company recognized those sums as | ||||
Financial results | 1,210,594 | 1,957,349 | |||||
Depreciation / amortization | 147,707 | 126,855 | revenues in the fiscal years of 2013-2016 and later, in FY16, | ||||
IR and CSLL | - | - | reversed 100% of the sums recognized as liabilities until the next | ||||
Reported EBITDA | (985,747) | (2,883,609) | cycle of tariff review. This adjustment aims at normalizing the | ||||
% on net revenue | (38%) | (108%) | impact of that reversion between the periods. | ||||
Reclassifications | 107,062 | 1,170,854 | Tax and labor adjustments | ||||
1 | Reclassification of AmGT's equity accounting result | 241,322 | 347,317 | ||||
2 | Reclassification of the provision for onerous liabilities | 16,463 | 812,694 | 10. Tax, labor, and social security impacts: refer to potential | |||
3 | Reclassification of impairment provisions | 417 | 63,131 | additional impacts resulting from the issues described in this | |||
4 | Reclassification of the new replacement value | (151,140) | (52,287) | summary, both quantified and non-quantified, classified as | |||
Accounting adjustments | 1,796,115 | (1,276) | probable loss by the Company’s legal advisors. | ||||
5 | Electricity for own consumption | NQ | (1,276) | ||||
6 | Exclusion of the AmGT financial impact | 1,796,115 | NQ | ||||
Normalization adjustments | 78,923 | 577,045 | #Description | 31-Dec-15 31-Dec-16 | |||
7 | Financial impacts due to write-off of CCC credits by ANEEL | NQ | 521,590 | 7 ICMS ST – Advanced on inbound power | - | 15,860 | |
8 | Normalization of expenses with PCLD | 64,352 | 85,110 | 8 ISS on billable services | NQ | NQ | |
Normalization of the revenue from excess demand and excess | Total tax exposures | - | 15,860 | ||||
9 | of reactive power | 14,570 | (29,655) | 3Irregularities related to work days | 2,607 | 3,080 | |
Tax and labor adjustments | (2,607) | (18,940) | Total labor exposures | 2,607 | 3,080 | ||
10 | Tax, labor, and social security impacts | (2,607) | (18,940) | Total tax and labor exposures + NQ | 2,607 | 18,940 | |
Adjusted EBITDA | 993,745 | (1,155,925) | |||||
% on net revenue | 38% | (43%) | |||||
Non-quantified adjustments | NQ | NQ | |||||
Other considerations | (47,331) | (639,348) | |||||
Source: Audited financial statements and Pw C analyses | |||||||
Privatization of the Eletrobras System Distribution Companies | 10 agosto 2017 | ||||||
PwC | 10 |
Exhibit I – Adjusted EBITDA (6/8) | |||||
The content below presents the main points of attention identified during the accounting due diligence procedures. Accordingly,, it does not | |||||
include all matters identified and discussed in the due diligence report, and, therefore, must be read jointly with the whole report in order to | |||||
provide a comprehensive understanding of the matters identified. | |||||
Quality of earnings | Non-quantified adjustments | ||||
FY15 | FY16 | 11. Financial impacts due to migration to free consumers: | |||
In R$ thousand | (Audited) | (Audited) | between FY15 and FY16, the Company suffered changes in 52 | ||
Net revenue | 2,620,767 | 2,669,848 | |||
captive consumers (with exclusive power distribution) to free | |||||
Net profit (loss) | (2,344,048) | (4,967,813) | |||
Add-backs (reversions) | 1,358,301 | 2,084,204 | consumers (power freely traded in the market), which caused a | ||
Financial results | 1,210,594 | 1,957,349 | financial impact on its revenue estimated by the management in | ||
Depreciation / amortization | 147,707 | 126,855 | R$ 88 million. We understand that those changes in the client base | ||
IR and CSLL | - | - | may influence the future results estimated by the Company. Note | ||
Reported EBITDA | (985,747) | (2,883,609) | that we have not had access to the estimated cost for meeting the | ||
% on net revenue | (38%) | (108%) | |||
energy demand (Kwh) in order to be able to evaluate the respective | |||||
Reclassifications | 107,062 | 1,170,854 | |||
impacts on the recurring EBITDA of the operation. | |||||
Accounting adjustments | 1,796,115 | (1,276) | |||
Normalization adjustments | 78,923 | 577,045 | 12. Financial impacts due to reduction of Settlement for | ||
Tax and labor adjustments | (2,607) | (18,940) | Price Differences (PLD) revenues: the revenues from PLD in | ||
Adjusted EBITDA | 993,745 | (1,155,925) | the sub-market of the northern region fell from R$ 712.6m in FY15 | ||
% on net revenue | 38% | (43%) | |||
to R$ 314.8m in FY16 due to a 63.38% price reduction to R$ | |||||
Non-quantified adjustments | NQ | NQ | |||
11 | Financial impacts due to migration to free consumers | NQ | NQ | 94.71/MWh (R$ 258.64 MWh in FY15), in addition to an increase | |
12 | Financial impacts due to reduction of PLD revenues | NQ | NQ | in the share of power from the interconnected system in | |
13 | Employee insourcing | NQ | NQ | Amazonas’s energy matrix, from 44.23% in 2015 to 60.21% in | |
Other considerations | (47,331) | (639,348) | |||
14 | Potential normalization of provision for contingencies | (47,331) | (639,348) | 2016, which left less energy to be settled in those conditions. We | |
15 | Potential risk of change in the CVA values | NQ | NQ | understand that the change in the energy mix in the period may | |
16 | Costs with new structure / Companies integration | NQ | NQ | influence the forecasts of future results for purposes of normalized | |
17 Other potential adjustments | NQ | NQ | EBITDA. | ||
Source: Audited financial statements and Pw C analyses | |||||
13. Employee insourcing: the management understands that, as | |||||
determined by law, the Company needs to insource employees of | |||||
its operations (consumption measurement and like professionals), | |||||
which will increase the costs, due to issues of inefficiency and | |||||
equivalence of labor benefits. We understand that those impacts | |||||
may influence the Company’s future results. | |||||
Privatization of the Eletrobras System Distribution Companies | 10 agosto 2017 | ||||
PwC | 11 |
Exhibit I – Adjusted EBITDA (7/8) | |||||
The content below presents the main points of attention identified during the accounting due diligence procedures. Accordingly,, it does not | |||||
include all matters identified and discussed in the due diligence report, and, therefore, must be read jointly with the whole report in order to | |||||
provide a comprehensive understanding of the matters identified. | |||||
Quality of earnings | Other considerations | ||||
FY15 | FY16 | 14. Potential normalization of provision for contingencies: we | |||
In R$ thousand | (Audited) | (Audited) | noticed that the Company’s EBITDA is being impacted by | ||
Net revenue | 2,620,767 | 2,669,848 | |||
Net profit (loss) | (2,344,048) | (4,967,813) | provisions for contingencies that are not characterized as financial | ||
Add-backs (reversions) | 1,358,301 | 2,084,204 | and/or operating for the business. We understand that, for | ||
Financial results | 1,210,594 | 1,957,349 | purposes of analysis of recurring and operational EBITDA, it must | ||
Depreciation / amortization | 147,707 | 126,855 | be considered only the sums duly paid between the periods, to | ||
IR and CSLL | - | - | which we did not have access, since the Company did not supply its | ||
Reported EBITDA | (985,747) | (2,883,609) | |||
% on net revenue | (38%) | (108%) | controls. | ||
Reclassifications | 107,062 | 1,170,854 | 15. Potential risk of change in the CVA values: the Account for | ||
Accounting adjustments | 1,796,115 | (1,276) | Compensation of “Portion A” Variations (CVA) records the | ||
Normalization adjustments | 78,923 | 577,045 | difference between the costs estimated in the tariff (Portion A) and | ||
Tax and labor adjustments | (2,607) | (18,940) | the costs effectively incurred, creating a payable or receivable | ||
Adjusted EBITDA | 993,745 | (1,155,925) | |||
% on net revenue | 38% | (43%) | balance (and, consequently, an expense or a revenue) for the | ||
Non-quantified adjustments | NQ | NQ | Company. Such amounts to be paid/received are ratified each year | ||
11 | Financial impacts due to migration to free consumers | NQ | NQ | by ANEEL. We found that, historically, the amounts ascertained by | |
12 | Financial impacts due to reduction of PLD revenues | NQ | NQ | the Company may significantly differ from those ratified by | |
13 Employee insourcing | NQ | NQ | |||
Other considerations | (47,331) | (639,348) | ANEEL, mainly with respect to the financial items, which are not | ||
14 | Potential normalization of provision for contingencies | (47,331) | (639,348) | controlled by the Company. Considering that the ratification | |
15 | Potential risk of change in the CVA values | NQ | NQ | process happens close to the end of the fiscal year (between | |
16 | Costs with new structure / Companies integration | NQ | NQ | ||
17 | Other potential adjustments | NQ | NQ | September and October), we understand that there are no material | |
Source: Audited financial statements and Pw C analyses | discrepancies for the balances accounted for in Dec-15 and Dec-16. | ||||
On the other hand, those differences may become significant over | |||||
the months. | |||||
Privatization of the Eletrobras System Distribution Companies | 10 agosto 2017 | ||||
PwC | 12 |
Exhibit I – Adjusted EBITDA (8/8) | |||||
The content below presents the main points of attention identified during the accounting due diligence procedures. Accordingly,, it does not | |||||
include all matters identified and discussed in the due diligence report, and, therefore, must be read jointly with the whole report in order to | |||||
provide a comprehensive understanding of the matters identified. | |||||
Quality of earnings | 16. Costs with new structure/Companies integration: we note | ||||
FY15 | FY16 | that, depending on the changes in the Company’s current structure | |||
In R$ thousand | (Audited) | (Audited) | that are made after the conclusion of the privatization process, as | ||
Net revenue | 2,620,767 | 2,669,848 | |||
well as on the measures required for the potential integration with | |||||
Net profit (loss) | (2,344,048) | (4,967,813) | |||
an investor, the Company’s EBITDA may change significantly. In | |||||
Add-backs (reversions) | 1,358,301 | 2,084,204 | |||
Financial results | 1,210,594 | 1,957,349 | addition, possible changes in the compensation of the new | ||
Depreciation / amortization | 147,707 | 126,855 | management must be considered in the Company’s result. We | ||
IR and CSLL | - | - | recommend that this issue be discussed with the “Economic and | ||
Reported EBITDA | (985,747) | (2,883,609) | Legal Assessment” area. | ||
% on net revenue | (38%) | (108%) | |||
Reclassifications | 107,062 | 1,170,854 | 17. Other potential adjustments: considering the defined scope of | ||
Accounting adjustments | 1,796,115 | (1,276) | our works; the limitations in the information provided; the tax, | ||
Normalization adjustments | 78,923 | 577,045 | labor, and social security exposures that could not be quantified; | ||
Tax and labor adjustments | (2,607) | (18,940) | and possible non-recoverable assets adjustments (e.g., inventory | ||
Adjusted EBITDA | 993,745 | (1,155,925) | with low recoverability expectation); other potential adjustments | ||
% on net revenue | 38% | (43%) | may be necessary, in order to better reflect the Company’s | ||
Non-quantified adjustments | NQ | NQ | |||
11 | Financial impacts due to migration to free consumers | NQ | NQ | normalized and recurring EBITDA. In addition, we recommend | |
12 | Financial impacts due to reduction of PLD revenues | NQ | NQ | that this summary be read jointly with the reports of the other due | |
13 | Employee insourcing | NQ | NQ | diligence areas (operational, legal, HR, insurance, and | |
Other considerations | (47,331) | (639,348) | |||
14 | Potential normalization of provision for contingencies | (47,331) | (639,348) | environmental). | |
15 | Potential risk of change in the CVA values | NQ | NQ | ||
16 | Costs with new structure / Companies integration | NQ | NQ | ||
17 Other potential adjustments | NQ | NQ | |||
Source: Audited financial statements and Pw C analyses | |||||
Privatization of the Eletrobras System Distribution Companies | 10 agosto 2017 | ||||
PwC | 13 |
Exhibit II – Net Indebtedness (1/5) | |||||
The content below presents the main points of attention identified during the accounting due diligence procedures. Accordingly,, it does not | |||||
include all matters identified and discussed in the due diligence report, and, therefore, must be read jointly with the whole report in order to | |||||
provide a comprehensive understanding of the matters identified. | |||||
Net indebtedness | The table on the left displays the Company’s net indebtedness, based | ||||
on the audited financial statements for the years ended on | |||||
In R$ thousand | Dec-15 | Dec-16 | December 31, 2015 (Dec-16) and December 31, 2016 (Dec-16). | ||
Cash and cash equivalents | 68,251 | 71,343 | |||
Securities | 117,122 | 28,706 | We note that the concept of Net Indebtedness is not contemplated in | ||
Loans - short term | (141,777) | (88,542) | the accounting practices adopted in Brazil, being it rather a | ||
Loans - long term | (1,185,389) | (1,898,681) | |||
Commercial lease - short term | (132,972) | (136,662) | contractual definition. For the purpose of our analysis, we | ||
Commercial lease - long term | (1,119,183) | (1,032,842) | considered, in addition to the cash net bank indebtedness, other | ||
Net financial indebtedness | (2,393,948) | (3,056,678) | items and transactions with financing features, such as: | ||
Taxes and social contributions - long term | 2,365,377 | 1,421,805 | |||
Collaterals and deposits in court - long term | 296,285 | 413,730 | - Taxes and social contributions – long term: Formed mainly by | ||
Indemnification right - long term | 4,350,275 | 3,573,069 | ICMS, PIS, and COFINS credits in connection with fuel purchase | ||
Suppliers - long term | (7,648,126) | (8,055,796) | cost, indemnified by means of the CCC. This amount is 100% | ||
Accounts payable to related parties - long term | - | (158,036) | |||
Post-employment benefit - long term | (921) | (2,160) | provisioned under Indemnification Obligations - long term and has | ||
Provisions for lawsuits | (316,138) | (1,630,713) | no impact for the net indebtedness. | ||
Indemnification obligations - long term | (2,150,827) | (1,157,893) | |||
Other liabilities - long term | (174,101) | (63,270) | - Indemnification right – long term: Fuel Consumption Account - | ||
Other debt items | (3,278,176) | (5,659,264) | CCC receivables, which will be used to pay off the debt with | ||
Reported net indebtedness | (5,672,124) | (8,715,942) | suppliers with past due and coming due credits. | ||
Reclassification between working capital and net indebtedness | (700,998) | (1,242,427) | |||
1 | CCC past due and installment payment amounts to be received | 6,643 | 5,709 | - Suppliers - long term: Balance of suppliers with past due and | |
2 | Suppliers with passt due credits | (1,086,227) | (1,141,024) | renegotiated credits, maturing (after the renegotiation) beyond 12 | |
3 | Reclassification of related parties | 438,478 | 40,144 | ||
4 | Other liabilities - short term | (59,892) | (147,256) | months. | |
Subtotal | (700,998) | (1,242,427) | The adjustments suggested and reported were prepared based on | ||
Adjustments proposed by the due diligence | NQ | (658) | |||
5 | Restricted cash balance | NQ | (658) | management information and reports, accounting trial balances, | |
Subtotal | NQ | (658) | and enquiries made to the Company’s management. | ||
Adjusted net indebtedness | (6,373,122) | (9,959,027) | We note that, due to limited information and scope, there may be | ||
Other considerations | 1,666,651 | 1,715,800 | adjustments that could not be quantified/identified during our | ||
Source: Audited trial balances and Pw C analyses | |||||
analysis. | |||||
Privatization of the Eletrobras System Distribution Companies | 10 agosto 2017 | ||||
PwC | 14 |
Exhibit II – Net Indebtedness (2/5) | |||||||
The content below presents the main points of attention identified during the accounting due diligence procedures. Accordingly,, it does not | |||||||
include all matters identified and discussed in the due diligence report, and, therefore, must be read jointly with the whole report in order to | |||||||
provide a comprehensive understanding of the matters identified. | |||||||
Reclassifications between working capital and net indebtedness | |||||||
Net indebtedness | |||||||
In R$ thousand | Dec-15 | Dec-16 | |||||
1. CCC past due and installment payment amounts to be | |||||||
Cash and cash equivalents | 68,251 | 71,343 | |||||
Securities | 117,122 | 28,706 | received: the Company has CCC receivables that are past due and, | ||||
Loans - short term | (141,777) | (88,542) | in some cases, subject to installment payments. Considering that | ||||
Loans - long term | (1,185,389) | (1,898,681) | they are receivables related to prior fiscal years, we are reclassifying | ||||
Commercial lease - short term | (132,972) | (136,662) | |||||
Commercial lease - long term | (1,119,183) | (1,032,842) | them from working capital to Company net indebtedness (which | ||||
Net financial indebtedness | (2,393,948) | (3,056,678) | reduces the debt), as these are funds that must be destined to pay | ||||
Taxes and social contributions - long term | 2,365,377 | 1,421,805 | off past due liabilities related to fuel acquisition. | ||||
Collaterals and deposits in court - long term | 296,285 | 413,730 | |||||
Indemnification right - long term | 4,350,275 | 3,573,069 | 2.Suppliers with past due credits: we suggest the reclassification | ||||
Suppliers - long term | (7,648,126) | (8,055,796) | as net indebtedness of 100% of the suppliers’ past due payable | ||||
Accounts payable to related parties - long term | - | (158,036) | balances, due to their nature of financing. | ||||
Post-employment benefit - long term | (921) | (2,160) | |||||
Provisions for lawsuits | (316,138) | (1,630,713) | 3.Reclassification of related parties: it refers to balances | ||||
Indemnification obligations - long term | (2,150,827) | (1,157,893) | |||||
Other liabilities - long term | (174,101) | (63,270) | receivable from related parties for employee loans (assigned) paid | ||||
Other debt items | (3,278,176) | (5,659,264) | by the Company. In view of their nature, we suggest their | ||||
Reported net indebtedness | (5,672,124) | (8,715,942) | reclassification as Company indebtedness. | ||||
Reclassification between working capital and net indebtedness | (700,998) | (1,242,427) | |||||
1 | CCC past due and installment payment amounts to be received | 6,643 | 5,709 | 4.Other liabilities – short term: we identified certain liabilities | |||
2 | Suppliers with passt due credits | (1,086,227) | (1,141,024) | classified in the Company’s current liabilities which, in our view, | |||
3 | Reclassification of related parties | 438,478 | 40,144 | are not characterized as operating working capital, as detailed in | |||
4 | Other liabilities - short term | (59,892) | (147,256) | the next slide: | |||
Subtotal | (700,998) | (1,242,427) | |||||
Adjustments proposed by the due diligence | NQ | (658) | In R$ thousand | Dec-15 | Dec-16 | ||
5 | Restricted cash balance | NQ | (658) | Balances payable to related parties, such as loans and use of the system | 28,495 | 88,633 | |
Subtotal | NQ | (658) | Environmental fines | 400 | 400 | ||
ANEEL installment payment | 529 | - | |||||
Adjusted net indebtedness | (6,373,122) | (9,959,027) | |||||
Interest with Eletrobrás | 715 | 715 | |||||
Other considerations | 1,666,651 | 1,715,800 | Collaterals | 327 | 327 | ||
Source: Audited trial balances and Pw C analyses | Refer to R&D and PEE balances classified as other liabilities. We, therefore, | 29,426 | 57,180 | ||||
suggest they be reclassified as debt, in view of their nature. | |||||||
Adjustment for reclassification as debt | 59,892 | 147,256 | |||||
Source: Pw C analyses and discussions w ith management | |||||||
Privatization of the Eletrobras System Distribution Companies | 10 agosto 2017 | ||||||
PwC | 15 |
Exhibit II – Net Indebtedness (3/5) | |||||||
The content below presents the main points of attention identified during the accounting due diligence procedures. Accordingly,, it does not | |||||||
include all matters identified and discussed in the due diligence report, and, therefore, must be read jointly with the whole report in order to | |||||||
provide a comprehensive understanding of the matters identified. | |||||||
Net indebtedness | Adjustments proposed by the due diligence | ||||||
5.Restricted cash balance: we were informed that certain sums | |||||||
In R$ thousand | Dec-15 | Dec-16 | |||||
maintained in the cash and cash equivalents account (cash | |||||||
Cash and cash equivalents | 68,251 | 71,343 | |||||
Securities | 117,122 | 28,706 | deposits, financial investments, etc.) are not immediately | ||||
Loans - short term | (141,777) | (88,542) | available. Accordingly, we are excluding those sums from the | ||||
Loans - long term | (1,185,389) | (1,898,681) | position as Company net indebtedness. | ||||
Commercial lease - short term | (132,972) | (136,662) | |||||
Commercial lease - long term | (1,119,183) | (1,032,842) | Other considerations | ||||
Net financial indebtedness | (2,393,948) | (3,056,678) | |||||
Taxes and social contributions - long term | 2,365,377 | 1,421,805 | i.Tax, labor, and social security impacts: we are | ||||
Collaterals and deposits in court - long term | 296,285 | 413,730 | considering, for purposes of analysis of the Company’s net | ||||
Indemnification right - long term | 4,350,275 | 3,573,069 | indebtedness, the tax, labor, and social security exposures | ||||
Suppliers - long term | (7,648,126) | (8,055,796) | classified as with risk of probable loss (see specific exhibit in | ||||
Accounts payable to related parties - long term | - | (158,036) | |||||
Post-employment benefit - long term | (921) | (2,160) | this summary). We note that the amounts presented here | ||||
Provisions for lawsuits | (316,138) | (1,630,713) | already consider possible fines and interest to be added upon an | ||||
Indemnification obligations - long term | (2,150,827) | (1,157,893) | assessment by the tax authorities. | ||||
Other liabilities - long term | (174,101) | (63,270) | |||||
Other debt items | (3,278,176) | (5,659,264) | # Description | 31-Dec-15 | 31-Dec-16 | ||
Reported net indebtedness | (5,672,124) | (8,715,942) | 3Ancillary obligations in breach of the law | 411,248 | 517,996 | ||
Reclassification between working capital and net indebtedness | (700,998) | (1,242,427) | 6Unpaid Income Tax and CSL advances in 2016 | - | 47,537 | ||
7ICMS ST – Advanced on inbound power | - | 24,220 | |||||
Adjustments proposed by the due diligence | NQ | (658) | I8 SS on billable services | NQ | NQ | ||
5 | Restricted cash balance | NQ | (658) | Total labor exposures | 411,248 | 589,753 | |
Subtotal | NQ | (658) | 3Irregularities related to work days | 10,121 | 13,351 | ||
Adjusted net indebtedness | (6,373,122) | (9,959,027) | Total tax and labor exposures + NQ | 421,369 | 603,104 | ||
Other considerations | 1,666,651 | 1,715,800 | |||||
i | Tax, labor, and social security impacts | (421,369) | (603,104) | ii. Financial asset – public utility concessions: it refers to | |||
ii | Financial asset - public utility concessions | 1,941,014 | 2,128,125 | ||||
iii | Clients with past due and installment payments | 147,006 | 190,779 | the financial asset indemnifiable in the end of the | |||
iv | Collaterals and deposits in court - long term | NQ | NQ | concession/service period. Depending on how the Company’s | |||
v | Provision for contingencies | NQ | NQ | sale is structured, the indemnifiable balance may be converted | |||
vi | Costs with completion of deverticalization process | NQ | NQ | ||||
vii | CAPEX investments | NQ | NQ | into cash, thus reducing the level of net indebtedness. | |||
viii Other potential adjustments | NQ | NQ | |||||
Source: Audited trial balances and Pw C analyses | |||||||
Privatization of the Eletrobras System Distribution Companies | 10 agosto 2017 | ||||||
PwC | 16 |
Exhibit II – Net Indebtedness (4/5) | |||||||
The content below presents the main points of attention identified during the accounting due diligence procedures. Accordingly,, it does not | |||||||
include all matters identified and discussed in the due diligence report, and, therefore, must be read jointly with the whole report in order to | |||||||
provide a comprehensive understanding of the matters identified. | |||||||
Net indebtedness | iii. | Clients with past due and installment payments: we | |||||
identified outstanding balances of clients’ past due and | |||||||
In R$ thousand | Dec-15 | Dec-16 | installment payments, classified in the current and non-current | ||||
Cash and cash equivalents | 68,251 | 71,343 | assets. Although they do not represent a cash item with | ||||
Securities | 117,122 | 28,706 | |||||
Loans - short term | (141,777) | (88,542) | immediate liquidity, we understand that they are a receivable of | ||||
Loans - long term | (1,185,389) | (1,898,681) | the Company, which, therefore, must be included in possible | ||||
Commercial lease - short term | (132,972) | (136,662) | cash flow projections. | ||||
Commercial lease - long term | (1,119,183) | (1,032,842) | |||||
Net financial indebtedness | (2,393,948) | (3,056,678) | In R$ thousand | Dec-15 | Dec-16 | ||
Taxes and social contributions - long term | 2,365,377 | 1,421,805 | Clients - current assets | 79,249 | 84,988 | ||
Collaterals and deposits in court - long term | 296,285 | 413,730 | Clients - non-current | 67,757 | 105,791 | ||
Suppliers - long term | (7,648,126) | (8,055,796) | Total | 147,006 | 190,779 | ||
Accounts payable to related parties - long term | - | (158,036) | |||||
Post-employment benefit - long term | (921) | (2,160) | iv. | Long term collaterals and deposits in court: we note that | |||
Provisions for lawsuits | (316,138) | (1,630,713) | the deposits in court directly related to a provision for | ||||
Indemnification obligations - long term | (2,150,827) | (1,157,893) | |||||
Other liabilities - long term | (174,101) | (63,270) | contingency must impact the indebtedness balances in the | ||||
Other debt items | (3,278,176) | (5,659,264) | period. However, since the Company did not provide the | ||||
Reported net indebtedness | (5,672,124) | (8,715,942) | ancillary controls, it was not possible to determine if the full | ||||
Reclassification between working capital and net indebtedness | (700,998) | (1,242,427) | amount of the reported balances must be included in the | ||||
Adjustments proposed by the due diligence | NQ | (658) | analysis of the Company’s net indebtedness. | ||||
5 | Restricted cash balance | NQ | (658) | ||||
Subtotal | NQ | (658) | v. | Provision for contingencies: we note that this summary | |||
Adjusted net indebtedness | (6,373,122) | (9,959,027) | does not consider possible changes in the projection of loss of | ||||
Other considerations | 1,666,651 | 1,715,800 | the Company’s lawsuits, resulting from the legal due diligence | ||||
i | Tax, labor, and social security impacts | (421,369) | (603,104) | works. | |||
ii | Financial asset - public utility concessions | 1,941,014 | 2,128,125 | ||||
iii | Clients with past due and installment payments | 147,006 | 190,779 | vi. | Costs with completion of deverticalization process: the | ||
iv | Collaterals and deposits in court - long term | NQ | NQ | net indebtedness position presented here does not consider | |||
v | Provision for contingencies | NQ | NQ | additional costs to complete the deverticalization process (e.g., | |||
vi | Costs with completion of deverticalization process | NQ | NQ | ||||
vii | CAPEX investments | NQ | NQ | renegotiation of contracts with creditors, etc.). | |||
viii Other potential adjustments | NQ | NQ | |||||
Source: Audited trial balances and Pw C analyses | |||||||
Privatization of the Eletrobras System Distribution Companies | 10 agosto 2017 | ||||||
PwC | 17 |
Exhibit II – Net Indebtedness (5/5) | ||||
The content below presents the main points of attention identified during the accounting due diligence procedures. Accordingly,, it does not | ||||
include all matters identified and discussed in the due diligence report, and, therefore, must be read jointly with the whole report in order to | ||||
provide a comprehensive understanding of the matters identified. | ||||
Net indebtedness | vii. CAPEX investments: as mentioned before, the Company has | |||
been operating as a public utility Company, which has resulted | ||||
In R$ thousand | Dec-15 | Dec-16 | in a reduction in CAPEX investments, maintaining only those | |
Cash and cash equivalents | 68,251 | 71,343 | that are essentially necessary to continue with the operational | |
Securities | 117,122 | 28,706 | ||
Loans - short term | (141,777) | (88,542) | activities and the levels of quality required by the regulatory | |
Loans - long term | (1,185,389) | (1,898,681) | agencies. We recommend that the you consider the impacts | |
Commercial lease - short term | (132,972) | (136,662) | estimated by the result of the technical and operational due | |
Commercial lease - long term | (1,119,183) | (1,032,842) | ||
Net financial indebtedness | (2,393,948) | (3,056,678) | diligence. | |
Taxes and social contributions - long term | 2,365,377 | 1,421,805 | viii.Other potential adjustments: considering the defined scope | |
Collaterals and deposits in court - long term | 296,285 | 413,730 | of our works; the limitations in the information provided; the | |
Indemnification right - long term | 4,350,275 | 3,573,069 | ||
Suppliers - long term | (7,648,126) | (8,055,796) | tax, labor, and social security exposures that could not be | |
Accounts payable to related parties - long term | - | (158,036) | quantified; and possible non-recoverable assets adjustments | |
Post-employment benefit - long term | (921) | (2,160) | (e.g., inventory with low recoverability expectation); other | |
Provisions for lawsuits | (316,138) | (1,630,713) | potential adjustments may be necessary, in order to better reflect | |
Indemnification obligations - long term | (2,150,827) | (1,157,893) | ||
Other liabilities - long term | (174,101) | (63,270) | the Company’s net and recurring indebtedness. In addition, we | |
Other debt items | (3,278,176) | (5,659,264) | recommend that this summary be read jointly with the reports of | |
Reported net indebtedness | (5,672,124) | (8,715,942) | the other due diligence areas (operational, legal, HR, insurance, | |
Reclassification between working capital and net indebtedness | (700,998) | (1,242,427) | and environmental). | |
Adjustments proposed by the due diligence | NQ | (658) | ||
5 | Restricted cash balance | NQ | (658) | |
Subtotal | NQ | (658) | ||
Adjusted net indebtedness | (6,373,122) | (9,959,027) | ||
Other considerations | 1,666,651 | 1,715,800 | ||
i | Tax, labor, and social security impacts | (421,369) | (603,104) | |
ii | Financial asset - public utility concessions | 1,941,014 | 2,128,125 | |
iii | Clients with past due and installment payments | 147,006 | 190,779 | |
iv | Collaterals and deposits in court - long term | NQ | NQ | |
v | Provision for contingencies | NQ | NQ | |
vi | Costs with completion of deverticalization process | NQ | NQ | |
vii CAPEX investments | NQ | NQ | ||
viii Other potential adjustments | NQ | NQ | ||
Source: Audited trial balances and Pw C analyses | ||||
Privatization of the Eletrobras System Distribution Companies | 10 agosto 2017 | |||
PwC | 18 |
Exhibit III – Net working capital (1/3) | |||||
The content below presents the main points of attention identified during the accounting due diligence procedures. Accordingly,, it does not | |||||
include all matters identified and discussed in the due diligence report, and, therefore, must be read jointly with the whole report in order to | |||||
provide a comprehensive understanding of the matters identified. | |||||
Net working capital | We present in the table on the left the Company’s net working capital | ||||
as of December 31, 2015 (Dec-15) and 2016 (Dec-16), prepared based | |||||
In R$ thousand | Dec-15 | Dec-16 | on the audited financial statements. | ||
Clients - short term | 474,440 | 609,707 | |||
Taxes and social contributions - short term | 10,506 | 22,495 | The adjustments suggested and reported were prepared based on | ||
Indemnification right - short term | 1,812,076 | 897,600 | management information and reports, accounting trial balances, and | ||
Inventory | 117,823 | 122,987 | enquiries made to the Company’s management. We note that, due to | ||
Financial assets | 109,237 | 77,062 | |||
Other assets - short term | 514,549 | 185,907 | limited information and scope, there may be adjustments that could | ||
Suppliers - short term | (5,168,720) | (4,819,380) | not be quantified/identified during our analysis. | ||
Taxes and contributions | (69,184) | (93,433) | |||
Estimated obligations | (32,632) | (42,298) | Reclassifications between working capital and net | ||
Financial liabilities | (19,288) | (103,157) | indebtedness | ||
Other liabilites - short term | (107,038) | (160,071) | |||
Reported net working capital | (2,358,231) | (3,302,581) | • | For further details, see the preceding exhibit of this summary, | |
Reclassification between working capital and net indebtedness | 700,998 | 1,242,427 | “net indebtedness.” | ||
CCC past due and installment payment amounts to be received | (6,643) | (5,709) | |||
Suppliers with past due credits | 1,086,227 | 1,141,024 | Adjustments proposed by the due diligence | ||
Reclassification of related parties | (438,478) | (40,144) | |||
Other liabilities - short term | 59,892 | 147,256 | 1. | Electricity for own consumption: the Company recognized | |
Subtotal | 700,998 | 1,242,427 | an accounts receivable related to the costs resulting from | ||
Adjustments proposed by the due diligence | electricity for its own consumption. We understand that such | ||||
1 Electricity for own consumption | - | (1,276) | sum should be accounted for as administrative expense in the | ||
2 Inventory with low recoverability expectation | (1,443) | (1,965) | |||
3 Clients with past due and installment payments | (79,249) | (84,988) | income for the fiscal year. | ||
4 Other assets -short term | (29,627) | (40,761) | 2. | Inventory with low recoverability expectation: items | |
Subtotal | (110,319) | (128,991) | |||
Adjusted net working capital | (1,767,553) | (2,189,144) | destined to sale (scraps) and lent materials, which are not | ||
Other considerations | classified as operating working capital and without movement | ||||
i | Risk of writing-off of CCC indemnification right | NQ | NQ | for a long time. | |
ii | Potential risk of change in the CVA values | NQ | NQ | ||
iii Tax, labor, and social security exposures | NQ | NQ | |||
iv Other potential adjustments | NQ | NQ | |||
Source: Audited trial balances and Pw C analyses | |||||
Privatization of the Eletrobras System Distribution Companies | 10 agosto 2017 | ||||
PwC | 19 |
Exhibit III – Net working capital (2/3) | |||||||
The content below presents the main points of attention identified during the accounting due diligence procedures. Accordingly,, it does not | |||||||
include all matters identified and discussed in the due diligence report, and, therefore, must be read jointly with the whole report in order to | |||||||
provide a comprehensive understanding of the matters identified. | |||||||
Net working capital | 3. | Clients with past due and installment payments: we | |||||
identified outstanding balances of clients’ past due and installment | |||||||
In R$ thousand | Dec-15 | Dec-16 | payments, classified in the current assets, which we suggest be | ||||
Clients - short term | 474,440 | 609,707 | excluded for purposes of analysis of the Company’s working capital. | ||||
Taxes and social contributions - short term | 10,506 | 22,495 | |||||
Indemnification right - short term | 1,812,076 | 897,600 | As mentioned before, although they do not represent a cash item | ||||
Inventory | 117,823 | 122,987 | with immediate liquidity, we understand that they are a receivable | ||||
Financial assets | 109,237 | 77,062 | of the Company, which, therefore, must be included in possible | ||||
Other assets - short term | 514,549 | 185,907 | cash flow projections. | ||||
Suppliers - short term | (5,168,720) | (4,819,380) | |||||
Taxes and contributions | (69,184) | (93,433) | 4. | Other assets – short term: we identified certain assets | |||
Estimated obligations | (32,632) | (42,298) | classified in the Company’s current assets which, in our view, are | ||||
Financial liabilities | (19,288) | (103,157) | |||||
Other liabilites - short term | (107,038) | (160,071) | not characterized as operating working capital, as detailed below: | ||||
Reported net working capital | (2,358,231) | (3,302,581) | |||||
Reclassification between working capital and net indebtedness | 700,998 | 1,242,427 | In R$ thousand | Dec-15 | Dec-16 | ||
CCC past due and installment payment amounts to be received | (6,643) | (5,709) | Goods to be written-off or scrapped | (1,561) | (3,955) | ||
Suppliers with past due credits | 1,086,227 | 1,141,024 | Refer to receivables from former employees | (122) | (179) | ||
Reclassification of related parties | (438,478) | (40,144) | Refer to R&D and PEE balances that must be reclassified in the future as | (17,896) | (20,072) | ||
Other liabilities - short term | 59,892 | 147,256 | fixed assets or expenses | ||||
Subtotal | 700,998 | 1,242,427 | Refer to longtime outstanding low income receivables due to Amazona's | ||||
default. Since those sums are not being used in the operation (longtime | |||||||
Adjustments proposed by the due diligence | (10,047) | (16,555) | |||||
outstanding), we suggest they be excluded from the recurring working capital | |||||||
1 Electricity for own consumption | - | (1,276) | analysis | ||||
2 Inventory with low recoverability expectation | (1,443) | (1,965) | Adjustment for WC write-off | (29,627) | (40,761) | ||
3 Clients with past due and installment payments | (79,249) | (84,988) | Source: Pw C analyses and discussions w ith management | ||||
4 Other assets -short term | (29,627) | (40,761) | |||||
Subtotal | (110,319) | (128,991) | |||||
Adjusted net working capital | (1,767,553) | (2,189,144) | Other considerations | ||||
Other considerations | i. | Risk of writing-off of CCC indemnification right: we were | |||||
i | Risk of writing-off of CCC indemnification right | NQ | NQ | ||||
ii | Potential risk of change in the CVA values | NQ | NQ | informed that ANEEL is in the process of inspecting the CCC | |||
iii Tax, labor, and social security exposures | NQ | NQ | account reprocessing. As a result, we understand that there may | ||||
iv Other potential adjustments | NQ | NQ | be variations in the CCC receivables account (positive or negative) | ||||
Source: Audited trial balances and Pw C analyses | |||||||
when that process is concluded. | |||||||
Privatization of the Eletrobras System Distribution Companies | 10 agosto 2017 | ||||||
PwC | 20 |
Exhibit III – Net working capital (3/3) | |||||
The content below presents the main points of attention identified during the accounting due diligence procedures. Accordingly,, it does not | |||||
include all matters identified and discussed in the due diligence report, and, therefore, must be read jointly with the whole report in order to | |||||
provide a comprehensive understanding of the matters identified. | |||||
Net working capital | ii. | Potential risk of change in the CVA values: the Account | |||
for Compensation of “Portion A” Variations (CVA) records the | |||||
In R$ thousand | Dec-15 | Dec-16 | difference between the costs estimated in the tariff (Portion A) | ||
Clients - short term | 474,440 | 609,707 | and the costs effectively incurred, creating a payable or | ||
Taxes and social contributions - short term | 10,506 | 22,495 | receivable balance (and, consequently, an expense or a revenue) | ||
Indemnification right - short term | 1,812,076 | 897,600 | |||
Inventory | 117,823 | 122,987 | for the Company. Such amounts to be paid/received are ratified | ||
Financial assets | 109,237 | 77,062 | each year by ANEEL. We found that, historically, the amounts | ||
Other assets - short term | 514,549 | 185,907 | ascertained by the Company may significantly differ from those | ||
Suppliers - short term | (5,168,720) | (4,819,380) | |||
Taxes and contributions | (69,184) | (93,433) | ratified by ANEEL, mainly with respect to the financial items, | ||
Estimated obligations | (32,632) | (42,298) | which are not controlled by the Company. Considering that the | ||
Financial liabilities | (19,288) | (103,157) | ratification process happens close to the end of the fiscal year | ||
Other liabilites - short term | (107,038) | (160,071) | (between September and October), we understand that there | ||
Reported net working capital | (2,358,231) | (3,302,581) | |||
are no material discrepancies for the balances accounted for in | |||||
Reclassification between working capital and net indebtedness | 700,998 | 1,242,427 | |||
CCC past due and installment payment amounts to be received | (6,643) | (5,709) | Dec-15 and Dec-16. On the other hand, those differences may | ||
Suppliers with past due credits | 1,086,227 | 1,141,024 | become significant over the months. | ||
Reclassification of related parties | (438,478) | (40,144) | |||
Other liabilities - short term | 59,892 | 147,256 | iii. | Tax, labor, and social security exposures: it refers to the | |
Subtotal | 700,998 | 1,242,427 | impact on the net working capital of adjustment #10 presented | ||
Adjustments proposed by the due diligence | in the quality of the results. We understand that any changes in | ||||
1 Electricity for own consumption | - | (1,276) | |||
2 Inventory with low recoverability expectation | (1,443) | (1,965) | the tax, labor, and social security procedures may also impact | ||
3 Clients with past due and installment payments | (79,249) | (84,988) | the Company’s net working capital. | ||
4 Other assets -short term | (29,627) | (40,761) | |||
Subtotal | (110,319) | (128,991) | iv. | Other potential adjustments: see adjustment viii of the | |
Adjusted net working capital | (1,767,553) | (2,189,144) | preceding exhibit. | ||
Other considerations | |||||
i | Risk of writing-off of CCC indemnification right | NQ | NQ | ||
ii | Potential risk of change in the CVA values | NQ | NQ | ||
iii Tax, labor, and social security exposures | NQ | NQ | |||
iv Other potential adjustments | NQ | NQ | |||
Source: Audited trial balances and Pw C analyses | |||||
Privatization of the Eletrobras System Distribution Companies | 10 agosto 2017 | ||||
PwC | 21 |
Exhibit IV – Balance Sheet | |||||
The content below presents the main points of attention identified during the accounting due diligence procedures. Accordingly,, it does not | |||||
include all matters identified and discussed in the due diligence report, and, therefore, must be read jointly with the whole report in order to | |||||
provide a comprehensive understanding of the matters identified. | |||||
Assets | Liabilities | ||||
In R$ thousand | Dec-15 | Dec-16 | In R$ thousand | Dec-15 | Dec-16 |
Cash and cash equivalents | 68,251 | 71,343 | Suppliers - short term | 5,168,720 | 4,819,380 |
Securities - TVM | 117,122 | 28,706 | Loans - short term | 141,777 | 88,542 |
Clients - short term | 474,440 | 609,707 | Commercial lease - short term | 132,972 | 136,662 |
Taxes and social contributions - short term | 10,506 | 22,495 | Taxes and contributions | 69,184 | 93,433 |
Indemnification right - short term | 1,812,076 | 897,600 | Estimated obligations | 32,632 | 42,298 |
Inventory | 117,823 | 122,987 | Financial liabilities | 19,288 | 103,157 |
Financial assets | 109,237 | 77,062 | Onerous Concession - short term | - | 812,694 |
Other assets - short term | 514,549 | 185,907 | Other liabilities - short term | 107,038 | 160,071 |
Current assets | 3,224,004 | 2,015,807 | Current liabilities | 5,671,611 | 6,256,237 |
Clients - long term | 67,756 | 105,790 | Suppliers - long term | 7,648,126 | 8,055,796 |
Taxes and social contributions - long term | 2,365,377 | 1,421,805 | Loans - long term | 1,185,389 | 1,898,681 |
Collaterals and deposits in court - long term | 296,285 | 413,730 | Accounts payable to related parties - long term | - | 158,036 |
Indemnification right - long term | 4,350,275 | 3,573,069 | Advance for future capital increase (AFAC) | - | 117,446 |
Financial asset - public utility concessions | 1,941,014 | 2,128,125 | Commercial lease - long term | 1,119,183 | 1,032,842 |
Investments | 206,473 | 17,107 | Post-employment benefit - long term | 921 | 2,160 |
Intangible assets | 181,298 | 140,765 | Provisions for lawsuits | 316,138 | 1,630,713 |
Fixed assets | 1,270,216 | 1,222,243 | Indemnification obligations - long term | 2,150,827 | 1,157,893 |
Non-current assets | 10,678,694 | 9,022,634 | Other liabilities - long term | 174,101 | 63,270 |
Total assets | 13,902,698 | 11,038,441 | Non-current liabilities | 12,594,685 | 14,116,837 |
Capital stock | 4,610,171 | 4,610,171 | |||
Adjustment for equity assessment | (2,421) | (5,642) | |||
Accumulated losses | (8,971,348) | (13,939,162) | |||
Net equity | (4,363,598) | (9,334,633) | |||
Total liabilities | 13,902,698 | 11,038,441 | |||
Source: Audited trial balances | |||||
Privatization of the Eletrobras System Distribution Companies | 10 agosto 2017 | ||||
PwC | 22 |
Exhibit V - Income Statement | ||
The content below presents the main points of attention identified during the accounting due diligence procedures. Accordingly,, it does not | ||
include all matters identified and discussed in the due diligence report, and, therefore, must be read jointly with the whole report in order to | ||
provide a comprehensive understanding of the matters identified. | ||
In R$ thousand | FY15 | FY16 |
Net revenue | 2,620,768 | 2,669,847 |
Operating cost | (3,072,953) | (2,747,664) |
Cost of Electricity | (1,685,067) | (1,758,515) |
Electricity bought for resale | (1,685,067) | (1,758,515) |
Operations cost | (1,106,434) | (705,403) |
Labor, materials, and third parties services | (417,907) | (384,710) |
Depreciation and amortization | (147,705) | (126,855) |
Use of w ater resources | (4,200) | - |
Fuel for electricity production | (3,828,978) | (3,476,449) |
Recovery of expenses - CCC | 3,798,015 | 3,513,758 |
Others | (505,659) | (231,147) |
Construction cost | (281,452) | (283,746) |
Gross profit | (452,185) | (77,817) |
Operating expenses / revenues | (439,948) | (2,743,365) |
Income from Electricity Service | (892,133) | (2,821,182) |
Financial revenues | 805,188 | 1,184,769 |
Financial expenses | (2,015,782) | (3,142,118) |
Financial result | (1,210,594) | (1,957,351) |
Income before equity stakes | (2,102,727) | (4,778,533) |
Equity stakes | (241,322) | (189,281) |
Net profit (loss) | (2,344,049) | (4,967,814) |
Source: Audited trial balances and audited financial statements | ||
Privatization of the Eletrobras System Distribution Companies | 10 agosto 2017 | |
PwC | 23 |
Exhibit VI – Quantified tax, labor, and social security exposures | |||
The content below presents the main points of attention identified during the accounting due diligence procedures. Accordingly,, it does not | |||
include all matters identified and discussed in the due diligence report, and, therefore, must be read jointly with the whole report in order to | |||
provide a comprehensive understanding of the matters identified. | |||
Tax exposure | |||
Item | Description | Exposure | Risk assessment * |
1 | ICMS, PIS, and COFINS on CCC reimbursement | 11,557,047 | Possible |
2 | ICMS on CDE and Low Income subsidies | 584,738 | Possible |
3 | Ancillary obligations in breach of the law | 517,996 | Probable |
4 | Write-off of PIS and COFINS credits on charges | 242,283 | Possible |
5 | Transfer of diesel oil to Amazonas GT | 203,039 | Possible |
6 | Unpaid Income Tax and CSL advances in 2016 | 47,537 | Probable |
7 | ICMS ST – Advanced on inbound energy and TUST | 24,220 | Probable/Possible |
8 | ISS on sharing of infrastructure and services | 2,571 | Probable/Possible |
Total of quantified tax exposure | 13,179,431 | ||
Source: Pw C analyses | |||
(*) Risk assessment for exposures reported in accordance w ith Loeser e Portela Advogados | |||
Labor and social security exposure | |||
Item | Description | Exposure | Risk assessment * |
1 | PLR disqualification | 81,795 | Possible |
2 | Medical and dental care | 31,653 | Possible |
3 | Irregularities related to work days | 13,351 | Probable |
Total quantified labor and social security exposure | 126,799 | ||
Source: Pw C analyses | |||
(*) Risk assessment for exposures reported in accordance w ith Loeser e Portela Advogados | |||
Privatization of the Eletrobras System Distribution Companies | 10 agosto 2017 | ||
PwC | 22 |
Exhibit VII Tax credit on tax loss, CSL negative basis, and temporary adjustments | |||
The content below presents the main points of attention identified during the accounting due diligence procedures. Accordingly,, it does not | |||
include all matters identified and discussed in the due diligence report, and, therefore, must be read jointly with the whole report in order to | |||
provide a comprehensive understanding of the matters identified. | |||
| The Company has not recognized in its accounting records the | ||
IRPJ and CSL deferred credit on the tax losses and on the social | |||
contribution negative basis, or on the temporary adjustments. | |||
| It is important to note that the balances of tax losses and CSL | ||
negative basis may be offset with future profits up to the limit of | |||
30% of the taxable profit of each year (without a limit in time). | |||
We should stress that the Company cannot use the balances of | |||
tax losses and CSL negative basis if (i) between the date of | |||
determination and offsetting there has been both a change in its | |||
corporate control and (ii) of its field of activity. | |||
| The tax losses and CSL negative basis balances are not reduced | ||
by the contingencies presented in this summary. | |||
In R$ thousand | IRPJ | CSL | |
Tax Loss/CSL Negative Basis | 11,006,615 | 11,025,501 | |
Temporary adjustment | - | - | |
Total | 11,006,615 | 11,025,501 | |
IRPJ 25% | 2,751,654 | - | |
CSL 9% | - | 992,295 | |
Total | 2,751,654 | 992,295 | |
Source: ECF and Calculation Records | |||
Privatization of the Eletrobras System Distribution Companies | 10 agosto 2017 | ||
PwC | 23 |
Evaluation Report on Eletrobras Distribuiçao Amazonas
Banco Nacional de Desenvolvimento Econômico e Social – BNDES
[Brazilian Development Bank]
November 2017
Belo Horizonte, November 1, 17.
Gentlemen,
In furtherance of the service provision agreement, this paper is part of the services retained for Eletrobras Distribuição Amazonas privatization, ITEM 3 – “SERVICE A” (Financial & Economic Evaluation), under the BNDES Agreement.
This Report encompasses the purpose, scope, procedures and methodology used, as well as the market and operating assumptions for Valuation of Distributor and the execution of the new Concession Contract1.
Discounted Cash Flow was the methodology used. Assumptions were adhered to, based on information delivered by the Distributors and BNDES, and on general market conditions.
The signed copies of this agreement are kept by the Contracting Party.
Best regards,
_______________________________
Alexandre Moreira Galvão
Legal Representative & Stockholding Director
1 Statutory Law 12.783 dated January 11, 2013, Article 8, Paragraph 1 A: ^Whev the seŒÀi e pŒoÀideŒ is a legal evtitÇ directly or indirectly controlled by the government, the Union will be entitled to hold such bidding procedure as described in the head section of this article, combined with the service-providing legal entity control transfer, and granting the Concession Contract to the new controlling shareholder for a 30-Çea peŒiod._
Ceres Inteligência Financeira 2
Ceres Inteligência Financeira | 3 |
Ceres Inteligência Financeira | 4 |
Ceres Inteligência Financeira | 5 |
Ceres Inteligência Financeira | 6 |
Ceres Inteligência Financeira | 7 |
Ceres Inteligência Financeira | 8 |
Ceres Inteligência Financeira | 9 |
Figure 13 - IASC Indicator – Realized/Forecasted x Target 1 of 3 | …144 | |
Figure 14 - IASC Indicator – Realized/Forecasted x Target 2 of 3 | …144 | |
Figure 15- IASC Indicator – Realized/Forecasted x Target 3 of 3 | …144 | |
Figure 16 - IASC Indicator - Forecasted/Realized X ANEEL Limit 2015-2047 | …145 | |
Figure 17 - INS Indicator – Realized/Forecast x Target 1 of 3 | …146 | |
Figure 1 - INS Indicator – Realized/Forecast x Target 2 of 3 | 146 | |
Figure 2 - INS Indicator – Realized/Forecast x Target 3 of 3 | …147 | |
Figure 20 - INS Indicator - Forecast/Realized X ANEEL Limit 2015-2047 | 147 | |
Figure 21 - ICO Indicator - Forecast/Realized X ANEEL Limit 2015-2047 | 153 | |
Figure 22 – Composition and Evolution of the X Factor Components | 157 | |
Figure 23 – Target Calculation by Benchmark Comparison | 167 | |
Figure 24 – Evolution of Non-Technical Losses (%/ Low-Voltage Market) | 172 | |
Figure 25 – Evolved Revenue and Growth Rate | 178 | |
Figure 26 – Evolved Default | 181 | |
Figure 27 – Evolved Operating Costs | 182 | |
Figure 28 - Costs versus EBITDA | 182 | |
Figure 29 – Evolved Costs with Power Purchase | 183 | |
Figure 30 – Evolved Transmission Costs | 184 | |
Figure 31 – Evolved PMSO | 184 | |
Figure 32 – Forecast Effective and Regulatory PMSO | 186 | |
Figure 33 – Evolved Operating Indicators: Gross Margin | 185 | |
Figure 34 – Evolved Operating Income: EBITDA Margin | 186 | |
Ceres Inteligência Financeira | 11 |
Introduction
Purpose
The purpose of this paper is to issue a Financial & Economic Evaluation Report on Eletrobras Dis-tribuição Amazonas and on the execution of a new Concession Contract, in order to shore up the accurate dimensioning and provide technical support in the business deals of the Company.
The purpose of the financial evaluation, besides the main point of determining the business Valuation, is to present scenarios, existing synergies for the business, and value possibilities that may be perceived by the market, as well as associated liabilities. From the company’s viewpoint, the discounted cash flow method reckons in numbers and at present value the whole dimension of the business, on a realistic basis, and taking into account potential points of exploitation of the Concession Contract, in view of the current structure.
Added hereto are the sensitivity analysis and the risk analysis, in addition to other valuable methods, such as comparative evaluation by multiples or similar transactions, aiming at reaching the clearest perception of the business value interval and possible structures that could make the transaction more efficient, both for the buyer and the seller.
Disclaimers
The job described in this paper was developed according to information obtained from sources appointed by Eletrobras Distribuição Amazonas and data delivered by ANEEL.
This evaluation does not take into account the penalties for electricity over-contract by the enterprise at issue, because it was assumed that the new utility company could afford settling its positions at market prices. Ceres hereby highlights that sudden changes in macroeconomic indicators and electricity prices may have some bearing on the values pointed out herein.
Please note that this paper does not contain a Compensation Basis added by the enterprise’s current PP&E positions. The accounting entries covering the current PP&E positions may be found in section “Comments on Current Assets” for invertors’ information.
Ceres Inteligência Financeira | 12 |
Methodology
Evaluating a distributor is based on the set of regulations making up the tariff review base applicable to inter-cycle tariffs and tariff readjustments, as well as on the economic pillar of effective forecasts, especially about costs incurred and capital invested. The set of regulations gives direction to the Required Revenue, which is the criterion to set the tariffs used by the distributors. Such tariffs arise from tariff reviews, decomposed from Installment A (non-manageable costs) and Installment B (manageable costs).
Tariff reviews are based on “tariff moderateness” and “continued award to efficiency” principles, with the different complexity/size areas being taken into consideration.
Costs and expenses, taxes, working capital, provision for indemnities and contingencies, and Real disbursements supplement the economic flow, to be dimensioned in forecast and at present value, for business analysis.
Please find below some directives forming the tariff review base, dimensioned at the Tariff Level and specified in PRORET (Portuguese acronym standing for “Tariff Regulation Procedures”). The cash flow and the capital cost definition methods used in this evaluation are detailed below. As a final point, find our comments on this paper’s directives for specific approaches and risk analysis.
Ceres Inteligência Financeira 13
Operating Costs Abstract
At this stage, we calculated items related to the tariff level cost elements. The operating costs calculated for the distributor take into account the own costs and the other distributors’ costs. The other distributors are included in the calculation to form the efficient cost target of the distributor under evaluation. The Statutory Operating Costs are forecasted from two angles:
1. Statutory Cost from Nov/2017 to Nov/2023 equivalent to such value as specified in Technical Note 149/2017 SRM/SGT/SRD/SFF/ANEEL;
2. Statutory Cost calculation from Nov/2023 through such methodologies as described in Submodules 2.2 and 2.2-A of PRORET, considering the information obtained from RT 2013, SAMP, BDGD and Financial Statements as the reference values.
The operating costs calculation as of 2023 adhered to the following brief plan of work:
1. Collect data from ANEEL documents;
a. PRORET submodule 2.2
b. PRORET submodule 2.2-A
c. APPROVAL RESOLUTION # 1.858 DATED FEBRUARY 27, 2015;
d. Technical Note 409/2013-SRE/ANEEL;
2. Market Data Collection from SAMP (Economic Regulation Market Information Monitoring System);
3. Data Collection of distributor’s structure from BDGD (Distributor’s Geographic Database);
4. Data Collection from the two most-recent annual Financial Statements available;
5. Updating Factor Calculation based on the methodology of Module 2.2, V2.0, PRORET;
6. Efficient Costs Interval Calculation;
7. Operating Costs Target Definition;
8. Operating Costs Revenue Calculation;
9. Report containing all the calculations made and results obtained upon the application of the proposed methodology;
Please find below a detailed description of such stages.
Database
Inputs
The Operating Costs calculation required:
Ceres Inteligência Financeira 19
age the service provision efficiency. Such amount was discounted from Installment B, variable Other Revenue (OR). Exception being made to items (8), (10), (11) and (13), where the sharing ratio was 30%, and item (14), where the sharing ratio was 50%.
Table 3 - Other Revenue Sharing (%) | |
Other Revenue Sharing | |
Activities inherent to the distribution service | |
Billable services | 60% |
Proper accessory activities | |
Collection of covenants or values through the invoice | 60% |
Collection of third-party invoices through own structure | 60% |
Advertising placement | 60% |
Rent or paid assignment of real estates and rooms | 60% |
Infrastructure sharing | 60% |
Technical evaluation and meter gauging | 60% |
Tax liability service commissioning | 60% |
Complementary accessory activities | |
(1) electricity distribution networks, aimed at land regularization of specific interest and to the service | 60% |
of the enterprises of multiple consumer units | |
(2) electricity networks for access to the transmission or distribution systems | 60% |
(3) electricity substations | 60% |
(4) internal electrical installations of consumer units | 60% |
(5) capacitors bank | 60% |
(6) input patterns of consumer units serviced at low voltage | 60% |
(7) electric power metering systems | 60% |
(8) generators, including distributed microgeneration and minigeneration sets | 30% |
(9) public lighting systems | 60% |
(10) Efficiency of electric power consumption and installation of qualified cogeneration, provided they | 30% |
are not included in Research and Development (R&D) or Energy Efficiency projects established by law. | |
(11) Data communication services (including PLC) | 30% |
(12) Consulting services | 60% |
(13) Commercialization of property rights and products obtained in a Research and Development | |
(R&D) project regulated by ANEEL, with proof of resource allocation for Northern, Northeastern, and | 30% |
Midwest regions. | |
(14) Commercialization of property rights and products obtained in a Research and Development | |
(R&D) project regulated by ANEEL, with proof of resource allocation for Northern, Northeastern, and | 50% |
Midwest regions. | |
Source: Prepared by us, based on Submodule 2.7 in PRORET. |
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General Rules
Revenues deemed as reference to reach tariff moderateness shall correspond to the average revenue invoiced plus taxes, in the 36 months preceding the 6th month before the review date, updated at IGP-M3 until the review date, multiplied by 12, as defined in Chapter 3 “Other Revenue Methodology” of
Submodule 2.7 in PRORET.
· In the event the activity was started within a period shorter than 36 months, then we considered the average revenue invoiced until the 6th month before the review date, updated at IGP-M, multiplied by 12.
3 Value updating calculation: A * updating at IGP-M thru review date * 12. Wherein, for updating in:
2015 and 2016: A = average revenue invoiced in the last 12 months, as of the 2nd month before the tariff review date;
2017: A = average revenue invoiced in the last 24 months, as of the 6th month before the tariff review date;
2018 on: A = average revenue invoiced in the last 36 months, as of the 6th month before the tariff review date.
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Statistical Techniques
During the project, statistical techniques were worked, such as the multi-varied analysis for demand forecast and sensitivity analysis.
Financial Techniques
Please find below the techniques that are comprised by the methodology of the financial and economic analysis for the evaluation. You may see the description of the Free Cash Flow to Firm. Then, you will find the analysis on the composition and formation of the capital cost that reflects the discount rate compatible with the business risk.
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Discounted Cash Flow
Introduction
The technique used for evaluation is based on the Discounted Cash Flow methodology, which is supported on the hypothesis that the value of a project depends on its capacity to generate wealth in the future. Revenues, costs, expenses, investments and other working capital requirements are estimated, in addition to all the items that affect the enterprise’s cash fluctuation, for a given period of time.
Seeing as the generated cash flow values occur in different time spans, these must be summed and compared in a current equivalence. Thus, the net balances reckoned per period are taken to present value at a discount rate reflecting the risks inherent to the business, added by the risk-averse investors opportunity cost, i.e., an attractiveness rate reflecting the business capital providers opportunity cost.
Such rate is given by value parameters generally offered by government bonds, incorporates the specific risk of the business, and is calculated based on CAPM (Capital Asset Pricing Model). By that model, the project owners’ equity (Ke) cost is calculated.
To calculate the project values, the owners’ equity cost (Ke) is weighted with the third-parties’ equity cost (Kd), in proportion to the capital structure used in the project, resulting in the enterprise’s WACC (Weighted Average Cost of Capital).
There are different versions of the Discounted Cash Flow methodology, and this paper adheres to the Free Cash Flow to Firm (FCFF) approach.
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Free Cash Flow to Firm – FCFF
The Free Cash Flow to Firm approach uses the weighted average capital cost (WACC) to discount at present value the free cash flow to firm. Hence, all resources available for dividend distribution or reinvestment are taken into account, but amortization flows and third-party debt interests paid are not considered, the yield on which is implied in estimated WACC rate. The firm flow is recommended for the evaluation at issue because it foresees the likelihood of permanent leverage over the Concession Contract period.
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Capital Asset Pricing Model – CAPM
Introduction
The owners’ equity cost (Ke) calculation is primarily based on the business risk analysis, added by the economy’s risk-free yield rate, generally given by the yield offered by government bonds.
At first, companies of the industry serve as the basis, measuring the price fluctuation of their shares in the money market, against the economy oscillations, mirrored on some market index, for instance.
One of such measures is by Beta, which represents a multiplier in relation to the return fluctuations of companies in a given segment in relation to the market and is equivalent to the risk of the segment analyzed. Primarily, we take a weighted average of such measure for the industry, excluding the indebtedness weight. That indicator represents an average and time relation between the returns on the shares selected in relation to the economy, which was highlighted here by the S&P500 returns fluctuation, an index that captures a good deal of transactions in the US market. Therefore, compared are the fluctuations of the prices in dollars of the shares in the open capital companies that operate in the same industry as the enterprise analyzed, with the S&P500 index fluctuations.
The purpose of this process is to obtain the additional risks of the business at issue in relation to the economy. Therefore, the result of the return expected and required on the business would be a risk free yield rate, in line with the rates offered by the government, added by the economy rate in general, plus the profits or minus the losses of the business, in comparison with the economy as a whole. Hence, a single rate synthesizes the yield required by a business, contemplating all the risks inherent in their fluctuations of income and cash, and adds the gains on zero risk investments, given in traditional short-term investments offered by the government.
Whereas we used indexes present in the US and global economy, calculated in dollars, considering the purpose of accuracy of inter-industry risk levels, therefore, utilization and supplementation in calculating the risks present in Brazilian interest rates in relation to the global market are necessary.
For risk-free and government rates, we used the 10-year US treasury bonds, marked to market continuously (Constant Maturity Bond). Thus, the risk elements present in the Brazilian interest rate, as the country risk premium, regarding the credit risk in the Brazilian Economy against the global market, and the exchange risk, showing the uncertainties about the R$ fluctuation against the USD, must be included. Both of them are already included in SELIC interest rate or government bonds with future maturities, the reason for such inclusions, for they represent the risk-free opportunity cost in Brazil.
For the country risk premiums, we used the difference between FRA for Exchange Coupon, contracts traded in BM&F-BOVESPA, and the Risk Free Rate calculated through the Treasury Bonds.
In order to calculate the exchange risk premium, we used the real difference between the DI – 1-day contracts, FRA for Exchange Coupon, denominated in Forward Premium, both the agreements traded
Ceres Inteligência Financeira | 36 |
Beta, unleveraged, for the industry, which is then re-leveraged in order to consider the fraction of systemic risk corresponding to the relevant company indebtedness effect.
Market Risk Premium
The Market Risk Premium represents the yield expected by the market, taking into account the additional risk in relation to the risk-free rate that practiced therein. The Market Risk Premium is calculated based on the difference between the returns on the S&P500 Index and the perpetual 10-year US Treasury Bonds (Constant Coupon Bond), marked to market annually, considering a long-term window of time. That is, to estimate the Market Risk Premium, the difference between the return on the S&P500, adjusted for dividends and the return on Treasury Bonds, was taken into account.
For the calculation of the return on T-Bonds, the constant maturity bonds, i.e. 10-year-maturity marked-to-market perpetual bonds, are taken into account, assuming the repurchase of the bond at the end of each year. Thus, this return is composed of two components: the yield hired for the year in which the bond was held by the investor and the paper price fluctuation to market due to the changes in the interest rate offered at the end of the year.
Country Risk
As previously mentioned, the CAPM model structuring based on the rates practiced in foreign markets, especially those found in the US market, is more advisable due to the diversity of business segments found in their stock market indices, which explain more comprehensively the relative risks between segments and companies in an economy. However, for application in the countries of origin, it is necessary to adjust the country-specific credit risks, since the US risk-free rate is used, based on T-Bonds, debt securities issued by the United States. The measurement of this risk spread, which applies to developing economies, including Brazil, is denominated country risk. The option recommended in this paper, for a better adjustment, is obtaining the spread between interpolated FRA and T-Bonds, which more directly reflect the country risk present in the interest curve.
Exchange Risk
To estimate the foreign exchange risk premium, the forward premium was obtained by the breakdown of domestic interest rates and the FRA, which already includes the country risk. The foreign exchange coupon and FRA contracts indicate the expected interest rates in US dollars, measuring the DI-1 day rate fluctuation against the exchange rate fluctuation, and are good indicators of the external interest rates evidenced in the negotiations of Brazilian bonds with sovereign risk, issued abroad.
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The Real Exchange Rate is calculated based on the difference between the Interbank Deposit (ID) and the Forward Rate Agreement (FRA) rates. It should be noted that this indicator is calculated in real terms, discounting the forecasted inflation in Brazil (IPCA) and the forecasted inflation in the USA (CPI).
The data of the rates and their respective maturities were interpolated using the Cubic Spline methodology to obtain the related risk curve.
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Capital Structure and Discount Rate Breakdown
Owners’ Equity Cost (Ke)
For the risk-free rate, the yield of the 10-year Treasury Bonds was considered. The data of the rates and their respective maturities were collected and then interpolated by using the Cubic Spline methodology to obtain the curve.
In order to estimate the Market Risk Premium, the difference between the return on the S&P500, adjusted for dividends, and the return on Treasury Bonds, was taken into account. For the calculation of the return on T-Bonds, the constant maturity bonds, i.e. 10-year-maturity marked-to-market perpetual bonds, are taken into account, assuming the repurchase of the bond at the end of each year. Thus, this return is composed of two components: the yield hired for the year in which the bond was held by the investor and the paper price fluctuation to market due to the changes in the interest rate offered at the end of the year. Thus, the Market Risk Premium was obtained, considering a time window, geometric mean and the long-term (10-year) bond with a coupon.
The Real Exchange Premium is calculated based on the difference between the Interbank Deposit (ID) and the Forward Rate Agreement (FRA) rates. It should be noted that this indicator, to be calculated in real terms, is discounted by the difference between inflation in Brazil (IPCA) and inflation in the USA (CPI).
The FRA and ID databases were collected in the Trading System of BM&FBovespa. Then, the data were interpolated by the Cubic Spline method, to obtain the rate curves.
In addition to FRA and ID, the Consumer Price Index (CPI) and the Extended Consumer Price Index (IPCA) forecasts are also necessary for the composition of the Foreign Exchange Risk. While the IP-CA forecast was obtained in the Market Expectation System of the Focus Bulletin, made available by the Banco Central (Bacen).
Table 6 - Summary of Applicable Methodologies | ||
Description | Parameter | Methodology |
Risk Free Rate | Treasury Bonds | Cubic Spline Interpolation |
Unleveraged Beta | Asset Price | EV weighted average |
Market Risk Premium | 10-year S&P500 X T-Bonds | Geometric Mean |
US Inflation | Consumer Price Index (CPI) | Forecast |
Brazilian Inflation | IPCA | Forecast |
FRA | FRA | Cubic Spline Interpolation |
Future DI | Interbank Deposit (DI1) | Cubic Spline Interpolation |
Source: Ceres Inteligência Financeira |
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Third-party capital cost (Kd)
The third party capital cost is obtained through the weighted average of the gross debt (2011-2016) of the companies used to calculate Beta, weighted at the Debt/Net Debt ratio, of the same companies, on their respective reference dates. Next, the Cost of Debt / Net Debt ratio is multiplied by the IDC forecast of the target year. As a final point, inflation and taxes are discounted to reach the tax-free real Kd.
Weighted Average Cost of Capital – WACC
The WACC rate is obtained by weighting the owners’ equity cost and the third-party equity cost and their respective sharing in the company’s capital structure, considering the tax benefit of the debt for third-party equity. The capital structure used was the same as used by ANEEL in PRORET, Submodule 2.4.
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Risk Analysis and Sensitivity Analysis
With the purpose of analyzing possible impacts on the valuation, we analyze the sensitivity of relevant variables for the forecast model, with a view to checking the impact on the Net Present Value (VPL). Herein, the sensitivity analysis was conducted in view of the impacts on the evaluation, from fluctuations falling on the Yield Base and on the weighted average cost of capital.
Critical Points and Adaptations
This paper further analyzes critical points of the business and suggested adaptations that may add value to the companies. We also studied some possibilities for this transaction that would minimize risks and maximize the return for investors.
Synergies
Costs and investments synergies and optimizations were identified, so as to obtain post-privatization potential business value benchmarks. We also appraised possible gains that could be reversed to the seller, depending on the sale structure.
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Special Treatments and Specific Risks
The distributors being analyzed are within the electric power distribution service provision norm as Designated Distributors, pursuant to the terms and conditions of Article 9, Statutory Law 12.783, dated January 11, 2013, and Ordinance 338 dated July 26, 2016, issued by the Department of Mines & Energies (MME).
Accordingly, several terms and conditions were agreed to for operation under supervision of the regulatory agency.
“ReA No. 748/2016 imposes on such distributors the pre-privatization Temporary Distribution Service Provision Plan for 2017, entailing loan transfer to meet the targets set and accommodate the operating costs, inter alia, according to Annex IV – Commitment, attached to said ReA, as follows: ‘The Designated Distributor Officers, regarding the distribution utility service provision (hereinafter referred to as the ‘Officers’), who are signatories to this agreement, in order to be entitled to the transfers of funds set forth in Paragraph 4, Article 9, Statutory Law 12.783 dated January 11, 2013, commit to abide by the provisions of Ordinance MME-388/2016 and see to continuity and suitability of the service delivered, particularly regarding the following parameters, which have been followed up by ANEEL as a priority:
I – industry compliance;
II – the assignment’s electric power loss threshold;
III – the assignment’s Operating Costs threshold;
IV – the assignment’s threshold of discontinuity equivalent duration per consumer unit (DEC);
V – the assignment’s threshold of discontinuity equivalent frequency per consumer unit (FEC);
VI – quality of information provided to ANEEL;
VII – meeting the inspection requirements issued by ANEEL.
The signatories hereto, on behalf of the Officers, hereby commit to send to ANEEL the Temporary Distribution Service Provision Plan, duly executed by the same signatories hereto, detailing the actions to be taken by the management, with a view to abide by the terms and conditions set forth by ANEEL during the assignment period granted by the Contract-Letting Branch of Government.”
Including, but not limited to, the following targets are in force according to the Opinion on ReA No. 748/2016:
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| |||||
Table 7 - End 2017 Threshold for Operating Management6 | |||||
2017 | Fluctuation | ||||
Indicator | Company | Reckoned | Threshold | (%) | Fluctuation |
PMSO Re. Adjusted (R$ thousand/year) | Amazonas | 864,502 | 821,277 | -5.00% | - 43,225 |
PMSO Re. Adjusted (R$ thousand/year) | Boa Vista | 17,829 | 169,375 | -5.00% | - 8,915 |
PMSO Re. Adjusted (R$ thousand/year) | Ceal | 384,705 | 36,547 | -5.00% | - 19,235 |
PMSO Re. Adjusted (R$ thousand/year) | Cepisa | 459,231 | 43,627 | -5.00% | - 22,961 |
PMSO Re. Adjusted (R$ thousand/year) | Ceron | 311,976 | 296,378 | -5.00% | - 15,598 |
PMSO Re. Adjusted (R$ thousand/year) | Eletroacre | 156,712 | 148,877 | -5.00% | - 7,835 |
PMSO Re. Adjusted w/o accruals (R$ thou- | |||||
sand/year) | Amazonas | 731,707 | 695,121 | -5.00% | - 36,586 |
PMSO Re. Adjusted w/o accruals (R$ thou- | |||||
sand/year) | Boa Vista | 95,921 | 91,125 | -5.00% | - 4,796 |
PMSO Re. Adjusted w/o accruals (R$ thou- | |||||
sand/year) | Ceal | 346,817 | 329,477 | -5.00% | - 1,734 |
PMSO Re. Adjusted w/o accruals (R$ thou- | |||||
sand/year) | Cepisa | 476,859 | 453,016 | -5.00% | - 23,843 |
PMSO Re. Adjusted w/o accruals (R$ thou- | |||||
sand/year) | Ceron | 324,072 | 307,868 | -5.00% | - 16,204 |
PMSO Re. Adjusted w/o accruals (R$ thou- | |||||
sand/year) | Eletroacre | 181,502 | 172,427 | -5.00% | - 9,075 |
DECi | Amazonas | 39.21 | 36.99 | -5.66% | - 2.22 |
DECi | Boa Vista | 11.38 | 10.36 | -8.96% | - 1.02 |
DECi | Ceal | 25.02 | 23.92 | -4.40% | - 1.10 |
DECi | Cepisa | 23.53 | 21.74 | -7.61% | - 1.79 |
DECi | Ceron | 32.14 | 29.42 | -8.46% | - 2.72 |
DECi | Eletroacre | 50.45 | 44.96 | -10.88% | - 5.49 |
DECi | CEA | 66.51 | 64.96 | -2.33% | - 1.55 |
FECi | Amazonas | 20.53 | 19.37 | -5.65% | - 1.16 |
FECi | Boa Vista | 11.78 | 11.30 | -4.07% | - 0.48 |
FECi | Ceal | 17.99 | 16.27 | -9.56% | - 1.72 |
FECi | Cepisa | 16.87 | 15.01 | -11.03% | - 1.86 |
FECi | Ceron | 20.31 | 17.57 | -13.49% | - 2.74 |
FECi | Eletroacre | 34.86 | 30.53 | -12.42% | - 4.33 |
FECi | CEA | 32.74 | 32.13 | -1.86% | - 0.61 |
Total Loss (% Power injection) | Amazonas | 40.3% | 39.1% | -3.1% | -1.2% |
Total Loss (% Power injection) | Boa Vista | 12.9% | 12.7% | -1.5% | -0.2% |
Total Loss (% Power injection) | Ceal | 25.2% | 24.1% | -4.6% | -1.2% |
Total Loss (% Power injection) | Cepisa | 30.5% | 29.0% | -5.0% | -1.5% |
Total Loss (% Power injection) | Ceron | 27.8% | 24.6% | -11.3% | -3.2% |
Total Loss (% Power injection) | Eletroacre | 23.3% | 22.4% | -3.8% | -0.9% |
Total Loss (% Power injection) | CEA | 40.0% | 38.9% | -2.7% | -1.1% |
Total Loss (% Power injection) | CERR | 55.4% | 53.8% | -3.0% | -1.6% |
Source: ANEEL |
The evaluation model treated such special norm, containing targets and specific budget for 2017. The treatment is due to the need to estimate the start balances for the valuation at the beginning of 2018.
6 Cases: 48500.004245/2016-77; rapporteur: Director Reive Barros dos Santos, 11/29/16; code: 48575.007296/2016-00.
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For subsequent years, we considered the private Concession Contract and performance trajectories of distributors according to this new reality. In its turn, the statutory targets were adjusted consistently with the reality and the complexity of the service provision in those regions. More to the point, we considered the terms and conditions contained in the draft template for the Electric Power Distribution Concession Contract, as per resolution issued by the Board of ANEEL during the 15th Ordinary Public Meeting held on May 2, 2017.
Likewise, the tariff review expected for those distributors was suspended. The new draft contract allows the possibility of accelerated tariff review in the new agreement6, a premise taken into account for the Base Scenario 2019.
Those distributors’ compensation bases appear to be outdated, and the unitizing process is underway, in many of them, it may valorize their compensation bases. As a final point, different compensation bases were simulated, given the expected results that may be obtained by Eletrobras, supported by such reports.
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Related Parties
The distributors have debt agreements with Eletrobras. Those agreements were priced separately, so as to allow possible debt restructuring with the shareholder.
Outstanding CCC Values and other Industry-Related Charges
There are debt balances for industry-related default. Normative Resolution No. 748/2016 resets post-assignment commitments and provides for loans with RGR funds for cash closing. CCC/other debt flows were treated separately, and the amounts of receivables and payables were reconciled.
Forecast of ‘Luz para Todos’ and RGR Flow earmarked to expiration
We forecasted the amounts payable and receivable by means of CDE funds for ‘Luz para Todos’ Program (PLPT – Portuguese acronym for “’Light for All’ Program”) through expiration scheduled for De-cember 20187. We did not make PLPT forecasts for subsequent years at scheduled expiration because such forecasts would depend on determinations foreign to the distributors.
As a final point, the total investment in replenishment will be distributed over the years 2018 to 2022 based on the Technical & Operating Due Diligence outcome; for the other years, the necessary replenishments, consistent with the private market8 within their area of operation.
7 Presidency of the Republic, Chief of Staff, Legal Team, Decree No. 8.387 dated December 30, 2014.
8 CEMAR, COELCE, COELBA, CELPE.
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Economic & Financial Evaluation
General Assumptions for the Financial Model
For the financial model, it was necessary to adopt some assumptions to analyze the distributors. The model was developed with monthly periodicity; the following general assumptions were defined: Base Date used for the evaluation as of March 1, 2018, with analysis period from March 1, 2018 to February 28, 2048 (30 years of Concession Contract). However, the tables, charts, and results shown in the Report start in January 2017 and end in December 2047, because, by considering only two months in 2048, the analyses would not be comparable with the other years.
The discount rate used is based on the dynamic rate methodology, consisting in the monthly calculation of the WACC – Weighted Average Cost of Capital, to be applied. The reporting currency is the official currency, i.e., the values are impacted by inflation over the analysis period. Deflator used to bring the forecasted cash flow to present value is IPCA.
For regulatory assumptions, we assumed that Ordinary Tariff Reviews have a 5-year periodicity, being considered in the month of November and as of the year 2023 as reference (5 years after the contract is signed with the new utility company, which is to take place in 2018). Besides, this evaluation considers an Extraordinary Tariff Review in 2019, basically encompassing the BRR reevaluation.
Finally, the results obtained in the evaluation are based on Nominal Cash Flow to Firm.
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General Comments on the Report
This report contains the assumptions, analyses and forecasts carried out for the valuation of the distribution companies for the privatization process. The analysis period is from 03/01/18 to 02/28/2048, which period is used to calculate the evaluation results.
Illustratively, tables and charts are shown in annual values through 12/31/47, seeing as the year 2048 covers only two months of evaluation, thus avoiding a distorted perception of the value over the series.
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Summary of Business and Existing Structures
Features of the Business
Amazonas Distribuidora de Energia S.A, subsidiary of Centrais Elétricas Brasileiras S.A. Eletrobras, is an electric power public utility concessionaire, which has as purpose to explore the services of electric power, as per the respective concession contract, performing, for such, studies, projects, construction and operation of power plants, substations, transmission lines, and networks.
.
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Financial Statements History Balance Sheet
Table 8 – Assets History – Eletrobras Distribuição Amazonas 2012 to 2016 | |||||
2012 | 2013 | 2014 | 2015 | 2016 | |
ASSETS | |||||
CURRENT | |||||
Cash and cash equivalents | 390,677 | 84,656 | 62,606 | 68,251 | 71,343 |
Equities and Securities - TVM | - | - | 131,715 | 117,122 | 28,706 |
Customers | 335,655 | 372,341 | 436,063 | 474,440 | 609,707 |
Taxes and social contributions | 31,789 | 34,063 | 27,099 | 10,506 | 22.495 |
Sureties and court deposits | - | - | 12,315 | - | - |
Reimbursement claims | 6,348,222 | 10,195,291 | 2,523,243 | 1,812,076 | 897,600 |
Stock | 77,318 | 141,381 | 103,542 | 117,823 | 122,987 |
Financial asset | - | - | 89,882 | 109,237 | 77,062 |
Other | 102,208 | 152,906 | 579,971 | 514,549 | 185,907 |
Total Current Assets | 7,285,869 | 10,980,638 | 3,966,436 | 3,224,004 | 2,015,807 |
NON CURRENT | |||||
Customers | 51,317 | 53,619 | 78,774 | 67,756 | 105,791 |
Taxes and social contributions | 1,450,703 | 1,749,861 | 2,100,973 | 2,365,377 | 1,421,805 |
Sureties and court deposits | 190,062 | 270,213 | 338,333 | 296,285 | 413,730 |
Reimbursement claims | 2,959,326 | 4,350,275 | 3,573,069 | ||
Financial asset | 2,138,126 | 3,039,230 | 3,024,112 | 1,941,014 | 2,128,125 |
Other | 9,077 | 9,071 | 9,072 | ||
Long Term Realizable | |||||
Investments | 7,670 | 7,678 | 12,938 | 206,473 | 17,107 |
Intangible | 629,606 | 121,613 | 620,842 | 181,298 | 140,765 |
Fixed assets | 1,278,105 | 1,257,715 | 1,376,407 | 1,270,216 | 1,222,243 |
Total Non-Current Assets | 5.754.666 | 6,509,000 | 10,520,777 | 10,678,694 | 9,022,635 |
TOTAL ASSETS | 13,040,535 | 17,489,638 | 14,487,213 | 13,902,698 | 11,038,442 |
Source: Ceres Inteligência Financeira, based on information provided by Eletrobras Distribuição Amazonas. |
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| |||||
Table 9 - Liabilities History - Eletrobras Distribuição Amazonas 2012 to 2016 | |||||
2012 | 2013 | 2014 | 2015 | 2016 | |
LIABILITIES | |||||
CURRENT | |||||
Suppliers | 2,937,920 | 4,841,004 | 2,439,763 | 5,168,720 | 4,819,380 |
Reimbursement obligation | 5,328,423 | 7,783,701 | - | - | - |
Finance and loans | 270,381 | 472,434 | 646,856 | 141,777 | 88,542 |
Lease operations | 162,929 | 181,596 | 74,507 | 132,972 | 136,662 |
Sectorial burden | 6,352 | - | 3,072 | - | - |
Taxes and social contributions | 47,250 | 63,227 | 52,290 | 69,184 | 93,433 |
Non Gratuitous Contracts | - | - | - | 812,694 | |
Estimated obligations | 40,130 | 48,028 | 58,707 | 32,632 | 42,298 |
Installments with suppliers | - | - | - | - | |
Financial liabilities | 292 | 19,288 | 103,157 | ||
Other | 540,103 | 848,812 | 124,500 | 107,038 | 160,071 |
Total Current Liabilities | 323,970 | 177,729 | 201,273 | 424,174 | 459,394 |
NON CURRENT | |||||
Suppliers | - | 599,631 | 7,326,768 | 7,648,126 | 8,055,796 |
Finance and loans | 758,962 | 715,349 | 1,517,563 | 1,185,389 | 1,898,681 |
Lease operations | 1,860,104 | 1,891,628 | 1,252,153 | 1,119,183 | 1,032,842 |
Estimated obligations | - | 4,849 | - | - | - |
Post-employment benefit | 11,562 | 1,362 | 1,321 | 921 | 2,160 |
Provisions for judicial causes | 298,218 | 273,615 | 341,313 | 316,138 | 1,630,713 |
Reimbursement obligation | 1,591,287 | 2,009,423 | 2,208,959 | 2,150,827 | 1,157,893 |
Provision for negative net equity in con- | |||||
trolled companies | - | - | - | - | 158,036 |
Advances for future capital increase | 277,687 | - | - | - | 117,446 |
Payable concessions | 279,392 | 295,259 | - | - | - |
Installments with suppliers | - | - | - | - | - |
Research and development | - | - | - | - | - |
Other | 21,159 | 23,890 | 458,530 | 174,101 | 63,270 |
Total Non-Current Liabilities | 5.098.371 | 5,815,006 | 13,106,607 | 12,594,685 | 14,116,837 |
EQUITY | |||||
Capital Stock | 4,330,917 | 4,610,171 | 4,610,171 | 4,610,171 | 4,610,171 |
Adjustment of equity evaluation | -13,498 | -2,409 | -2,253 | -2,421 | -5,642 |
Accrued losses | -5,708,743 | -7,172,954 | -6,627,299 | -8,971,348 | -13,939,161 |
Total Equity | -1.391.324 | -2,565,192 | -2,019,381 | -4,363,598 | -9,334,632 |
TOTAL LIABILITIES AND EQUITY | 13,040,535 | 17,489,638 | 14,487,213 | 13,902,698 | 11,038,442 |
Source: Ceres Inteligência Financeira, based on information provided by Eletrobras Distribuição Amazonas. |
Ceres Inteligência Financeira | 52 |
Income Statement
Table 10 - Income Statement History - Eletrobras Distribuição Amazonas 2012 to 2016 | |||||
2012 | 2013 | 2014 | 2015 | 2016 | |
NET OPERATING INCOME | 2,070,391 | 2,711,484 | 3,610,036 | 2,620,767 | 2,669,847 |
OPERATING COST | (1,921,055) | (2,567,585) | (3,060,129) | (3,072,952) | (2,747,664) |
Electric Power Cost | (98,100) | (406,444) | (1,336,890) | (1,685,067) | (1,758,515) |
Electric power purchased for resale | (98,100) | (406,444) | (1,336,890) | (1,685,067) | (1,758,515) |
Operation Cost | (1,103,753) | (1,172,565) | (1,333,327) | (1,106,433) | (705,403) |
Workforce, materials, outsourced services | (442,942) | (473,350) | (448,564) | (417,907) | (384,710) |
Depreciation and amortization | (127,978) | (154,218) | (268,555) | (147,705) | (126,855) |
Use of water resources | (5,593) | (6,363) | (7,197) | (4,200) | - |
Fuel for the production of electric energy | (3,294,316) | (3,751,983) | (4,354,645) | (3,828,978) | (3,476,449) |
Expense recovery - CCC | 3,124,593 | 3,611,563 | 4,165,564 | 3,798,015 | 3,513,758 |
Other | (357,517) | (398,214) | (419,930) | (505,658) | (231,147) |
Construction cost | (719,202) | (988,576) | (389,912) | (281,452) | (283,746) |
GROSS PROFIT | 149,336 | 143,899 | 549,907 | (452,185) | (77,817) |
OPERATING EXPENSES | (575,549) | (850,283) | 320,676 | (439,947) | (2,743,365) |
ELECTRIC POWER SERVICE PROFIT | (426,213) | (706,384) | 870,583 | (892,132) | (2,821,182) |
Financial income | (638,140) | (658,113) | (1,218,442) | (1,210,594) | (1,957,351) |
Result Before Equity Holdings | (1,064,353) | (1,364,497) | (347,859) | (2,102,726) | (4,778,533) |
Equity Holdings | - | - | 5,125 | (241,322) | (189,281) |
PROFIT (LOSS) FOR THE YEAR | (1,064,353) | (1,364,497) | (342,734) | (2,344,048) | (4,967,814) |
Source: Ceres Inteligência Financeira, based on information provided by Eletrobras Distribuição Amazonas. |
Ceres Inteligência Financeira | 53 |
Financial Indicators
Table 11 - Financial Indicators 2012 to 2016 | |||||
2012 | 2013 | 2014 | 2015 | 2016 | |
Gross Margin = LB9/ROL10 | 60.5% | 48.6% | 52.2% | 25.0% | 23.5% |
Margin EBITDA = EBITDA11/ROL | 13.4% | 11.0% | 22.7% | -11.6% | 1.8% |
Net Margin = LL12/ROL | -51.4% | -50.3% | -9.5% | -89.4% | -186.1% |
Indebtedness Ratio = DL13/PT14 | 4.9% | 6.3% | 14.5% | 9.1% | 17.4% |
Indebtedness Composition = CP15/(CP+LP16) | 64.7% | 71.0% | 20.6% | 31.0% | 30.7% |
Return on invested capital (ROIC) = LL/AF17 | -49.8% | -44.9% | -11.3% | -120.8% | -233.4% |
Return on assets (ROA) = LL/AT18 | -8.2% | -7.8% | -2.4% | -16.9% | -45.0% |
Source: Ceres Inteligência Financeira |
Operating and financial indicators were calculated for the company. We may see a material reduction in Margin EBITDA from 2012 to 2016, which demonstrates cost inefficiency. Net Profit caused negative margins and returns in the other years analyzed.
9 Gross Profit
10 Net Operating Income
11 Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
12 Net Profit
13 Net Debt
14 Total Liabilities
15 Short-term debt
16 Long-term debt
17 Financial Assets
18 Total Assets
Ceres Inteligência Financeira
54
Network Extension (Km)
Common Analyses to Distributors
The network extension project was based on the history of extension of low, medium, and high voltage networks between years 2001 and 201629. The network extension set forth by the Decennial Plans and PDDs of distributors was added to such history, of which the forecasted network extension was extracted for years 2017 to 2021 for low and medium voltages, 2017 and 2018 for the “Luz Para To-dos Program” (Light for All) and high voltage for years 2017 to 2026.
Its history of expansion after the Decennial Plans and PDDs takes into account both the historical and Forecast investments to each distributor.
Three groups have been segregated: (i) low and medium voltage, (ii) high voltage, and (iii) “Luz Para Todos Program”. This division was necessary to determine the fundamental differences existing in each group.
The forecasting of group (i) Low and Medium Voltage is set to begin in 2022. A proxy (average of investment/average of growth) of dependency was created between the degree of investment and the network expansion. With the degree of investment Forecast by Ceres, it was possible to estimate from 2022 the network mileage values.
The same methodology applied to the Low and Medium Voltages was applied to the High Voltage segment. The Decennial Plan already projects the expansion of the network mileage for years 2017-2026. For years 2027-2048, a causal relation was applied between the investment and the network expansion. The investments Forecast for the high voltage Market served as an input to obtain the network expansion of that class.
Regarding “Luz Para Todos Program” (PLPT), the data used refer to the Decennial Plans and, therefore, based on the current condition of the legislation that determines the end of the program in 2018, no forecast was made for the coming years.
29 The extension of the network built under Luz Para Todos Program in included in the 2001-2006 history, in low and medium voltage
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Specific Analyses of Distributor
The network forecasting per voltage level for Amazonas Energia is presented below.
Table 14 – Network Forecasting per Voltage Level 1 of 3 | |||||||||||
Voltage | |||||||||||
2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | |
(Km) | |||||||||||
LV/MV | 29,389 | 29,952 | 30,577 | 30,887 | 31,110 | 31,540 | 31,970 | 32,400 | 32,830 | 33,260 | 33,690 |
HV | 3,342 | 3,700 | 3,999 | 4,379 | 4,379 | 4,385 | 4,484 | 4,570 | 4,619 | 4,910 | 5,016 |
PLPT | 2,820 | 6,579 | 6,579 | 6,579 | 6,579 | 6,579 | 6,579 | 6,579 | 6,579 | 6,579 | 6,579 |
Total | 35,551 | 40,232 | 41,155 | 41,845 | 42,068 | 42,504 | 43,033 | 43,549 | 44,029 | 44,750 | 45,286 |
Source: ANEEL, Distributors Data, Ceres Inteligência Financeira |
Table 15 - Network Forecasting per Voltage Level 2 of 3 | |||||||||||
Voltage | |||||||||||
2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2035 | 2036 | 2037 | 2038 | |
(Km) | |||||||||||
LV/MV | 34,121 | 34,551 | 34,981 | 35,411 | 35,841 | 36,271 | 36,701 | 37,132 | 37,562 | 37,992 | 38,422 |
HV | 5,123 | 5,229 | 5,335 | 5,442 | 5,548 | 5,654 | 5,760 | 5,867 | 5,973 | 6,079 | 6,186 |
PLPT | 6,579 | 6,579 | 6,579 | 6,579 | 6,579 | 6,579 | 6,579 | 6,579 | 6,579 | 6,579 | 6,579 |
Total | 45,823 | 46,359 | 46,896 | 47,432 | 47,968 | 48,505 | 49,041 | 49,578 | 50,114 | 50,650 | 51,187 |
Source: ANEEL, Distributors Data, Ceres Inteligência Financeira |
Table 16 - Network Forecasting per Voltage Level 3 of 3 | ||||||||||
Voltage | ||||||||||
2039 | 2040 | 2041 | 2042 | 2043 | 2044 | 2045 | 2046 | 2047 | 2048 | |
(Km) | ||||||||||
LV/MV | 38,852 | 39,282 | 39,712 | 40,142 | 40,573 | 41,003 | 41,433 | 41,863 | 42,293 | 42,723 |
HV | 6,292 | 6,398 | 6,504 | 6,611 | 6,717 | 6,823 | 6,930 | 7,036 | 7,142 | 7,248 |
PLPT | 6,579 | 6,579 | 6,579 | 6,579 | 6,579 | 6,579 | 6,579 | 6,579 | 6,579 | 6,579 |
Total | 51,723 | 52,260 | 52,796 | 53,333 | 53,869 | 54,405 | 54,942 | 55,478 | 56,015 | 56,551 |
Source: ANEEL, Distributors Data, Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 67 |
Investment Forecasting
Deployment and Renewal
The Amazonas 2017 Distribution Development Plan (PDD 2017), the 2017 Decennial Plan, the 2017 Plan on the Provisional Electric Power Distribution Services (Provisional Plan), the information of the Due Diligence of service B, in its “Product 7 – Amazonas’ Technical-Operational Report”, annex II, in addition to indications of Amazonas’ technical team, obtained in the meetings organized by CERES, were used to define Amazonas’ investment needs.
Investments were subdivided into High Voltage Expansion, Medium Voltage/Low Voltage Expansion, Improvement, Renewal (Maintenance), Luz para Todos, and Infrastructure and Support. From 2017 to 2022, the values obtained in the Due Diligence of service B, in its “Product 7 – Amazonas’ Technical-Operational Report”, annex II, were considered as a whole and added to the expenses with Renewal (Maintenance) in 2017, of the Provisional Plan.
Only 10% of the expenses with Luz para Todos Program were considered for years 2017 and 2018, since the other 90% were subsidized with CDE resources and have been allocated as Special Obligations. In addition, approximately R$ 57.4 million in 2019 and R$ 172.4 million in 2020, of the investments with High Voltage Expansion were also considered as Special Obligations, since they are subrogated.
As of 2023, investments with High Voltage Expansion, Medium Voltage/Low Voltage Expansion, and Renewal (Maintenance) continued being forecasted according to the premises described below.
High Voltage Expansion: The values informed in the 2017 PDD were fully considered until 2026. For the remaining years of forecasting, the investment estimated is equal to the average of expenses among the years 2022 and 2026.
Medium Voltage/Low Voltage Expansion: As of 2023, the amount is equivalent to the average of amounts expended between 2018 and 2021, and was considered as fixed until the end of the forecasting.
Improvement: It has been defined that, as of 2023, the amount is equivalent to that of 2022, without variations, once it already represents the minimum among the years 2018 to 2022, and there is a continuous character for such line.
Renewal (Maintenance): As of 2023, expenses with maintenance will be equivalent to the asset depreciation value. The reference of depreciation of ANEEL’s Normative Resolution no. 674/2015 for the current assets was used to define this value, in addition to the depreciation of new investments of the company, calculated based on the average depreciation of the assets of the Equity Control Report.
Ceres Inteligência Financeira | 68 |
Table 17 – Deployment and Renewal | |||||||||||
R$ million | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 |
High Voltage Expansion | 35 | 167 | 357¹ | 358² | 18 | 283 | 10 | 28 | 57 | 55 | 87 |
Medium Voltage/Low Voltage Expansion | 6 | 154 | 125 | 160 | 107 | 137 | 137 | 137 | 137 | 137 | 137 |
Improvement | 60 | 50 | 224 | 64 | 90 | 40 | 40 | 40 | 40 | 40 | 40 |
Renewal (Maintenance) | 144 | 4 | 4 | 4 | 5 | 17 | - | - | - | - | - |
Luz para Todos² | 22 | 73 | - | - | - | - | - | - | - | - | - |
Infrastructure and support | 25 | 1 | - | - | - | - | - | - | - | - | - |
Total | 293 | 449 | 711 | 587 | 220 | 476 | 187 | 205 | 234 | ||
Source: Ceres Inteligência Financeira, based on the information supplied by Eletrobras Distribuição Amazonas | |||||||||||
and by the Due Diligence of service B, in its “Product 7 – Amazonas’ Technical-Operational Report”, in annex II. | |||||||||||
1- The 2019 Investment with High Voltage Expansion was adjusted in R$ 57.4 million (subrogation) | |||||||||||
2- The 2020 Investment with High Voltage Expansion was adjusted in R$ 172.4 million (subrogation) | |||||||||||
3- The 2017 Investment with Luz para Todos was adjusted in R$ 202.9 million, and that of 2018 in R$ 661.5 million (CDE subsides) | |||||||||||
Ceres Inteligência Financeira | 69 |
Replacement
In addition to the investments with Deployment and Renewal defined as of the 2017 PDD, of information supplied by Amazonas’ technical team and the Due Diligence of service B, in its “Product 7 –Amazonas’ Technical-Operational Report”, in annex II, other analyses have been carried out to define the investments with maintenance and investments with the replacement of assets both partially and fully depreciated.
Using the 2015 Equity Control Report, it was possible to classify assets as Buildings, Civil Works and Improvements, Machinery and Equipment, Furniture and Appliances, Easements, Software, Real Properties, and Vehicles. In addition, the Market Value in Use (VMU) was identified, as well as depreciation and the New Replacement Value (VNR), of each asset of Amazonas. The relationship between the VMU and the VNR creates the indicator that represents the non-depreciated percentage of each asset.
Due to its large representativeness in the assets of the company, group Machinery and Equipment had a more detailed classification, allowing for the individual analysis of each item. This degree of detail may be found in the annexes to this report.
Both the VMU and VNR of the most recent rate adjustment of private distributors - CEMAR, Energisa Sergipe and Energisa Paraíba – was determined, with a reference rate of 59.26%. Therefore, each item of the Equity Control Report has a target percentage of VMU/VNR that must be achieved by 2022, from the 2017 to 2022 investments.
Table 18 – Private Reference | ||||
Energisa | Energisa | |||
R$ million | CEMAR | Accumulated | ||
Paraíba | Sergipe | |||
Rate Adjustment Year | 2013 | 2013 | 2013 | |
New Replacement Value | 5,440 | 1,894 | 1,246 | 8,579 |
Market Value in Use | 3,307 | 1,082 | 695 | 5,084 |
% VMU/VNR | 60.79% | 57.11% | 55.82% | 59.26% |
Source: Ceres Inteligência Financeira, based on data from Aneel. |
The depreciation of each item was applied to the basis of the Equity Control Report, based on ANEEL’s Normative Resolution no. 674/2015, both for the 2016 assets and for new investments forecasted until 2022. Forecasted investments with deployment and renewal from 2017 to 2022 were also considered. The treatment above and money adjustments formed the assets of Amazonas in 2022, which has been considered as the reference to define the need to invest in replacement. Since the new basis exceeded the new reference value, with VMU/VNR equal to 61.4%, no investment is necessary to replace assets in 2022.
Ceres Inteligência Financeira | 70 |
| ||||||||
Table 19 – VMU/VNR Ratio in 2022 | ||||||||
Addi- | Addi- | |||||||
VMU | VNR | VMU/VN | VMU | VNR | VMU/VNR | |||
R$ million | tions | tions | ||||||
2016 | 2016 | R 2016 | 2022 | 2022 | 2022 | |||
VMU | VNR | |||||||
Buildings, Civil Works and Improvements | 34.7 | 114.7 | 30.3% | 68.0 | 127.8 | 102.7 | 242.6 | 42.4% |
Machinery and Equipment | 1,176.3 | 2,222.1 | 52.9% | 2,506.6 | 3,715.0 | 3.683 | 5,937.1 | 62.0% |
Furniture and Appliances | 9.9 | 17.7 | 56.0% | 17.5 | 30.9 | 27.4 | 48.6 | 56.3% |
Easements | 29.8 | 29.8 | 100.0% | 84.3 | 84.3 | 114.1 | 114.1 | 100.0% |
Software | 14.3 | 55.3 | 25.9% | 8.0 | 55.6 | 22.3 | 110.8 | 20.1% |
Real Property | 20.1 | 20.1 | 100.0% | 56.8 | 56.8 | 76.8 | 76.8 | 100.0% |
Vehicles | 4.6 | 23.1 | 20.0% | 4.3 | 19.9 | 8.9 | 43.0 | 20.7% |
Total General | 1,289.8 | 2,482.7 | 52.0% | 2,745.5 | 4,090.3 | 4,035.2 | 6,573.0 | 61.4% |
Source: Ceres Inteligência Financeira, based on the information supplied by Eletrobras Distribuição Amazonas. |
Maintenance
The values equivalent to the Renewal considered in the Due Diligence of service B, in its “Product 7 -Amazonas’ Technical-Operational Report”, in annex II, were used for the period among 2017 to 2022. From 2023, the maintenance will be composed by values related to the former asset base and the maintenance of new investments forecasted to the company.
The maintenance of the former base of assets is equivalent to the depreciation value of each item, as per ANEEL’s Normative Resolution no. 674/2015. For the maintenance of the new investments, the reference of 59.26% out of 4.58% (average depreciation of the assets values of the Equity Control Report) was used in the calculation, thus allowing the assets of the company to remain depreciated at the reference level obtained from private companies used as a reference.
Maintenance values were considered as a whole from 2017 to 2022. For the other years, until 2046, the maintenance value was accumulated and executed two and one year before each rate review. The distribution of the investment in these two years obeyed the proportion of investments made by the reference companies, for the period prior to the equivalent rate review.
The accounting of expenditures with maintenance occurs until 2047. Since the concession ends in 2048, there is no need to make long term investments, between 2044 and 2048, at the same levels of the preceding years. Therefore, the final investment in maintenance corresponds to the values accumulated in 2043 and 2044.
Table 20 – Distribution of Investment with Maintenance prior to Rate Review | |||
Reference | |||
2 years | 1 year | Years considered | |
Companies | |||
CEMAR | 45% | 55% | 2006 and 2007 |
COELCE | 42% | 58% | 2004 and 2005 |
COELBA | 45% | 55% | 2005 and 2006 |
Ceres Inteligência Financeira | 71 |
PMSO Estimate
Common Analyses to Distributors
PMSO Forecasting Method
The analysis of Personnel, Material, Third-party Services, and Other Expenses (PMSO, of the Portu-guese “Pessoal, Material, Serviços de terceiros e Outras despesas”) may be divided into two parts: characterization of the analytical bases and the effective forecasting of such bases according to the types of expenses observed in such accounts
The First Part, known as the Characterization of Analytical Accounts, underwent 5 Phases:
Phase 1 – Grouping of analytical accounts;
Phase 2 – Analysis of the account nature as fixed and variable;
Phase 3 – Identification of atypical values30;
Phase 4 – Evaluation of the best correlation to variable accounts;
Phase 5 – Identification of regulatory accounts (considered as recurring by ANEEL and compensated thereby).
Phase 1 begins with the monetary adjustment of the analytical accounts evaluated. These accounts are included in the sampling period between January 2012 and December 2016, and were adjusted for the base date of December 2016 for it is the most current of the period.
After such first monetary adjustment, the accounts of expenses were grouped in each PMSO group, in accordance with the similarity of type of expense and respective taxable events.
Phase 2 consists of the analysis of the fixed and variable accounts. The PMSO groups were evaluated considering as fixed account the account whose participation in the expenditure in the past 3 periods 31 was within the lower and upper limits of the expense grouping sample, where:
Upper limit fix/var = 60%*(1-((standard sample deviation)/(sample minimum)) and
Lower limit fix/var = 60%*(1-(standard sample deviation)/(sample maximum)).
30 Values with behavior different from the usual of the account, either too high or too low in relation to the average, values at non-recurring levels
31 To accounts completely fixed in value, each 1 out of 5 years of the period would represent 20% of the total expenditure. Thus, the last 3 years would represent 60% of the value in the 5 years evaluated
Ceres Inteligência Financeira | 73 |
Initially, accounts above or below such limits are considered variable. Then, an evaluation is carried out in relation to the nature of the expense (if having characteristics of fixed or variable) and the degree of variation in the recent period32.
Fixed accounts, when Forecast, are calculated as the average of expenses in the sampling period, excepting outliers.
Variable accounts, when Forecast, are transformed into indicators and range according to the forecasts33 of Consumption Units and Consumed MWh, also excluding atypical values.
Phase 3 evaluates which periods in a sample may consist of atypical values and, therefore, unlikely to occur in the Forecast scenario. A period entry is considered as an outlier when its value is beyond the established limits of normality of the sample, where:
Upper limit out = (sample average) + (standard sample deviation);
Lower limit out = (sample average) - (standard sample deviation).
After such initial characterization, the nature of the expense and the levels verified in the past 3 years are evaluated in order to identity structural breaches to the expense level to define if the prior samples must be kept or eliminated in the evaluation.
Phase 4 evaluates what are the most correlated variables with the PMSO account groups. More correlated groups are used as an indicator to estimate the account value. The two variables with the greatest correlation with the PMSO accounts were Network Extension (Km)34 and Consumption in MWh.
The formation of the indicator in the PMSO group expenses considered as variable occur as shown below:
(Σ Regular Expense Values35)/(Σ Regular Parameter Values)36.
Finally, Phase 5 consists of the classification of the accounts composing the groups of each PMSO block, pursuant to the characterization defined by ANEEL for regulatory PMSO. Thus, each account composing the analytical PMSO has a classification as Effective PMSO (total), Regulatory PMSO and PMSO Other (effective PMSO – regulatory PMSO).
32 Expenses with low variation would tend to be fixed
33 More detail on the forecasting of Consumption Units and Consumption in MWh are provided in the chapter of Demand and Consumption Forecasting 34 Includes the extension of low, medium, and high voltage network 35 Excluding those atypical 36 The parameters considered are consumption units and consumption in MWh for the same period of time of the expense, excluding periods considered as atypical by the company
Ceres Inteligência Financeira | 74 |
The Second Part includes the Forecasting of the Effective and Regulatory PMSO Groups, and may be divided into four Phases:
Phase 1 – Expense Forecasting for 2017;
Phase 2 – Operating Costs Variation Rate;
Phase 3 – Identification and Treatment of Accounts with Behavior Linked to Improvements of the Distributor;
Phase 4 – Concession Period Forecasting – 2018 to 2047.
Phase 1, Expense Forecasting for 2017, will consider a variation of the expense based on the history of the company, observing the fixed and variable natures of the expenses composing the PMSO.
Fixed and variable expenses are calculated as detailed in the First Part, Phase 2, in accordance with the provisions of this chapter. Variable expenses are transformed into indicators having as denominator the parameter of best correlation that has been analyzed, based on R$/Parameter, multiplied by the forecasting37 of Network Extension (Km) or MWh Extension.
Phase 2, Operating Costs Variation Rate and Target, is subdivided into three steps:
1 – Definition of the Operating Cost Benchmarks;
2 – Definition of Variation Rate and Target between 2018 and 2022;
3 – Definition of Variation Rate and Target between 2023 and 2027.
Step 1 of definition of Operating Cost Benchmarks initially took into account the groups determined by ANEEL, which have been adjusted per region. For the distributors of the Northern region, the benchmarks that have been considered consisted of the following private distributors: Celpa and Celtins. These were grouped with Ceron, Eletrobrás Roraima, EletroAcre and Amazonas Energia.
For the Northeastern region, the following were considered: Celpe, Cemar, Coelce, Energisa Paraíba and Energisa Sergipe, Coelba and Cosern; these were grouped with Cepisa and Ceal.
37 Detailed in the chapter on Consumption and Demand Forecasting
Ceres Inteligência Financeira | 75 |
In Step 2 of Definition of the Variation Rate between 2018 and 2022, ANEEL’s DEA data base of calculation of efficient costs was used for the 4CRTP. The PMSO expense of each company with the extension of the network is parameterized.
Based on these indicators, it is possible to calculate the average of the group of each distributor according to the region. Distributors whose initial indicator is greater than that verified by the group average shall have their cost adjusted in terms of indicator in the next rate adjustment, in 2023.
Distributors whose initial indicator is below that verified in the group average shall have as their target the indicator level between 2023 and 2027 lower than the group average.
Step 3 of Definition of the Variation Rate between 2023 and 2027 consists of the calculation of the average indicator of the private benchmarks of the groups. For the Northeastern region, the private distributors considered were: Celpe, Cemar, Coelce, Energisa Paraíba, and Energisa Sergipe. For the Northern region, the private distributors were: Celpa and Celtins.
When achieving the R$/Consumption unit indicator of the cycle target, distributors stabilize the operating cost indicators parameterized by consumption unit.
Phase 3 of Identification and Treatment of Accounts with Behavior Linked to Improvements of the Distributor consists of the identification of considered accounts that influence the effective PMSO cost, but that range in accordance with the operating improvements of the distributor38. Each company had a set of adjustments treated in their specific section.
Phase 4 consists of the estimate of the PMSO expense levels of distributors during the period of concession. With the targets between 2018 and 2022 and from 2023 to 2027, distributors will achieve the operating cost benchmarks by the end of 2027. From that year, the indicator of R$ PMSO/Consumption Unit is stabilized, and the absolute PMSO value ranges in effective terms by means of the variation of consumption units.
Efficient Costs Interval
The upper and lower limits of the efficiency interval39 calculated to each distributor were estimated.
The values considered to these forecasts were based on those found in “Annex I – Efficiency Intervals” of submodule 2.2 V2 of PRORET. These limits have the trend of being aligned with their respec-
38 Examples: ANEEL fines are reduced according to the curve of improvement of quality indicators
39 Greater detail on the PRORET methodology about this subject may be found in chapter “Methodology”, Item PRORET (Rate Level), Sub-item “Operating Costs”, Topic “Efficient Cost Interval”, or PRORET submodule 2.2 V2
Ceres Inteligência Financeira | 76 |
tive benchmarks in two occasions during the concession; the first ending in 2022 and the second ending in 2027.
The first occasion calculates the simple average of each one of these limits to distributors according to their regional groups, consisting of:
Northeast: Ceal, Cepisa, Celpe, Cemar, Coelba, Coelce, Cosern, Energisa Paraíba, and Energisa Sergipe;
North: Amazonas Energia, Eletrobras Roraima, Ceron, EletroAcre, Celpa, and Celtins.
Distributors with upper or lower limit at level worse than that of the group average achieve the group average by 2022.
At the second occasion, the average of private distributors of these regional groups is calculated, consisting of:
Northeast Private Benchmark: Celpe, Cemar, Coelce, Energisa Paraíba, and Energisa Sergipe;
North Private Benchmark: Celpa, Celtins.
It should be noted that since Technical Note 149/2017-SRM/SGT/SRD/SFF/ANEEL defines the operating costs in force from 2017 to 2023, the efficient costs intervals defined in this section will only have an impact to the rate after the Rate Review of 2023.
Ceres Inteligência Financeira | 77 |
Specific Analyses of Distributor History
The annexes contain tables that show the groups of the accounts related to the PMSO of each distributor. Similar accounts were initially grouped in terms of type of expense. After this exercise, the groups were allocated inside the PMSO accounts. The names and codes of accounts are described according to the original names and codes of the financial statements provided by the distributor. The values are adjusted as per the December/2016 Base Date.
Ceres Inteligência Financeira | 78 |
Forecasting
According to the methodologies of groups and calculations already detailed, the results of the forecasting of expenses with PMSO - Personnel (P), Material (M), Services (S), and Other (O):
Table 22 – Personnel Expenses Forecasting 1 of 3 | |||||||||||
Personnel Groups | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 |
Added bonus | 16,169 | 16,870 | 17,617 | 18,385 | 19,177 | 19,989 | 20,834 | 21,715 | 22,634 | 23,591 | 24,589 |
Cost Aid | 3,202 | 3,341 | 3,489 | 3,641 | 3,798 | 3,958 | 4,126 | 4,300 | 4,482 | 4,672 | 4,869 |
Medical Care, Occupational Health, and | |||||||||||
13,498 | 14,083 | 14,707 | 15,348 | 16,009 | 16,687 | 17,392 | 18,128 | 18,895 | 19,694 | 20,527 | |
Examinations | |||||||||||
Daycare, School, Exceptional, Academy, | |||||||||||
3,969 | 4,413 | 4,535 | 4,629 | 4,670 | 4,731 | 4,766 | 4,800 | 4,830 | 4,885 | 4,920 | |
Funeral Aid | |||||||||||
Capacitation and Training | 3,588 | 4,062 | 4,174 | 4,261 | 4,298 | 4,354 | 4,387 | 4,419 | 4,446 | 4,497 | 4,529 |
Disease Aid Complement | 15,315 | 17,013 | 17,483 | 17,846 | 18,002 | 18,237 | 18,375 | 18,506 | 18,620 | 18,834 | 18,968 |
Vacation/Provision/Gratification/Money | |||||||||||
47,908 | 49,982 | 52,196 | 54,472 | 56,820 | 59,223 | 61,728 | 64,339 | 67,061 | 69,898 | 72,854 | |
Bonus/13th Salary | |||||||||||
Job Title Bonus | 8,601 | 8,973 | 9,371 | 9,779 | 10,201 | 10,632 | 11,082 | 11,551 | 12,039 | 12,548 | 13,079 |
Overtime | 6,271 | 6,542 | 6,832 | 7,130 | 7,438 | 7,752 | 8,080 | 8,422 | 8,778 | 9,149 | 9,536 |
Labor Damages | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 |
INSS, FGTS and their Provisions | 50,084 | 52,252 | 54,567 | 56,946 | 59,401 | 61,913 | 64,532 | 67,262 | 70,107 | 73,073 | 76,164 |
Others | 719 | 849 | 907 | 963 | 1,009 | 1,063 | 1,122 | 1,183 | 1,247 | 1,321 | 1,393 |
Other Expenses and Aids | (19,314) | (17,891) | (18,288) | (18,672) | (19,042) | (19,396) | (20,932) | (22,581) | (24,352) | (26,251) | (28,289) |
Other Expenses and provisions for | |||||||||||
5,840 | 6,093 | 6,363 | 6,640 | 6,926 | 7,219 | 7,525 | 7,843 | 8,175 | 8,521 | 8,881 | |
personnel | |||||||||||
Profit Share (PLR) | 7,548 | 11,928 | 12,257 | 12,511 | 12,621 | 12,786 | 12,883 | 12,974 | 13,054 | 13,204 | 13,298 |
PDV | - | - | - | - | - | - | - | - | - | - | - |
Private Retirement Plan | 5,186 | 5,443 | 5,594 | 5,710 | 5,760 | 5,835 | 5,879 | 5,921 | 5,958 | 6,026 | 6,069 |
Salary / Remunerations / Fees / Annual | |||||||||||
59,821 | 46,195 | 50,388 | 54,292 | 57,925 | 61,293 | 54,265 | 47,292 | 40,425 | 42,103 | 43,847 | |
Bonus | |||||||||||
Transfers | 240 | 271 | 278 | 284 | 287 | 290 | 292 | 295 | 296 | 300 | 302 |
Meal Voucher | 19,791 | 20,648 | 21,563 | 22,503 | 23,473 | 24,466 | 25,501 | 26,580 | 27,704 | 28,876 | 30,097 |
Total | 248,437 | 251,067 | 264,032 | 276,668 | 288,772 | 301,032 | 301,838 | 302,949 | 304,399 | 314,941 | 325,636 |
Source: Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 79 |
Table 23 - Personnel Expenses Forecasting 2 of 3 | |||||||||||
Personnel Group | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2035 | 2036 | 2037 | 2038 |
Added bonus | 25,629 | 26,713 | 27,843 | 29,021 | 30,249 | 31,528 | 32,862 | 34,252 | 35,701 | 37,211 | 38,785 |
Cost Aid | 5,075 | 5,290 | 5,514 | 5,747 | 5,990 | 6,243 | 6,507 | 6,783 | 7,070 | 7,369 | 7,680 |
Medical Care, Occupational | |||||||||||
Health, and Examinations | 21,396 | 22,301 | 23,244 | 24,227 | 25,252 | 26,320 | 27,433 | 28,594 | 29,803 | 31,064 | 32,378 |
Daycare, School, Exceptional, | |||||||||||
Academy, Funeral Aid | 4,293 | 3,745 | 3,267 | 2,849 | 2,485 | 2,619 | 2,760 | 2,908 | 3,064 | 3,228 | 3,400 |
Capacitation and Training | 3,952 | 3,447 | 3,007 | 2,623 | 2,287 | 2,411 | 2,540 | 2,677 | 2,820 | 2,971 | 3,129 |
Disease Aid Complement | 16,550 | 14,438 | 12,595 | 10,985 | 9,579 | 10,096 | 10,640 | 11,211 | 11,812 | 12,443 | 13,107 |
Vaca- | |||||||||||
tion/Provision/Gratification/Mon | 75,936 | 79,148 | 82,496 | 85,986 | 89,623 | 93,414 | 97,365 | 101,484 | 105,777 | 110,251 | 114,915 |
ey Bonus/13th Salary | |||||||||||
Job Title Bonus | 13,632 | 14,209 | 14,810 | 15,437 | 16,090 | 16,770 | 17,480 | 18,219 | 18,990 | 19,793 | 20,630 |
Overtime | 9,940 | 10,360 | 10,798 | 11,255 | 11,731 | 12,228 | 12,745 | 13,284 | 13,846 | 14,431 | 15,042 |
Labor Damages | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
INSS, FGTS and their Provisions | 79,385 | 82,743 | 86,243 | 89,891 | 93,694 | 97,657 | 101,788 | 106,094 | 110,581 | 115,259 | 120,134 |
Others | 1,469 | 1,550 | 1,634 | 1,722 | 1,816 | 1,914 | 2,016 | 2,125 | 2,239 | 2,358 | 2,484 |
Other Expenses and Aids | (30,475) | (32,821) | (35,337) | (38,036) | (40,929) | (44,032) | (47,358) | (50,882) | (54,614) | (58,561) | (62,733) |
Other Expenses and provisions | |||||||||||
for personnel | 9,257 | 9,648 | 10,056 | 10,482 | 10,925 | 11,387 | 11,869 | 12,371 | 12,894 | 13,440 | 14,008 |
Profit Share (PLR) | 11,603 | 10,123 | 8,830 | 7,701 | 6,716 | 7,078 | 7,459 | 7,860 | 8,281 | 8,724 | 9,189 |
PDV | - | - | - | - | - | - | - | - | - | - | - |
Private Retirement Plan | 5,295 | 4,620 | 4,030 | 3,515 | 3,065 | 3,230 | 3,404 | 3,587 | 3,779 | 3,981 | 4,194 |
Salary / Remunerations / Fees / | |||||||||||
Annual Bonus | 45,524 | 47,294 | 49,158 | 51,119 | 53,178 | 55,433 | 57,784 | 60,235 | 62,790 | 65,454 | 68,230 |
Transfers | 263 | 230 | 200 | 175 | 152 | 161 | 169 | 178 | 188 | 198 | 209 |
Meal Voucher | 31,370 | 32,697 | 34,080 | 35,522 | 37,025 | 38,591 | 40,223 | 41,924 | 43,698 | 45,546 | 47,473 |
Total | 330,096 | 335,736 | 342,470 | 350,221 | 358,927 | 373,049 | 387,689 | 402,904 | 418,719 | 435,161 | 452,255 |
Source: Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 80 |
Table 24 - Personnel Expenses Forecasting 3 of 3 | |||||||||
Personnel Groups | 2039 | 2040 | 2041 | 2042 | 2043 | 2044 | 2045 | 2046 | 2047 |
Added bonus | 40,426 | 42,136 | 43,918 | 45,776 | 47,712 | 49,730 | 51,834 | 54,027 | 56,312 |
Cost Aid | 8,005 | 8,344 | 8,697 | 9,065 | 9,448 | 9,848 | 10,264 | 10,698 | 11,151 |
Medical Care, Occupational | |||||||||
Health, and Examinations | 33,748 | 35,175 | 36,663 | 38,214 | 39,830 | 41,515 | 43,271 | 45,102 | 47,010 |
Daycare, School, Exceptional, | |||||||||
Academy, Funeral Aid | 3,581 | 3,771 | 3,971 | 4,181 | 4,401 | 4,633 | 4,877 | 5,133 | 5,402 |
Capacitation and Training | 3,296 | 3,471 | 3,655 | 3,848 | 4,051 | 4,265 | 4,489 | 4,725 | 4,972 |
Disease Aid Complement | 13,804 | 14,537 | 15,308 | 16,117 | 16,968 | 17,862 | 18,801 | 19,788 | 20,824 |
Vaca- | 141,36 | ||||||||
tion/Provision/Gratification/M | 119,775 | 124,842 | 130,123 | 135,627 | 147,344 | 153,576 | 160,073 | 166,844 | |
oney Bonus/13th Salary | |||||||||
Job Title Bonus | 21,503 | 22,412 | 23,360 | 24,349 | 25,378 | 26,452 | 27,571 | 28,737 | 29,953 |
Overtime | 15,678 | 16,341 | 17,033 | 17,753 | 18,504 | 19,287 | 20,103 | 20,953 | 21,839 |
Labor Damages | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 |
INSS, FGTS and their Provisions | 125,216 | 130,513 | 136,033 | 141,788 | 154,037 | 160,552 | 167,344 | 174,422 | |
Others | 2,616 | 2,755 | 2,901 | 3,055 | 3,216 | 3,385 | 3,563 | 3,750 | 3,947 |
Other Expenses and Aids | (67,138) | (71,787) | (76,688) | (81,853) | (93,010) | (99,024) | (105,343) | (111,977) | |
Other Expenses and provisions | |||||||||
for personnel | 14,601 | 15,218 | 15,862 | 16,533 | 17,232 | 17,961 | 18,721 | 19,513 | 20,338 |
Profit Share (PLR) | 9,678 | 10,192 | 10,732 | 11,300 | 11,896 | 12,523 | 13,181 | 13,873 | 14,600 |
PDV | - | - | - | - | - | - | - | - | - |
Private Retirement Plan | 4,417 | 4,651 | 4,898 | 5,157 | 5,429 | 5,715 | 6,016 | 6,331 | 6,663 |
Salary / Remunerations / Fees | |||||||||
/ Annual Bonus | 71,124 | 74,141 | 77,286 | 80,564 | 83,981 | 87,543 | 91,256 | 95,127 | 99,162 |
Transfers | 220 | 231 | 244 | 257 | 270 | 284 | 299 | 315 | 331 |
Meal Voucher | 49,481 | 51,574 | 53,756 | 56,029 | 58,400 | 60,870 | 63,445 | 66,128 | 68,926 |
Total | 470,032 | 488,520 | 507,752 | 527,760 | 548,579 | 570,246 | 592,798 | 616,275 | 640,720 |
Source: Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 81 |
Table 25 - Material Expenses Forecasting 1 of 3 | |||||||||||
Material Groups | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 |
(-) CREDIT COFINS | - | (420) | (432) | (441) | (445) | (450) | (454) | (457) | (460) | (465) | (468) |
(-) CREDIT PASEP | - | (91) | (94) | (96) | (97) | (98) | (99) | (99) | (100) | (101) | (102) |
SUBSCRIPTION OF NEWSPAPERS, | |||||||||||
MAGAZINES AND BOOKS | 7 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 |
FUELS AND LUBRICANTS | 23 | 24 | 25 | 26 | 28 | 29 | 30 | 31 | 33 | 34 | 35 |
EVENTS | 19 | 20 | 21 | 22 | 23 | 24 | 25 | 26 | 27 | 28 | 29 |
OFFICE ROUTINE AND SUPPORT | 12 | 38 | 39 | 40 | 41 | 41 | 45 | 48 | 52 | 56 | 60 |
CLEANING AND MAINTENANCE | |||||||||||
OF REAL-ESTATE AND FACILITIES | 331 | 362 | 370 | 378 | 385 | 392 | 423 | 457 | 493 | 531 | 572 |
Maintenance of Network, | |||||||||||
Transmission Line, and Substation | 5,456 | 6,503 | 6,682 | 6,821 | 6,881 | 6,970 | 7,023 | 7,073 | 7,117 | 7,199 | 7,250 |
MAINTENANCE AND CONSUMPTION | |||||||||||
IN DATA PROCESSING | 31 | 33 | 34 | 36 | 37 | 39 | 41 | 42 | 44 | 46 | 48 |
MAINTENANCE AND REPAIR OF VEHICLES | 2 | 8 | 8 | 8 | 8 | 9 | 9 | 10 | 11 | 12 | 13 |
MAINTENANCE, MANUF. OR ACQUIS. | |||||||||||
OF TOOLS AND EQUIP.SERV. | 521 | 865 | 889 | 907 | 915 | 927 | 934 | 941 | 947 | 957 | 964 |
MATERIAL – PRO-RATA COST | |||||||||||
REMAINING | 2,379 | 2,786 | 2,863 | 2,922 | 2,948 | 2,987 | 3,009 | 3,031 | 3,049 | 3,084 | 3,106 |
Other | 1 | 39 | 40 | 41 | 41 | 42 | 42 | 43 | 43 | 43 | 44 |
Total | 8,782 | 10,171 | 10,451 | 10,670 | 10,771 | 10,916 | 11,034 | 11,150 | 11,260 | 11,429 | 11,557 |
Source: Ceres Inteligência Financeira |
Table 26 - Material Expenses Forecasting 2 of 3 | |||||||||||
Material Groups | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2035 | 2036 | 2037 | 2038 |
(-) CREDIT COFINS | (409) | (357) | (311) | (271) | (237) | (249) | (263) | (277) | (292) | (307) | (324) |
(-) CREDIT PASEP | (89) | (77) | (68) | (59) | (51) | (54) | (57) | (60) | (63) | (67) | (70) |
SUBSCRIPTION OF NEWSPAPERS, | |||||||||||
4 | 4 | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 4 | |
MAGAZINES AND BOOKS | |||||||||||
FUELS AND LUBRICANTS | 37 | 38 | 40 | 42 | 44 | 45 | 47 | 49 | 51 | 54 | 56 |
EVENTS | 31 | 32 | 33 | 35 | 36 | 38 | 39 | 41 | 42 | 44 | 46 |
OFFICE ROUTINE AND SUPPORT | 65 | 70 | 75 | 81 | 87 | 94 | 101 | 109 | 117 | 125 | 134 |
CLEANING AND MAINTENANCE | |||||||||||
616 | 664 | 715 | 769 | 828 | 891 | 958 | 1,029 | 1,105 | 1,184 | 1,269 | |
OF REAL-ESTATE AND FACILITIES | |||||||||||
Maintenance of Network, | |||||||||||
6,326 | 5,519 | 4,814 | 4,198 | 3,661 | 3,859 | 4,067 | 4,285 | 4,515 | 4,756 | 5,010 | |
Transmission Line, and Substation | |||||||||||
MAINTENANCE AND CONSUMPTION | |||||||||||
50 | 52 | 54 | 56 | 59 | 61 | 64 | 67 | 70 | 72 | 76 | |
IN DATA PROCESSING | |||||||||||
MAINTENANCE AND REPAIR OF | |||||||||||
13 | 15 | 16 | 17 | 18 | 19 | 21 | 22 | 24 | 26 | 28 | |
VEHICLES | |||||||||||
MAINTENANCE, MANUF. OR AC- | |||||||||||
QUIS. | 841 | 734 | 640 | 558 | 487 | 513 | 541 | 570 | 600 | 633 | 666 |
OF TOOLS AND EQUIP.SERV. | |||||||||||
MATERIAL – PRO-RATA COST | |||||||||||
2,710 | 2,365 | 2,063 | 1,799 | 1,569 | 1,653 | 1,742 | 1,836 | 1,934 | 2,038 | 2,146 | |
REMAINING | |||||||||||
Other | 38 | 33 | 29 | 25 | 22 | 23 | 24 | 26 | 27 | 29 | 30 |
Total | 10,235 | 9,091 | 8,104 | 7,254 | 6,526 | 6,896 | 7,288 | 7,700 | 8,133 | 8,590 | 9,070 |
Source: Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 82 |
Table 27 – Material Expenses Forecasting 3 of 3 | |||||||||
Material Groups | 2039 | 2040 | 2041 | 2042 | 2043 | 2044 | 2045 | 2046 | 2047 |
(-) CREDIT COFINS | (341) | (359) | (378) | (398) | (419) | (441) | (464) | (489) | (514) |
(-) CREDIT PASEP | (74) | (78) | (82) | (86) | (91) | (96) | (101) | (106) | (112) |
SUBSCRIPTION OF NEWSPAPERS, | |||||||||
4 | 4 | 4 | 4 | 5 | 5 | 5 | 5 | 6 | |
MAGAZINES AND BOOKS | |||||||||
FUELS AND LUBRICANTS | 58 | 61 | 63 | 66 | 69 | 72 | 75 | 78 | 81 |
EVENTS | 48 | 50 | 52 | 54 | 57 | 59 | 62 | 64 | 67 |
OFFICE ROUTINE AND SUPPORT | 143 | 153 | 164 | 175 | 186 | 199 | 211 | 225 | 239 |
CLEANING AND MAINTENANCE | |||||||||
1,358 | 1,452 | 1,551 | 1,656 | 1,766 | 1,881 | 2,003 | 2,131 | 2,265 | |
OF REAL-ESTATE AND FACILITIES | |||||||||
Maintenance of Network, | |||||||||
5,276 | 5,556 | 5,851 | 6,160 | 6,485 | 6,827 | 7,186 | 7,563 | 7,959 | |
Transmission Line, and Substation | |||||||||
MAINTENANCE AND CONSUMPTION | |||||||||
79 | 82 | 86 | 89 | 93 | 97 | 101 | 105 | 110 | |
IN DATA PROCESSING | |||||||||
MAINTENANCE AND REPAIR OF VEHICLES | 30 | 32 | 34 | 36 | 39 | 41 | 44 | 47 | 50 |
MAINTENANCE, MANUF. OR ACQUIS. | |||||||||
702 | 739 | 778 | 819 | 863 | 908 | 956 | 1,006 | 1,059 | |
OF TOOLS AND EQUIP.SERV. | |||||||||
MATERIAL – PRO-RATA COST | |||||||||
2,261 | 2,381 | 2,507 | 2,639 | 2,779 | 2,925 | 3,079 | 3,241 | 3,410 | |
REMAINING | |||||||||
(-) CREDIT COFINS | 32 | 33 | 35 | 37 | 39 | 41 | 43 | 46 | 48 |
Total | 9,575 | 10,106 | 10,665 | 11,252 | 11,869 | 12,518 | 13,199 | 13,915 | 14,667 |
Source: Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 83 |
Table 28 - Service Expenses Forecasting 1 of 3 | |||||||||||
Service Groups | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 |
Water / Sewage / Electricity | 351 | 366 | 382 | 399 | 416 | 434 | 452 | 471 | 491 | 512 | 534 |
Support and Infrastructure | 30,293 | 29,293 | 29,943 | 30,571 | 31,177 | 31,757 | 34,272 | 36,972 | 39,871 | 42,981 | 46,317 |
Consumer-oriented Campaigns | 57,847 | 60,352 | 63,025 | 65,773 | 68,608 | 71,510 | 74,535 | 77,688 | 80,974 | 84,399 | 87,970 |
Communications (Telephone, | |||||||||||
12,581 | 15,411 | 15,837 | 16,165 | 16,307 | 16,520 | 16,645 | 16,764 | 16,867 | 17,061 | 17,182 | |
Internet, IT, Mail Services) | |||||||||||
Consulting and Audits | 8,808 | 9,189 | 9,596 | 10,014 | 10,446 | 10,888 | 11,348 | 11,829 | 12,329 | 12,850 | 13,394 |
Expenses with Traveling and | |||||||||||
2,772 | 2,892 | 3,020 | 3,152 | 3,288 | 3,427 | 3,572 | 3,723 | 3,880 | 4,045 | 4,216 | |
Training | |||||||||||
Taxes | - | (8,080) | (8,304) | (8,476) | (8,550) | (8,662) | (8,727) | (8,790) | (8,844) | (8,945) | (9,009) |
Logistics | 4,692 | 7,586 | 7,796 | 7,957 | 8,027 | 8,132 | 8,194 | 8,252 | 8,303 | 8,398 | 8,458 |
Maintenance of Distribution | |||||||||||
Net ("RD") | 70,633 | 73,154 | 74,776 | 76,345 | 77,858 | 79,307 | 85,587 | 92,330 | 99,568 | 107,335 | 115,667 |
Other | 2,276 | 2,374 | 2,480 | 2,588 | 2,699 | 2,813 | 2,932 | 3,057 | 3,186 | 3,321 | 3,461 |
Advertising and Publicity | 2,198 | 2,766 | 2,828 | 2,887 | 2,944 | 2,999 | 3,237 | 3,492 | 3,765 | 4,059 | 4,374 |
Administrative and IT | |||||||||||
28,640 | 32,072 | 32,784 | 33,472 | 34,135 | 34,770 | 37,524 | 40,480 | 43,653 | 47,058 | 50,711 | |
Support Services | |||||||||||
Total | 221,091 | 227,377 | 234,164 | 240,849 | 247,355 | 253,896 | 269,571 | 286,268 | 304,043 | 323,073 | 343,275 |
Source: Ceres Inteligência Financeira |
Table 29 - Service Expenses Forecasting 2 of 3 | |||||||||||
Service Groups | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2035 | 2036 | 2037 | 2038 |
Water / Sewage / Electricity | 556 | 580 | 604 | 630 | 656 | 684 | 713 | 743 | 775 | 807 | 842 |
Support and Infrastructure | 49,897 | 53,737 | 57,857 | 62,275 | 67,013 | 72,092 | 77,538 | 83,309 | 89,418 | 95,881 | 102,711 |
Consumer-oriented Campaigns | 91,691 | 95,569 | 99,612 | 103,825 | 108,217 | 112,795 | 117,566 | 122,539 | 127,722 | 133,125 | 138,756 |
Communications (Telephone, | |||||||||||
14,992 | 13,079 | 11,409 | 9,950 | 8,677 | 9,146 | 9,638 | 10,155 | 10,699 | 11,271 | 11,873 | |
Internet, IT, Mail Services) | |||||||||||
Consulting and Audits | 13,961 | 14,551 | 15,167 | 15,808 | 16,477 | 17,174 | 17,900 | 18,657 | 19,447 | 20,269 | 21,127 |
Expenses with Traveling and | |||||||||||
4,394 | 4,580 | 4,774 | 4,976 | 5,186 | 5,405 | 5,634 | 5,872 | 6,121 | 6,380 | 6,649 | |
Training | |||||||||||
Taxes | (7,861) | (6,858) | (5,982) | (5,217) | (4,550) | (4,795) | (5,053) | (5,325) | (5,610) | (5,910) | (6,225) |
Logistics | 7,380 | 6,438 | 5,616 | 4,898 | 4,271 | 4,502 | 4,744 | 4,999 | 5,267 | 5,548 | 5,844 |
Maintenance of Distribution | |||||||||||
Net ("RD") | 124,607 | 134,198 | 144,486 | 155,519 | 167,350 | 180,035 | 193,635 | 208,046 | 223,303 | 239,441 | 256,499 |
Other | 3,607 | 3,760 | 3,919 | 4,085 | 4,258 | 4,438 | 4,625 | 4,821 | 5,025 | 5,238 | 5,459 |
Advertising and Publicity | 4,712 | 5,075 | 5,464 | 5,881 | 6,328 | 6,808 | 7,322 | 7,867 | 8,444 | 9,055 | 9,700 |
Administrative and IT | |||||||||||
54,631 | 58,836 | 63,346 | 68,183 | 73,370 | 78,932 | 84,894 | 91,212 | 97,901 | 104,977 | 112,455 | |
Support Services | |||||||||||
Total | 362,567 | 383,545 | 406,271 | 430,813 | 457,255 | 487,216 | 519,157 | 552,897 | 588,512 | 626,083 | 665,690 |
Source: Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 84 |
Table 30 - Service Expenses Forecasting 3 of 3 | |||||||||
Service Groups | 2039 | 2040 | 2041 | 2042 | 2043 | 2044 | 2045 | 2046 | 2047 |
Water / Sewage / Electricity | 877 | 914 | 953 | 993 | 1,035 | 1,079 | 1,125 | 1,172 | 1,222 |
Support and Infrastructure | 109,924 | 117,535 | 125,561 | 134,016 | 142,918 | 152,284 | 162,131 | 172,476 | 183,338 |
Consumer-oriented Campaigns | 144,626 | 150,743 | 157,120 | 163,766 | 170,693 | 177,914 | 185,439 | 193,283 | 201,459 |
Communications (Telephone, Internet, IT, Mail Services) | 12,505 | 13,169 | 13,867 | 14,600 | 15,371 | 16,180 | 17,031 | 17,925 | 18,864 |
Consulting and Audits | 22,020 | 22,952 | 23,923 | 24,934 | 25,989 | 27,089 | 28,234 | 29,429 | 30,674 |
Expenses with Traveling and | |||||||||
6,931 | 7,224 | 7,529 | 7,848 | 8,180 | 8,526 | 8,887 | 9,263 | 9,654 | |
Training | |||||||||
Taxes | (6,556) | (6,905) | (7,271) | (7,655) | (8,059) | (8,484) | (8,930) | (9,398) | (9,891) |
Logistics | 6,155 | 6,482 | 6,826 | 7,187 | 7,566 | 7,965 | 8,384 | 8,823 | 9,286 |
Maintenance of Distribution | |||||||||
Net ("RD") | 274,512 | 293,519 | 313,561 | 334,676 | 356,907 | 380,296 | 404,886 | 430,722 | 457,849 |
Other | 5,690 | 5,931 | 6,182 | 6,443 | 6,716 | 7,000 | 7,296 | 7,604 | 7,926 |
Advertising and Publicity | 10.381 | 11.100 | 11.857 | 12.656 | 13.497 | 14.381 | 15.311 | 16.288 | 17.314 |
Administrative and IT | |||||||||
120.353 | 128.686 | 137.473 | 146.730 | 156.477 | 166.731 | 177.512 | 188.839 | 200.732 | |
Support Services | |||||||||
Total | 707,417 | 751,351 | 797,580 | 846,195 | 897,290 | 950,961 | 1,007,306 | 1,066,426 | 1,128,427 |
Source: Ceres Inteligência Financeira |
Table 31 - Other Expenses Forecasting 1 of 3 | |||||||||||
Other Groups | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 |
Rentals / Leasing / Leases / | |||||||||||
4,040 | 4,215 | 4,402 | 4,594 | 4,792 | 4,995 | 5,206 | 5,426 | 5,656 | 5,895 | 6,144 | |
Monthly Fees and Similar | |||||||||||
Own Power Consumption | 6,318 | 6,592 | 6,884 | 7,184 | 7,494 | 7,811 | 8,141 | 8,485 | 8,844 | 9,218 | 9,608 |
Court Expenses / Compensations / Pro- | |||||||||||
41,677 | 40,473 | 39,494 | 38,491 | 37,361 | 36,391 | 35,415 | 34,514 | 33,672 | 33,009 | 32,329 | |
cedural Costs | |||||||||||
Donations / Contributions/ | |||||||||||
368 | 384 | 401 | 419 | 437 | 455 | 475 | 495 | 516 | 538 | 560 | |
Subventions | |||||||||||
Interns / Minor Apprentices / | |||||||||||
532 | 564 | 579 | 591 | 597 | 604 | 609 | 613 | 617 | 624 | 629 | |
Assigned Employees | |||||||||||
ANEEL Infractions/Fines | - | - | - | - | - | - | - | - | - | - | - |
Other | - | - | - | - | - | - | - | - | - | - | - |
Provisions/ Reversals/ Renewals/ | |||||||||||
3,907 | 4,076 | 4,257 | 4,442 | 4,634 | 4,830 | 5,034 | 5,247 | 5,469 | 5,700 | 5,942 | |
Administrative Expenses/ Advertising | |||||||||||
Insurance | 1,335 | 1,392 | 1,454 | 1,517 | 1,583 | 1,650 | 1,719 | 1,792 | 1,868 | 1,947 | 2,029 |
Training / Other Daily Fees/ | |||||||||||
Travel/ Accommodation/ Medical Ex- | 633 | 660 | 689 | 719 | 750 | 782 | 815 | 850 | 886 | 923 | 962 |
penses | |||||||||||
Levies/ Fees/ Taxes/ Fares | 12,989 | 14,851 | 15,328 | 15,741 | 16,028 | 16,370 | 16,658 | 16,951 | 17,241 | 17,604 | 17,926 |
Total | 71,800 | 73,208 | 73,488 | 73,699 | 73,675 | 73,888 | 74,073 | 74,374 | 74,769 | 75,459 | 76,130 |
Source: Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 85 |
Table 32 - Other Expenses Forecasting 2 of 3 | |||||||||||
Other Groups | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2035 | 2036 | 2037 | 2038 |
Rentals / Leasing / Leases / | |||||||||||
6,404 | 6,675 | 6,958 | 7,252 | 7,559 | 7,878 | 8,212 | 8,559 | 8,921 | 9,298 | 9,692 | |
Monthly Fees and Similar | |||||||||||
Own Power Consumption | 10,015 | 10,438 | 10,880 | 11,340 | 11,820 | 12,320 | 12,841 | 13,384 | 13,950 | 14,541 | 15,156 |
Court Expenses / Compensations / | |||||||||||
29,181 | 26,396 | 23,933 | 21,755 | 19,830 | 19,858 | 19,957 | 20,125 | 20,362 | 20,666 | 21,039 | |
Procedural Costs | |||||||||||
Donations / Contributions/ | |||||||||||
584 | 609 | 634 | 661 | 689 | 718 | 749 | 781 | 814 | 848 | 884 | |
Subventions | |||||||||||
Interns / Minor Apprentices / | |||||||||||
548 | 478 | 417 | 364 | 317 | 335 | 353 | 372 | 391 | 412 | 434 | |
Assigned Employees | |||||||||||
ANEEL Infractions/Fines | - | - | - | - | - | - | - | - | - | - | - |
Other | - | - | - | - | - | - | - | - | - | - | - |
Provisions/ Reversals/ Renewals/ | |||||||||||
6,193 | 6,455 | 6,728 | 7,012 | 7,309 | 7,618 | 7,940 | 8,276 | 8,626 | 8,991 | 9,372 | |
Administrative Expenses/ Advertising | |||||||||||
Insurance | 2,115 | 2,205 | 2,298 | 2,395 | 2,497 | 2,602 | 2,712 | 2,827 | 2,947 | 3,071 | 3,201 |
Training / Other Daily Fees/ | |||||||||||
Travel/ Accommodation/ Medical | 1,003 | 1,045 | 1,089 | 1,136 | 1,184 | 1,234 | 1,286 | 1,340 | 1,397 | 1,456 | 1,518 |
Expenses | |||||||||||
Levies/ Fees/ Taxes/ Fares | 16,629 | 15,537 | 14,628 | 13,879 | 13,273 | 13,905 | 14,568 | 15,261 | 15,988 | 16,748 | 17,544 |
Total | 72,672 | 69,839 | 67,566 | 65,795 | 64,477 | 66,468 | 68,617 | 70,925 | 73,395 | 76,032 | 78,839 |
Source: Ceres Inteligência Financeira |
Table 33 - Other Expenses Forecasting 3 of 3 | |||||||||
Other Groups | 2039 | 2040 | 2041 | 2042 | 2043 | 2044 | 2045 | 2046 | 2047 |
Rentals / Leasing / Leases / | |||||||||
10,102 | 10,529 | 10,974 | 11,439 | 11,922 | 12,427 | 12,952 | 13,500 | 14,071 | |
Monthly Fees and Similar | |||||||||
Own Power Consumption | 15,797 | 16,465 | 17,161 | 17,887 | 18,644 | 19,433 | 20,254 | 21,111 | 22,004 |
Court Expenses / Compensations / | |||||||||
21,479 | 21,987 | 22,562 | 23,206 | 23,920 | 24,704 | 25,559 | 26,487 | 27,489 | |
Procedural Costs | |||||||||
Donations / Contributions/ | |||||||||
921 | 960 | 1,001 | 1,043 | 1,087 | 1,133 | 1,181 | 1,231 | 1,283 | |
Subventions | |||||||||
Interns / Minor Apprentices / | |||||||||
457 | 482 | 507 | 534 | 562 | 592 | 623 | 656 | 690 | |
Assigned Employees | |||||||||
ANEEL Infractions/Fines | - | - | - | - | - | - | - | - | - |
Other | - | - | - | - | - | - | - | - | - |
Provisions/ Reversals/ Renewals/ | |||||||||
9,768 | 10,181 | 10,612 | 11,061 | 11,529 | 12,016 | 12,525 | 13,054 | 13,607 | |
Administrative Expenses/ Advertising | |||||||||
Insurance | 3,336 | 3,478 | 3,625 | 3,778 | 3,938 | 4,104 | 4,278 | 4,459 | 4,648 |
Training / Other Daily Fees/ | |||||||||
Travel/ Accommodation/ Medical Ex- | 1,582 | 1,649 | 1,718 | 1,791 | 1,867 | 1,946 | 2,028 | 2,114 | 2,203 |
penses | |||||||||
Levies/ Fees/ Taxes/ Fares | 18,378 | 19,250 | 20,164 | 21,120 | 22,121 | 23,169 | 24,267 | 25,415 | 26,618 |
Total Other | 81,820 | 84,980 | 88,325 | 91,860 | 95,590 | 99,524 | 103,667 | 108,028 | 112,613 |
Source: Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 86 |
Table 34 – PMSO Expense (R$ ‘000) and Network Extension (Km) of Evaluated Distributors and Bench- | |||||||||
mark | |||||||||
Total | |||||||||
Company | Total | PMSO | Personnel | Other | |||||
Year | Distributor | Network | Material/Km Services/Km | ||||||
Type | PMSO | /Km | /Km | /Km | |||||
(Km) | |||||||||
2013 | Evaluated | EletroAcre | 106,816 | 18,410 | 5,802 | 3,320 | 55 | 2,308 | 120 |
2013 | Evaluated | Amazonas Energia | 346,761 | 43,984 | 7,884 | 3,558 | 174 | 3,708 | 445 |
2013 | Evaluated | Ceron | 249,123 | 53,315 | 4,673 | 2,088 | 120 | 2,104 | 361 |
2013 | Evaluated | Boa Vista | 85,667 | 3,467 | 24,706 | 18,906 | 390 | 4,851 | 559 |
2013 | Private | Celpa | 687,146 | 116,757 | 5,885 | 1,176 | 135 | 2,669 | 1,906 |
2013 | Private | Celtins | 177,792 | 83,766 | 2,122 | 751 | 138 | 1,052 | 181 |
2012 | Evaluated | EletroAcre | 76,190 | 18,010 | 4,230 | 2,357 | 72 | 1,649 | 151 |
2012 | Evaluated | Amazonas Energia | 384,610 | 42,270 | 9,099 | 4,121 | 242 | 4,404 | 331 |
2012 | Evaluated | Ceron | 240,541 | 51,181 | 4,700 | 2,104 | 139 | 2,132 | 325 |
2012 | Evaluated | Boa Vista | 79,721 | 3,101 | 25,705 | 19,174 | 456 | 5,389 | 686 |
2012 | Private | Celpa | 579,802 | 109,907 | 5,275 | 1,571 | 140 | 2,963 | 602 |
2012 | Private | Celtins | 164,168 | 82,049 | 2,001 | 693 | 97 | 978 | 233 |
2011 | Evaluated | EletroAcre | 84,853 | 17,780 | 4,772 | 2,251 | 94 | 2,330 | 97 |
2011 | Evaluated | Amazonas Energia | 395,512 | 39,421 | 10,033 | 4,224 | 273 | 4,740 | 796 |
2011 | Evaluated | Ceron | 229,485 | 45,451 | 5,049 | 2,391 | 137 | 2,282 | 238 |
2011 | Evaluated | Boa Vista | 81,293 | 2,888 | 28,146 | 21,133 | 568 | 5,855 | 590 |
2011 | Private | Celpa | 469,014 | 107,048 | 4,381 | 1,218 | 164 | 2,602 | 397 |
2011 | Private | Celtins | 135,252 | 75,336 | 1,795 | 640 | 69 | 888 | 198 |
2010 | Evaluated | EletroAcre | 73,334 | 16,814 | 4,361 | 2,077 | 54 | 2,142 | 88 |
2010 | Evaluated | Amazonas Energia | 365,947 | 35,618 | 10,274 | 4,716 | 352 | 5,073 | 133 |
2010 | Evaluated | Ceron | 210,271 | 38,236 | 5,499 | 2,639 | 148 | 2,431 | 281 |
2010 | Evaluated | Boa Vista | 77,370 | 2,660 | 29,091 | 22,737 | 638 | 4,648 | 1,067 |
2010 | Private | Celpa | 458,401 | 99,354 | 4,614 | 998 | 156 | 2,946 | 513 |
2010 | Private | Celtins | 145,785 | 66,962 | 2,177 | 781 | 103 | 1,087 | 206 |
2009 | Evaluated | EletroAcre | 70,861 | 15,202 | 4,661 | 2,256 | 97 | 2,218 | 90 |
2009 | Evaluated | Amazonas Energia | 257,978 | 15,412 | 16,739 | 6,850 | 672 | 8,065 | 1,151 |
2009 | Evaluated | Ceron | 193,307 | 35,480 | 5,448 | 2,408 | 200 | 2,589 | 252 |
2009 | Evaluated | Boa Vista | 75,543 | 2,764 | 27,329 | 19,712 | 730 | 5,903 | 983 |
2009 | Private | Celpa | 504,850 | 91,289 | 5,530 | 1,411 | 205 | 3,286 | 629 |
2009 | Private | Celtins | 146,626 | 63,352 | 2,314 | 675 | 160 | 1,242 | 237 |
2008 | Evaluated | EletroAcre | 47,692 | 9,326 | 5,114 | 2,037 | 161 | 2,785 | 130 |
2008 | Evaluated | Amazonas Energia | 236,187 | 13,977 | 16,898 | 8,205 | 950 | 6,786 | 956 |
2008 | Evaluated | Ceron | 180,255 | 34,435 | 5,235 | 2,177 | 166 | 2,508 | 383 |
2008 | Evaluated | Boa Vista | 76,383 | 2,668 | 28,628 | 21,137 | 696 | 6,350 | 445 |
2008 | Private | Celpa | 400,760 | 81,748 | 4,902 | 1,403 | 266 | 2,782 | 452 |
2008 | Private | Celtins | 154,854 | 58,889 | 2,630 | 858 | 152 | 1,457 | 162 |
Source: ANEEL (DEA model data base for Efficient Costs) |
Ceres Inteligência Financeira | 87 |
Voluntary Dismissal Plan (“PDV”)
Common Analyses to Distributors
The adjustment of personnel involves the decision between terminating the labor agreement with the collaborator versus offering him/her a voluntary dismissal against financial compensation. The values of each option are evaluated by the employee and by the company, and each will choose what is best when making the decision.
The evaluation begins with the definition of the public eligible to the PDV, considering only collaborators with at least 20 years41 of effective labor link with the company. This public represents approximately one-third42 of the total personnel of the evaluated distributors.
Labor link with the company means employees in the following categories43:
· Employees in full-time positions;
· Assigned employees44;
· Employees under license or with labor agreement suspended;
· Officer45.
In this sense, the following employees are not included in the base containing employees eligible to the PDV:
· Employees requested from other agencies and branches46;
· Employees without link with the government;
· Board members;
· Young apprentice;
· Interns.
The payroll independent of enrollment on December 31, 2016, was evaluated to each distributor. Such evaluation resulted a termination value that is compared to the value if the employee applies to the PDV.
41 PID – Eletrobras Companies Dismissal Stimulation Plan – Commission of Mines and Energy – Chamber of Deputies –07/02/2013
42 PID Eletrobras calculated 36.4% of total eligible personnel
43 The categories are those presented in the due diligence of Human Resources performed by Service B, in “Product 8: Report on Distributor’s Human Resources Evaluation” of each distributor
44 According to Decree no. 4.050, dated April 12, 2001, which governs Article 93 of Act no. 8.112, dated 12/11/1990, these employees are part of the personnel of the conceding agency (the evaluated distributor is the conceding institution in such case)
45 Applicable only to officers with more than 20 years of career in the distributor and part of the effective personnel, not including officers required by other government agencies and branches or without link to the government, among others
46 According to Decree no. 4.050, dated April 12, 2001, which governs Article 93 of Act no. 8.112, dated 12/11/1990, these employees are part of the personnel of the conceding agency (the evaluated distributor is the receiving institution in such case)
Ceres Inteligência Financeira | 89 |
The PDV expense is entered as a nonrecurring item that occurs in two occasions, in its phase 1 on June 1, 2018, and in its phase 2 on June 2, 2019. Employees who leave the company reduce the PMSO personnel account. Such reduction may occur in two ways, either by means of reduction of the work position without the addition of a new employee and/or replacement with a new employee with a more competitive cost, which will return to the PMSO Personnel account.
The termination value is calculated based on the sum of the following accounts: base salary, additions47, overtime, prior notice, FGTS fine, vacation, and 13th salary, in which:
· 13th salary has the same value of the Dec/2016 base salary;
· Additions and overtime refer to values received by the employees in December 2016;
· Prior notice is the sum of the monthly base salary, extraordinary compensation for length of work48;
· FGTS is calculated with the multiplication of the monthly salary by 8%, by the number of months that the individual worked at the company until the base date of December 31, 2016. The fine of FGTS represent 50% of this value;
· Vacation has total value per employee of half plus 1+(1/3) of a base salary related to Decem-ber 2016. This value is divided by half because at this point of the period, half of the individuals have already used their vacation benefit.
The PDV is calculated as approximately 18 times the sum of the Base Salary, Additions, and Overtime of the collaborators in December 2016. This choice represents the value with which approximately one-third49 of individuals eligible to the PDV see it as financially interesting when compared to the involuntary dismissal.
Considering such eligible collaborators, those in two specific situations join the Plan:
1 – Individuals whose PDV is equal to or higher than the involuntary contractual termination value;
2 – Individuals whose PDV is greater than twice the sum of the base salary, additions, and overtime is greater than or equal to the termination value.
The individuals in situation 1 join and receive the PDV originally offered, the individuals in situation 2 joint and receive the PDV plus two times the sum of the base salary, additions, and overtime.
47 Premium for hazardous, dangerous and hardship
48 At every one year, 3 days of bonus are received as compensation, up to a maximum of 60 days or two months of compensation. Added to the prior notice compensated with maximum of 30 days, the total of receipts may totalize 90 days
49 PID – Eletrobras Dismissal Benefit Plan – Commission of Mines and Energy – Chamber of Deputies – 07/02/2013. Eletrobras estimated that the number of dismissals would represent 47% of the public eligible to its 2013 PID
Ceres Inteligência Financeira | 90 |
Distributor’s Specific Analyses
Table 38 – Payroll Realized Dec /16 (in R$ ‘000) | |||||
Base | 13th | Vacation + | |||
Employees | Addition | FGTS Fine | |||
Salary | Salary | 1/3 | |||
Ineligible | 4,114 | 8,053 | 19,875 | 1,028 | 2,742 |
Eligible who have not joined | 2,748 | 8,245 | 42,463 | 687 | 1,832 |
Eligible Joining 1st year | 529 | 1,588 | 5,454 | 132 | 353 |
Eligible Joining 2nd year | 564 | 1,693 | 6,796 | 141 | 376 |
Total | 7,956 | 19,579 | 74,587 | 1,989 | 5,304 |
Source: Distributor’s bases, Eletrobras, Ministry of Labor, ANEEL, Ceres Inteligência Financeira |
Table 39 - 2018-2019 Voluntary Dismissal Plan (PDV) Forecasting | ||||||
% PDV | ||||||
# Em- | % Em- | R$ Ter- | R$ PDV Pro- | R$ PDV Final | ||
Employees | Final Ex- | |||||
ployees | ployees | mination | posal | Expense | ||
pense | ||||||
Ineligible | 1,067 | 53% | 35,813 | 65,820 | - | 0% |
Eligible who have not joined | 455 | 26% | 55,975 | 43,971 | - | 0% |
Eligible Joining 1st year | 171 | 10% | 8,057 | 8,470 | 8,470 | 45% |
Eligible Joining 2nd year | 183 | 11% | 9,571 | 9,031 | 10,160 | 55% |
Total | 1,876 | 100% | 109,415 | 127,292 | 18,630 | 100% |
Source: Distributor’s bases, Eletrobras, Ministry of Labor, ANEEL, Ceres Inteligência Financeira |
The base of employees used considers the base of the due diligence of human resources in its “Product 8: Human Resources Evaluation Report from Distributor Amazonas Energia (Parts I and II)”.
Ceres Inteligência Financeira | 91 |
1 – Normative Resolution no. 748, dated November 29, 201655, which establishes the terms and conditions for the provision of the public service of electric power by Designated Distributor;
2 – Official Letter no. 113/2017-DR/ANEEL, Brasília, dated May 3, 2017, case: 48510.000502/2017-00, which determines the submittal of a draft of the new model of Agreement for the Concession of Public Service of Electric Power Distribution56.
The treatment given in relation to Document 1, in its Chapter I (Revenue), in its Article 5 established that: “The Designated Distributor will be authorized to assign the resources from offsetting for violation of the limits of quality related to the continuity of the service and the voltage level in permanent regimen as per items 2.13 of section 8.1 and 5.11 of section 8.2 of PRODIST’ Module 8 for investments in the area of concession.”
These offset values are included in entry Obligations Linked to the Electric Power Service (Special Obligations), during the period of designation for the provision of the electric power public service, i.e., between 01/01/17 and 02/28/18.
In relation to Document 2, in its Clause Nineteen (Transitory Provisions), Subclause One, we have: “DISTRIBUTOR may allocate the resources from offsetting for violation of the limits of quality, related to the continuity of the services and the sampling measurements of the voltage level in permanent regime, for the investments in the area of concession, until the end of the fifth calendar year after the date of execution of the concession agreement.”
I.e., between 03/01/2018 and 02/28/2023, the distributor may allocate such offsetting to make investments, according to the criteria below:
· Paragraph one: “DISTRIBUTOR must continue calculating the offset values from the date of execution of the agreement, according to the regulation, for the purposes of follow-up and inspection by ANEEL”;
· Paragraph Two: From the second calendar year following the execution of the agreement, in case the calculated values of the offsets are below the values of the calculated offsetting for the previous calendar year, such difference will be considered as a remunerable investment by DISTRIBUTOR upon the rate review, with the remaining value being included in entry Obligations Linked to the Electric Power Public Service (Special Obligations) ”;
· Paragraph Three: “From the second calendar year after the execution of the agreement, in case the calculated values of the offsetting is greater than the values of calculated offsetting for the previous calendar year, such difference shall be invested doubled in the concession
55 ANEEL
56 As resolved by ANEEL Management in the 15th Ordinary Public Meeting, held on May 2, 2017
Ceres Inteligência Financeira | 94 |
and included in entry Obligations Linked to the Electric Power Public Service (Special Obligations)”.
In addition, regarding Document 2, the values of offsets accounted in special obligations and remunerable investments by the distributor are distributed in 12 months starting from the comparative calculation of the values as described in Paragraphs Two and Three.
Finally, from 03/01/2023 to the end of the concession, on 02/28/2048, all the offsetting will be included as an expense in the PMSO account.
Ceres Inteligência Financeira | 95 |
Financing
Summary of the contracts
The information related to financing have been obtained from contracts and internal controls of the distributors. After the extraction of the data, a validation was made directly with the distributor. Financings have three formats, as detailed below:
· Existing loans, held by the company in December 2016 and credit concessions in 2017 until the delivery of this report. Currently, Amazonas Energia has a debt balance on financing of R$ 3,156,986,000.00. The table below shows the financing lines currently in force. Clearance is foreseen for the contract ECF 2903-2010 in 2017 in the amount of R$ 13,129,000.00, divided into the months of January and March.
The currently effective financing lines are shown in the table below:
Table 45 – Financings (1 of 4) | ||||||||
ECF | ECF | ECF | ECF- | ECF- | ECF- | ECF- | ECF- | |
Title | 2082- | 2133- | 2571- | 2572- | 2573- | 2642- | 2653- | 2672- |
2001 | 2002 | 2006 | 2006 | 2006 | 2007 | 2007 | 2007 | |
Months reserve account | - | - | - | - | - | - | - | - |
Reserve Account Debt | ||||||||
- | - | - | - | - | - | - | - | |
Balance | ||||||||
Financing Debt Balance | 3,336 | 695 | 722 | 134 | 396 | 1,785 | 243 | 630 |
Reference Date of Debt | ||||||||
Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | |
Balances | ||||||||
Table | SAC | SAC | SAC | SAC | SAC | SAC | SAC | SAC |
First amortization | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 |
Number of installments | 10 | 5 | 7 | 7 | 7 | 7 | 7 | 2 |
Interval between in- | ||||||||
1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | |
stallments (months) | ||||||||
Principal grace period | ||||||||
- | - | - | - | - | - | - | - | |
(months) | ||||||||
Last amortization | Sep/17 | Apr/17 | Jun/17 | Jun/17 | Jun/17 | Jun/17 | Jun/17 | Jan/17 |
First payment interest | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 |
Interval between pay- | ||||||||
1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | |
ments (months) | ||||||||
Grace period (months) | - | - | - | - | - | - | - | - |
Reference Rate | None | None | None | None | None | None | None | None |
Reference rate limiter | ||||||||
- | - | - | - | - | - | - | - | |
(% p.a.) | ||||||||
Reference rate multipli- | ||||||||
1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | |
er (%) | ||||||||
Spread (% p.a.) | 0.070 | 0.070 | 0.070 | 0.070 | 0.070 | 0.070 | 0.070 | 0.070 |
Readjustment Rate | ||||||||
None | None | None | None | None | None | None | None | |
(Incorporated in the SD) | ||||||||
Source: Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 98 |
Table 46 - Financings (2 of 4) | ||||||||
ECF- | ECF- | ECF- | ECF- | ECF- | ECF- | ECF- | ECF- | |
Title | 2719- | 2748- | 2770- | 2843- | 2765- | 2814- | 2841- | 2707- |
2008 | 2009 | 2009 | 2010 | 2009 | 2010 | 2010 | 2008 | |
Months reserve ac- | ||||||||
- | - | - | - | - | - | - | - | |
count | ||||||||
Reserve Account Debt | ||||||||
- | - | - | - | - | - | - | - | |
Balance | ||||||||
Financing Debt Bal- | ||||||||
914 | 158 | 325 | 7,091 | 29,784 | 2,330 | 3,833 | 10,679 | |
ance | ||||||||
Reference Date of | ||||||||
Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | |
Debt Balances | ||||||||
Table | SAC | SAC | SAC | SAC | SAC | SAC | SAC | SAC |
First amortization | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Oct/18 |
Number of install- | ||||||||
4 | 4 | 10 | 14 | 17 | 17 | 17 | 17 | |
ments | ||||||||
Interval between in- | ||||||||
1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | |
stallments (months) | ||||||||
Principal grace period | ||||||||
- | - | - | - | - | - | - | 22 | |
(months) | ||||||||
Last amortization | Mar/17 | Mar/17 | Sep/17 | Jan/18 | Apr/18 | Apr/18 | Apr/18 | Apr/18 |
First payment interest | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 |
Interval between | ||||||||
1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | |
payments (months) | ||||||||
Grace period (months) | - | - | - | - | - | - | - | - |
Reference Rate | None | None | None | None | None | None | None | None |
Reference rate limiter | ||||||||
- | - | - | - | - | - | - | - | |
(% p.a.) | ||||||||
Reference rate multi- | ||||||||
1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | |
plier (%) | ||||||||
Spread (% p.a.) | 0.070 | 0.070 | 0.070 | 0.070 | 0.070 | 0.070 | 0.070 | 0.070 |
Readjustment Rate | ||||||||
(Incorporated in the | None | None | None | None | None | None | None | None |
SD) | ||||||||
Source: Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 99 |
Table 47 - Financings (3 of 4) | ||||||||
ECF | ECF | ECF | ECF- | ECF- | ECF | ECF- | ECF- | |
Title | 2116- | 2267- | 2452- | 2923- | 3016- | 2459- | 2910- | 2864- |
2001 | 2003 | 2004 | 2011 | 2012 | 2005 | 2010 | 2010 | |
Months reserve account | - | - | - | - | - | - | - | - |
Reserve Account Debt Balance | - | - | - | - | - | - | - | - |
Financing Debt Balance | 15,281 | 20,542 | 1,554 | 13,563 | 1,447 | 20,434 | 3,580 | 548 |
Reference Date of Debt Balances | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 |
Table | SAC | SAC | SAC | SAC | SAC | SAC | SAC | SAC |
First amortization | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 |
Number of installments | 18 | 18 | 18 | 28 | 33 | 50 | 55 | 74 |
Interval between installments | ||||||||
1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | |
(months) | ||||||||
Principal grace period (months) | - | - | - | - | - | - | - | - |
Last amortization | May/18 | May/18 | May/18 | Mar/19 | Aug/19 | Jan/21 | Jun/21 | Jan/23 |
First payment interest | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 |
Interval between payments | ||||||||
1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | |
(months) | ||||||||
Grace period (months) | - | - | - | - | - | - | - | - |
Reference Rate | None | None | None | None | SELIC | None | None | None |
Reference rate limiter (% p.a.) | - | - | - | - | - | - | - | - |
Reference rate multiplier (%) | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 |
Spread (% p.a.) | 0.070 | 0.070 | 0.070 | 0.070 | 0.070 | 0.070 | 0.070 | 0.070 |
Readjustment Rate (Incorpo- | ||||||||
None | None | None | None | None | None | None | None | |
rated in the SD) | ||||||||
Source: Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 100 |
Table 48 - Financings (4 of 4) | |||||||
ECR- | ECR- | ECF- | ECF- | ECF- | ECF | ||
Commercial | |||||||
Title | 284- | 289- | 2883- | 2827- | 2903- | 3325- | |
Lease | |||||||
2014 | 2014 | 2010 | 2010 | 2010 | 2016 | ||
Months reserve account | - | - | - | - | - | - | - |
Reserve Account Debt Balance | - | - | - | - | - | - | - |
Financing Debt Balance | 393,491 | 853,459 | 4,034 | 8,266 | 112,731 | 475,497 | 1,169,504 |
Reference Date of Debt Balances | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 |
Table | SAC | SAC | SAC | SAC | SAC | Price | SAC |
First amortization | Jan/18 | Jan/18 | Dec/16 | Dec/16 | Sep/18 | Jan/24 | Dec/16 |
Number of installments | 73 | 73 | 88 | 99 | 97 | 37 | 102 |
Interval between installments | |||||||
1 | 1 | 1 | 1 | 1 | 1 | 1 | |
(months) | |||||||
Principal grace period (months) | 13 | 13 | - | - | 21 | 85 | - |
Last amortization | Jan/24 | Jan/24 | Mar/24 | Feb/25 | Sep/26 | Jan/27 | May/25 |
First payment interest | Jan/18 | Jan/18 | Dec/16 | Dec/16 | Dec/16 | Dec/16 | Dec/16 |
Interval between payments (months) | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
Grace period (months) | 13 | 13 | - | - | - | - | - |
Reference Rate | CDI | CDI | None | None | BIRD | SELIC | None |
Reference rate limiter (% p.a.) | - | - | - | - | - | - | - |
Reference rate multiplier (%) | 1.20 | 1.20 | 1.00 | 1.00 | 1.00 | 1.11 | 1.00 |
Spread (% p.a.) | 0.005 | 0.005 | 0.070 | 0.070 | 0.005 | 0.005 | - |
Readjustment Rate (Incorporated in | |||||||
None | None | None | None | IPCA | None | IGP-M | |
the SD) | |||||||
Source: Ceres Inteligência Financeira |
· Financing linked to the investment budge, beginning in Jan/18, equivalent to 60% of the financeable CapEx (80% of CapEx is financeable). The amortization occurs according to the SAC table, with 12 months of grace period, interest rate of 115% of the CDI and monthly payments (each release occurs in conjunction with the investment schedule).
· Credit releases in 2017 from the RGR fund, as per Directive 388/2016-MME. These releases occur on a monthly basis in 2017, with estimated value of R$ 485 million, with amortization by the Price table, with interest rate of 111%, SELIC, in 36 installments. The credit releases of the RGR fund also follow the premises of the table below. It is worthwhile noting that the conditions of the RGR fund financings will be reviewed, so that the new premises will be adopted from the grant of the new concession, as indicated in NT 149/2017-SRM/SGT/SRD/SFF/ANEEL.
Ceres Inteligência Financeira | 101 |
Net Debt
The net debt balance adopted for the evaluation of Eletrobras Distribuição Amazonas was determined and complemented by the Due Diligence work of service B, as per report “Product 5: Accounting-Equity Due Diligence Report / Amazonas Distribuidora de Energia S/A”. The components of the net debt position indicated by the Accounting-Equity Due Diligence are presented in the table below. The position of the debt is fully discounted from the Enterprise Value of the company for the Valuation calculation.
Table 50 – Net Debt Balance | ||
| ||
Net Indebtedness (R$'000) | Dec/15 | Dec/16 |
Cash and cash equivalents | 68,251 | 71,343 |
Sureties and Securities - TVM | 117,123 | 28,706 |
Loans - Short-term | (141,777) | (88,542) |
Loans - Long-term | (1,185,389) | (1,898,681) |
Lease operations - Short-term | (132,972) | (136,662) |
Lease operations - Long-term | (1,119,183) | (1,032,842) |
Net financial indebtedness | (2,393,947) | (3,056,678) |
Taxes and social contributions - Long-term | 2,365,377 | 1,421,805 |
Collateral and judicial deposits - Long-term | 296,285 | 413,730 |
Reimbursement right - Long-term | 4,350,275 | 3,573,069 |
Suppliers -Long-term | (7,648,126) | (8,055,796) |
Payable Related Parties - Long-term | - | (158,036) |
Post-employment benefit - Long-term | (921) | (2,160) |
Provisions for judicial causes | (316,138) | (1,630,713) |
Reimbursement obligations - Long-term | (2,150,827) | (1,157,893) |
Other liabilities -Long-term | (174,101) | (63,270) |
Other debt items | (3,278,176) | (5,659,264) |
Net indebtedness reported | (5,672,123) | (8,715,942) |
Reclassification between working capital and net indebtedness | (700,998) | (1,242,427) |
1 Balances receivable from CCC overdue and in installments | 6,643 | 5,709 |
2 Overdue suppliers | (1,086,227) | (1,141,024) |
3 Reclassification related parties | 438,478 | 40,144 |
4 Other liabilities - Short-term | (59,892) | (147,256) |
Adjustments proposed by "due diligence" | NQ | (658) |
5 Cash restricted balance | NQ | (658) |
Net indebtedness adjusted | (6,373,122) | (9,959,027) |
Source: Accounting-Equity Due Diligence Report (Product 5, pages 18 to 22) |
Ceres Inteligência Financeira | 103 |
Contingencies
The balance of contingencies of the valuation includes the values calculated by the Due Diligence works of Accounting-Equity, Environment, Actuarial, Legal, Human Resources, and Technical-Operational, and represent the overdue position for Dec/16. In such valuation, the value of contingencies is deducted directly from the calculated value for the distributor’s Enterprise Value, as a component of the Valuation.
For the values indicated as tax, labor and social security contingencies, only the amounts whose evaluation of risk represented a likely event were considered.
The table below summarizes the amounts indicated as contingencies by the Due Diligence to Eletrobras Distribuição Amazonas and considered in this work.
Table 51 - Due Diligence Contingencies | |
| |
R$'000 | |
Tax, labor and social security contingencies | (603,104) |
Environmental contingencies | (184,495) |
Actuarial contingencies | 445 |
Legal contingencies | (373,230) |
HR contingencies | - |
Technical-operational contingencies | - |
Total Contingencies | (1,160,384) |
Source: Elaborated based on the indications of the reports of Accounting-Equity, Environmental, Actuarial, Legal, | |
Human Resources, and Technical-Operational Due Diligence. |
Ceres Inteligência Financeira | 104 |
Gas Contracts
The item “Adjustment of Gas Invoicing” relates to the impact calculated for the base date of Dec/16 2016 relative to the estimated difference between what will effectively be invoiced of the contract between Eletrobras Distribuição Amazonas and CIGÁS and the invoicing of this contract as recognized by ANEEL of Jann/2017 until Nov/2030. The onerosity of this contract is due to the unbalance generated by its installments of Ship or Pay and Take or Pay.
The impact of these gas contracts is not being considered in the valuation made in accordance with the assumptions adopted by Service B, which assumes that the Distributor’s sales would be preceded by the devertizalization of Amazonas Geração e Transmissão of Amazonas Distribuição. In this direction, the Take or Pay and Ship or Pay contract would be allocated to Amazonas GT. Therefore, there would not be burden to Amazonas Distribuição, including the installment not contracted of the Natural Gas. Moreover it is also estimated that the supposition that CIGÁS, with the agreement of Petrobras, will validate the obligation as responsibility of Amazonas GT.
The real flow of the difference between the effective value of the installments and the value recognized is presented below.
Table 52 – Difference between effective and recognized installments | ||||||||||||||
R$ (Million) | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 |
Ship-or-Pay | 438 | - | 0 | 148 | 311 | 311 | 311 | 312 | 637 | 963 | 963 | 966 | 963 | 879 |
Take-or-Pay | 169 | - | - | 4 | 11 | 11 | 11 | 11 | 108 | 176 | 176 | 176 | 176 | 161 |
Total | 607 | - | 0 | 153 | 322 | 322 | 322 | 323 | 745 | 1,139 | 1,139 | 1,142 | 1,139 | 1,040 |
Source: Ceres Inteligência Financeira, based on the information supplied by Eletrobras Distribuição Amazonas. |
Once these assumptions are not confirmed, the total impact foreseen is of - R$ 3,482 billion and valuation then is - R$ 12,002 billion.
Ceres Inteligência Financeira | 105 |
Agreements for the purchase and sale of power
Summary of agreements for the purchase and sale of power
The data contained in the contracts were collected to define the characteristics of the agreements of purchase and sale of power in the Regulated Contracting Environment. Such data were validated with spreadsheets of internal control assigned by the distributor and with the spreadsheet updated in March 2017, of Consolidated Result of Electric Power Auctions per Contract, obtained on the website of the Electric Power Trading Chamber.
After gathering information on the contracts, the SPARTA system, 2016 readjustment, calculated if the power purchase volume was the same found in the contracts and spreadsheets of internal control. From the validation, the necessary volumes were added in order to obtain values and volumes compatible with the SPARTA.
With the data on quantity of power, price, beginning of effectiveness, end of effectiveness, base date of price, month of readjustment, and index rate of the readjustment of each contract, it was possible to group them based on the beginning and end of the contractual effectiveness, and to readjust the prices in order to update them. Thus, the contracts have been synthesized as shown in the table below. Such data were used as the basis for the demand of power to compose Installment A.
Ceres Inteligência Financeira | 106 |
Table 53 - Power Purchase Agreements | |||||||
Month | |||||||
Weighted | Qty. (MwAv- | Base | Index | ||||
Identification | Beginning | End | Read- | ||||
Price | erage) | Date | Rate | ||||
just. | |||||||
A-3 2012-15 T | 313.86 | 0.72 | 01/01/2012 | 12/31/2026 | Mar/17 | March | IPCA |
A-3 2012-30 H | 229.88 | 0.07 | 01/01/2012 | 12/31/2041 | Mar/17 | March | IPCA |
A-3 2014-20 OF/ New rule | 137.45 | 39.48 | 03/01/2014 | 12/31/2033 | Mar/17 | March | IPCA |
A-3 2014-20 T | 145.10 | (10.79) | 03/01/2014 | 12/31/2033 | Mar/17 | March | IPCA |
A-3 2014-20 T | 145.10 | (4.22) | 03/01/2014 | 12/31/2033 | Mar/17 | March | IPCA |
A-3 2014-20 T | 145.10 | 37.95 | 03/01/2014 | 12/31/2033 | Mar/17 | March | IPCA |
A-3 2014-20 T | 145.10 | 35.12 | 03/01/2014 | 12/31/2033 | Mar/17 | March | IPCA |
A-3 2014-30 H/ New rule | 137.33 | 17.65 | 03/01/2014 | 12/31/2043 | Mar/17 | March | IPCA |
A-5 2013-15 T | 242.09 | 32.86 | 01/01/2013 | 12/31/2027 | Mar/17 | March | IPCA |
A-5 2015-30 H | 152.05 | 10.69 | 01/01/2015 | 12/31/2044 | Mar/17 | March | IPCA |
A-5 2015-30 H | 100.15 | 31.00 | 01/01/2015 | 12/31/2044 | Mar/17 | March | IPCA |
A-3 2013-20 OF | 205.09 | 197.21 | 01/01/2013 | 12/31/2032 | Mar/17 | March | IPCA |
A-3 2013-30 H | 224.58 | 14.24 | 01/01/2013 | 12/31/2032 | Mar/17 | March | IPCA |
Santo Antônio - MCSD | 137.30 | 0.96 | 01/01/2013 | 12/31/2032 | Mar/17 | March | IPCA |
Jirau | 120.76 | 51.64 | 01/01/2013 | 12/31/2042 | Mar/17 | March | IPCA |
Jirau - MCSD | 120.76 | 1.42 | 01/01/2013 | 12/31/2042 | Mar/17 | March | IPCA |
Belo Monte | 119.70 | 83.59 | 01/01/2015 | 12/31/2044 | Mar/17 | March | IPCA |
Belo Monte | 119.70 | 6.27 | 01/01/2015 | 12/31/2044 | Mar/17 | March | IPCA |
Belo Monte - MCSD | 119.70 | (52.34) | 01/01/2015 | 12/31/2044 | Mar/17 | March | IPCA |
Breitner Jaraqui | 219.88 | 46.81 | 05/01/2005 | 01/05/2025 | Mar/17 | March | IGP-M |
Breitner Tambaqui | 219.88 | 46.81 | 05/01/2005 | 01/05/2025 | Mar/17 | March | IGP-M |
Rio Amazonas | 219.88 | 50.71 | 05/01/2005 | 01/05/2025 | Mar/17 | March | IGP-M |
Companhia Energética | |||||||
219.88 | 46.81 | 05/01/2005 | 01/05/2025 | Mar/17 | March | IGP-M | |
Manauara | |||||||
Geradora de Energia do | |||||||
219.88 | 46.81 | 05/01/2005 | 01/05/2025 | Mar/17 | March | IGP-M | |
Amazonas S.A. | |||||||
UHE Balbina | 219.88 | 101.66 | 05/01/2013 | 01/03/2027 | Mar/17 | March | IPCA |
UTE Aparecida | 219.88 | 113.35 | 05/01/2013 | 01/07/2020 | Mar/17 | March | IPCA |
UTE Mauá Bloco 3 | 219.88 | 76.92 | 05/01/2013 | 01/07/2020 | Mar/17 | March | IPCA |
Own generation | 219.88 | 105.54 | 01/31/2017 | 12/31/2047 | Jan/17 | January | IPCA |
Cota Angra I/Angra II | 206.29 | 21.16 | 01/31/2017 | 12/31/2047 | Jan/17 | January | IPCA |
Quotas Law No. | |||||||
0.00 | 0.00 | 01/31/2017 | 12/31/2047 | Jan/17 | January | IPCA | |
12783/2013 | |||||||
Itaipu (removing the loss- | |||||||
0.00 | 0.00 | 01/31/2017 | 12/31/2047 | Jan/17 | January | IPCA | |
es) | |||||||
22nd LEN | 205.87 | 13.54 | 01/01/2018 | 12/31/2037 | Mar/17 | March | IPCA |
22nd LEN | 226.85 | 1.59 | 01/01/2018 | 12/31/2047 | Mar/17 | March | IPCA |
21st LEN | 315.49 | 100.58 | 01/01/2020 | 12/31/2044 | Mar/17 | March | IPCA |
21st LEN | 208.08 | 21.39 | 01/01/2020 | 12/31/2049 | Mar/17 | March | IPCA |
Source: Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 107 |
Other Revenues
Analytical History of “Other Revenues”
The history of Other Revenues was elaborated for the past 5 years, based on the trial balance sheets supplied by the distributor. Following that, the relevance and recurrence of Other Revenues were analyzed to define which revenues are recurrent throughout time and may be forecasted for the period of analysis. Among the revenues that have been defined for the scope of the forecast, a study was carried out to verify if there is any relationship between each type of revenue with the operational indicators of the distributor (consumption units and/or consumption). At AmE, it was possible to note that the accessory activities of the company and the collectable services have no relation with the operational indicators.
Table 54 – Definition of Other Revenues | |
Other Revenues (R$ '000) | |
Income | Base Date |
Own | 30,133 |
Lease and Rent | 3,224 |
Other | 26,909 |
Chargeable services | 6,844 |
Source: Ceres Inteligência Financeira |
In the analysis of the trial balance sheets, the accounts were grouped in the large groups of the table above. The groups were made due to changes to the standards of trial balance sheets throughout the years, which in some cases generated different descriptions or codes to different years, but that consisted of the same account. Another important factor for the creation of the groups was the impossibility to classify certain accounts of the sharing percentage groups in accordance with their description, reason why they have been allocated in the large groups based on the definition. The consolidation of Other Revenues in large groups was also important to establish an analysis of the historical evolution of the revenues grouped throughout the years, excluding specific and punctual effects of a single account. The table below presents the accounts in detail and the group division made.
Ceres Inteligência Financeira | 108 |
| |||
Table 55 – Details on Other Revenues in the Trial Balance Sheet (in R$ ‘000) | |||
Group | CODE | Description | Avg. Last 3 |
Own | 30,132,907 | ||
Lease and rent | 3.224.365 | ||
67103120000099 | PROFITS ALIENATION ASSETS AND RIGHTS | 1,491 | |
67104120000099 | PROFITS ALIENATION ASSETS AND RIGHTS | 3,222,875 | |
Other | 26,908,542 | ||
61101191100099 | MISCELLANEOUS | 33,147 | |
61101191200099 | MISCELLANEOUS | 90,641 | |
61101191900099 | MISCELLANEOUS | 104,107 | |
61103191100009 | MUNICIPAL CITY HALL | 0 | |
61103191100099 | MISCELLANEOUS | 83,462 | |
61103191200099 | MISCELLANEOUS | 9,793,393 | |
61103191300099 | MISCELLANEOUS | 0 | |
61103191900099 | MISCELLANEOUS | 5,952,048 | |
61105191100099 | MISCELLANEOUS | 2,017,557 | |
61105191300001 | CVA - LOW-INCOME SUBSIDY | 407,190 | |
61105191300098 | IF - SUBSIDY. CDE FOR BALANCED REDUCTION D | 0 | |
61105191600099 | MISCELLANEOUS | 3,055,472 | |
61105191900099 | MISCELLANEOUS | 0 | |
67101490000099 | OTHER MISCELLANEOUS INCOME | 1,805,573 | |
67103490000099 | MIISCELLANEOUS INCOME | 2,030,452 | |
67104190000001 | LEFT-OVER IN THE INVESTMENT INVENTORY | 355,748 | |
67104190000094 | DONATIONS TO ZERO HUNGER (FOME ZERO) | 1,304 | |
67104190000099 | MIISCELLANEOUS INCOME | 717,273 | |
67105490000099 | MISCELLANEOUS | 461,175 | |
Collectible Services | 6.825.487 | ||
Collectible Services | 6.825.487 | ||
61103191100001 | CONSUMERS | 990,796 | |
61103191100009 | MUNICIPAL CITY HALL | 133,546 | |
61105191100009 | INCOME SERVICES PROVISION - CITY HALL | 4,175,681 | |
61105191100099 | MISCELLANEOUS | 2,288,196 | |
Total | 36,958,394 | ||
Source: Distributor’s trial balance sheet, Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 109 |
Other Revenues Forecasting
The revenues that have not been linked to the operational indicators will remain fixed and shall be corrected by the IGP-M during the period. The initial base date of these revenues was defined by the average of the entry in the past three years. Revenues related to operational indicators were Forecast from the calculation of the average value in R$ per Consumption Units (“UC”) or Mega Watt hour (MWh), and based on the curve of the indicators, the factor is corrected based on the IGP-M. The definition of the factor was based on the average of the value of revenue in the past three years, over the average of the past three years of the operational indicator values.
Ceres Inteligência Financeira | 110 |
Regulatory Remuneration Base Flow
Regulatory Remuneration Base Calculation
To estimate the Regulatory Remuneration Base to be validated in 4CRTP by ANEEL, the additions, write-off, and adjustments of the regulatory agencies have been evaluated for the following lines:
(1) Fixed Assets in Use (New Replacement Value);
(2) Maximum Usage Index;
(3) Gross Special Operations;
(4) Fully Depreciated Assets;
(5) Gross Remuneration Base = (1)-(2)-(3)-(4);
(6) Accumulated Depreciation;
(7) Net AIS (Market Value in Use);
(8) Depreciated Usage Index;
(9) Remuneration Base Value (VBR);
(10) Stockroom in Operation;
(11) Deferred Charges;
(12) Net Special Obligations;
(13) Real Property and Easements;
(14) Total Net Remuneration Base = (1)-(6)-(8)+(10)+(11)-(12)+(13);
(15) RGR PLPT Balance;
(16) RGR Balance Other Investments;
(17) Depreciation Rate;
(18) Regulatory Reintegration Quota = (5)*(17);
(19) Effective WACC before Taxes;
(20) RGR PLPT Rate;
Ceres Inteligência Financeira | 111 |
(21) RGR Rate Other Investments;
(22) Remuneration of Capital (RC) = (15)*(20)+(16)*(21)+[(14)-(15)-(16)]*(19).
Common Analyses to Distributors
Composition of the 4CRTP Regulatory Remuneration Base
The composition of the Regulatory Remuneration Base considered in the evaluation may be divided into two parts: Initial Base and ANEEL Adjustments58.
The Initial Base refers to the values that will compose the Regulatory Remuneration Base in the 4th Cycle of Periodical Rate Review (4CRTP). These values were determined by independent companies that conduct the Investment Evaluation (Incremental Base Review) and Armored Base of distributors between 3CRTP and 4CRTP, achieving a composition of part of the lines composing the Regulatory Remuneration Base of the 4CRTP to each distributor. This Initial Base takes into account the Complete Evaluation Report of Distributors.
Thus, the Complete Evaluation Reports, which include the Incremental Base Review and the Armored Base Review and that were considered in the evaluation of each distributor are:
Eletrobras Distribuição Acre: SETAPE – Report: “EDAC Executive Summary – Complete Base –Evaluation of the Electricity Assets of Acre – Eletrobras Distribuição Acre”, reference February 28, 2017;
Eletrobras Distribuição Alagoas: Levin – Complete Evaluation Report “Companhia Energética de Ala-goas – CEAL Project no. 2715-17745”, reference February 28, 2017;
Eletrobras Distribuição Amazonas: Levin – Complete Evaluation Report “Eletrobras Amazonas Ener-gia – Project Levin no. 3174-17752”, reference February 28, 2017;
Eletrobras Distribuição Piauí: Levin - Complete Evaluation Report “Cepisa Eletrobras Distribuição Piauí Project Levin no. 3082-18367”, reference February 28, 2017;
Eletrobras Distribuição Rondônia: Deloitte – Equity Evaluation Report “Centrais Elétricas de Rondônia – Ceron”, reference February 28, 2017;
58 Performed by ANEEL inspection
Ceres Inteligência Financeira | 112 |
Eletrobras Distribuição Roraima: Levin – Complete Evaluation Report: “Eletrobras Distribuição Rorai-ma Project no. 3012-17862” reference February 28, 2017.
Complete Evaluation of distributions shall hereinafter mean the aforementioned reports, related to the respective distributors.
During the evaluation procedure, the Distributors had two review reports of the Regulatory Remuneration Base. One to be presented to ANEEL, except atypical situations, with the Asset Evaluation Report, which reviews the Incremental Base of a CRTP to the other, considering money adjustments, additions, and write-off.
The second, the Complete Evaluation Report, considers this same Asset Evaluation Base and also reviews the Armored Base of 3CRTP, adjusted to the 4CRTP. This report was made and used in this work due to the important value of the assets of the distributors with potential to make part of their Armored Bases. However, it should be noted that the reviews on the Armored Base may have a smaller expectation of being accepted for they regard to specific cases when compared to the evaluations of the Incremental Base between CRTPs59.
The position of the Complete Evaluation Report, which has been considered in this work, includes the money adjustments of the 3CRTP Base, the additions and write-off between the 3CRTP and 4CRTP, and the review of the 3CRTP Armored Base, adjusted to the 4CRTP. The additions, write-off, and review of the Armored Base were included in its pertinent items by the evaluator of the Complete Report.
The evaluation of the Complete Report includes60 from item (1) Fixed Assets in Use (New Replacement Value) to (14) Total Net Remuneration Base = (1)-(6)-(8)+(10)+(11)-(12)+(13) and all were used in the composition of the initial Regulatory Remuneration Base of 4CRTP61.
Items (15) RGR PLPT Balance and (16) RGR Balance Other Investments were subject to money adjustment by the IPCA between the values obtained in 3CRTP and 4CRTP.
Finally, the other percentage items: (17) and (19) to (21) were maintained constant in relation to what has been verified in 3CRTP and subtotals (5), (7), (9), (14), (18) and (22) had their calculation logics.
59 To balance such smaller change of acceptance by the regulatory agency, the difference of the Reviewed Armored Base and the “Common” Armored Base (Armored Base of the Asset Evaluation Report) is set aside, which is greater than that applied to the Incremental Base, as detailed in the topics below
60 These same lines are also included for the Asset Evaluation Report that reviews the Incremental Base
61 Item 1 was adjusted by ANEEL’s disallowance rate, which implied the variation of the original values used in the Regulatory Remuneration Base of the economic-financial evaluation. The disallowance was applied in separate over the Incremental Base and the Armored Base
Ceres Inteligência Financeira | 113 |
ANEEL Adjustment on the Incremental and Armored Bases
ANEEL inspects the Incremental Base of assets and the Reviewed Armored Base62 between periodical rate cycles. This advent implies that the assets presented and/or reviewed may be considered as inapplicable and thus discarded by the regulatory agency. Thus, the incremental Base between the 3CRTP and 4CRTP and the Armored Base Review of this same period were applied percentages of Incremental Base Adjustments and Armored Base Adjustments, respectively.
The average adjustment (disallowance) of the group of distributors evaluated in the 3CRTP per region was applied over the Incremental Base that forms the Initial Base of 4CRTP63, or for cases in which the average adjustment is worse than that verified by the company, the adjustment of the distributor was maintained
The average adjustments (disallowance) of the group of distributors evaluated in the 3CRT per region were applied over the Reviewed Armored that forms the Initial Base of the 4CRTP. Such adjustment is applied once to each distributor in its Initial Base, i.e., it is not applied in the following years, differently to the Incremental Base. For the Reviewed Armored Base64, Northern companies were attributed a disallowance of 5.73% and Northeastern companies had disallowance of 5.01%.
From 2018 to 204865, the average adjustment of the benchmark private distributors66 is applied per region, obtained from the 3CRTP Incremental Base. A disallowance of 2.09% was considered to Northeastern, and of 2.83% to Northern companies.
Disallowances are considered as effective, i.e., they are not presented again in the future and considered as assets by ANEEL. This occurs due to two main reasons:
- Difficulty to present the proof of the investment at the degree demanded by the regulatory agency;
- Management faults that could generate investments in assets not acknowledged in the Regulatory Remuneration Base, which makes part of the invested assets to be set aside.
The evaluated distributors, with the entry of a new concession holder, will seek and gradually achieve the adjustment level by ANEEL of the benchmark private distributors of their regions, which will cause in the average that their asset disallowances are reduced when compared to the period prior to the private concession holder.
62 In the specific cases in which they are reviewed and presented again, as occurring to the Evaluated Distributors
63 Provided by the investment evaluators between 3CRTP and 4CRTP
64 Armored Base of the Complete Report less Armored Base of the Incremental Report
65 From the period of a new concession
66 Benchmark distributors compared to those evaluated in the Northern region: Celpa and Cemar; Northeastern region: Celpe, Energisa Paraíba and Energisa Sergipe. Energisa Tocantins (Celtins) was discarded due to the atypical value (above 1.5 of standard deviation over the average of indicators) of ANEEL adjustment for the period considered when compared to the other private distributors
Ceres Inteligência Financeira | 114 |
Finally, the application of the disallowance of the Remuneration Base presented by the distributors is levied upon item (1) Fixed Assets in Use (New Replacement Value) and consequently affects the items connected thereto. This will make the values considered in the evaluation to be different of the asset evaluation report in the magnitude of the disallowance applied to each distributor.
Regulatory Remuneration Base Components Forecasting
Inflation adjustments, additions, and write-off of assets shall occur for the years after the Initial Base of 4CRTP, which are considered in the evaluation until the final period of the concession.
Money Adjustments
The money adjustments of the Regulatory Remuneration Base may be subdivided into four detailed subgroups, as follows:
Items Monetarily Adjusted Directly;
Items Consisting of Formulas;
Percentage Items;
Other Items.
It should also be noted that the values of the rates to which such adjustments occur may be found in section “Economic-Financial Evaluation”, in chapter “Macroeconomic Forecasting”.
The items of the Regulatory Remuneration Base are monetarily adjusted67 by the IPCA68:
(1) Fixed Assets in Use (New Replacement Value);
(3) Special Gross Obligations;
(10) Stockroom in Operation;
(11) Deferred Asset;
(13) Real Properties and Easements;
67 The IPCA is applied directly to the value observed from the Initial Base, also considering their increments and write-off throughout the evaluation period
68 National Broad Price Index to the Consumer – IBGE, according to PRORET Submodule 2.3 V5, review 2.0, with date of effectiveness on 11/23/2015 and after, according to Normative Review no. 686/2015, dated 11/23/2015
Ceres Inteligência Financeira | 115 |
(15) RGR PLPT Balance;
(16) RGR Balance Other Investments.
Items consisting of formulas, i.e., using the lines of the Regulatory Remuneration Base to be calculated, are monetarily updated indirectly, using the calculations over the items over which the accounts are realized, already monetarily updated. They are:
(5) Gross Remuneration Base = (1)-(2)-(3)-(4);
(7) Net AIS (Market Value in Use);
(9) Remuneration Base Value (VBR);
(14) Total Net Remuneration Base = (1)-(6)-(8)+(10)+(11)-(12)+(13);
(18) Regulatory Reintegration Quota = (5)*(17);
(22) Remuneration of Capital (RC) = (15)*(20)+(16)*(21)+[(14)-(15)-(16)]*(19).
The percentage items are not monetarily adjusted by any index. These items are:
(17) Depreciation Rate;
(19) Effective WACC before Taxes;
(20) RGR PLPT Rate;
(21) RGR Rate Other Investments.
Finally, items net of their depreciations, depreciations, and complete usage rates are treated specifically and have their money adjustments obtained indirectly.
Item (2) Complete Usage Rate is obtained by multiplying item (1) Fixed Assets in Use (New Replacement Value)69 by the ratio of the values of the Initial Base between item (2) over item (1).
Item (4) Fully Depreciated Assets is obtained by multiplying item (1) Fixed Assets in Use (New Replacement Value)70 by the ratio between the Accumulated Fully Depreciated Assets over the Accumulated VNR, both items of the ratio are in the same monetary date.
69 Monetarily adjusted by the IPCA as highlighted above
70 Monetarily adjusted by the IPCA as highlighted above
Ceres Inteligência Financeira | 116 |
On its turn, the (6) Accumulated Depreciation is found by multiplying item (1) Fixed Assets in Use (New Replacement Value) by the ratio between the accumulated depreciation and the Accumulated VNR, with both last items being in the same monetary date.
Item (8) Depreciated Usage Rate is also monetarily adjusted indirectly, multiplying item (2) Complete Usage Rate71 by the subtraction of one by the ratio between the Depreciation of the Accumulated Usage Rate over the Accumulated Gross Usage Rate, with both items of the ratio being in the same monetary date.
Finally, item (12) Net Special Obligations72 is obtained by multiplying item (3) Special Gross Obligations by one less the ratio between the Depreciation of the Accumulated Special Obligation over the Accumulated Gross Special Obligation, with both items of the ratio being in the same monetary date.
Increments and Composition of the Regulatory Remuneration Base Lines
The assets will have increments throughout the period of concession, which are net of write-off, and that are contemplated in the economic-financial evaluation of distributors.
The items of the Regulatory Remuneration Base are affected differently by these increments and may be divided into five groups:
Items with Direct Increments;
Items Consisting of Formulas;
Percentage Items;
Items without Increments;
Other Items.
Part of the items of the Regulatory Remuneration Base are incremented directly, as detailed below:
(1) Fixed Assets in Use (New Replacement Value);
(3) Special Gross Obligations;
(10) Stockroom in Operation;
(13) Real Properties and Easements;
71 Monetarily adjusted by the IPCA as highlighted above
72 Monetarily adjusted by the IPCA as highlighted above
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Items (1), (10) and (13) have their increment values of the Regulatory Remuneration Base detailed in section “Economic-Financial Evaluation” of this document, in section “Investment Forecasting” and, on its turn item (3), is detailed in chapter “Special Obligations”.
Items consisting of formulas, i.e., using the lines of the Regulatory Remuneration Base to be calculated, are monetarily updated indirectly, using the calculations over the items over which the accounts are realized, already with their respective increments. The composition of the formulas of these items is the same according to the provisions established by the regulatory agency73, these items being:
(5) Gross Remuneration Base = (1)-(2)-(3)-(4);
(7) Net AIS (Market Value in Use);
(9) Remuneration Base Value (VBR);
(14) Total Net Remuneration Base = (1)-(6)-(8)+(10)+(11)-(12)+(13);
(18) Regulatory Reintegration Quota = (5)*(17);
(22) Remuneration of Capital (RC) = (15)*(20)+(16)*(21)+[(14)-(15)-(16)]*(19).
Percentage items are not affected by increments. Their percentages are established by regulation and the values verified in the 3CRTP of each evaluated distributor are kept constant. These items are:
(17) Depreciation Rate;
(19) Effective WACC before Taxes;
(20) RGR PLPT Rate;
(21) RGR Rate Other Investments.
These percentages are maintained unaltered throughout the entire valuation period.
Part of the items of the Regulatory Remuneration Base do not have increments, being only adjusted monetarily by the IPCA, considering the 3CRTP values allocated to each distributor.
(11) Deferred Asset;
(15) RGR PLPT Balance;
73 ANEEL PRORET Submodule 2.3, V2.0, of Normative Resolution no. 686/2015, dated 11/23/2015
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(16) RGR Balance Other Investments.
At last, the other items of the Regulatory Remuneration Base have particularities related to their composition and their increments, which are not related to the groups above.
Item (2) Complete Usage Rate is obtained by multiplying item (1) Fixed Assets in Use (New Replacement Value)74 of the period for the ratio of the values of the Initial Base between item (2) over item (1).
Item (4) Fully Depreciated Assets is detailed in the topic below “Fully Depreciated Assets”, of this same Chapter “Regulatory Remuneration Base Flow”.
Item (6) Accumulated Depreciation is calculated from the sum of the depreciation of the Initial Base, summed to the depreciation of the Incremental Base throughout the period of concession. Greater detail of the depreciation may be found in Chapter “Investment Forecasting” of this same section.
Item (8) Depreciated Usage Rate is calculated from the multiplication of item (2) Complete Usage Rate by one less the ratio between the Depreciation of the Accumulated Usage Rate over the Accumulated Gross Usage Rate, considering the components of the ratio in the same monetary date.
Finally, item (12) Net Special Obligations is obtained with the multiplication of item (3) Special Gross Obligations, by one less the ratio between the Depreciation of the Accumulated Special Obligation and the Special Gross Obligation, considering the components of the ratio in the same monetary date.
74 Monetarily adjusted by the IPCA as highlighted above
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Fully Depreciated Assets History
Fully depreciated assets are those that have already been 100% depreciated by that remain in use, thus being linked to the conceded service75.
Thus, it is possible to understand that the participation of the fully depreciated assets in item (1) Fixed Assets in Use (New Replacement Value) indicates underused assets for cases of extremely low or percentages, or out-of-date for too high participations.
Thus, a balance was sought for the ratios of this indicator throughout the period of concession, which has been calculated based on the simple average of the indicator to the evaluated companies.
Finally, the history of distributors to such balance rate of 12.54% is based on the ratio (4)/(1) observed in the Regulatory Remuneration Base of 4CRTP and ranges at a constant, monthly rate until such balance is achieved at the end of the concession (02/28/2048).
The table presented below is presented at the initial and final rate of this indicator to the distributors:
Table 56 – Initial and Final Rate of Fully Depreciated Assets over the VNR76 | |||||||
AC | AL | AM | PI | RO | RR | Avrg | |
(1) Fixed Assets in Use | 963,111 | 2,546,705 | 1,259,774 | 3,006,302 | 1,886,310 | 303,341 | |
(VNR) | |||||||
(4) Fully Depreciated | 62,262 | 446,509 | 149,809 | 886,730 | 113,231 | 11,733 | |
Assets Balance | |||||||
(4)/(1) | 6.46% | 17.53% | 11.89% | 29.50% | 6.00% | 3.87% 12.54% | |
Source: ANEEL, asset evaluators to 4CRTP CETAPE and Levin, Ceres Inteligência Financeira |
75 Accounting Manual of the Electric Sector – ANEEL 2015
76 Considering the values of the Asset Evaluation Report that review the Incremental Base as a reference of the trend of these assets
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Specific Analyses of Distributors
Distributor Results
Table 57 - Regulatory Remuneration Base 4CRTP (R$ ‘000) – Amazonas Energia | ||
CAPEX Description – Distribution Assets | Armored Base | |
Base 3CRTP | ||
(Valued in thousand R$) | 4CRTP Feb17 | |
(1) Fixed Assets in Use (New Replacement Value) | 1,136,613 | 3,138,599 |
(2) Complete Usage Rate | 1,948 | 2,534 |
(3) Special Gross Obligations | 648,521 | 1,042,607 |
(4) Fully Depreciated Assets | 123,383 | 385,340 |
(5) Gross Remuneration Base = (1)-(2)-(3)-(4) | 362,761 | 1,708,118 |
(6) Accumulated Depreciation | 300,431 | 1,331,894 |
(7) Net AIS (Market Value in Use) | 836,182 | 1,806,705 |
(8) Depreciated Usage Rate | 1,435 | 2,409 |
(9) Remuneration Base Value (VBR) | 834,747 | 1,804,296 |
(10) Stockroom in Operation | 9,044 | 36,548 |
(11) Deferred Asset | 0 | 0 |
(12) Net Special Obligations | 590,193 | 945,037 |
(13) Real Properties and Easements | 3,619 | 39,862 |
(14) Total Net Remuneration Base = (1)-(6)- | ||
257,216 | 935,670 | |
(8)+(10)+(11)-(12)+(13) | ||
(15) RGR PLPT Balance | 0 | 0 |
(16) RGR Balance Other Investments | 167,426 | 217,270 |
(17) Depreciation Rate | 3.68% | 3.68% |
(18) Regulatory Reintegration Quota = (5) * (17) | 13,357 | 62,893 |
(19) Effective WACC before taxes | 11.36% | 11.36% |
(20) RGR PLPT Rate | 1.35% | 1.35% |
(21) RGR Rate Other Investments | 3.62% | 3.62% |
(22) Remuneration of Capital (RC) = | ||
16,261 | 89,475 | |
(15)*(20)+(16)*(21)+[(14)-(15)-(16)]*(19) | ||
Source: ANEEL, Levin77,78, Ceres Inteligência Financeira | ||
Notes: ANEEL’s 3CRTP Base; Armored Base 4CRTP, based on the Levin data of the Complete Evaluation ad- | ||
justed by means of disallowances applied to the Additional Incremental and Armored Bases, in separate, by | ||
Ceres |
77 Levin – Evaluation Investment Report Eletrobras Amazonas Energia – “Project Levin no 3174-17752” reference February 28, 2017
78 Levin – Report of Full Evaluation of Eletrobras Amazonas Energia – “Project Levin no 3174-17752” reference February 28, 2017
Ceres Inteligência Financeira | 121 |
| |||
Table 58 – Operation of Assets (R$ ‘000) 3CRTP to 4CRTP – Amazonas Energia | |||
Incremental Base VNR | VNR Variation of Ar- | ||
ANEEL Incremental | ANEEL Armored Base | ||
between 3CRTP and | mored Base after Re- | ||
Base Adjustment | Adjustment | ||
4CRTP | view | ||
625,156 | 1,254,313 | (26,389) | (71,903) |
Source: ANEEL, Levin79,80, Ceres Inteligência Financeira |
Table 59 - ANEEL Adjustments 3CRTP – Incremental Base – Amazonas Energia | ||||
Incremental Base – Amazonas Energia (R$ '000) | ||||
ANEEL Adjust- | % ANEEL Ad- | |||
Accounting Entry | VNR Report | ment | VNR ANEEL | justment |
Intangible | 25,877 | (2,800) | 23,078 | (10.82%) |
Real Property | 465 | (256) | 209 | (55.11%) |
Tank | 0 | 0 | 0 | 0.00% |
Buildings | 21,823 | (11,751) | 10,073 | (53.84%) |
Equipment | 732,202 | (61,370) | 670,832 | (8.38%) |
Vehicles | 18,438 | (1,023) | 17,415 | (5.55%) |
Furniture and Appli- | ||||
ances | 5,997 | 43,228 | 49,225 | 720.84% |
Total | 804,803 | (33,972) | 770,831 | (4.22%) |
Source: ANEEL, Ceres Inteligência Financeira | ||||
Note: RF TN 0082/2013-SFF. Case: 48500.003956/2013-81 – ANEEL |
79 Levin – Evaluation Investment Report Eletrobras Amazonas Energia – “Project Levin no 3174-17752” reference February 28, 2017
80 Levin – Report of Full Evaluation of Eletrobras Amazonas Energia – “Project Levin no 3174-17752” reference February 28, 2017
Ceres Inteligência Financeira | 122 |
| ||||
Table 63 - ANEEL 3CRTP Adjustments - Armored Base – Eletroacre | ||||
Armored Base - EletroAcre (R$ '000) | ||||
VNR Re- | ANEEL Ad- | % ANEEL Ad- | ||
Accounting Entry | port | justment | VNR ANEEL | justment |
Intangible | 8,803 | 9 | 8,812 | 0.10% |
Real Property | 989 | 1 | 990 | 0.10% |
Tank | 0 | 0 | 0 | 0.00% |
Buildings | 7,170 | 1,662 | 8,832 | 23.18% |
Equipment | 515,113 | (17,099) | 498,014 | (3.32%) |
Vehicles | 455 | 0 | 455 | 0.10% |
Furniture and Appli- | ||||
ances | 669 | 1 | 670 | 0.10% |
Total | 533,199 | (15,426) | 517,773 | (2.89%) |
Source: ANEEL, Ceres Inteligência Financeira | ||||
Note: RF TN 0082/2013-SFF. Case: 48500.003956/2013-81 – ANEEL |
Table 64 - ANEEL 3CRTP Adjustments - Armored Base – Amazonas Energia | ||||
Armored Base - Amazonas Energia (R$ '000) | ||||
VNR Re- | ANEEL Ad- | % ANEEL Ad- | ||
Accounting Entry | port | justment | VNR ANEEL | justment |
Intangible | 24,034 | 0 | 24,034 | 0.00% |
Real Property | 61,477 | 0 | 61,477 | 0.00% |
Tank | 0 | 0 | 0 | 0.00% |
Buildings | 111,678 | 0 | 111,678 | 0.00% |
Equipment | 1,817,478 | (191,533) | 1,625,945 | (10.54%) |
Vehicles | 11,821 | 0 | 11,821 | 0.00% |
Furniture and Appli- | ||||
ances | 27,394 | 0 | 27,394 | 0.00% |
Total | 2,053,882 | (191,533) | 1,862,349 | (9.33%) |
Source: ANEEL, Ceres Inteligência Financeira | ||||
Note: RF TN 0079/2013-SFF. Case: 48500.0006386/2012-09 – ANEEL |
Ceres Inteligência Financeira | 124 |
| ||||
Table 65 - ANEEL 3CRTP Adjustments - Armored Base – Ceron | ||||
Armored Base - Ceron (R$ '000) | ||||
VNR Re- | ANEEL Ad- | % ANEEL Ad- | ||
Accounting Entry | port | justment | VNR ANEEL | justment |
Intangible | 10,714 | (18) | 10,695 | (0.17%) |
Real Property | 1,863 | 0 | 1,863 | 0.00% |
Tank | 1,660 | 0 | 1,660 | 0.00% |
Buildings | 8,073 | 0 | 8,073 | 0.00% |
Equipment | 926,118 | (109,255) | 816,863 | (11.80%) |
Vehicles | 7,022 | 0 | 7,022 | 0.00% |
Furniture and Appli- | ||||
ances | 8,980 | 0 | 8,980 | 0.00% |
Total | 964,430 | (109,274) | 855,156 | (11.33%) |
Source: ANEEL, Ceres Inteligência Financeira | ||||
Note: RF TN 0085/2013-SFF. Case: 48500.0003957/2013-26 – ANEEL |
Table 66 - ANEEL 3CRTP Adjustments - Armored Base – Eletrobras Roraima | ||||
Armored Base - Eletrobras Roraima (R$ '000) | ||||
VNR Re- | ANEEL Ad- | % ANEEL Ad- | ||
Accounting Entry | port | justment | VNR ANEEL | justment |
Intangible | 3,427 | (19) | 3,408 | (0.57%) |
Real Property | 1,523 | 132 | 1,655 | 8.69% |
Tank | 0 | 0 | 0 | 0.00% |
Buildings | 3,126 | 24 | 3,151 | 0.78% |
Equipment | 176,609 | 1,042 | 177,651 | 0.59% |
Vehicles | 2,929 | (15) | 2,914 | (0.52%) |
Furniture and Appli- | ||||
ances | 1,031 | 4 | 1,035 | 0.35% |
Total | 188,645 | 1,168 | 189,813 | 0.62% |
Source: ANEEL, Ceres Inteligência Financeira | ||||
Note: RF TN 0080/2013-SFF. Case: 48500.000433/2013-83 – ANEEL |
Table 67 - ANEEL Adjustment Average, Group Evaluated Distributors 3CRTP - Armored Base | ||
Total Adjust. Average | ||
Evaluated North | Evaluated Group | (5.73%) |
Source: ANEEL, Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 125 |
Considerations on Assets in Course
It should be noted that this work does not incorporate the Fixed Assets positions in course of the enterprise to the Remuneration Base.
The evaluation reports of the Remuneration Base did not perform any treatment regarding the items of Fixed Assets in Course, due to the fact that this type of asset is not part of the scope of contract. In addition, the accounting position from the audited Financial Statements of the evaluated Distributor does not allow the acknowledgement of relevant particularities for the amounts in course to be considered.
Thus, based on the reports of the evaluators of the Remuneration Base and the audited Financial Statements, the following information cannot be extracted:
· what are the assets in operation not unitized;
· which amounts represent works in progress;
· which values refer to improvements or expansions interrupted;
· the New Replacement Value (VNR) of Fixed Assets in course;
· the depreciation rate to be applied and the moment in which its application begun;
· the usage rate of the assets for the cases in which the asset is already in use, and
· the source of financing of these assets in course.
These restrictions impede the estimate of the effective impact that the Fixed Assets in Course may generated to the Initial Remuneration Base and, consequently, to the respective tax impact.
Since the minimum set of premises to include these assets in course in the Remuneration Base was not met, it is not possible to obtain reasonable consistency regarding to
· eligibility for provision;
· physical-accounting conciliation;
· sources of financing, and
· other parameters of the reevaluation procedure (such as the VNR calculation, depreciation, usage rate, and write-off evaluations).
Thus, the effects of Fixed Assets in Course to the Remuneration Base were not included in this economic-financial evaluation document. The investor shall then analyze the criterion of adoption of the parameters to be considered.
Finally, for the case of Eletrobras Distribuição Amazonas, the Complete Evaluation Report “Eletrobras Amazonas Energia – Levin Project no. 3174-17752”, with reference on February 28, 2017, which presents a balance position for these Fixed Assets in Course, as noted in the table below, was highlighted:.
Ceres Inteligência Financeira | 126 |
| ||
Table 68 – Balance of Fixed Assets in Progress of Amazonas Energia on Feb/17 | ||
ANEEL Ac- | Balance Reference | |
Description | ||
count | Feb/17 | |
Plants – Fixed Assets in Progress | 142,758,697.94 | |
123210301 | Lands | 69,700.00 |
123210303 | Buildings, Civil Works and Improvements | 25,255,347.55 |
123210304 | Machinery and Equipment | 57,678,562.26 |
123210306 | Furniture and Utensils | 1,650,415.26 |
123210308 | Project Development | 1,178,051.11 |
123210309 | Transformation, Manufacture and Repair of Materials | 11,628,304.14 |
123210310 | Material in Deposit | 44,263,700.13 |
123210312 | Advance to Suppliers | 1,034,617.49 |
Plants – Intangible under way | 0.00 | |
123310304 | To be pro-rated | 0.00 |
123310307 | Judicial Deposits | 0.00 |
Lines, Networks and Substations – Fixed Assets under Way | 965,378,211.96 | |
123230301 | Land | 10,000.00 |
123230303 | Buildings, Civil Works and Improvements | 7,571,825.70 |
123230304 | Machinery and Equipment | 790,053,333.63 |
123230305 | Vehicles | 167,435.12 |
123230306 | Furniture and Utensils | 440,088.00 |
123230307 | To be pro-rated | 795,519.21 |
123230308 | Project Development | 34,871,971.93 |
123230310 | Material in Deposit | 121,609,346.04 |
123230311 | Purchase under Way | -132,048.90 |
123230312 | Advance to Suppliers | 9,990,741.23 |
Lines, Networks and Substations – Intangible in Progress | 3,594,544.54 | |
123330301 | Encumbrances | 137,100.00 |
123330303 | Software | 3,457,444.54 |
123330399 | Other | 0.00 |
Associated Transmission System – Fixed Assets in Progress | 223,895,332.29 | |
123230601 | Land | 34,592,744.11 |
123230603 | Buildings, Civil Works and Improvements | 53,323,894.12 |
123230604 | Machinery and Equipment | 80,332,169.49 |
123230608 | Project Development | 13,473,280.87 |
123230611 | Purchase under Way | 38,016.00 |
123230612 | Advance to Suppliers | 42,135,227.70 |
Associated Transmission System – Intangible in Progress | 186,105.44 | |
123330601 | Encumbrances | 186,105.44 |
Central Administration – Fixed Assets in Progress | 41.455,902.20 | |
123240303 | Buildings, Civil Works and Improvements | 21,318,782.88 |
123240304 | Machinery and Equipment | 9,301,976.19 |
123240305 | Vehicles | 736,095.68 |
123240306 | Machinery and Equipment | 7,169,239.96 |
123240307 | To be pro-rated | 0.00 |
123240310 | Material in Deposit | 2,929,807.49 |
123240311 | Purchases under Way | 0.00 |
Central Administration – Fixed Assets in Progress | 32,643,167.42 | |
123340303 | Software | 32,643,167.42 |
Total | 1,409,911,961.79 | |
Source: Levin; Preparation: Ceres Inteligência Financeira | ||
Note: Report of Full Evaluation “Eletrobras Amazonas Energia – Project Levin no 3174-17752”, reference Febru- | ||
ary 28, 2017, files “Executive Summary” and “Annex L – Fixed Assets in Course” | ||
Ceres Inteligência Financeira | 127 |
Indemnification
This work considered the receipt of indemnification upon the end of the forecasting period (Feb/2048) resulting from the Net Remuneration Base.
The value calculated as indemnification is equivalent to the amount of the Net Remuneration Base of February/2048, net of tax over the capital gain. The capital gain was determined by the difference between the Net Remuneration Base at the end of the forecast, and the value of this base without the IPCA money adjustment effect.
The table below shows the forecasted value of indemnification for the case of Eletrobras Distribuição Amazonas.
Table 69 – Indemnification Forecasting | |
| |
R$'000 in Feb/2048 | |
Net Remuneration Base | 38,046,829 |
Income Tax on Money Adjustment | (5,640,912) |
Net Indemnification | 32,405,917 |
Source: Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 128 |
Tax Loss and Negative Basis of CSL
As indicated in the Accounting-Financial Due Diligence Report, the company did not acknowledge in accounting terms the deferred credits of IRPJ [Corporate Taxpayer Income Tax] and CSL [Contribution over Profit] over the tax loss and over the negative CSL base. The calculated balances are found in the table below and were considered, until their complete liquidation, as a reduction base of the forecast of taxes payable of the enterprise.
Table 70 – Tax Loss Balances and CSL Negative Base | |||
(R$'000) | IRPJ | CSL | Total |
Tax Loss / Negative CSL Base | 11,006,615 | 11,025,501 | 11,011,614 |
IRPJ 25% | 2,751,654 | - | 2,751,654 |
CSL 9% | - | 992,295 | 992,295 |
Total | 2,751,654 | 992,295 | 3,743,949 |
Source: Accounting-Equity Due Diligence Report (Product 5, page 40) |
Ceres Inteligência Financeira | 129 |
Special Obligations
Common Analyses to Distributors
The Special Obligations consist of resources related to: financial participation of the consumer, budget appropriation of the Government, federal, state, and municipal charges, and charges of special credits related to the investments applied to the enterprises linked to the concession.
The Special Obligations were calculated in two periods: The first for Dec/16, which used the position of Dec/16 made available by the evaluated distributors. The second from 2017, which excluded from the analytical bases of Special Obligations all nonrecurring items.
Bases with different levels of detail were provided. Some distributors had specific treatments to define the recurring items. “Luz para Todos” Program (PLPT)81 is considered as a recurring item during its period of effectiveness for which distributors have expense forecasting (until 2019).
For the other Special Obligations, recurring items have been considered as those that in the past 5 years presented at least three variations of value, or that in the past three years had at least two years with variation of value.
81 Detailed in the Investments chapter
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| |||||||||
Specific Analyses of Distributor | |||||||||
Table 71 – Special Obligations Forecasting (in R$ ‘000) | |||||||||
2017 | 2018 | 2019 | 2020 | 2025 | 2030 | 2035 | 2040 | 2047 | |
Special Obliga- | 3,246 | 3,246 | 3,246 | 3,246 | 3,246 | 3,246 | 3,246 | 3,246 | 3,246 |
tions | |||||||||
Source: Distributor’s bases, Ceres Inteligência Financeira |
Table 72 – History of Special Obligations and Recurrence (in R$ ‘000) | |||
Entry | 2014 | 2015 | 2016 |
CON“UME‘ “ CONT‘IBUTION | 19,301 | 18,448 | 17,596 |
AGREEMENT CNP 25/79 - CEM | 50 | 48 | 46 |
AGREEMENT NR 001 SNE MINFRA | 82 | 78 | 74 |
AGREEMENT SUFRAMA/2002 DISTRIBUTION NETWORK | 1,137 | 1,086 | 1,036 |
COST SUPPLY CAPACITY | 68 | 65 | 62 |
DONATIONS DUBV. DEST. INVEST. SERVICE GRANTED – MISC. | 7,668 | 7,411 | 7,068 |
DONATIONS AND SUBVENTIONS DESTINED TO INVESTMENTS IN | |||
5,353 | 8,017 | 8,017 | |
THE SERVICE GRANTED | |||
OTHER – MISC. | -13 | -25 | -37 |
FINANCIAL PARTICIPATION OF FEDERAL GOVERNMENT – MISC. | 1,158 | 1,106 | 1,054 |
FINANCIAL PARTICIPATION OF THE CONSUMER – MISC. | -15 | -24 | -33 |
LUZ PARA TODOS PROGRAM | 542,352 | 664,708 | 693,623 |
PROTERRA/73 - CEM | 229 | 220 | 211 |
PROTERRA/74 - CEM | 2 | 1 | 0 |
SG MME 96/66 - CEM | 11 | 11 | 10 |
UNIVERSALIZATION OF THE ELECTRIC ENERGY PUBLIC SERVICE | -52,180 | -68,924 | -85,581 |
Source: Distributor’s bases, Ceres Inteligência Financeira |
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Quality Indicators
Analysis of Quality Indicators
The levels of the quality indicators achieved by the evaluated distributors throughout the concession period (03/01/2018 to 02/28/2048) were estimated, the targets established by ANEEL in the same period were forecasted.
Seven indicators were evaluated:
DEC (Equivalent Duration of Interruption per Consumption Unit);
FEC (Equivalent Frequency of Interruption per Consumption Unit);
FER (Equivalent Frequency of Complaint);
IASC (ANEEL Rating of Consumer Satisfaction);
IAb (Telephone Support Abandonment Rate);
ICO (Indicator of Busy Calls of Telephone Support).
These indicators affect the Component of Quality of Service Q of Factor X and may influence the values of Installment B of distributors, in accordance with the coverage or not of the regulatory targets established by ANEEL. The levels of coverage or not of each distributor are compared with the results obtained by the distributors of a same group82. A distributor may be between the 25% best or worst companies to whether achieve or not the target, or between the other 75% that whether achieve or not the levels established by ANEEL.
Summing all indicators, the addition or reduction value of Installment B may be of 2%, depending on the level of coverage of ANEEL targets by the distributor in each indicator, also compared to the other distributors of its group.
The equations and parameters for the classes of each indicator were used in accordance with ANEEL’s PRORET 2.5 V2.0.
The weights equivalent to each indicator are presented below:
82 Groups are defined by size of company, as per Submodule 2.5 V2.0 of ANEEL’s PRORET
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| ||||||
Table 73 - Weight Values of Indicators of Quality of Concession Holders with more than 60 thousand Consumption Units83 | ||||||
3CRTP Methodology | New Methodology | |||||
Indicator | Apr/16 to | Apr/17 to | Apr/18 to | Apr/19 to | ||
Indicator | Apr/15 to Mar/16 | |||||
Type | Mar/17 | Mar/18 | Mar/19 | Mar/20 | ||
DEC | 50.000% | 30.000% | 37.500% | 45.000% | 50.000% | |
Technical | ||||||
FEC | 50.000% | 30.000% | 30.000% | 27.000% | 20.000% | |
INS | 0.750% | 1.800% | 4.000% | |||
ICO | 0.375% | 0.900% | 3.000% | |||
Commercial | IAb | 0.375% | 0.900% | 3.000% | ||
FER | 3.000% | 7.200% | 10.000% | |||
IASC | 3.000% | 7.200% | 10.000% | |||
Total | 100.000% | 60.000% | 75.000% | 90.000% | 100.000% | |
Source: PRORET ANEEL |
The evaluation considered each one of such ratios in accordance with the dates specified in PRORET, and for the periods after Mar/2020, the last weights were considered for each indicator related to the values from Apr/19 to Mar/20.
In addition, terms of the draft of agreement84 were considered in the evaluation. The effects of the transgressions of these quality indicators as null for the 24 months following the execution of the concession agreement, considering that: “the inspection performed by ANEEL has an instructional and/or determinative nature, without penalties, except in the case of infringement of determinations made by
ANEEL’s Management.”85
In addition, the following section of “Clause Nineteen – Transitory Provisions” shall be highlighted, valid until the end of the 5th year of concession from the date of execution of the concession agreement:
“Paragraph Two - From the second calendar year following the execution of the agreement, in case the calculated values of the offsets are below the values of the calculated offsetting for the previous calendar year, such difference will be considered as a remunerable investment by DISTRIBUTOR upon the rate review, with the remaining value being included in entry Obligations Linked to the Electric Power Public Service (Special Obligations).”
83 PRORET Submodule 2.5 Version 2.0
84 Draft of Concession Agreement dated 05/03/2017, Official Letter no. 113/2017-DR/ANEEL of procedure 48510.000502/2017-00, of Officer-General Romeu Donizete Rufino
85 Draft of Concession Agreement dated 05/03/2017, Official Letter no. 113/2017-DR/ANEEL of procedure 48510.000502/2017-00, of Officer-General Romeu Donizete Rufino, in its Clause Nineteen – Transitory Provisions, Subclause Five
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“Paragraph Three – From the second calendar year after the execution of the agreement, in case the calculated values of the offsetting is greater than the values of calculated offsetting for the previous calendar year, such difference shall be invested doubled in the concession and included in entry Obligations Linked to the Electric Power Public Service (Special Obligations).”
DEC and FEC
Common Analyses to Distributors
Forecasting of Indicators Performed by the Companies
The indicator of DEC (Equivalent Duration of Interruption per Consumption Unit) consists of the time in which a Consumption Unit (UC) remained without electric power for a certain period and the indicator of FEC (Equivalent Frequency of Interruption per Consumption Unit) consists of the number of times that an UV had no electricity for a given period.
The analyses86 may be divided into three parts: Starting Point, Indicator Variation Rate and ANEEL Limit.
The starting point consists of the DEC and FEC estimates for 2017 and is the result of data obtained for 201687 and adjusted according to ANEEL’s target of reduction for 201788 of DECi and FECi89. Based on the history of variation of distributors, the assumption is that distributors seek and achieve the DECi reduction percentage for the DEC as a whole, and, similarly, achieve the FECi percentage for the FEC as a whole.
The rate of variation of the indicator is based on the rate of variation realized by the private benchmark90. The DEC and FEC levels of the evaluated company in 2015 are evaluated and compared with the history of the private company, identifying 1993 and 2015 the most recent period in which the company had a rate near that of the evaluated company.
With the evaluation of this period of similarity of indicators, the extension of the period from this point to 2015 is evaluated, followed by the calculation of the annual geometric mean of variation of the indicator of the private company. Such indicator is initially applied in the distributors evaluated between 2018 and 2022, including both.
86 DEC and FEC Analyses are carried out in separate but have common constructive logical structure
87 Annual DEC and FEC of the case of collective indicators of continuity of ANEEL
88 Procedure 48500.004245/2016-77, Vote, Table 1 – Limit for the end of 2017 for operational management. Variation % between the Determined DECi and its Limit for 2017 and the Determined FECi and its Limit for 2017
89 Internal DEC and Internal FEC, indicators that accompany the interruptions occurred in the distribution system of internal origin
90 Companies with geographic proximity to the evaluated distributors
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The assumed premise is that the privatization will cause the evaluated company to present internal changes that will impact the improvement of the indicator, aligned with the improvement verified by other distributors, also private.
Between 2023 and 2027, the speed in which distributors adjust91 to achieve the limits established by ANEEL92 for 2027. This is possible due to the maturity that the new concession holder gains throughout the period in the management of the company, which enables a degree of improvement that is faster than that verified in the recent period by the benchmark private distributors. Subsequently, the speeds adjust to the speed verified by the private distributors.
The evolution of the indicators occurs until the distributor achieves the DEC and FEC levels of the benchmark distributors for 2015 and remain constant until the end of the concession, on February 28, 2048.
At last, it should be noted that although achieving the global regulatory DEC and FEC levels, the distributor may offset consumer in case of violation of the individual limits. Such offsetting is treated in section “Offsetting for the Transgression of the Continuity Limits”.
Forecasting of Limits Established by ANEEL
The definitions of the limits established by ANEEL are based on those established between 2014 and 2016 by ANEEL to each distributor. To 2017, the limit used was that established by no. 88/2017-SRM/SGT/SRD/ ANEEL, dated May 24, 2017, case: 48500.002667/2017-99, until November to Elet-roacre, Amazonas Energia, Ceron and Eletrobras Roraima, and until September to Cepisa and Ceal, for it consists of the limit established to distributors for the year.
The subsequent months used the limits established in Technical Note no. 149/2017-SEM/SGT/SRD/SFF/ANEEL, dated September 8, 2017, procedure 48500.002667/2017-99, thus achieving a weighted limit for 2017 between both technical notes.
Years from 2018 to 202393 considered the provisions of Technical Note no. 149/2017-SEM/SGT/SRD/SFF/ANEEL, dated September 8, 2017, procedure 48500.002667/2017-99, related to
91 Approximate speed of that verified by the private companies, to be presented in the specific analysis to each distributor
92 Estimate by Ceres as exposed below
93 Until the month of the ordinary rate review. To facilitate the view, the values are presented with annual references where 2022 will represent the indicator until the month of review
Ceres Inteligência Financeira | 135 |
the definitions of regulatory DEC and FEC limits for the designated distributors, which are: Eletroacre, Ceal, Amazonas Energia, Cepisa, Ceron and Eletrobras Roraima94.
Such Note 147/2017-SRM/SGT/SRD/ ANEEL defines the DEC and FEC limits in its paragraph 72, Table 7, and its paragraph 70 defines the period of duration of these limits “(...)Such limits shall remain unaltered until the fifth calendar year following the execution of the new contracts, so that the first ordinary rate review of the new contract establishes the limits for the next cycle.”
These limits established for five years are presented in the table below.
Table 70 – DEC and FEC Global Limits from 2018 to 2022, including95 | |||
Designated Distributor | DEC | FEC | |
Amazonas Energia | 48.53 | 45.69 | |
Eletrobras Roraima | 48.67 | 58.43 | |
Ceal | 15.58 | 13.06 | |
Cepisa | 20.67 | 13.99 | |
Ceron | 27.54 | 18.90 | |
Eletroacre | 44.17 | 35.31 | |
Source: ANEEL, Ceres Inteligência Financeira |
Therefore, the evaluation considered the global DEC and FEC limits for 2018 and the ANEEL 2018 limits until the first rate review of each distributor in 2023.
From the first rate review after the assumption of a new concession holder in the second semester of 202396, an adjustment factor is applied to the targets established by ANEEL.
Such subsequent targets range according to the annual geometric mean of variation of ANEEL’s target for each distributor individually evaluated between 2014 and 201797. The targets adjust according to the variation rate proposed by the agency until the target reaches the degree of the indicator verified by the benchmark private companies, remaining constant from that point.
94 The limit includes Boa Vista (Capital) and CERR (Countryside), with the global limits of each one, for DEC, are of 29.75 and 99.84, respectively, while for FEC are of 54.65 and 68.65
95 Technical Note no. 149/2017-SEM/SGT/SRD/SFF/ANEEL, dated September 8, 2017, procedure 48500.002667/2017-99
96 November 2023
97 From 2014-2016, the limits established by the following technical notes have been used –Eletroacre: NT 0194/2013-SRD/ANEEL on August 9, 2013, procedure 48500.002318/2013-43; Ceal: NT 0186/2013-SRD/ANEEL on July 30, 2013, procedure 48500.000547/2013-23; Amazonas Energia: NT 0179/2013-SRD/ANEEL on July 24, 2013, procedure 48500.001941/2013-89; Cepisa: NT 0199/2013-SRD/ANEEL on August 13, 2013, procedure 48500.000546/2013-89; Ceron: NT 0234/2013-SRD/ANEEL on November 8, 2013, procedure 48500.002316/2013-54; Boa Vista: NT 0178/2013-SRD/ANEEL on July 22, 2013, procedure 48500.001942/2013-23; Year 2017 used the limits verified in Technical Note 88/2017-SEM/SGT/SRD/ANEEL on May 24, 2017, procedure 48500.002667/2017-99
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When achieving the targets of the period, distributors stabilize their efforts of improvement in order to achieve ANEEL’s target and sustain it. In the long term, companies tend to have indicators verified by the benchmark companies, which tend to be equal to the targets estimated to ANEEL. This makes companies tend to achieve the other 75% of the distributors that achieve the DEC and FEC targets.
Specific Analyses of Distributor
DEC
Eletroacre will achieve ANEEL’s DEC limits in 2027 and shall sustain that position until the end of the concession, which makes the distributor to achieve the limits established by the regulatory agency and to be part of the 75% that achieve the target from that point.
Table 71 - DEC Indicator - Realized/Forecasted x ANEEL Limits 1 of 3 | |||||||||||
Data | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
Realized | 46.64 | 47.83 | 45.12 | 45.58 | 45.58 | 45.58 | 45.58 | 45.58 | 44.16 | 42.79 | 41.46 |
ANEEL Limit | 47.67 | 45.57 | 45.83 | 48.53 | 48.53 | 48.53 | 48.53 | 48.53 | 44.16 | 42.79 | 41.46 |
Δ% | (2%) | 5% | (2%) | (6%) | (6%) | (6%) | (6%) | (6%) | 0% | 0% | 0% |
Source: ANEEL, Ceres Inteligência Financeira |
Table 72 - DEC Indicator - Realized/Forecasted x ANEEL Limits 2 of 3 | |||||||||||
Data | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2035 | 2036 |
Realized | 40.17 | 38.92 | 34.81 | 33.24 | 33.24 | 33.24 | 33.24 | 29.73 | 28.38 | 28.38 | 28.38 |
ANEEL Limit | 40.17 | 38.92 | 37.71 | 36.54 | 35.40 | 34.30 | 33.24 | 32.20 | 31.20 | 30.23 | 29.29 |
Δ% | 0% | 0% | (8%) | (9%) | (6%) | (3%) | 0% | (8%) | (9%) | (6%) | (3%) |
Source: ANEEL, Ceres Inteligência Financeira |
Table 73 - DEC Indicator - Realized/Forecasted x ANEEL Limits 3 of 3 | |||||||||||
Data | 2037 | 2038 | 2039 | 2040 | 2041 | 2042 | 2043 | 2044 | 2045 | 2046 | 2047 |
Realized | 28.38 | 25.38 | 24.23 | 24.23 | 24.23 | 24.23 | 21.68 | 20.69 | 20.69 | 20.69 | 20.69 |
ANEEL Limit | 28.38 | 27.50 | 26.64 | 25.82 | 25.01 | 24.23 | 23.48 | 22.75 | 22.04 | 21.36 | 20.69 |
Δ% | 0% | (8%) | (9%) | (6%) | (3%) | 0% | (8%) | (9%) | (6%) | (3%) | 0% |
Source: ANEEL, Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 137 |
| ||||
Table 81 – DEC Benchmark Curve | ||||
Benchmark | 2004 2005 2006 2007 2008 2009 2010 2011 2012 | 2013 | 2014 | 2015 |
Cemar | 42.4 28.6 27.2 23.5 21.5 21.4 21.6 | 18.9 | 17.0 | 15.3 |
Source: ANEEL, Ceres Inteligência Financeira |
Specific Analyses of Distributor
FEC
FEC indication achieves the target established by ANEEL since the initial date of concession period and remains better or equal to the limit established by the agency until the end of the concession.
Table 82 - FEC Indicator - Realized/Forecasted x ANEEL Limits 1 of 3 | |||||||||||
Data | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
Realized | 29.06 | 29.95 | 28.26 | 28.26 | 28.26 | 28.26 | 28.26 | 28.26 | 28.26 | 28.26 | 28.26 |
ANEEL Limit | 45.18 | 43.28 | 43.63 | 45.69 | 45.69 | 45.69 | 45.69 | 45.69 | 41.45 | 39.56 | 37.75 |
Δ% | (36%) | (31%) | (35%) | (38%) | (38%) | (38%) | (38%) | (38%) | (32%) | (29%) | (25%) |
Source: ANEEL, Ceres Inteligência Financeira |
Table 83 - FEC Indicator - Realized/Forecasted x ANEEL Limits 2 of 3 | |||||||||||
Data | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2035 | 2036 |
Realized | 28.26 | 28.26 | 27.19 | 27.19 | 27.19 | 27.19 | 27.19 | 24.43 | 21.95 | 21.52 | 21.52 |
ANEEL Limit | 36.02 | 34.37 | 32.80 | 31.30 | 29.86 | 28.50 | 27.19 | 25.95 | 24.76 | 23.63 | 22.55 |
Δ% | (22%) | (18%) | (17%) | (13%) | (9%) | (5%) | 0% | (6%) | (11%) | (9%) | (5%) |
Source: ANEEL, Ceres Inteligência Financeira |
Table 84 - FEC Indicator - Realized/Forecasted x ANEEL Limits 3 of 3 | |||||||||||
Data | 2037 | 2038 | 2039 | 2040 | 2041 | 2042 | 2043 | 2044 | 2045 | 2046 | 2047 |
Realized | 21.52 | 19.33 | 17.37 | 17.02 | 17.02 | 17.02 | 15.29 | 13.74 | 13.47 | 13.47 | 13.47 |
ANEEL Limit | 21.52 | 20.53 | 19.59 | 18.69 | 17.84 | 17.02 | 16.24 | 15.50 | 14.79 | 14.11 | 13.47 |
Δ% | 0% | (6%) | (11%) | (9%) | (5%) | 0% | (6%) | (11%) | (9%) | (5%) | 0% |
Source: ANEEL, Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 139 |
Table 80 - FEC Benchmark Curve | ||||
Benchmark | 2004 2005 2006 2007 2008 2009 2010 2011 2012 | 2013 | 2014 | 2015 |
Cemar | 32.9 24.6 19.8 16.8 15.1 14.0 11.6 10.9 | 10.9 | 11.0 | 9.0 |
Source: ANEEL, Ceres Inteligência Financeira |
FER
Common Analyses to Distributors
The FER indicator (Equivalent Frequency of Complaint) consists of the equivalent frequency of complaints per each thousand of consumption units.
Its analysis may be divided into three main parts: Starting Point, Indicator Variation Rate, and Target.
The starting point consists of the FER estimates for 2017 and is the result of data of the indicator of each distributor obtained between 2010 and 201698. The geometric mean of annual variation of the distributor to each distributor between 2010 e 2016 is calculated and the variation is applied over the FER realized in 2016. (Realized FER Evaluated Distributor 2016)*(1+Geometric Mean FER 2010-2016 Evaluated Distributor)
The rate of variation of the indicator as of 2018 results from the rate of variation realized by the benchmark private groups99. The indicators from 2010 to 2016 of each benchmark are used to calculate the simple average of the indicator of each established group100. The joint geometric mean per group is applied between years 2012 and 2016101, having (2017 Indicator)*(1+Rate of Variation of 2013-2016 Benchmark Group) and so successively until the indicator achieves the FER targets defined by ANEEL of the evaluated distributions to the years starting in 2017.
The FER target used is the limit to year 2017 and after that, defined102 by ANEEL to each distributor. When achieving the targets in the period, distributors stabilize their efforts to improve the indicator. In the long term, companies tend to have indicators equal to the targets estimated to ANEEL. This makes companies tend to achieve the other 75% of the distributors that achieve the FER targets.
98 FER base of ANEEL Distribution Indicators
99 Companies with geographic proximity to the evaluated distributors
100 Benchmark distributors of the Northern region: Celpa and Celtins (Energisa TO) and benchmark distributors of Northeastern region: Celpe, Cemar, Energisa Paraíba and Energisa Sergipe
101 2012 is the year in which the FER indicators of the groups of private companies are more similar to the average of the indicators of the evaluated distributors. From such common point, we evaluate how the indicator of non-state owned is developed and apply its variation rate to the FER of the evaluated companies
102 Normative Resolution no. 574, dated August 20, 2013
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Specific Analyses of Distributor
Amazonas Energia achieves the FER limits established by ANEEL as of 2021 and keeps achieving the target until the end of concession, which makes the distributor to be part of the 75% that achieved the target.
Figure 10 - FER Indicator - Realized/Forecasted x Target 1 of 3 | |||||||||||
Data | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
Realized | 69.29 | 42.37 | 39.94 | 35.87 | 32.22 | 28.94 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 |
ANEEL Limit | 30.00 | 28.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 |
Δ% | 131% | 51% | 54% | 38% | 24% | 11% | 0% | 0% | 0% | 0% | 0% |
Source: ANEEL, Ceres Inteligência Financeira | |||||||||||
Figure 11 - FER Indicator - Realized/Forecasted x Target 2 of 3 | |||||||||||
Data | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2035 | 2036 |
Realized | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 |
ANEEL Limit | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 |
Δ% | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 0% |
Source: ANEEL, Ceres Inteligência Financeira | |||||||||||
Figure 12 - FER Indicator - Realized/Forecasted x Target 3 of 3 | |||||||||||
Data | 2037 | 2038 | 2039 | 2040 | 2041 | 2042 | 2043 | 2044 | 2045 | 2046 | 2047 |
Realized | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 |
ANEEL Limit | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 | 26.00 |
Δ% | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 0% |
Source: ANEEL, Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 142 |
| |||
Table 84 - FER Realized Benchmark Group | |||
Rate of Varia- | |||
Benchmark | 2012 2013 2014 2015 | 2016 | |
tion 2016-2012 | |||
| |||
Private 1 | -10.19% | 19.7 23.1 14.5 12.6 | 12.8 |
Source: ANEEL, Ceres Inteligência Financeira |
IASC
Common Analyses to Distributors
The IASC (ANEEL Rating of Consumer Satisfaction) indicator consists of the result of the research of evaluation of the degree of satisfaction of the residential consumer with the provided services.
Its analysis may be divided into three main parts: Starting Point, Indicator Variation Rate, and Target.
The starting point consists of the IASC estimates for 2017 and also provide data of the indicator of each distributor obtained between 2010 and 2016103. The geometric mean of annual variation of the indicator to each distributor between 2010 and 2016 and applies to the variation over the IASC during 2016. (IASC realized Evaluated Distributor 2016)*(1+Geometric Mean IASC 2010-2016 Evaluated Distributor)
The rate of variation of the indicator as of 2018 will be originated by the realized variation rate of the benchmark private groups104. The 2010 to 2016 indicators of each benchmark allows for the calculation of the simple average of the indicator of each group established105. The joint geometric mean is applied per group106 between years 2015 and 2016, with (2017 Indicator)*(1+Variation Rate of the 2015-2016 Benchmark Group) and so successively until the indicator achieves the IASC targets defined by ANEEL for the distributors evaluated for the years as of 2017.
The IASC target used is the minimum value of 70107 from 2017 and sustained until the end of the concession. When achieving the targets of the period, the distributors stabilize their efforts of improvement of the indicator. In the long term, companies tend to have indicators equal to the targets estimated to ANEEL. This makes companies tend to achieve the other 75% of the distributors that achieve the IASC targets.
103 IASC base of ANEEL Distribution Indicators
104 Companies with geographical proximity to the evaluated distributors
105 Benchmark distributors of the Northern region: Celpa and Celtins (Energisa TO) and benchmark distributors of Northeastern region: Celpe, Cemar, Energisa Paraíba and Energisa Sergipe
106 The variation between 2015 and 2016 is the only one with expressive variation of the IASC indicator between 2010 and 2016. Since as of April 2017 it will count on the composition of the X Factor, we understand that the most recent improvement represents the effort of private companies to meet ANEEL targets
107 PRORET ANEEL Submodule 2.5A
Ceres Inteligência Financeira | 144 |
Specific Analyses of Distributor | |||||||||||
Amazonas Energia achieves ANEEL limits of IASC since2021, and keeps achieving the target until the | |||||||||||
end of concession, which makes the distributor to be part of the 75% that achieved the target. | |||||||||||
Figure 13 - IASC Indicator – Realized/Forecasted x Target 1 of 3 | |||||||||||
Data | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
Realized | 45.93 | 52.28 | 52.40 | 57.67 | 63.46 | 69.83 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 |
ANEEL Limit | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 |
Δ% | -34% | -25% | -25% | -18% | -9% | 0% | 0% | 0% | 0% | 0% | 0% |
Source: ANEEL, Ceres Inteligência Financeira | |||||||||||
Figure 14 - IASC Indicator – Realized/Forecasted x Target 2 of 3 | |||||||||||
Data | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2035 | 2036 |
Realized | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 |
ANEEL Limit | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 |
Δ% | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 0% |
Source: ANEEL, Ceres Inteligência Financeira | |||||||||||
Figure 15- IASC Indicator – Realized/Forecasted x Target 3 of 3 | |||||||||||
Data | 2037 | 2038 | 2039 | 2040 | 2041 | 2042 | 2043 | 2044 | 2045 | 2046 | 2047 |
Realized | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 |
ANEEL Limit | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 | 70.00 |
Δ% | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 0% |
Source: ANEEL, Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 145 |
Source: ANEEL, Ceres Inteligência Financeira
INS
Analyses Common to the Distributors
The INS (Service Level Indicator of Telephone Service) consists of the list of calls answered by the calls received less abandoned.
We have reviewed the INS base of the distributors was reviewed and we noticed that the indicators improved from 2010 and 2016, reaching in 2016 the minimum levels required by ANEEL of 85%108. Therefore, we deemed that in 2017 the distributors evaluated have kept the levels of indicator in 2016.
The INS targets of ANEEL have been perpetuated from 2017 to 2047. The companies have kept the levels established by ANEEL and become part of the group of remaining distributors – 75% - that reached the target in the period.
Specific Analyses of the Distributor
Amazonas Energia achieves ANEEL limits of INS since the initial date of concession, and keeps achieving the target until the end of concession, which makes the distributor to be part of the 75% that achieved the target.
Figure 10 - INS Indicator – Realized/Forecast x Target 1 of 3 | |||||||||||
Data | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
Realized | 93.55 | 92.10 | 92.10 | 92.10 | 92.10 | 92.10 | 92.10 | 92.10 | 92.10 | 92.10 | 92.10 |
ANEEL Limit | 85.00 | 85.00 | 85.00 | 85.00 | 85.00 | 85.00 | 85.00 | 85.00 | 85.00 | 85.00 | 85.00 |
Δ% | 10% | 8% | 8% | 8% | 8% | 8% | 8% | 8% | 8% | 8% | 8% |
Source: ANEEL, Ceres Inteligência Financeira |
108 PRORET ANEEL Submodule 2.5A
Ceres Inteligência Financeira | 147 |
Table 96 – Realized and Potential Variation Rate of INS per Period | ||||||||
Data | 16/15 | 17/16 | 18-22 | 23-27 | 28-32 | 33-37 | 38-42 | 43-47 |
Realized | -1.55% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
Potential | -1.55% | -1.50% | -1.50% | -1.50% | -1.50% | -1.50% | -1.50% | -1.50% |
Source: ANEEL, Ceres Inteligência Financeira |
INS benchmarks of Celpa and Celtins (Energisa TO) were selected as reference to Amazonas Ener-gia; they damaged the indicator to an annual average rate of 1.5% of the indicator between 2012 and 2016. As Amazonas Energia achieves ANEEL limits since the beginning of the concession period, that variation rate of the benchmarks does not apply.
Table 97 - INS Realized Benchmark | |||||||
Benchmark | Variation Rate | ||||||
Benchmark | 2012 | 2013 | 2014 | 2015 | 2016 | ||
Distributor | 2016-2013 | ||||||
CELPA | Private 1 | -2.18% | 89.6 | 92.3 | 82.0 | 82.6 | 86.4 |
CELTINS | Private 1 | -0.84% | 91.5 | 96.3 | 91.9 | 84.9 | 93.9 |
Source: ANEEL, Ceres Inteligência Financeira |
Table 98 – Group of Benchmark of INS Realized | |||
Variation Rate | |||
Benchmark | 2012 2013 2014 2015 | 2016 | |
2016-2013 | |||
| |||
Private 1 | -1.50% | 90.5 94.3 87.0 83.7 | 90.2 |
Source: ANEEL, Ceres Inteligência Financeira |
IAb
Analyses Common to the Distributors
The IAb (Indicator of Telephone Service Abandonment) consists of the list of calls abandoned by the calls received less abandoned.
Ceres Inteligência Financeira | 149 |
We have reviewed the IAb base of the distributors evaluated and we noticed that the indicators improved from 2010 and 2016, reaching in 2016 the minimum levels required by ANEEL of 4%109. Therefore, we deemed that in 2017 the distributors evaluated have kept the levels of indicator in 2016.
The IAb targets of ANEEL have been perpetuated from 2017 to 2047. The companies have kept the levels established by ANEEL and become part of the group of remaining distributors – 75% - that reached the target in the period.
Specific Analyses of the Distributor
Amazonas Energia achieves ANEEL limits of IAb since the initial date of concession, and keeps achieving the target until the end of concession, which makes the distributor to be part of the 75% that achieved the target.
Table 99 - IAb Indicator – Realized/Forecast x Target 1 of 3 | |||||||||||
Data | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
Realized | 1.98 | 2.24 | 2.24 | 2.24 | 2.24 | 2.24 | 2.24 | 2.24 | 2.24 | 2.24 | 2.24 |
ANEEL Limit | 4.00 | 4.00 | 4.00 | 4.00 | 4.00 | 4.00 | 4.00 | 4.00 | 4.00 | 4.00 | 4.00 |
Δ% | -51% | -44% | -44% | -44% | -44% | -44% | -44% | -44% | -44% | -44% | -44% |
Source: ANEEL, Ceres Inteligência Financeira | |||||||||||
Table 90 - IAb Indicator – Realized/Forecast x Target 2 of 3 | |||||||||||
Data | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2035 | 2036 |
Realized | 2.24 | 2.24 | 2.24 | 2.24 | 2.24 | 2.24 | 2.24 | 2.24 | 2.24 | 2.24 | 2.24 |
ANEEL Limit | 4.00 | 4.00 | 4.00 | 4.00 | 4.00 | 4.00 | 4.00 | 4.00 | 4.00 | 4.00 | 4.00 |
Δ% | -44% | -44% | -44% | -44% | -44% | -44% | -44% | -44% | -44% | -44% | -44% |
Source: ANEEL, Ceres Inteligência Financeira |
109 PRORET ANEEL Submodule 2.5A
Ceres Inteligência Financeira | 150 |
Table 93 – Benchmark of IAb Realized | |||||||
Benchmark | Variation Rate | ||||||
Benchmark | 2012 | 2013 | 2014 | 2015 | 2016 | ||
Distributor | 2016-2015 | ||||||
CELPA | Private 1 | -18.15% | 0.9 | 1.7 | 3.0 | 3.3 | 2.7 |
CELTINS | Private 1 | -29.56% | 1.3 | 0.6 | 1.7 | 2.0 | 1.4 |
Source: ANEEL, Ceres Inteligência Financeira |
Table 94 – Group of Benchmark of IAb Realized | ||||||
Benchmark | Variation Rate | 2012 | 2013 | 2014 | 2015 | 2016 |
2016-2015 | ||||||
| ||||||
Private 1 | 21.51% | 1.1 | 1.1 | 2.4 | 2.6 | 2.0 |
Source: ANEEL, Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 152 |
ICO
Analyses Common to the Distributors
The ICO (Busy Call Indicator of Telephone Service) refers to the list of busy calls over offered.
Its analysis can be divided into three main parts: Starting Point, Indicator Variation Rate and Target.
The starting point consists of the ICO estimates for 2017, which derives from indicator data of each distributor obtained from 2010 to 2016110. The average is calculated by excluding the missing data111 from 2010 to 2016.
The indicator variation rate from 2018 to 2022 is calculated based on the variation of indicators obtained by the groups of benchmark of the outsourced distributors112. By using the indicators from 2010 to 2016 of each benchmark, the simple indicator average is calculated for each group established. The joint geometric average is applied per group from 2012 to 2016113, in which we have (Indicator 2017)*(1+Variation Rate of the Group of Benchmarks 2012-2016) and so on until the indicator reaches the targets defined by ANEEL of the distributors evaluated for the years starting in 2017 of ICO.
Between 2023 and 2027 the distributor speed is adjusted114 to reach the target established by ANEEL115 for 2027. This is possible thanks to the maturity that the new concessionaire acquires during the period in the company management, which allows them an improvement rate faster than that verified in the recent period by the benchmark of the outsourced distributors. Subsequently, the speeds are adjusted to the speed verified by the outsourced distributors.
The ICO target used is the maximum amount of 2%116 from 2015, which is kept to the concession end. While reaching the targets of the period, the distributors stabilized their improvement efforts of the indicator. In the long run, the companies tend to show indicators equal to the targets estimated for ANEEL. This leads the companies to reach the remaining 75% of distributors that reach the ICO targets.
110 ICO base of Distribution Indicators of ANEEL
111 The year of 2016 and other points along the historical series present missing data, reason which the average reference checked in the period was used
112 Companies geographically located near the distributors evaluated
113 The interval with longer historic period was used, without missing data among the benchmark outsourced
114 Speed near that checked by the outsourced companies will be present in the specific analysis for each distributor
115 Estimated by Ceres as it will be addressed below
116 PRORET ANEEL Submodule 2.5A
Ceres Inteligência Financeira | 153 |
Specific Analyses of the Distributor
Amazonas Energia achieves the ICO limit established by ANEEL since the initial date of concession and keeps it during the concession period, which makes the distributor to be among the 75% of those reaching the target.
Table 95 - ICO Indicator – Realized/Forecast x Target 1 of 3 | |||||||||||
Data | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
Realized | 0.00 | 0.00 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 |
ANEEL Limit | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 |
Δ% | -100% | -100% | -98% | -98% | -98% | -98% | -98% | -98% | -98% | -98% | -98% |
Source: ANEEL, Ceres Inteligência Financeira | |||||||||||
Table 96 - ICO Indicator – Realized/Forecast x Target 2 of 3 | |||||||||||
Data | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2035 | 2036 |
Realized | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 |
ANEEL Limit | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 |
Δ% | -98% | -98% | -98% | -98% | -98% | -98% | -98% | -98% | -98% | -98% | -98% |
Source: ANEEL, Ceres Inteligência Financeira | |||||||||||
Table 97 - ICO Indicator – Realized/Forecast x Target 3 of 3 | |||||||||||
Data | 2037 | 2038 | 2039 | 2040 | 2041 | 2042 | 2043 | 2044 | 2045 | 2046 | 2047 |
Realized | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 |
ANEEL Limit | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 |
Δ% | -98% | -98% | -98% | -98% | -98% | -98% | -98% | -98% | -98% | -98% | -98% |
Source: ANEEL, Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 154 |
Table 100 – Group of Benchmark of ICO Realized | ||||||
Variation Rate | ||||||
Benchmark | 2016-2012 | 2012 | 2013 | 2014 | 2015 | 2016 |
| ||||||
Private 1 | -17.70% | 1.5 | 0.4 | 1.7 | 1.7 | 0.7 |
Source: ANEEL, Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 156 |
The PTF values, Annual average variation of the distributor market and Annual average variation of the number of consuming units were maintained during concession, starting May/15, date on which they became valid.
The values ΔMWh(i) and ΔUC(i) were calculated according to the forecast of demand and specific consuming units per consumption class of each distributor evaluated and are discussed in the chapter of Demand Forecast of this document.
Finally, we outline that according to the official letter no. 113/2017-DR/ANEEL118 in its “Clause
Nineteen – Transitory Provisions”, Subclause Three, the value of Pd component will be defined as zero119 between the agreement execution ate and the first subsequent ordinary tariff revision.
Q Factor
The Q Component of the X Factor composed by portions technical and commercial quality according to the following equation: Q = 0.70.QTechnical + 0.30.QCommercial.
The technical component is composed by the indicators DEC (Equivalent Duration of Interruption per Consuming Unit) and FEC (Equivalent Frequency of Interruption per Consuming Unit).
The commercial component is composed by the indicators of FER (Equivalent Frequency of Complaint), IASC (ANEEL Index of Consumer’s Satisfaction), INS (Telephone Service Level Indicator), IAb (Telephone Service Abandonment Indicator) and ICO (Busy Call Indicator of Telephone Service).
These commercial and technical indicators are discussed in further details in the chapter “Quality Indicators” and take into account, among others, the provisions of the Technical Note 149/2017-SEM/SGT/SRD/SFF/ANEEL, of September 8, 2017, case 48500.002667/2017-99.
Considerations about the T Factor
The description and dates used for this component are discussed in the chapter that addresses Operating Costs and PMSO (Personnel, Materials, Services of Outsources and Others). We outline that during evaluation, between the agreement execution and the first ordinary subsequent tariff revision, its value was deemed zero120, as provided in the Technical Note no. 88/2017-SEM/SGT/SRD/ANEEL121.
118 On May 3, 2017, case 48510.000502/2017-00
119 Also provided in the Technical Note 149/2017-SEM/SGT/SRD/SFF/ANEEL on Sep 8, 2017, case 48500.002667/2017-99
120 Also provided in the Technical Note 149/2017-SEM/SGT/SRD/SFF/ANEEL on Sep 8, 2017, case 48500.002667/2017-99
121 On May 24, 2017, case 48500.002667/2017-99
Ceres Inteligência Financeira | 158 |
Calculation of the Regulatory WACC and Discount Rate
Calculation of the WACC Rate
ANEEL calculates the Weighted Average Cost of Capital (WACC) used in the calculation of the Capital Remuneration (RC) of the distributor, which composes the Portion B. The table below shows the real WACC before taxes and the real WACC after taxes calculated for the years of tariff revision.
Ceres Inteligência Financeira | 160 |
Table 104 – Financial Structure of the Companies | ||||||||
Equatorial | Average | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 |
Financial Expenses | 502,149 | 176,455 | 166,693 | 216,644 | 517,214 | 662,137 | 906,589 | 869,308 |
Short Term Debt | 760,769 | 257,092 | 342,185 | 818,280 | 175,208 | 970,716 | 852,690 | 986,951 |
Long Term Debt | 3,128,378 | 1,084,609 | 1,127,211 | 2,257,395 | 3,050,429 | 3,404,177 | 3,082,448 | 3,847,440 |
Average Balance | 3,194,798 | 1,405,549 | 2,272,536 | 3,150,656 | 3,800,265 | 4,155,016 | 4,384,765 | |
Cost of Debt | 17.42% | 11.86% | 9.53% | 16.42% | 17.42% | 21.82% | 19.83% | |
Average DI | 9.75% | 11.60% | 8.40% | 8.06% | 10.81% | 13.24% | 14.00% | |
Cost of Debt/DI | 147.82% | 102% | 114% | 204% | 161% | 165% | 142% | |
Coelce | Average | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 |
Financial Expenses | 166,184 | 159,541 | 134,465 | 163,869 | 133,031 | 167,313 | 207,716 | 197,354 |
Short Term Debt | 249,390 | 261,468 | 236,280 | 187,617 | 147,976 | 131,530 | 395,797 | 384,031 |
Long Term Debt | 854,297 | 581,441 | 859,146 | 766,154 | 774,042 | 1,134,099 | 901,531 | 695,660 |
Average Balance | 1,082,579 | 969,168 | 1,024,599 | 937,895 | 1,093,824 | 1,281,479 | 1,188,510 | |
Cost of Debt | 15.45% | 13.87% | 15.99% | 14.18% | 15.30% | 16.21% | 16.61% | |
Average DI | 9.75% | 11.60% | 8.40% | 8.06% | 10.81% | 13.24% | 14.00% | |
Cost of Debt/Di | 144.75% | 120% | 190% | 176% | 141% | 122% | 119% | |
Ampla RJ | Average | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 |
Financial Expenses | 296,019 | 213,405 | 195,242 | 195,848 | 189,529 | 208,424 | 375,456 | 694,226 |
Short Term Debt | 341,985 | 450,098 | 567,248 | 248,710 | 106,444 | 209,042 | 355,388 | 790,340 |
Long Term Debt | 1,778,949 | 797,854 | 844,324 | 1,107,447 | 1,419,582 | 1,599,493 | 2,329,232 | 2,438,990 |
Average Balance | 1,837,592 | 1,329,762 | 1,383,865 | 1,441,092 | 1,667,281 | 2,246,578 | 2,956,975 | |
Cost of Debt | 16.86% | 14.68% | 14.15% | 13.15% | 12.50% | 16.71% | 23.48% | |
Average DI | 9.75% | 11.60% | 8.40% | 8.06% | 10.81% | 13.24% | 14.00% | |
Cost of Debt/Di | 144.63% | 127% | 169% | 163% | 116% | 126% | 168% | |
Eletrobras | Average | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 |
Financial Expenses | 7,209,741 | 2,789,800 | 2,848,884 | 3,130,611 | 3,256,398 | 7,918,149 | 17,896,207 | 12,628,136 |
Short Term Debt | 4,486,314 | 2,105,674 | 5,014,281 | 4,764,074 | 1,982,569 | 5,257,263 | 4,581,674 | 5,845,989 |
Long Term Debt | 38,744,462 | 32,283,838 | 38,885,727 | 45,613,253 | 30,712,400 | 35,041,785 | 42,379,060 | 39,975,814 |
Average Balance | 42,389,624 | 39,144,760 | 47,138,668 | 41,536,148 | 36,497,009 | 43,629,891 | 46,391,269 | |
Cost of Debt | 18.75% | 7.28% | 6.64% | 7.84% | 21.70% | 41.02% | 27.22% | |
Average DI | 9.75% | 11.60% | 8.40% | 8.06% | 10.81% | 13.24% | 14.00% | |
Cost of Debt/Di | 157.33% | 63% | 79% | 97% | 201% | 310% | 194% | |
Source: Ceres Inteligência Financeira. |
Table 105 - Enterprise Value and Company Debt | ||||||
Company | Cost of Debt | Gross debt | Ev | Debt To equity Pl | Debt/DI | Debt To Equity MC |
Eletropaulo | 15.27% | 3,099,172.60 | 4,305,981.92 | 92.39% | 137.81% | 99.91% |
CELESC | 17.13% | 762,892.40 | 1,078,106.91 | 6.91% | 158.42% | 14.51% |
Equatorial | 17.42% | 3,889,146.80 | 8,555,543.67 | 67.63% | 147.82% | 37.58% |
Coelce | 15.45% | 1,103,687.40 | 4,276,685.55 | 53.13% | 144.75% | 28.20% |
Ampla RJ | 16.86% | 2,120,933.60 | 6,222,435.72 | 76.74% | 144.63% | 43.05% |
Eletrobras | 18.75% | 43,230,776.20 | 55,199,995.15 | 85.51% | 157.33% | 309.90% |
Source: Ceres Inteligência Financeira. |
Ceres Inteligência Financeira | 162 |
Irrecoverable Revenues
Analyses Common to the Distributors
The irrecoverable revenues evaluated are the value invoiced that had not been received up to certain set date. Irrecoverable revenue is that deemed the indicator average: (value invoiced not received in the period t)/ (total value invoiced in the period t), from the 49th to the 60th month prior to the base date.
The analysis can be divided into three main parts: an estimate for 2017, a variation rate of the indicators along the concession period and the target established.
To assess the indicator level in 2017, the medium value of the indicator was calculated for the base date of Dec/16. For each consumption class, the total value invoiced in the 60 prior months122 was assessed as well as the total value not received of such respective months in relation to the base date of Dec/16123.
The medium value was calculated between the value invoiced not received over the total value invoiced between the months of Dec/11 and Nov/12 inclusive, reaching the value of irrecoverable revenues on the base date of Dec/16.
The percentage of annual variation proposed by ANEEL in the indicator between 3CRTP and 2CRTP was applied to the value of Dec/16, reaching the value estimated for Dec/17. Thus, it was concluded that the company reached the variation forecast by the regulating body.
In relation to the variation rate after 2017, between 2017 and 2020, it was concluded that the variation rate proposed by ANEEL between 3CRTP and 2CRTP carries on being reached, completing a period of four years in this variation rate, according to initial forecast of ANEEL.
From 2021, the variation rate considered is that proposed in the variation from 4CRTP to 3CRTP. Such order of variations is chosen based on the difference of the rates initially proposed by the regulating body. The variation from 3CRTP to 2CRTP in average is softer than that proposed from 4CRTP to 3CRTP. It is agreed that the default levels need time to be deeply changed and, therefore, a less accelerated rate was used in the 3 first years of concession and a more accelerated rate was applied in the subsequent years.
122 Data obtained from the distributors also made available for ANEEL. Period prior to the base date considered from Dec/11 to Nov/16
123 Considering Dec/16, when what was invoiced, e.g.; in Jan/15, has not yet been received by the distributor
Ceres Inteligência Financeira | 164 |
The rate of irrecoverable revenues is stabilized when it reaches the target established by ANEEL in 4CRTP. If the company indicator has been lower than the target of the regulating body since the beginning, such default level lower than the target has perpetuated.
The reference target is the rate of irrecoverable revenues established by ANEEL for 4CRTP124
Specific Analyses of the Distributors
Table 110 – Curve of Irrecoverable Revenues per Consumption Class of the Distributor 2016-2027 (%) | |||||||||||||
Consumption Class | 2016 | 2017 2018 | 2019 | 2020 | 2021 2022 | 2023 2024 | 2025 | 2026 | 2027 | Target | |||
Household | 5.46 | 5.22 | 5.00 | 4.78 | 4.57 | 3.92 | 3.36 | 2.88 | 2.47 | 2.36 | 2.36 | 2.36 | 2.36 |
Industrial | 2.23 | 2.18 | 2.14 | 2.10 | 2.06 | 1.76 | 1.69 | 1.69 | 1.69 | 1.69 | 1.69 | 1.69 | 1.69 |
Commercial | 2.26 | 2.25 | 2.25 | 2.24 | 2.24 | 1.92 | 1.64 | 1.41 | 1.21 | 1.03 | 0.89 | 0.78 | 0.78 |
Rural | 4.90 | 4.90 | 4.90 | 4.90 | 4.90 | 4.90 | 4.90 | 4.90 | 4.90 | 4.90 | 4.90 | 4.90 | 5.04 |
Public Power | 1.25 | 1.15 | 1.06 | 0.98 | 0.90 | 0.78 | 0.67 | 0.57 | 0.49 | 0.43 | 0.37 | 0.31 | 0.19 |
Public Lighting | 0.98 | 0.90 | 0.82 | 0.75 | 0.69 | 0.57 | 0.47 | 0.38 | 0.32 | 0.31 | 0.31 | 0.31 | 0.31 |
Public Service | 5.90 | 5.64 | 5.40 | 5.17 | 4.94 | 4.18 | 3.53 | 2.99 | 2.52 | 2.13 | 1.80 | 1.52 | 0.25 |
Others | 2.24 | 2.09 | 1.94 | 1.80 | 1.68 | 1.41 | 1.19 | 1.01 | 0.85 | 0.72 | 0.61 | 0.51 | 0.24 |
Source: ANEEL, Ceres Inteligência Financeira | |||||||||||||
Table 111 - Curve of Irrecoverable Revenues per Consumption Class of the Distributor 2028-2037 (%) | |||||||||||||
Consumption Class 2028 | 2029 | 2030 | 2031 | 2032 2033 | 2034 | 2035 | 2036 | 2037 | Target | ||||
Household | 2.36 | 2.36 | 2.36 | 2.36 | 2.36 | 2.36 | 2.36 | 2.36 | 2.36 | 2.36 | 2.36 | ||
Industrial | 1.69 | 1.69 | 1.69 | 1.69 | 1.69 | 1.69 | 1.69 | 1.69 | 1.69 | 1.69 | 1.69 | ||
Commercial | 0.78 | 0.78 | 0.78 | 0.78 | 0.78 | 0.78 | 0.78 | 0.78 | 0.78 | 0.78 | 0.78 | ||
Rural | 4.90 | 4.90 | 4.90 | 4.90 | 4.90 | 4.90 | 4.90 | 4.90 | 4.90 | 4.90 | 5.04 | ||
Public Power | 0.27 | 0.23 | 0.20 | 0.19 | 0.19 | 0.19 | 0.19 | 0.19 | 0.19 | 0.19 | 0.19 | ||
Public Lighting | 0.31 | 0.31 | 0.31 | 0.31 | 0.31 | 0.31 | 0.31 | 0.31 | 0.31 | 0.31 | 0.31 | ||
Public Service | 1.29 | 1.09 | 0.92 | 0.78 | 0.66 | 0.56 | 0.47 | 0.40 | 0.34 | 0.28 | 0.25 | ||
Others | 0.43 | 0.36 | 0.31 | 0.26 | 0.24 | 0.24 | 0.24 | 0.24 | 0.24 | 0.24 | 0.24 | ||
Source: ANEEL, Ceres Inteligência Financeira |
124 ANEEL PRORET Submodule 2.2 v1.0, v1.1 e v2.0
Ceres Inteligência Financeira | 165 |
Table 112 - Curve of Irrecoverable Revenues per Consumption Class of the Distributor 2038-2047 (%) | |||||||||||
Consumption Class | 2038 | 2039 | 2040 | 2041 | 2042 | 2043 | 2044 | 2045 | 2046 | 2047 | Target |
Household | 2.36 | 2.36 | 2.36 | 2.36 | 2.36 | 2.36 | 2.36 | 2.36 | 2.36 | 2.36 | 2.36 |
Industrial | 1.69 | 1.69 | 1.69 | 1.69 | 1.69 | 1.69 | 1.69 | 1.69 | 1.69 | 1.69 | 1.69 |
Commercial | 0.78 | 0.78 | 0.78 | 0.78 | 0.78 | 0.78 | 0.78 | 0.78 | 0.78 | 0.78 | 0.78 |
Rural | 4.90 | 4.90 | 4.90 | 4.90 | 4.90 | 4.90 | 4.90 | 4.90 | 4.90 | 4.90 | 5.04 |
Public Power | 0.19 | 0.19 | 0.19 | 0.19 | 0.19 | 0.19 | 0.19 | 0.19 | 0.19 | 0.19 | 0.19 |
Public Lighting | 0.31 | 0.31 | 0.31 | 0.31 | 0.31 | 0.31 | 0.31 | 0.31 | 0.31 | 0.31 | 0.31 |
Public Service | 0.25 | 0.25 | 0.25 | 0.25 | 0.25 | 0.25 | 0.25 | 0.25 | 0.25 | 0.25 | 0.25 |
Others | 0.24 | 0.24 | 0.24 | 0.24 | 0.24 | 0.24 | 0.24 | 0.24 | 0.24 | 0.24 | 0.24 |
Source: ANEEL, Ceres Inteligência Financeira |
Table 113 - Curve of Irrecoverable Revenues per Consumption Class of the Distributor 2048-2052 (%) | ||||||
Consumption Class | 2048 | 2049 | 2050 | 2051 | 2052 | Target |
Household | 2.36 | 2.36 | 2.36 | 2.36 | 2.36 | 2.36 |
Industrial | 1.69 | 1.69 | 1.69 | 1.69 | 1.69 | 1.69 |
Commercial | 0.78 | 0.78 | 0.78 | 0.78 | 0.78 | 0.78 |
Rural | 4.90 | 4.90 | 4.90 | 4.90 | 4.90 | 5.04 |
Public Power | 0.19 | 0.19 | 0.19 | 0.19 | 0.19 | 0.19 |
Public Lighting | 0.31 | 0.31 | 0.31 | 0.31 | 0.31 | 0.31 |
Public Service | 0.25 | 0.25 | 0.25 | 0.25 | 0.25 | 0.25 |
Others | 0.24 | 0.24 | 0.24 | 0.24 | 0.24 | 0.24 |
Source: ANEEL, Ceres Inteligência Financeira |
Table 114 – Distribution of Total Invoicing and Not Received (in R$ '000) | |||
uovth 49-60 | uovth 49-60 | ||
Consumption Class | % Not Received | ||
Invoiced Not Received | Total Invoiced | ||
Residential | 40,333 | 716,338 | 5.63% |
Industrial | 14,408 | 624,047 | 2.31% |
Commercial | 13,238 | 542,297 | 2.44% |
Rural | 896 | 16,881 | 5.31% |
Public Power | 2,867 | 232,267 | 1.23% |
Public Lighting | 343 | 29,445 | 1.17% |
Public Service | 5,331 | 86,751 | 6.15% |
Total | 77,417 | 2,248,026 | 3.44% |
Source: ANEEL, Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 166 |
| |||||
Table 115 - Targets ANEEL per Regulatory Cycle | |||||
Δ% | Δ% | ||||
Consumption Class | 2CRTP | 3CRTP | 4CRTP | ||
3CRTP/2CRTP | 4CRTP/3CRTP | ||||
Residential | 0.66% | 0.89% | 1.88% | 34.85% | 111.24% |
Industrial | 0.86% | 0.79% | 1.50% | -8.14% | 89.87% |
Commercial | 0.88% | 0.87% | 0.98% | -1.14% | 12.64% |
Rural | 1.49% | 1.40% | 1.98% | -6.04% | 41.43% |
Public Power | 1.38% | 0.89% | 0.28% | -35.51% | -68.54% |
Public Lighting | 1.07% | 0.67% | 0.05% | -37.38% | -92.54% |
Public Service | 0.34% | 0.36% | 0.08% | 5.88% | -77.78% |
Others | 0.93% | 0.64% | 0.14% | -31.18% | -78.65% |
Source: ANEEL, Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 167 |
Loss Forecast
The electrical distribution system losses are divided into two categories: Basic Network losses and Distribution Network losses. It its turn, the Distribution Network losses are divided into Technical Losses and Non-Technical Losses.
The Basic Network loss consists of the energy loss in the physical processes occurring between generation to the distribution system. Such loss costs are divided equally between the generator and distributor, with each company assuming 50% of the Basic Network loss. The Technical Loss consists of the energy loss inherent to the electric power transport, voltage transformation and energy measurement. They can be deemed as the consumption of equipment employed in the energy distribution. The Non-Technical Losses correspond to the difference between total losses and technical losses. The remaining losses are associated to the distribution system (e.g. energy robbery, measurement error, invoicing error, etc.). These are losses related to the commercial management of the distributors.
The model is forecast in loss percentage in the energy invoiced (deemed equivalent to the energy injected in the Forecasts of this work) for the Technical Losses and in the Basic Network and loss percentage in the low voltage market for the Non-Technical Losses, as established by the submodule 2.6 of PRORET.
Technical Loss and Loss in the Basic Network
The regulatory loss consists in the amounts of efficient loss defined as a target for the distributor in the tariff review period. It has been assumed that the Real Loss in the Basic Grid and the Technical Loss will be equal to the calculated regulatory ones. The Technical Loss was calculated by ANEEL125 in the last tariff review cycle in 2013, and considered the physical characteristics of the distribution system and the distributors´ equipment. The Real Loss in the Basic Grid is calculated monthly by CCEE126 and the regulatory amount is provided by the average of the measurements in the last 12 months and the amount from the last tariff adjustment in 2016 was used. As the amounts of Technical Loss and Loss in the Basic Grid are not related to the distributor´s activity and its distributed power administration, but to physical processes and the characteristics of the used equipment, it was defined that for both indicators, the regulatory and the Real amounts will remain constant and equal along the period.
125 Data obtained from SAMP, disclosure source defined by submodule 2.6 of PRORET
126 Data available in SPARTA, file from the last tariff adjustment (2016)
Ceres Inteligência Financeira | 168 |
record over years being defined by the straight-line method. When the target of Non-technical Loss calculated for the next revision does not present more reduction of regulatory levels the trajectory of regulatory loss curve stabilizes. At that point, AmE has reached the levels of Real Non-technical Losses by LIGHT, and it was assumed that this would be considered the level of effective losses, so that AmE, keesp its trajectory to the Real and regulatory curves until the end of the granting.
Table 117 – Forecast Regulatory Losses 1 of 3 | |||||||||||
Regulatory Losses % | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 |
Technical Losses (PT/EI) | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% |
Non Technical Losses | |||||||||||
(PNT/BT) | 93.18% | 87.44% | 81.70% | 75.96% | 70.23% | 64.49% | 58.75% | 53.01% | 47.28% | 41.54% | 41.54% |
Losses in the Basic Network | |||||||||||
(PB/EI) | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% |
Source: Ceres Inteligência Financeira |
Table 118 – Forecast Regulatory losses 2 of 3 | ||||||||||
Regulatory losses % | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2035 | 2036 | 2037 |
Technical Losses (PT/EI) | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% |
39.15 | 36.89 | 34.77 | 32.76 | 30.88 | 28.95 | 27.15 | 25.46 | 23.87 | 22.38 | |
Non-Technical Losses (PNT/BT) | % | % | % | % | % | % | % | % | % | % |
Losses at Basic Grid(PB/EI) | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% |
Source: Ceres Inteligência Financeira | ||||||||||
Table 119 – Forecast Regulatory losses 3 of 3 | ||||||||||
Regulatory losses % | 2038 | 2039 | 2040 | 2041 | 2042 | 2043 | 2044 | 2045 | 2046 | 2047 |
Technical Losses (PT/EI) | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% |
22.38 | 22.38 | 22.38 | 22.38 | 22.38 | 22.38 | 22.38 | 22.38 | 22.38 | 22.38 | |
Non-Technical Losses (PNT/BT) | % | % | % | % | % | % | % | % | % | % |
Losses at Basic Grid(PB/EI) | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% |
Source: Ceres Inteligência Financeira |
For projecting effective Non-Technical Losses, three different perspectives were considered: starting point, track record and target. The starting point was construed as the non-technical loss occurred in 2016, obtained in the utility’s energetic balance sheet.
The target set is the level of Real Non-Technical Losses practiced by the benchmark company considered when calculating the target of regulatory losses, in this case, the levels practiced by LIGHT, which is 22.38%. The loss value practiced by the benchmark company was obtained through the SAMP basis.
In relation to track record of annual loss defining the loss decrease speed up to the defined efficiency level, the track record was used to reach the loss efficiency noted in the selected benchmark company, CEMAR – Companhia Energética do Maranhão. The company was chosen based on the fact that CEMAR already holds an efficient level of Non-Technical Losses and has recently been through the privatization process. Out of the possible benchmark companies analyzed, CEMAR was the best fit,
Ceres Inteligência Financeira | 170 |
since: CELPA and CELPE had no efficient loss levels in 2016; COSERN has increasingly low loss levels not similar to the levels practiced by the utilities, as well as it does not have a track record for linear loss decrease; and ENERGISA PARAÍBA has losses decreased at highly aggressive levels which would not be factual for the analyzed utilities.
Table 120 – Annual Loss Decrease Rate Definition: Benchmark Company CEMAR | ||||||
Benchmark | PNT/EI Real | PNT/EI Real | PNT/EI Real | CAGR | PNT/EI | PNT/EI |
Company | 2008 | 2013 | 2016 | 08/13 | Regulatory 2013 | Regulatory 2016 |
CEMAR | 16.28% | 9.35% | 8.10% | 0.8951 | 9.89% | 9.77% |
Source: Ceres Inteligência Financeira, based on information provided by SAMP |
The starting point of the Real Non-Technical Loss track record (realized 2016) is 25.57% over the Low-Voltage market.
Table 121 – Starting Point and Target of Non-Technical Losses | ||
% Losses/ Low-Voltage Market | ||
Non-Technical Loss- | Non-Technical Losses | Year regulatory level is |
es AmE in 2016 | Benchmark in 2016 | reached |
117.45% | 22.38% | 2019 |
Source: Ceres Inteligência Financeira, based on information provided by SAMP and Vote127 by ANEEL |
The Forecast Real Non-Technical Losses were defined as follows:
Table 122 – Forecast Real Losses 1 of 3 | |||||||||||
Real Losses % | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 |
Technical Losses (PT/EI) | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% |
Non-Technical Losses | 105.13 | 43.32 | 38.77 | 34.71 | |||||||
(PNT/BT) | % | 94.10% | 84.23% | 75.39% | 67.48% | 60.40% | 54.07% | 48.39% | % | % | % |
Losses at Basic Grid(PB/EI) | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% |
Source: Ceres Inteligência Financeira |
Table 123 – Forecast Real Losses 2 of 3 | ||||||||||
Real Losses % | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2035 | 2036 | 2037 |
Technical Losses (PT/EI) | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% | 7.77% |
Non-Technical Losses | 31.07 | 27.81 | 24.89 | 22.38 | 22.38 | 22.38 | 22.38 | 22.38 | 22.38 | 22.38 |
(PNT/BT) | % | % | % | % | % | % | % | % | % | % |
Losses at Basic Grid(PB/EI) | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% | 0.94% |
Source: Ceres Inteligência Financeira |
127 Vote of Case 48500.004245/2016-77 of ANEEL
Ceres Inteligência Financeira | 171 |
Thus, calculation of the operating due dates for the Forecast required working capital did not consider the balances which, as assessed by Ceres Inteligência, have financial characteristic and nature, i.e., non-operating. Furthermore, recurrence of the accounts was also analyzed, such as the Long-Term Sectorial Charges, considered as a regular account, such that its periodical recomposition was considered in the working capital. The detailed re-rating between debt balances and working capital may be found in the attachments hereto.
The following table shows the balances considered when calculating the receipt and payment due dates for Forecast required working capital of the company. The receipt and payment due dates (in number of days) is in column “# of days ROB”, calculated from division of the balances calculated by the company’s gross income (net of construction revenue) multiplied by 365 (number of days in the year).
Table 126 – Parameters of Forecast NCG | ||
| ||
Operating Assets | R$'000 | # days ROB |
Accounts Receivable (Customers) | 524,719 | 59 |
Other short-term assets | 288,663 | 32 |
Operating Liabilities | R$'000 | # days ROB |
Accounts Payable (Suppliers) | 541,063 | 61 |
Other short-term liabilities | 189,966 | 21 |
Source: Own draft from DFP Dec/16 and from Accounting-Capital Due Diligence Report (Product 5). |
A comparison was conducted between due dates for receivables from customers and payables to suppliers of the utility and private companies present in the Northern region, under the following table. In case of Eletrobras Distribuição Amazonas, its operating due dates of Accounts Receivable and Payable were maintained, since they are better than those noticed in the market.
Table 127 – Benchmark operating due dates Northern Region | |||||
| |||||
North | Operating Assets | Operating Liabilities | ROB | # days ROB Assets | # days ROB Liabilities |
CELTINS | 183,810 | 84,817 | 1,443,500 | 46 | 21 |
CELPA | 1,512,826 | 619,237 | 5,770,226 | 96 | 39 |
Total | 1,696,636 | 704,054 | 7,213,726 | 86 | 36 |
Source: Own draft from DFP Dec/16 of each company. |
Ceres Inteligência Financeira | 174 |
Handling of Special Balances
Specific balances were selected from the titles of Assets and liabilities, both short- and long-term, to reflect the account settlement (between titles of Reimbursement Rights and Reimbursement Liabilities) for balance division into installments as contained in the Explanatory Notes for the financial statements dated Dec/16, for the case of the Debt Admission Instruments.
The adjustment for inflation or capitalization listed in the financial statements was considered and, when the applied adjustment was not identified, the standard adjustment by the SELIC fluctuation was chosen (since this is the most common procedure between such selected accounts. Division into installments was also obtained based on the financial statements and, when such information was not explicit, the due date equivalent to the proportions of both short- and long-term winning balances was calculated for the same title.
The balances, updating rates, due dates and number of installments adopted for the selected titles are as follows.
Table 128 – Balances with special treatment | |||||
| |||||
# install- | |||||
Type | Account | Balance R$/K ments | Due Date | Adjustment | |
Reimbursement right | |||||
Assets | CCC CP | 808,776 | 12 | Dec/17 | SELIC |
Reimbursement right | |||||
Assets | CDE CP | 88,824 | 12 | Dec/17 | SELIC |
Reimbursement right | |||||
Assets | CCC LP | 3,573,069 | 53 | May/22 | SELIC |
Reimbursement obli- | |||||
Liabilities | gations CCC LP | 1,157,893 | 12 | Dec/17 | SELIC |
Liabilities | Petrobras installment | 8,857,650 | 120 | Feb/25 | SELIC |
BR Distribuidora and | |||||
Liabilities | Cigás | 3,476,463 | 12 | Dec/17 | SELIC |
Liabilities | Onerous Contracts | 812,694 | 12 | Dec/17 | SELIC |
Source: Ceres Inteligência Financeira from the financial statements dated Dec/16 |
Such balances are fully or partially comprised in the Net Debt balance listed in the Accounting-Capital Due Diligence, thus, the balance of remaining debt components were also considered in the appraisal, as indicated in the Net Debt section.
In addition, settlements of the long-term balances were Forecast upon conclusion of the Forecast (Feb/2048). Only for the long-term customer balance such settlement was advanced for the initial stage of Forecast (Mar/2018), as considered by the Accounting-Capital Due Diligence that the balance is an outstanding negotiated receipt, the date was set since the due dates of such negotiations were unknown. The most significant balances are in the following table.
Ceres Inteligência Financeira | 175 |
| ||
Table 129 – Settlement of Long-Term Balances | ||
| ||
Long-Term Balances | R$'000 | Settlement Date |
Customers | 105,791 | Mar/18 |
Source: Ceres Inteligência Financeira from the financial statements dated Dec/16 |
Installment A
Installment “A” involves costs related to the electric power generation and transmission activities, as well as the sectorial charges provided for in specific law. These are costs with sums and prices that, to certain extent, are beyond the utility’s will or management. When calculating Installment A, SPARTA data of the tariff readjustment occurred on November 30, 2016 were considered.
The costs associated with Installment “A” of the revenue are comprised of:
· Electric power purchase due to the “Benchmark Market”, including the amount of electric power from the own generation undertakings;
· Connection and use of the electric power transmission and distribution plants;
· Sectorial charges outlined in specific law, such as: Financial Set-off for Use of Water Resources - CFURH for electric power generation purposes, as applicable; Electric Power Service Surveillance Fee - TFSEE; Energetic Development Account - CDE; Program for Development of the Alternative Sources of Electric Power - PROINFA; System Service Charge -ESS; Spare Power Charge - EER; Contribution to the National Electric System Operator -ONS; Research & Development - R&D; Energetic Efficiency Program – PEE.
Amounts of Sectorial Charges and Costs of Transmission on the Prior Benchmark Date (DRA) and on the Date of the Readjustment being Processed (DRP) are contained in the following table:
Table 130 - Sectorial Charges | ||
Sectorial charges | DRP | DRA |
RGR | - | - |
CCC | - | - |
TFSEE | 1,750,144 | 2,194,708 |
CDE | 161,930,410 | 147,266,797 |
CFURH | - | - |
ESS/EER | 135,038,233 | 90,192,745 |
PROINFA | 50,367,345 | 35,540,758 |
P&D | 27,160,281 | 22,393,910 |
ONS | 66,741 | 62,358 |
Source: ANEEL128 | ||
128 Technical Record No. 379/2016-SGT/ANEEL |
Ceres Inteligência Financeira | 176 |
| |
Table 132 - Benchmark Revenue and Annual Revenue | |
Amazonas | R$ ('000) |
RA0 | 2,587,492 |
RA1 | 2,847,472 |
Source: ANEEL130 |
Amount of Installment “A” (VPA1), considering the effective conditions on the DRP and the Benchmark Market, is calculated by considering the Off-Balance Sheet Compensation of Variation of Amounts for Items of Installment A (CVA), which is adjusted by the SELIC Rate and includes the electric power related to the Isolated Systems: the average cost of power traded in the Regulated Contracting Territory (ACR), Transmission Costs and sectorial charges, with the amounts of the tables below.
Table 133 - CVA | |||
CVA Balance to | |||
Acre (R$'000) | CVA Being Pro- | be Offset | |
cessed (R$'000) | |||
(R$'000) | |||
Power Purchase | 94,333 | (55,054) | |
Transmission Costs | (23,284) | (100) | |
Sectorial charges | 40,419 | (5,219) | |
Source: ANEEL131 |
130 Technical Record No. 379/2016-SGT/ANEEL
131 Technical Record No. 379/2016-SGT/ANEEL
Ceres Inteligência Financeira | 178 |
Analyses of Financial Indicators
The following table provides company’s summary financial indicators. From the table, it is possible to note that 2018 had the worst results for Net Margin, Gross Margin and EBITDA, associated with increased costs and expenses not followed by revenue growth. In respect of the Return on Invested Capital Indicator, the year 2018 was negative, due to negative EBIT for the period and, as of 2019, the Indicator remained positive. In relation to Return on Assets, in turn, which shows how capable the company’s profit is to finance its assets, is negative for the years 2017 to 2019 and 2026, due to the negative net profit for the period, and positive for remaining years.
Table 142 – Summary Financial Indicators 2017 to 2026 (1 of 3) | |||||||||||
Financial Indicators | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | |
26.30 | 16.22 | 28.10 | 27.50 | 31.30 | 34.46 | 31.67 | 27.86 | 27.91 | 24.59 | ||
Gross Margin | % | % | % | % | % | % | % | % | % | % | |
11.62 | 12.47 | 16.48 | 20.43 | 17.08 | 12.85 | 13.03 | |||||
EBITDA Margin | 7.47% | -3.18% | % | % | % | % | % | % | % | 9.08% | |
- | - | ||||||||||
23.39 | 22.40 | 11.26 | - | ||||||||
Net Margin | % | % | -7.96% | 1.71% | 9.77% | 0.32% | % | 2.61% | 3.99% | 9.22% | |
Return on Invested Capital (ROIC) | 0.84% | -2.30% | 1.27% | 1.45% | 2.45% | 3.80% | 2.69% | 1.44% | 1.53% | 0.20% | |
- | |||||||||||
Return on Assets (ROA) | -7.85% | -6.52% | -2.59% | 0.57% | 3.20% | 0.11% | 3.87% | 0.88% | 1.40% | 3.11% | |
Source: Ceres Inteligência Financeira, based on Company’s Financial Statements | |||||||||||
Table 143 – Summary Financial Indicators 2027 to 2036 (2 of 3) | |||||||||||
Financial Indicators | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2035 | 2036 | |
33.29 | 30.62 | 34.92 | 34.89 | 35.23 | 34.99 | 35.80 | 32.69 | 36.68 | 34.62 | ||
Gross Margin | % | % | % | % | % | % | % | % | % | % | |
19.46 | 16.60 | 22.13 | 22.51 | 23.25 | 23.38 | 24.40 | 21.62 | 26.47 | 24.33 | ||
EBITDA Margin | % | % | % | % | % | % | % | % | % | % | |
10.97 | 21.15 | 12.61 | 14.65 | 19.80 | 32.57 | 16.38 | 20.82 | ||||
Net Margin | % | % | % | % | 6.05% | % | % | % | % | 8.32% | |
Return on Invested Capital (ROIC) | 3.37% | 2.18% | 4.29% | 4.87% | 5.03% | 4.67% | 4.61% | 4.01% | 5.80% | 5.25% | |
10.41 | |||||||||||
Return on Assets (ROA) | 4.01% | 7.00% | 4.44% | 5.15% | 2.16% | 6.77% | % | 5.27% | 7.12% | 2.91% | |
Source: Ceres Inteligência Financeira, based on Company’s Financial Statements | |||||||||||
Table 144 – Summary Financial Indicators 2037 to 2047 (3 of 3) | |||||||||||
Financial Indicators | 2037 | 2038 | 2039 | 2040 | 2041 | 2042 | 2043 | 2044 | 2045 | 2046 | 2047 |
33.80 | 33.81 | 35.42 | 35.24 | 34.99 | 34.80 | 32.07 | 35.47 | 36.02 | 33.71 | 35.07 | |
Gross Margin | % | % | % | % | % | % | % | % | % | % | % |
23.57 | 23.74 | 25.76 | 25.72 | 25.57 | 25.48 | 22.98 | 27.10 | 27.69 | 25.19 | 26.79 | |
EBITDA Margin | % | % | % | % | % | % | % | % | % | % | % |
21.51 | 31.99 | 17.35 | 17.55 | 21.32 | 31.72 | 18.36 | 19.26 | 13.01 | 21.52 | ||
Net Margin | % | % | % | % | 5.58% | % | % | % | % | % | % |
Return on Invested Capital (ROIC) | 4.88% | 5.24% | 6.64% | 7.31% | 7.49% | 7.35% | 6.22% | 9.14% | 9.95% | 8.86% | 9.85% |
11.62 | 13.10 | 10.68 | |||||||||
Return on Assets (ROA) | 7.60% | % | 6.87% | 7.35% | 2.44% | 9.31% | % | 8.52% | 9.35% | 6.34% | % |
Source: Ceres Inteligência Financeira, based on Company’s Financial Statements |
Ceres Inteligência Financeira | 189 |
Final Forecasts and Appraisal Results
Forecast DRE
Table 145 – Forecast DRE Eletrobras Distribuição Amazonas | |||||||||||
Income Statement | 2017 | 2018 | 2019 | 2020 | 2025 | 2030 | 2035 | 2040 | 2045 | 2046 | 2047 |
Gross Operating Income | 4,137,150 | 4,398,925 | 5,362,675 | 5,939,697 | 7,192,360 | 10,284,780 | 15,627,765 | 21,673,005 | 31,767,897 | 32,704,647 | 35,312,974 |
Operating Revenue | 4,103,859 | 4,805,167 | 5,129,414 | 5,565,004 | 7,152,403 | 10,151,606 | 14,966,876 | 21,312,676 | 31,013,807 | 32,366,696 | 34,445,993 |
Revenue from Financial | |||||||||||
(106,099) | (542,480) | 131,430 | 134,474 | (12,943) | 67,346 | 578,973 | 258,393 | 627,243 | 205,434 | 728,539 | |
Components | |||||||||||
Other Revenues | 36,784 | 38,751 | 40,581 | 42,466 | 52,899 | 65,828 | 81,916 | 101,935 | 126,848 | 132,518 | 138,441 |
(-) Deductions | (1,217,203) | (1,454,729) | (1,762,921) | (1,937,200) | (2,370,594) | (3,363,229) | (5,067,541) | (7,055,514) | (10,299,869) | (10,647,168) | (11,448,954) |
(-) ICMS | (738,066) | (784,831) | (957,977) | (1,061,502) | (1,285,103) | (1,839,411) | (2,798,253) | (3,882,792) | (5,695,389) | (5,862,983) | (6,331,416) |
(-) PIS/COFINS | (382,686) | (406,901) | (496,047) | (549,422) | (665,293) | (951,342) | (1,445,568) | (2,004,753) | (2,938,530) | (3,025,180) | (3,266,450) |
(-) Real Non- | |||||||||||
(64,228) | (61,986) | (67,078) | (68,964) | (83,738) | (120,257) | (184,534) | (258,199) | (380,902) | (392,456) | (424,146) | |
Recoverable Revenues | |||||||||||
(-) Sectorial charges | |||||||||||
(32,222) | (201,012) | (241,819) | (257,313) | (336,460) | (452,218) | (639,187) | (909,769) | (1,285,047) | (1,366,549) | (1,426,942) | |
(Deductions) | |||||||||||
Net Operating Revenue | 2,919,947 | 2,944,195 | 3,599,754 | 4,002,496 | 4,821,766 | 6,921,551 | 10,560,223 | 14,617,491 | 21,468,029 | 22,057,479 | 23,864,020 |
(-) Operating costs and | |||||||||||
(2,703,710) | (3,036,425) | (3,181,617) | (3,503,275) | (4,194,575) | (5,363,865) | (7,765,359) | (10,858,394) | (15,525,600) | (16,499,339) | (17,470,516) | |
expenses | |||||||||||
(-) Manageable Costs | |||||||||||
(550,110) | (570,660) | (593,205) | (601,886) | (717,572) | (856,812) | (1,077,878) | (1,391,565) | (1,789,204) | (1,880,332) | (1,975,583) | |
(PMSO & SG&A) | |||||||||||
(-) Power Purchase | (1,987,018) | (2,109,365) | (2,206,507) | (2,530,879) | (3,043,997) | (4,048,186) | (5,850,919) | (8,150,263) | (11,888,504) | (12,647,103) | (13,443,607) |
(-) Effect of Loss Differ- | |||||||||||
(120,528) | (67,593) | (27,330) | 6,433 | 60,275 | 199,542 | 88,505 | - | - | - | - | |
ence (Reg - Real) | |||||||||||
(-) Transmission Costs | (14,657) | (91,951) | (113,077) | (120,105) | (157,180) | (209,107) | (293,086) | (416,732) | (584,638) | (623,973) | (648,938) |
(-) Sectorial charges | |||||||||||
(31,399) | (196,855) | (241,498) | (256,838) | (336,101) | (449,302) | (631,981) | (899,835) | (1,263,254) | (1,347,932) | (1,402,387) | |
(Costs) | |||||||||||
EBITDA | 216,237 | (92,229) | 418,137 | 499,221 | 627,191 | 1,557,686 | 2,794,864 | 3,759,096 | 5,942,428 | 5,558,140 | 6,393,504 |
(-) Depreciation & Amorti- | |||||||||||
(128,788) | (193,736) | (243,375) | (280,773) | (369,358) | (389,749) | (609,271) | (860,044) | (1,141,854) | (1,204,011) | (1,297,889) | |
zation | |||||||||||
(-) IFRS Depreciation | (84,852) | (117,936) | (146,172) | (178,068) | (260,430) | (275,047) | (493,241) | (810,680) | (1,102,713) | (1,163,005) | (1,253,933) |
(-) Depreciation | (43,936) | (75,800) | (97,203) | (102,704) | (108,928) | (114,701) | (116,030) | (49,364) | (39,141) | (41,006) | (43,956) |
EBIT | 87,449 | (285,965) | 174,762 | 218,448 | 257,833 | 1,167,937 | 2,185,593 | 2,899,053 | 4,800,575 | 4,354,129 | 5,095,615 |
(-) Financial Expenses | (1,024,713) | (639,750) | (603,927) | (561,667) | (175,302) | (253,064) | (364,679) | (442,183) | (350,678) | (265,583) | (118,165) |
(+) Financial Revenues | (114,255) | (78,381) | (20,440) | 377,317 | 162,825 | 389,911 | 1,120,408 | 949,674 | 990,211 | (325,596) | 1,790,864 |
(+) Cash Financial Rev- | |||||||||||
846 | (0) | (0) | 0 | 997 | 130,805 | 510,858 | 209,025 | 4,440 | 4,547 | 4,797 | |
enue | |||||||||||
(+) Adjustment for In- | |||||||||||
(115,102) | (78,381) | (20,440) | 377,317 | 161,828 | 259,106 | 609,550 | 740,650 | 985,771 | (330,143) | 1,786,067 | |
flation of Financial Assets | |||||||||||
EBT | (1,051,520) | (1,004,097) | (449,605) | 34,098 | 245,355 | 1,304,784 | 2,941,323 | 3,406,544 | 5,440,107 | 3,762,950 | 6,768,314 |
(-) Income Taxes | 367,483 | 346,513 | 163,201 | 34,540 | (53,540) | (290,440) | (742,374) | (840,966) | (1,307,028) | (892,084) | (1,632,781) |
(-) CSLL | 89,658 | 86,537 | 41,848 | 34,112 | (3,463) | (59,735) | (156,173) | (173,595) | (280,743) | (257,988) | (314,011) |
(-) IRPJ | 249,049 | 240,381 | 116,243 | 94,757 | (9,620) | (165,929) | (433,813) | (482,208) | (779,842) | (716,632) | (872,253) |
(-) Taxes deferred from | |||||||||||
28,775 | 19,595 | 5,110 | (94,329) | (40,457) | (64,777) | (152,388) | (185,162) | (246,443) | 82,536 | (446,517) | |
Financial Assets | |||||||||||
Net Profit | (684,037) | (657,583) | (286,404) | 68,638 | 191,815 | 1,014,343 | 2,198,949 | 2,565,578 | 4,133,080 | 2,870,866 | 5,135,533 |
Source: Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 190 |
FCFF
Table 147 – Forecast Cash Flow to Firm Eletrobras Distribuição Amazonas | |||||||||||
Free Cash Flow to Firm | 2017 | 2018 | 2019 | 2020 | 2025 | 2030 | 2035 | 2040 | 2045 | 2046 | 2047 |
(+) EBITDA | 216,237 | (92,229) | 418,137 | 499,221 | 627,191 | 1,557,686 | 2,794,864 | 3,759,096 | 5,942,428 | 5,558,140 | 6,393,504 |
(-) Income Taxes (Except Fin. | |||||||||||
Rec.) | (23,882) | (2,714) | (33,594) | (43,468) | (63,020) | (241,420) | (503,088) | (689,975) | (1,568,039) | (1,480,404) | (1,732,509) |
(+)Δ Assets & Lia ilities + I - | |||||||||||
demnity | (2,288,007) | 80,282 | (8,968) | (6,165) | 4,910 | (16,583) | (15,881) | (31,885) | (14,296) | (64,596) | (42,268) |
(-) CAPEX | (243,890) | (468,362) | (774,350) | (667,197) | (326,952) | (453,508) | (557,890) | (686,297) | (844,259) | (2,281,692) | (2,476,979) |
Cash Flow to Firm (Nominal) | (2,339,543) | (483,023) | (398,775) | (217,609) | 242,130 | 846,175 | 1,718,006 | 2,350,940 | 3,515,835 | 1,731,448 | 2,141,748 |
Cash Flow to Firm (Real) | (2,446,184) | (475,010) | (376,043) | (197,084) | 177,887 | 504,553 | 833,117 | 926,477 | 1,126,918 | 531,402 | 631,177 |
Source: Ceres Inteligência Financeira |
Results
When considering all assumptions described in the previous sections and the general assumptions of the appraisal, it is possible to calculate the Cash Flow and the firm’s and shareholder’s valuations. The cost of own capital is 10.77% and the weighted average cost of capital is 7.57% per year and its calculation log may be analyzed in the specific section “Regulatory WACC and Discount Rate Calculation”.
Table 148 - Results from Appraisal Eletrobras Distribuição Amazonas | |
Pattern Results | Valuation |
Methodologies | R$'000 |
Free Cash Flow to Firm (FCFF) | (8,290,992) |
Source: Ceres Inteligência Financeira |
The following table contains the key appraised components segregated, focused on the Cash Flow to Firm. Items “Cash (DD)”, “Debt (DD)” and “Contingencies (DD)” comprise the recommendations of the Due Diligence conducted and refer to the balances dated Dec/16. The Enterprise Value was calculated considering the flow from March 2018 to February 2048 and refers to the base date of February 2018.
Ceres Inteligência Financeira | 192 |
| |
Table 149 – Valuation Components | |
Pattern Results | |
Methodologies | Free Cash Flow to Firm (FCFF) R$'000 |
Enterprise Value | 2,828,419 |
Cash (DD) | 99,391 |
Gross Debt (DD) | (10,058,418) |
Contingencies (DD) | (1,160,384) |
Valuation | (8,290,992) |
Source: Ceres Inteligência Financeira |
We highlight that the EV values have their base date in March 1, 2018. In turn, the amounts verified in the Due Diligence for Cash, Gross Debt and Contingencies were reported for December 2016. In summary, either such balances are required to be Forecast for the appraisal date or exclusive date should be used to appraise all such structures, having to be adjusted by some adjustment Indicator until the effective date of settling the disposal. In this case, IPCA was adopted for application of the adjustment accruing over the Enterprise Value.
The following table contains the results of the Enterprise Value respectively adjusted as per the IPCA indexer, for the base date of December 31, 2016. Such adjusted result is, therefore, on the same base date of the Net Debt balance and the contingencies indicated by the Accounting-Capital Due Diligence.
Table 150 – Adjusted Enterprise Value | |||
Free Cash Flow to Firm (FCFF) | |||
Base date Enterprise Value | Feb/2018 | Dec/2016 | |
Adjustment on Enterprise Value | - | IPCA | |
Enterprise Value (R$) | A | 2,828,419,335.80 | 2,687,563,915.43 |
Cash (R$) | B | 99,391,000.00 | 99,391,000.00 |
Gross Debt (R$) | C | (10,058,418,395.23) | (10,058,418,395.23) |
Net Debt (R$) | B+C | (9,959,027,395.23) | (9,959,027,395.23) |
Tax, labor and social security contingencies (R$) | D | (603,104,000.00) | (603,104,000.00) |
Legal Contingencies (R$) | E | (373,230,168.53) | (373,230,168.53) |
Actuarial Adjustments (R$) | F | 445,310.00 | 445,310.00 |
Environmental Adjustments (R$) | G | (184,495,398.57) | (184,495,398.57) |
A+B+C+D | |||
Valuation (R$) | +E+F+G | (8,290,992,316.53) | (8,431,847,736.90) |
Source: Ceres Inteligência Financeira |
Forecast Cash and gross indebtedness balances for the company in Feb/18 are shown in the following table. Such balances may be comprised in the valuation analysis considering the base date of March 01, 2018. It should be stressed that the contingencies balance is not contained in such items.
Ceres Inteligência Financeira | 193 |
| ||
Table 151 – Forecast Cash and Gross Debt Balance | ||
Forecast | Benchmark Date | R$'000 |
Cash | Feb/18 | 0 |
RGR Balance | Feb/18 | (461,988) |
Remaining Debt | Feb/18 | (4,915,023) |
Source: Ceres Inteligência Financeira |
Sensitivity Analysis
Table 152 - WACC and BRRL Sensitivity – Enterprise Value | |||||||
Enterprise | BRRL Multiplier | ||||||
Value | |||||||
1.0 | 1.5 | 2.0 | 2.5 | 3.0 | 3.5 | ||
(R$'000) | |||||||
6.00% | 3,951,937 | 4,736,882 | 5,477,771 | 6,188,766 | 6,876,387 | 7,544,833 | |
6.50% | 3,498,087 | 4,238,586 | 4,937,896 | 5,609,528 | 6,259,587 | 6,891,977 | |
7.00% | 3,096,946 | 3,796,874 | 4,458,232 | 5,093,918 | 5,709,659 | 6,309,089 | |
7.50% | 2,741,895 | 3,404,709 | 4,031,351 | 4,634,143 | 5,218,459 | 5,787,689 | |
7.57% | 2,687,564 | 3,344,586 | 3,965,809 | 4,563,465 | 5,142,873 | 5,707,386 | |
WACC (Re al p. a. ) | 8.00% | 2,427,196 | 3,055,989 | 3,650,807 | 4,223,428 | 4,778,906 | 5,320,407 |
8.50% | 2,147,867 | 2,745,407 | 3,310,990 | 3,855,881 | 4,384,837 | 4,900,820 | |
Source: Ceres Inteligência Financeira | |||||||
Table 153 - WACC and BRRL Sensitivity – Valuation | |||||||
Valuation | BRRL Multiplier | ||||||
(R$'000) | 1.0 | 1.5 | 2.0 | 2.5 | 3.0 | 3.5 | |
6.00% | (7,167,474) | (6,382,529) | (5,641,640) | (4,930,646) | (4,243,024) | (3,574,579) | |
6.50% | (7,621,324) | (6,880,825) | (6,181,515) | (5,509,883) | (4,859,824) | (4,227,434) | |
7.00% | (8,022,465) | (7,322,538) | (6,661,179) | (6,025,493) | (5,409,752) | (4,810,323) | |
7.50% | (8,377,516) | (7,714,702) | (7,088,060) | (6,485,269) | (5,900,953) | (5,331,722) | |
7.57% | (8,431,847) | (7,774,826) | (7,153,602) | (6,555,947) | (5,976,538) | (5,412,026) | |
WACC (Real p. a. ) | 8.00% | (8,692,215) | (8,063,423) | (7,468,605) | (6,895,984) | (6,340,506) | (5,799,005) |
8.50% | (8,971,544) | (8,374,004) | (7,808,421) | (7,263,530) | (6,734,574) | (6,218,591) | |
Source: Ceres Inteligência Financeira |
The BRRL sensitivity analysis indicates, if the secured base unification process is successful, that 50% increase to the base for Amazonas would increase the Enterprise Value at approximately R$ 657 million.
In relation to the discount rate, in turn, when considering the WACC rate from 6% to 8.5% per year, the Enterprise Values respectively vary from R$ 3.952 billion to R$ 2.148 million.
Ceres Inteligência Financeira | 194 |
mation Monitoring for Economic Regulation (SAMP) of ANEEL136. In turn, amounts for Net Compensation Basis and Amount of Installment B were obtained in the SPARTA spreadsheets of the tariff review of each of the companies137 and from the Annual Tariff Readjustment of each company138.
Multiples for each year from 2010 to 2016 were calculated. All cash values were brought to the base date of December 2016 from the Broad National Consumer Price Index (IPCA).
With the amounts of multiples for each year, the simple arithmetic average for each company was calculated. From average values, the average between companies was calculated to obtain the amount of each multiple.
Table 156 - Multiples Companies Privatized from 1997 to 2000 | |||||
Multiples | CEMAR | CELPE | CELPA | COSERN | Average |
EV/UC | 1.94 | 1.38 | 2.27 | 2.00 | 1.90 |
EV/EBITDA | 6.09 | 7.61 | 7.83 | 6.28 | 6.96 |
EV/ Reve- | |||||
nue | 1.45 | 0.99 | 1.56 | 1.43 | 1.36 |
EV/BRR | 1.69 | - | 2.37 | - | 2.03 |
EV/VPB | 4.36 | 2.60 | 3.89 | 4.95 | 3.95 |
Source: Ceres Inteligência Financeira |
By obtaining the averages of each multiple and multiplying them by the respective assumption of appraised company, we get to the estimated value, like the following example:
136 SAMP Report (ANEEL Website). Accessed on: May 05, 2017.
137 CELG: Open Court ANEEL 062/2013.
138 Annual Tariff Readjustment available at Result of the Distribution Tariff Procedures (ANEEL Website). Accessed on: May 10, 2017.
Ceres Inteligência Financeira | 197 |
| ||||||
Table 158 - Multiples Publicly Held Companies | ||||||
Multiples | Ampla | Celesc | Eletropaulo | Equatorial | Average | Weighted Average |
EV/UC | 2.50 | 0.46 | 0.66 | 2.25 | 1.47 | 1.92 |
EV/EBITDA | 11.85 | 3.07 | 5.99 | 9.06 | 7.49 | 9.01 |
EV/Revenue | 1.46 | 0.19 | 0.37 | 1.38 | 0.85 | 1.14 |
EV/BRR | 1.57 | 0.52 | 0.72 | 0.94 | 1.18 | |
EV/VPB | 4.94 | 0.86 | 1.55 | 2.45 | 3.38 | |
Source: Ceres Inteligência Financeira |
As shown previously, the amounts of multiples above were used, multiplying them by the multiples of the appraised companies to obtain the Enterprise Value.
Table 159 - Enterprise Value from the Multiples of Publicly Held Companies (R$’000) | |
EV | Amazonas |
EV/UC | 1,822,713 |
EV/EBITDA 2020 | 3,361,315 |
EV/EBITDA 2023 | 4,274,318 |
EV/Revenue 2016 | 1,634,172 |
EV/Revenue 2020 | 1,668,435 |
EV/Revenue 2023 | 1,660,437 |
EV/BRR | 1,102,806 |
EV/VPB 2016 | 1,305,930 |
EV/VPB 2019 | 2,781,000 |
Source: Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 200 |
According to the previous example, the multiples above were used, multiplying them by the multiples of the appraised company to obtain the Enterprise Value (EV).
Table 161 - Enterprise Value from Multiples of CELG D (R$’000) | |
EV | Amazonas |
EV/UC | 1,624,127 |
EV/Revenue 2016 | 1,676,525 |
EV/Revenue 2020 | 1,711,676 |
EV/Revenue 2023 | 1,703,471 |
EV/BRR | 2,372,076 |
EV/VPB 2016 | 1,505,656 |
EV/VPB 2019 | 3,206,319 |
Source: Ceres Inteligência Financeira |
The Enterprise Values calculated from CELG D are not necessarily direct comparison in terms of values since they have different specificities or favorable points to the appraised company. However, due to the recent privatization they were individually considered in this analysis.
Ceres Inteligência Financeira | 202 |
| |||||||
Table 162 - Multiples from Share Transfer | |||||||
CPFL Piratininga | Cosern | Coelba | |||||
Multiples | Light 2006 | Light 2009 | Ampla 2011 | Average | |||
2001 | 2015 | 2015 | |||||
EV/UC | 1.80 | 2.99 | 2.49 | 6.03 | 2.14 | 2.03 | 2.91 |
EV/Financial+inta | |||||||
1.13 | 1.82 | 1.30 | 2.00 | 1.64 | 1.58 | ||
ngible Assets | |||||||
EV/EBITDA | 6.62 | 1.37 | 5.41 | 13.00 | 7.33 | 8.74 | 7.08 |
EV/Revenue | 0.71 | 6.87 | 1.25 | 4.07 | 2.13 | 1.51 | 2.75 |
Source: Ceres Inteligência Financeira |
According to the previous example, the multiples above were used, multiplying them by the multiples of the appraised companies to obtain the Enterprise Value.
Table 163 - Enterprise Value of Multiples from Share Transfer (R$’000) | |
EV | Amazonas |
EV/UC | 2,764,424 |
EV/ Financial+intangible Assets | 3,585,306 |
EV/EBITDA 2020 | 2,639,217 |
EV/EBITDA 2023 | 3,356,084 |
EV/Revenue 2016 | 3,938,445 |
EV/Revenue 2020 | 4,021,021 |
EV/Revenue 2023 | 4,001,746 |
Source: Ceres Inteligência Financeira |
Privatizations from 1997 to 2000
Another group of similar transactions analyzed was that of companies CEMAR, CELPE, CELPA, CO-SERN, Energisa Paraíba and Energisa Sergipe, by the time of both privatizations, which occurred from 1997 to 2000.
Ceres Inteligência Financeira | 204 |
As proxy to calculate the EV, the ratio between the Real risk-free rate for the companies and the Real risk-free rate of Brazil in the transaction year was calculated. Thus, all risks (foreign exchange risk, country risk, etc.) are construed to be embedded into the basic rate of the countries.
Since the companies work with electric power distribution in more than one country (ENEL operates in Italy, Spain and Romania and EDP operates in Portugal, Spain and Brazil), the Real rate of each country was weighted by the respective gross income of electric power distribution, so as to obtain the Real weighted rate for the company in the year of each transaction.
Such ration between the rates, named “Rate Adjustment” in the following table, was multiplied by the amount of EV in each multiple, so as to find how much such amounts should represent in Brazil.
Table 16677 - Multiples Foreign Transactions | |||||
Rate Adjustment | 11.64% | 24.80% | 12.01% | 110.54% | |
Multiples | ENEL 2003 | ENEL 2004 | ENEL 2005 | EDP 2011 | Average |
EV/UC | 2.68 | 2.68 | |||
EV/EBITDA | 1.40 | 2.56 | 1.18 | 16.73 | 5.47 |
EV/Gross income | 0.20 | 0.43 | 0.19 | 2.67 | 0.88 |
Source: Ceres Inteligência Financeira |
He average value found for the multiples was multiplied with the Amazonas data to find the Enterprise Value and compare it to the EV of Ceres appraisal. Such value carries an average variation of 31%.
Table 167 - Enterprise Value Foreign Transactions | |
EV Abroad | Amazonas |
EV/UC | 2,543,359 |
EV/EBITDA 2020 | 2,038,906 |
EV/EBITDA 2023 | 2,592,715 |
EV/Gross income 2016 | 1,250,999 |
EV/Gross income 2020 | 1,925,436 |
EV/Gross income 2023 | 1,985,461 |
Mean EV | 2,056,146 |
EV Ceres Appraisal | 2,687,564 |
Average Variation | 31% |
Source: Ceres Inteligência Financeira |
It should be stressed that, in average, the amounts of the multiples found are compatible to the reality, but separately the adjustment rates were very different. Such rates could be construed as the amount of a company in Brazil which could be equal to 11.64% to 110.54% of the amount of a similar company in Europe.
Ceres Inteligência Financeira | 207 |
Median of Multiples
For this analysis, all groups of multiples provided above were used, except for the transactions of other countries and amounts of privatizations from 1997 to 2000 which, as previously explained, would not be used for any Enterprise Value calculation since they are very different. Aimed at not considering the strength of too extreme numbers, the median of the multiples was calculated.
In the groups of companies privatized from 1997 to 2000, CELG D and publicly held companies, the multiple EV/(Financial+Intangible Assets) was not used. In the group of share transfer companies, the EV/BRR and EV/VPB multiples were not used. Furthermore, for CELG D the multiple EV/EBITDA was also not used since the 2016 amount is negative.
Table 16879 – Median of Multiples (1 of 2) | ||||||||
Multiples | CEMAR | CELPE | CELPA | COSERN | CELG | Ampla | Celesc | Eletropaulo |
EV/UC | 1.94 | 1.38 | 2.27 | 2.00 | 1.71 | 2.50 | 0.46 | 0.66 |
EV/EBITDA | 6.09 | 7.61 | 7.83 | 6.28 | 244.61 | 11.85 | 3.07 | 5.99 |
EV/Revenue | 1.45 | 0.99 | 1.56 | 1.43 | 1.17 | 1.46 | 0.19 | 0.37 |
EV/BRR | 1.69 | - | 2.37 | - | 2.54 | 1.57 | 0.52 | 0.72 |
EV/VPB | 4.36 | 2.60 | 3.89 | 4.95 | 3.90 | 4.94 | 0.86 | 1.55 |
EV/ Financial+Intangible Assets | ||||||||
Source: Ceres Inteligência Financeira |
Table 1690 - Median of Multiples (2 of 2) | ||||||||
Multiples | Equatorial | Light 2006 | Light 2009 | Ampla 2011 | CPFL Piratininga 2001 | Cosern 2015 | Coelba 2015 | Median |
EV/UC | 2.25 | 1.80 | 2.99 | 2.49 | 6.03 | 2.14 | 2.03 | 2,03 |
EV/EBITDA | 9.06 | 6.62 | 1.37 | 5.41 | 13.00 | 7.33 | 8.74 | 7,33 |
EV/Revenue | 1.38 | 0.71 | 6.87 | 1.25 | 4.07 | 2.13 | 1.51 | 1,43 |
EV/BRR | 1,15 | |||||||
EV/VPB | 3,89 | |||||||
EV/ Financial+Intangible | ||||||||
1.13 | 1.82 | 1.30 | 2.00 | 1.64 | 1.64 | |||
Assets | ||||||||
Source: Ceres Inteligência Financeira |
For the provided multiples, amounts of Enterprise Value were also calculated in the same method as before; this time, from the median of multiples. EV amounts are not directly comparable, since the companies are going through quite different stages. If previously public companies, privatizations were already consolidated (except for CELG D) and these companies are currently private companies. So that the values are comparable, it is possible that a discount be considered or the understanding of implicit discount in the transaction, in view of the value indicated by the cash flow of the company.
The following table shows the resulting calculation of the variation between the Enterprise Value found in the Economic-Financial Appraisal and Enterprise Value of the appraisal by multiples, which is 32%.
Ceres Inteligência Financeira | 208 |
| ||
Table 170 - Enterprise Value from the Median of Multiples (R$’000) | ||
Median EV | Amazonas | Variation |
EV/UC | 1.927.814 | 39% |
EV/EBITDA 2020 | 2.732.549 | -2% |
EV/EBITDA 2023 | 3.474.766 | -23% |
EV/Revenue 2016 | 2.044.559 | 31% |
EV/Revenue 2020 | 2.087.427 | 29% |
EV/Revenue 2023 | 2.077.421 | 29% |
EV/BRR | 1.074.656 | 150% |
EV/VPB 2016 | 1.503.357 | 79% |
EV/VPB 2019 | 3.201.423 | -16% |
EV/Financial+Intangible Assets | 3.720.265 | -28% |
Mean EV | 2.384.424 | 13% |
EV Ceres Appraisal | 2.687.564 | |
Source: Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 209 |
Final Considerations
The fair value of the business for the Enterprise Value indicates R$ 2,687,563,915.43 to Eletrobras Distribuição Amazonas and granting of new Concession Agreement. However, the debts, liabilities with suppliers and contingencies cause the company’s Valuation to be negative at R$ 8,431,847,736.90.
Such assertion hinder the possibility of company sale and granting of new concession would only take effect if proper conditions are structured for such investor, such as transferring existing liabilities to the current shareholder and deep regulatory changes to remuneration foreseen for Eletrobras Amazonas, demonstrating the peculiar conditions of the region and the company.
The Capex required, Non-Recoverable Revenues, X Factor and more strongly the PMSO for Eletrobras Amazonas generate current amounts which decrease the business value. Although there is great conditions to reduce such companies’ costs, business governance and management are evolved, either as to productivity, quality, continuity, among other Indicators, yet, in view of the estimated track record, such transaction shall not be sufficient to neutralize all existing liabilities at Eletrobras Amazonas. This calculation considers also R$ 3.743.948.840,00 of taxes to compensate.
The analysis by multiples by private companies shows that the Enterprise Value of Eletrobras Amazo-nas is above that suggested by the metrics of the compared private companies, being, on average 13% above. This happens, because, although of the regional specificities, the increased indebtedness level, the companies’ status and specific risk premiums, regulatory adjustments and proposals added value to the company.
Ceres Inteligência Financeira | 210 |
Attachments
Market Discount Rates
Table 1712 – Market Discount Rates | |||
| |||
Cost of Rated Tax- | Cost of Real Tax- | ||
Free shareholders' | Free shareholders' | Weighted Average | |
Capital Cost (Wacc) | |||
Equity (Ke) | Equity (Ke) | ||
2017 | 16.40% | 11.73% | 8.09% |
2018 | 15.03% | 10.16% | 7.20% |
2019 | 14.97% | 10.18% | 7.30% |
2020 | 15.18% | 10.42% | 7.39% |
2021 | 15.32% | 10.65% | 7.51% |
2022 | 15.42% | 10.75% | 7.56% |
2023 | 15.46% | 10.78% | 7.57% |
2024 | 15.48% | 10.80% | 7.59% |
2025 | 15.52% | 10.84% | 7.60% |
2026 | 15.51% | 10.84% | 7.60% |
2027 | 15.53% | 10.85% | 7.61% |
2028 | 15.52% | 10.84% | 7.61% |
2029 | 15.51% | 10.83% | 7.60% |
2030 | 15.47% | 10.79% | 7.58% |
2031 | 15.47% | 10.79% | 7.58% |
2032 | 15.47% | 10.79% | 7.58% |
2033 | 15.47% | 10.79% | 7.58% |
2034 | 15.47% | 10.79% | 7.58% |
2035 | 15.47% | 10.79% | 7.58% |
2036 | 15.47% | 10.79% | 7.58% |
2037 | 15.47% | 10.79% | 7.58% |
2038 | 15.47% | 10.79% | 7.58% |
2039 | 15.47% | 10.79% | 7.58% |
2040 | 15.47% | 10.79% | 7.58% |
2041 | 15.47% | 10.79% | 7.58% |
2042 | 15.47% | 10.79% | 7.58% |
2043 | 15.47% | 10.79% | 7.58% |
2044 | 15.46% | 10.79% | 7.58% |
2045 | 15.46% | 10.79% | 7.58% |
2046 | 15.46% | 10.79% | 7.58% |
2047 | 15.46% | 10.79% | 7.58% |
2048 | 15.46% | 10.79% | 7.58% |
Source: Ceres Inteligência Financeira. |
Ceres Inteligência Financeira | 211 |
Detailed Machinery and Equipment - VMU/VNR 2022
Table 172 – VMU/VNR Ratio 2022 - Machinery and Equipment | ||||||||
VMU VNR VMU/VNR | VMU | VNR | VMU | VNR | VMU/VNR | |||
R$ million | ||||||||
2016 | 2016 | 2016 | Additions | Additions | 2022 | 2022 | 2022 | |
STORAGE, HANDLING AND TRANSPORT OF FUEL | 10.2 | 21.4 | 47.9% | 21.3 | 33.1 | 31.5 | 54.5 | 57.8% |
STORAGE, HANDLING AND TRANSPORT OF RESIDUE | 0.9 | 1.3 | 68.3% | 1.6 | 2.7 | 2.5 | 4.0 | 63.1% |
PARALLEL CAPACITOR BANK | 26.5 | 64.9 | 40.8% | 47.1 | 89.1 | 73.6 | 154.0 | 47.8% |
BUS | 15.8 | 20.6 | 76.4% | 39.0 | 46.4 | 54.7 | 67.0 | 81.7% |
SWITCH | 9.2 | 35.3 | 26.1% | 13.0 | 35.8 | 22.2 | 71.1 | 31.2% |
CONDUIT AND TUBE | 2.3 | 7.1 | 32.1% | 4.2 | 8.3 | 6.5 | 15.4 | 42.1% |
CONDUCTOR | 143.9 | 385.4 | 37.3% | 292.0 | 496.4 | 435.9 | 881.8 | 49.4% |
BREAKER | 14.2 | 32.6 | 43.7% | 31.6 | 47.1 | 45.8 | 79.6 | 57.6% |
GENERAL EQUIPMENT | 13.7 | 31.1 | 44.1% | 21.7 | 45.2 | 35.4 | 76.2 | 46.4% |
GENERAL COMPUTER EQUIPMENT | 8.1 | 47.9 | 16.9% | 6.2 | 37.6 | 14.3 | 85.5 | 16.7% |
STRUCTURE (POLE, TOWER) | 428.0 | 727.0 | 58.9% | 958.3 | 1.321.6 | 1.386.4 | 2.048.6 | 67.7% |
EQUIPMENT AND BUS SUPPORT STRUCTURE | 18.0 | 34.5 | 52.1% | 40.8 | 57.0 | 58.8 | 91.5 | 64.3% |
FIBER OPTIC | 0.9 | 3.8 | 23.7% | 1.3 | 3.6 | 2.2 | 7.5 | 29.2% |
GENERATOR | 29.7 | 40.2 | 73.8% | 69.7 | 87.9 | 99.3 | 128.0 | 77.6% |
METER | 47.4 | 86.8 | 54.7% | 71.1 | 148.8 | 118.5 | 235.5 | 50.3% |
ENGINE OF INTERNAL COMBUSTION | 43.3 | 89.7 | 48.3% | 68.3 | 139.7 | 111.6 | 229.4 | 48.6% |
PANEL, COMMAND TABLE AND CUBICLE | 93.9 | 141.1 | 66.5% | 214.1 | 283.0 | 308.0 | 424.1 | 72.6% |
LIGHTENING ROD | 1.9 | 4.1 | 45.5% | 3.8 | 6.1 | 5.6 | 10.2 | 55.1% |
BRIDGE CRANE, DERRICK OR PORTAL | 0.0 | 0.0 | 86.3% | 0.0 | 0.0 | 0.1 | 0.1 | 83.7% |
REACTOR (OR RESISTOR) | 5.0 | 6.2 | 82.0% | 12.4 | 14.7 | 17.4 | 20.8 | 83.5% |
VOLTAGE REGULATOR | 0.5 | 0.6 | 93.6% | 1.3 | 1.6 | 1.9 | 2.2 | 86.4% |
RECONNECTOR | 0.6 | 0.8 | 71.7% | 1.3 | 1.7 | 1.9 | 2.6 | 74.1% |
ANTI-NOISE SYSTEM | 0.3 | 0.4 | 72.3% | 0.6 | 0.8 | 0.8 | 1.1 | 76.7% |
ENERGY FEEDING SYSTEM | 4.4 | 7.4 | 59.0% | 8.1 | 13.5 | 12.5 | 20.9 | 59.8% |
Ceres Inteligência Financeira | 212 |
| ||||||||
COMPRESSED AIR SYSTEM | 1.1 | 2.2 | 51.3% | 2.4 | 3.6 | 3.6 | 5.9 | 61.1% |
GROUNDING SYSTEM | 10.2 | 13.7 | 74.4% | 24.5 | 30.2 | 34.7 | 44.0 | 78.9% |
LOCAL COMMUNICATION SYSTEM | 0.2 | 0.4 | 48.0% | 0.3 | 0.7 | 0.5 | 1.1 | 48.4% |
EXHAUSTING, VENTING AND AIR CONDITIONING SYSEM | 0.0 | 0.0 | 54.8% | 0.0 | 0.0 | 0.0 | 0.1 | 63.2% |
LIGHTING AND POWER SYSTEM | 1.2 | 4.2 | 29.8% | 2.2 | 4.6 | 3.5 | 8.8 | 39.3% |
LUBE, OIL AND REGULATION SYSTEM | 0.0 | 0.1 | 30.5% | 0.0 | 0.1 | 0.1 | 0.2 | 40.1% |
FIRE PROTECTION SYSTEM | 0.7 | 0.8 | 85.4% | 1.6 | 2.0 | 2.3 | 2.9 | 81.1% |
PROTECTION, MEASUREMENT AND AUTOMATION SYSTEM | 0.8 | 1.4 | 57.5% | 1.4 | 2.5 | 2.2 | 3.9 | 56.0% |
RADIOCOMMUNICATION SYSTEM | 0.9 | 1.7 | 55.5% | 1.6 | 2.9 | 2.5 | 4.6 | 54.5% |
EQUIPMENT COOLING SYSTEM | 1.2 | 2.6 | 45.1% | 2.4 | 3.9 | 3.6 | 6.5 | 55.4% |
ELECTRONIC SURVEILLANCE SYSTEM | 0.1 | 0.1 | 69.4% | 0.1 | 0.2 | 0.2 | 0.3 | 72.8% |
SOFTWARE | 0.0 | 0.0 | 76.7% | 0.0 | 0.1 | 0.1 | 0.1 | 36.7% |
GROUNDING TRANSFORMER | 0.8 | 1.7 | 45.7% | 1.7 | 2.5 | 2.4 | 4.2 | 58.3% |
DISTRIBUTION TRANSFORMER | 129.5 | 194.4 | 66.6% | 287.0 | 390.5 | 416.5 | 584.9 | 71.2% |
POWER TRANSFORMER | 94.8 | 182.8 | 51.9% | 219.7 | 300.8 | 314.5 | 483.6 | 65.0% |
MEASURE TRANSFORMER | 11.8 | 19.7 | 59.8% | 26.9 | 36.3 | 38.7 | 56.0 | 69.1% |
AUXILIARY SERVICES TRANSFORMER | 0.6 | 1.0 | 57.4% | 1.3 | 1.8 | 1.8 | 2.7 | 67.5% |
UNIT OF PHOTOVOLTAIC SOLAR GENERATION | 3.6 | 5.1 | 70.0% | 4.8 | 10.7 | 8.4 | 15.8 | 52.9% |
Source: Ceres Inteligência Financeira |
Ceres Inteligência Financeira | 213 |
PMSO Background
The tables below contain the grouping conducted of the ledger accounts related to each utility’s PMSO. Firstly, similar accounts were grouped, in terms of type of expenditure. After such exercise, groups were inserted into the PMSO accounts. Names and codes of the ledger accounts are described according to those from the accounting statements provided by the utility. Amounts are adjusted by the Base Date of December/2016.
Table 173 – Grouped Personnel (PMSO) and Realized Accounts 2012-2016 1 of 4 | |||||
AmE | 2012 | 2013 | 2014 | 2015 | 2016 |
Total PMSO | 574,267 | 573,183 | 628,239 | 557,728 | 591,426 |
Personnel | 254,689 | 278,909 | 262,723 | 247,648 | 282,625 |
13th Salary | 11,847 | 9,203 | 10,506 | 11,312 | 11,284 |
13th Salary - Provision | 0 | 0 | 0 | 0 | 0 |
13th Salary Administration Board | 0 | 0 | 0 | 0 | 0 |
13th Salary Fiscal Board | 0 | 0 | 0 | 0 | 0 |
13th Salary - effective | 11,847 | 9,203 | 10,506 | 11,312 | 11,284 |
Provision for 13th Salary | 0 | 0 | 0 | 0 | 0 |
Vacation Premium | 24,935 | 23,062 | 27,683 | 29,086 | 29,336 |
Vacation Premium | 0 | 0 | 15 | 0 | 13 |
Vacation Premium | 4,770 | 4,334 | 4,230 | 4,794 | 4,644 |
Effective Vacation | 0 | 22 | 19 | 20 | 19 |
Effective Vacation | 7,263 | 6,786 | 6,852 | 7,380 | 6,766 |
Vacation Bonus | 0 | 22 | 62 | 48 | 106 |
Vacation Bonus | 12,902 | 11,898 | 16,504 | 16,844 | 17,787 |
Cost Allowance | 3,059 | 10,709 | 8,297 | 2,758 | 2,300 |
Transport allowance | 2,571 | 2,293 | 2,114 | 1,864 | 1,593 |
Other | 51 | 53 | 37 | 31 | 59 |
1.9 – Labor Indemnities | 437 | 8,363 | 6,146 | 862 | 648 |
After one year | 10 | 9 | 103 | 7 | 4 |
Other Remuneration | 10 | 9 | 103 | 7 | 4 |
Medical, Dental and Hospital Assistance | 4 | 1 | 2 | 74 | 42 |
Labor Safety, Medicine and Hygiene | 4 | 1 | 2 | 74 | 42 |
Academy Allowance | 2 | 1 | 6 | 24 | 0 |
Social Assistance | 2 | 1 | 6 | 24 | 0 |
Allowance to Special Individuals | 68 | 129 | 29 | 191 | 469 |
Allowance Move Cost* | 68 | 129 | 29 | 191 | 469 |
Allowance Day Care | 27 | 0 | 94 | 27 | 0 |
Indemnity / Compensatory Bonus | 27 | 0 | 94 | 27 | 0 |
Higher Level / Education Allowance | 0 | 0 | 0 | 0 | 0 |
Pre-School Allowance | 0 | 0 | 0 | 0 | 0 |
Source: Own draft, based on utility’s accounting statements |
Ceres Inteligência Financeira | 214 |
| ||||||
Table 174 – Grouped Personnel (PMSO) and Realized Accounts 2012-2016 2 of 4 | ||||||
AmE | 2012 | 2013 | 2014 | 2015 | 2016 | |
Education Allowance | 55 | 76 | 111 | 89 | 90 | |
Funeral Allowance | 55 | 76 | 111 | 89 | 90 | |
Funeral Allowance | 3,723 | 3,960 | 3,570 | 3,637 | 4,019 | |
Day Care Allowance | 909 | 924 | 983 | 914 | 1,021 | |
TFD- PPRS-Periodic/Per Diems | 759 | 725 | 711 | 537 | 655 | |
TFD- PPRS- Periodic /Lodging | 743 | 750 | 833 | 927 | 1,034 | |
TFD- PPRS- Periodic /Tickets | 1,303 | 1,560 | 1,044 | 1,260 | 1,304 | |
TFD- PPRS- Periodic /Taxi | 0 | 0 | 0 | 0 | 6 | |
Treatment away from Domicile - PPRS/Periodic | 9 | 0 | 0 | 0 | 0 | |
Allowances | 0 | 0 | 14 | 40 | 9 | |
Living Allowance | 0 | 0 | 14 | 40 | 9 | |
Ca Professional-Taxi | 1,721 | 987 | 750 | 1,053 | 537 | |
Education Allowance – Higher Level | 852 | 585 | 423 | 216 | 174 | |
Education Allowance – Higher Level – Post-Grad | 66 | 64 | 59 | 60 | 83 | |
Training/Per Diems | 174 | 104 | 61 | 224 | 74 | |
Training /Lodging | 545 | 174 | 120 | 272 | 125 | |
Training /Taxi | 85 | 60 | 87 | 280 | 81 | |
Cap Professional – Per Diem | 382 | 275 | 198 | 267 | 151 | |
Training /Tickets | 382 | 275 | 198 | 267 | 151 | |
Cap Professional - Ticket | 494 | 535 | 1,171 | 1,123 | 843 | |
Training | 494 | 535 | 1,171 | 1,123 | 843 | |
Professional Qualification | 1,553 | 1,629 | 1,715 | 1,693 | 1,759 | |
Education Allowance ACT | 1,553 | 1,629 | 1,715 | 1,693 | 1,759 | |
Complementation of Illness Allowance | 16,128 | 16,284 | 15,991 | 15,937 | 14,546 | |
After One Year | 11,871 | 11,879 | 11,882 | 12,441 | 13,189 | |
Remuneration Commissioned Position- ART. 37 | 4,257 | 4,405 | 4,109 | 3,495 | 1,357 | |
Fgts | 12,221 | 11,560 | 12,366 | 12,351 | 13,514 | |
FGTS | 15 | 38 | 44 | 37 | 118 | |
FGTS | 11.118 | 10.528 | 10.800 | 10.992 | 11.817 | |
FGTS - Provision | 0 | 5 | 9 | 7 | 16 | |
FGTS -Provision | 1.087 | 990 | 1.514 | 1.316 | 1.563 | |
Source: Own draft, based on utility’s accounting statements |
Ceres Inteligência Financeira | 215 |
| ||||||
Table 175 – Grouped Personnel (PMSO) and Realized Accounts 2012-2016 3 of 4 | ||||||
AmE | 2012 | 2013 | 2014 | 2015 | 2016 | |
Expenses with Periodic Exams | 11,606 | 12,586 | 12,819 | 16,902 | 25,291 | |
Complement Illness Allowance | 178 | 128 | 361 | 303 | 376 | |
1.6.2- Medical Assistance | 11,428 | 12,458 | 12,457 | 16,599 | 24,915 | |
Expenses with Private Security | 5,240 | 4,495 | 4,840 | 5,250 | 5,416 | |
1.6.1 – Contribution Maintenance Foundation-Previnorte | 5,240 | 4,495 | 4,840 | 5,250 | 5,416 | |
Position Bonus | 8,702 | 8,518 | 8,241 | 8,582 | 8,894 | |
1.4 – Bonus due to the Position | 8,702 | 8,518 | 8,241 | 8,582 | 8,894 | |
Labor Indemnities | 0 | 0 | 0 | 1 | 1 | |
Other Social Benefits | 0 | 0 | 0 | 1 | 1 | |
Inss - Provision | 30,743 | 29,122 | 31,033 | 30,963 | 33,810 | |
INSS | 64 | 139 | 167 | 211 | 347 | |
INSS | 27,961 | 26,497 | 27,061 | 27,445 | 29,515 | |
INSS - Provision | 2,718 | 2,475 | 3,784 | 3,289 | 3,907 | |
INSS - Provision | 0 | 12 | 21 | 18 | 40 | |
Other Personnel Provisions | 12,670 | 13,149 | 12,083 | 11,992 | 14,375 | |
SESI/SENAI | 0 | 11 | 3 | 2 | 11 | |
Addition SENAI | 0 | 1 | 0 | 0 | 1 | |
Addition SENAI | 286 | 280 | 274 | 278 | 305 | |
Addition SENAI - Provision | 0 | 0 | 0 | 0 | 0 | |
ADDITION SENAI - Provision | 27 | 25 | 38 | 33 | 39 | |
FNDE | 0 | 9 | 3 | 3 | 11 | |
FNDE | 3,469 | 3,334 | 3,391 | 3,430 | 3,694 | |
FNDE Provision | 0 | 1 | 0 | 0 | 2 | |
FNDE - Provision | 340 | 309 | 473 | 411 | 488 | |
Provision for Vacation | 0 | 43 | 61 | 50 | 114 | |
SAT/INCRA/SEBRAE | 0 | 13 | 3 | 2 | 15 | |
SAT/INCRA/SEBRAE | 4,222 | 5,008 | 3,260 | 3,318 | 4,758 | |
SAT/INCRA/SEBRAE Provision | 0 | 2 | 0 | 0 | 2 | |
SAT/INCRA/SEBRAE- Provision | 516 | 470 | 719 | 625 | 742 | |
SENAI/SESI | 3,469 | 3,334 | 3,386 | 3,430 | 3,705 | |
SENAI/SESI - Provision | 340 | 309 | 473 | 411 | 488 | |
Source: Own draft, based on utility’s accounting statements |
Ceres Inteligência Financeira | 216 |
| ||||||
Table 176 – Grouped Personnel (PMSO) and Realized Accounts 2012-2016 4 of 4 | ||||||
AmE | 2012 | 2013 | 2014 | 2015 | 2016 | |
Other | 0 | 22,928 | 1,908 | 0 | 0 | |
PDV (PPRS) Provision | 0 | -33 | 0 | 0 | 0 | |
Incentive to PDV - Provision | 0 | 3,767 | 0 | 0 | 0 | |
Volunteer Dismissal Program | 0 | 19,194 | 1,908 | 0 | 0 | |
Profit Participation | 16,633 | 14,263 | 11,851 | 9,251 | 3,308 | |
1.11 - PLR – Profit Share | 16,633 | 14,263 | 11,851 | 9,251 | 3,308 | |
PDV | 0 | 4,647 | 0 | 0 | 0 | |
PPRS - PID – Former employee | 0 | 4,647 | 0 | 0 | 0 | |
Personnel - Overtime | 6,610 | 3,895 | 5,649 | 6,554 | 8,677 | |
Notice Hours | 398 | 278 | 275 | 672 | 948 | |
Overtime | 6,195 | 3,602 | 5,360 | 5,875 | 7,727 | |
Hours in Traffic | 16 | 14 | 15 | 6 | 2 | |
Personnel-Adm/Hon-Ins/Ad./Peric/T/ | 15,968 | 14,207 | 15,835 | 16,705 | 19,182 | |
Addition Night Work | 670 | 699 | 583 | 732 | 861 | |
Insalubrity | 36 | 34 | 30 | 28 | 26 | |
Laboriousness | 692 | 672 | 674 | 712 | 812 | |
Risk Level | 14,570 | 12,802 | 14,548 | 15,233 | 17,484 | |
Provision for Vacations | 9,690 | 8,804 | 9,999 | 8,664 | 10,314 | |
Provision for Vacations | 9,690 | 8,804 | 9,999 | 8,664 | 10,314 | |
Remuneration | 293 | 647 | 783 | 972 | 1,541 | |
Board of Administration - Fees | 177 | 195 | 216 | 203 | 204 | |
Tax Council - Fees | 106 | 98 | 92 | 110 | 64 | |
Fees Decree Law 2355/87 | 0 | 296 | 385 | 634 | 1,251 | |
Other Remunerations | 10 | 58 | 90 | 25 | 23 | |
Remuneration Commissioned Position | 0 | 0 | 0 | 0 | 0 | |
Salary | 59,811 | 57,623 | 58,877 | 60,150 | 64,333 | |
Remuneration – Base Salary | 59,811 | 57,623 | 58,877 | 60,150 | 64,333 | |
Transfer | 135 | 190 | 254 | 276 | 401 | |
Transfer | 135 | 190 | 254 | 276 | 401 | |
V . C . P . | -17,768 | -15,834 | -23,161 | -23,461 | -11,819 | |
Reversion of Prov. Last Month Exerc. Ant. 1 | 0 | 0 | -74 | 0 | 0 | |
Reversion of Prov. Last Month Exerc. Ant. 2 | -17,768 | -15,834 | -23,087 | -23,461 | -11,819 | |
Meal Voucher | 18,125 | 21,249 | 29,106 | 15,180 | 19,999 | |
1.8 – WoŒkeŒ[s Meal PŒogŒau | 18,125 | 21,249 | 29,106 | 15,180 | 19,999 | |
Source: Own draft, based on utility’s accounting statements |
Ceres Inteligência Financeira | 217 |
| |||||
Table 177 – Grouped Material (PMSO) and Realized Accounts 2012-2016 | |||||
AmE | 2012 | 2013 | 2014 | 2015 | 2016 |
Materials | 13,478 | 10,172 | 9,950 | 9,278 | 5,260 |
(-) CREDIT COFINS | 0 | 0 | 0 | 0 | -1,948 |
2.9 - (-) COFINS Material | 0 | 0 | 0 | 0 | -1,948 |
(-) CREDITS PASEP | 0 | 0 | 0 | 0 | -423 |
2.8 - (-) PIS Material | 0 | 0 | 0 | 0 | -423 |
SUBSCRIPTION OF NEWSPAPERS, MAGAZINES AND BOOKS | 0 | 7 | 0 | 6 | 8 |
Technical publications | 0 | 7 | 0 | 6 | 8 |
FUELS AND LUBE OILS | 428 | 58 | 26 | 27 | 15 |
Fuels | 428 | 58 | 26 | 27 | 15 |
Lube Oils | 0 | 0 | 0 | 0 | 0 |
EVENTS | 210 | 82 | 2 | 3 | 13 |
Disclosures, Promotions and Events | 210 | 82 | 2 | 3 | 13 |
OFFICE ROUTINE AND SUPPORT | 149 | 0 | 0 | 0 | 47 |
Material for Printing of Invoices and Customer Inspections | 149 | 0 | 0 | 0 | 47 |
CLEANING AND CONSERVATION OF REAL-ESTATE AND FACILITIES | 523 | 422 | 343 | 269 | 305 |
Maintenance and Conservation of Own Real-Estate | 523 | 422 | 343 | 269 | 305 |
MAINTENANCE OF RD | 7,519 | 5,779 | 7,236 | 4,687 | 4,930 |
Distribution Maintenance | 7,519 | 5,779 | 7,236 | 4,687 | 4,930 |
MAINTENANCE AND CONSUMPTION IN DATA PROCESSING | 137 | 8 | 25 | 4 | 88 |
2.7 – Information Technology | 137 | 8 | 25 | 4 | 88 |
MAINTENANCE AND REPAIR OF VEHICLES | 33 | 5 | 2 | 0 | 0 |
Maintenance of Vehicles | 33 | 5 | 2 | 0 | 0 |
MAINTENANCE, MANUFACTURE OR ACQUISITION OF TOOLS AND SERVICE | |||||
EQUIP. | 1,574 | 602 | 481 | 922 | 432 |
Maintenance of Plants | 0 | 0 | 0 | 0 | 0 |
Spare parts (imported) | 0 | 0 | 0 | 0 | 0 |
Spare parts (national) | 54 | 2 | 24 | 0 | 0 |
Work Safety | 1,520 | 600 | 457 | 922 | 432 |
MATERIAL – PRO-RATA OF REMAINING COST | 2,904 | 3,029 | 1,835 | 3,359 | 1,792 |
General Consumption Material | 2,904 | 3,029 | 1,835 | 3,359 | 1,792 |
Other | 1 | 180 | 1 | 0 | 0 |
Environmental and Monitoring Actions | 1 | 0 | 1 | 0 | 0 |
Center for Preservation and Research of Mammals and Chelonians | 0 | 179 | 0 | 0 | 0 |
Material for Vila de Balbina | 0 | 1 | 0 | 0 | 0 |
Source: Own draft, based on utility’s accounting statements |
Ceres Inteligência Financeira | 218 |
| |||||
Table 178 – Grouped Service (PMSO) and Realized Accounts 2012-2016 1 of 2 | |||||
AmE | 2012 | 2013 | 2014 | 2015 | 2016 |
Services | 270,117 | 238,554 | 230,615 | 232,940 | 191,082 |
Water / Sewage / Electricity | 507 | 409 | 432 | 330 | 311 |
Consumption of Water and Sewage Fee | 474 | 390 | 420 | 308 | 311 |
Consumption of Electric Energy | 32 | 19 | 12 | 22 | 0 |
Support and Infrastructure | 32,921 | 28,594 | 31,654 | 26,899 | 30,631 |
Cleaning and Conservation | 5,847 | 5,287 | 4,772 | 4,314 | 4,479 |
Maintenance and Vehicle Driving | 4,719 | 3,680 | 3,722 | 6,031 | 8,693 |
Maintenance and Conservation of Furniture and Equipment | 1,397 | 976 | 805 | 552 | 773 |
Maintenance and Conservation of Own Property | 3,738 | 3,977 | 3,121 | 4,109 | 2,245 |
Maivteva e avd CovseŒÀatiov of ThiŒd Pa ties[ PŒopeŒtÇ | 41 | 0 | 0 | 0 | 0 |
General Auxiliary Service | 0 | 0 | 0 | 550 | 933 |
Surveillance Service | 17,179 | 14,674 | 19,234 | 11,343 | 13,507 |
Activities with the Consumer | 53,270 | 59,892 | 60,262 | 57,964 | 75,052 |
Registration and Administrative Billing | 0 | 321 | 0 | 82 | 2,352 |
Cut and Reconnection | 15,945 | 12,329 | 11,753 | 15,959 | 15,228 |
Reading and Delivery of Bill | 0 | 0 | 0 | 13,601 | 19,170 |
Inspection Service | 2,476 | 16,827 | 8,265 | 12,335 | 15,693 |
Technical Service of Support - Commercial | 0 | 0 | 0 | 0 | 7,720 |
Teleservice | 5,943 | 2,700 | 5,716 | 5,265 | 5,148 |
Telemetry Service | 1,035 | 1,918 | 1,613 | 1,622 | 1,080 |
Commercial Services | 27,871 | 25,797 | 32,915 | 9,100 | 8,660 |
Communications (Telephone, Internet, IT, Post Office) | 17,728 | 13,987 | 17,304 | 11,560 | 10,879 |
Call Center 0800 | 2,446 | 2,467 | 5,521 | 2,151 | 1,241 |
Internet and Broad Band | 14 | 1,093 | 1,516 | 956 | 317 |
Link | 12,291 | 8,500 | 8,842 | 7,119 | 8,024 |
Postal Services | 289 | 222 | 233 | 271 | 238 |
Mobile and Fixed Telephony | 2,690 | 1,705 | 1,193 | 1,063 | 1,059 |
Consulting and Auditing | 10,550 | 11,970 | 11,745 | 5,884 | 7,239 |
External Audit | 920 | 490 | 1,031 | 706 | 1,339 |
Consulting | 9,535 | 11,091 | 4,641 | 4,729 | 5,453 |
Implementation of MCPSE | 0 | 0 | 5.646 | 0 | 0 |
Services of Actuarial Evaluation and Files | 95 | 389 | 428 | 449 | 447 |
Source: Own draft, based on utility’s accounting statements |
Ceres Inteligência Financeira | 219 |
| ||||||
Table 179 – Grouped Service (PMSO) and Realized Accounts 2012-2016 2 of 2 | ||||||
AmE | 2012 | 2013 | 2014 | 2015 | 2016 | |
Expenses with Travel and Training | 7,269 | 3,883 | 3,128 | 4,018 | 2,230 | |
Lodging | 2,374 | 1,141 | 974 | 1,259 | 815 | |
Tickets | 4,268 | 2,351 | 1,845 | 2,178 | 1,144 | |
Taxi | 627 | 391 | 309 | 581 | 270 | |
Taxes | 0 | 0 | 0 | 0 | -37,467 | |
3.14 - (-) PIS Services | 0 | 0 | 0 | 0 | -6,683 | |
3.15 - (-) COFINS Services | 0 | 0 | 0 | 0 | -30,784 | |
Logistics | 12,318 | 5,964 | 8,332 | 4,892 | 3,670 | |
Freights and Tows | 11,538 | 5,604 | 7,766 | 3,260 | 2,959 | |
Transport Services | 780 | 360 | 566 | 1,632 | 711 | |
Maintenance of the Distribution Network (RD) | 80,222 | 72,221 | 61,559 | 94,501 | 67,838 | |
Dead Line | 9,360 | 1,382 | 2,617 | 2,008 | 701 | |
Live Line | 8,873 | 6,341 | 6,777 | 13,116 | 5,822 | |
Distribution Maintenance | 49,076 | 56,450 | 43,394 | 58,176 | 51,589 | |
Maintenance of Vila de Balbina | 0 | 0 | 0 | 0 | 0 | |
Maintenance of Plants | 0 | 0 | 0 | 0 | 0 | |
Maintenance and Conservation of Electric Installations | 0 | 183 | 0 | 0 | 0 | |
Tree Trimming / Hoeing of the Encumbrance Range | 9,239 | 6,689 | 8,772 | 21,201 | 9,726 | |
Recovery of Transformers | 3,674 | 1,176 | 0 | 0 | 0 | |
Other | 2,411 | 1,676 | 1,785 | 2,632 | 3,020 | |
Administration of Accounts and Guarantees | 0 | 0 | 1,120 | 1,887 | 1,815 | |
Customs Broker | 0 | 0 | 0 | 116 | 655 | |
Environment | 789 | 733 | 115 | 0 | 0 | |
Minor Apprentice | 1,505 | 875 | 471 | 579 | 544 | |
OtheŒ ThiŒd Pa ties[ “eŒÀi es | 117 | 68 | 78 | 50 | 6 | |
Services Provided by Eletronorte | 0 | 0 | 0 | 0 | 0 | |
Publicity and Advertising | 5,331 | 2,470 | 2,089 | 2,171 | 2,171 | |
Advertising, Promotions and Events | 865 | 242 | 180 | 422 | 204 | |
Legal Publicity | 4,465 | 2,228 | 1,908 | 1,749 | 1,967 | |
Administrative Support and IT Services | 47,590 | 37,486 | 32,324 | 22,091 | 25,507 | |
Maintenance and Conservation of Equipment | 4,686 | 4,880 | 7,195 | 5,191 | 5,348 | |
Technical Support Service | 2,252 | 2,018 | 3,692 | 5,698 | 9,166 | |
Services of Printing, Reproduction and Printshop | 4,062 | 2,844 | 2,037 | 2,131 | 1,475 | |
3.6 – Technical Support Services - Adm | 36,590 | 27,745 | 19,399 | 9,070 | 9,517 |
Ceres Inteligência Financeira | 220 |
| |||||
Table 1801 – Grouped Others (PMSO) and Realized Accounts 2012-2016 1 of 2 | |||||
AmE | 2012 | 2013 | 2014 | 2015 | 2016 |
Other | 35,983 | 45,548 | 124,951 | 67,862 | 112,459 |
Rents/ Leasing/ Tenancy/ Monthly Dues and the like | 10,183 | 4,925 | 5,063 | 3,723 | 3,723 |
Real-estate | 6,928 | 2,349 | 1,873 | 1,085 | 586 |
Other Assets | 13 | 6 | 8 | 0 | 0 |
Data Processing | 605 | 511 | 413 | 493 | 528 |
Substations | 2,596 | 2,058 | 2,713 | 2,144 | 2,609 |
Tanks for storage of fuels | 0 | 0 | 0 | 0 | 0 |
Vehicles | 42 | 0 | 56 | 0 | 0 |
Own Energy Consumption | 8,016 | 6,045 | 5,334 | 5,878 | 21,677 |
4.1 – Own Electric Energy Consumption | 8,016 | 6,045 | 5,334 | 5,878 | 21,677 |
Judicial Expenses / Indemnities/ Process Costs | 8,854 | 18,036 | 92,619 | 17,986 | 72,870 |
Several Infraction Reports | 0 | 0 | 0 | 0 | 1,104 |
Electric Damages | 649 | 751 | 1,171 | 1,123 | 1,893 |
Material/Environmental Damages | 236 | 786 | 95 | 61 | 212 |
Notary Expenses | 123 | 133 | 103 | 55 | 204 |
Expenses with Labor Processes | 0 | 0 | 0 | 0 | 0 |
Indemnities and Extra Judicial Agreements | 0 | 0 | 0 | 0 | 0 |
Judicial Indemnities | 683 | 146 | 40 | 0 | 0 |
Civil Judicial Indemnities | 6,512 | 8,334 | 29,976 | 15,445 | 68,539 |
Labor Judicial Indemnities | 370 | 7,812 | 61,027 | 1,238 | 827 |
Tax Judicial Indemnities | 257 | 71 | 196 | 53 | 79 |
Traffic Ticket | 24 | 3 | 10 | 12 | 12 |
Losses with the Prescription of Tax Credits | 0 | 0 | 0 | 0 | 0 |
Donations / Contributions / Subventions | 606 | 555 | 518 | 319 | 273 |
IBAMA and Walmiri-Atroari Agreement | 0 | 0 | 0 | 0 | 0 |
Several Class Associations | 538 | 481 | 478 | 319 | 273 |
Donations and Cultural/Artistic Sponsorship | 68 | 73 | 40 | 0 | 0 |
Trainees / Minor Apprentices / Employees on Loan | 4,377 | 5,042 | 3,907 | 5,352 | 5,525 |
Expenses with Trainees | 847 | 586 | 405 | 310 | 466 |
Employees on Loan | 3,530 | 4,456 | 3,502 | 5,042 | 5,058 |
Source: Own draft, based on utility’s accounting statements |
Ceres Inteligência Financeira | 221 |
| ||||||
Table 1812 – Grouped Others (PMSO) and Realized Accounts 2012-2016 2 of 2 | ||||||
AmE | 2012 | 2013 | 2014 | 2015 | 2016 | |
Infractions / ANEEL Fines | 0 | 0 | 0 | 24,448 | 50,780 | |
4.14 – Penalties of Transgression of Indicators DIC/ FIC E DRC/ DRP | 0 | 0 | 0 | 12,381 | 16,352 | |
4.15 - ANEEL Fines – Infraction Report | 0 | 0 | 0 | 12,067 | 34,428 | |
4.18 – Factor of Cut of Regulatory Losses | 0 | 0 | 0 | 0 | 0 | |
4.19 – Limit of Specific Regulatory Consumption | 0 | 0 | 0 | 0 | 0 | |
Other | -20,338 | -12,734 | -5,183 | -10,468 | -57,883 | |
Actions of Social Responsibility (ARS) | 0 | 1,042 | 0 | 0 | 0 | |
Missing from the Inventory | 457 | 303 | 84 | 1,692 | 2,095 | |
Other 1 | 51 | 53 | 1,394 | 31 | 1,191,477 | |
Losses with Stock | 0 | 0 | 0 | 0 | 0 | |
PPRS Former employees | 0 | 0 | 0 | 0 | 222 | |
- | ||||||
4.13- Recovery of Expenses | -20,846 | -14,132 | -6,661 | -12,192 | 1,251,678 | |
Provisions / Reversions / Renovations / Administrative Expenses / Advertis- | ||||||
ing | 5,911 | 6,224 | 5,577 | 3,887 | 2,414 | |
Marketing Publications | 5,911 | 6,224 | 5,577 | 3,887 | 2,414 | |
Insurance | 1,388 | 1,280 | 1,137 | 1,336 | 1,675 | |
Against Fire | 0 | 0 | 0 | 0 | 258 | |
Engineering Risk | 520 | 384 | 358 | 558 | 339 | |
Group Life | 868 | 896 | 779 | 778 | 1,079 | |
Training / Other Per Diem / Travel /Lodging / Medical Expenses | 1,747 | 813 | 610 | 840 | 560 | |
Allowances | 1,747 | 813 | 610 | 840 | 560 | |
Fees / Taxes/ Rates / Tariffs | 15,239 | 15,362 | 15,369 | 14,560 | 10,846 | |
Environmental/Monitoring Actions | 129 | 178 | 127 | 0 | 0 | |
Operating License | 157 | 79 | 113 | 116 | 137 | |
Consumers' Council | 0 | 103 | 72 | 34 | 0 | |
Inquiry SPC/Serasa | 3,124 | 2,285 | 1,638 | 1,610 | 1,102 | |
Taxes and Fees | 2,128 | 3,352 | 3,165 | 2,595 | 1,478 | |
IPTU | 612 | 80 | 791 | 1,033 | 766 | |
IPVA | 288 | 221 | 235 | 232 | 193 | |
Collection Tariffs | 8,801 | 9,064 | 9,157 | 8,745 | 8,450 | |
Tariffs on bank movement | 0 | 0 | 71 | 195 | 603 | |
4.16 - PIS other | 0 | 0 | 0 | 0 | -336 | |
4.17 - COFINS other | 0 | 0 | 0 | 0 | -1,548 | |
Source: Own draft, based on utility’s accounting statements |
Ceres Inteligência Financeira | 222 |
Re-rating Net Debt and Working Capital Balances
| |||||
Table 1823 – Re-rating of Asset Balances | |||||
Alt. Due | |||||
R$'000 | DFP Dec/16 | Dec/16 Alt. | Rating DD | Rating Ceres | |
Diligence | |||||
Assets | |||||
Current | 2,015,807 | 1,881,726 | |||
Cash and cash equivalents | 71,343 | (658) | 70,685 | Net Debt | Net Debt |
Surety and Securities - TVM | 28,706 | 28,706 | Net Debt | Net Debt | |
Working Capi- | |||||
Customers | 609,707 | (84,988) | 524,719 | tal | Working Capital |
Working Capi- | |||||
Fees and social contributions | 22,495 | 22,495 | tal | Working Capital | |
Working Capi- | |||||
Stocks | 122,987 | (1,965) | 121,022 | tal | Working Capital |
Working Capi- | |||||
Reimbursement right | 897,600 | (5,709) | 891,891 | tal | Net Debt |
CCC | 808,776 | ||||
CDE | 88,824 | ||||
Working Capi- | |||||
Financial asset | 77,062 | 77,062 | tal | CVA | |
Working Capi- | |||||
Other assets | 185,907 | (40,761) | 145,146 | tal | Working Capital |
Non-Current | 9,022,635 | 9,028,344 | |||
Working Capital | |||||
Customers | 105,791 | 105,791 | n/a | LP (Feb/18) | |
Working Capital | |||||
Fees and social contributions | 1,421,805 | 1,421,805 | Net Debt | LP | |
Guarantee and judicial deposits | 413,730 | 413,730 | Net Debt | Net Debt | |
Reimbursement right | 3,573,069 | 5,709 | 3,578,778 | Net Debt | Net Debt |
CCC | 3,573,069 | ||||
Financial assets – concessions of public service | 2,128,125 | 2,128,125 | |||
Working Capital | |||||
Investments | 17,107 | 17,107 | LP | ||
Gross Intangible | 649,064 | 649,064 | |||
(-) Accrued Amortization | (508,299) | (508,299) | |||
Fixed assets | 1,944,240 | 1,944,240 | |||
(-) Accrued depreciation | (721,997) | (721,997) | |||
Source: Own draft based on DFP 2016 and on the Accounting-Capital Due Dilligence Report |
Ceres Inteligência Financeira | 223 |
| |||||
Table 183 - Re-rating of Liabilities Balances | |||||
Alt. Due Dili- | |||||
R$'000 | DFP Dec/16 | Dec/16 Alt. | Rating DD | Rating Ceres | |
gence | |||||
Lia ilities avd “ha eholdeŒ[s E‹uit | |||||
Current | 36,484,666 | 29,571,170 | |||
Working Capi- | |||||
Suppliers | 4,819,380 | (1,141,024) | 3,678,356 | tal | |
National materials and services | 5,937,475 | Net Debt | |||
Transfer to liabilities LP | (2,461,012) | Net Debt | |||
Independent producers | 336,112 | Working Capital | |||
Energy Supplier AmGT | 159,726 | Working Capital | |||
CCEE | 33,552 | Working Capital | |||
Encumbrances from the use of electric | |||||
energy | 11,673 | Working Capital | |||
Petrobrás Installments | 801,854 | Net Debt | |||
Loans | 88,542 | 88,542 | Net Debt | Net Debt | |
Lease Operation | 136,662 | 136,662 | Net Debt | Net Debt | |
Working Capital | |||||
Onerous contracts | 812,694 | 812,694 | DRE | LP | |
Working Capi- | |||||
Fees and social contributions | 93,433 | 93,433 | tal | Working Capital | |
Working Capi- | |||||
Estimated encumbrances | 42,298 | 42,298 | tal | Working Capital | |
Working Capi- | |||||
Financial liability | 103,157 | 103,157 | tal | CVA | |
Working Capi- | |||||
Other liabilities | 160,071 | (105,836) | 54,235 | tal | Working Capital |
Non Current | 14,116,837 | 15,364,973 | |||
Suppliers | 8,055,796 | 1,141,024 | 9,196,820 | Net Debt | Net Debt |
Petrobrás Installments | 8,055,796 | ||||
Transfer to liabilities CP | 2,461,012 | ||||
Difference of price of the gas transport | |||||
installment | (2,364,318) | ||||
Difference of price of the oil - RES | |||||
427/2011 ANEEL | (96,694) | ||||
Loans | 1,898,681 | 1,898,681 | Net Debt | Net Debt | |
Lease Operation | 1,032,842 | 1,032,842 | Net Debt | Net Debt | |
Provision for outstanding controlled | 158,036 | 158,036 | Net Debt | Net Debt | |
Post-employment benefit | 2,160 | 2,160 | Net Debt | Net Debt | |
Provision for judicial causes | 1,630,713 | 1,630,713 | Net Debt | Net Debt | |
Reimbursement right | 1,157,893 | 1,157,893 | Net Debt | Net Debt | |
ICMS CCC | 1,055,109 | ||||
PIS/COFINS CCC | 102,784 | ||||
AFAC | 117,446 | 117,446 | |||
Working Capital | |||||
Other liabilities | 63,270 | 107,112 | 170,382 | Net Debt | LP |
Net Equity | (9,334,632) | (9,334,632) | |||
Social Capital | 4,610,171 | 4,610,171 | |||
Adjustment of equity evaluation | (5,642) | (5,642) | |||
Accrued losses | (13,939,161) | (13,939,161) | |||
Source: Own draft based on DFP 2016 and on the Accounting-Capital Due Dilligence Report | |||||
| |||||
Ceres Inteligência Financeira | 224 |
To
Banco Nacional de Desenvolvimento Econômico e Social
(Brazilian Development Bank - "BNDES")
Av. República do Chile nº 100
Rio de Janeiro - RJ
Att.: Mrs. Lidiane Delesderrier Gonçalves - Manager of Contract OCS 028/2017
September 18, 2017
Dear,
Pursuant to service contract OCS 028/201 7 (“the Contract") signed February 14, 2017 by BNDES and Consortium Mais Energia B (“the Consortium”), this report presents the result of our analysis related to the Privatization of Eletrobras System Distributors.
The result of our work is detailed in this document titled “Product 10: Final Valuation Report” (“the Report”) and provides a financial valuation as of September 18, 2017, of Amazonas Distribuidora de Energia.
As contemplated under the Contract, the sole purpose of the Report is to provide a valuation of Amazonas Distribuidora de Energia to BNDES, the institution responsible under Decree 8.893 for the privatization process of the Eletrobras System Distributors.
If the Report is shared with third parties, it must be provided in full so that the applicable disclaimers and limitations are effectively communicated.
Sincerely,
Summary | ||||
1. | Introduction | 9 | ||
1.1 | Context | 9 | ||
1.2 | Purpose | 9 | ||
1.3 | Summary of the Assumptions | 10 | ||
1.4 | Valuation | 11 | ||
2. | History and Characteristics of the Concession | 12 | ||
2.1. | Brief History | 12 | ||
2.2. | Description of Operating Area | 13 | ||
2.3. | Socioeconomics | 14 | ||
2.4. | Transportation Infrastructure | 16 | ||
2.5. | Climate | 19 | ||
2.6. | Geoelectric Characteristics | 22 | ||
2.7. | Particularities: Vertical Disintegration Process | 26 | ||
3. | Market and Consumption Unit Forecasts | 30 | ||
3.1. | Market and Consumption Unit History | 30 | ||
3.2. | Market Forecast Methodology | 33 | ||
3.3. | Market Forecast Results | 40 | ||
3.4. | Consumption Unit Forecast Methodology | 50 | ||
3.5. | CU Forecast Results | 51 | ||
4. | Methodologies, Premises, and Results of Readjustment and Reviews | 53 | ||
4.1. | Overview | 53 | ||
4.1.1. | Regulation by incentives | 53 | ||
4.1.2. | Recent changes to the contractual and tariff rules of the electric power distribution. | 57 | ||
4.2. | Methodologies, Premises and Results for the Definition of Portion A | 75 | ||
4.2.1. | Purchase of Power and Tariff Flags | 75 | ||
4.2.2. | Charges | 76 | ||
4.2.3. | Transport Costs | 78 | ||
4.2.4. | Financial | 78 | ||
4.2.5. | Technical Losses (“PT”) | 79 | ||
4.2.6. | Non-Technical Losses (“PNT”) | 85 | ||
4.2.7. | Default | 103 | ||
4.3. | Methodology for definition of Portion B | 105 | ||
4.3.1. | Regulatory WACC | 106 | ||
4.3.2. | Operational costs and Factor Xt | 109 | ||
4.3.3. | Factor Xpd and Xq | 122 | ||
4.3.4. | Demand Surplus, Reactive Excess and Other Revenues | 128 | ||
4.3.5. | DEC and FEC Indicators | 130 | ||
4.3.6. | Compensations | 140 | ||
4.3.7. | Long-Term Investment | 143 | ||
PwC | Loeser e Portela Advogados | Siglasul | Prepared for BNDES | 3 |
4.3.8. | Remuneration Base | 151 | ||
4.3.9. | Tariff Transactions | 165 | ||
5. | Analysis of the Distributor | 169 | ||
5.1. | Historical Financial Statements | 170 | ||
6. | Valuation | 176 | ||
6.1. | Methodology | 176 | ||
6.2. | Discount rate | 176 | ||
6.3. | Assumptions | 178 | ||
6.4. | Valuation by Multiples | 186 | ||
6.5. | Valuation Results | 190 | ||
6.6. | Sensitivity | 198 | ||
7. | References | 200 | ||
ANNEX I – Extent of Responsibility | 201 | |||
APPENDIX A – Socioeconomic Characterization of the Concession Area of AmE | 202 | |||
APPENDIX B – Methodology of Market Projection | 205 | |||
APPENDIX C - Selection of Models for Market Projection | 209 | |||
APPENDIX D - Non Selected Alternative Models | 211 | |||
APÊNDICE E – Models of the Assessed DEC and FEC Indicators | 214 | |||
APÊNDICE F – Concepts and Methods of BRR Valuation | 215 | |||
APPENDIX G – Company’s Debt Overview | 218 | |||
Figures | ||||
Figure 1 – Macroeconomic Assumptions | 11 | |||
Figure 2 –State of Amazonas (capital in highlight) | 14 | |||
Figure 3 – Federal and State Highways of Amazonas | 18 | |||
Figure 4 - Representation of waterways, federal and state highways of Amazonas | 19 | |||
Figure 5 – Cumulative total rainfall for the Brazilian states | 21 | |||
Figure 6 – Average temperatures observed for the Brazilian states | 21 | |||
Figure 7 – National Interconnected System (SIN) | 23 | |||
Figure 8 – Substations of the electrical system of Manaus | 25 | |||
Figure 9 - Map of the River Channels in the Interior | 26 | |||
Figure 10 – Illustration of the vertical disintegration process of AmE – Primeira Etapa | 28 | |||
Figure 11 - Illustration of the vertical disintegration process of AmE – Second Stage | 28 | |||
Figure 12 – GDP real growth forecasts (% p.a.) of external sources | 38 | |||
Figure 13 – Schematic drawing for the total forecast of CU | 50 | |||
Figure 14 – Price cap functioning | 54 | |||
Figure 15 – Yardstick Competition Functioning | 55 | |||
Figure 16– Example of Periodicity of Periodical Tariff Reviews and Tariff Readjustments | 55 | |||
Figure 17 – Time line with changes to the PRORET | 59 | |||
Figure 18– Time line with recent rulings related to the renewal of the concessions | 62 | |||
Figure 19 - Trajectory of reduction | 91 | |||
Figure 20 - Periodicity of Forecast of Regulatory Non-Technical Loss Targets | 95 | |||
Figure 21 - Dynamics of the Regulatory PNT target forecast | 97 | |||
Figure 22 – Example of a model for calculation of components X Factor quality indicator | 126 | |||
Figure 23 – Historical Financial Indicators | 170 | |||
Figure 24 – Summarized Income Statements | 171 | |||
Figure 25 – Summarized Balance Sheet | 171 | |||
PwC | Loeser e Portela Advogados | Siglasul | Prepared for BNDES | 4 |
Figure 26 - Balance Sheet | 171 | |
Figure 27 – Income Statements | 172 | |
Figure 28 – Quality of earnings | 173 | |
Figure 29 – Working Capital | 174 | |
Figure 30 – Net Debt | 175 | |
Figure 31 – Due Diligence Financial Indicators | 175 | |
Figure 32 - Rolling WACC | 178 | |
Figure 33 - Working Capital | 185 | |
Figure 34 - EV / Net Revenues Multiples | 188 | |
Figure 35 - EV / EBITDA Multiples | 188 | |
Figure 36 - EV / BRR Multiples | 189 | |
Figure 37 - EV / Consumer Units Multiples (R$ thousand/ Number of clients) | 189 | |
Figure 38 - EV / distributed energy Multiples (R$ thousand / MWh) | 190 | |
Graphs | ||
Graph 1 - Total Highway Density (km/km²) | 16 | |
Graph 2 - Percentage of Existing and Planned Highways in 2015 | 17 | |
Graph 3 - Competitiveness of generation sources | 23 | |
Graph 4 - Voltage level share in the total market (%) - AmE Forecasts | 35 | |
Graph 5 - Share of the state GDP in the Brazil GDP (%) -– Forecast for AmE | 40 | |
Graph 6 - Forecasted Market of AmE in each Decade per Class of Consumption | 49 | |
Graph 7 - Forecasted Market of AmE until 2046 per Class of Consumption | 49 | |
Graph 8 - AmE CU’s Forecasts | 52 | |
Graph 9 - Average Loss per Segment of AmE and Comparable | 82 | |
Graph 10 - Forecast of regulatory technical losses of AmE | 85 | |
Graph 11 - Comparison between Real and Regulatory Non-Technical Losses on the Low Voltage Market | 86 | |
Graph 12 - Forecast of Verified and regulatory PNT AmE (Invoiced) | 98 | |
Graph 13 – Example of heterogeneity curve | 115 | |
Graph 14 - AmE efficiency curve | 118 | |
Graph 15 - Forecast of Other Regulatory Revenues – AmE (R$ Million) | 129 | |
Graph 16 - Forecast of Annual Demand Surplus and Reactive Excess Revenues – AmE (R$ Million) | 129 | |
Graph 17 – Calculated Indicator and Limits of DEC for AmE | 131 | |
Graph 18 – Calculated Indicator and Limits of FEC for AmE | 131 | |
Graph 19 - History of Compensations for Violation of the Individual Indicators of AmE | 132 | |
Graph 20 - DEC Forecast for AmE | 138 | |
Graph 21 - FEC Forecast for AmE | 139 | |
Graph 22 - Forecasted Compensations for AmE | 143 | |
Graph 23 - Forecast for electric and non-electric investments of AmE | 150 | |
Graph 24 - Long-Term Investments Plan of AmE per Type of Works/Systems | 150 | |
Graph 25 – Tariff Transactions (%) | 168 | |
Tables | ||
Table 1 – Valuation | 11 | |
Table 2 – Highway indicators to Amazonas | 17 | |
Table 3 – Climate Characteristics of the Concession Area of AmE | 20 | |
Table 4 – Evolution of the Number of Consumers per Voltage Level | 30 | |
Table 5 – Market Evolution per Voltage Level | 31 | |
Table 6 – Mid-Market Evolution per Voltage Level | 32 | |
Table 7 – Evolution of the Average Consumption per Tariff Class | 32 | |
Table 8 – Variables used in the market forecasts per class - AmE | 37 | |
Table 9 – State GDP share in Brazil’s GDP (%) | 39 | |
Table 10 – GDP average growth rates (%) | 40 | |
Table 11 – Forecasted Market of AmE in each Decade per Class of Consumption. | 48 | |
Table 12 – Summary of the CU Forecast for AmE | 52 | |
Table 13- Values Factor T and Xpd | 68 | |
PwC | Loeser e Portela Advogados | Siglasul | Prepared for BNDES | 5 |
Table 14 - Values of Regulatory Losses | 68 | |
Table 15 - DEC and FEC Global Limits | 69 | |
Table 16 - Variation of the amounts destined to PMSO per Distributor | 72 | |
Table 17 - Variation of the DEC limits per Distributor | 74 | |
Table 18 - Variation of the FEC limits per Distributor | 74 | |
Table 19 - Amount of Losses in the Amazonas Distribution System | 80 | |
Table 20 - Amount of Technical Losses per Segment of Transformation and Network | 80 | |
Table 21 - Technical Loss Target per Voltage Segment | 83 | |
Table 22 - Amount of Technical Losses per Segment of Transformation and grid | 84 | |
Table 23 – Socio-Economic Variables for the Composition of the Complexity Index to Fight Non-Technical Losses | ||
87 | ||
Table 24 - Models Selected for the Composition of the Complexity Factor to Fight Non-Technical Losses | 88 | |
Table 25 - Result of the Complexity Indexes of each Econometric Model for the Companies from Grupo Eletrobras | ||
89 | ||
Table 26 - Average Complexity Index of the Companies from the Eletrobras Group | 89 | |
Table 27 - Summary of Definition of the Starting Point | 93 | |
Table 28 - Example of Forecast of the Regulatory Non-Technical Losses | 94 | |
Table 29 - Comparison of Real Invoiced Loss with Regulatory Invoiced Loss | 96 | |
Table 30 - Complexity Index of Fighting Non-Technical Losses of the most Complex Distributors from Group 1 | 96 | |
Table 31 - Forecast Regulatory PNT 2023 to 2027 | 99 | |
Table 32 - Forecast Regulatory PNT 2028 to 2032 | 100 | |
Table 33 - Forecast Regulatory PNT 2033 to 2037 | 101 | |
Table 34 – Forecast Regulatory PNT 2038 to 2042 | 102 | |
Table 35 – Forecast Regulatory PNT 2043 to 2047 | 103 | |
Table 36 – Operational Costs Efficiency Parameters in 4CRTP | 110 | |
Table 37 – Confidence intervals of the efficiency estimations | 111 | |
Table 38 – Cluster Composition | 115 | |
Table 39 – Composition of the clusters and efficiency – AmE | 117 | |
Table 40 – Forecast of Regulatory PMSO of AmE | 118 | |
Table 41 – Grid forecast modeling results | 121 | |
Table 42 – Operational Costs and Component T of AmE | 122 | |
Table 43 – Technical and commercial indicators of component Q of Factor X | 124 | |
Table 44 – Commercial indicators in 2016 – AmE | 127 | |
Table 45 – Results for Factor X and its components of AmE | 127 | |
Table 46 – Calculated/ Forecasted Calculated and Approved/ Forecasted Limit of DEC for AmE | 138 | |
Table 47 - Calculated/ Forecasted Calculated and Approved/ Forecasted Limit of FEC for AmE | 139 | |
Table 48 – Compensation Regression Table | 142 | |
Table 49- Forecast of Quinquennial Investments2018-2022 | 144 | |
Table 50 - Investments in HV Expansion works 2018-2022 | 146 | |
Table 51 - Mean, Standard deviation and Limits for HV Expansion works | 146 | |
Table 52 - Investments in HV Expansion work ( outliers excluded) | 146 | |
Table 53 - Investments in HV Expansion works 2023-2027 | 146 | |
Table 54 - Forecast of Investments for the Quinquennium of AmE | 148 | |
Table 55 – Proportions of the Groups of Assets in BAR | 155 | |
Table 56 - Calculation of the AIS Considered in the BRR Model in Feb/17 | 157 | |
Table 57 –Difference between the Initial and the Final Additional AIS (VOC) of the 3rd RTP | 157 | |
Table 58 – Values of BRR Considered Starting Point in the Closed BRR in Feb/17 | 158 | |
Table 59 – Investments between 2018 and December 2022 per Registration Unit: Impact on the Average | ||
depreciation rate of the Assets | 162 | |
Table 60 – Assumptions for Index and Rate Forecast | 163 | |
Table 61 – TJLP Forecast | 163 | |
Table 62 – Forecast of Regulatory Reintegration Quota in RTPs | 164 | |
Table 63 – Forecast for Equity Remuneration without Special obligations in RTPs | 164 | |
Table 64 – Forecast for Equity Remuneration of the Special obligations in RTPs | 165 | |
Table 65 – Forecast of the Annual Fixed or Portable Facilities Cost in RTPs | 165 | |
Table 66 – Estimations for Required Revenues, VPA and VPB for AmE (rated R$ million) | 167 | |
Table 67 - Unlevered Beta of comparable companies | 177 | |
Table 68 – Transaction Multiples | 187 | |
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Table 69 – Distributed energy projections | 190 | |
Table 70 - Net revenues projections | 191 | |
Table 71 - Operating costs projections | 192 | |
Table 72 - Gross profit projections | 193 | |
Table 73 - Operating expenses projections | 194 | |
Table 74 - EBITDA projections | 195 | |
Table 75 - Net income projections | 195 | |
Table 76 - Cash flow projections | 196 | |
Table 77 – Terminal Value | 197 | |
Table 78 – Valuation | 197 | |
Table 79 – Financial Covenants | 197 | |
Table 80 – Sensitivity Analysis | 198 | |
Table 81 – Demographic Information, Level of Education and Unemployment Rates | 202 | |
Table 82 – Service Access Information | 203 | |
Table 83 – Information on Income | 203 | |
Table 84 – Information on Violence | 204 | |
Table 85 – Family of Exponential Models | 207 | |
Table 86 – Statistical Indicators | 210 | |
Table 87 – Residential Class: AmE | 211 | |
Table 88 – Industrial Class: AmE | 211 | |
Table 89 – Commercial Class: AmE | 212 | |
Table 90 – Rural Class: AmE | 212 | |
Table 91 – Public Entity Class: AmE | 213 | |
Table 92 – Utility Class: AmE | 213 | |
Charts | ||
Chart 1 – Socioeconomic characterization of the state of Amazonas | 15 | |
Chart 2 – Summary of the stages of AmE's vertical disintegration process | 27 | |
Chart 3 – Summary with the forecast model for Residential Consumption of AmE | 41 | |
Chart 4 – Summary with the forecast model for Industrial Consumption of AmE | 42 | |
Chart5 – Summary with the forecast model for Commercial Consumption of AmE | 42 | |
Chart 6 – Summary with the forecast model for Rural Consumption of AmE | 43 | |
Chart 7 – Summary of the forecast model for the Consumption of Public Service of AmE | 45 | |
Chart 8 – Summary of the forecast model for the Consumption of Public Lighting of AmE | 45 | |
Chart 9 – Summary of the forecast model for the Consumption of Public Service of AmE | 46 | |
Chart 10 – Summary with the forecast model for Own Consumption of AmE | 48 | |
Chart 11 – Example of the need of investments in HV Expansion for the period between 2023-2027 | 146 | |
Equations | ||
Equation 1 - Box Cox Transformation | 33 | |
Equation 2 - Domiciliary Density Calculation | 50 | |
Equation 3 – Kt Coverage | 51 | |
Equation 4 – Residential CU’s Forecast | 51 | |
Equation 5 – Average Consumption Series | 51 | |
Equation 6 - CU’s Forecast | 51 | |
Equation 7 - Formula for the Maximum Cap Price and Periodical Readjustment | 53 | |
Equation 8 - Formulation for Tariff Readjustment Rate | 56 | |
Equation 9 - Formulation for the Complexity Factor to Fight to Non-Technical Loss of Company A | 88 | |
Equation 10 - Calculation of Non-Technical Loss Targets | 90 | |
Equation 11 - Global Target | 90 | |
Equation 12 – Value of Non-recoverable revenues for companies, which have not undergone 4CRTP yet | 104 | |
Equation 13 – Value of Non-recoverable revenues for companies that have undergone 4CRTP | 104 | |
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Equation 14 – Calculation of Portion B in adjustment processes | 106 |
Equation 15 – Calculation of Portion B in review processes | 106 |
Equation 16 – Operational Cost Tariff Coverage | 112 |
Equation 17 – Value of the Efficient operational costs | 112 |
Equation 18 – Annual Variation of the Regulatory Operational Costs | 113 |
Equation 19 – Target of Efficient operational costs | 113 |
Equation 20 – Target of shared Efficient operational costs | 113 |
Equation 21 – Standardization of variables | 114 |
Equation 22 – Euclidean Distance | 114 |
Equation 23 – Efficiency Indicator | 116 |
Equation 24 – Value of the Efficient operational costs | 119 |
Equation 25 – Update Factor | 119 |
Equation 26 – Operational Cost in Tariff review | 121 |
Equation 27 – Component T of Factor X | 121 |
Equation 28 – Component Pd of Factor X | 123 |
Equation 29 – Component Q of Factor X | 124 |
Equation 30 - Determination of Heterogeneity | 134 |
Equation 31 - Limit Equation | 134 |
Equation 32 – Simplified Limit Equation | 135 |
Equation 33 – Linear Regression Equations for DEC | 136 |
Equation 34 – Linear Regression Equations for FEC | 136 |
Equation 35 - Calculation of the average EUSD | 140 |
Equation 36 - Calculation of the Compensation in Force | 141 |
Equation 37 - Forecasted Compensation | 142 |
Equation 38 – Regulatory Reintegration Quota | 151 |
Equation 39 – Gross BRR | 152 |
Equation 40 – Capital Remuneration | 152 |
Equation 41 – Net Regulatory Remuneration Base | 153 |
Equation 42 – Special Obligations Capital Remuneration | 154 |
Equation 43 – Regulatory Annuity Base (BAR) | 154 |
Equation 44 – Annual Rental Cost (CAL) | 155 |
Equation 45 – Annual vehicle Cost (CAV) | 155 |
Equation 46 – Annual Cost of Information Systems (CAI) | 156 |
Equation 47 - Stationary Series | 205 |
Equation 48 - Seasonal Series | 205 |
Equation 49 - Box & Jenkins Methodology Models | 206 |
Equation 50 – ETS Model | 206 |
Equation 51 - Dynamic Model | 208 |
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1. Introduction
1.1 Context
Amazonas Distribuidora de Energia S/A - (“Company”, “Amazonas Energia”) is a quasi-public company headquartered in Manaus, capital of the state of Amazonas. It is a federal concessionaire of utility responsible for the distribution and commercialization of electric power to the entire State of Amazonas. The Company is currently controlled by Centrais Elétricas Brasileiras S.A. – Eletrobras, holding 100% of its shares.
According to Article 2 of Decree 8.893, the Brazilian Brazilian Development Bank (BNDES) is responsible for the supervision and execution of the privatization process of the electric distributorship concession holders.
In this context, the Consortium has prepared the financial valuation of the Company’s shares with a base date of December 31, 2016, using a Discounted Cash Flow (“DCF”) methodology. The financial valuation assumes the scenario of renewal of the concession for electric power distribution. Therefore, the result of this work represents the Company’s value in the event of concession renewal.
1.2 Purpose
The purpose of this report is to provide BNDES, the leader of the project, with information regarding the company’s Fair Value, making clear all assumptions used for calculations of portions A and B, as well as the methodologies used in the financial model.
With this purpose, the following analyses were carried out:
· Research and analysis or market information;
· Projections for the energy market, energy demand and regulatory elements;
· Analysis of the historical financial statements;
· Meetings, conference calls, and discussions with the directors and technical teams of the Company;
· Field visits;· financial statements projections (Income Statements and Cash Flow Statements) based on information provided by the Company, market analyses, and due diligence studies;
· Financial valuation based on Discounted Cash Flow methodology;
· Calculation and projection of the discount rate based on the Weighted Average Cost of Capital (WACC) methodology, used for calculating the present value of projected cash flows;
· Calculation and projection of regulatory WACC.
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1.3 Summary of the Assumptions
Methodology
The valuation of the Company was performed using the Discounted Cash Flow method, based on the projected profits, utilizing Free Cash Flow to the Firm (FCFF).
Discount rate
The methodology used to estimate the discount rate was the Weighted Average Cost of Capital (WACC), considering a rolling capital structure (Rolling WACC).
Base date
The base date used in this valuation is 12/31/2016
Projection period
The cash flows were estimated for the period between January 1, 2017 and February 29, 2048 (end of the concession period) assuming operational shutdown of the Company at the end of the concession period. Only the cash flows projected for the period between March 2018, and February 2048, were considered in calculating the Net Present Value of the Company.
Currency
The projections are expressed in nominal Reais (R$) considering inflation effects.
Macroeconomic Assumptions
The macroeconomic assumptions used in the financial model are presented below. It is important to highlight that the GDP premise was used in the projection of the number of consumers by market class as detailed in Chapter 4 of this report.
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2. History and Characteristics of the Concession
This chapter will detail relevant characteristics of Amazonas Energia Distribuição (AmE), providing information regarding its history, socioeconomics, transportation infrastructure, climate and level of connectedness to the SIN (“Sistema Interligado Nacional” or National Interconnected System), as well as a brief assessment of the company's vertical disintegration process.
2.1.Brief History
The history of electricity in the city of Manaus dates back to the year 1880, when electricity was first generated in the Amazonian capital through incinerators. However, the standardized expansion of electricity in the city only began in 1895, when the Manaus Electric Lighting Company, a North American company was created after winning a bid solicited by the. Soon thereafter, in 1898, the state government incorporated the Manaós Electric Lighting Company to provide publicly available electricity to the capital [1].
In the late 19th and early 20th century, during the early years of the Brazilian Republic, utilities were commonly administered by municipal governments who then contracted specialized companies. This also occurred in the state of Amazonas.
In 1908, the electricity generation and distribution for the city of Manaus was contracted by Engineer Antônio Lavandaira, who for ten years provided these services through what today would be called a PPP (Public-Private Partnership). In 1918, the supply of electricity in the state of Amazonas fell under private control the British company The Manaós Tramways and Light Company [2].
It wasn’t until 1952 that electric generation was again controlled by the state government, which created Centrais Elétricas de Manaus (CEM), under Law No. 1.654, dated July 28, 1952. The objective of the newly created state company was to generate, transmit and distribute electric energy in the city of Manaus [3].
Ten years later, CEM became a subsidiary of Centrais Elétricas Brasileiras S.A. (Eletrobras). Created on July 11, 1962, Eletrobras was responsible for research, construction projects and the operation of generating plants, transmission lines and substations for the supply of electric energy in Brazil [4]. From the moment of its creation, Eletrobras contributed decisively to the expansion of electric energy and the economic advancement of the country.
In the year 1980, Eletronorte (Centrais Elétricas do Norte do Brasil S.A.), a subsidiary of Eletrobras, created by Decree No. 72.548, art. 1, of 07/30/1973 with the purpose of expanding the large-scale production of electricity in the Amazon region, took control of the Companhia de Eletricidade de Manaus.
In parallel, in 1963, Centrais Elétricas do Amazonas S/A, abbreviated CELETRAMAZON, was created by State Law No. 35, of July 31, 1963, with the purpose of expanding electric energy services to the inland regions of Amazonas. In November 1983, the company's corporate name changed to Companhia Energética do Amazonas (CEAM).
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Thus at that time, two independent electric companies operated in the state of Amazonas: one operating in the state capital and the other for the rural inland regions. It should be noted that Eletronorte did not build one integrated electrical system due to the high transmission costs in the Amazon region and the dispersed population requiring smaller loads. The most important isolated systems included the capitals Manaus, Porto Velho, Rio Branco, Macapá and Boa Vista [5].
In 1997 CEM was renamed Manaus Energia, but remained a direct subsidiary of Eletronorte [6]. In turn, in the year 2000, CEAM was federalized and fell under control of the Eletrobras group. But it was not until 2008 that Eletrobras assumed the control of Manaus Energia. Thus, the group's next step was to unify, in April 2009, the two companies - Manaus Energia and CEAM - Amazonas distribuidora de Energia S.A (AmE). For the first time in history the entire state had services provided by a single utility.
Amazonas Distribuidora de Energia SA was responsible not only for energy distribution services, but also for the generation and transmission of electricity throughout the state of Amazonas, made difficult by the large size of the state and difficulty in access to inland regions, requiring local isolated generation.
With the connection of the capital Manaus to the National Interconnected System (SIN), the process of vertical disintegration of AmE was started. In 2013, the creation of a Generation and Transmission Company (AmE G&T) was approved, through the Extraordinary General Meeting of Amazonas distribuidora de Energia S.A., with the purpose of enabling the vertical disintegration process [7]. However, this process is not concluded yet. In item 2.7 we will further address the process of vertical disintegration of the company.
Finally, in July 2016, the Eletrobras group decided not to renew the contracts of electric power suppliers in the North and Northeast regions, including AmE. On August 3, 2016, through Ordinance No. 424/2016, the MME designated AmE as responsible for providing the public electricity distribution service with the intention ensuring continuity of the service until December 31, 2017 or until the assumption of a new electricity provider, whichever occurs first.
2.2. Description of Operating Area
AmE operates throughout the state of Amazonas, which is the largest state in Brazil (area 1,559,159,148 km²), constitutes the ninth largest subdivision in the world and is larger than the combined are of France, Spain and Sweden [8]. It borders the state of Pará, to the East; Mato Grosso, to the Southeast; Rondônia and Acre, to the South and Southwest; and Roraima to the North. In addition, it also borders the countries of Venezuela, Colombia and Peru, the North, Northwest and West, respectively. Amazonas is 98% covered by forest, the famous Amazonian Rainforest, that has an area of 5,500,000 km² and spans 9 countries (Brazil, Peru, Colombia, Venezuela, Ecuador, Bolivia, Guyana, Suriname and French Guiana).
Amazonas has almost 4 million inhabitants, with 50% of the population in the capital city of Manaus. Additionally, the Brazilian Institute of Geography and Statistics (IBGE) has identified 65 indigenous groups living within the state, making Amazonas the state with the largest
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of the state makes transportation difficult for the maintenance teams, and consequently can increase repair times lowering the DEC and FEC quality indicators of AmE12.
2.6. Geoelectric Characteristics
The state of Amazonas is served, in part, by the National Interconnected System (SIN) -which has been supplying the municipalities of Manaus, Iranduba, Manacapuru and Presidente Figueiredo since 2013 (known as Manaus System) and by the Isolated System - which fully serves the rest of the state.
This chapter will address the level of connectedness of the State of Amazonas to the SIN, as well as the characteristics of the High, Medium and Low Voltage distribution systems that make up the state system.
i. Connectedness Level to the Integrated Nacional System (SIN)
The transmission system in Brazil has importance and a role that exceeds the classic function of “only” taking energy from the generating centers to the consumption centers. Due to the characteristics of the Brazilian electric system, notably its hydraulic base, and the large territorial extension of the country, the transmission system in Brazil also works as a “virtual source of energy”, that is, it is operated in a way that allows diverse uses between the sub-systems (North, Northeast, Mid-West/Southeast, and South).
The isolated systems are located virtually totally in the North Region of the country. Today, they represent a little more than 2% of the total consumption of electricity in Brazil [6]. The supply of electric power in the isolated systems of the North region essentially consists of hydroelectric plants - without reservoirs - and thermal plants - 80% of the installed capacity of generation of diesel oil-powered thermoelectric plants, according to data from the Ministry of Mines and Energy [9].
The non-interconnectedness of the isolated systems implies a high cost of operation and maintenance of such generating plants, since generating power based on fossil fuels is notoriously more expensive than from a water source, as observed in Graph 3 (comparison of the year of 2011).
12 Equivalent Duration of Interruption per Consumer Unit - DEC; Equivalent Frequency of Interruption per Consumer Unit - FEC
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Analyzing the state of Amazonas it can be noted that there is a planned transmission line of approximately 1,430 km that would connect Manaus to Boa Vista (the capital of the state of Roraima). This line was supposed to be ready by January 2015; however, work on the line has currently stopped due to environmental issues related to a section of the line passing through the Waimiri Atroari indigenous reserve that is on the border of Amazonas with Roraima. It should be emphasized, however, that this line would not increase the level of connectedness of the State because there are no representative towns to enable substation constructions from 500 kV to 13.8 kV along its extension. The objective of the line is to connect Boa Vista to the SIN because currently the capital of Roraima is supplied by Venezuela. There is no official forecast of termination of this transmission line13.
ii. AT/MT/BT network standards
The Amazonas High Voltage Distribution System is serviced by a single point of supply from Tucuruí, Pará, through a transmission line of 1,438 km in a double circuit of 500 kV that reaches the Lechuga substation, in the state capital [10]. From this SE14 four lines derive, forming the existing subtransmission system: (I) a 138 kV line, in a simple circuit, with a length of 29 km connecting the SEs Lechuga to Jorge Teixeira and (ii) three double-circuit 230 kV lines linking SE Lechuga to the SEs Jorge Teixeira, Manaus and to UHE Balbina [11].
In order to reach the municipalities of Manaus, Iranduba, Manacapuru and Presidente Figueiredo, which make up the interconnected area of the Amazonas Energia concession, AT's electricity distribution system has 5 transmission lines (LTs) at 138 kV and 45 LTs at 69 kV. For distribution of energy that runs along these lines, there are 23 SEs of 69/13.8 kV, 1 SE of 230/13.8 kV and 3 SEs of 138/13.8 kV. The distribution lines of the AT system are separated into 3 subsystems, supplied by the substations: SE Mauá Três – 230/138/69 kV (Subsystem 01), SE Manaus – 230/69/13.8 kV (Subsystem 02) & SE Jorge Teixeira – 230/138 kV (Subsystem 03). Figure 8 shows the layout of the SEs of the Manaus Distribution System.
13 "In an exclusive interview with Folha, the regional superintendent of Eletrobras Transmissão Roraima, Roni Franco Rodrigues, announced that at the beginning of April there will be a meeting with the indigenous people to define overcoming the last obstacles for the resumption of the work of Linhão de Tucuruí between Manaus (AM) and Boa Vista, which will link Roraima to the National Interconnected System (SIN) from the Amazonas. With the resumption, the process should be started from zero, with a forecast for the energy to reach Roraima possibly in 2021. ” – Information from FolhaWeb (03/28/2017).
14 SE's is the abbreviation commonly used for AT/MT transformation substations.
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Contract - involving Petrobras and the gas supplier of the state of Amazonas (Cigás) - from AmD to AmGT is foreseen.
Despite the urgent need for vertical disintegration, ANEEL has extended the deadline for separating the generating and transmission areas of AmE. The state-owned company will have 18 months, beginning November 1, 2016, to complete the process. The Agency's decision took into account the complexity of the company's vertical disintegration process and its economic and financial situation. The aforementioned proposal proved to be complex due to the difficulty of pricing Amazonas GT, partly due to uncertainties related to the natural gas contract with Cigás.
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for untying models. The untying of models was made from the criteria of information that in both cases seeks the smallest value possible:
- AIC (Akaike Information Criterion) and BIC (Bayesian Information Criterion), both based on the average square of residues.
- MAPE (Median Absolute Percentage Error), which consists of evaluating the forecast error.
In this regard, the objective was that of finding forecast models that were suitable for the conduction of long term forecasts, conciliating the observance of presuppositions and using good rates in the information criteria. Since it regards to markets with very specific particularities, in some cases it was necessary to use auxiliary variables that presented association with the historical series from a degree of reliability of 75%, being selected as significant those obtaining p-value below 25% of significance. In most part of the approved models, the p-values were around 5 or 10%. Only in specific cases the p-value of 25% was used. The p-value is not the only criterion adopted for the approval of the models, considering that other tests (residue analyses and information criteria) were applied to each model. Not necessary a value of significance greater than 0.05 or 0.1 is a factor of elimination of the estimated model. There is not a consensus in the specialized literature about the p-value threshold, the most important being understanding the problem in question and the theoretical justification of the estimated models [13].
For the case of autoregressive components, moving averages, and trend averages, the models with the best information criteria and that resulted in models with proper residues were selected. The choice of a more appropriate methodology was performed in the following order: Box & Jenkins, ETS and Dynamic Models. The models in which the coefficient signals of the auxiliary variables followed the economic logics were also selected. Therefore, the approach used allows for choosing the best model among a wide range of options and the selection of relevant auxiliary variables. For the 6 companies designated, this approach was applied to each one of the eight consumption classes, which facilities the treatment of specificities of each one of the series to be forecasted. Appendix C shows the consistency tests performed to each selected model. Appendix D presents models that have also been tested and not selected for they violate modeling criteria.
The market forecast per voltage level took into account the evolution of the participation in the voltage levels of the overall market since 2012, according to information provided by the concessionaires. From the analysis of the behavior of these participations, it was possible to build an evolution curve, based on linear extrapolation, generating the market forecasts for each level of voltage (High, Medium, and Low). The evolution of the participation of each voltage level is presented in Graph 4.
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Table 8.
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Chart 7 presents the forecast results for the Public Power class of AmE. The selected model for the conduction of forecasts – and proven as the most robust -, uses the Box & Jenkins methodology, with Population and seasonality being the auxiliary variable, using the observed series of consumption from January 2009 to November 2016. It shall be pointed out that the seasonal pattern of the forecast is due to the seasonal difference (integrated seasonal model). Based on the estimated forecasts, the consumption of the Public Service grows at an average of 3.15% p.a. between 2017 and 2048.
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Chart 10 presents the forecast results for the Own Consumption class of AmE. The selected model for the conduction of forecasts – and proven as the most robust -, uses the ETS methodology, using the observed series of consumption from January 2010 to November 2016. Based on the estimated forecasts, Own Consumption grows at an average of 0.58% p.a. between 2017 and 2048.
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d) Extraordinary Tariff Review
In addition to the annual readjustments and periodical reviews, the Regulator my, upon request of the regulated agent or granting power, perform the Extraordinary Tariff Review (RTE) at any time, whenever an event causes substantial economic-financial instability. The RTE may be requested in cases of creation, change or extinction of taxes or charges, after the execution of the concession agreements, and whenever the impact over the activities of the companies is relevant, and duly proven, to the economic-financial equilibrium.
e) Manageable and non-manageable part
Non-manageable costs correspond to expenses that do not depend on the control of the concessionaire, being directly transferred to the consumer. These items form a relevant part of Portion A, component of the revenue of the concessionaire of distribution that includes costs and sectorial charges, in addition to costs of inputs and upstream segments of the activities of the regulated company, such as costs of power generated or transmitted to the electric power distribution companies. On their turn, manageable costs represent the part related to the effective activity of the electric power distribution concessionaire, in which the company may establish strategies of management. The so-called Portion B is composed, for instance, by the operational costs, capital and depreciation costs, and non-recoverable revenues.
There are also costs that present a relative degree of management by the concessionaire. This is the case, for instance, of non-technical losses (“PNT”), whose amount depends on both the efficiency of the commercial activities and routines of the concessionaire and on the socioeconomic, institutional, and cultural environment of the geographic area in which the company acts.
Although they affect the purchase of power, allocated in Portion A, technical and nontechnical losses receive regulatory treatment aiming at allowing gains of efficiency in the procedures. The purchase of power may also receive regulatory treatment and respect restriction in order to foment an efficient acquisition and modicity to the end consumer (captive).
An example of this regulatory treatment are the controls related to the purchase of power by related party and the obligations of acquisition of power in auctions in the regulated environment. Therefore, the separation of the manageable and non-manageable costs, in the so-called Parts A and B, is a conceptual simplification that may be changed in accordance with the evolution of the regulation.
4.1.2. Recent changes to the contractual and tariff rules of the electric power distribution.
The implementation of the regime of regulation by incentives in the activity of electric power distribution has been done throughout almost two decades, conditioned by changes to the concession/permit agreements and by public policies. Its evolution and transformation were also marked by the processes of discussions, in inquiries and public hearings, of the regulations that treat the different tariff and contractual aspects. Currently, these rules are described in Technical
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Notes elaborated by ANEEL, which describe in detail the methods, premises, and results applicable to the different components of the tariffs and the tariff operation procedures.
These regulatory rules are consolidated in the Tariff Regulation Procedures (“PRORET”), which have normative character and consolidate the regulation of tariff processes. The PRORET structure was approved by Normative Resolution no. 435/2011, organized in 12 modules, which on their turn are subdivided into submodules.
Regarding the distribution of electric power, there is a set of tariff procedures that include specificities to each contractual situations, as detailed below:
I. To Distributors that renew their concession agreements under the terms of Decree no. 8.461/2015, signed contractual amendments with new economic clauses, or signed contractual amendments for the complete adhesion to the new concession model19, the new tariff rules presented in Normative Resolution no. 761/2017 and in the PRORET list indicated with the letter A in its original number shall be valid20.
II. To companies that hold permits and distribution concessionaires that have not renewed their concession agreement or signed amendments still have valid the PRORET without the indication of letter A.
III. For the set of Distributors owned by the Government, responsible for the provision of distribution services in concessions that have not been extended (so-called Designated Distributors), specific rules shall be applied as per Normative Resolution no. 748/2016 and Approval Resolution no. 2.184/201621.
Figure 17 presents a time line with the indications of all Normative Resolutions (REN), Homologation Resolutions (REH), Technical Notes (NT), and Public Hearings (AP) that changed or proposed changes to the PRORET as of April 2015.
19 In the terms of the Reporting Judge´s Vote announced in the 30th Ordinary Public Meeting in 2016.
20 Sub-modules 2.1A, 2.2A, 2.5A, 2.7A, 3.1A, 3.2A, 3.3A, 3.4A, 4.2A and 4.4A.
21Both resolutions replace Technical Note No. 331/2016, setting forth definitely the additional conditions to be applied to the Designated distributors (public administration body or entity responsible for the decision of the Granting Authority on the provision of public service for electric power distribution because of non-extension of given concession according to Law No. 12.783/2013), with the purpose to assure the continuity of the provision of public service for electric power distribution until a new concessionaire to be granted by means of a bid takes over.
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a. To companies that have already underwent the first tariff review after the 3rd Periodical Tariff Review (RTP), the accumulated balance of UD and ER, registered in specific account of special obligations until the date of execution of contractual amendment, will be subtracted from Portion B only in the second review after the 3rd RTP.
b. To companies that will undergo their first review after the 3rd RTP, the revenues registered as UD and ER in special obligations until the date of contractual amendment will be subtracted from Portion B.
c. To all companies, the invoiced values of UD and ER between the date of contractual change and the date of the tariff procedure will be used as reducers of Portion B.
d. The invoiced values will be updated according to the IPCA.
iii. The RI’s are no longer calculated in two parts and now consider exclusively the regulatory percentages of default. In addition, the financial revenues now compose the basis of calculation of the RI’s.
iv. In the first tariff review after the execution of the contractual change, the calculation of the Factor X will no longer consider the average growth of the market and consumers of the tariff cycle, being determined on an annually basis.
v. The values of other revenues (OR) to be subtracted from Portion B will be calculated in the twelve months prior to the month of reference for the review, and will be updated by the IPCA.
The rules of tariff readjustment presented in Module 3 had the following changes:
i. If the first tariff process after the execution of contractual change is a tariff readjustment, known as DR1 in the A version of the PRORET, there will be the need to remove the RI components from Portion B and to transfer them to Portion A, in addition to isolating OR, UD, and ER, which will be determined according to what has been effectively realized. The ONS values shall be transferred from Portion A to Portion B.
ii. In the tariff readjustments, Portion B shall be effectively calculated and not only obtained as a residue of the calculation of Required Revenue.
iii. The value of Portion B considering the conditions in force and the Reference Market (VPB0DR1) will be obtained from the multiplication of this market for the economic value in force (homologated in the last procedure), equivalent to the tariff component of Thread B (TUSD Thread B) in force. This value will be updated by the difference between IPCA and Factor X and multiplied by a correction factor (Factor DR1), necessary for the application of the adjustments indicated in (i). Finally, the values of OR, UD, and ER will be expurgated, and added the values with ONS.
iv. In the subsequent tariff processes, the procedure will be quite similar in practical terms, with the calculation of Factor Pbi-1, which reintroduces the values of OR, UD, and ER in Portion B, which will be adjusted by the inflation (IPCA) and Factor X. Following that,
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the observed values of these components in the period of reference are excluded from Portion B.
In Module 4, the neutralities are calculated to all components of Portion A (including other financial components, financial components of neutrality, and financial component of CVA balance to compensate), not only to sectorial charges, as it is the case of the rules in force. The concept of neutrality remains unchanged, such as the difference between the invoiced values and the values included in the tariff processes, neutralizing the differences derived from market changes22. The proposed methodologies of calculation differentiate items with tariff coverage of fixed nature, when the expense is not changed with the market variation (sectorial charges, connection charges, and Itaipu), and variably, in the opposite case (costs with power, charges with the use of transmission/distribution, and non-recoverable revenues).
The specific case of the neutrality of non-recoverable revenues will be calculated only from the second tariff procedure after the execution of the contractual amendment, since until then there is not a component of tariff coverage for this item. All new items to which there is no calculation of neutrality shall take into account the date of execution of the agreement or contractual amendment. Therefore, for the first tariff procedure after the execution of the agreement or publication of the PRORET, whatever occurs last, the neutrality of Portion A will be calculated only from the next month of signature of the contractual amendment or renewal of the concession agreement, limited to the period of reference, i.e., the last 12 months.
Finally, the part of non-recoverable revenues was inserted in submodules 7.1 and 7.2, in the function of TUSD Losses cost. The update of submodule 3.2 impacts directly to Module 7, due to the calculation of losses in the other facilities of transmission of shared use (DITc), which is in the tariff component of losses in the basic network.
b) Additional Conditions for the Designated Distributors
In its 165th Special Meeting, the shareholders of Eletrobras decided not to approve the extension of the concessions of Ceal, Cepisa, Eletroacre, Ceron, Boa Vista Energia, and Amazonas Energia. In addition, Companhia de Eletricidade do Amapá (CEA) did not have its concession extended for it did not gather the requirements of compliance. By means of several directives, the Ministry of Mines and Energy designated Amazonas Energia, Eletroacre, Ceron, Cepisa, Ceal, Boa Vista Energia and CEA as responsible for the provision of the public service of distribution of electric power until the end of 2017 or until the assumption of a new concessionaire, whatever occurs first.
Figure 18 illustrates the time line with recent rulings related to the renewal of the concessions of the distributors of Grupo Eletrobras.
22 In this section we are describing the changed made to the PRORETs from Normative Resolution no. 276/2017, including changes to the treatment of the neutralities of charges. The modeling of the items composing Portion A in the financial model is detailed in section 3.2.
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quarter, and annual values of 2016; (iv) flexibilization of the references of regulatory losses to Amazonas Energia, Boa Vista Energia, CEA, and CERR.
Such resolution also establishes that the resources of RGR will be used to assure the minimum conditions of sustainability of the service, as per Directive no. 388/2016-MME, with deadlines, grace periods and fees as indicated in REN no. 748/2016, and the contracted obligations will be assumed by the new concessionaire.
In addition, REN asserts that there are major investments to be made, which will reduce expenses of CCC and, therefore, classified as subrogation of the fund’s resources. ANEEL shall homologate prudent investments considered in the elaboration of the basic project, calculate the amount to be subrogated, and inspect the application. The agency or entity of the federal public administration shall assign to the contracted company for the implementation of the distribution lines, on an irrevocable basis, the credits of reimbursement of CCC.
Finally, the resolution establishes an exceptional regime of regulatory sanctions, prioritizing the character exclusively orientational and/or determinant, without the imposition of penalties.
c) Public Hearing no. 094/2016
In May 2017, ANEEL published, after receiving contributions in Public Hearing no. 094/2016: (i) Technical Note no. 182/2017, with guidelines for the elaboration of a new agreement for the concession of the public service of electric power, as per Paragraph 1-A of Article 8 of Act no. 12.783/2013; and (ii) a new Contractual Draft.
According to Technical Note no. 182/2017, dated May 2, 2017, ANEEL received Official Letter no. 242/2016-SE, of the Ministry of Mines and Energy (MME) requesting the elaboration of a draft of a concession agreement, observing a few guidelines that aim at expediting the realization and to increase competitiveness of bidding procedures of transfer of corporate control, associated with grants of new concessions. MME emphasized four guidelines:
I. Adoption of clauses that allow the conversion of pecuniary compensations into investment obligations to the first five years of new concessions, aiming at allowing the recovery of the concessions;
II. Adoption of trajectories of regulatory parameters of efficiency, providing the new controller with term to readjust the values adopted by the companies;
III. Adoption of a tariff calendar with interstice of five years at every tariff review, but that allows the performance of two tariff reviews in the first five years of the agreement, allowing exceptionally, the acknowledgment in shorter investment terms;
IV. The possibility of the calendar set forth in the item above being chosen by the winner of the bidding, with the first review occurring prior to the third tariff process after the execution of the agreement and the second review shall be carried out in the fifth tariff procedure after such signature.
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According to the result of public hearing no. 094/2016 – presented in Technical Note no. 182/2017 -, transitory provisions were considered about the use of compensations due to violations of the limits of quality related to the continuity of the service and the voltage level to investment, as reproduced below.
“CLAUSE NINETEEN – TRANSITORY PROVISIONS
Subclause One - DISTRIBUTOR may use the resources of compensations due to violation of the limits of quality, related to the continuity of the service and sampling measurements of the voltage level in a permanent regime, for the realization of investments in the area of concession, until the end of the fifth calendar year after the date of execution of the concession agreement.
Paragraph One – From the date of execution of the agreement, the compensation values shall remain being calculated by DISTRIBUTOR, as per the regulation, for the purposes of follow-up and inspection by ANEEL.
Paragraph Two – From the second calendar year following the execution of the agreement, in case the calculated values of the compensations are below the values of the compensations calculated for the previous calendar year, such difference shall be considered as a remunerable investment by DISTRIBUTOR upon its tariff review, with the remaining value being accounted in entry Obligations Linked to the Public Service of Electric Power (Special Obligations).
Paragraph Three – From the second calendar year following the execution of the agreement, in case the calculated values of compensations are higher than the compensations calculated for the previous calendar year, such different will be invested twice in the concession and accounted in entry Obligations Linked to the Public Service of Electric Power (Special Obligations). ”
According to the Draft, as of 2020, the non-fulfillment of the global, annual limits of the indicators of continuity per determined period will cause economic-financial limitations, as established in Subclause Eight.
“Subclause Eight – As of 2020, the non-fulfillment of the annual limits of collective indicators of continuity for two years in a row or three times in five years may, as per the ANEEL regulation, imply limitation of dividends or payments of interest over its own capital, until the regulatory parameters are restored, observing the provisions of Item I of Subclause One of Clause Seven. ”
From the sixth calendar year, the non-fulfillment of the regulatory goals may imply the filing of an expiry proceeding of the concession as indicated in Subclause Thirteen, as reproduced below, applicable to the criteria related to the continuity of supply.
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It has been observed in Technical Note no. 182/2017 that the designated companies needed high investments in the first years of the concession in order to restore the levels of quality of the service. According to ANEEL, this context consists of an atypical situation, incompatible with the type of application to which the methodology of the Factor X has been designed. Due to this reason, an adequateness of its calculation is seen as possible.
In addition, the new Draft considered that the inspection performed by ANEEL will not apply penalties in the first two years of the new contracts, as a form of mitigating the effects of the technical or commercial problems inherited from the prior situation, as set forth in Subclause Five.
“Subclause Five – Until the twenty-fifth month following the month of execution of the concession agreement, the inspection of ANEEL will have a guiding and/or determinative character, without the application of penalties, except in case of non-fulfillment of determinations by Aneel Management. ”
To meet the request by the MME regarding a tariff calendar that allows an additional tariff review in the first five years of the agreement, aiming acknowledgment in shorter term of investments, the Draft presents the transitory provisions in its Clause Nineteen.
“Subclause Two – In the period between the date of execution of the agreement and the first subsequent ordinary tariff review, a tariff review may occur upon request of the Concessionaire, observing the following criteria:
I – The tariff review in lieu of an annual tariff readjustment, to which the same date of processing shall be maintained.
II – The request for review shall be formally presented to ANEEL within at least one (1) years prior to its conduction.
III – The tariff review will occur based on the rules set forth in this agreement and in the regulations in force, except those items set forth in Subclause Three.
IV – In the period of review, the Concessionaire may request the complete evaluation of the Regulatory Remuneration Base.
V – The review shall occur until the third tariff procedure after the execution of the agreement. ”
The Draft also defines the values and specific formulas of calculation for the period between the date of execution of the agreement and the first subsequent tariff review, as set forth in Subclause Three.
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“Subclause Three – In the period between the date of execution of the agreement and the first subsequent ordinary tariff review, the values and formula of calculation for the Factor X will be used, as well as Operational Costs and Regulatory Losses, different from those set forth by Clause Six, observing the following criteria:
I – The value of component Pd of Factor X will be defined as zero (0).
II – The regulatory Operational Costs will be defined considered a degree of efficiency of []% over the average of effective costs observed in the last three (3) years prior to the tariff processing.
III – Regulatory, non-technical losses will be defined in the percentage of []% over the average of the real percentages observed in the last three (3) years prior to the tariff processing.
Sole Paragraph – The tariff effects resulting from the treatment described in this Subclause will be perceived from the first tariff calculation following the execution of the agreement, always with prospective effects. ”
Subclause Four establishes the rules on the debt related to the loan existing with the RGR fund, occurred in the period of designation.
“Subclause Four – DISTRIBUTOR undertakes to settle the debt related to the loan existing with the RGR Fund occurred in the period of designation, in the following conditions:
I – The interest rate to be used for the loan will be of 111% of the SELIC rate;
II – The amortization of principal and the payment of interest will have a grace period of 12 months from the assumption of the concession by the new concessionaire, considering that, once the grace period expires, the amortization of the loan will occur in 36 monthly, equal parts. ”
d) Public Hearing no. 032 /2017
On May 4, 2017, ANEEL placed in public hearing Technical Note no. 088/2017, aiming at gathering subsidies to improve the calculation of the regulatory parameters and indicators of quality of services that will serve as the basis for the next tariff review procedures of the Distributors controlled by Eletrobras. The Technical Note establishes the regulatory parameters for the tariff procedures of the Designated Distributors, defined under the terms of Normative Resolution no. 748/2016 and limits to the DEC and FEC collective indicators of continuity.
The proposal is that the value of the T component of Factor X is equal zero (0)to all tariff processes homologated until the first tariff review process after the execution of the Concession Agreement, while to the value of the Xpd component the recommendation is to maintain the Pd component in force until the first tariff process after the execution of the Concession Agreement, when it will assume zero value (see Table 13).
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modicity and with the quality of the service, the tariff impact was simulated considered interest of 5% p.a. and a deadline of 30 years for payment. The monthly values of RGR are defined by REH 2199/2017-ANEEL and the values are reviewed by ANEEL on a quarterly basis based on the quarterly results of distributors. According to ANEEL, the payment of the loan would begin in the sixth year of contractual effectiveness and would extend until its expiration (25 years to pay). Considering that the loan will now be acknowledged in the tariff, there will be neutrality for the new concessionaire in terms of payment of the amounts involved.
f) Technical Note no. 247/2017
In view of Technical Note no. 351/2017, the Ministry of Mines and Energy proposed changes to the draft of the Agreement for the Concession of Public Service of Electric Power Distribution by means of Technical Note no. 247/2017. The main proposed changes related to (i) the acknowledgment in Portion A of the revenue necessary for the payment of RGR loans; (ii) definition, as an extraordinary review, of the tariff procedure that the new controller may request in the interstice of five years of the new concession, basically to consider the volume of investments in the base of assets; and (iii) clarifications on the systematic of flexibilization of the regulatory parameters of operational costs and non-technical losses until the first periodical tariff review.
The proposed changes to the Draft of Agreement mentioned in Technical Note no. 247/2017 are presented below, whose contributions were received until 09/06/2017.
“CLAUSE SIX – TARIFFS APPLICABLE IN THE PROVISION OF THE SERVICE
Portion A – Sectorial Charges: part of the revenue of the DISTRIBUTOR, destined to the observance of the obligations associated with the Electric Power Services Inspection Fee – “TFSEE”; with the Financial Compensation for the Use of Water Resources –“CFURH” for the purposes of generation of electric power, when applicable; with the System Services Fee – “ESS”; with the Energetic Development Account – “CDE”; with Research and Development – R&D; with the Energetic Efficiency Program – “PEE”; with the Reserve Power Fee – “EER”; payments of loans of the Global Reversion Reserve – “RGR”, made in accordance with Article 4, Paragraph 4, item VI, of Act no. 5.655, dated May 20, 1971, and the other public policies for the electric sector, defined in the supervening legislation;
CLAUSE NINETEEN – TRANSITORY PROVISIONS
Subclause Two – In the period between the date of execution of the agreement and the first subsequent ordinary tariff review, an extraordinary tariff review may occur upon request of the Concessionaire, observing the following criteria:
Subclause Three – In the period between the date of execution of the agreement and the first subsequent ordinary tariff review, values and formula of calculation for the
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Factor X will be used, as well as to Operational Costs and Regulatory Losses other than those set forth in Clause Six, observing the following criteria:
I – The value of component Pd of Factor X will be defined as zero (0).
II – The regulatory Operational Costs in the first tariff procedure after the execution of the concession agreement will be defined as a percentage of []% over the value of the operational costs of the previous tariff procedure, updated according to the rule of readjustment of Portion B. Between the second tariff procedure and the tariff procedure immediately before the first ordinary tariff, the operational costs will be defined by applying the rule of readjustment of Portion B.
III – Regulatory, non-technical losses will be defined in the percentage of []% over the low voltage invoiced market.
Paragraph One – The tariff effects resulting from the treatment described in this Subclause will be perceived from the first tariff calculation following the execution of the agreement, always with prospective effects.
Paragraph Two – The transitory percentages of items II and III are those resulting from the bidding procedure of the concession of electric power distribution associated with the transfer of control of the legal entity providing the service, under the terms of Art. 8 of Act no. 12.783/2013 and its regulations.
Paragraph Three – The rules set forth in Clause Six shall be applied in the first ordinary tariff review, not considering any effects resulting from the transitory percentages of items II and III.
Sub-clause Four – DISTRIBUTOR shall settle the loans with the RGR Fund as per Directive MME no. 388, dated July 26, 2016, adjusted as per Art. 4, Paragraph 5, of Act no. 5.655, dated May 20, 1971.
Paragraph One – The payments shall be made between the first ordinary tariff review and the final deadline of this agreement.
Paragraph Two – DISTRIBUTOR will be entitled to tariff acknowledgment of []% of loans paid, according to the definition of the bidding procedure of the concession of electric power distribution, associated with the transfer of control of the legal entity providing the service, under the terms of Art. 8 of Act no. 12.783/2013 and its regulations. ”
g) Technical Note no. 149/2017
On September 8, 2017, ANEEL reopened Public Hearing no. 032/2017, by means of Technical Note no. 149/2017. In it, the Regulator exposed its proposal of flexibilization of a few regulatory parameters – non-technical losses, operational costs and Factor X – and the limits to the DEC and FEC collective continuity indicators until the first ordinary tariff review of the new controller of the designated companies, to be contracted by means of bidding procedure. The proposal of the Agency generated substantial changes in a few parameters that have been
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Table 17 and Table 18 present the variations of the DEC and FEC indicator limits after the flexibilization, respectively, in relation to the provisions exposed in Technical Note no. 88/ 2017.
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03/01/2018. An adjustment (IRT) will occur in this year, on the date of anniversary of the old agreements;
· An extraordinary review23 will occur in 2019, on the date of anniversary of the old agreements. In such review, the tariff coverage related to the Annual Cost of Assets (“CAA”), composed by the Remuneration of Capital, Regulatory Reintegration Quota, and Annual Cost of Movable and Immovable Facilities will be reevaluated. No review shall be performed to metrics of PNT, OPEX, Default, Factor X etc.;
· There will be usual IRT’s between 2020 and 2022;
· In 2023, there will be a complete RTP corresponding to the 5-year period after the execution of agreement, in which the regulatory parameters will be once again established (such as PNT, OPEX, Default, Factor X, etc.).
· After 2023, there will be both IRT and RTP in the interstice of 5 years until 2048. The new agreement will be adapted to the tariff rules of REN no. 761/2017.
4.2. Methodologies, Premises and Results for the Definition of Portion A
Portion A is the tariff revenue component through which consumers compensate the Distributor for the costs considered as non-manageable, such as: purchase of power, sectorial charges, power transport costs, financial charges, technical losses, non-technical losses, and default.
Since these costs are considered as non-manageable, they are directly transferred to the tariffs (pass-through) according to the rules established by the Regulator, as detailed below.
The pass-through condition above is true for the cases in which the Distributor is within a regulatory interval of limits of losses and over-contracting.
4.2.1. Purchase of Power and Tariff Flags
For the definition of the amount of required power, for the purposes of regulatory purchase of power, the volumes of energy were calculated for the provision and supply. The power for provision includes the total forecasted market, excluding volumes to free market, distribution, and supply.
The Methodologies and results obtained for the total and free market forecast were presented above. The forecasts of the volumes for distribution and provision followed the estimated behavior for the total market of the concessionaire.
Using the forecasts of regulatory losses, the total losses were estimated – technical, nontechnical, and basic network. In relation to the losses of the basic network, the percentages presented in the SPARTA spreadsheet of 2016 were maintained. The required power is obtained from the sum of supply, provision, and regulatory losses.
23 In this extraordinary review, the frozen asset base will be opened.
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The system of flags, applied by the concessionaires connected to the National Interconnected System – SIN, has three tariff flags (green, yellow and red), which indicate if the power costs are more or less, based on the conditions of generation of electricity. For the economic-financial evaluation, the same favorable scenario of generation was considered by ANEEL in the tariff procedures, i.e., a green flag scenario.
4.2.2.Charges
The sectorial charges are all created by laws approved by the National Congress to allow the implementation of public policies in the Brazilian energetic sector. Its values are included in resolutions or decisions by the National Agency for Electric Power (ANEEL) and are paid by distributors through the electricity bill. Each charge has pre-defined objectives. The charges described below are applicable to the electric sector.
Energetic Development Account (CDE) [Conta de Desenvolvimento Energético]
CDE was created by Law No. 10.438/2002 with the objective of, among other purposes, promoting the universalization of the electric power sector in the entire national territory, funding discounts to the tariffs granted to the low income rural and residential classes, assuring the competitiveness of the energy produced from wind source, small hydroelectric power plants, biomass, natural gas, and mineral coal.
The National Treasury may provide contributions of resources to the CDE accounts, aiming the modicity of tariffs. The CDE cost is prorated by all consumers served by the National Interconnected System (SIN). The quota value is calculated by ANEEL.
Electric Power Services Inspection Fee (TFSEE)
The TFSEE was created with the purpose of funding the operation of ANEEL in the exercises of both activities of inspection and economic regulation.
The Fee is paid by all consumers of electric power, levied upon the activity of the agents of distribution, generation, and transmission of electric power.
Program of Incentive to Alternative Sources of Electric Power – “PROINFA”
PROINFA was created by Act no. 10.438/2002 and regulated by Decree no. 5.025/2004 with the objective of Funding the operation of ANEEL in the exercises of both activities of inspection and economic regulation.
Prorating of costs and of electric power contracted by the program, taking into account the Annual Plan elaborated by Centrais Elétricas Brasileiras S/A (ELETROBRAS) and the electric power market verified, both captive and free. The Act conceded exempted to consumptions of the Low Income residential subclass.
Financial Compensation for the Use of Water Resources (“CFURH”)
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The CFURH is set forth in the Federal Constitution of 1988, with the objective of providing financial compensation to the Government, state and municipalities, for the use of water and productive lands necessary for the installation of plants for the generation of power.
System Services Charges (“ESS”)
The ESS was created with the objective of increasing the reliability and safety of the offer of power in the country. The cost is calculated on a monthly basis by the Chamber of Commercialization of Electric Power and is paid by all consumers, captive and free, to the generation agents. It considers the dispatch of thermoelectric plants by order of merit, by energetic safety, operational restrictions, and ancillary services.
National System Operator (“ONS”)
The contribution to the ONS was created with the objective of financing the operation of the National Electric System Operator, which coordinates and controls the operation of generators and transmitters of electric power in the National Interconnected System (SIN). The value is defined on an annually basis by the ONS and approved by ANEEL.
Research and Development and Energetic Efficiency (“P&D/EE”)
The P&D/EE was created with the purpose of stimulating scientific and technological researches related to electric power and the sustainable use of the resources necessary to create it.
Reserve Power Charge (“EER”)
The ERR was created with the purpose of covering costs resulting from the contracting of reserve power, including administrative, financial, and tax costs.
The prorating among the end users of electric power of the National Interconnected System (SIN), including free consumers and self-producers only in the part of the energy resulting from the interconnection to the SIN, is defined on a monthly basis by the Chamber of Commercialization of Electric Power (CCEE), according to the formula set forth by ANEEL resolution.
As mentioned above, the effect of Portion A is that of pass-through, i.e., costs with sectorial charges, one of the components of Portion A, will be transferred to the consumer by the tariff, thus neutral from the point of view of the economic-financial evaluation, presenting only a temporal effect, since the adjustment caused by the difference between markets of reference is subject to inflation adjustment and adjusted in the next readjustment, however, for the effects of this evaluation, such temporal effect caused by the difference between the inflation adjustment rate (SELIC) and the discount rate (WACC), was not considered by virtue of its low representativeness.
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4.2.3.Transport Costs
Costs with the transport of power are those related to the transport of power from the generation units to the distribution systems, regulated by Resolutions 1917 and 1918, dated 06/03/2015 and Submodule 3.3 of the PRORET, being composed by the following items:
a) Use of the transmission facilities classified as Basic Network, Basic Network at Borders, or Other Transmission Facilities (DIT) of shared use;
b) Use of the distribution facilities;
c) Connection to DIT of exclusive use;
d) Connections to the distribution networks;
e) Transport of power from Itaipu to the point of connection to the Basic Network;
f) Use of Basic Network by the Itaipu plant; and
g) Use of the transmission system by the generation centers connected at the voltage level of 88kV or 138kV.
Both the use of the transmission systems and distribution system for the purposes of tariff procedures are calculated considering the amount of contracted demand for the period of reference, valued by the respective economic tariffs in force on the date of the tariff procedure.
As mentioned above, the effect of Portion A is that of pass-through, i.e., costs with sectorial charges, one of the components of Portion A, will be transferred to the consumer by the tariff, thus neutral from the point of view of the economic-financial evaluation, presenting only a temporal effect, since the adjustment caused by the difference between markets of reference is subject to inflation adjustment and adjusted in the next readjustment, however, for the effects of this evaluation, such temporal effect caused by the difference between the inflation adjustment rate (SELIC) and the discount rate (WACC), was not considered by virtue of its low representativeness.
4.2.4.Financial
Portion A includes costs that are transferred to the tariffs of the regulated market, but the calculation of the tariff occurs from a forecast for these costs, and the effective costs then do be different in relation to the forecast.
The invoicing of the distributor, as a recovery of Portion A, may be higher or lower than the effective costs of Portion A, and the differences verified will be accounted in entry CVA (“Compensation of Variation of Values of Items of Portion A”) to a posterior encounter of accounts.
It also occurs with the cost of the thermoelectric generation contracted, which may be higher or lower than that estimated in accordance with the intensity of use of the thermal plants, which on its turn depend on the volume of rainfall, a situations especially difficult to forecast. If, at the time of the calculation of the annual readjustment, CVA has a surplus, that means that the distributor has collected, via tariff, more money has been collected that what has been effectively applied in non-manageable costs. The balance will be corrected by the SELIC rate and the financial component corresponding to CVA will be negative in the calculation of the tariff of the
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next year to compensate the surplus, thus charging against the consumer less than the economic tariff.
As mentioned above, once the components of Portion A were considered neutral, i.e., values related to financial charges for the purposes of this economic-financial evaluation were not considered.
4.2.5. Technical Losses (“PT”)
The electric system is divided into generation, transmission, and distribution of electric power. Distributors receive the power from the supplying agents (transmitters, generators, or other distributors), delivering it to the end consumers, either residential, commercial, rural, industrial, or pertaining to the other classes. The power measured by the Distributors in the consumption units will always be smaller than the power received from the supplying agents. This different is known as loss of power and is segregated according to its origin.
The National Agency for Electric Power - ANEEL – shall refine, at every tariff review, a regulatory referential of losses that takes into account the performance of the concessionaire. Losses may be segmented by losses in the Basic Network, external to the distribution system of the concessionaire and with origin specifically technical, and losses in the distribution, which may have either technical or non-technical nature.
a) Concept and Characterization of the Historical Technical Losses of the Distributor
Technical Losses (PT) are those inherent to the transport of electric power in the network, related to the transformation of electric power into thermal power in the conductors (joule effect), losses in the transformer cores, dielectric losses, etc. They may be understood as the consumption of the equipment responsible for the distribution of power. It is worthwhile noting that the degrees of Technical Losses are defined by ANEEL upon the RTP, and kept constant by a tariff cycle.
The most recent determination of technical losses of Amazonas, segmented by the components of transformation and network, was performed by ANEEL by means of ANEEL Technical Note no. 0175/2013-SRD/ANEEL, dated Wednesday, July 17, 2013, “Calculation of losses in the distribution related to the 3rd Cycle of Periodical Tariff Review of Amazonas distribuidora de Energia – AmE”. The outcome of the calculation resulted in the values established as per Table 19 and Table 20.
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Table 19 - Amount of Losses in the Amazonas Distribution System | ||
Description | Amounts (MWh/year) | % Injected power |
Injected power (El) | 9,323,191,321 | 100.000% |
Supplied power (EF) | 5,605,433,766 | 60.124% |
Losses in Distribution (PD) | 3,717,758,146 | 39.876% |
Technical Losses (PT) | 715,651,950 | 7.676% |
Non Technical Losses (PNT) | 3,002,106,205 | 32.200% |
Source: ANEEL Technical Note No. 0175/2013-SRD/ANEEL |
Table 20 - Amount of Technical Losses per Segment of Transformation and Network | ||||
Technical Losses of the Segments | ||||
Passing Power | ||||
(EP) | Upstream | % Passing | % of the Total | |
(PTS) | Power (IPTS)) | Injected Power | ||
MWh | MWh | % | % | |
Trafos A1-A3 | 1,558,599,730 | 19,370,274 | 1.243% | 0.208% |
Trafos A1-A4 | 47,448,563 | 663,688 | 1.399% | 0.007% |
Trafos A3-A4 | 5,686,164,920 | 33,509,851 | 0.589% | 0.359% |
Trafos A4-B | 5,908,754,880 | 155,950,963 | 2.639% | 1.673% |
Grid A1 | 1,628,653,050 | 22,604,757 | 1.388% | 0.242% |
Grid A3 | 5 783 268 210 | 114,018,762 | 1.681% | 1.223% |
Grid A4 | 8,149,940,060 | 233,728,467 | 2.868% | 2.507% |
Grid B | 5,651,605,790 | 111,885,851 | 1.980% | 1.200% |
Meters | 2,633,518,520 | 8,609,388 | 0.327% | 0.092% |
Services Wires | 2,633,518,520 | 15,309,950 | 0.581% | 0.164% |
TOTAL | 7.676% |
Source: ANEEL Technical Note No. 0175/2013-SRD/ANEEL
Thus, ANEEL adopted, for the entire tariff cycle (2013-2017), the amount of Technical Loss of 7.67 % over the Total Injected Power in the system of the distributor.
b) Methodology and Premises of Technical Losses Forecasting
The methodology consists: (i) in evaluation of the technical losses rates of the supply voltage segments (IPTS) of Amazonas Energia in relation to the average of comparable companies identified according to the methodology described in section 4.3.2); and (ii) in seeking the lowest value between the segmented loss of the company and the average verified for comparable companies, which will be the base for the trajectory. Below, we present the step-by-step of the applied methodology:
i. The indexes of the technical loss per supply voltage segment - grid and transformation level (IPTS) were used as a primary source for the calculation of the loss. In order to preserve the confidentiality of the information, the methodology is
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based on the adoption of information from public sources, namely, ANEEL Technical Note No. 0175/2013-SRD/ANEEL dated July 17, 2013 “Determination of distribution losses related to the 3rd Periodical Tariff Review Cycle of Amazonas distribuidora de Energia – AmE”, process No.: 48500.001940/2013-34. With the Technical Note, ANEEL provides the losses per voltage segment, with unequivocal application and best representation of the verified historical information.
ii. The losses obtained in each voltage segment of the distributor were object of comparison with the companies having greater similarity to the concession are in evaluation, considering their specific characteristics. For AmE, the selected comparable companies were:
· Companhia Nacional de Energia Elétrica – CNEE;
· Rio Grande Energia S.A. – RGE;
· AES-SUL distribuidora Gaúcha de Energia S/A – AES-SUL;
· Caiuá Distribuição de Energia S.A. – Caiuá-D;
· Energisa Tocantins - ETO – former CELTINS;
· Energisa Paraíba distribuidora de Energia S/A – ENERGISA PB;
· Light Serviços de Eletricidade - LIGHT;
· Companhia Estadual de Distribuição de Energia Elétrica – CEEE-D.
iii. From the comparison with the similar companies, the average IPTS’s obtained considered the weighted losses of each Distributor in relation to the inject power in each voltage segment. The forecasted goal for 2047 consider, by segment, the maintenance of the rates of the company when below the weighted average; or the values observed in the weighted average of comparable companies when the results demonstrate level below that currently achieved by the company.
iv. Based on the obtained results of losses per segment, forecasted for 2047, a simple interpolation was used to define the intermediate values.
v. With the annual IPTS values obtained, such values were applied over the volumes of injected power per supply voltage segment, resulting the technical losses per segment, estimated to the entire period of Concession. For the consolidation of the total value of loss of the company, the same proportion of injected power as the one adopted in ANEEL Technical Note No. 0175/2013-SRD/ANEEL was used.
It is worthwhile noting that ANEEL, through Approval Resolution no. 2.184, dated November 29, 2016, approved the Technical Losses of AmE between 2016 and 2025 at 7.77% of the injected power. We kept this level constant until 202724. That is, the methodology described in this section applies after 2028.
As provided in art. 4, Law No. 13.299/2016, the regulatory technical and non-technical loss level to be used in the tariff processes and for the calculation of the efficient level of losses for
24 The calendar proposed in item “e” of section 4.1.2 foresees one RTP in 2023 and another in 2028. That is, the year of 2025 will be inserted in the middle of a tariff cycle. Thus, we take as premise the maintenance of the Technical Loss level from 2025 to 2027, since a review will only occur in 2028.
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Table 21 - Technical Loss Target per Voltage Segment | |||
Voltage segment | Avg ITPS Company | Final | |
ITPS | goal | ||
A1-A2 | 0.000% | 0.000% | 0.000% |
A1-A3 | 0.000% | 1.243% | 1.243% |
Al-A3a | 0.000% | 0.000% | 0.000% |
A1-A4 | 0.000% | 1.399% | 1.399% |
A2-A2 | 0.146% | 0.000% | 0.000% |
A2-A3 | 0.754% | 0.000% | 0.000% |
A2-A3a | 0.933% | 0.000% | 0.000% |
A2-A4 | 0.412% | 0.000% | 0.000% |
A3-A2 | 1.283% | 0.000% | 0.000% |
A3-A3a | 1.462% | 0.000% | 0.000% |
A3-A4 | 0.538% | 0.589% | 0.538% |
A3a-A2 | 0.000% | 0.000% | 0.000% |
A3a-A4 | 1.053% | 0.000% | 0.000% |
A3a-B | 0.000% | 0.000% | 0.000% |
A4-A3 | 0.420% | 0.000% | 0.000% |
A4-A3a | 0.000% | 0.000% | 0.000% |
A4-B | 2.843% | 2.639% | 2.639% |
B-A4 | 0.000% | 0.000% | 0.000% |
Al (< 230 kV) | 0.501% | 1.388% | 0.501% |
A2 (88 a 138 kV) | 1.633% | 0.000% | 0.000% |
A3 (69 kV) | 3.035% | 1.681% | 1.681% |
A3a (30 a 44 kV) | 1.796% | 0.000% | 0.000% |
A4 (2.3 a 25 kV) | 1.470% | 2.868% | 1.470% |
B (< 2.3 kV) | 2.066% | 2.251% | 2.066% |
Meters | 0.480% | 0.327% | 0.327% |
Service Wires* | 0.000% | 0.000% | 0.000% |
Source: Own Elaboration |
Based on the forecast of IPTS´s, the losses forecasted for the period 2026-2047 are established. The regulatory loss values for 2017 to 2025 were established by ANEEL by means of Approval Resolution No. No 2.184, dated November 29, 2016. Below, the annual IPTS´s and the consolidated technical losses are presented, as per line “Forecast of Technical Loss %” and “Forecast of Regulatory Technical Loss %”from Table 22.
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Table 25 - Result of the Complexity Indexes of each Econometric Model for the Companies from | ||||||
Grupo Eletrobras | ||||||
| ||||||
COMPANY | INDEX C | DEVIATION C | INDEX G | DEVIATION G | INDEX K | DEVIATION K |
Amazonas | 0.37 | 0.04 | 0.34 | 0.05 | 0.39 | 0.04 |
Ceal | 0.27 | 0.02 | 0.24 | 0.02 | 0.29 | 0.03 |
Cepisa | 0.26 | 0.02 | 0.25 | 0.03 | 0.25 | 0.02 |
Eletroacre | 0.25 | 0.02 | 0.24 | 0.02 | 0.24 | 0.02 |
Ceron | 0.19 | 0.02 | 0.19 | 0.02 | 0.19 | 0.02 |
Boa Vista (Capital) | 0.07 | 0.03 | 0.06 | 0.03 | 0.09 | 0.03 |
Source: Technical Note no. 106/2015, ANEEL |
Table 26 - Average Complexity Index of the Companies from the Eletrobras Group | |||
COMPANY | IC | Ranking | Size |
Amazonas | 0.364 | 4 | Large (Group 1) |
Ceal | 0.266 | 8 | Large (Group 1) |
Cepisa | 0.257 | 10 | Large (Group 1) |
Eletroacre | 0.243 | 12 | Large (Group 1) |
Ceron | 0.191 | 18 | Large (Group 1) |
Boa Vista (Capital) | 0.074 | 44 | Small (Group 2) |
Source: Technical Note no. 106/2015, ANEEL |
i. Analysis of the Potential of Reduction of Non-Technical Losses
Once the positions of the concessionaires are defined in each ranking of socio-economic complexity, it is possible to conclude that companies with small non-technical losses and in areas of concession identified as having greater or equal socio-economic complexity are more efficient, and, therefore, reference to the others.
Initially, the goal of reduction of losses of a certain company, once the comparable benchmark is identified, would correspond to the very own load of the benchmark. However, as per ANEEL’s methodology, a differentiated treatment is given as a form of making the calculation procedure more robust, treating the uncertainty regarding the position of the companies in the ranking, as a combination of the value of losses adopted by the benchmark with the probability of having the benchmark in fact in a more complex area of concession. With this purpose, a probability matrix was built, where the probability of occurrence for the concessionaire to be above or below the benchmarking was calculated. In general, by using the probability matrix, the reference for all potential benchmarking of the concessionaire is calculated, which determines the reduction potential.
The definition of the target from the probability matrix is done using Equation 10 as presented below.
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The starting point of non-technical losses is a referential value for the tariff year immediately before the year of the tariff review. In the definition of the starting point of nontechnical losses, the percentage of non-technical losses of the measured market is used. The definition of the starting point will be given by:
a) Group 1: Maximum 7.50%; Minimum (Goal 3, Measured CRTP, Average of the last 4 years);
b) Group 2: Maximum 2.50%; Minimum (Goal 3, Measured CRTP, Average of the last 4 years).
The exceptions of the general rule are applied in the following cases:
1. When the company has already been adopting low levels of non-technical losses, below 7.50% to companies of Group 1 and below 2.50% to companies of Group 2, then the average of non-technical losses adopted over the measured market in the last four (4) calendar years shall be considered;
2. Companies with low probability of comparison shall be subject to a complementary analysis and a diagnostics analysis that take into account the degree of effort of the Distributor to combat losses;
3. Concessionaires whose goals to be established by the methodology are greater than the starting point established by the goal of 3CRTP and not included in the item above. Then:
a. In case the goal obtained with the non-technical losses of the company of 3CRTP is greater than the goal established with the most recent loss, the goal obtained with the most recent loss will be used as the starting point, without trajectory of reduction;
b. In case the goal obtained with the non-technical losses of the company of 3CRTP is greater than the starting point, but smaller than the goal established with the most recent loss, the goal obtained with the non-technical losses of 3CRTP shall be used as the starting point, without trajectory of reduction;
c. In case the goal obtained with the non-technical losses of the company of 3CRTP is smaller than the starting point, the starting point shall be defined according to the equations of items (iii.a) and (iii.b), however without trajectory of reduction.
Concessionaire Amazonas Energia was not included in any criterion of exception to the rule of definition of the starting point.
Table 27 summarizes the rules for the definition of the starting point.
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The second group includes companies CEAL, CEPISA and ELETROACRE, which have the following common characteristics: (i) the difference between verified and regulatory invoiced PNT is below 30%. (as observed in Table 29) and (ii) they are at a close level of socio-economic complexity, which reflects in similarity related to the difficulties to fight PNT (as per Table 30).
Table 29 - Comparison of Real Invoiced Loss with Regulatory Invoiced Loss | |||
Actual Loss | Regulatory Loss | Difference Actual Loss and | |
Company | |||
Billed | Billed | Billed Regulatory | |
AME | 116.74% | 41.54% | 75.20% |
Ceron | 38.74% | 8.33% | 30.41% |
Eletroacre | 26.02% | 11.28% | 14.74% |
Ceal | 41.35% | 15.67% | 25.68% |
Cepisa | 37.00% | 13.93% | 23.07% |
Boa Vista | 10.29% | 11.05% | -0.76% |
Source: 2016 data for real and regulatory loss. Except for AME, where we used | |||
a regulatory loss invoiced in force before REN no. 2184/16. The data for Boa | |||
Vista include only information about the capital due to the lack of information | |||
about the state countryside. |
Table 30 - Complexity Index of Fighting Non-Technical Losses of the most Complex Distributors | |
from Group 1 | |
| |
Major Distributors | Complexity Index |
(Group 1) | |
CELPA | 0.503 |
LIGHT | 0.377 |
AMAZONAS ENERGIA | 0.364 |
CEMAR | 0.315 |
CELPE | 0.313 |
COELBA | 0.284 |
CEAL | 0.266 |
ELETROPAULO | 0.265 |
CEPISA | 0.257 |
COELCE | 0.253 |
ELETROACRE | 0.243 |
Source: TN No. 106/2015, ANEEL. |
For these companies, the trajectory of the real loss reduction will be equal to the average of reductions (percent per year) of real Non-Technical Losses in historical 5-year periods of companies CELPE, CEMAR and COELBA.
The third group includes Boa Vista, which is closer to its regulatory target. In this case, the trajectory of real losses is supported by the benchmark companies SANTA MARIA – in model K – and FORCEL – in models C and G.
The average of reductions (percent per year) of real Non-Technical Losses was calculated for the benchmark companies, in historical 5-year periods between years 2003 and 2016. Based on such real performance, reductions have been forecasted for the designated companies until
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Table 31 - Forecast Regulatory PNT 2023 to 2027
1 - Calculation of the Starting point before the flexibility analysis | ||||||
Non Technical | ||||||
Description | Losses (% BT) | |||||
3rd Cycle Goal (billed) | 47.28% | |||||
2. Difference between measured and invoiced (median of the 4 | 3.87% | |||||
last years) | ||||||
3 3rd Cycle Goal (verified) (1+2) | 51.15% | |||||
4 Historical Average (verified) | 104.87% | |||||
5. Starting Point (Historic Avg) | 51.15% | |||||
2 - Calculation of the goal based on the Benchmarks | ||||||
Description | Model C | Model G | Model K | |||
Benchmanr Company | CELPA | CELPA | CELPA | |||
6 Benchmark Loss (PNT/BT) | 43.59% | 43.59% | 43.59% | |||
7.Amazonas Loss (PNT/BT) | 89.14% | 89.14% | 89.14% | |||
8 Comparison probability | 95.10% | 95.90% | 96.70% | |||
9 Goal based on each Benchmark [8 x 6 + (1 – 8) x 7] | 45.82% | 45.46% | 45.09% | |||
Average goal of the Benchmarks [average(9)] | 45.46% | |||||
3 - Calculation of the Start and Arrival Point after the flexibility analysis | ||||||
Description | Model C | Model G | Model K | |||
Benchmark Company | CELPA | CELPA | CELPA | |||
11 Benchmark Loss (PNT/BT) | 43.59% | 43.59% | 43.59% | |||
12 Anazonas Loss (PNT/BT) - 3rd Cycle | 120.61% | 120.61% | 120.61% | |||
13 Comparison probability | 95.10% | 95.90% | 96.70% | |||
14 Goal based on each Benchmark [13 x 11 + (1 – 13) x 12] | 47.36% | 46.75% | 46.13% | |||
15 Average goal of the Benchmarks [average(14)] | 46.75% | |||||
16 Starting Point (5) | 51.15% | |||||
17 Goal [= Starting point] | 45.46% | |||||
Description | Starting point | 2023 | 2024 | 2025 | 2026 | 2027 |
PNT/BT Path (Starting point to the goal) | 51.15% | 50.01% | 48.87% | 47.73% | 46.60% | 45.46% |
Reduction Pace (p.a.) | -1.14% | -1.14% | -1.14% | -1.14% | -1.14% | |
Reduction limit (p.a.) | -1.14% | -1.14% | -1.14% | -1.14% | -1.14% | |
PNT/BT Regulatory Reference (verified) | 51.15% | 50.01% | 48.87% | 47.73% | 46.60% | 45.46% |
Difference between verified and billed | 3.87% | 3.87% | 3.87% | 3.87% | 3.87% | 3.87% |
PNT/BT Regulatory Reference (billed) | 47.28% | 46.14% | 45.00% | 43.87% | 42.73% | 41.59% |
Source: Self elaborated based on the methodology presented in TN No. 106/2015, ANEEL |
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Table 32 - Forecast Regulatory PNT 2028 to 2032
1 - Calculation of the Starting point before the flexibility analysis | ||||||
Non Technical | ||||||
Description | Losses (% BT) | |||||
3rd Cycle Goal (billed) | 47.28% | |||||
2. Difference between measured and invoiced (median of the 4 | 3.87% | |||||
last years) | ||||||
3 3rd Cycle Goal (verified) (1+2) | 51.15% | |||||
4 Historical Average (verified) | 60.66% | |||||
5. Starting Point (Historic Avg) | 51.15% | |||||
2 - Calculation of the goal based on the Benchmarks | ||||||
Description | Model C | Model G | Model K | |||
Benchmanr Company | CELPA | CEMAR | CELPA | |||
6 Benchmark Loss (PNT/BT) | 43.59% | 21.73% | 43.59% | |||
7.Amazonas Loss (PNT/BT) | 53.16% | 53.16% | 53.16% | |||
8 Comparison probability | 95.10% | 42.20% | 96.70% | |||
9 Goal based on each Benchmark [8 x 6 + (1 – 8) x 7] | 44.06% | 39.90% | 43.91% | |||
Average goal of the Benchmarks [average(9)] | 42.62% | |||||
3 - Calculation of the Start and Arrival Point after the flexibility analysis | ||||||
Description | Model C | Model G | Model K | |||
Benchmark Company | CELPA | CEMAR | CELPA | |||
11 Benchmark Loss (PNT/BT) | 43.59% | 21.73% | 43.59% | |||
12 Anazonas Loss (PNT/BT) - 3rd Cycle | 68.16% | 68.16% | 68.16% | |||
13 Comparison probability | 95.10% | 42.20% | 96.70% | |||
14 Goal based on each Benchmark [13 x 11 + (1 – 13) x 12] | 44.79% | 48.57% | 44.40% | |||
15 Average goal of the Benchmarks [average(14)] | 45.92% | |||||
16 Starting Point (5) | 51.15% | |||||
17 Goal [= Starting point] | 42.62% | |||||
Description | Starting point | 2028 | 2029 | 2030 | 2031 | 2032 |
PNT/BT Path (Starting point to the goal) | 51.15% | 49.44% | 47.74% | 46.03% | 44.33% | 42.62% |
Reduction Pace (p.a.) | -1.71% | -1.71% | -1.71% | -1.71% | -1.71% | |
Reduction limit (p.a.) | -1.71% | -1.71% | -1.71% | -1.71% | -1.71% | |
PNT/BT Regulatory Reference (verified) | 51.15% | 49.44% | 47.74% | 46.03% | 44.33% | 42.62% |
Difference between verified and billed | 3.87% | 3.87% | 3.87% | 3.87% | 3.87% | 3.87% |
PNT/BT Regulatory Reference (billed) | 47.28% | 45.57% | 43.87% | 42.16% | 40.46% | 38.75% |
Source: Self elaborated based on the methodology presented in TN No. 106/2015, ANEEL |
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Table 33 - Forecast Regulatory PNT 2033 to 2037
1 - Calculation of the Starting point before the flexibility analysis | ||||||
Non Technical | ||||||
Description | Losses (% BT) | |||||
3rd Cycle Goal (billed) | 38.75% | |||||
2. Difference between measured and invoiced (median of the 4 | 3.87% | |||||
last years) | ||||||
3 3rd Cycle Goal (verified) (1+2) | 42.62% | |||||
4 Historical Average (verified) | 41.76% | |||||
5. Starting Point (Historic Avg) | 41.76% | |||||
2 - Calculation of the goal based on the Benchmarks | ||||||
Description | Model C | Model G | Model K | |||
Benchmanr Company | CELPE | CEMAR | CELPE | |||
6 Benchmark Loss (PNT/BT) | 20.35% | 21.73% | 20.35% | |||
7.Amazonas Loss (PNT/BT) | 40.35% | 40.35% | 40.35% | |||
8 Comparison probability | 14.60% | 42.20% | 18.90% | |||
9 Goal based on each Benchmark [8 x 6 + (1 – 8) x 7] | 37.43% | 32.50% | 36.57% | |||
Average goal of the Benchmarks [average(9)] | 35.50% | |||||
3 - Calculation of the Start and Arrival Point after the flexibility analysis | ||||||
Description | Model C | Model G | Model K | |||
Benchmark Company | CELPE | CEMAR | CELPE | |||
11 Benchmark Loss (PNT/BT) | 20.35% | 21.73% | 20.35% | |||
12 Anazonas Loss (PNT/BT) - 3rd Cycle | 43.16% | 43.16% | 43.16% | |||
13 Comparison probability | 14.60% | 42.20% | 18.90% | |||
14 Goal based on each Benchmark [13 x 11 + (1 – 13) x 12] | 39.83% | 34.12% | 38.85% | |||
15 Average goal of the Benchmarks [average(14)] | 37.60% | |||||
16 Starting Point (5) | 41.76% | |||||
17 Goal [= Starting point] | 35.50% | |||||
Description | Starting point | 2033 | 2034 | 2035 | 2036 | 2037 |
PNT/BT Path (Starting point to the goal) | 41.76% | 40.50% | 39.25% | 38.00% | 36.75% | 35.50% |
Reduction Pace (p.a.) | -1.25% | -1.25% | -1.25% | -1.25% | -1.25% | |
Reduction limit (p.a.) | -1.25% | -1.25% | -1.25% | -1.25% | -1.25% | |
PNT/BT Regulatory Reference (verified) | 41.76% | 40.50% | 39.25% | 38.00% | 36.75% | 35.50% |
Difference between verified and billed | 3.87% | 3.87% | 3.87% | 3.87% | 3.87% | 3.87% |
PNT/BT Regulatory Reference (billed) | 37.89% | 36.64% | 35.39% | 34.14% | 32.89% | 31.63% |
Source: Self elaborated based on the methodology presented in TN No. 106/2015, ANEEL |
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Table 34 – Forecast Regulatory PNT 2038 to 2042
1 - Calculation of the Starting point before the flexibility analysis | ||||||
Non Technical | ||||||
Description | Losses (% BT) | |||||
3rd Cycle Goal (billed) | 31.63% | |||||
2. Difference between measured and invoiced (median of the 4 | ||||||
last years) | 3.87% | |||||
3 3rd Cycle Goal (verified) (1+2) | 35.50% | |||||
4 Historical Average (verified) | 37.09% | |||||
5. Starting Point (Historic Avg) | 35.50% | |||||
2 - Calculation of the goal based on the Benchmarks | ||||||
Description | Model C | Model G | Model K | |||
Benchmanr Company | CELPE | CEMAR | CELPE | |||
6 Benchmark Loss (PNT/BT) | 20.35% | 21.73% | 20.35% | |||
7.Amazonas Loss (PNT/BT) | 35.69% | 35.69% | 35.69% | |||
8 Comparison probability | 14.60% | 42.20% | 18.90% | |||
9 Goal based on each Benchmark [8 x 6 + (1 – 8) x 7] | 33.45% | 29.80% | 32.79% | |||
Average goal of the Benchmarks [average(9)] | 32.01% | |||||
3 - Calculation of the Start and Arrival Point after the flexibility analysis | ||||||
Description | Model C | Model G | Model K | |||
Benchmark Company | CELPE | CEMAR | CELPE | |||
11 Benchmark Loss (PNT/BT) | 20.35% | 21.73% | 20.35% | |||
12 Anazonas Loss (PNT/BT) - 3rd Cycle | 38.49% | 38.49% | 38.49% | |||
13 Comparison probability | 14.60% | 42.20% | 18.90% | |||
14 Goal based on each Benchmark [13 x 11 + (1 – 13) x 12] | 35.84% | 31.42% | 35.06% | |||
15 Average goal of the Benchmarks [average(14)] | 34.10% | |||||
16 Starting Point (5) | 35.50% | |||||
17 Goal [= Starting point] | 32.01% | |||||
Description | Starting point | 2038 | 2039 | 2040 | 2041 | 2042 |
PNT/BT Path (Starting point to the goal) | 35.50% | 34.80% | 34.10% | 33.41% | 32.71% | 32.01% |
Reduction Pace (p.a.) | -0.70% | -0.70% | -0.70% | -0.70% | -0.70% | |
Reduction limit (p.a.) | -0.70% | -0.70% | -0.70% | -0.70% | -0.70% | |
PNT/BT Regulatory Reference (verified) | 35.50% | 34.80% | 34.10% | 33.41% | 32.71% | 32.01% |
Difference between verified and billed | 3.87% | 3.87% | 3.87% | 3.87% | 3.87% | 3.87% |
PNT/BT Regulatory Reference (billed) | 31.63% | 30.94% | 30.24% | 29.54% | 28.84% | 28.14% |
Source: Self elaborated based on the methodology presented in TN No. 106/2015, ANEEL |
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Table 35 – Forecast Regulatory PNT 2043 to 2047
1 - Calculation of the Starting point before the flexibility analysis | ||||||
Non Technical | ||||||
Description | Losses (% BT) | |||||
3rd Cycle Goal (billed) | 28.14% | |||||
2. Difference between measured and invoiced (median of the 4 | 3.87% | |||||
last years) | ||||||
3 3rd Cycle Goal (verified) (1+2) | 32.01% | |||||
4 Historical Average (verified) | 32.42% | |||||
5. Starting Point (Historic Avg) | 32.01% | |||||
2 - Calculation of the goal based on the Benchmarks | ||||||
Description | Model C | Model G | Model K | |||
Benchmanr Company | CELPE | CEMAR | CELPE | |||
6 Benchmark Loss (PNT/BT) | 20.35% | 21.73% | 20.35% | |||
7.Amazonas Loss (PNT/BT) | 31.02% | 31.02% | 31.02% | |||
8 Comparison probability | 14.60% | 42.20% | 18.90% | |||
9 Goal based on each Benchmark [8 x 6 + (1 – 8) x 7] | 29.46% | 27.10% | 29.00% | |||
Average goal of the Benchmarks [average(9)] | 28.52% | |||||
3 - Calculation of the Start and Arrival Point after the flexibility analysis | ||||||
Description | Model C | Model G | Model K | |||
Benchmark Company | CELPE | CEMAR | CELPE | |||
11 Benchmark Loss (PNT/BT) | 20.35% | 21.73% | 20.35% | |||
12 Anazonas Loss (PNT/BT) - 3rd Cycle | 33.82% | 33.82% | 33.82% | |||
13 Comparison probability | 14.60% | 42.20% | 18.90% | |||
14 Goal based on each Benchmark [13 x 11 + (1 – 13) x 12] | 31.85% | 28.72% | 31.27% | |||
15 Average goal of the Benchmarks [average(14)] | 30.61% | |||||
16 Starting Point (5) | 32.01% | |||||
17 Goal [= Starting point] | 28.52% | |||||
Description | Starting point | 2043 | 2044 | 2045 | 2046 | 2047 |
PNT/BT Path (Starting point to the goal) | 32.01% | 31.31% | 30.61% | 29.92% | 29.22% | 28.52% |
Reduction Pace (p.a.) | -0.70% | -0.70% | -0.70% | -0.70% | -0.70% | |
Reduction limit (p.a.) | -0.70% | -0.70% | -0.70% | -0.70% | -0.70% | |
PNT/BT Regulatory Reference (verified) | 32.01% | 31.31% | 30.61% | 29.92% | 29.22% | 28.52% |
Difference between verified and billed | 3.87% | 3.87% | 3.87% | 3.87% | 3.87% | 3.87% |
PNT/BT Regulatory Reference (billed) | 28.14% | 27.45% | 26.75% | 26.05% | 25.35% | 24.65% |
Source: Self elaborated based on the methodology presented in TN No. 106/2015, ANEEL |
In addition, according to the instructions in TN No. 351/2017, percentage that makes the verified loss of the company close to the regulatory levels in the first five years of the contract was applied in the economic-financial model for establishment of the company value in the privatization process. The companies Amazonas and Boa Vista do not fit these transitory provisions, considering that they have been benefited by Approval Resolution No. 2.184/2016.
4.2.7. Default
The methodology for calculation of Non-Recoverable Revenues for 4CRTP is presented in TN No. 107/2015 and has been kept partially after the discussions in AP No. 58/2016. In addition to being included in Portion A of the Required Revenues, the main methodological change refers to the exclusive use of the regulatory percentage of non-recoverable revenues – in its previous version, part of the non-recoverable revenues was calculated based on the percentage of non-recoverable revenues observed in the concessionaire. In addition, as of the review of 4CRTP, the non-recoverable revenues will also be calculated on the additional priority revenues.
The calculation of the percentage of regulatory non-recoverable revenues is based on a “mobile median” model, which considers aging period of 49 to 60 months. The aging period
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ρc: participation of consumption class C in the total revenues verified in the test year;
RIc: percentage of regulatory non-recoverable revenues, related to class C, according to the tables in PRORET Sub-module 2.2A (tables 2 and 3).
Most components of the equations above will be presented in sections, where Portion B and the results from the tariff transactions are discussed. For ICMS and PIS/Cofins rates, the values used in the tariff adjustment process from 2016are adopted. For AmE, the values are 13.69% for ICMS and 0% for PIS/Cofins. These rates are kept constant over the period of analysis.
The percentage of regulatory non-recoverable revenues is obtained using the methodology in TN No. 107/2015 and presented in sub-module 2.2A of PRORET, and are also kept constant over the period of analysis: 1.88% for residential; 1.50% for industrial; 0.98% for commercial; 1.98% for rural; 0.28% for public authority; 0.05% for public lighting; 0.08% for public services.
In addition to the regulatory calculation, the values of the observed default to be used in the calculation of the cash flow have also been estimated. The average revenues not invoiced in the period from 49 to 60 months until the end of 2016 were adopted as starting point, as informed by the distributor. The values obtained and applied in the calculation for 2017 were: 2.95% for residential; 5.88% for industrial; 2.92% for commercial; 6.21% for rural; 2.,95% for public authority; 1.74% for public lighting; 0.78% for public services. It was assumed that these values will be converted into the regulatory percentage within 10 years.
4.3. Methodology for definition of Portion B
The definitions used to calculate Portion B are presented in Official Document No. 113/2017-DR/ANEEL with the draft concession contract - as well as the definitions for Portion A and tariff transactions. In addition to some particularities, the definitions follow the methodologies presented in versions “A” of PRORET, as presented hereunder. It shall be noted that the elements discussed hereunder are regulatory and refer to the concession of public service.
The calculation of the value of Portion B is different between the processes of tariff review and adjustment. In the tariff adjustment process, the methodology from sub-module 3.1A of PRORET is followed.
First, the Value of Portion B in the test year (12 months prior to the tariff adjustment) –also called VPB0 component -, is calculated as the quotient of the division of the Value of Portion B from the reference market (both from the previous tariff process) multiplied by the value from the reference market of the current process.
Then, VPB0 is adjusted to recompose the elements, which are excluded from the previous process: Other Revenues, Demand Surplus and Reactive Excess. In the first tariff adjustment of the analyzed concessionaires (2017), an adjustment factor calculated by ANEEL according to Public Hearing No. 58/2016 (DR1 Factor) is used. For the other years, the so-called Pbi-1 Factor is estimated annually based on the data from the previous tariff process (t-1).
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· r usd= USA inflation rate: Average of the 10-year forecast of the North-American inflation rate on Base-Date 03/31/2017 (source: US Congressional Budget Office);
RC = Credit risk: Average historical spread of the Credit risk compared to SELIC applied on the SELIC forecast along the forecast (source: Bacen)
4.3.2. Operational costs and Factor Xt
The Efficient Operational Costs are one of the main components to estimate the Value of Portion B in the Tariff Review processes (CAOM component in the formula for VPB calculation). The methodology used to calculate the efficient operational costs is presented in Official Document No. 113/2017-DR/ANEEL, clause six, and in general, follows the exposed in submodule 2.2A of PRORET. Some particularities of the Official Document are described along the methodology.
Under regulatory point of view, such costs refer to the figures for Personnel, Material, Outsourced Services, Other Operational costs, Taxes and Insurance related to the Electric Power Distribution and Sale activity (PMSO). According to specifications in TN No. 66/2015, PMSO shall be adjusted in some points, particularly for Personnel and Other costs. In the Personnel data, the values of actuarial deficits and surpluses and the retirement and/or voluntary dismissal programs are excluded, while in Others, only the following are considered: indemnities for loss and damage, proper power consumption, expenses for trainees and job initiation program, expenses for consumer advising, expenses for internal communication and reprography, collection fee, bank fees and judicial labor sentences. Such adjustments are applied by ANEEL for tariff reviews and were considered to compose the PMSO data to be forecasted within this analysis.
The approach used by ANEEL for the calculation of the efficient operational costs in the periodic tariff review seeks defining the efficient cost level for the performance of the processes, according to the conditions provided in the concession contracts and the regulation, assuring adequate service provision and that the assets will keep their service capacity unchanged throughout their service life. In the definition of the efficient operational costs, the costs of the distributors, the efficient cost level and the characteristics of the concession area will be observed.
ANEEL uses the non-parametric model called DEA (Data Envelopment Analysis), whose purpose is to define a production/variable cost boarder as a way to identify the level of efficiency of the companies. The model considers PMSO, with the adjustments mentioned above, as production input. The values are also adjusted by salary indexes, for companies, which work in regions where labor cost is cheaper, not to have competitive advantage, and thus, masking their efficiency score.
The products considered in 4CRTP were: Grid (underground grid, air-borne distribution grid and high voltage grid), consumers, average market (weighted by voltage level), NonTechnical Losses and quality (interrupted consumer hour). Using a sample of 61 companies for the period from 2011 to 2013, ANEEL obtained the efficiency scores in the DEA model as presented in Table 36.
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The products used are the following:
· Underground grid; Airborne Distribution grid; High Voltage grid. The methodology for total grid forecast is presented hereunder. The breakdown in underground, airborne and high voltage was kept constant, based on the data from 2016;
· Weighted Market: LV, MV and HV (weights indicated in PRORET 2.2A and forecast as indicated in the specific market section)
· Consumers
· Interrupted consumer hour CHIaj = max ((DECreal -DECV8) . cons;0), where DECreal is the global performed DEC (average from the last 3 years); DECV8 is the reference for the DEC indicator of the concessionaire and cons is he number of consumers
· Non-Technical Losses PNTaj = max((PNTBT - meta) . MBT;0), where PNTBT is the indicator on the low voltage market (average from the last 3 years), target is the regulatory target of Non-Technical Losses on the low voltage market and MBT is the low voltage market in the Test Year
The total extension of grids of each concessionaire was forecasted according to elasticity calculated for the number of total consumption units in the concession area. To determine this elasticity, panel data of the designated - concessionaires (6 companies) for the period between 2007 and 2016 (10 years) was used. A panel least squares model [14]32 was adopted, whose results are presented in Table 41. Elasticity of 0.76 was applied to the growth rates forecasted for the consumption unit of each concessionaire, obtaining the forecast of the total grids.
32 The model was estimated using the software E-Views 9. The database used is the same as that considered for the | ||
calculation of efficient operational costs. | ||
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75%. Therefore, there are four classes of concessionaires according to their performance. The division of the classes is preceded by the separation of the concessionaires in two groups using the size criterion. Thus, bigger concessionaires will have their performance compared in between. Likewise for the smaller concessionaires. The criterion for division of the two groups is set within the annual evaluation of the service continuity ranking, which shall also include disclosure of the commercial indicators.
To obtain the quality parts (QDEC, QFEC, QFER, QIASC, QINS, QIAb, QICO), the following are necessary: (i) the variation of the indicators in the two previous years; (ii) the values of the standards for identification of concessionaires, which meet the limits or not; and (iii) the performance ranking for definition of the four classes.
There is a specific model to be applied to obtain each quality part. These models are presented in the annexes to sub-module 2.5A of PRORET. There is an example for DEC below.
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4.3.4.Demand Surplus, Reactive Excess and Other Revenues
Sub-module 2.7A of PRORET classified Other revenues in three categories: (i) activities inherent to the electric power distribution service; (ii) complementary activities; and (iii) atypical activities.
The revenues inherent to the electric power distribution service are additional to the power supply, but are still part of the essence of the electric power distribution concession, for which the expenses incurred while providing the services are already contemplated in the revenues of the regulated service. In this category, the revenues obtained from connection charges and chargeable services as included; as well as the revenues determined for Demand Surplus and Reactive Excess; the purpose of their collection is to incentive optimized use of the grid and efficient consumption of power, without effective service compensation by the concessionaire.
The complementary activities are those, whose expenses are not clearly identified and are already covered by the revenues coming from the regulated activity. In this sub-group, the revenues from share of infrastructure and communication systems (PLC) are allocated.
The atypical activities are those, on which administration and management criteria are imposed, which enable full distinction of the cost and income accounting. They are composed of revenues coming from provision of services to third parties (operation and maintenance, consulting, communication and engineering) and charge for the agreement collection in the energy bills.
From the most recent information about Other revenues supplied by the analyzed concessionaires it was adopted as assumption that they will evolve according to the growth of IGP-M, as it is about the price index used by ANEEL for financial update of the regulatory values of Other revenues. This indicates maintenance of the current levels of other revenues, without additional efforts for their expansion. Such case reflects a reduction of the incentives for generation of other revenues, once there was reduction of the period, in which it is possible gain benefits from this source of revenues. Upon the last update, PRORET, the other revenues are excluded from Portion B annually, and not only in the tariff review processes.
For the groups of analyzed concessionaires, it shall be pointed out that in the adjustment in 2017 and 2010, the other revenues share model from 3CRTP was used. The application of the current share methodology is done from the first tariff review process (2020). The obtained results are presented in Graph 15.
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4.3.5. DEC and FEC Indicators
The regulation of the electric power service continuity – started in the 70s by means of DNAEE Ordinance No. 046/1978 – has underwent successive amendments and improvements until nowadays. After the creation of ANEEL, Aneel Resolution No. 024/2000 (REN No. 024/00) was approved, in which the regulation of the continuity with the new tariff regimen was accounted: the price cap. In this regimen, the regulator seeks encouraging the distribution concessionaires to provide their services more efficiently, i.e., lower costs and prudent investments. However, for the seek for maximization of the return from the business not lead to worsening of the service quality, ANEEL developed a complementary regulatory mechanism, which sets standards (limits or targets) to be met by the concessionaires under penalties of sanctions and compensations for non-fulfillment.
a) Concepts and History of Calculation of the Indicators
The Distributor determines the continuity of the service provided to the consumers by means of individual indicators regarding the time and the number of times a consumption unit has remained without electric power in given period. Such indicators are submitted to ANEEL periodically, and ANEEL is entitled to inspect the calculation process and assess them from the regulatory point of view. The individual indicators are: DIC - Individual Interruption Duration per Consumption unit or Point of Connection; FIC – Frequency of Individual Interruption per Consumption unit or Point of Connection; DMIC – Maximum duration of continuous interruption per consumption unit or point of connection; and DICRI - Individual duration of the interruption on a critical day per consumption unit or point of connection.
The follow-up of the individual indicators is done by means of limits, also individual, which are defined for monthly, quarterly and annual periods in relation to the DIC and FIC indicators. The limit of the DMIC indicator is defined for a monthly period, while the limit of the DICRI indicator is defined for each interruption on a critical day.
When the limits of the individual continuity indicators are violated, the Distributor shall compensate the consumer financially by means of direct discount in the bill within two months after the calculation of the violation. As it will be approached in section 4.3.6, the formula defined by the Regulator for the calculation of the compensation considers the percentage of excess valued by a financial charge.
From the values calculated for the individual DIC and FIC indicators, group indicators (DEC and FEC) are obtained, which reflect he average of the continuity of the provided service for given conglomerate of consumers. Normally, the group indicators are calculated both at level of groups of consumption units (subdivisions of the concession area) and at company level (the entire concession area).
The graphs present the historical series both for the determination and the limits of the DEC and FEC indicators for AmE for the years from 2013 to 2016, as well as the regulatory and
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annual limits of each group from their target values in force; (vi) application of specific treatment for groups with give characteristics – those with high degrees of heterogeneity, high share of the supply in the interruptions and/or high annual target drop rates -.
The group of consumption unit (analysis unit for definition of group limits) is defined as the range area of a Distribution Substation (SED) owned by the Distributor, with High Voltage (HV) primary and Medium Voltage (MV) secondary. The criteria for creation, aggregation and division of the groups are set by ANEEL in Section 8.2, Module 8 of PRODIST.
For purposes of determination of the quality targets, the groups are characterized by means of attributes with high correlation (theoretically) with the DEC and FEC indicators. The 7 (seven) attributes currently used are:
· PC_VRAMà Percentage of area with remaining vegetation high or medium (%);
· PLUVà Average Annual Pluviometric Precipitation (mm);
· PC_NUC_ADà Percentage of Consumption units (UC) in High Density Areas (%);
· PC_ERMT_3Fà Percentage of Medium Voltage (MV) grids, three-phase (%);
· CM_NUC_RESà Average Consumption per CU of the Residential Class (given in MWh);
· NUC_INDà Number of CU in the Industrial Class (exclusive for DEC);
· NUC_COMà Number of CU in the Commercial Class (exclusive for FEC).
ANEEL takes these attributes from the Geographic Database of the Distributor (BDGD) sent annually by each Distributor, in addition to using other databases36. The methodology approved by the Agency uses the dynamic clustering method to identify similarity between the groups in these attributes. It is worth pointing out that this method is applied only between airborne groups, while the underground groups form a single cluster.
In the clustering process, each group, in given time of analysis, is considered the reference group and then, the groups, which are the most similar to it, are established. The distance measure used to evaluate the degree of similarity between the groups is the Euclidean one. Considering that this measure is sensitive to the scale differences existing between the attributes used in the comparison, the standardization called Score Z is done first - calculated by subtracting the average and dividing by the standard deviation for each attribute.
Once the Euclidean distances are calculated, it is necessary to determine the heterogeneity of each reference group in relation to the other groups by means of Equation 30.
36 Native vegetation data taken from Project for Preservation and Sustainable Use of the Brazilian Biological Diversity | ||
- Probio (2008), and the precipitation data is from the CPTEC site (from 1999 to 2012). | ||
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From the regressions, the indicators are estimated year by year, starting from the assumption that the independent variable is the result for the previous year, obtaining possible decrease every year until 2025. The models estimated and used for the definition of the forecast of the quality indicators for AmE are presented in Appendix E.
Finally, the third moment is the forecast of the indicators from 2026 to 2047 and for this purpose, the calculated historical indicators were ordered in increasing order (2003 to 2016) of the comparable companies. The final target for the analysis period (2047) is defined by the measurement of the position of the 1st decile (or percentile 10) of the indicators of the comparable companies38. Once this level was found, a linear reduction trajectory was outlined, considering 2025 as starting point and the value of the 1st decile applied in 2047 as end point. The value obtained in 2047 is considered for 2048, as it is expected to close the concession in the beginning of the latter year.
d) Assumptions for Forecast of the Regulatory Limits of DEC and FEC
For the forecasts of these regulatory targets, the method in force in 4CRTP was used, mainly grounded on the method of group clustering by similarity and the measurement of the position for the definition of the regulatory target. The database of attributes of each group in the country in 2016 was used to perform dynamic clustering.
For the calculation, the following assumption were necessary: (i) progress in the interconnections of isolated systems to SIN was foreseen from 2019 to 2021 for the distributors Eletroacre, Ceron and Boa Vista, influencing their regulatory target; (ii) the contribution of each group to the formation of the global indicators (DEC and FEC) in 2016 was used as weighing criterion for opening the forecasted indicators of the companies defined according to the methodology presented in the previous section; and (iii) only the indicators of the Distributors from the Eletrobras group presented annual reduction rate, while the indicators of the other groups remained constant.
For calculation of the trajectories of the DEC and FEC limits forecasted from 2023 to 2048, it shall be considered that: (i) RTP will occur in 2023, 2028, 2033, 2038 and 2043; (ii) the value for 2048 will be equal to that obtained in 2047, as it is expected to close the concession in the latter year; and (iii) all limit values are weighed by the number of consumption units related to the average from the 1st quarter 2017, according to NT No. 088/2017 SRD-ANEEL.
e) Results for the Forecasts of the Calculated and Regulatory Indicators
Based on the used assumptions and methodologies, the results for the forecasts of the calculated indicators and the regulatory service quality limits of the distributor – DEC and FEC –until 2048 are presented. Graph 20 and Table 46 present the forecasts for DEC and Graph 21 and Table 47, for FEC.
38 The 1st decile is the cut-off point, i.e., the target is defined as the accomplished performance of the best 10%. | ||
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Analyzing the DEC forecasts, it can be noted that from 2019 to 2048, the calculated values for DEC will remain under the regulatory limits. The same is verified in the forecasts for FEC, considering that the calculated values will always be below the regulatory, verifying higher variation between 2020 and 2025.
4.3.6.Compensations
Among the penalties provided in the legislation for violation of the quality standards in the electric power supply, the compensation for violation of the individual service continuity indicators is the most expressive.
The methodology for the calculation of this compensation was prepared about eight years ago, as provided in Technical Note No. 092/2009 – SRD/ANEEL, and it comprehends the followings stages: (i) building the database of the individual indicators observed in the groups of consumption units for 2007 and 2008 – data from 36 Distributors, which served 65% of the consumers in the country at that time –; (ii) production of histograms for 42 DEC and FEC ranges according to the verified individual indicators segregated by connection voltage (HV, MV and LV) and localization (urban or non-urban); (iii) definition of percentile 90 as position measurement of the individual limit for each range; and (iv) application of a trend line to correct possible inconsistencies related to the limits of each range; (v) setting the DICRI limit as the DMIC value from the last DEC range; and (vi) multiplication of the monthly values by 2 and 4 for calculation of the quarterly and the annual limits, respectively. By means of this method, the limit tables of the individual indicators presented on Module 8 of PRODIST were built.
To what refers to the compensations paid to the consumer for the violation of the individual limit, the calculation is made using the quotient of the calculated value in relation to the limits (percentage of limit excess), multiplied by the value of the Distribution System Use Charge (EUSD) and increased by a constant, which depends on the voltage level of the consumer´s connection.
EUSD is used as a base for the calculation of the individual compensations. EUSD is calculated using the product of the use tariff39 (TUSD) by the respective verified consumption variable or contracted demand, according to Equation 35.
Equation 35 - Calculation of the average EUSD
EUSDaverage = TUSD x Consumption (KWh)
Where:
EUSDaverage: Arithmetic mean of the Distribution System Use Charges (EUSD);
TUSD: Distribution System Use Tariffs.
39 Related to the voltage level and the tariff sub-group. | ||
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This plan will set the forecasts of investments for the other 25 years of the contract, which are medium and long-term resource needs. The forecasts will be explained in two blocks: forecasts of the electric investments (HV Expansion, MV Expansion; LV Expansion; HV Improvement; MV Improvement; LV Improvement and Renewal) and forecast of investments in non-electric assets (Systems).
a) Assumptions for Forecast of the Electric Investments
The forecast of electric investments in the other 25 years of the contract was estimated by quinquennium, according to the need of funds aimed at expansion and improvement of the distribution assets based on PIQ 2018-2022.
The need of investments in LV Expansion and HV/MV/LV improvement for the 2nd quinquennium (2023-2027) was forecasted according to the following metrics: (i) initially, we calculated the mean and the standard deviation of each kind of investment stated in PIQ 2018-2022; (ii) the values of the interval between the mean ± a standard deviation (considered outliers) were not computed for PIQ 2023-2027; (iii) the sum of the investments of the years considered typical were multiplied by factor “5/No. of typical years” to obtain the necessary quinquennial amount; (iv) finally, this result was multiplied by a reducing factor, using the assumption that in the 1st quinquennium of the concession, there are important investments blocked, which shall be made by the new controller47, which will not repeat in the other years of the concession. Chart 11 illustrates the methodology used to forecast the quinquennial investments.
47 It shall not be supposed that there will be grid infrastructure works in the other quinquennial periods similar – in | ||
quantity and resources – to the need projected for the quinquennium 2018-2022. | ||
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the quinquennium – close to the subsequent tariff review of the distributor48 - considering that in general, there is certain flexibility to execute these works, and 30% have been allocated in each year. The other 40% are allocated in the first three years of the quinquennium, at 10% rate for the first two years and 20% for the third year.
The forecasts of the third (2028-2032), fourth (2033-2037), fifth (2038-2042) and sixth (2043-2047) quinquennial periods for LV Expansion and HV/MV/LV Improvement works were based on the previous quinquennium.
It shall be pointed out that the investments in HV and MV Expansion works of the second five-year period (2023-2027) were forecasted in a different way, considering that AmE itself already had investments in expansion forecasted for the period from 2023 to 2026. Thus, the need for 2027 was estimated from the average investments in the last 4 years, i.e., average investments between 2023 and 2026. The forecast metrics for the other five-year periods were similar to that mentioned above, where the disaggregation of the HV Expansion works per year was equivalent to the HV Improvement works.
For HV expansion works, we also considered oscillating factors between quinquennial periods: at every 10 years, the need of investments doubles in relation to the previous quinquennium. The idea is that expansion at high voltage levels tends to withstand short and medium-term load increase. For MV and LV works MT, the amounts of investments present a stable trajectory along the five-year cycles, reflecting the more continuous and capillary fulfillment of the load in these voltage levels.
Regarding the investments in Renewal, the forecast metrics was different, in two steps: (i) first, the share of the amount destined to Renewal within the investments in PIQ 2018-2022 was calculated; (ii) taking this percentage as a reference, we applied it to the other 25 years of the contract, from 2023 to 2047.
It shall be pointed out that no resources have been forecasted for PLpT because the program will be closed in 2018.
b) Assumptions for Forecast of Non-Electric Investments
The non-electric investments of the distributor were not forecasted, because it was considered that the amount of R$ 964 thousand forecasted for 2018 will meet the needs for improvement of the distribution management49 provided in Visit Note dated 30 and 31/03/17.
c) Results
Table 54 presents the results for the forecasts for each investment segment of the Distributor by quinquennium. To make comparison easy, we present the forecasted values in real
48 The objective is that the capital disbursement of the concessionaire is close to the tariff recognition of the | ||
investments made. | ||
49 The current system used by AmE does not meet all needs of the distributor. Further details can be found in | ||
Annex I - Report on field visit to the AmE facilities. | ||
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Graph 23 illustrates the behavior of the electric and the non-electric investments over the years. It can be initially noted that the investments from 2018 to 2020 are actually high, given the historical blocking of investments in the concession. Furthermore, the investments are growing during the 30 years, with peaks in the two years before RTP (given the concentration of HV investments in these years). Finally, the effect of the expressive expansions at every 10 years can be perceived.
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4.3.8.Remuneration Base
Within the tariff review process, the definition of the Regulatory Remuneration Base (BRR) is a fundamental input for the calculation of the capital remuneration and the regulatory reintegration quota. BRR consists in the group of assets held by the service provider and appreciated according to given methodology.
a) Methodology Adopted by ANEEL
For electric power distribution concessionaires in Brazil, ANEEL uses the DORC (Depreciated Optimized Replacement Cost) method to evaluate the assets of higher representativeness in the BRR value and CCV (Current Cost Valuation) for the valuation of the assets with lower representativeness. Furthermore, the Rolling Forward method is applied with the purpose to provide its movement in time. These methods are described in Appendix F.
In the Periodic Tariff Review (RTP), the construction of BRR considers two elements. The first is obtained by the BRR amount of the previous RTP (called frozen asset base), deducting the depreciation and the write-off made in the period between the RTP’s, financially updated by the IPCA index. The second, called additional base, is calculated by means of the additions made in the period between the RTP’s, valued at market prices through an asset re-evaluation process.
BRR is composed of the values of the following items: Fixed assets in service (evaluated and depreciated); warehouse in operation; deferred assets; and special obligations (or without lien). For the purposes of validation of the physical registration and the re-evaluation, the Fixed Assets in Service (AIS) are divided in the following groups: intangible; land; reservoirs, dams and water networks; buildings, civil works and improvements; machines and equipment; vehicles; and furniture and utensils.
For the valuation of the electric power distribution assets, DORC or CCV are considered depending on the asset group. The groups of machines and equipment; buildings, civil works and improvements are evaluated by DORC, while the groups of land and easement are evaluated by CCV, i.e., from the accounting values corrected by the IPCA index.
In the composition of Portion B, the Regulatory Reintegration Quota (QRR) and the Capital Remuneration (RC) are considered. QRR results from the multiplication of the gross BRR by the regulatory depreciation, according to Equation 38.
Equation 38 – Regulatory Reintegration Quota
QRR = BRRb x δ
Where:
QRR = Regulatory reintegration quota.
BRRb = gross BRR.
δ = average depreciation rate of the fixed assets in Service.
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Gross BRR is calculated by Equation 39.
Equation 39 – Gross BRR
BRRb = AIS - IA - OE - BTD
Where:
BRRb: gross BRR.
AIS: Fixed assets in Service. IA : Use Index.
OE: Special Obligations.
BTD: 100% depreciated assets.
The special obligations (OE) correspond to the resources of the consumer´s financial share and the budget subsidies from the Federation, federal, state or municipal funds. These are non-onerous liabilities and are not shareholder credits. They are updated upon the same criteria and indexes as those used to correct the assets entered in AIS. The depreciation of the assets acquired with funds from the special obligations is not computed in the calculation of the concessionaire´s required revenues. They are amortized in the accounting at the same depreciation rates, using an average rate defined from the tariff review.
The use index corresponds to the percentage of use of the asset in the regulated service. It is calculated for land, buildings, facilities, machines and equipment.
The Capital Remuneration is calculated by Equation 40.
Equation 40 – Capital Remuneration
RC = (BRRl – RGR). rWACCpré + RGR . rRGR
Where:
RC: Capital remuneration BRRl: Net BRR.
RGR: RGR debt balance.
rWACCpre: Weighted average verified capital cost before taxes.
rRGR: RGR capital cost.
The Global Reversal Reserve (RGR) is a sector fund created by Decree No. 41.019/1957. This fund is used to finance the Program Luz Para Todos (PLpT), in addition to energetic
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efficiency projects within the National Program for Electric Power Preservation (Procel). The RGR cash to capital are also aimed at the system electric improvement and expansion works in the power generation, transmission and distribution areas.
The verified WACC before taxes is defined as described in section 4.3.1. The remuneration rate of the RGR resources designed to the Program Luz para Todos (PLpT) was calculated in the 4th Cycle of Periodic Tariff reviews considering the spread of interest for correction of the permanent assets plus the administration rate and taking out the average IPCA in the period between May 2009 and April 2014. On its turn, the remuneration rate of RGR resources destined to Other Investments was calculated considering the average TJLP in the period between May 2009 and April 2014, plus the administration rate and taking out the average IPCA in the same period.
Net BRR, which WACC is applied on, is determined by Equation 41.
Equation 41 – Net Regulatory Remuneration Base
BRRl = AIS - DA - IAD - OEL + AO + TS
Where:
BRRl: Net BRR
DA: Accrued depreciation
IAD: Depreciated Use Index
OEL: Net special obligations
AO: Operation warehouse
TS: Land and Easement
The accrued depreciation is calculated from the percentage entered in the books, by means of the date each asset entered in operation, calculated by the linear depreciation method (straight line). The identification of the accrued depreciation of each asset is done through the process of conciliation of the physical with the accounting record.
The warehouse operation, related to operation and maintenance of machines, installations and equipment necessary for the provision of the service is composed of the average balance from the last twelve months of sub-accounts: (i) raw materials and inputs for generation of electric power, (ii) materials (except materials destined to sale, loans and residues or scrap), (iii) purchasing in progress and advance payment to suppliers, deducting the (i) provisions for impairment.
To compose Portion B, in addition to the Capital remuneration and the regulatory reintegration quota, the Remuneration from Special obligations is also considered, which is calculated according to Equation 42.
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· For companies with deductions under the average, the average percentage of deductions (9.2%) was considered.
· When the company had percentage of deductions above the average, the average between the company´s percentage and the maximum percentage of deductions (20.1%) was used.
AmE fits the latter case, obtaining deduction at 20.1%.
The values considered as starting point in the closed BRR in Feb/17 are presented in Table 58.
Table 58 – Values of BRR Considered Starting Point in the Closed BRR in Feb/17 | |
Report | |
Description | |
Feb/17 | |
(1) Fixed Asset in Service (New Replacement Value) | 2,854,818,325 |
(2) integral Use Index | 2,534,440 |
(3 ) Special Obligations | 1,042,606,574 |
(4) totally depreciated Assets | 385,339,677 |
(5) Gross Remuneration Base = (1)-(2)-(3)-(4) | 1,424,337,634 |
(6) Accumulated Depreciation | 1,331,893,507 |
(7) Net AIS (Market value in Use) | 1,522,924,818 |
(8 ) Depreciated Utilization Index, | 2,409,306 |
(9) Value of the Remuneration Base (VBR) | 1,520,515,512 |
(10) Warehouse in Operation | 36,548,280 |
(11) Deferred Asset | 0 |
(12 ) Net Special Obligations, | 945,036,789 |
(13 ) Land and Easements | 39,862,188 |
(14) Total Net Remuneration Base = (1)-(6)-(8)-(12)+(10)+(11)+(13) | 651,889,191 |
(15) RGR PLPT Balance | 0 |
(16) RGR Other Investments Balance | 187,961,705 |
(17) Depreciation Rate | 3,61% |
*The values of RGR balance and depreciation rate were estimated, because they were | |
not stated in the evaluation report prepared by Levin (delivered on 06/30/2017). | |
Source: Own Elaboration |
From the values considered in Table 58, he monthly transactions of the Closed BRR is determined by financial update by IPCA and the deduction of depreciation and write-off related to the assets, which entered in operation by Feb/17. The forecast of the Closed BRR account was made as described below:
· AIS: evolves upon deduction of write-off of assets and update by IPCA.
· Write-off of assets: the average rate of Write-offs/AIS verified from the information in the Evaluation report prepared by Levin (delivered on 6/19/2017) in the period between the 3rd RTP and Feb/17 was applied to AIS every month.
· Full Use Index (R$): evolves with IPCA.
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Gross Special obligations: evolve upon deduction of write-off of special obligations (OEs) and update by IPCA. Write-off of special obligations was forecasted by applying, to AIS of each month, the average rate of OE write-offs informed by the company on AIS in the period between the 3rd RTP and Feb/17. Write-off of special obligations was converted into VNR (New Replacement Value50). VOC (Original Accounting Value51) conversion into VNR is done by means of the AIS (VNR) / AIS | ||
(VOC) relation of the in the 3rd RTP, which resulted in 0.49. AIS (VNR) is the approved value of AIS in the 3rd RTP of the company. AIS (VOC) comes from the worksheet “Calculation Report - Capital Cost - Factor X” (made available by ANEEL in AP No. 040/2010) adding the VOC informed by the company for Additional BRR | ||
from | the 3rd RTP to AIS value. | |
100% Depreciated assets: application of an average growth rate determined from the evolution of the monthly accounting balance of the assets, which have been 100% depreciated, considering the average depreciation rate of each asset and the residual value in the database in Feb/17 informed by the concessionaire. | ||
Accrued depreciation: updates the previous accrued depreciation by IPCA, adds the monthly depreciation and takes the write-off depreciation out. | ||
o | Monthly Depreciation: Gross BRR multiplied by the average depreciation rate. | |
o | Write-off Depreciation: application of the average write-off depreciation percentage verified in the Evaluation report prepared by Levin (delivered on 6/19/2017) on the value of write-offs in the forecasted month. | |
Average Depreciation Rate: the depreciation rate drops from the average level determined in Feb/17, considering the increase of the average service life of the assets. | ||
o | In Feb/17 the weighted average between the depreciation rate of each asset and its weight in the residual AIS (AIS deducting 100% depreciated assets) verified in the Evaluation report prepared by Levin (delivered on 06/30/2017) was considered, resulting in 3.59%. | |
o | After Feb/17, the rate drops from the average level of 3.59%, because the assets are becoming 100% depreciated (or are written off). The purpose is to estimate which the expected level at the end of the forecast is (2048). For this purpose, we used accounting data made available by the concessionaire in Feb/17 again, forecasting the residual AIS year by year. Then, we calculated the average depreciation rates of the assets, weighting the depreciation rates of each asset by its weight in the residual AIS. Once the rate expected in 2048, |
50 Equivalent to the valuation by DORC in the ANEEL case.
51 Equivalent to the valuation by CCV in the ANEEL case.
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2.49%, was obtained, we interpolated the values between Feb/17 and Dec/2048.
· Operation warehouse: proportion of the Operation warehouse account in relation to the gross BRR of the Evaluation report prepared by Levin (delivered on 06/30/2017) applied to the gross BRR of the forecasted month.
· Depreciated Use Index (R$): segregation of the percentage of assets, which are not land, in the amount of Full IA, using the proportion of the amount of assets in IA of BRR of the 3rd RTP, which are not land.
o In the proportion of the land use index, the annual depreciation rate is not applied.
o The annual depreciation rate is applied to the proportion of the use index of the other assets.
· Net special obligations: update of the net special obligation accumulated by the previous month by IPCA, deduction of the Special obligations write-offs from the current month and depreciation of the result.
· Deferred Assets: if any, they evolve with IPCA.
· Land and Easement: evolves with IPCA.
· RGR Balance (PLpT): initially, the RGR Balance (PLpT) was financially updated by IPCA and the depreciation from the period between the 3rd RTP and Feb/17 was deducted. In the subsequent months, the forecast was made by updating the balance until the previous month by IPCA and depreciation of the result.
· RGR Balance (Other Investments): initially, the RGR Balance (Other Investments) was financially updated by IPCA and the depreciation from the period between the 3rd RTP and Feb/17 was deducted. In the subsequent months, the forecast was made by updating the balance until the previous month by IPCA and depreciation of the result.
The transaction of Additional BRR (new investments) was made by means of addition of assets forecasted for the period after Feb/17, deducted from the write-offs related to these assets. The forecast of the Additional BRR account was made as described below:
· New Assets (Investments): addition of assets from the current month added to the update (IPCA) of the amount accumulated until the previous month, deducting the write-offs of asset, which entered in operation after the base date Feb/17 The forecast was made using the investments presented in section 4.3.7, deducted at 5%. Lower percentage of deductions was considered in the forecast period considering that the additional efforts for asset management and modernization of the asset and unification controls will increase the consistency of the information and reduce the differences, which generated these regulatory deductions.
· Asset Write-offs:
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o | By Feb/27: null, considering the reduced probability of the assets to be written off in the first 10 years. | |
o | Between Mar/27 and Feb/32: 1/3 multiplied by the Write-off/AIS ratio of the Closed BRR. | |
o | Between Mar/32 and Feb/42: 2/3 multiplied by the Write-off/AIS ratio of the Closed BRR. | |
o | From Mar/42 on: full ratio of Write-off/AIS of the Closed BRR. | |
Gross special obligations: additions of special obligations and update by IPCA. The compensation amounts for indicator violation, forecasted between 2019 and 2023, were added to this account following the provisions in Sub-Clause One of Clause Nineteen, which stipulates Transitory Provisions in Technical Note No. 182/2017. | ||
100% Depreciated assets: it was considered null by Feb/32, given the insignificant proportion of assets, which become 100% depreciated in the period. After this date, scaling was done as follows: | ||
o | Between Mar/32 and Feb/37: 1/3 multiplied by the average proportion of the 100% Depreciated Assets/AIS ratio of companies of the North and the North- East Regions in the 3rd CRTP. The following were companies considered: Celtins, Energisa Borborema, Celpe and Cemar. | |
o | Between Mar/37 and Feb/42: 2/3 multiplied by the average proportion of the 100% Depreciated Assets/AIS ratio of companies of the North and the North- East Regions in the 3rd CRTP. | |
o | From Mar/42 on: average proportion of the 100% Depreciated Assets/AIS ratio of companies of the North and the North-East Regions in the 3rd CRTP. It was considered that in 25 years, the companies from the Eletrobras Group will be with level of 100% depreciated assets similar to that of the compared | |
Full Use companies Index (R$): in the multiplication North and the of AIS North-East (new assets) Regions. from each month by the Use Index/AIS ratio verified in BRR in the Evaluation report prepared by Levin (delivered on 06/30/2017). | ||
Accrued depreciation: update of the accrued depreciation prior to IPCA and addition of the monthly depreciation. | ||
Average depreciation rate: the weight of the investments made available in the Quinquennium Investment Plan (PIQ) from 2018 to 2022, presented in Front 5 Report was considered per group of assets and their respective depreciation rates. The segregation of each investment per registration unit of the asset base was done according to the big items (ex: substation busbars, power transformers, reclosers, conductors, etc.), when possible. Thus, the average depreciation rate coming from the investments provided in PIQ was obtained, which resulted in 3.59% of the AIS, as it can be observed in Table 59. This rate was kept constant along the 30 years of concession. | ||
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In the forecast of the Annual Fixed Facilities Cost, the same parameters, currency used by ANEEL were considered, changing only AIS and the use index of each RTP and updating IPCA to the date of each future RTP.
In the forecast for special obligation remuneration, the values of the other items of Portion B of each forecasted RTP were considered, as well as those of the parameters of the rates risk-free rate, rated equity cost and equity share, according to the forecasted regulatory WACC, which was presented in section 4.3.1.
c) Results
The results for the Regulatory Reintegration Quota forecast for the subsequent RTPs until 2043 can be seen in Table 62.
Table 62 – Forecast of Regulatory Reintegration Quota in RTPs | ||||||||
| ||||||||
3rd RTP | Report | 4th RTP | 5ªRTP | 6th RTP | 7th RTP | 8th RTP | 9th RTP | |
Description | ||||||||
Nov/13 | Feb/17 | Nov/19 | Nov/23 | Nov/28 | Nov/33 | Nov/38 | Nov/43 | |
(1) Fixed Asset in Service (New Replacement Value) | 1,136,613,078 | 2,854,818,325 | 4,092,972,695 | 6,735,255,578 | 9,018,101,773 | 12,056,774,115 | 10,943,832,727 | 14,967,777,855 |
(2) integral Use Index | 1,947,971 | 2,534,440 | 3,767,338 | 6,409,764 | 8,914,684 | 12,239,022 | 9,715,676 | 13,288,039 |
(3 ) Special Obligations | 648,521,135 | 1,042,606,574 | 1,093,433,061 | 1,163,108,150 | 1,212,803,759 | 1,243,898,416 | 72,746,864 | 89,490,713 |
(4) totally depreciated Assets | 123,383,242 | 385,339,677 | 516,506,497 | 836,605,514 | 1,529,907,674 | 3,171,246,021 | 1,016,182,192 | 2,084,734,346 |
(5) Gross Remuneration Base = (1)-(2)-(3)-(4) | 362,760,730 | 1,424,337,634 | 2,479,265,799 | 4,729,132,150 | 6,266,475,657 | 7,629,390,655 | 9,845,187,995 | 12,780,264,757 |
(17) Depreciation Rate | 3,68% | 3,61% | 3,55% | 3,53% | 3,53% | 3,59% | 3,59% | 3,59% |
(18) Regulatory Reintegration Quota = (17) * (5) | 13,356,850 | NA | 87,971,448 | 166,734,751 | 221,103,851 | 273,978,058 | 353,741,851 | 459,200,425 |
Source: Own Elaboration |
The results for the Equity Remuneration forecast for the subsequent RTPs until 2043 can be seen in Table 63.
Table 63 – Forecast for Equity Remuneration without Special obligations in RTPs | ||||||||
3rd RTP | Report | 4th RTP | 5ªRTP | 6th RTP | 7th RTP | 8th RTP | 9th RTP | |
Description | ||||||||
Nov/13 | Feb/17 | Nov/19 | Nov/23 | Nov/28 | Nov/33 | Nov/38 | Nov/43 | |
(1) Fixed Asset in Service (New Replacement Value) | 1,136,613,078 | 2,854,818,325 | 4,092,972,695 | 6,735,255,578 | 9,018,101,773 12,056,774,115 10,943,832,727 14,967,777,855 | |||
(6) Accumulated Depreciation | 300,430,625 | 1,331,893,507 | 1,574,774,661 | 2,274,777,293 | 3,644,131,118 | 5,620,164,669 | 5,363,895,831 | 8,862,477,321 |
(7) Net AIS (Market value in Use) | 836,182,453 | 1,522,924,818 | 2,518,198,035 | 4,460,478,285 | 5,373,970,655 | 6,436,609,446 | 5,579,936,896 | 6,105,300,534 |
(8 ) Depreciated Utilization Index | 1,435,183 | 2,409,306 | 3,767,338 | 6,409,764 | 8,914,684 | 12,239,022 | 9,715,676 | 13,288,039 |
(9) Value of the Remuneration Base (VBR) | 834,747,270 | 1,520,515,512 | 2,514,430,696 | 4,454,068,521 | 5,365,055,971 | 6,424,370,424 | 5,570,221,220 | 6,092,012,494 |
(10) Warehouse in Operation | 9,043,577 | 36,548,280 | 55,472,002 | 117,013,107 | 157,375,945 | 193,042,717 | 245,789,901 | 320,534,665 |
(11) Deferred Asset | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
(12 ) Net Special Obligations, | 590,193,452 | 945,036,789 | 901,777,467 | 808,021,256 | 642,298,373 | 446,641,376 | 39,863,920 | 40,964,222 |
(13 ) Land and Easements | 3,618,710 | 39,862,188 | 44,842,091 | 52,976,131 | 65,169,431 | 80,169,212 | 98,621,432 | 121,320,724 |
(14) Total Net Remuneration Base = (1)-(6)-(8)-(12)+(10)+(11)+(13) | 257,216,105 | 651,889,191 | 1,712,967,323 | 3,816,036,504 | 4,945,302,974 | 6,250,940,977 | 5,874,768,634 | 6,492,903,661 |
(15) RGR PLPT Balance | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
(16) RGR Other Investments Balance | 167,425,575 | 187,961,705 | 195,137,542 | 200,910,857 | 209,963,032 | 221,473,513 | 235,672,877 | 252,865,041 |
(19) Actual WACC before tax | 11,36% | NA | 11,34% | 11,34% | 11,34% | 11,34% | 11,34% | 11,34% |
(20) Actual RGR/PLPT rate | 1,35% | NA | 0,00% | 1,13% | 2,10% | 2,10% | 2,10% | 2,10% |
(21) RGR Other Investments Rate | 3,62% | NA | 2,00% | 4,44% | 4,40% | 4,38% | 4,38% | 4,38% |
( 22 ) Capital Remuneration without Special Obligations (RCsOE) | 16,261,010 | NA | 176,073,375 | 418,980,165 | 546,372,898 | 693,627,282 | 649,970,371 | 718,888,538 |
Source: Own Elaboration |
The results for the forecast of the Equity Remuneration of the Special obligations for subsequent RTPs until 2043 can be seen in Table 64.
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Table 64 – Forecast for Equity Remuneration of the Special obligations in RTPs | ||||||||
3rd RTP | Report | 4th RTP | 5ªRTP | 6th RTP | 7th RTP | 8th RTP | 9th RTP | |
Description | ||||||||
Nov/13 | Feb/17 | Nov/19 | Nov/23 | Nov/28 | Nov/33 | Nov/38 | Nov/43 | |
(3 ) Special Obligations | 648,521,135 | 1,042,606,574 | 1,093,433,061 | 1,163,108,150 | 1,212,803,759 | 1,243,898,416 | 72,746,864 | 89,490,713 |
(23 ) Cost of Own Capital nominal (rp) | NA | NA | 12,27% | 12,27% | 12,27% | 12,27% | 12,27% | 12,27% |
(24) Nominal Risk Free Rate (rf) | NA | NA | 4,89% | 4,89% | 4,89% | 4,89% | 4,89% | 4,89% |
(25 ) Taxes and Contributions on Revenue(t) | NA | NA | 34,00% | 34,00% | 34,00% | 34,00% | 34,00% | 34,00% |
(26) participation in Own capital | NA | NA | 51,24% | 51,24% | 51,24% | 51,24% | 51,24% | 51,24% |
(27) CAOM / (CAOM+QRR+RCsOE+CAIMI) | NA | NA | 54,07% | 41,25% | 41,23% | 42,79% | 50,15% | 52,81% |
(28 ) Special Obligations Remuneration | NA | NA | 16,937,554 | 13,744,983 | 14,325,819 | 15,248,140 | 1,045,310 | 1,354,014 |
Source: Own Elaboration |
The results of the forecast of the Annual Fixed or Portable Facilities Cost for subsequent RTPs until 2043 can be seen in Table 65.
Table 65 – Forecast of the Annual Fixed or Portable Facilities Cost in RTPs | ||||||||
| ||||||||
Description | Nov/13 | Feb/17 | Nov/19 | Nov/23 | Nov/28 | Nov/33 | Nov/38 | Nov/43 |
(1) Regulatory Annuity Basis (BAR) | 66,298,123 | NA | 284,369,986 | 442,744,218 | 584,460,874 | 770,591,784 | 735,964,800 | 988,914,821 |
(2) Annuity Basis - Infraestrutura de imóveis e móveis administrativos (BARA) | 16,574,531 | NA | 127,966,494 | 199,234,898 | 263,007,393 | 346,766,303 | 331,184,160 | 445,011,669 |
(3) Annuity Basis - Vehicles (BARV) | 16,574,531 | NA | 34,124,398 | 53,129,306 | 70,135,305 | 92,471,014 | 88,315,776 | 118,669,778 |
(4) Annuity Basis – Computer Systems (BARI) | 33,149,062 | NA | 122,279,094 | 190,380,014 | 251,318,176 | 331,354,467 | 316,464,864 | 425,233,373 |
(5) Annuity - Infraestrutura de imóveis e móveis administrativos (CAL) | 1,535,503 | NA | 11,844,171 | 18,440,547 | 24,343,126 | 32,095,584 | 30,653,351 | 41,188,862 |
(6) Annuity - Vehicles (CAV) | 3,309,223 | NA | 6,810,263 | 10,603,104 | 13,997,019 | 18,454,594 | 17,625,326 | 23,683,125 |
(7) Annuity – Computer Systems (CAI) | 8,137,407 | NA | 30,006,527 | 46,718,068 | 61,671,913 | 81,312,320 | 77,658,504 | 104,349,618 |
(8) CAIMI = (5)+(6)+(7) | 12,982,133 | NA | 48,660,961 | 75,761,720 | 100,012,059 | 131,862,498 | 125,937,181 | 169,221,605 |
Source: Own Elaboration |
4.3.9.Tariff Transactions
From the composition of the items identified above, the values for Portion A and Portion B are forecasted and thus, the Required Revenues for each tariff year are determined.
There are some particularities in the tariff transactions between 2017 a 2019.
In 2017, as stated in TN No. 149/2017 and TN No. 247/2017, the difference between the flexible regulatory level of the operational costs and that recognized in the tariff process from 2016 (difference calculated in TN No. 149/2017), updated by IPCA between the tariff process date from 2016 and the tariff process date from 2017, shall be added to Portion B. For 2018, first year of the new concession, it is assumed that the operational costs will be equal to those from 2017, updated by IPCA (this value will be reduced according to the bidding criterion).
In this context, the following was done:
(a) the value of the difference between the flexible regulatory of operational costs and that recognized in the tariff from 2016 was updated by accumulated IPCA and added to VPB in 2017;
(b) the tariff coverage of Operational costs in Portion B in 2017 was estimated, according to PRORET 2.2A, formula (1) of paragraph 13, section 3.1, presented above in this report in Equation 16;
(c) the new operational cost for 2017 was obtained by the sum of (a) and (b).
(d) the share of (c) in VPB for 2017 was applied to VPBo for 2018, obtaining an estimation of the operational costs coverage for 2018;
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(e) the IPCA accumulated in one year was applied, reducing the Factor X, to (c). The difference between this value and (d) was applied to VPB for 2018.
In 2019, there will be extraordinary review. For its implementation, the tariff coverage of the Annual Asset Cost (CAA, composed of the sum of the equity remuneration, regulatory reintegration quota and annuity of the fixed and portable facilities) was estimated using a mechanism similar to that for the calculation of the operational cost tariff coverage. This value was excluded from VPB and the CAA forecast for 2019 was added. The forecast already includes the closed and the additional base reports.
It shall also be pointed out that for the period between 2017 and 2022, the regulatory limits for Non-Technical Losses were made flexible, being replaced by the average between the verified Non-Technical Losses and the regulatory losses observed in 2016. This procedure was not adopted for AmE and Boa Vista Energia, because their technical losses were made flexible by the Approval of Resolution No. 2.184/2016.
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Table 66 – Estimations for Required Revenues, VPA and VPB for AmE (rated R$ million) | ||||
RA1 | VPA | VPB | ||
Regulatory Year | Reference Period | Required Revenue | Value of Portion A | Value of Portion B |
2017 | Nov/16 - Oct/17 | R$3,056,69 | R$2,402,72 | R$653,97 |
2018 | Nov/17 - Oct/18 | R$3,288,15 | R$2,543,65 | R$744,50 |
2019 | Nov/18 - Oct/19 | R$3,789,06 | R$2,725,61 | R$1,063,45 |
2020 | Nov/19 - Oct/20 | R$3,977,55 | R$2,795,78 | R$1,181,78 |
2021 | Nov/20 - Oct/21 | R$4,242,96 | R$2,941,14 | R$1,301,82 |
2022 | Nov/21 - Oct/22 | R$4,537,21 | R$3,106,34 | R$1,430,87 |
2023 | Nov/22 - Oct/23 | R$4,281,41 | R$3,262,40 | R$1,019,01 |
2024 | Nov/23 - Oct/24 | R$4,538,61 | R$3,425,21 | R$1,113,40 |
2025 | Nov/24 - Oct/25 | R$4,800,79 | R$3,586,51 | R$1,214,28 |
2026 | Nov/25 - Oct/26 | R$5,172,77 | R$3,850,77 | R$1,321,99 |
2027 | Nov/26 - Oct/27 | R$5,563,52 | R$4,133,37 | R$1,430,15 |
2028 | Nov/27 - Oct/28 | R$5,783,54 | R$4,370,43 | R$1,413,12 |
2029 | Nov/28 - Oct/29 | R$6,149,54 | R$4,636,82 | R$1,512,72 |
2030 | Nov/29 - Oct/30 | R$6,529,59 | R$4,912,80 | R$1,616,79 |
2031 | Nov/30 - Oct/31 | R$6,922,18 | R$5,197,13 | R$1,725,05 |
2032 | Nov/31 - Oct/32 | R$7,333,50 | R$5,493,99 | R$1,839,51 |
2033 | Nov/32 - Oct/33 | R$7,614,95 | R$5,776,89 | R$1,838,06 |
2034 | Nov/33 - Oct/34 | R$8,081,37 | R$6,113,57 | R$1,967,80 |
2035 | Nov/34 - Oct/35 | R$8,574,66 | R$6,468,84 | R$2,105,82 |
2036 | Nov/35 - Oct/36 | R$9,094,39 | R$6,841,76 | R$2,252,63 |
2037 | Nov/36 - Oct/37 | R$9,641,92 | R$7,233,11 | R$2,408,80 |
2038 | Nov/37 - Oct/38 | R$9,784,93 | R$7,642,04 | R$2,142,89 |
2039 | Nov/38 - Oct/39 | R$10,384,01 | R$8,097,55 | R$2,286,47 |
2040 | Nov/39 - Oct/40 | R$11,017.21 | R$8,578.26 | R$2,438.95 |
2041 | Nov/40 - Oct/41 | R$11,685.54 | R$9,084.63 | R$2,600.91 |
2042 | Nov/41 - Oct/42 | R$12,390.90 | R$9,617.95 | R$2,772.95 |
2043 | Nov/42 - Oct/43 | R$12.859,90 | R$10,151.64 | R$2,708.27 |
2044 | Nov/43 - Oct/44 | R$13,623.34 | R$10,740.13 | R$2,883.21 |
2045 | Nov/44 - Oct/45 | R$14,429.73 | R$11,360.77 | R$3,068.96 |
2046 | Nov/45 - Oct/46 | R$15,280.31 | R$12,014.08 | R$3,266.23 |
2047 | Nov/46 - Oct/47 | R$16,177.51 | R$12,701.66 | R$3,475.84 |
Source: Own Elaboration |
Adopting the hypothesis that the financial components will be neutral along the period, the tariff transactions are obtained by direct comparison of the required revenues to the revenues observed in the reference period. The graph below shows the variations of tariff transactions observed in the analyzed period.
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5. Analysis of the Distributor
The Company's corporate social responsibility and objective is to design, build and operate the public distribution service to final consumers of electricity, as well as services that may be granted or authorized by any laws and activities associated with the public utility, to provide technical services and expertise to determine what inputs and outputs are needed to achieve the company goals, being such activities regulated and supervised by the Brazilian Electricity Regulatory Agency - ANEEL, an entity related to the Ministry of Mines and Energy – MME.
The Company held the concession to operate public electricity distribution services, pursuant to Concession Agreement no. 20/2001, entered into on 03/21/2001 which had four additive terms, respectively, on October 17, 2005, on November 4, 2008, on June 8, 2010 and December 10, 2014, effective until July 7, 2015,
On July 22, 2016, the 165th Extraordinary General Meeting of Centrais Elétricas Brasileiras SA - Eletrobras, resolved not to extend the concessions of Eletrobras Energy Suppliers, including Amazonas Distribuidora de Energia SA (jointly referred to as "Company” or “Distributor"),
The ordinance of the Ministry of Mines and Energy no. 420, dated August 3, 2016, designated the Company as the Responsible for the Provision of the Public Service for the Distribution of Electric Power, with a view to guaranteeing the continuity of the public electricity service in the area concession of the State of Amazonas until the assumption of a new concessionaire,
It should be highlighted that the Company operates in a region that, due to its geographic characteristics, extensive areas and low population concentration is distinguished from other regions of the country. The company’s thermoelectric plants are fueled with fuel oil and represent the main source of electricity supply with a significantly higher cost. In view of the interconnection of the isolated system in the northern region, AmE was subject to the restrictions set forth in paragraph 5 of Article 4 of Law 9,074 of July 7, 1995 ("Law No, 9,074"), according to which concessionaires of public service of electricity distribution can not develop activities of generation or transmission of electric energy, in order to fit the company into Brazilian electricity sector legislation, the Company's management decided to implement the vertical disintegration process which consists in segregating the assets and liabilities of generation and transmission of the capital from the energy distribution activities, so that in the end, Eletrobras Holding controls the new operating company created especially to concentrate the activities of generation and transmission in Amazonas.
The evaluation of the Distributor assumes that a new concession agreement will be signed with the granting authority on 03/01/2018. At the end of the fiscal year in December 2016 the Company recorded a loss in the amount of R$ 13,974,676, shareholders' equity (uncovered liability) in the amount of R$ 9,370,147 and loss for the year on December 31, 2016 of R$ 5,003,331 thus requiring funds to meet the short-term debt, consequently, the Company's continuity depends on the financial support of the controlling shareholder and / or maintenance of sources of financing by third parties.
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Due to the high leverage ratio expected for the initial projected years, the variable discount rate approach (rolling WACC) was used. This approach considers the impact of changes to the capital structure that occur during the projection period.
The following variable assumptions were considered for the rolling WACC projections:
· Brazilian inflation projected by BACEN (IPCA):
· American inflation projected by the Congress Budget Office (CPI); and
· Variable leverage ratio based on two selected groups of comparable companies (higher leverage ratio during the first years and lower leverage ratio by the end of the projection period).
Considering the projected variations of these parameters, the Discount Rates (rolling WACC) used to calculate the net present value of the projected cash flows are shown below:
Figure 32 - Rolling WACC | |||||||||||
Parameters: | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | > 2026 |
Rate Free from Risk (Rf) | 2.78% | 2.78% | 2.78% | 2.78% | 2.78% | 2.78% | 2.78% | 2.78% | 2.78% | 2.78% | 2.78% |
Country Risk | 2.53% | 2.53% | 2.53% | 2.53% | 2.53% | 2.53% | 2.53% | 2.53% | 2.53% | 2.53% | 2.53% |
Market Premium | 6.90% | 6.90% | 6.90% | 6.90% | 6.90% | 6.90% | 6.90% | 6.90% | 6.90% | 6.90% | 6.90% |
Unlevered Beta (²u) | 0.43 | 0.43 | 0.43 | 0.43 | 0.43 | 0.43 | 0.43 | 0.43 | 0.43 | 0.43 | 0.43 |
% Debt (Kd) - [D/(D+E)] | 54.0% | 50.7% | 47.3% | 44.0% | 40.6% | 37.3% | 33.9% | 30.6% | 27.3% | 23.9% | 23.9% |
% Equity (Ke) - [E/(D+E)] | 46.0% | 49.3% | 52.7% | 56.0% | 59.4% | 62.7% | 66.1% | 69.4% | 72.7% | 76.1% | 76.1% |
Taxes rate - IRPJ/CSLL | 34.0% | 34.0% | 34.0% | 34.0% | 34.0% | 34.0% | 34.0% | 34.0% | 34.0% | 34.0% | 34.0% |
Levered Beta (²L) | 0.76 | 0.72 | 0.68 | 0.65 | 0.62 | 0.59 | 0.57 | 0.55 | 0.53 | 0.52 | 0.52 |
Size Premium | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
Inflation - Brazil | 4.33% | 4.43% | 4.36% | 4.31% | 4.23% | 4.23% | 4.23% | 4.23% | 4.23% | 4.23% | 4.23% |
Inflation – USA | 2.40% | 2.30% | 2.30% | 2.40% | 2.40% | 2.40% | 2.40% | 2.40% | 2.40% | 2.40% | 2.40% |
Cost of Equity | 12.62% | 12.55% | 12.22% | 11.83% | 11.55% | 11.37% | 11.21% | 11.06% | 10.93% | 10.81% | 10.81% |
Selic | 10.71% | 9.07% | 9.03% | 8.87% | 8.73% | 8.73% | 8.73% | 8.73% | 8.73% | 8.73% | 8.73% |
Spread | 0.64% | 0.64% | 0.64% | 0.64% | 0.64% | 0.64% | 0.64% | 0.64% | 0.64% | 0.64% | 0.64% |
Debt Cost | 11.35% | 9.71% | 9.67% | 9.51% | 9.37% | 9.37% | 9.37% | 9.37% | 9.37% | 9.37% | 9.37% |
Debt Cost – Post-Tax | 7.49% | 6.41% | 6.38% | 6.28% | 6.18% | 6.18% | 6.18% | 6.18% | 6.18% | 6.18% | 6.18% |
WACC in current BRL (Post-Tax) | 9.85% | 9.44% | 9.46% | 9.39% | 9.37% | 9.44% | 9.50% | 9.57% | 9.64% | 9.71% | 9.71% |
6.3. Assumptions
General Considerations
The valuation approach employed was a Discounted Cash Flow using Free Cash Flow to the Firm (FCFF) discounted by the Weighted Average Cost of Capital (WACC), which results in the Enterprise Value (EV), after adjustment for net debt and non-operational assets and liabilities, representing the Fair Value of 100% of the Company’s shares (Equity Value).
The projections assume a base date December 31,2016, the same used by BNDES and the Consortium for their other analyses related to this project (e.g., Due Diligence). The base date was selected considering the availability of required information and documents.
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The Distributor currently has permission to operate as the public electric distributor until December 31, 2017. Our projections considered an extension of this permission until February, 28, 2018, when a new concession contract would be signed, as contemplated under the terms of the Contract Draft made public by Aneel that establishes a concession period of 30 years (from March 1,2018 to February 29, 2048).
The Cash Flows projections therefore considered the period from January 1, 2017 to February 29, 2048. However, the business value is based only on the Cash Flows projected for the period from March 1, 2018 to February 29, 2048, as decided by BNDES and the Consortium. This period corresponds to the best assumption for the entry of new investors and the start of a new concession contract. The cash flows were projected in current-day Reais (BRL) (taking into account inflation effects) and discounted at a variable WACC rate according to the calculations previously presented. From the valuation base date (Dec. 31, 2016) to the estimated date for the start of the new concession contract (Mar. 1, 2018), only the Brazilian inflation rate (IPCA) was included in the discount factor. This approach was used in order to assure the business risk would not affect the period prior to the entry of the potential investor.
This valuation considered the projection of a divestiture distribution operation, that is, without the future impacts of the assets and contracts related to Amazonas Geração Geração e Transmissão, such as payments related to the contract of purchase and sale of gas of competence after the date- base
Operating Assumptions
Market and Energy
The operational assumptions are based on projected energy consumption as it relates to:
· Regulated Market: the amount of energy consumed by the clients of the Residential, Commercial, Industrial, Rural and Other Classes, who pay the distributor both for the consumed energy and the distribution service.
· Free Consumers: the amount of energy consumed by the clients of Commercial and Industrial classes that pay the Distributor only for the distribution service, negotiating the price of the consumed energy directly with other market participants.
· Supplied Distributors: the amount of energy delivered to another energy distribution company that serves consumers outside the concession area of the Distributor.
· Regulatory Allowance for Energy Losses: the amount of energy the Distributor would have as a write-off due to Technical Losses, Non-Technical Losses, and Losses in the High Voltage Network, according to the efficiency limits established by Aneel.
· Regulatory Allowance for Contracted Energy: the amount of energy the Distributor needs to generate or buy to supply the consumers (Regulatory Market,
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Free Consumers, and Supply), considering its Regulatory Allowance for Energy Losses.
· Verified Energy Losses: the amount of energy equivalent to the difference between the sum of purchased and self-generated energy and the billed energy (Regulatory Market, Free Consumers, and Supply), considering Technical Losses, Non-Technical Losses, and Losses in the High Voltage Network. This amount can be different from the Regulatory Allowance for Energy Loss. When the difference between the Verified Losses and the Regulatory Allowance for Energy Losses (in terms of amount of energy), is over the tolerance limit established by ANEEL, a portion of the losses is not passed on by the Distributor as tariff, which negatively impacts the value of the Company.
· Required Energy Supply: the amount of energy the Distributor needs to generate or buy to supply the consumers (Regulated Market, Free Consumers, and Supply), considering its index of Verified Energy Losses.
· Excess Contracted Energy: the excess amount of energy the Distributor generates or buys in relation to the Required Energy Supply. This variable was projected according to the contracted amounts informed by the Company’s Distribution Board. Additionally, the perspectives of adequacy of the Energy Balance with the achievement of an optimum level of 3% of Excess Contracted Energy were considered. Such optimum level is established in order to guarantee a safety margin to the supply of the demand for energy. Considering a scenario where the Regulatory Allowance for Energy Losses and the Verified Energy Losses were equivalent, the Distributor would be paid by the generation and purchase of energy exceeding the demand up to the upper limit of 5% of Excess Contracted Energy calculated on the Regulatory Allowance for Contracted Energy.
· Self-Generation: the amount of energy the Distributor itself generates through power stations and generators. As explained in this report, because Portion A was considered neutral, we did not explicitly consider the volume of self-generated energy in the projections, although its effects are implicit in the Working Capital projections.
· Energy Purchase: the amount of energy bought by the Distributor to supply its consuming market, equivalent to the Required Energy Supply added to the Excess Contracted Energy.
· VPA Volume: the amount of energy distributed to the Regulated Market consumers and the Supplied Distributors, who pay for the cost of the energy they consume.
· VPB Volume: the amount of energy distributed to the Regulated Market consumers, Free Consumers, and Supplied Distributors, who only pay for the cost of the energy distribution services.
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Electricity Rate
The Electricity Rate, the sale price of the electric power to the consumers in R$/MWh, is composed of Portions A and B. The former relates to the cost of energy production and other non-management costs, and the latter relates to returns to investment and the operational margin inherent in the electric power distribution service. The Electricity Rate is adjusted or revised on an annual basis by Aneel.
Our analyses considered the net value of the Electricity Rate meaning the taxes are not projected separately.
· Portion A
Portion A considers five factors in its calculation: Energy Costs, Transportation Costs, Sector Charges, Finance Charges, and Bad Debt.
The calculation method applied for Portion A considers that its components should not have an impact on the business value (neutrality), since eventual gains or losses related to estimates made during the rate adjustment are neutralized in the adjustment the following year.
However, there are two cases where the principle of neutrality of Portion A is not applicable:
i - When the Cost of Capital of the Distributor is different from the Adjustment Rate applied on the Finance Charges. In such case, the impact will be the difference between the net present values calculated using the different rates. Considering that the difference between the rates is not relevant, the Finance Charges were not projected. Thus, we consider the costs related to Energy Purchase, Transportation, and Sector Charges (R$/MWh) as they are used in the Electricity Rate calculation.
ii - When the amount (MWh) of Required Energy Supply is over the limit of 105% of the Regulatory Allowance for Contracted Energy. In such case, the impact is considered in a portion of the costs related to Energy Purchase and Transportation that is not considered in the Electricity Rate calculation. Such an impact is considered in the valuation, as detailed in this report.
a) Energy Cost
The energy cost is calculated from the Weighted Average Cost of the Energy, in R$/MWh, considering the Energy Purchase Contracts.
Some Energy Purchase Contracts, as is the case for Self-Generation, have a different approach from the Portion A calculation methodology, using costs from the last energy auctions in the regulated market in order to balance the energy costs to consumers from different distributors operating in the Brazilian market.
In these cases, the differences between the effective cost of energy to the Distributor and the cost considered in Portion A is repaid to the Distributor through CCC. Since the projections assume the neutrality of Portion A, such differences were not considered. However, the financial impact related to the period between the payments of Energy Purchase Costs and the CCC repayments is considered in the projections of the Distributor’s Working Capital needs.
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The Consortium observed recent cases in the electric power distribution sector where this difference is directly paid to the party responsible for the power generation, and does not impact the distributor’s Working Capital needs and, therefore, does not present a financial impact for the company. This observed trend supports the assumption of neutrality of Portion A considered in the projections, as well as the assumption of normalization of Working Capital levels based on the average financial indicators for the electricity distribution sector, as discussed in next sections.
The costs informed in the last Distributor’s rate adjustment were used to define the
Weighted Average Cost of Energy as of the base date. The referred average cost was projected considering inflation rate assumptions. Since the monetary adjustments are carried out in the following year through the Finance Charges, which were not considered in the valuation, we considered the costs used in the calculation of Portion A to be equivalent to the effective Energy Purchase Costs.
Thus, the fraction of Portion A related to the Energy Purchase Cost has a negative financial impact in the cases where the considered Energy Purchase is more than 5% higher than the Regulatory Allowance for Contracted Energy.
b) Transportation Costs
The transportation costs refer to the SIN transmission system. The Transportation Costs are paid by the Distributor in order to receive the purchased energy.
Transportation Costs were projected based on the relation between the Transportation Cost and the Energy Cost (in R$/MWh) observed in the last Distributor’s rate adjustment. The calculations consider the Distributor´s estimated plans for interconnection.
Thus, the fraction of Portion A related to the Transportation Cost has a negative financial impact in the cases where the Required Energy Supply is more than 5% higher than the Regulatory Allowance for Contracted Energy.
c) Sector Charges
The energy distributors collect the applicable Sector Charges from their consumers and transfer the values to the sector funds.
The Sector Charges were projected based on the values considered in the last available rate adjustment. The base values were adjusted considering the projections for the inflation rate.
Due the assumption of neutrality of Portion A, the Sector Charges do not present financial impact in the valuation. However, the financial impact related to the period between the payment of Sector Charges and the receipt from the consumers is considered in the projections of the Distributor’s Working Capital needs.
d) Finance Charges
As mentioned before, the Finance Charges were not considered in the valuation.
e) Bad Debts
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Since the projections consider impact of Bad Debts on the cash flows net of the regulatory allowance considered in Portion A, values related to Bad Debts in the calculation of Portion A were not considered.
· Portion B
Portion B compensates the distributor for capital expenditures and operating margin of the electric power distribution service. It is calculated according to the methodology previously explained in this report and divided by the size of the market considered in the rate adjustments/revision to obtain a value expressed in R$/MWh.
Revenues
The projected Net Operating Revenues are composed of four types of revenues:
· Portion A
Product of the Energy Tariff (R$/MWh) related to Portion A and VPA Volume (MWh).
· Portion B
Product of the Energy Tariff (R$/MWh) related to Portion B and VPB Volume (MWh).
· Sale of the Excess Contracted Energy
The sale of Excess Contracted Energy is considered for the amounts over the regulatory allowance limit (5.0%) in relation to the Required Energy Supply. The energy price considered for the sale of the Excess Contracted Energy is the Difference Liquidation Price (PLD).
The PLD projection considers the average values observed over the last 5 years for the maximum and minimum limits fof PLD as well as the average PLD in the region. The observed values were adjusted considering the inflation rate projections. The projections also considered the historical seasonality of PLD, since the averages were calculated for each month of the year. The value considered in the sale of Excess Contracted Energy is the projected average value between the minimum limit and observed mean of PLD in the region.
· Other Revenues
The other revenues include Chargeable Services and Sharing of Infrastructure, for example. No real growth was projected for those revenues.
All the projections were estimated net of sales tax, such as PIS, COFINS, and ICMS.
Costs
· Energy Purchase
Product of the Energy Purchase (MWh) and the respective cost (R$/MWh) as projected in Portion A.
· Cost of Self-Generation, Fuel and CCC Repayments
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As explained before, because of the assumption of neutrality of Portion A, the values related to such items are not considered in this valuation.
· Transportation
Considering the assumption of neutrality of Portion A, the same value in R$/MWh considered in Portion A was considered as transportation costs. The impact on the Company’s valuation refers only to the amount of energy transported that exceeds the Regulatory Allowance for Contracted Energy.
Operational Expenses
In addition to the costs of Energy and Transportation, distributors also presents operational expenses, as described below:
· PMSO
Expenses of Personnel, Materials, Third Parties’ Services, and Other, projected according to the regulatory methodology of Portion B previously explained. The projected PMSO separated into the four components mentioned above is based on the historical average for each type of expense, as observed in the Distributor’s financial statements.
An additional cost is considered in relation to the eligible PMSO for Portion B, since some distributors’ expenses are not covered by regulatory allowance. This Aditional Cost is projected from historical information made available by the Distribution Board and follows an accelerated path of efficiency gain in relation to PMSO. This assumption is adopted because it is expected that the Distributor will concentrate efforts to reduce costs that do not have a regulatory allowance.
· Bad Debts
The bad debt levels were projected as a decreasing percentage of the net revenues. The calculations were made according to the regulatory methodology of Portion B previously explained. As mentioned before, the percentage was calculated net of the regulatory allowance provided as part of Portion A.
Depreciation and Amortization
The projections for depreciation of existing assets (financial, tangible, and fixed) were based on the historical relation between the Depreciation and Amortization Expenses and the the book value of the assets, calculated using the audited Financial Statements of the Distributor.
The average depreciation considered in the calculations of Regulatory Remuneration Base (BRR) was the same used for the new investments.
Financial Results
Since the valuation method used was the Free Cash Flow for the Firm approach, the financial revenues or expenses were not projected.
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Indemnity
The projected values for permanent assets not fully depreciated and/or amortized at the end of the concession period are considered in the calculation of an indemnity to be received by the Distributor.
The Indemnity value is calculated based on the remaining value of the Regulatory Remuneration Basis (“BRR”) net of depreciation at the end of the concession period. The capital gain related to the indemnity is estimated in order to calculate the applicable Income Tax (25% total rate) and Social Contribution (9% rate). The terminal value of the Distributor is consists of the Indemnity net of taxes.
Remaining Value of Portion B
In addition to the Indemnity, it was also considered the effect of the end of the concession contract before the completion of the last regulatory year, starting with the concession’s anniversary month. Since the required revenue to the last regulatory year, established in the respective rate adjustment, is not achieved until February, 2048 according to the projections, the payment for the Remaining Value of Portion B by the end of the concession period is considered.
WACC
As mentioned above, the net present value of the projected cash flows is calculated using a discount rate determined using the methodology of the weighted average cost of capital (WACC). The rolling WACC approach considers the annual variation of the discount rate, in order to measure the effects of changes in parameters such as the Distributor leverage ratio over the years.
6.4. Valuation by Multiples
Comparable Companies or Market Transactions Multiples
After the use of the discounted cash flows approach, the valuation by multiples may be used to ratify the results obtained, considering the relation between the market value of comparable companies (or comparable companies transaction values) and operational indicators.
Such approaches are based on the idea that similar assets have similar future profitability, and may have comparable values considering the business size.
We highlight that the direct comparison with valuation by multiples shall be made with caution, since the samples normally used as comparison may present differences in size, operational context, economic context and different geographies or risk levels.
Transaction Multiples
Estimated ranges of market values from public information about completed transactions, considering the relation between the value paid in acquisitions of companies in the same sector
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The symmetric dynamic observed for the discount rate was also verified in the market demand assumption, which also has a significant impact on the result.
The investment (CAPEX) presented the lower effect in the sensitivity analysis, also with relative symmetric behavior.
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7. | References |
[1] | Rede Tiradentes, 03 31 2017. [Online]. Available: http://www.redetiradentes.com.br/ronaldotiradentes/energia-eletrica-completa-120-anos-em-manaus.. |
[2] | “Portal Eletrobrás,” Eletrobrás, [Online]. Available: http://www.eletrobrasamazonas.com/cms/?s=hist%C3%B3rico. [access on 03 31 2017]. |
[3] | “Memória de Eletricidade,” 25 04 1961. [Online]. Available: http://www.memoriadaeletricidade.com.br. |
[Acess on 03 31 2017]. | |
[4] | Lei nº 3.890-A, 1961. |
[5] | “Fundação Getúlio Vargas,” Fundação Getúlio Vargas, [Online]. Available: Site http://www.fgv.br/cpdoc/acervo/dicionarios/verbete-tematico/eletronorte. [Access on 03 31 2017]. |
[6] | Provisional Measure nº 1.531-11, 1997. |
[7] | Deliberation nº. 016/2013, 2013. |
[8] | I. Própria, Somatório das áreas dos países, Rio de Janeiro, 2017. |
[9] | E. d. P. Energética, “Plano Nacional de Energia,” Rio de Janeiro, 2007. |
[10] | “Valor Econômico,” 09 07 2013. [Online]. Available: http://www.valor.com.br/brasil/3191994/manaus-e- integrada-ao-sistema-interligado-nacional-de-energia. [Access on 04 24 2017]. |
[11] | M. d. M. e. Energia, “Plano Decenal de Expansão 2022,” 2013. |
[12] | Law Nº 12.111, 2009. |
[13] | K. F. O. &. R. G. Israel, “Why Does Everyone Use the .05 Level of Significance?, Research Quarterly for Exercise and Sport,” 1987. |
[14] | J. M. WOOLDRIDGE, “ Econometric analysis of cross section and panel data. MIT Press,” 2010. |
[15] | World Bank, “The Regulatory Challange of Asset VAluation: A Case Study from the Brazilian Electricity |
Distribution Sector. Energy Working Notes. Energy and Mining Sector Board.,” 2004. | |
[16] | PricewaterhouseCoopers, “Electricity Lines Business – ODV Valuation. Study for Unison Networks Limited,” |
New Zealand, 2005. |
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ANNEX I – Extent of Responsibility
This report (the “Report”) was jointly prepared by PricewaterhouseCoopers Corporate Finance & Recovery Ltda. ("PwC CFR") and Siglasul Consultoria Ltda. (“SSU”) for the use of the Brazilian Development Bank ("BNDES") with the purpose of supporting the privatization process of the Distributors of Eletrobrás System (the “Privatization”), in accordance with contract OCS 028/2017 of February 14, 2017 (the “Contract”).
The Report was prepared based on the information and documents provided by the administration of Amazonas Distribuidora de Energia S.A. – AmE (the “Administration”). The works carried out do not constitute an exam performed according to the audit standards for financial statements; the works of financial valuation are not regulated and do not have specific determined standards and, for this reason, the procedures applied by us were determined in the Official Notice or aligned with BNDES where indicated in this Report.
This analysis considers only one of several methods that may be used to calculate the valuation of a company, with nothing preventing the potential stakeholders from using their own valuation of the projects. Our analysis did not consider eventual synergies, strategic reasons, scale economies, or other benefits or drawbacks that eventual investors could experience in the event of a change of shareholding interests of the Company.
Upon preparing the analysis, we used information and historical and projected data, not audited by the Consortium and provided in writing or orally by the Administration or obtained from the mentioned sources. Additionally, as every prediction is subjective and depends on individual judgment, being subject to uncertainties, we did not present predictions as specific results to be achieved.
Our work considered the contingencies considered in the other reports of diligences prepared by Consórcio Mais Energia B (the “Consortium”) under the terms of the Contract, that contain more detailed information.
Our work was developed with the purposes described above, therefore, it should not be used for other purposes.
In the event we become aware, at any time, of facts or information that had not been provided to us, we reserve the right to revise the calculations and the numerical results.
We do not take responsibility for the update of our reports outside the terms provided in the Contract with BNDES.
We do not take any responsibility, outside the legal hypotheses or hypotheses provided in the Contract executed with BNDES, for losses caused to BNDES, to Amazonas Distribuidora de Energia S.A., companies connected thereto, their shareholders, officers, or other parties, as a consequence of use of the data and information provided by Amazonas Distribuidora de Energia S.A. – AmE, or obtained from other sources, or for the improper use of our reports that does not observe the disclaimers of the previous paragraphs.
Finally, the provisions of Contract OCS no. 28/2017 (and its annexes) and the effective legislation were followed in the preparation of this Report, whose copyrights are granted to BNDES under the terms of art. 8 of Law no. 13.303/2016. All information transmitted in this document may be used and disclosed by BNDES, without any restriction.
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APPENDIX C - Selection of Models for Market Projection
The selection of models to perform market projections was made from the selection of models that would present greater strength among the set of models estimated in each distributor and market. It should be noted that the historical series of consumption per class (MWh) presented very strange characteristics, especially due to the economic crisis experienced by Brazil, resulting in greater variability of the sets of data, structural and momentary breaks, modifying the standard and level of the series, diverging from historical standards previously experienced, and increasing the difficult of finding an ideal regression model to perform forecasts.
The models were selected within the set of adjusted models considering: the most adequate methodology to be deployed; the use of transformations in the historical series; the need of use of auxiliary variables; the analysis of the information criteria; the analysis of the residuals; and the value of the need of change in the period of the observed historical series, in order to obtain more robust models.
Statistical tests were used in the analysis of the residuals to check assumptions of non-correlation of errors, heteroscedasticity, and normality, namely: Ljung-Box, Durbin-Watson, Arch, and Jarque Bera tests. Additionally, the residuals of the models were analyzed, through serial autocorrelation graphs and histograms. In the cases of the statistical tests, the greater the p-value, the greater the evidence of non-violated assumptions. To fix a base value, the significance level of 1% was used (0.01).
Considering all aspects presented, the purpose was to find the most robust forecast models within each market and class. Below are the p-value of the statistical tests carried out in each distributor and class of the final models used in the projections, which were elected as most adequate among the possibilities and specificities of each historical series.
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Table 86 – Statistical Indicators | ||||
Distributor | Class | Autocorrelation | Heteroscedasticity | Normality |
AmE | Residential | 0.676 | 0.669 | 0.946 |
Industrial | 0.058 | 0.735 | 0.064 | |
Commercial | 0.957 | 0.986 | 0.136 | |
Rural | 0.418 | 0.46 | 0.001 | |
Public Entities | 0.852 | 0.086 | 0.001 | |
Public Lighting | 0.140 | 0.245 | 0.001 | |
Public Service | 0.007 | 0.03 | 0.000001 | |
Proper | 0.34 | 0.514 | 0.557 | |
ELETROACRE | Residential | 0.748 | 0.178 | 0.54 |
Industrial | 0.929 | 0.0084 | 0.6287 | |
Commercial | 0.629 | 0.268 | 0.369 | |
Rural | 0.070 | 0.702 | 0.314 | |
Public Entities | 0.121 | 0.911 | 0.224 | |
Public Lighting | 0.999 | 0.960 | 0.0000001 | |
Public Service | 0.921 | 0.345 | 0.0001 | |
Proper | 0.847 | 0.978 | 0.234 | |
CEPISA | Residential | 0.050 | 0.285 | 0.519 |
Industrial | 0.386 | 0.53 | 0.788 | |
Commercial | 0.908 | 0.617 | 0.797 | |
Rural | 0.503 | 0.667 | 0.06 | |
Public Entities | 0.109 | 0.344 | 0.255 | |
Public Lighting | 0.104 | 0.144 | 0.3 | |
Public Service | 0.134 | 0.577 | 0.007 | |
Proper | 0.268 | 0.779 | 0.108 | |
Ceal | Residential | 0.307 | 0.661 | 0.739 |
Industrial | 0.002 | 0.141 | 0.019 | |
Commercial | 0.977 | 0.623 | 0.3388 | |
Rural | 0.735 | 0.983 | 0.0032 | |
Public Entities | 0.503 | 0.548 | 0.003 | |
Public Lighting | 0.603 | 0.997 | 0.0001 | |
Public Service | 0.467 | 0.686 | 0.328 | |
Proper | 0.547 | 0.958 | 0.22 | |
Ceron | Residential | 0.987 | 0.399 | 0.688 |
Industrial | 0.815 | 0.8343 | 0.010 | |
Commercial | 0.081 | 0.701 | 0.646 | |
Rural | 0.278 | 0.452 | 0.428 | |
Public Entities | 0.007 | 0.361 | 0.386 | |
Public Lighting | 0.607 | 0.992 | 0.00003 | |
Public Service | 0.137 | 0.850 | 0.803 | |
Proper | 0.002 | 0.407 | 0.053 | |
BOA VISTA | Residential | 0.813 | 0.634 | 0.88 |
Industrial | 0.757 | 0.856 | 0.001 | |
Commercial | 0.007 | 0.814 | 0.2329 | |
Rural | 0.123 | 0.732 | 0.325 | |
Public Entities | 0.289 | 0.942 | 0.00001 | |
Public Lighting | 0.819 | 0.809 | 0.152 | |
Public Service | 0.289 | 0.942 | 0.00002 | |
Proper | 0.953 | 0.998 | 0.000005 | |
Source: Self Prepared. |
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APÊNDICE F – Concepts and Methods of BRR Valuation
In relation to the methods of BRR valuation, there are four main approaches used by the regulators in Brazil and in other countries: (i) the economic or market value; (ii) the replacement cost; (iii) the combination between the economic and replacement methods, resulting in a hybrid approach; and (iv) valuation based on comparison of BRR with similar companies.
Methods Based on the Economic or Market Value
The methods based on the economic value, also called market value, aim at determining the price the investors would be willing to pay for the company or, in other words, the capacity of the company’s assets to generate wealth.
The economic value of the assets may be estimated from three methodologies:
i. Auction Bid: corresponds to the minimum bid value of the sale auction or to the winning bid. Only applicable in the cases where there is a bidding process of sale of the assets, as in the case of privatization. Its value shall coincide with the net present value of the expected cash flow from the point of view of the winner of the auction or the minimum bidder. This method was used by ARSESP (Regulatory Agency of Sanitation and Energy of the State of São Paulo) in the definition of the value of BRR of COMGÁS (Companhia de Gás de São Paulo) [7].
ii. Net Present Value (VPL): defined as the sum of the present values of the estimated flows of expenses, taxes, investments, and revenues of the company, calculated with a discount rate (Weighted Average Cost of Capital - WACC). Its preparation requires several assumptions to the projections of the different components of costs and expenses of the regulated company.
iii. Share Value: it consists of the value estimated by the quotation of the company’s shares negotiated on a stock exchange. Although it is a simple parameter, it only represents part of the company’s value: the business value under the point of view of the shareholder. Therefore, it excludes the debt value, which is added in separately. This method was used by the electric power and channeled gas and sanitation Regulators of the United Kingdom, OFGEM (Office of Gas and Electricity Markets) and OFWAT (Water Services Regulation Authority), respectively.
Methods Based on the Replacement Cost
The replacement cost method is focused on the physical, taking into account the valuation of existing assets or the design of the optimum configuration of the infrastructure. Therefore, these methods are different from the economic value, which focuses on the value itself.
There are four main methodologies to estimate the replacement cost:
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i. | Historical Corrected Costs (Current Cost Valuation - CCV): it involves the adoption of the original acquisition price (from the accounting records), depreciated based on the service life and updated by monetary indicator (sector or general). The updating of the book value is required when, as occurs in Brazil, the accounting standards do not allow the indexation of the acquisition value of fixed assets. This method is adopted in the regulation of sanitation in Colombia and of Melbourne Water in Australia. It is also used in the regulation of the services of electric power distribution and transmission in Norway and The Netherlands. In the Netherlands, this method is also applied to the regulation of natural gas. |
ii. | Depreciated Replacement Cost (DRC): consists of the cost of replacing each asset with a new one that performs the same services and that has the same capacity as the existing asset, replacing it in identical conditions—that is, without considering technological innovations. Additionally, the depreciation is discounted, representing a deduction for the physical deterioration of the asset and its obsolescence. This method is used in the regulation of some sanitation companies of Australia such as the South East Queensland Water and Hobart Water. |
iii. | Depreciated Optimized Replacement Cost (DORC): this measures the current cost of replacing each asset, taking into account the remaining service life and the best technological and economical options existing. It involves the adaptation of the assets to the demand (such as, for example, using use indexes), the revaluation of the assets to the price of new and the consideration of their accumulated depreciation according to the service life elapsed. Such method is used by ARSESP in the regulation of sanitation to SABESP (Companhia de Saneamento Básico do Estado de São Paulo) and by ANEEL in the electric power distribution [15]. |
iv. | New Replacement Cost - VNR (Gross Optimized Replacement Cost - GORC): this is the result of an optimization process of bottom-up engineering and economic parameters. It does not take into consideration the age of the assets, but simulates the assets that would be operated by a new hypothetical and efficient provider, with current costs and technologies. This method, also called Reference Company, is applied in Chile, either in the regulation of electric power distribution or sanitation. It was also applied by ADASA (Agência Reguladora de Águas, Energia Saneamento do Distrito Federal - Regulatory Agency of Water, Energy, and Sanitation of Distrito Federal) in the regulation of the sanitation services provided by CAESB (Companhia de Saneamento Ambiental do Distrito Federal). In the case of CAESB, the Regulator aimed at respecting the technological history of the investments made [15]. |
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Hybrid Methods
The hybrid methods correspond to combinations between the methods of economic value and replacement cost. Their use has combined pros and cons of both methods. There are two main approaches:
i. Optimized Deprival Value (ODV): this consists of the lowest value between the economic value and the replacement cost. Such method is used by the Commerce Commission in regulation of the services of electric power distribution and transmission in New Zealand [16].
ii. Rolling Forward: this represents the shielding of the initial base, defined from any of the methods previously detailed, and subsequent update of the shielded values until the date of each tariff revision, taking into consideration the monetary indexing, the deduction of the write-offs, the depreciation, and the additions (whose methods may be different from those used for the initial base). This method converts the initial asset into a kind of financial asset. Once incorporated to the BRR, the price of the asset is not reassessed again nor is technological change incorporated. This method is used by ANEEL in the valuation of the BRR of the electric power distributors in Brazil.
Comparison Value Method
This method is determined from the values associated to the BRR of similar companies with a sample of comparable assets. To its calculation, it is required the establishment of a benchmarking and the gathering of the values defined to the BRR of other companies.
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To
National Bank for Economic and Social Development ("BNDES")
Av. República do Chile, 100
Rio de Janeiro - RJ
C/O: Ms. Lidiane Delesderrier Gonçalves - OCS 028/2017 Agreement Manager
June 2017
Dear Sirs,
According to our service agreement OCS 028/2017 ("Agreement") executed between BNDES and the Mais Energia B Consortium ("Consortium") on 2/14/2017, we present the result of our work carried out in the context of Privatization of Eletrobrás System Distributors.
The result of our work is detailed in this document "Product 07: AMAZONAS Technical-Operational Evaluation Report ("Report"), dated June 2017.
Our work was developed solely for the purpose of advising the BNDES, as those responsible for executing and monitoring the process of privatization of utility companies by Decree 8,893, in AMAZONAS' evaluation, in accordance with the Agreement, and was based on information provided by AMAZONAS' management and on the premise that this information is true and complete. This information was not subject to testing or verification, except where expressly stated within the scope of our work.
In case the Report is to be accessed by third parties, it must be made available in full, so that the applicable safeguards and limitations are known.
Regards,
Siglasul Consultoria Ltda., as member of the Consortium
Luis Fernando Alvarez | Leonardo Campos Filho |
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This document is a true copy of the original signed version delivered to BNDES and in the possession of Eletrobras. |
Summary | ||
1. | Executive summary | 5 |
2. | Company operational characterization and diagnosis | 8 |
2.1. | Characterization of the company's area of activity | 9 |
2.2. | Geoelectric Characterization of the Concession | 19 |
2.3. | Utility's Consumer Market Analysis | 24 |
2.4. | Operating Indicators | 29 |
2.5. | Energy Purchase and Sale Indicators | 38 |
2.6. | Asset Conditions | 41 |
2.7. | Critical points observed during the field visit and challenges for new utilities | 44 |
3. | Five-Year Investment Plan ("PIQ") | 46 |
4. | References | 51 |
APPENDIX A - Socioeconomic Characterization of the Concession Area | 52 | |
APPENDIX B - Consumer Market | 55 | |
APPENDIX C - Response to Emergencies | 56 | |
APPENDIX D - AmE Vertical Divestiture Process | 58 | |
Figures | ||
Figure 1 - State of Amazonas (capital highlighted) | 11 | |
Figure 2 - Federal and State Highways of Amazonas | 14 | |
Figure 3 - Representation of the waterways, federal and state roads of Amazonas | 16 | |
Figure 4 - Cumulative total precipitation for the Brazilian states | 18 | |
Figure 5 - Average temperatures observed for the Brazilian states. | 18 | |
Figure 6 - National Interconnected System | 20 | |
Figure 7 - Substations of Manaus' electrical system | 22 | |
Figure 8 - Map of the Location of River Tracks in Rural Areas | 23 | |
Figure 10 - Illustration of the AmE vertical divestiture process - First Stage | 59 | |
Figure 11 - Illustration of the AmE vertical divestiture process - Second Stage | 60 |
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Graphs | |
Graph 1 - Total Road Density (km/km²) | 13 |
Graph 2 - Percentage of Existing and Planned Roads in 2015 | 13 |
Graph 3 - Competitiveness of generation sources | 20 |
Graph 4 - DEC Determined Indicator and Limits | 31 |
Graph 5 - FEC Determined Indicator and Limits | 31 |
Graph 6 - Number of Sets that violated their 2016 limits and UC Representation | 32 |
Graph 7 - Histogram of AmE's sets: 2016 DEC | 33 |
Graph 8 - Histogram of AmE's NUC: 2016 DEC | 33 |
Graph 9 - Histogram of AmE's sets: 2016 FEC | 33 |
Graph 10 - Histogram of AmE's NUC: 2016 FEC | 33 |
Graph 11 - Evolution of the product quality indicator (DRCE) | 35 |
Graph 12 - Evolution of the product quality indicator (DRPE) | 35 |
Graph 13 - Regulatory Technical Losses for Injected Energy | 36 |
Graph 14 - Comparison between Non-Technical Real and Regulatory Losses for the BT Market | 37 |
Graph 15 - Evolution of Base Energy, Bilateral and CCEAR and the percentage of Required Energy recognized by the Energy | |
Rate | 40 |
Graph 16 - Mean Times of Response to Emergencies | 56 |
Graph 17 - Evolution of the Number of Emergency Events with Electric Power Outage Versus the Total | 57 |
Tables | |
Table 1 - Five-year Investment Plan - Base Scenario | 7 |
Table 2 - Five-year Investment Plan - Alternative Scenario | 7 |
Table 3 - Amazonas Road Indicators | 15 |
Table 4 - Climatic Characteristics of AmE's Concession Area | 17 |
Table 5 - Evolution of the Number of Consumers by Voltage Level | 24 |
Table 6 - Market Evolution by Voltage Level | 25 |
Table 7 - Evolution of Revenue by Voltage Level | 26 |
Table 8 – NUC Evolution by Rate Class | 26 |
Table 9 - Market Evolution by Rate Class | 27 |
Table 10 - Evolution of the Average Market by Rate Class | 27 |
Table 11 - Revenue Evolution by Rate Class | 28 |
Table 12 - Number of Consumers, Market and Revenue by Voltage Level | 28 |
Table 13 - Number of Consumers and Revenue by Rate Class | 29 |
Table 14 - Compensations for Breach of Quality of Service Indicators | 30 |
Table 15 - Results of Regulated Required Energy (MWh) from 2012 to 2016 | 39 |
Table 16 - Results of Contracted Energy (MWh) from 2012 to 2016. | 39 |
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Table 17 - Physical data of UTEs connected to the Manaus system | 42 |
Table 18 - AmE distribution system physical data | 43 |
Table 19 - Investments in progress in the year 2017 by Type of Project | 47 |
Table 20 - Base Scenario: Projection of Five-Year Investments (Detailed Resources by Type of Project/System) | 49 |
Table 21 - SEs and LDs with investments anticipated from 2024/2023 to 2022 for the Five-Year Plan | 50 |
Table 22 - Base Scenario: Projection of Five-Year Investments (Detailed Resources by Type of Project/System) | 50 |
Table 23 - Demographic Information, Level of Education and Unemployment Rates | 52 |
Table 24 - Service Access Information | 53 |
Table 25 - Income Information | 53 |
Table 26 - Information on Violence | 54 |
Charts | |
Chart 1 - Socioeconomic characterization of the state of Amazonas | 11 |
Chart 2 - Overview of the Brazilian Rate Structure | 55 |
Chart 3 - Summary of the AmE vertical divestiture process stages. | 58 |
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1. Executive summary
This report aims to fulfill item "4.2.5 - Technical-Operational Evaluation of Eletrobras Group Companies", of the "Invitation to Bid" regarding the "AARH Electronic Bidding #51/2016 - of the National Bank for Economic and Social Development (BNDES) for Amazonas" (hereinafter referred to as AmE for the purposes of this report).
In this document - and in its Appendices - all aspects related to the Invitation to Bid are presented, as described below: (i) operational characterization and diagnosis of the company, identifying the operational challenges in the distributor's concession area, including the current operational indicators; (ii) conditions of assets, services and investments in progress, based on field visits, assessing the most critical points in the concession; and, (iii) investment plan for the next 5 years, with scenarios that envisage the proper operation of the distributor.
AmE's concession area, located in the state of Amazonas, northern region of Brazil, has continental dimensions: the state of Amazonas is the largest federative unit in the country, with an area of 1,559,159 km², making it the ninth largest subdivision in the world and with a territory that is larger than the combined areas of countries such as France, Spain and Sweden [1]. It borders the state of Pará, to the east; Mato Grosso, to the southeast; Rondônia and Acre, to the south and southwest; Roraima, to the north; in addition to countries such as Venezuela, Colombia and Peru, respectively to the north, northwest and west. The state has about 4 million inhabitants, with 50% of the population in the capital, Manaus.
With a hot and humid climate, annual temperatures varying between 21 ºC and 42 ºC, the concession is characterized by high humidity throughout the year, which favors the formation of vegetation cover. Rains are abundant and, at certain times, cause floods, submerging vast regions. In addition, the total of paved roads represents only 36% of the state's highways roads, which shows the lowest density of roads in Brazil, with only 10 meters of road per square kilometer.
These facts directly influence the logistics of operation of the teams to respond to emergencies due to the imminent threat of car bogging during the rainy season, since these roads tend to become even more precarious with the concentration of mud and dirt, affecting even the durability of vehicles. It should be noted that, in contrast to the difficulties of expanding and using Amazonas' road network, there is access to navigation through the region's rivers (about 40% of the navigable parts of the country) and this is a facilitating factor for access to non-urbanized regions.
Consequently, these climate and logistic issues affect service times in the event of discontinuation of energy supply (AmE shows a total mean time of response to emergencies equivalent to 5 hours). This finding is reflected in the collective quality indicators, especially the DEC1, resulting in a breach of limits approved by ANEEL. According to data from 2016, 76% of consumer units ("NUC") of the company belonged to consumer sets which had indicators that were higher than regulatory targets.
1 Equivalent Downtime Duration per Consumer Unit ("DEC"). | ||
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It should be noted that the level of energy losses in the AmE system is extremely high, especially with respect to the commercial aspect of losses. The level of real Non-Technical Losses ("PNT") is well above the regulatory target, higher than 100% of what is billed from the Company's entire low voltage grid.
Regarding the consumer market, AmE has its market represented by consumers allocated at the High, Medium and Low Voltage levels, the latter being more expressive with respect to the number of consumers (99.7%), market (54.4%) and revenue (59.3%), according to 2016 data. Noteworthy is the growth of consumers classified as Low Income: this market grew, on average, 51% p.a. in the period between 2013 and 2016. Despite the high level of representativeness for BT, the AT level has a good market share, with an average consumption of 1TWh (15.6% of the market and 12.2% of revenues), according to 2016 data. This is essentially due to the existence of the industrial hub of Manaus. Noteworthy is the current migratory movement of large consumers to the free market, which represents a risk for the distributor (which contracts energy/input for power generation to serve the medium- and long-term market).
Regarding the distributor's electrical system, in spite of the fact that good assets were observed during the visits, there were substations with over 30 years of installation and operation time. Due to obsolete equipment in general (AT and MT circuit breakers, disconnecting switches etc.) in the entire protection system and communication system, these substations still require operators for manual operations. There are also feeders with little flexibility in the transfer of loads in situations of operation contingency due to excessive loading. Thus, there is a need for new transforming substations and sub transmission lines.
The thermoelectric base shows problems that affect electric power supply to municipalities served in rural areas of the concession. In rural areas, there is a need for revitalization of assets due to the problems caused by excessive exposure to humidity. There are also operational problems related to the low voltage system, caused by faults in the management of connected loads and irregular consumption, which cause burning of transformers.
For correcting AmE's operating conditions, while observing both commercial and technical aspects, a Five-Year Investment Plan ("PIQ") is an integral part of this report, which prioritizes, for the first five years, investments related to the expansion and strengthening of the company's distribution system, as well as resources needed to complete the Programa Luz Para Todos ("PLPT") program.
The main sources of information for the PIQ are the "Electricity System Expansion Plan (2017-2026 horizon)", the "Distribution Development Plan ("PDD") for the year 2017" (although provisional2), the "2015 Results Plan for Improvement of the Distribution Services" and the "2017 Plan for Temporary Rendering of the Electricity Distribution Service (internal version)3", all of which were prepared by AmE, among other bibliographic references listed in Item "3 - Five-Year Investment Plan ("PIQ")".
2 At the time of drafting this report, the 2017 PDD had not yet been delivered to ANEEL.
3 At the time of drafting this report, the Temporary Provision Plan had not yet been filed at ANEEL.
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The PIQ has two investment scenarios (called the "Base Scenario" and the "Alternative Scenario") that differ in the time allocation of certain investments, where the Alternative Scenario occurs in the most opportune time for rate recognition when carrying out the rate revision expected for 20234, and also foresees investments that are not included in the Base Scenario.
The investments were, in their total amounts, defined as shown in Table 1 (Base Scenario) and Table 2 (Alternative Scenario) 5.
Table 1 - Five-year Investment Plan - Base Scenario | ||||||
Total | ||||||
Year | 2018 | 2019 | 2020 | 2021 | 2022 | |
Period | ||||||
Total | BRL 1,115,342,529 | BRL 776,588,850 | BRL 767,540,831 | BRL 222,734,514 | BRL 481,722,544 | BRL 3,363,929,268 |
Total | ||||||
Own | BRL 453,880,838 | BRL 719,209,500 | BRL 595,177,169 | BRL 222,734,514 | BRL 481,722,544 | BRL 2,472,724,565 |
Resources* | ||||||
Table 2 - Five-year Investment Plan - Alternative Scenario | ||||||
Total Period | ||||||
Year | 2018 | 2019 | 2020 | 2021 | 2022 | |
Total | BRL 1,115,342,529 | BRL 776,588,850 | BRL 767,540,831 | BRL 222,734,514 | BRL 518,196,774 | BRL 3,400,403,498 |
Total | ||||||
Own | BRL 453,880,838 | BRL 719,209,500 | BRL 595,177,169 | BRL 222,734,514 | BRL 518,196,774 | BRL 2,509,198,795 |
Resources* | ||||||
*For total Own Resources, we deducted subsidies related to the projects linked to the Programa Luz para Todos ("PLpT") (90%) in the year | ||||||
2018 and the CCC subrogation for the interconnection of isolated systems in the years 2019 and 2020, thus better equalizing the initial | ||||||
disbursement to the new utility. |
The high volume of investments allocated in 2018 (around 33% of the five-year period) are related to expansion and reinforcement works on the AT distribution system, which have been hampered in recent history due to a lack of financial resources. In addition, this year, a large amount of investment is needed to meet the PLPT targets. Since the program ends in the year 2018 according to Decree #8,387 of 12/30/2014, and considering the large volume of investments that are still needed, special attention will be paid to the new manager of the company regarding the physical capacity to execute the works or otherwise renegotiate with ANEEL the postponement of the deadline for completion of the program.
4 In this case, it was assumed that the company will have its privatization process finalized in 2018, having, therefore, an RTP in the year 2023.
5 The financial amounts of projected five-year investments presented in this Report are in real currency at April 2017 prices.
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It should be noted that the company has a particularity regarding the process of vertical divestiture. The model of the Brazilian electricity sector determines that distributors connected to the National Interconnected System ("SIN") should not have power generation, transmission and commercialization ventures, which are considered to be activities that are not related to the electric power distribution service concession. The fact that the company operates in isolated systems has caused it to hold generation and transmission assets and, consequently, to become a company with vertical processes. However, since the state already has its capital and surroundings interconnected to the SIN, vertical divestiture is necessary.
Despite the urgency for vertical divestiture, ANEEL extended the deadline for separating the company's generation and transmission (G&T) departments. Thus, AmE will still have 18 months, as of November 1, 2016, to complete the process. The Agency's decision took into account the complexity of the Company's vertical divestiture model, which proved to be arduous due to the difficulty in pricing the Amazonas G&T, partly due to the uncertainty regarding the price of gas after 2030, when the contract with the Amazonas state gas distributor (Cigás) ends. Further details of this process are contained in Appendix D to this report.
In the following items (and in its Appendices), all the aspects discussed in the executive summary shall be detailed.
2. Company operational characterization and diagnosis
In this chapter, we will discuss the characterization of AmE's concession area, as well as make a brief operational diagnosis of the company.
Firstly, we will make a brief description of the company's area of activity (by providing information about its history, socioeconomic, road infrastructure and climate indicators) in order to subsequently carry out the Company's electrical characterization (assessing the level of interconnection to the SIN and constructive standards of the electricity distribution grids).
Next, we will analyze the company's consumer market by detailing information of both consumption broken down by voltage level and by rate class and of billing according to the type of user. Subsequently, we will cover the main operating indicators regarding: (i) quality of service; (ii) product quality; (iii) response to emergencies; and (iv) power losses, in addition to evaluating energy purchase and sale indicators.
Also in this chapter we will analyze the conditions of the assets observed in the visits made in the field, highlighting critical points and main challenges for a new utility.
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2.1. Characterization of the company's area of activity
2.1.1. Brief History
Street lighting in the city of Manaus goes back to the year 1880, when electricity was generated in Amazonas' capital through wood gas generators. However, street lighting in the city was only expanded in a structured way in 1895, with the creation of Manaós Electric Lighting Company, a North American company which won the bidding process promoted by the state's government. Soon thereafter, in 1898, the state government incorporated Manaós Electric Lighting Company, which started to provide street lighting service to the state's capital [2].
At the end of the 19th century and the beginning of the 20th century, during the first years of the Brazilian Republic, concessions for public services were commonly administered by Municipal Authorities (municipal governments), and were usually passed on to individuals with economic and political influence, and which later leased the concessions to specialized companies. This movement was not different in the state of Amazonas.
In 1908, the electricity generation and distribution service in the city of Manaus was leased by Engineer Antônio Lavandaira, who for ten years worked in the service provision through a contract that today resembles a "PPP" (Public-Private Partnership). In 1918 electric power supply in the state of Amazonas was passed again into the hands of external capital through an England-based company called The Manaos Tramways and Light Company [3].
Only in 1952 did the company return to state government, which created Centrais Elétricas de Manaus (CEM), as per Law #1,654 of July 28, 1952. The purpose of the newly created state company was to generate, transmit and distribute electric power to the city of Manaus [4].
Ten years later, CEM became a subsidiary of Centrais Elétricas Brasileiras S.A. (Eletrobras). Created on July 11, 1962, Eletrobras was awarded the assignment of promoting studies, construction projects and operation of generating plants, transmission lines and substations intended for the supply of electric power in Brazil [5]. From the moment of its creation, Eletrobras started to contribute decisively to the expansion of electric power supply and the development of the country.
In the year 1980, Eletronorte (Centrais Elétricas do Norte do Brasil S.A., a subsidiary company of Eletrobras, which was created by means of article 1 of Decree #72,548 of 7/30/1973 with the purpose of expanding the large-scale electricity production in the Amazon region) incorporated Companhia de Eletricidade de Manaus under its control.
At the same time, in 1963, Centrais Elétricas do Amazonas S/A (called CELETRAMAZON), was created by means of State Law #35 of July 31, 1963, with the purpose of expanding electric power services to the rural part of the state of Amazonas. In November 1983, the company's corporate name changed to Companhia Energética do Amazonas ("CEAM").
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Thus, at the moment, two independent companies were operating in the state of Amazonas to promote electric power services: one for the capital and the other for the rural part of the state. It should be noted that Eletronorte did not build a single, continuous and interconnected system of generation, transmission and distribution of electric power due to high transmission costs in the Amazon region and the characteristics of the market in the region, which is marked by spread out population and small loads. The most important isolated systems included the capital cities of Manaus, Porto Velho, Rio Branco, Macapá and Boa Vista [6].
In 1997 CEM was renamed Manaus Energia, still as a direct subsidiary of Eletronorte [7]. In turn, in the year 2000 CEAM was federalized, and its control was assigned to the Eletrobras group. In 2008 alone, Eletrobras assumed control of Manaus Energia. Thus, the group's next step was to unify the two companies (Manaus Energia and CEAM) in April 2009 as Amazonas Distribuidora de Energia S.A (AmE). For the first time in history, both the rural part of the state and the capital had services provided by a single utility.
In its area of activity, Amazonas Distribuidora de Energia S.A. was responsible not only for energy distribution services, but also for the generation and transmission of electricity to the entire state of Amazonas (which has large dimensions and difficult access to rural areas, requiring local isolated generation).
However, with the interconnection of the capital Manaus to the National Interconnected System in July 2013, there was a need to begin the process of AmE's vertical divestiture. In 2013, through the Extraordinary General Meeting of Amazonas Distribuidora de Energia S.A., the creation of a Generation and Transmission Company (AmE G&T) was approved with the purpose of enabling the process of vertical divestiture [8]. Eletrobras approved the creation of a wholly-owned subsidiary of Amazonas Energia, as part of the segregation operation of its generation and transmission assets and operations, approved in 2015 through a General Meeting. However, such process is not yet complete. In Appendix D to this report, we will go deeper into the company's vertical divestiture process.
2.1.2. Description of the Area of Activity
AmE operates in the entire state of Amazonas, which is the largest federative unit in Brazil, with an area of 1,559,159,148 km², making it the ninth largest subdivision in the world and with a territory that is larger than the combined areas of countries such as France, Spain and Sweden [1]. It borders the state of Pará, to the east; Mato Grosso, to the southeast; Rondônia and Acre, to the south and southwest; Roraima, to the north; in addition to countries such as Venezuela, Colombia and Peru, respectively to the north, northwest and west. It has 98% of its forest cover preserved, the so-called Amazon Rainforest, with an area of 5,500,000 km² covering 9 countries (Brazil, Peru, Colombia, Venezuela, Ecuador, Bolivia, Guyana, Suriname and French Guiana).
The state has about 4 million inhabitants, with 50% of the population in the capital, Manaus. In addition, the Brazilian Institute of Geography and Statistics ("IBGE") identified 65 indigenous groups in the state, which holds the largest indigenous population in the country, totaling 168,680 inhabitants according to the 2010 Census.
Figure 1 shows the spatial distribution of the 62 municipalities in the state.
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As shown, the state of Amazonas shows deficiencies in infrastructure services: according to data from the 2015 PNAD, 15% of households did not have garbage collection; 16% of urban households did not receive water supply through networks, and 21% did not have adequate sanitary sewage (septic tank or networks). With regard to income, according to data from the 2014 IPEA and IBGE, the state had 24% of households living below the poverty line, despite having the 11th highest GDP per capita in Brazil (BRL 21,874), which shows high income inequality.
It should be noted that the electric power service is the closest to being universalized in the state, but Amazonas still concentrates the largest percentage of rural households without electricity lighting in Brazil (17% of the total).
The main economic pole of the North region is worth noting: built in an area of 10 thousand km², based in Manaus, the Manaus Free Trade Zone ("ZFM") is a very important economic center for the state of Amazonas. The ZFM was implemented through Decree-Law #288 of February 28, 1967, aimed at allying environmental protection with the establishment of tax incentives for the implementation of three poles6: commercial (major rise until the end of the 80's); industrial (considered ZFM's foundation, with approximately 600 high-tech plants generating more than half a million direct and indirect jobs, mainly in the electronics, motorcycle and chemical (and farming) sectors, encompassing projects aimed at the activities of food production, agroindustry, fish farming, tourism and wood processing.
Regarding revenues, and knowing that most of Amazonas' GDP comes from Manaus, in 2014 ZFM obtained a total of BRL 87.25 billion in revenues7. This amount corresponded to 1.6% of Brazil's GDP in that year, keeping the capital Manaus within the top six municipalities with largest revenues in the country.
Appendix A shows the comparisons of the indicators analyzed in relation to the national and north and northeast region averages.
2.1.4. Characterization of Road Infrastructure
The National Department of Transportation Infrastructure ("DNIT") is the main executing agency of the Ministry of Transportation. It was implemented in February 2002 to perform the roles related to the construction, maintenance and operation of the infrastructure of the segments of the Federal Highway System under direct administration of the Union in the modalities of road, rail and waterway. The analysis and conclusions contained in this section are based on information provided by DNIT in the 2015 annual summary of the National Road System.
Graph 1 - Total Road Density (km/km²) contemplates the total road density by taking into account the planned and existing regions of Brazil, specifying the data for the North and Northeast states. As shown, the state of Amazonas shows the lowest density of roads, with only 10 meters of highways per square kilometer of geographical area. This fact is partially justified by the area occupied by the Amazon rainforest, a fact that (greatly) reduces the free area for urbanization.
6 According to information from the Manaus Free Trade Zone Superintendency ("SUFRAMA") website.
7 "Indicadores de Desempenho do Polo Industrial de Manaus" Report. Accessed 4/3/2017.
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Considering all the above facts, AmE's concession area identifies the climatic and infrastructure peculiarities that are independent on the utility's management and which may hinder the movement of the emergency teams in a region of large distances, thus substantially increasing service time and compromising the collective indicators of continuity of supply13 (DEC and FEC).
2.2. Geoelectric Characterization of the Concession
The state of Amazonas is served in part by the National Interconnected System ("SIN") (comprising the capital (Manaus) and nearby municipalities) and by isolated systems spread throughout the rural part of the state, comprising 61 municipalities.
This section shall address information about the level of interconnection to the SIN of the state of Amazonas, as well as characteristics of the High (AT), Medium (MT) and Low Voltage (BT) distribution systems.
2.2.1. SIN Interconnection Level
The transmission system in Brazil has an importance and role that goes beyond the classic function of "just" bringing power from the generating centers to the consumption centers. Due to the characteristics of the Brazilian electrical system - notably the power generation base of a hydroelectric source - and the great territorial extension of the country, the transmission system in Brazil also functions as a "virtual energy source", that is, it is operated in order to allow exploitation of the diversity and use of existing energy sources between the subsystems (North, Northeast, Southeast/Center-West and South), through the National Interconnected System ("SIN").
Just over 2% of Brazil's total electric power consumption is not connected to the SIN [9] and is supplied by so-called "isolated systems", which are almost entirely located in the North of the country and with 80% of the installed capacity supplied by diesel oil thermoelectric plants, according to data from the Ministry of Mines and Energy [9]. The energetic supplementation of the isolated systems occurs through hydraulic plants that do not have reservoirs, called "hydroelectric power plants with no reservoir".
As the cost to generate energy based on fossil fuels is higher than the water source, isolated systems have a high cost of operation and maintenance, as shown in the comparison of Graph 3.
13 Equivalent Duration of Downtime per Consumer Unit ("DEC"); Equivalent Frequency of Downtime per Consumer Unit ("FEC")
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Despite being interconnected to the National System, about 20% of the energy used to serve the capital and nearby municipalities is supplied by natural gas thermoelectric plants. The plants connected to the system allow greater reliability, thus minimizing the impact of potential disconnections of lines and avoiding generalized downtimes. The rural part of the state of Amazonas is served by isolated systems. There are 61 municipalities served by 95 thermoelectric plants, which have 573 generator sets (generally driven by diesel oil). In addition, the sizes of municipalities and generating stations are distinct, varying from 50 kW of installed power up to 30 MW.
Still analyzing the state of Amazonas, we note that there is a project for a transmission line of approximately 1,430 km that would connect Manaus to Boa Vista (capital of the state of Roraima). This line should have been energized as of January 2015, however, currently its work is stopped due to environmental issues, since a certain stretch of the line passes through the Waimiri Atroari indigenous reserve located between the states of Amazonas and Roraima. However, it should be emphasized that this line would not increase the level of interconnectedness of the state, since there are no villages with representative density to justify the construction of 500 kV to 13.8 kV substations. The objective of the line is to connect the city of Boa Vista to the SIN, as currently the capital (Roraima) is supplied by Venezuela and local Thermoelectric Power Plants ("UTEs")14.
2.2.2. Distribution System of the Utility
The Amazonas High Voltage Distribution System is served by a single point of supply originating from Tucuruí, Pará, through a 1,438-km long transmission line in a double 500 kV circuit that reaches the Lechuga substation in the state's capital [10]. From this SE15, four lines are derived, which form the existing sub transmission system: (i) one 138 kV line, in single circuit, with a length of 29 km connecting the Lechuga SE to the Jorge Teixeira SE and (ii) three 230 kV double circuit lines connecting the Lechuga SE to the Jorge Teixeira and Manaus SEs and to the Balbina UHE [11].
In order to serve the municipalities of Manaus, Iranduba, Manacapuru and Presidente Figueiredo, which make up the interconnected area of Amazonas Energia's concession, the AT electricity distribution system has 5 transmission lines ("LTs") at 138 kV, and 45 LTs at 69 kV. For distributing the energy that runs along these lines, there are twenty-three 69/13.8 kV SEs, one 230/13.8 kV SE and three 138/13.8 kV SEs.
The distribution lines of the AT system are separated into 3 subsystems supplied by the respective substations: Mauá Três SE (230/138/69 kV) (Subsystem 01), Manaus SE (230/69/13.8 kV) (Subsystem 02) and Jorge Teixeira SE (230/138 kV) (Subsystem 03).
Figure 7 shows the spatial distribution of the SEs of the Manaus Distribution System.
14 "In an exclusive interview with Folha, Roni Franco Rodrigues, the regional superintendent of Eletrobras Transmissão Roraima, announced that a meeting will be held with the natives to define the last obstacles for the resumption of the work of the Linhão de Tucuruí line between Manaus (AM) and Boa Vista, which will link Roraima to the National Interconnected System ("SIN") from Amazonas. With the resumption, the process should be started from scratch, with a forecast for the power to reach Roraima possibly in 2021", - FolhaWeb Information (3/28/2017).
15 SEs is the acronym commonly used for AT/MT transformation substations.
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2.3. Utility's Consumer Market Analysis
This chapter will analyze the consumer market of the company, detailing information on consumption, broken down by voltage level and by rate class, in addition to billing according to the type of user. It should be noted that all the information in this section was obtained from the company's rate activity over the time horizon from 2012 to 2016.
We summarize in Appendix B to this report concepts that facilitate the understanding of the Brazilian rate structure.
In Table 5 we show the evolution of the number of consumer units ("NUC") of the company between the years 2012 to 2016, as well as the growth rates for the whole period - change in the year 2016 versus the year 2013 - and geometric - percentage of average annual increase.
Table 5 - Evolution of the Number of Consumers by Voltage Level | |||||||
NUC by Voltage Level | Rate of Change | ||||||
Period % | Geometric | ||||||
Voltage/Year | 2012 | 2013 | 2014 | 2015 | 2016 | (2013/2016) | (p.a.)16 % |
A3 | - | 27 | 29 | 35 | 32 | 19% | 6% |
A4 | - | 2,708 | 2,811 | 2,798 | 2,842 | 5% | 2% |
BT | - | 816,728 | 856,704 | 901,555 | 922,977 | 13% | 4% |
TOTAL | 753,708 | 819,463 | 859,544 | 904,388 | 925,851 | 13% | 4% |
Source: ANEEL, rate activity approved between 2012 and 2016, processed in November of each year. In general, NUC relates to the | |||||||
month of October of each year, except for the years 2015 and 2016, which had August and July as the reference months, | |||||||
respectively. | |||||||
* There is no public data approved by ANEEL of NUC by voltage level for the year 2012. For this reason, the rates of change were | |||||||
estimated by considering the change observed between 2013 and 2016. |
Subgroup A3 (High Voltage) shows, on average, a path of 6% growth per annum (p.a.), with only a slight decrease in the year 2016. Subgroup A4 (Medium Voltage) showed an oscillation in its growth trend of 2% p.a., while BT (Low Voltage) has a continuous growth path in all years, with an average rate of 4% p.a.
Table 6 shows the evolution of the billed market (MWh) by voltage level, in addition to the two growth rates (period and geometric). Market information is also presented according to the types: (i) Provision - captive consumers of the distributor; (ii) Supply - distributor supplying another distributor; (iii) Other Free Consumers - free consumers of the distributor; and (iv) Distribution.
16 | p.a. = per annum. |
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Table 7 - Evolution of Revenue by Voltage Level | |||||||
Revenue by Voltage Level (BRL Million) | Rate of Change | ||||||
Period % | Geometric | ||||||
Voltage/Year | 2012 | 2013 | 2014 | 2015 | 2016 | (2012/2016) | % (p.a.) |
PROVISION | 1,665 | 1,675 | 1,660 | 1,953 | 2,587 | 55% | 12% |
A3 | 227 | 218 | 196 | 239 | 315 | 38% | 8% |
A4 | 626 | 571 | 475 | 560 | 738 | 18% | 4% |
BT | 810 | 885 | 988 | 1,153 | 1,534 | 89% | 17% |
SUPPLY | - | - | - | - | - | - | - |
OTHER FREE | - | - | - | - | - | - | - |
CONSUMERS | |||||||
DISTRIBUTION | - | - | - | - | - | - | - |
TOTAL | 1,665 | 1,675 | 1,660 | 1,953 | 2,587 | 55% | 12% |
Source: ANEEL, rate activity approved between 2012 and 2016, processed in November of each year. Revenue is in nominal currency, at the | |||||||
price as of the date of processing the rate activity of each year. |
Table 8 shows the NUC evolution by rate class. There is a higher percentage of NUC growth in the "Street Lighting" class, with an increase of 7% p.a. The "Public Service", "Other" and "Industrial" classes were shrunk, namely 1% p.a., 2% p.a. and 1% p.a., respectively.
Table 8 – NUC Evolution by Rate Class | |||||||
NUC by Rate Class | Rate of Change | ||||||
Period % | Geometric | ||||||
Class/Year | 2012 | 2013 | 2014 | 2015 | 2016 | (2012/2016) | % (p.a.) |
Residential | 636,805 | 695,275 | 733,444 | 774,318 | 795,294 | 25% | 6% |
Industrial | 3,178 | 3,161 | 3,065 | 3,087 | 3,022 | -5% | -1% |
Commercial | 65,989 | 69,574 | 71,315 | 74,339 | 74,520 | 13% | 3% |
Rural | 38,448 | 40,878 | 41,016 | 41,496 | 41,678 | 8% | 2% |
Street Lighting | 499 | 651 | 662 | 664 | 662 | 33% | 7% |
Public Power | 7,595 | 8,595 | 8,703 | 9,211 | 9,532 | 26% | 6% |
Public Service | 905 | 927 | 940 | 881 | 879 | -3% | -1% |
Other | 289 | 402 | 399 | 392 | 264 | -9% | -2% |
TOTAL | 753,708 | 819,463 | 859,544 | 904,388 | 925,851 | 23% | 5% |
Source: ANEEL, rate activity approved between 2012 and 2016, processed in November of each year. |
Table 9 shows the evolution of the AmE Market by class. The "Residential" class showed the highest growth in energy consumption in the period considered, namely, 10%, followed by "Public Power", with a 6% growth and "Industrial" and "Rural", both with an average 5% p.a. increase. The "Other" and "Industrial" classes were shrunk by 15% p.a. and 5% p.a., respectively.
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Table 9 - Market Evolution by Rate Class | |||||||
Market by Rate Class (MWh) | Rate of Change | ||||||
Period % | Geometric | ||||||
Class/Year | 2012* | 2013 | 2014 | 2015 | 2016 | (2012/2016) | % (p.a.) |
Residential | 1,508,849 | 1,737,539 | 2,000,143 | 2,152,857 | 2,187,534 | 45% | 10% |
Industrial | 1,832,457 | 1,750,733 | 1,700,752 | 1,685,274 | 1,483,470 | -19% | -5% |
Commercial | 1,140,947 | 1,215,185 | 1,268,683 | 1,354,504 | 1,342,078 | 17% | 4% |
Rural | 66,087 | 74,425 | 79,599 | 78,604 | 79,392 | 20% | 5% |
Street Lighting | 130,483 | 183,746 | 177,044 | 173,061 | 158,453 | 21% | 5% |
Public Power | 487,414 | 529,166 | 560,899 | 629,227 | 621,990 | 27% | 6% |
Public Service | 213,158 | 219,721 | 200,124 | 176,084 | 185,467 | -13% | -3% |
Other | 41,291 | 63,385 | 59,644 | 59,907 | 21,220 | -49% | -15% |
TOTAL | 5,420,686 | 5,773,899 | 6,046,889 | 6,309,519 | 6,079,604 | 12% | 3% |
Source: ANEEL, rate activity approved between 2012 and 2016, processed in November of each year. | |||||||
*Market values for the year 2012 were taken from Technical Note #394/2012 (SRE/ANEEL). They are not in agreement with the market | |||||||
values by voltage level, which are demonstrated in Table 6. |
The average monthly consumption information per customer is arranged in Table 10. As shown, the "Residential" class had the highest increase in average consumption (4% p.a.), while the "Public Service", "Other", "Lighting" and "Industrial" classes showed a consumption drop.
Table 10 - Evolution of the Average Market by Rate Class | |||||||
Average Monthly Consumption by Class (kWh) | Rate of Change | ||||||
Period % | Geometric | ||||||
Class/Year | 2012 | 2013 | 2014 | 2015 | 2016 | (2012/2016) | % (p.a.) |
Residential | 197 | 208 | 227 | 232 | 229 | 16% | 4% |
Industrial | 48,051 | 46,155 | 46,241 | 45,494 | 40,908 | -15% | -4% |
Commercial | 1,441 | 1,456 | 1,482 | 1,518 | 1,501 | 4% | 1% |
Rural | 143 | 152 | 162 | 158 | 159 | 11% | 3% |
Street Lighting | 21,791 | 23,521 | 22,287 | 21,719 | 19,946 | -8% | -2% |
Public Power | 5,348 | 5,131 | 5,371 | 5,693 | 5,438 | 2% | 0% |
Public Service | 19,628 | 19,752 | 17,742 | 16,656 | 17,583 | -10% | -3% |
Other | 11,906 | 13,140 | 12,457 | 12,735 | 6,698 | -44% | -13% |
TOTAL | 599 | 587 | 586 | 581 | 547 | -9% | -2% |
Source: ANEEL, rate activity approved between 2012 and 2016, processed in November of each year. |
Table 11 shows the evolution of AmE's revenue by rate class. It should be noted that there is no public data approved by ANEEL in 2012 regarding revenue related to each rate class, which is why only the total amount for 2012 is presented. The rates of change for this information are calculated by using the period from 2013 to 2016. As shown, the "Residential" class was the one with the highest revenue growth, which was 17% p.a.
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Table 11 - Revenue Evolution by Rate Class | |||||||
Revenue by Class (BRL Million) | Rate of Change | ||||||
Period % | Geometric | ||||||
Class/Year | 2012* | 2013 | 2014 | 2015 | 2016 | ||
(2013/2016) | % (p.a.) | ||||||
Residential | - | 555 | 643 | 763 | 1,037 | 87% | 17% |
Industrial | - | 445 | 377 | 438 | 554 | 24% | 6% |
Commercial | - | 376 | 365 | 433 | 578 | 54% | 11% |
Rural | - | 23 | 24 | 27 | 36 | 56% | 12% |
Street Lighting | - | 30 | 30 | 33 | 41 | 37% | 8% |
Public Power | - | 172 | 156 | 191 | 259 | 50% | 11% |
Public Service | - | 52 | 45 | 46 | 69 | 31% | 7% |
Other | - | 17 | 17 | 19 | 9 | -45% | -14% |
TOTAL | 1,665 | 1,675 | 1,660 | 1,953 | 2,587 | 54% | 11% |
Source: ANEEL, rate activity approved between 2012 and 2016. *There is no public data approved by ANEEL of Revenue by rate class for | |||||||
the year 2012. For this reason, the rates of change were estimated by considering the change observed between 2013 and 2016. Revenue is in | |||||||
nominal currency, at the price as of the date of processing the rate activity of each year. |
Once the market evolution of the distributor has been observed, it is necessary to evaluate it according to the data of the last readjustment of the company (carried out in November 2016, the most recent regulatory information). To that end, Table 12 shows the distribution of users, market and revenue, by voltage level.
Table 12 - Number of Consumers, Market and Revenue by Voltage Level | ||||||
AmE | NUC | Market (MWh) | Revenue (BRL million) | |||
A3 | 32 | 0.0% | 950,666 | 15.6% | 315 | 12.2% |
A4 | 2,842 | 0.3% | 1,824,456 | 30.0% | 738 | 28.5% |
BT | 922,977 | 99.7% | 3,304,482 | 54.4% | 1,534 | 59.3% |
Total | 925,851 | 100% | 6,079,604 | 100% | 2,587 | 100% |
Source: ANEEL, Company's 2016 IRT, November 2016. |
As shown, BT has a greater weight of consumers (99.7%), market (54%) and also revenue (59%) compared to other voltage levels. From the point of view of AT, there is a certain market and revenue representativeness (16% and 12%, respectively), although the number of customers is unimpressive compared to the other voltages.
In addition, since it held almost 1 million consumers in 2016, the company is the third in terms of NUC representativeness among other distributors of the Eletrobras group (only behind Cepisa and Ceal).
By analyzing the number of users, the market and income per consumption class for the year 2016 (Table 13), we notice that Residential has a greater weight for the company (86%, 36% and 40%, respectively). About 43% of the billing is associated to the commercial and industrial rate classes.
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Table 13 - Number of Consumers and Revenue by Rate Class | ||||||
Market (MWh) | Revenue (BRL Million) | |||||
Class | Consumers | |||||
Residential | 795,294 | 86% | 2,187,534 | 36% | 1,038 | 40% |
Industrial | 3,022 | 0% | 1,483,470 | 24% | 554 | 21% |
Commercial | 74,520 | 8% | 1,342,078 | 22% | 579 | 22% |
Rural | 41,678 | 4% | 79,392 | 1% | 37 | 1% |
Street Lighting | 662 | 0% | 158,453 | 3% | 41 | 1% |
Public Power | 9,532 | 1% | 621,990 | 10% | 260 | 10% |
Public Service | 879 | 0% | 185,467 | 3% | 69 | 3% |
Other | 264 | 0% | 21,220 | 0% | 10 | 0% |
TOTAL | 925,851 | 100% | 6,079,604 | 100% | 2,587 | 100% |
Source: ANEEL, Company's 2016 IRT, November 2016. |
In view of the above, the main conclusions of AmE's consumer market by voltage level are: (i) MT represents 0.3% of consumers, 30% of the market and 29% of the company's revenue in 2016; (ii) BT represents 99.7% of consumers, 54% of the market and 59% of the company's revenue in 2016 and, in the analyzed period from 2012 to 2016, showed annual growth rates of 4%, 7% and of 17% for NUC, the market and the revenue, respectively; (iii) the "Low Income" market associated with the BT voltage level had its highest value in the year 2015, showing a drop in 2016.
From the point of view of the rate classes, for the same information, it can be deduced that: (i) the residential class represents 86% of the NUC and 36% of the company's market in 2016 with annual growth of 6% and 10%, respectively; and (ii) in the analyzed period, the industrial class showed a decrease in market and increase in revenue.
2.4. Operating Indicators
This chapter aims to analyze the main operating indicators of the company, based on its performance in recent years. To do so, sections 2.4.1 and 2.4.2 address service and product quality indicators, respectively, while section 2.4.3 shows a diagnosis on power losses.
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2.4.1. Quality of Service Indicators
The distributor assesses the continuity of the service provided to consumers through individual and collective indicators, which are required by ANEEL and arranged in Module 8 of PRODIST. Individual indicators are divided into indicators of Individual Downtime Duration per Consumer Unit or per Connection Point ("DIC"); or Frequency of Individual Downtime per Consumer Unit or Connection Point ("FIC"); Maximum continuous downtime duration per consumer unit or connection point ("DMIC"); and Duration of individual downtime occurred on a critical day per consumer unit or connection point ("DICRI").
The monitoring of the individual indicators is done by means of limits which are also individual, and are defined for monthly, quarterly and annual periods in relation to the DIC and FIC indicators. The DMIC indicator limit is set for the monthly period, while the DICRI indicator limit is set for each critical-day downtime.
When the limits of the individual continuity indicators are breached, the distributor must compensate the consumer financially automatically with a deduction on their invoice within two months after the indicator is determined.
Table 14 shows the evolution of the compensation paid by AmE over the period (2012-2016), as well as the evolution of the amount of compensations paid for violation of quality of service indicators. It is worth noting that the amount of compensations and their respective financial value related to the annual period of assessment of the quality of service indicators are not available on ANEEL's website for the year 2016, which is why the 2016 compensation path reflects a decline.
Table 14 - Compensations for Breach of Quality of Service Indicators | |||||
Item | 2012 | 2013 | 2014 | 2015 | 2016 |
Quantity (#) | 2,022,840 | 1,924,724 | 1,964,471 | 1,946,731 | 1,220,182 |
Compensation Amounts (BRL) | 8,729,151 | 10,229,092 | 10,611,450 | 9,792,237 | 7,362,766 |
Installment B (BRL) | 303,779,115 | 367,145,212 | 366,546,278 | 381,393,727 | 386,332,452 |
%Comp./Installment B | 2.87% | 2.79% | 2.89% | 2.57% | 1.91% |
Source: ANEEL website |
There is some stability in the amount paid for compensation. The same is true for the quantity of compensations paid, which remained at a level of 1,900 thousand compensations. As an example, the total compensations paid in 2015 corresponded to 2.57% of the company's installment B, according to IRT data for this year.
From the sums of the determined amounts for the individual DIC and FIC indicators, we obtain collective indicators that reflect the continuity of the service provided, both at the level of groups of consumer units and at the company level, namely: "DEC" (Equivalent Duration of Downtime per Consumer Unit) and "FEC" (Equivalent Frequency of Downtime per Consumer Unit).
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Of the DEC violating sets, 32% (or 6 sets) had values assessed to be up to 50% over the regulatory limit. These 6 sets represent 23% of the company's NUC. The Distributor had 15% of its sets (only 3) with values below the target, and revolved around 20%-50% away from the target.
Of the FEC violating sets, 11% (or only 2 sets) had values assessed to be up to 50% over the regulatory limit, representing 9% of the NUC. Currently, the FEC is not a significant problem for the company.
As will be presented in chapter 3 ("PIQ"), large investment amounts are planned to correct AmE's AT system with a view to expanding and strengthening the grids, which will allow greater operating flexibility and, as a consequence, improvement in continuity indicators.
It should be noted that in Appendix C we make an additional analysis regarding the Mean Time of Response ("TMA") to emergencies, which directly influences the Company's DEC. As shown, the company's TMA revolves around 5 (five) hours, which is quite expressive.
2.4.2. Product Quality Indicators
Product quality indicators analyze the adequacy of the voltage level in steady state, arranged in Module 8 of PRODIST. These indicators are: The Relative Duration of the breach for Equivalent Critical Voltage ("DRCE") and the Relative Duration of the breach for Equivalent Poor voltage ("DRPE"). The stipulated limits for the indicators are: 0.5%21 for Critical Voltage and 3% for Poor Voltage. Graph 11 and Graph 12 show the evolution of the mentioned indicators.
21 The steady state voltage indicators are calculated on a quarterly basis based on sample measurements performed by distributors in consumer units randomly selected within their concession or permit area. For each consumer unit, voltage is measured over a week, and the DRP (relative duration of the poor voltage breach) and DRC (relative duration of the critical voltage breach) indicators are determined, which express the percentage of time in which the consumer unit remained with poor voltage and with critical voltage.
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2.5. Energy Purchase and Sale Indicators
In this chapter, the historical evolution of the Required and Contracted Energy of AmE will be discussed. The entire analysis is based on the current regulation expressed in Sub-module 3.2 - Energy Acquisition Costs - for Rate Regulation Procedures ("PRORET"), which have a normative nature regarding the rate processes of electric power distribution utilities.
Firstly, the conceptual distinction between Required and Contracted Energy must be defined.
Required Energy is the volume of electric power (MWh) acquired in a given reference period to serve consumers or other utilities and distribution licensees, plus regulatory power losses of the distribution system - subdivided into technical ("PT") and non-technical ("PNT")22.
Contracted Energy is the volume of electric energy (MWh) acquired by Base contracts, Bilateral contracts and Energy Trading in the Regulated Environment Contracts ("CCEAR"), which shall be briefly explained below.
Base Energy encompasses:
• Own Generation: energy generated by the distributor to serve its market, according to Law 9,074 of July 7, 1995, with the wording given by Law 10,848 of 2004, which provides that distributors of the National Interconnected System ("SIN") with a market below 500 GWh/year and those that serve Isolated Systems can carry out electric power generation activities, provided that they are fully intended to serve their own markets.
• Angra 1 and 2 Quota: energy marketed by the Angra 1 and Angra 2 generating plants and compulsorily acquired by utilities operating in the SIN, as provided in article 11 of Law #12,111 of 2009.
• Renewed Concession Quota: amount resulting from the apportionment of the physical energy and power guarantee of plants whose concessions were extended pursuant to Law #12,783 of 2013. Allocation of quotas to distributors is established according to ANEEL regulations.
• Itaipu Binacional Quota: Energy sold by Itaipu Binacional with the electricity distribution utilities acquiring shares of the production that were made available to Brazil, according to specific ANEEL regulation. Holders of quotas of the plant's energy are only distributors located in the South and Southeast/Center-West subsystems, which compulsorily acquire the electricity generated by Itaipu. That is, they do not include distributors located in the North and Northeast subsystems.
Bilateral Contracts are freely negotiated between the agents, signed before the enactment of Law #10,848 of 2004, to serve the Interconnected System. Contracts signed to serve the Isolated System before Provisional Measure #466 of July 29, 2009, and those signed by means of a bidding held in the form of a competition or auction, as set forth by Decree #7,246 of July 28, 2010, also correspond to Bilateral Contracts.
22 If the real electrical losses (whether technical or non-technical) are considered instead of regulatory losses, the energy of the system is called Injected Energy.
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Also classified as Bilateral Contracts are the contracting of Distributed Generation energy resulting from vertical divestiture, as provided by Law #10,848 of 2004. In addition, also classified as such are contracts arising from public bidding carried out by distribution agents with own market lower than 500 GWh/year and contracts signed between a utility with market under 500 GWh/year and its current supply agent.
Finally, Energy Trading in the Regulated Environment Contracts ("CCEAR") are those established for the Auctions of: (i) Existing Energy for existing generation projects - defined based on article 19 of Decree #5,163 of 2004; (ii) New Energy for new generation projects - deriving from auctions defined based on article 19 of Decree #5,163 of 2004 and (iii) Alternative Energy Sources -arising from auctions defined based on article 19 of Decree #5,163 of 2004.
After explaining the concepts, the evolution of the Required Energy (MWh) and Contracted Energy (MWh) for the years 2012 to 2016 of AmE is shown on Table 15 and Table 16.
Table 15 - Results of Regulated Required Energy (MWh) from 2012 to 2016. | |||||
2012 | 2013 | 2014 | 2015 | 2016 | |
Required Energy (Provision + | |||||
7,001,694 | 7,548,198 | 7,981,968 | 8,362,688 | 10,231,282 | |
Supply + Losses) | |||||
Provision + Supply | 5,645,682 | 5,773,899 | 6,046,889 | 6,309,519 | 6,079,604 |
Provision | 5,645,682 | 5,773,899 | 6,046,889 | 6,309,519 | 6,079,604 |
Supply (TE Market) | 0 | 0 | 0 | 0 | 0 |
Regulatory Losses | 1,356,012 | 1,774,299 | 1,935,079 | 2,053,168 | 4,151,678 |
Non-Technical Loss | 816,181 | 1,188,106 | 1,310,163 | 1,382,681 | 3,269,260 |
Technical Loss | 539,831 | 586,193 | 619,456 | 648,036 | 786,837 |
Basic Grid Loss on Dist. | 0 | 0 | 1,321 | 5,467 | 38,250 |
Basic Grid Loss on Captive market | 0 | 0 | 4,139 | 16,985 | 57,332 |
Source: ANEEL. | |||||
Table 16 - Results of Contracted Energy (MWh) from 2012 to 2016. | |||||
2012 | 2013 | 2014 | 2015 | 2016 | |
Contracted Energy (Base + Bilateral + CCEAR) | 11,513,873 | 7,823,340 | 12,012,919 | 12,769,544 | 13,071,495 |
Base Energy | 6,221,920 | 1,185,113 | 4,610,089 | 1,335,429 | 1,579,296 |
Own Generation | 6,221,920 | 0 | 4,463,333 | 1,185,113 | 1,185,113 |
Angra I/Angra II Quota | 0 | 0 | 0 | 0 | 237,641 |
Quotas Law #12783/2013 | 0 | 0 | 0 | 0 | 0 |
Itaipu (deducting losses) | 0 | 0 | 0 | 0 | 0 |
PROINFA | 0 | 0 | 146,756 | 150,316 | 156,542 |
Bilateral | 2,643,062 | 2,671,800 | 2,671,800 | 5,950,020 | 5,950,020 |
CCEAR | 2,648,891 | 3,966,427 | 4,731,030 | 5,484,095 | 5,542,180 |
Source: ANEEL. |
From the viewpoint of the Requested Energy, we note that the total has increased over time, driven by the increase in the level of regulatory losses calculated by ANEEL (regulatory losses increased by 2.79 TWh over five years, while provision increased by only 0.43 TWh over the same period).
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2.6. Asset Conditions
Between 3/21/2017 and 3/25/2017, a field visit was carried out at AmE's premises, aiming at the diagnosis and evaluation of the technical and physical conditions of the utility's assets, in particular the main electrical energy distribution equipment and infrastructure, identifying its status, critical points at distribution grids by voltage level, as well as the description and evaluation of services.
The selection of sets where the field inspections were performed was based on the performance of quality indicators (continuity and compliance). Thus, the most critical electrical sets were evaluated: Rio Negro and Low Solimões (Careiro da Várzea and Parauá), Mauá, Distrito Industrial II, Marapatá, Cachoeirinha, Santo Antônio, São José, Cidade Nova, Redenção, and V oito24.
By taking advantage of logistics, the Santa Etelvina I and II substations were visited, where the works of the new road (federal highway) and the UTE (Manauara Thermoelectric Power Plant) are taking place, where the installed mobile substation is located to overcome the deficiencies in the service to the region of Santo Antônio. The substations of the Interconnected System ("SIN"), whose assets are owned by Eletronorte, of the 3 systems that supply the capital (Manaus): System 1 Mauá Três SE, System 2 Manaus and System 3 Jorge Teixeira, were also visited.
The supply point for the electrical system connected to the SIN is located in the metropolitan region of Manaus and is installed in the 500/230/138 kV (1800 MVA) Lechuga SE through the Linhão de Tucuruí line (Tucuruí-Macapá-Manaus LT), a double 500 kV circuit. The Lechuga SE feeds, through double 230 kV circuits, the three subsystems of the capital (Manaus), which are the substations of: 230/69 kV (450 MVA) Manaus SE; 230/138 kV (300 MVA) Jorge Teixeira SE; and 230/138 kV (600 MVA) Mauá 3 SE.
The assets of 230 kV substations and transmission lines belonging to the three main systems connecting the capital (Manaus) are in good conditions of construction, use and operation, ensuring that they are maintained predictively and preventively in compliance with their respective maintenance plans. The visited SEs were: Mauá, Jorge Teixeira and Manaus. They meet the safety and environmental requirements, with firewalls between transformers and the oil collection basins thereof.
Existing 230 kV supply points require load relief. The construction of a new 230/138 kV substation (Tarumã SE) is planned, which will be connected through the Lechuga SE substation and interconnected via two simple transmission line circuits at 230 kV. The construction of the 230 kV transmission lines is also planned for the same 2020 horizon, linking the Mauá 3 SE to the Manaus SE and the Mauá 3 SE to the Manaus SE, obviating the need to use current UTEs.
the migration of consumers to ACL, each distributor should have the opportunity to file an involuntary overcontracting recognition petition to ANEEL by proving maximum efforts and detailing its particular case." | ||
24 The name of the set is "V oito". | ||
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2.7. Critical points observed during the field visit and challenges for new utilities
Below are a series of observations from the field visit, which are related to the PIQ and with the appropriate actions.
2.7.1. High-voltage distribution system
It can be observed that the existing assets of AT, 138 kV and 69 kV transmission lines, assets of substations of the 138/13.8 kV and 69/13.8 kV systems, which belong to the three main AmE systems connecting the capital (Manaus), are in good conditions of construction, use and operation, thus ensuring that predictive and preventive maintenance are performed, in compliance with their respective maintenance plans.
The main critical points observed were in the substations with more than 30 years of installation and operation, due to obsolete equipment (AT and MV circuit breakers, disconnecting switches etc.), the complete protection and communication system, also maintaining the need for operators for manual operations when defects or faults occur in the automated systems, among which are the 69/13.8 kV SEs of Aparecida, Cachoeirinha, Distrito Industrial II, Flores, Ponta Negra and V.oito. Limitations of companies' financial resources for investment in renovations and improvements inhibit the performance of essential services for continuity of service to customers with the quality established by the regulators.
In the AmE AT system, the priority needs for investment in expansion and strengthening are clearly and objectively identified in the 2017-2016 Ten-Year Plan, and in even more detail in the 2017 Distribution Development Plan ("PDD"). It is worth mentioning that the Temporary Provision Plan cut much of what was planned, which means that in the following years a liability for works will be concentrated, thus increasing the risk of cutting loads.
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2.7.2. Medium-voltage distribution system, grids and substations
In the capital (Manaus) system, the lack of flexibility due to excessive loading of the substations aggravates actions of the operation to act to minimize the number of disconnected clients, as well as in accepting programmed shutdowns for maintenance or works. Maintenance services are delayed and in some cases, can be solved by working on energized grids (live line). Eighteen substations, of a total of fifteen, have problems associated with the loadability in the Manaus system, that is, 72% are beyond normal limits. As previously observed, the 69/13.8 kV SEs of Aparecida, Cachoeirinha, Industrial District II, Flores, Ponta Negra and V.oito and, consequently, their respective feeders interconnected thereto, are considered to be critical points.
In distribution feeders and their respective MT branches and in BT transformation circuits, which have been visited and inspected, were observed and classified as being in a good state of preservation and in good conditions of construction and operation. It is possible to ensure that preventive maintenance plans are carefully carried out, keeping the easement strips clean and without afforestation in the vicinity of the grids. Operational conditions are preserved, even in older MT feeders and BT circuits, indicating that their main assets are periodically maintained. However, in more than 70% of substations, load levels are above 60%, thus preventing maneuvers through MT feeders.
Generally, wood structures, for a large part of the assets, are not suitable for the region due to the high moisture content. This feature reduces their service life, causing cable breakage and falling structures, making them extremely dangerous and liable to cause fatal accidents.
Large volumes of investments in improvements on MT grids are contained in the PIQ for the first two years of the new concession, aiming at this type of need.
In "rural" isolated systems, the last diagnosis of the thermoelectric base situation identifies problems that effectively affect the supply of electric power to the municipalities served, namely: (i) the situation of proprietary Generating Groups; (ii) the situation of lease agreements and leased Groups; (iii) the situation of the plants' infrastructure; (iv) logistic conditions; and (v) process and fuel management.
Single-phase transformers total 52,322 units, all connected by Single-wire Earth Return ("MRT") grids, which cause enormous imbalance in the UTEs' supply system.
Projects with CCC subrogation are foreseen in the PIQ for the interconnection of the Silves and Itapiranga systems (year 2019), Silves/Rio Preto and Eva/Silves Dois/Paritins/Novo Airão (year 2020), thus mitigating reliance of rural areas on the concession of such plants and allowing improvement in supply to those regions.
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In total, rural areas have 289,928 poles installed, usually made of wood, which in recent years have been replaced by fiberglass poles. These poles are capable of being transported in rivers and raised manually. The high humidity of the region has shortened the service life of wooden poles, as well as of crosses, which need to be replaced in the short term. This type of improvement is covered under item "MT grid improvements" of the PIQ.
2.7.3. BT distribution system - Grids and SET
In the capital (Manaus) system low voltage segment, considering that the distribution transformers are BT circuit assets, we note that the fault rate has a significant volume, reaching in the capital (Manaus) system an annual average of 14% (total of 12,058 three-phase transformers installed). In most circuits, load balancing is not carried out, even if statically, in addition to new connections, where connections are made to the phases of easiest handling. Better operational management of these grids is necessary for correction.
Another great offender as the cause of the burnings are clandestine connections, which, without control, end up causing excessive overloads and even short-circuits in the transformers' secondary side. The PIQ contains large volumes of investments to regularize clandestine connections under the "Grid expansion" items. In addition to issues involving reduction of losses and increase in billing that such investments make feasible, this type of occurrence of a technical nature (short circuits and overloads) is minimized with regularization.
3. Five-Year Investment Plan ("PIQ")
The objective of the PIQ is to present, based on technical and economic evaluations, a five-year investment plan - 2018 to 2022 horizon - for AmE's electric energy distribution concession area, with reference to the projects planned as necessary to meet the demand for new connections (within the scope of the vegetative growth and the Programa Luz para Todos program) improvement of the performance indicators of service continuity, reduction of electrical losses, as well as adjustments and implementations of computerized systems for support in commercial management and distribution.
The following summarizes the main points of the adopted methodology, the contracted investments in progress and the summary of the consolidated amounts of projected annual investments.
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In order to verify investment needs, the information provided in the Data Room by AmE was used, namely: "Electricity System Expansion Plan (2017-2026 horizon)", "Distribution Development Plan ('PDD') for the year 2017" (although provisional26), the "2015 Results Plan for the Improvement of Distribution Services" and the "2017 Plan for Temporary Provision of Electricity Distribution Services (internal version)27". In addition, we used incremental investment data projected by the company's planning area, obtained through face-to-face meetings and conference calls.
Initially, Table 19 shows a summary, by type of project and voltage level, of investments in progress reported by AmE. In total, BRL 357.1 million are intended for projects/investments planned for the year 201728.
Table 19 - Investments in progress in the year 2017 by Type of Project | |
Type of Project | Total |
AT Expansion | BRL 35,800,530 |
MT Expansion | BRL 6,154,990 |
Subtotal | BRL 41,955,520 |
MT Improvement | BRL 5,600,842 |
BT Improvement | BRL 54,807,069 |
Subtotal | BRL 60,407,911 |
"Luz Para Todos" MT | BRL 154,110,000 |
"Luz Para Todos" BT | BRL 71,291,166 |
Subtotal | BRL 225,401,166 |
Renewal | BRL 3,827,684 |
Subtotal | BRL 3,827,684 |
Other Investments | BRL 25,470,000 |
Subtotal | BRL 25,470,000 |
Total | BRL 357,062,281 |
The works contained in the PIQ were defined based on the information provided and analysis of the investments in progress. Firstly, we drafted a Base Scenario, starting with the 2017 PDD by setting, for the years with no initial investment forecast, the following assumptions by type of investment and voltage level:
• "AT, MT and BT Expansion": the company's projected annual investment in the 2017 PDD for the period from 2018 to 2021 was considered. As there were no projected investments for the year 2022, the need for this year was estimated as being equivalent to the average of previous years.
• "AT Improvement": the company's projected annual investment in the 2017 PDD for the period from 2018 to 2020 and the year 2022 was considered. As there were no projected
26 At the time of drafting this report, the 2017 PDD had not yet been delivered to ANEEL.
27 At the time of drafting this report, the Temporary Provision Plan had not yet been filed at ANEEL.
28 The amounts set forth in this section relate to works in execution or in the stage of signing a contract, within the scope of the Plan for Temporary Provision of electric power distribution services in the state of Amazonas. The figures shown are estimated: therefore, they may change during the year.
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investments for the year 2021, we estimated the need for this year by calculating the average annual rate of increase of investments in the period from 2018 to 2020 (disregarding the investment for the year 2019, which is seen as atypical) applying it to the amount of resources projected for the year 2020;
"MT/BT Improvement": the company's projected annual investment in the 2017 PDD for the period from 2018 to 2021 was considered. As there were no projected investments for the year 2022, we estimated the need for this year by calculating the average annual rate of reduction of the investments in the period from 2018 to 2021, applying it to the amount of resources projected for the year 2021:
"Renewal": the company's projected annual investment in the 2017 PDD for the period from 2018 to 2021 was considered. For the year 2022, the necessary investment was estimated as the amount corresponding to the portion related to the "Regulatory Reintegration Quota ('QRR')" established by ANEEL to AmE in the last rate revision occurred in the year 2013, adjusted by the IPCA until April 2017.
"PLpT": considered, in the year 2018, the necessary investments to meet the targets of conventional connections and through photovoltaic systems, within a program that ends in the year 2018, according to Decree #8,387 of 12/30/2014.
In addition to these, necessary investments were made in "Systems", where in the year 2018 the value corresponding to the update of the Distribution Management System ("SGD") was allocated. We present, in Table 20, the Base Scenario PIQ, by type of project and voltage level. BRL 3.363 billion in investments are needed in the next five (5) years, with a notable requirement for resources in the year 2018, which concentrates BRL 1.115 billion 29 (of these, an estimated BRL 453.9 million in the company's own resources).
29 The financial amounts presented in this section are in real currency at April 2017 prices. | ||
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Table 20 - Base Scenario: Projection of Five-Year Investments (Detailed Resources by Type of Project/System) | ||||||
Type of Project | 2018 | 2019 | 2020 | 2021 | 2022 | Total |
AT Expansion | BRL 168,935,839 | BRL 419,136,103 | BRL 536,489,710 | BRL 18,647,970 | BRL 285,802,406 | BRL 1,429,012,028 |
MT Expansion | BRL 76,812,728 | BRL 55,680,919 | BRL 91,041,016 | BRL 37,080,755 | BRL 65,153,854 | BRL 325,769,272 |
BT Expansion | BRL 78,679,506 | BRL 71,023,916 | BRL 71,042,609 | BRL 71,054,229 | BRL 72,950,065 | BRL 364,750,325 |
AT Improvement | BRL 8,397,465 | BRL 167,324,690 | BRL 31,199,891 | BRL 59,438,912 | BRL 10,500,000 | BRL 276,860,958 |
MT Improvement | BRL 33,310,875 | BRL 49,803,625 | BRL 23,638,866 | BRL 22,205,478 | BRL 20,355,762 | BRL 149,314,606 |
BT Improvement | BRL 9,299,110 | BRL 9,458,628 | BRL 9,763,924 | BRL 9,722,539 | BRL 9,833,376 | BRL 48,077,577 |
"Luz para todos" MT | BRL 188,622,422 | - | - | - | - | BRL 188,622,422 |
"Luz para todos" BT | BRL 546,335,013 | - | - | - | - | BRL 546,335,013 |
Renewal | BRL 3,984,866 | BRL 4,160,969 | BRL 4,364,815 | BRL 4,584,631 | BRL 17,127,081 | BRL 34,222,362 |
SGD Update | BRL 964,705 | - | - | - | - | BRL 964,705 |
Total Investments | BRL 1,115,342,529 | BRL 776,588,850 | BRL 767,540,831 | BRL 222,734,514 | BRL 481,722,544 | BRL 3,363,929,268 |
Total Own Resources | ||||||
BRL 453,880,838 | BRL 719,209,500 | BRL 595,177,169 | BRL 222,734,514 | BRL 481,722,544 | BRL 2,472,724,565 |
Of the total amount, Own Resources stands out, since there are subsidies (with funds from sectoral funds) of 90% of investments related to the works of the Programa Luz Para Todos ("PLPT") program in the year 2018 and 100% related to the subrogation of benefits of the Fuel Consumption Account ("CCC") for the years 2019 and 2020, as specified below:
1) Interconnection of Silves Itapiranga Systems (Year: 2019) to the amount of BRL 57,379,350;
2) Interconnection of the Silves/Rio Preto da Eva/ Silves Dois/Paritins/Novo Airão System (Year: 2020) to the amount of BRL 172,363,662.
In addition to the Base Scenario, an Alternative Scenario PIQ, which anticipates, for the year 2022 (the year prior to the date of the first Periodic Rate Revision ("1RTP") to be applied in the new concession) investment concession related to the expansion of SEs in the years 2023 and 2024, representing an amount of about BRL 36.5 million, so as to increase the Regulatory Remuneration Base ("BRR"), as shown in Table 2130.
30 In this case, it was assumed that the company will have its privatization process finalized in 2018, having, therefore, an RTP in the year 2023. | ||
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4. | References |
[1] | I. Própria, Somatório das áreas dos países, Rio de Janeiro, 2017. |
[2] | Rede Tiradentes, 3 31 2017. [Online]. Available: http://www.redetiradentes.com.br/ronaldotiradentes/energia-eletrica- completa-120-anos-em-manaus.. |
[3] | “Portal Eletrobras,” Eletrobras, [Online]. Available: http://www.eletrobrasamazonas.com/cms/?s=hist%C3%B3rico. [Accessed 3 31 2017]. |
[4] | “Memória de Eletricidade,” 4 25 1961. [Online]. Available: http://www.memoriadaeletricidade.com.br. [Accessed 3 31 |
2017]. | |
[5] | Law #3,890-A, 1961. |
[6] | “Fundação Getúlio Vargas,” Fundação Getúlio Vargas, [Online]. Available: Website http://www.fgv.br/cpdoc/acervo/dicionarios/verbete-tematico/eletronorte. [Accessed 3 31 2017]. |
[7] | Provisional Measure #1,531-11, 1997. |
[8] | Decision #016/2013, 2013. |
[9] | E. d. P. Energética, “Plano Nacional de Energia 2030,” 2007. |
[10] | “Valor Econômico,” 7 9 2013. [Online]. Available: http://www.valor.com.br/brasil/3191994/manaus-eintegrada-ao- sistema-interligado-nacional-de-energia. [Accessed 4 24 2017]. |
[11] | M. d. M. e. Energia, “Plano Decenal de Expansão 2022,” 2013. |
[12] | E. -. G. T. O. d. R. Norte, “Plano Anual de Operação dos Sistemas Isolados para 2017,” 2016. |
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APPENDIX A - Socioeconomic Characterization of the Concession Area
In order to better characterize the area of activity of the Distributor, socioeconomic information was collected and grouped into four data sets: (a) Demographic, Education and Employment; (b) Access to Services; (c) Income and (d) Violence. In the following items, comparative analysis was performed for each information collected from the company in relation to the data observed in the North and Northeast regions and Brazil's average. This comparison allows to evaluate the degree of similarity/divergence of the socioeconomic indicators of the company in relation to the regions where the companies of the Eletrobras group operate, as well as to compare with the national average.
a) Demographic Information, Level of Education and Unemployment Rate
Table 23 shows, in order, the number of municipalities, area, population, population density per km2, number of households, percentage of population living in rural areas, percentage of illiterate population and unemployment rate in the Distributor's area, as well as average data for Brazil and the North and Northeast Regions.
Table 23 - Demographic Information, Level of Education and Unemployment Rates | ||||||||
Region | # Municipalities |
Area (km2) |
Population (Thousand) |
Density (Inhabitants/km2) |
# Households (thousand) |
% Rural Popul. |
% Illiterate Popul. |
Unemployment Rate |
AMAZONAS | 62 | 1,559,149 | 3,953 | 2,54 | 1,046 | 16% | 9% | 11% |
BRAZIL | 5,567 | 8,497,584 | 204,860 | 24,11 | 68,037 | 15% | 9% | 8% |
NORTH | 449 | 3,848,855 | 17,525 | 4.55 | 5,093 | 25% | 11% | 9% |
NORTHEAST | 1,794 | 1,554,291 | 56,639 | 36,44 | 17,836 | 27% | 17% | 9% |
Sources: Data on the population were taken from the 2015 PNAD. Number of municipalities and areas were obtained from INPE. | ||||||||
Unemployment rate was obtained at IPEA/PNAD for the year 2014. |
Amazonas is the Brazilian state with second lowest demographic density (2.54 inhabitants per km2). Its population is concentrated mainly in urban centers, and the representativeness of inhabitants in rural regions is close to the national average. It shows a rate of unemployment above the regional and national averages, being the state with the third highest unemployment rate in the Northern Region.
b) Access to services
Table 24 shows information on access to services in AmE's area of service, as well as average data for Brazil and the North and Northeast Regions. The table shows percentages of households (i) without garbage collection; (ii) without garbage collection for urban areas; (iii) without water supply through networks; (iv) without water supply through networks to urban areas; (v) without sanitary sewage through networks or septic tank; (vi) without sanitary sewage through networks or septic tank for urban areas; and (vi) without electric lighting located in rural areas.
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As shown, the state shows a percentage of population below the poverty line higher than the comparative averages, despite having a per capita household income and GDP per capita higher than the North and Northeast regional averages.
d) Violence
Table 26 - Information on Violence shows the number of deaths per aggression for every 100 thousand inhabitants registered in the year 2014. As shown, the state of Amazonas is slightly above the national average, but lower than the North and Northeast regional averages.
Table 26 - Information on Violence | |
Region | Deaths by |
Aggression | |
AMAZONAS | 31.8 |
BRAZIL | 29.4 |
NORTH | 34.3 |
NORTHEAST | 41.6 |
Source: 2014 Datasus/IBGE. |
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Amazonas Energia
Environmental Assessment
Summary Report
September 18, 2017
National Bank for Economic and Social Development ("BNDES")
Av. República do Chile, 100 Rio de Janeiro/RJ
September 18, 2017 Dear Sirs,
As requested by BNDES and in compliance the with terms and conditions of Electronic Tender AARH No. 51/2016, of OCS Contract No. 28/2017 (the Contract) dated February 14, 2017, and the provisions of section 80 of Law No.
13,303/2016, we have prepared this summary containing a presentation of key issues identified by us during the environmental assessment work carried out in Amazonas Energia S.A. (Amazonas Energia).
The scope of our services was limited to the procedures described in item 4.2.7 of Annex I to the Contract. This summary does not include all the issues identified and presented in the Environmental Assessment Report dated May 5, 2017, and should thus be reviewed together with the remainder of the report for a comprehensive understanding of the issues identified.
Our work involved review of documents made available in databases, interviews with managers in charge of the environmental activities of the company and on-site visits to six substation facilities.
The information used in our work was provided by the company's management and reviewed on the premise that it is true and complete. Except as expressly stated in the scope of our work, this information was not subject to testing or verification.
The work carried out does not constitute an examination performed in accordance with financial statement auditing standards. Due diligence works are unregulated and not subject to specific standards; for this reason, the procedures applied in our work were those determined in the Final Tender Protocol, and PwC is not responsible for any inadequacies of such procedures in achieving the goals determined by BNDES. Other matters could have been detected and reported if PwC had been asked to perform additional procedures.
Yours faithfully,
PricewaterhouseCoopers Corporate Finance & Recovery Ltda. acting as consortium leader
/s./ Rogério Roberto Gollo
/s./ Luciano Jorge Moreira Sampaio Junior
This document is a true copy of the original signed version delivered to BNDES and in the possession of Eletrobras.
Summary of key issues identified | ||
Below is a summary of key issues identified during the environmental assessment work. As such, it does not include all of the issues identified and | ||
discussed in the Environmental Assessment Report and should thus be read in conjunction with the rest of the report for a comprehensive | ||
understanding of the issues identified. | ||
1 Purpose and limitations of the work | 2 Summary of key issues identified: | |
Our work involved review of documents made available in databases, | • | Facilities operate without the required environmental operation license and |
interviews with managers in charge of the environmental activities of the | other licenses such as the Fire Brigade Inspection Service Certificate (FBISC) | |
company and on-site visits to one substation and four thermoelectric power | and the IBAMA Federal Technical Registration (IFTR) | |
plants. | • | Noncompliance with the terms and conditions of operating licenses |
The purpose of the work was to evaluate key environmental and social issues of | • | Noise levels not monitored in some facilities |
Amazonas Energia in light of the applicable laws and regulations, review how | ||
such issues are managed from environmental and social standpoints, and | • | Lack of documents such as Solid Waste Management Plans (SWMPs) and |
identify potential deficiencies and situations that may result in significant risks | Solid Waste Inventories (SWIs) in some facilities | |
and costs to the company. | • | Incorrect storage and disposal of hazardous solid wastes |
The following topics were reviewed: solid wastes, PCB/ascarel, noise, | • | Unlicensed use of artesian wells (drinkability not monitored also) |
atmospheric emissions, wastewaters, water resources, permanent preservation | ||
areas, plant suppression, service providers, environmental accidents, | • | Oil stains found on non-impervious soils |
environmental liabilities, easement trespassing, conflicts with indigenous | • | Old, pre-1980 transformers in use and untested for PCB/ascarel |
populations, engagement practices and interaction with surrounding | ||
populations, as well as assessments, fines and consent agreements. | ||
The scope of the work did not include generation of additional data through | ||
collection and analysis of soil and water, atmospheric emission and wastewater | ||
samples, nor was any evaluation performed for the purpose of checking | ||
compliance with laws related to workers' health and safety. | ||
Eletrobras System Distributor | ||
Privatization PwC | 3 |
Summary of key issues identified
Below is a summary of key issues identified during the environmental assessment work. As such, it does not include all of the issues identified and discussed in the Environmental Assessment Report and should thus be read in conjunction with the rest of the report for a comprehensive understanding of the issues identified.
3 Estimate of costs to remedy issues identified
An estimated amount between R$ 63.7 million and R$ 305.3 million, approximately, is required in order to remedy and mitigate some of the previously highlighted issues and their respective potential impacts, as shown in the chart below.
Cost estimates do not include the expense with fines incurred by the company due to noncompliance with any applicable laws and regulations. Fines and assessments provided for in the applicable environmental laws and regulations vary substantially in amount; for this reason, the exact amounts of fines are contingent, among other considerations, upon evaluation by the competent environmental agency. Furthermore, amounts reported do not include the cost of mitigating issues that depend on non-measurable variables at the time of writing, such as disposal of hazardous wastes and disposal of any equipment containing PCBs.
At present, it is not the intention of PwC to state that these figures are accurate and that they reflect the amounts effectively required to implement each of the proposed actions. In any case, the figures presented in this summary serve as a reference in connection with the privatization process.
In addition to the estimated expenditures, resolution alternatives for each identified issue as well as the potential violation or infringement, if any, that the company is subject to under the applicable environmental laws and regulations, were presented. This information is included in the Environmental Assessment Report dated May 5, 2017.
Eletrobras System Distributor Privatization PwC | 4 |
© 2017 - PricewaterhouseCoopers Corporate Finance & Recovery. All rights reserved. In this document, PwC refers to PricewaterhouseCo opers Corporate Finance & Recovery, a member firm of the PricewaterhouseCoopers network, or, as suggested by context, the network itself.
Each member firm of the PwC network is a separate and independent legal entity. Please see www.pwc.com/structure for further details on the PwC network.
To
Banco Nacional de Desenvolvimento Econômico e Social National Bank for Economic and Social Development (“BNDES”) Av. República de Chile nº 100 Rio de Janeiro - RJ
F.A.O.: Ms. Lidiane Delesderrier Gonçalves - Manager of Contract OCS 028/2017 May 2017 Dear Sirs,
In accordance with our service agreement OCS 028/2017 (“Agreement”), signed between the BNDES and Consórcio Mais Energia B (“Consortium”) on February 14, 2017, we present the result of the work that we undertook in relation to Privatization of the Eletrobrás System’s Distribution Companies.
The result of our work is set out in the document “Product 08: Assessment Report of AMAZONAS’ Human Resources (“Report”), dated May 2017.
Our work was carried out solely for the purpose of advising the BNDES, in its capacity as the party responsible for executing and monitoring the privatization process of the concessionaires in accordance with Decree 8893 of (sic) in AMAZONAS’ assessment, in accordance with the Agreement and was based on information provided by AMAZONAS’ management and under the assumption that this information is true and complete. This information was not subject to testing or verification, except as expressly stated in the scope of our work.
In the case of access to the Report by third parties, it should be made available in full, so that the applicable safeguards and limitations be known.
Truly yours,
PricewaterhouseCoopers Corporate Finance & Recovery Ltda., in its capacity as leader of the Consortium
Rogério Roberto Gollo | Marcio José Soares Lutterbach |
PwC | Loeser e Portela Advogados | Siglasul | 2 |
This document is a true copy of the original signed version delivered to BNDES and in the possession of Eletrobras. |
Summary | |||
1. | Executive Summary | 6 | |
2. | Organizational structure | 9 | |
2.1. | Organizational chart | 9 | |
2.2. | Nature and duties of the bodies | 9 | |
2.3. | Profile of positions and roles | 11 | |
2.4. | Profile of positions entitled to a bonus (funções gratificadas) and commissioned positions (cargos em comissão) | 12 | |
2.5. | Relevant changes to the organizational structure | 13 | |
Annual Shareholders’ Meeting | 14 | ||
Fiscal Council | 14 | ||
Board of Directors | 14 | ||
Internal Audit Department (CAD) | 14 | ||
Executive Board | 14 | ||
Financial Office | 14 | ||
Regulatory and Special Projects Office | 14 | ||
Regulatory and Special Projects Department | 14 | ||
Presidency | 14 | ||
Sustainability and Social Responsibility Office | 14 | ||
Corporate Risk, Integrity and Internal Controls Office | 14 | ||
Correction Management | 14 | ||
Legal Office | 14 | ||
General Office | 14 | ||
Projects and Indicators Office | 14 | ||
Ombudsman | 14 | ||
Social Communication and Institutional Relations Office | 14 | ||
Planning and Expansion Office | 14 | ||
Energy Distribution Office | 14 | ||
Management Office | 14 | ||
Commercial Office | 14 | ||
Financial Office | 14 | ||
3. | Profile of the workforce | 15 | |
3.1. | General information | 15 | |
3.2. | Demographic profile | 15 | |
3.3. | Productive profile of the workforce | 17 | |
3.4. | Development of the workforce | 23 | |
3.5. | Leadership profile | 26 | |
3.6. | Leadership by position | 26 | |
3.7. | Education level of the leadership | 27 | |
3.8. | Length of service of the leadership | 28 | |
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4. | Staff costs | 29 | |
4.1. | Compensation structure | 29 | |
4.2. | Cost with active employees | 30 | |
4.3. | Interns and apprentices | 32 | |
5. | Collective Bargaining Agreements | 33 | |
5.1. | Salary adjustment | 33 | |
5.2. | Benefits | 33 | |
5.3. | Payment of other additional amounts | 33 | |
6. | Outsourcing | 35 | |
7. | Aspects related to health and safety | 36 | |
7.1. | Verification of the existence of health and safety policies and procedures | 36 | |
7.2. | Analysis of the PCMSO | 36 | |
7.3. | Analysis of the PPRA | 36 | |
7.4. | Verification of occupational medical tests | 37 | |
7.5. | Internal Commission for Accident Prevention (CIPA) | 37 | |
7.6. | Survey of work accidents (with/without lost time) and submission of CAT (Communication of accident at | ||
work) | 37 | ||
7.7. | Verification of Delivery of PPE | 38 | |
7.8. | Activity of Occupational Safety Technician | 39 | |
7.9. | Compulsory training courses | 39 | |
1. | Staffing and Compensation Plan (PCR) | 41 | |
1.1. | Remuneration structure | 42 | |
Steps: The number of steps per band varies due to the wage spread defined - guided by internal and external | |||
market information - and compliance with the methodology governing requirements for accessing the complexity | |||
levels of each job position | 42 | ||
1.2. | Rules of movement: | 43 | |
1.3. | Access requirements | 44 | |
2. | Variable compensation | 45 | |
3. | Benefits | 46 | |
4. | Performance Management | 49 | |
4.1. | Performance matrix | 51 | |
5. | Training and development | 52 | |
6. | Organizational climate | 53 |
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I. Part I
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1. Executive Summary
This report consists of the first part of the Assessment of the Human Resources of the distribution company Amazonas Energia, as part of the scope of the project “Assessment of the Privatization Process of the Eletrobras System’s Distribution Companies” contracted by BNDES, by means of the Invitation to Bid “Electronic Auction AARH No. 51/2016” with the consortium Consórcio Mais Energia B made up of PwC (leader of the consortium), Siglasul and the law firm Loeser e Portela Advogados.
For the preparation of the analyzes and indicators shown below, the documents provided by Amazonas Energia between February and April 2017 were used.
In this report, we present information in relation to Eletroacre’s workforce, taking into account the cut-off date of December 31, 2016, and adopt the following assumptions for the generation and analysis of indicators in relation to personnel.
Takes into account: | Does not take into account: |
Employees | Interns |
Members of the councils | Young apprentices |
Commissioned employees | Pensioners |
Employees requisitioned | Retired due to disability |
Employees who left the company as a result of | |
the voluntary termination incentive program | |
Employees who left the company in | |
December/2016 | |
Employees Assigned |
In order to compare the indicators, PwC’s Benchmarking 2016 was used. The indicators were compared with the figures from the Electricity Sector Panel, which is made up of 18 companies in the sector. In those cases in which the figures from the Panel were not available, the Distribution company’s indicators were compared with the figures from the General Market.
When assessing the indicators generated, we observed:
· Taking into account the base date of December 31, 2016, the Distribution company’s workforce has 1,710 active employees. This group is made up for the most part of men (84%), with an average age of 47, who completed senior high school· On average, the employees have been with the company for 18 years, and roughly 43% of them have been with the company for more than 20 years.
· Employees are distributed in four wide groups: fundamental level professionals (36%), mid-level operational professionals (28%), mid-level support professionals (20%), and higher level professionals (16%). There are professionals with educational level above and below the level required in the exam. Even though most of the employees hold fundamental level positions, approximately 28% of them have college degree.
· Average churn rate of the last 5 years was around 2%, a lower level than the average for the electricity sector(7%). This indicator was affected by the terminations resulting from the voluntary termination programs, in 2013 and 2014, and by the admissions resulting from insourcing of activities in 2015. The average absenteeism rate was 1.05%, also lower than the average for the electricity sector (2.51%). The overtime rate is also better than
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I. | PART I |
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Internal audit department: To verify compliance with the guidelines and internal and external normative acts, by means of examining the procedures, records, files, documents and figures of the functions and activities carried out by the Company.
Board of Directors: the Company’s management’s highest joint decision-making body, whose purpose is to set the general direction of the Company’s business by means of fundamental management guidelines, as well as the superior control of the Company, by means of inspection of compliance with the guidelines established by it, monitoring the implementation of the approved programs and verification of the results obtained.
Fiscal Council: Joint decision-making body which is responsible for overseeing the actions of the company’s managers and verifying compliance with the Company’s legal and statutory duties, examining its financial statements, as well as other powers set forth in specific legislation.
Executive Board: To ensure the smooth operation of the Company, and to this end, is endowed with the powers to administer and manage the business, being able to decide on issues regarding the corporate purpose, except those which by their nature or by the company’s bylaws are the responsibility of the General Shareholders’ Meeting or of the Board of Directors. It is overseen by the Chairman of the Board of Directors and is made up 6 (six) members, with a term of office of 3 (three) years, with re-election being permitted. It consists of the local Chief Executive Officer and 5 (five) corporate officers. Regular meetings are held on a weekly basis, and extraordinary meetings are held whenever necessary. The members of the Executive Board are elected by the company’s Board of Directors.
Higher management bodies: presidency and offices |
The bodies responsible for the planning, coordination and control of its specific activities, |
defined in the Bylaws and in the Company’s Organization Manual. |
Presidency: The company’s political-administrative direction and representation are the responsibility of the Presidency, by means of the actions of the Chief Executive Officer.
Capital City Operations Office: This is responsible for managing the Operation,
Maintenance and Services of the Company’s electricity distribution systems, following the guidelines of the Executive Board and of the Board of Directors, in addition to the concession agreement and the legislation in force.
Interior Operations Office. This is responsible for managing the Operation,
Maintenance, Generation and Services of the Company’s electricity distribution systems, following the guidelines of the Executive Board and of the Board of Directors, in addition to the concession agreement and the legislation in force
Planning and Expansion Office: The Planning and Expansion Office is responsible for planning, directing, supervising, coordinating and controlling the activities related to the planning and implementation of the expansion of the distribution and sub-transmission electrical systems, in such a way as to guarantee meeting the demand from the consumer market for energy in the concession area, as well as activities related to the environmental management and monitoring of the company’s activities.
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Management Office: It is the responsibility of the Management Office to plan, direct, supervise, coordinate and control those activities related to personnel management, training and development, occupational health and safety, labor and union relations, supplies and management of materials, transport, information technology, organization and methods, documentation and filing and general services.
Commercial Office: It is the responsibility of the Commercial Office to plan, direct, supervise, coordinate and control the activities related to the company’s commercial relationship with its consumers, in accordance with what is laid down in the concession agreement and the current legislation, as well as those activities related to market projections and energy purchases.
Financial Office: It is the responsibility of the Financial Office to plan, direct, oversee, coordinate and control the activities related to general and cost accounting, accounts payable and receivable, budget, treasury, tax and fiscal management, asset control, insurance, fundraising and investments.
On December 31, 2016, Amazonas Energia’s workforce was made up as shown in the table below.
Category | Number | ||||
a. | Employees in permanent positions | 1,701 | |||
b. | Employees required by other bodies and spheres | 8 | |||
c. | Employees with no employment relationship with the public | 1 | |||
authorities (commissioned employees) | |||||
d. | Members of the board | 0 | |||
e. | Employees assigned | 0 | |||
Total (a+b+c -d) | 1,710 |
In addition to the employees above, trainees and young apprentices are also a part of
Amazonas Energia’s workforce.
Category | Number | |
a. | Young apprentice | 64 |
b. | Interns | 102 |
Total (a+b) | 166 |
2.3. Profile of positions and roles
In line with the provisions of the Eletrobras System’s Staffing and Compensation Plan (PCR), Amazonas Energia’s employees are distributed across four broad job positions:
Levels of | |||
Broad Job Positions | complexity | Function | |
§ Administrative assistant | |||
§ Administrative service assistant | |||
Fundamental Level Professional | § Engineering technical assistant | ||
(PF) | I, II | § Office assistant | |
§ General services assistant | |||
§ Electrician |
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§ | Reader | ||
§ | Sailor | ||
§ | Mechanic | ||
§ | Driver | ||
§ | Plant operator | ||
§ | Guard | ||
§ | Administrative Stockman assistant | ||
§ | Nursing assistant | ||
Mid-Level Support Professional | § | Administrative support | |
(PMS) | I, II, III and IV | § | Audit assistant |
§ | Technical assistant | ||
§ | Programmer | ||
§ | Accounting technician | ||
§ | Engineering technical assistant | ||
§ | Electrician/Driver | ||
Mid-Level Operational | I, II, III and IV | § | Engineering technician |
Professional (PMO) | § | Occupational safety technician | |
§ | Operational technician | ||
§ | Administrator | ||
§ | Lawyer | ||
§ | System analyst | ||
§ | Social assistant | ||
§ | Accountant | ||
§ | Economist | ||
Higher Level Professional (PS) | I, II, III and IV | § | Operational engineer |
§ | Engineer | ||
§ | Occupational safety engineer | ||
§ | Operational engineer | ||
§ | Dentist | ||
§ | Higher Level Technician |
Note: The PCR also defines the position of Researcher Professional, but this was not adopted by the Distribution Companies.
2.4. Profile of positions entitled to a bonus (funções gratificadas) and commissioned positions (cargos em comissão)
Positions entitled to a bonus are performed by permanent employees, who hold the leadership and advisory positions.
Category | Number |
Assistant | 10 |
Manager | 103 |
Location Leader | 75 |
COI Leader | 1 |
President of the CPL | 1 |
Superintendent | 1 |
207 |
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In addition to the positions entitled to a bonus, Amazonas Energia has employees who have no employment relationship with the public administration, who hold commissioned positions. This model of contracting is provided for in Article 37, sub-item II of the Constitution.
Category | Number |
Management assistant | 1 |
1 |
In total, Amazonas Energia’s staff includes 208 employees in positions entitled to a bonus and commissioned positions.
2.5. Relevant changes to the organizational structure 2.5.1. Voluntary Termination Incentive Program (PID)
In 2013 and 2014 all the Eletrobras System’s distribution companies implemented the Voluntary Termination Incentive Plan (PID). In order to be considered as eligible, employees had to have had a permanent employment relationship with the distribution company for at least 20 years, taking into account the month of termination, or be retired under the INSS, regardless of the length of their employment relationship with the distribution company. Signing up for the plan was on a voluntary basis and required the employees to make a request for voluntary termination. In total, 277 employees left the company.
· The terminations were carried out in two stages: Stage 1 (July 2013 to December 2013), and· Stage 2 (January 2014 to November 2014).
Those terminated under the PID continued to receive medical assistance benefits, for a determined· period, in accordance with the stage during which they were terminated:· Stage 1 - 60 months of continued medical assistance Stage 2 - 12 months of continued medical assistance
2.5.2. Approval of the new organizational structure 2017
On February 17, 2017, change in the organizational structure of Amazonas Energia was approved, as presented below.
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4. Staff costs
The analysis of Amazonas Energia’s staff costs was based on the payroll reports for
December 2016.
In the documents and reports provided by the Distribution company, the following types of employment relationships included on the payroll, in other words, receiving some kind of compensation, were identified.
Category | Number | |
ACTIVE | EMPLOYEE | 1,701 |
COMMISSIONED POSITION | 1 | |
OTHERS | assigner | 23 |
REQUIRED | 0 | |
YOUNG APPRENTICES | 64 | |
INTERNS | 102 | |
Total | 1,868 |
The figures and analyses shown below take into account the 1,702 active employees and also the 23 assigned employees, totaling 1,725 employees.
Amazonas Energia has 8 requisitioned employees who are not included in the payroll, and who are directly paid by the company of origin. The data relating to the cost of personal, presented below, do not consider these employees.
4.1.Compensation structure
Amazonas Energia’s compensation structure is made up of the following items:
· Fixed compensation:
Salary established in accordance with the Staffing and Functions Plan, according to· positions and complexity. The current salary table can be found in item 1.1, Part II;· Compensation received for vacations, maternity wages and sick pay; Fees paid to employees who exercise the function of Executive Officers or members of the· Board of Directors and who do not receive a salary; Incorporated bonus, in other words, bonuses that were incorporated into the salary and· which the employee does not stop receiving; Additional amounts for length of service incorporated into the salary, paid according to the specific term contained in the Distribution company’s collective agreement.
Variable compensation
This takes into account the payment of Profit Sharing. The rules for this payment are described in item 2, Part II.
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Benefits:
Benefits currently effective are defined in a collective bargaining agreement and include the following items:
Support for Health and Well-being |
Support for Education | Family Support |
Reimbursement for medications used on a continuous basis |
School materials allowance | Funeral Allowance |
Reimbursement for medications |
Educational allowance | Reimbursement for babysitters |
Reimbursement for gym | Reimbursement for undergraduate degree studies | Day Care Center allowance |
Medical-hospital treatment | Reimbursement for graduate degree studies |
Allowance for children with learning disabilities/handicapped children |
Meal ticket | ||
Life insurance | ||
Reimbursement for spectacles | ||
Gym allowance |
The rules established for payment of the above benefits are specified in section 6 of this report.
Additional Pay:
· Allowance for health hazard;· Risk premium;· Allowance for hardship;· Allowance for night work;
· Allowance for position entitled to a bonus;
· Special bonus for the executive board/board of directors;
Other items (representing one-off payments):
· Overtime;·· On call;
Allowance for relocation;· Per diem.
4.2. Cost with active employees
Total personnel cost for the month of December 2016, taking into account active employees, is R$26,705,492.26. The costs of the 13th salary paid in December, which amounted to R$15,929,103.60. This calculation does not take into account charges or discounts:
Dec/2016 | |
Total personnel cost (R$)* | R$26,705,492.26 |
* Considers gross compensation, without deductions and charges. |
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5. Collective Bargaining Agreements
The Collective Bargaining Agreement is national and covers 100% of the employees, and its clauses cover all six Distribution companies analyzed. In addition to this instrument, the company also has a Specific Profit Sharing Agreement. Over the years the definitions established in previous years have been maintained.
Document | Coverage |
Collective bargaining agreement 2016 - 2018 | Its clauses cover all the Distribution companies. |
Nationwide undertaking | |
Specific collective bargaining agreement 2016 -2018 | |
Specific undertaking | |
Specific clauses in the Collective Bargaining | Specific clauses for Amazonas Energia. |
Agreement by distribution company | |
Specific undertaking |
5.1.Salary adjustment
With regard to the salary increase, under the current agreement the adjustment was 9.28%. It is usual to establish a 5% advance on the category’s base date (May), with the difference between the advance and the percentage increase granted under the agreement being paid retroactively.
Collective Bargaining Agreement |
Salary readjustment percentages |
2012-2013 | 6.60% |
2013-2015 | 7.90% |
2015-2016 | 8.18% |
2016-2018 | 9.28% |
5.2. Benefits
The collective bargaining agreement establishes the benefits that the Distribution companies’ employees are entitled to. The full list can be found in Part II, item 3. The face value of benefits is generally adjusted by percentages aligned with the percentage defined for the salary increase.
5.3. Payment of other additional amounts
In addition to the benefits, the collective bargaining agreement and its specific terms provide for the payment of additional amounts. The main elements are shown below.
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Clause | Description of the agreement |
Allowance for hardship |
Payment of 7.5% on top of base salary, plus Additional Pay for length of service, for employees who work on continuous rotating shifts. |
Allowance for health hazard |
Calculation basis will be the lowest salary in Eletrobras’ salary matrix. It is restricted to percentages of 40%, 20% and 10%, according to the level of unhealthiness classified as maximum, average and minimum levels. |
Allowance for night work |
Payment of additional amounts for the employees’ extended hours, provided that the working hours occur entirely during the nighttime period. |
Risk premium | Indicates adoption of the payment criteria established under Law 12740/2012 for employees who joined the company prior to 12/08/2012. |
Overtime | Calculated in accordance with applications of the percentages established in the applicable legislation. |
Remuneration for substitution |
Amount granted non-cumulatively to the bonus payment for the formal substitute of the holder of a remunerated leadership function for any period greater than 10 days, of the sum in force in the month of payment. |
13th salary | Advance of 50% may be requested at the time that the employee takes an annual vacation and should be received jointly with the payment of vacation pay. |
Additional pay for length of service (ATS) |
An additional amount will be paid to employees for each year of uninterrupted service with the company. |
Electrician / driver remuneration (GEM) |
Remunerations as driver for those electricians who habitually perform the functions of Electrician/Driver. |
On call | 1/3 of the normal hourly rate for employees when they are on call as established under the applicable legislation. |
Vacation pay | Payment of vacation remuneration of 75%. |
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6. Outsourcing
Historically, the Distribution companies have been in the practice of making use of outsourced labor to perform certain functions. This outsourcing is contracted and managed by the contracting area, which is the contract manager. In this way, there is no creation of any employment relationship with the outsourced professionals.
In 2013, there were judicial decisions to replace the outsourced labor force (judicial decisions and judgments 2132/2010 Federal Court of Accounts Plenary Session and 2303/2012 Federal Court of Accounts Plenary) per own personnel.
Amazonas has created a project to in-source this workforce.
The services that are the subject of this change are those of a continuous nature, directly related to the companys core activity and whose functions are included in the Career and
Compensation Plan (PCR), and the deadline established was May 19, 2017. The duties linked to the activities considered to be insourced are:
· Mid-Level Support Professional (PMS) o Electrician· o Administrative Support
Mid-Level Operational Professional (PMO) o Electric technician o Electronics technician o Occupational Safety technician
· Higher-Level Operational Professional (PS) o Electrical Engineer o Occupational Safety Engineer o Labor Physician
According to the Insourcing Project, the proposal for Amazonas Energia is that from a total of 1,427 outsourced employees, 936 employees be insourced.
In compliance with the Insourcing Project, in 2015 121 new employees were hired, approved in a public exam, to replace outsourced labor.
At present Amazonas Energia has 2,827 outsourced professionals, it being understood that 52% are electricians (29%), plant operators (13%) and meter readers (10%).
It is important to stress that Law 13249/2017 which regulates outsourcing in companies is being discussed and has not yet been ratified, as a result of which the performance of core activities by outsourced professionals may represent a labor exposure and the need for in-sourcing should be considered.
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7.8. Activity of Occupational Safety Technician
Amazonas Energia has eleven (11) employees who operate as Occupational Safety Technicians.
7.9. Compulsory training courses
The health and safety training courses that are compulsory depend on the activities that are carried out by the employees, which can expose them to different risk situations. According to their activities, Amazonas Energia offers its employees the following training courses: Regulatory Standard 10 (NR10), Regulatory Standard 35 (NR35). As mentioned the training courses· must be taken every two years.
NR10 - Training course taken by employees who carry out activities related to the· electrical system; NR35 - Training course taken by employees who carry out activities at heights; In 2016, 571 employees participated in these trainings.
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II. PART II
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Broad job position | Levels of complexity |
Fundamental Level Professional (PF) | I, II |
Mid-Level Support Professional (PMS) | I, II, III and IV |
Mid-Level Operational Professional (PMO) | I, II, III and IV |
Higher Level Professional (OS) | I, II, III and IV |
Professional Researcher (PP) | I, II, III and IV |
The broad job positions are separated into different occupations with the aim of providing professionals with the flexibility to assume different roles in the Organization and, in this way, to enable greater alignment between the professional’s activity and the expectations and needs of each person and the Organization, respecting the specific requirements of each education level.
Each position defines specific duties, skills and educational requirements, taking into account the characteristics of the organizational processes and the professional regulations.
1.1. Remuneration structure
Each of the five broad job positions defined in the Eletrobras System’s Career and Compensation Plan has its own pay scale. The pay scale consists of “bands” that are divided into steps: Bands: Reflect each of the levels of complexity defined for the positions.
Steps: The number of steps per band varies due to the wage spread defined - guided by internal and external market information - and compliance with the methodology governing requirements for accessing the complexity levels of each job position.
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1.3. Access requirements
Each level of complexity of the broad job positions has specific access requirements.
Level of Complexity | Access requirement |
I | Access via public exam, without any need for experience. |
II | Amount of time spent at the previous level of complexity; Result of the performance assessments of the last 3 years. |
III | Amount of time spent at the previous level of complexity; Result of the performance assessments of the last 3 years; Approval from the Executive Board; Existence of a vacancy. |
IV | |
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2. Variable compensation
The Eletrobras system includes a profit sharing (PLR) policy for the company’s employees. The maximum amount to be distributed is up to two months’ salary of the year in question, by each company that uses the system.
This profit sharing payment is carried out in accordance with the fulfillment of two steps.
Step | Targets | Impact on the sum to be distributed |
STEP 1 | Holding company’s net profit target | 25% |
PROFITABILITY | EBITDA target by company | 25% |
STEP 2 OPERATIONAL TARGETS |
Corporate Targets Performance Contract: -Availability and Generation; -Availability of transmission lines; -Variable Portion Discounted in transmission; -Points achieved on the Bovespa ISE. |
50% |
Achievement of the targets can be proportional, and there are specific criteria for each one. Once all the targets linked to the payment of the PLR payment have been achieved, this will be paid 50% in a linear way and 50% in proportion to each employee’s compensation.
As long as they have been with the company since January 1 of the year related to the PLR, permanent employees will be entitled to it, as will those employees transferred from or to other companies, provided they do not receive PLR from their original/assignee companies. If any of the above mentioned employees have interrupted their employment agreement, during the course of the reference year, they will not receive PLR. If they work only part of the time, over the course of the year, due to the date of joining, retirement, dismissal without due cause, termination or leave, they will receive PLR proportionally.
In order for an employee to be entitled to receive PLR, the hours worked by the employee vis-à-vis the total hours required for their position, discounting vacations, maternity leave and leave on account of occupational illness or accidents at work should be equal to or greater than 95%.
Note 1: The tables with the fulfillment levels of the holding company’s net profit targets,
EBITDA by company and operational targets are listed in the PLR normative documents.
Note 2: There are points in relation to which there are still differences between the companies and the unions, to be settled at a later date.
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3. Benefits
As reported in section 4, Part I, Personnel Costs, the distribution company provides its employees with a series of benefits, part of which are established in the collective bargaining agreement and part of which are offered at the company’s discretion.
No practices which are widely adopted by the market were identified, such as differentiated benefits for management positions.
The benefits defined in the collective bargaining agreement, whether in the nationwide agreement, in the nationwide deed of undertaking, in the Distribution companies’ specific deed of undertaking or in the distribution company’s specific deed of undertaking are shown in the table below:
Benefit | Present value |
Food Allowance/Meal Voucher | Between 13 and 16 voucher booklets/year each containing 29 vouchers with a face value of R$37.82. |
Snack Voucher | Those employees who are subject to shift schedules are given a unit value equal to 50% of the meal voucher. |
Food/meal allowance during overtime |
Granted to the employees, whenever they are called to work on Saturdays, Sundays and holidays. |
Educational Allowance | Reimbursement of up to R$449.29/month per dependent, for dependents up to 17 years of age, not cumulative with day-care center allowance, depending on the school term (basic education, high school and/or technical college). Reimbursement of expenses for uniforms and school supplies for recipients of full scholarships. NB: limited to two monthly payments |
Allowance for those with a PCD | |
dependent (who has a disability) | Reimbursement of proven expenses for PCD dependents up to a limit of R$843.65. |
Day-care center/kindergarten/babysitter allowance |
Reimbursement of R$599.05/month per dependent, for dependents aged between 6 months and 6 years. NB: limited to two monthly payments. |
Reimbursement of school materials |
Up to a limit of two monthly payments of the educational allowance or of the day-care center allowance. |
Cost allowance for university students |
Partial reimbursement of expenses for higher education for those employees who do not yet have a degree or for courses whose areas of knowledge are considered to be of interest to the company. Refund of 90% of the value of the monthly fee limited to the sum of R$1,133.83. |
Healthcare and dental plan: | Amazonas Energia has a costing, assistance and benefits plan which it manages itself: Health Protection and Recovery Plan (PPRS), which includes the use of medical and healthcare services under the Accredited Network, Free Choice and Reciprocal Agreement modalities, by the beneficiaries and their dependents. |
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The following are regarded as dependents: children, stepchildren, spouse, companion and parents, under the conditions set out in the specific rule. The·plan Corrective offers comprehensive and/or orthopedic coverage, devices; including: · Reimbursement of expenses for drugs (only those · Hospital used on a Care, continuous Surgical basis); and Obstetric procedures; · Psychotherapeutic Treatment and Speech · Treatment Therapy; by means of Global Postural · Treatment Reeducation outside - RPG; the home. the distribution company has a table with the values of each procedure. The payment is made by the company, which discounts the employee’s co-participation. In 2016, the Self-Management Health Plan (PPRS) provided coverage to 7,406 beneficiaries, including benefit-holders and dependents, with a cost of R$45,249,801.80. | |
Funeral Allowance | Reimbursement of funeral expenses up to a limit of R$4,921.28, or R$9,842.57 as a result of death due to an accident at work. |
Incentive for physical activity | Reimbursement of expenses for physical activity up to a fixed limit of R$94,58. |
Transport allowance | Granted to employees, apprentices and interns, in accordance with the law. |
Medical-hospital treatment | The Distribution company pays any medical and hospital treatment expenses which are not covered by the health plan for victims of accidents at work and work-related illness. |
Medication for those who have suffered accidents |
The Distribution company pays 100% of the value of medicines for victims of accidents at work. |
Sick pay/work accident assistance |
A compensation supplement, which includes the thirteenth salary, of the amount corresponding to the difference between the monthly compensation and the benefit received from social security by way of sick pay/accident assistance. |
Health treatment outside the State |
Advance payment of 2 months’ worth of gross wages to employees who need treatment outside the State (up to a maximum of 30% of the employee’s compensation limited to 10 installments). |
Air fares | Provision of air fares for treatment of illness outside the home for employees in the State’s interior. |
Life insurance | Group life insurance for permanent employees, apprentices, interns, board members and executive officer, with specified values. |
Time off for victims of domestic violence |
Paid leave for the employee for a period of between 3 and 5 days. |
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Time off for medical | Medical observation of family members or dependents of |
observation | the health plan: for a period of between 1 and 30 days on |
production of a doctor’s certificate or a medical report. | |
Time off for death of stepfather | Leave granted for a period of up to 5 days. |
or stepmother | |
Hours of transportation to and | It will pay the hours of transportation, as set forth in the |
from work | law and internal rules, upon analysis of each case. |
Life or disability insurance | It will maintain the inclusion in the existing group life |
insurance, coverage for death or permanent disability, | |
originated from disease, keeping the indemnity coverages | |
updated. | |
Reimbursement for spectacles | Reimbursement of expenses for spectacles (lenses and |
and contact lenses | frames) or contact lenses for active employees, within the |
established limits: | |
Frame - reimbursement of up to R$110.52; | |
Monofocal lenses - reimbursement of up to R$95.49; | |
Multifocal lenses - reimbursement of R$181.25; | |
Contact lenses - reimbursement of up to R$149.21. |
Other incentives offered:
Private Pension Plan - Amazonas Energia uses PREVINORTE to offer its employees a
Defined Contribution (CD) Supplementary Pension Plan. The employees’ monthly contributions, together with the company’s participation, will create a savings fund, enabling employees, when they retire, to supplement their pension. The foundation also provides personal payroll-deductible loans. In 2016, the amount of the normal contributions paid by the company to the plan’s arithmetical reserves was R$521,408.13.
Employee Profit Sharing (PLR) – Eletrobras pays PLR to its permanent employees, after the end of each financial year, provided that the targets established in the Term of Agreement have been achieved. The guidelines for the distribution of the share of the profits are negotiated with the employees’ representative entity, and comply with the provisions of the State Enterprises’ Coordination and Control Council’s (CCE) Resolution No. 10/1995 and Law
10101/2000.
Quality of Life Program - In order to improve and ensure the quality of life of its employees, the company signs an agreement on an annual basis with SESI/AC, the purpose of which is to offer an active quality of life and leisure program, with the creation of groups interested in dance, sport, culture and other fields of entertainment, where employees can exchange experiences and perform at festive events.
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5. Training and development
The educational model of Eletrobras’ distribution companies for the planning and execution of educational action is formally described in its Corporate Education regulations - Planning and Execution and Development and Training of People, and in UNISE’s (the Eletrobras companies’ University) Corporate Education Plan.
The management of educational action has a hierarchical structure defined both in
Eletrobras’ corporate sphere and in the distribution companies’ local development structures. The educational model’s general guidelines are defined at corporate level and implemented locally, maintaining the strategic alignment between the different companies, while the distribution companies’ specific demands are met by the local corporate education unit.
The structure of Eletrobras’ educational model is based on management by skills. In the process of drawing up the educational plan, the skills that are a priority for the organization are defined based on the business strategy. The educational model is also integrated with the other people management practices such as performance management, the job position and salary plan, and leadership development, promoting a strategic alignment between the various human resources initiatives.
The Eletrobras companies’ corporate education is organized in two organizational structures
· that are complementary:
UNISE - the Eletrobras companies’ University: undertakes the role of providing education that is common to the group’s companies. The planning of UNISE’s educational action is
· described in the Corporate Education Plan, along with the guidelines for execution.
Each member company’s Corporate Education Unit: this is responsible for meeting the demands for development of each company’s specific skills, in alignment with its strategy and UNISE’s guidelines. This service is achieved by means of drawing up a Local Corporate Education Plan, which is constructed from each employee’s individual development plans and in accordance with the guidelines of each company’s Business and Management Plan. Education can be categorized as internal when performed on the company’s premises and with internal instructors, and as external when performed by an external supplier in which case it may be within Eletrobras facilities or outside; an introductory course that is designed to integrate the new employee into the organization; and contractual training resulting from contracts with equipment or software suppliers who require that the employees receive training. The distribution companies also have short duration distance learning courses offered by TV Corporativa (LUME).
In order to monitor the quality of the training courses and help ensure continuous improvement, feedback and impact assessments are applied to each training course. And at managerial level, educational action is accompanied by monthly and quarterly reports submitted to the Executive Board.
The criteria for participation and certification of employees are clearly defined in the regulations and the procedures in standard forms. The justifications accepted in the case of dropping out are also listed in the regulations, along with the penalties in the case of withdrawal, failure to pass or dismissal from the company. The formalization of the process ensures greater transparency and fairness to the employees, with a view to guaranteeing them equal opportunity for participation and development.
An analysis of the documentation provided by the Distribution companies for training and development shows that Eletrobras’ Corporate University offers consistent programs for developing leadership skills, as well as for management, strategy and various aspects related to operations, along with other topics.
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Due to budget constraints, the training courses offered by the Distribution companies are more focused on operational aspects and compliance with compulsory training. For these courses the Distribution companies sometimes use the agreement with System S institutions.
6. Organizational climate
The organizational climate survey aims to monitor the employees’ satisfaction and commitment to the company, as well as to identify training needs and personal/managerial development needs and to align the culture with the actions carried out by the company.
All of the Eletrobras System’s Distribution companies carry out a survey every two years, evaluating the following aspects:
Motivation | People | Management’s | Work |
Management | Philosophy | Environment | |
Corporate Education | Organizational | ||
Identity | Clarity | ||
Career and | Working Conditions | ||
Leadership | Compensation | Communication | |
Occupational Safety | |||
Interpersonal | Benefits | Institutional Image | and Health |
Relationship | |||
Recognition | Sustainability |
The result of the survey is expressed by means of the Favorability Index, which is the result of the average obtained in the four dimensions evaluated.
In the last edition of the survey, which was carried out in 2015, Amazonas Energia’s favorability index was 67.14%, which is aligned to the average of the Eletrobras system.
During the interview with the Human Resources leadership, it was reported that, at present, the points for attention in relation to the climate are the lack of motivation regarding the company’s sales prospects and the excessive burden on the workforce (due to the decrease in the number of employees) versus the high demand that is causing leaves due to the occupational accidents.
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To
National Bank for Economic and Social Development ("BNDES") Av. República do Chile, 100 Rio de Janeiro - RJ
C/O: Ms. Lidiane Delesderrier Gonçalves — Manager of Agreement OCS 028/2017
May 2017
Dear Sirs,
According to our service agreement OCS 028/2017 ("Agreement") executed between BNDES and the Mais Energia B Consortium ("Consortium") on 2/14/2017, we present the result of our work carried out in the context of Privatization of Eletrobrás System Distributors.
The summary of the outcome of our work "Product 04: Legal Due Diligence Report" for AMAZONAS ("Report"), dated May 2017, is detailed in this document.
Our work was developed solely for the purpose of advising the BNDES, as those responsible for executing and monitoring the process of privatization of utility companies by Decree 8,893, in AMAZONAS' evaluation, in accordance with the Agreement.
In case this Report is to be accessed by third parties, it must be made available in full, so that the applicable safeguards and limitations are known.
Regards,
Loeser e Portela Advogados, as member of the Consortium
[Signed] | [Signed] |
Fernando Loeser | José Augusto Sollero Figueira |
This document is a true copy of the original signed version delivered to BNDES and in the possession of Eletrobras.
TABLE OF CONTENTS | ||
INTRODUCTION | 4 | |
EXECUTIVE REPORT | 7 | |
A. | REGULATORY ASPECTS | 7 |
B. | CORPORATE ASPECTS | 9 |
C. | FINANCIAL AGREEMENTS | 11 |
D. | OPERATING AGREEMENTS AND OBLIGATIONS | 11 |
E. | INTELLECTUAL PROPERTY | 11 |
F. | INSURANCE | 11 |
G. | LABOR ASPECTS | 11 |
H. | CIVIL, COMMERCIAL AND EQUITY LITIGATION | 13 |
I. | TAX LITIGATION | 14 |
J. | REAL ESTATE ASPECTS | 15 |
* * * |
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Introduction | Page 4/16 |
INTRODUCTION
1. This Executive Report ("Report") was carried out as part of the structuring of the privatization operation of Amazonas Distribuidora de Energia S.A. ("Amazonas" or "Company" or "enterprise"), in accordance with the Invitation to Bid corresponding to
AARH ELECTRONIC TRADING FLOOR #51/2016 - BNDES - ITEM 1 - "SERVICE B"
(economic and financial assessment and legal, accounting, technical-operational and other specialized professional services).
2. In this context, the NATIONAL BANK FOR ECONOMIC AND SOCIAL
DEVELOPMENT (BNDES), through its Bidding Department, pursuant to the provisions of Law #10,520 of 7/17/2002; Decree #5,450 of 5/31/2005; Supplementary Law #123 of 12/14/2006; Decree #8,538 of 10/6/2015; Law #13,303 of 7/1/2016; and DIR Resolution #3.063/2016 (BNDES System Bidding Regulation) provided for the hiring of a company to provide the specialized services described above.
3. Loeser and Portela Advogados, an integral part of the Mais Energia Consortium, together with PricewaterhouseCoopers Corporate Finance & Recovery Ltda., PricewaterhouseCoopers Serviços Profissionais Ltda. and Siglasul Consultoria Ltda., pursuant to OCS Agreement #028/2017, executed on February 14, 2017, was contracted to advise BNDES on the structuring of the AMAZONAS privatization operation ("Operation"), specifically with respect to (i) legal aspects related to the structuring and implementation of the Operation; as well as (ii) carrying out limited legal due diligence work through sampling with respect to the Company, which is contemplated in this Executive Report.
4. This Legal Due Diligence resulted in the preparation of this Report, and includes the analysis and assessment of information and documents to identify any issues that may significantly alter the accounting position and/or market value of AMAZONAS with respect to the following aspects:
(i) corporate, civil and regulatory matters. Tax, labor, social security and environmental aspects (compliance) were carried out by the advisors responsible for the analysis in these departments, and are reflected in their respective reports;
(ii) existing administrative and/or judicial litigation that affects or may affect, or is in any way related to AMAZONAS;
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(iii) status of the assignment and ownership of real estate and equipment registered or likely to be registered in AMAZONAS' property, plant and equipment, and the regularity of the respective documentation, including before public records, pointing out any existing liens or encumbrances; and
(iv) gathering public information needed to carry out this service.
5. Lastly, this Report was prepared at the request of BNDES and is addressed only to our client (BNDES), and no other person or entity other than BNDES should rely on it; reference to this Report is also prohibited in any other document, as well as its registration or submission to third parties without our prior and explicit authorization and consent. Notwithstanding the foregoing, and provided that the client-attorney relationship (and related rights and obligations) is limited exclusively to BNDES and our firm, (a) BNDES and its advisors may use this Report for analyzing the legal feasibility of the Operation, for its economic and financial structuring and related purposes; and (b) this Report may be sent or disclosed to third parties, at BNDES' sole discretion and liability, which logically includes full disclosure to potential stakeholders in the Operation and their respective advisors.
6. The legal audit, carried out in the period from March 6 to May 12, 2017, was based on documents and information provided by AMAZONAS related to the Company.
7. The date of 12.31.2016 was set as the base date for issuance of the respective report of the legal audit performed ("Base Date"). It should be noted, however, that some of the information contained in this Report, as expressly indicated therein, may refer to events occurring after the Base Date.
8. The content of the Report is limited to information obtained through the procedures described below, subject to the restrictions listed.
9. The legal audit was conducted according to the following methodology:
(a) submission of initial request for documents and information to representatives of AMAZONAS designated to attend the audit process;
(b) submission of requests for additional documents and information, based on information obtained during the investigation process;
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Introduction | Page 6/16 |
(c) interviews, meetings and contacts with AMAZONAS employees working in the various sectors and units of the company, especially those related to the legal and accounting departments;
(d) obtaining data extracted from AMAZONAS' process control system;
(e) analysis of the documents and information made available.
10. It is assumed that (i) all copies made available by AMAZONAS match the originals; (ii) such documents, except when explicitly stated in the report, are complete and authentic; and (iii) the signatures therein belong to persons empowered to represent the respective parties.
11. In some cases, as usual in all legal proceedings, the level of detail in this Report was compromised by the (partial or total) absence of AMAZONAS' information and documents, especially related to Civil, Tax and Labor Litigation.
12. This Report is not intended to cover all legal aspects related to AMAZONAS, but mainly those that have a significant impact on the economic-financial analysis for the purpose of recommending the minimum sale price of the Company's shares.
* * *
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EXECUTIVE REPORT
A. REGULATORY ASPECTS
1. AMAZONAS acts as a designated distributor responsible for providing public electricity distribution services in the areas of municipalities of the state of Amazonas listed in MME Ordinance #420/2016, in order to ensure the continuity of service, pursuant to paragraph 1 of article 9 of Law #12,783/2013, and subject to provide such services in accordance with the terms and conditions established in MME Ordinance 388/2016, until assumption by a new utility or until 12.31.2017, whichever occurs first.
2. Centrais Elétricas Brasileiras S.A. ("ELETROBRAS"), the controlling shareholder of AMAZONAS, agreed to designate its subsidiaries, including AMAZONAS, as providers of energy distribution services on a temporary basis, provided that, among other conditions: (i) ELETROBRAS does not undertake to guarantee any new obligations that may be assumed by the Distributors, in any way, including obligations arising from the provision of temporary services; and (ii) measures be taken to ensure that the transfer of shareholding controls of the Distributors occurs by 12.31.2017, in order to avoid liquidation of the Distributors and the return of the respective concessions.
3. AMAZONAS held the concession for operation of public electricity distribution services under the terms of Concession Agreement #20/2001, signed on 3.21.2001, effective until 7.7.2015, and requested extension of its validity within deadline and under the conditions laid down in that agreement. Nevertheless, ELETROBRAS, at its 165th Extraordinary General Meeting, resolved for: (i) reject the extension of AMAZONAS' concession; and (ii) approve the assignment of ownership control of the Distributor by 12.31.2017, provided that, until the assignment of the Distributor to a new controller, the Distributor receives directly from the federal government or through a rate all resources and income necessary to operate, maintain and make investments that are related to the public services of the respective Distributor.
4. On 11.3.2016, Decree #8,893 was published, which provides for projects of the Investment Partnerships Program ("PPI"), which will be handled as a national priority in the energy and mining sectors. In accordance with article 1 subsection IV of said Decree, AMAZONAS and the concession of public electric power distribution services which it holds were qualified as a national priority in the energy and mining sectors pursuant to article 1, section II of the heading of article 4, and article 5 of Law #13,334/2016.
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5. According to Decree #8,893/2016, BNDES was designated as responsible for executing and monitoring the process of privatization of AMAZONAS and other public electric power distribution service utilities mentioned in the Decree, and MME was designated as responsible for the coordination and monitoring of the procedures and stages of the privatization process
6. In view of the interconnection of the Manaus system to the SIN, AMAZONAS was subject to the restrictions provided for in paragraph 5 of article 4 of Law #9,074/1995, according to which utilities, permit holders and authorized companies related to public electric power distribution services operating in the National Interconnected System ("SIN") will not be able to perform, among other activities, those of generation and transmission of electric power.
7. The process of vertical divestiture of AMAZONAS, as determined by paragraph 5 of article 4 of Law 9,074/1995, has not yet been completed. One of the obstacles to its completion is the partial assignment of the Purchase and Sale of Natural Gas (OC 1902/2006), which relies on prior consent of Petróleo Brasileiro S.A. (“PETROBRAS”). This, in turn, requires that the outstanding debt be negotiated as a condition for agreement with the assignment of the gas purchase and sale agreement necessary for vertical divestiture.
8. Considering the interest of the Ministry of Mines and Energy ("MME") in promoting the bidding associated with the assignment of control of the legal entity providing energy distribution services with the corresponding granting of a contract to the new controller for a term of 30 years, the National Electric Energy Agency ("ANEEL"), at the MME's request, prepared and submitted to public hearing (Public Hearing #094/2016) the draft of the concession agreement prepared in accordance with guidelines established by the MME with the purpose of increasing competitiveness of bidding processes for assignment of corporate control related with new concession grants.
9. The assignment of AMAZONAS' ownership control shall be submitted to ANEEL's prior consent, in line with the provisions of article 27 of Law #8,987/1995, article 4(XI) of Attachment I to Decree #2,335/1997, as well as the provisions of ANEEL Normative Resolution #484/2012.
10. On the Base Date, the Distributor had 5 administrative proceedings of regulatory nature, to a total contingency amount of BRL 41,348,732.87. All these proceedings were provisioned to the amount of BRL 41,348,732.87. The spreadsheet below summarizes the analysis of the proceedings and provisions:
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part) of the LSA5. Based on the most recent decisions of the Brazilian Securities and Exchange Commission ("CVM")6, and based on the specific response of this body in a consultation formulated by ELETROBRAS, the right of first refusal provided for in this legal provision is only applicable to wholly-owned subsidiaries thus converted through mergers of shares.
4. At the time of completion of this Report, the second phase of the AMAZONAS vertical divestiture process had not been completed, with the assignment of shareholding control of Amazonas Geração e Transmissão ("AMAZONAS GT") to ELETROBRAS.
5. ANEEL granted an extension of the deadline for AMAZONAS to complete the process of assignment of the ownership control of AMAZONAS GT, due to the complexity of pricing the segregated assets, in particular the agreement related to acquisition of natural gas. Any corporate operation related to AMAZONAS must take into account the existence of this pending issue.
6. AMAZONAS' Vertical Divestiture Process consists of a corporate reorganization process designed as two main stages, namely: (i) Drop Down of net assets; and (ii) Redemption of Debentures.
7. The first stage consists of the realization of a capital increase in AMAZONAS GT through contribution of assets, rights and obligations related to generation and transmission activities by AMAZONAS. As a result, AMAZONAS will cease to exercise electric power generation and transmission activities, however, AMAZONAS will temporarily be the holder of a stake in a company that carries out such activities.
8. The second stage consists of: (i) Assumption by ELETROBRAS of debt that AMAZONAS owes before PETROBRAS, through a debt assumption instrument; (ii) Private issuance by AMAZONAS of convertible and swappable debentures for 100% of the shares issued by AMAZONAS GT, to be fully subscribed and paid in by ELETROBRAS, with the total credit held with AMAZONAS arising from the Debt Assumption; and (iii) Redemption of Debentures by AMAZONAS upon delivery to ELETROBRAS of the total amount held by the Company in AMAZONAS GT.
5 Article 251. The company can be established by means of a public deed, having a Brazilian company as sole shareholder. Paragraph 2. The company may be converted into a wholly-owned subsidiary upon acquisition, by a Brazilian company, of all its shares, or as per article 252.
6 Such understanding may be observed in CVM Administrative Proceeding #RJ2010/13425, in which it alleges that for companies converted into a wholly-owned subsidiary upon acquisition by a Brazilian company of all its shares, pursuant to article 251 paragraph 2 (1st part), the provisions of article 253 do not apply.
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9. Although the segregation of generation and transmission activities took place on July 1, 2015, with the commercial start-up of AMAZONAS GT, the vertical divestiture process has not yet finished the second phase, which is the assignment of AMAZONAS GT's shareholding control to ELETROBRAS, as it is dependent on the partial segregation of the natural gas agreement.
C. FINANCIAL AGREEMENTS
1. Related Party Agreements. Financing agreements entered into with ELETROBRAS do not contain provisions regarding the possibility and procedures for assignment and/or transfer of the respective rights and obligations, nor do they expressly establish restrictions on the conveyance of control and/or the corporate restructuring of AMAZONAS.
2. Debt Confession Agreements. Debt confession agreements signed between AMAZONAS and PETROBRAS provide for early maturity of the debt as a result of the change of control of AMAZONAS.
D. OPERATING AGREEMENTS AND OBLIGATIONS
1. Operating agreements were submitted in a partial manner. Until the closure of the Report, based on the analysis of the documents provided, no information was identified indicating risks or recommendations in the privatization process.
E. INTELLECTUAL PROPERTY
1. Intellectual Property. According to the information available in the data room, we have verified that, in addition to the "AMAZONAS" brand, the "AMD" brand is currently used by AMAZONAS, but without proper registration with the National Intellectual Property Institute (INPI). However, it should be noted that the term and symbols may be protected under business name protection.
F. INSURANCE
1. Failure to submit compulsory insurance policies may result in penalties in accordance with applicable sectoral Regulations. This item is detailed in Section 6 (Insurance) of the Report.
G. LABOR ASPECTS
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Introduction | Page 12/16 |
1. From the completion of the studies undertaken in AMAZONAS on labor aspects, we highlight the following points:
(i) The main and most recurrent themes addressed in the individual actions refer to actions for compensation for accidents at work with requests for material, moral and aesthetic damages, issues involving salary equalization and subsidiary liability;
(ii) There are class actions and public civil actions with probable risk of loss;
(iii) Of the ten individual actions analyzed to have the highest amount up to the analysis base date (December 2016), only one action was granted, with a subsidiary sentencing of AMAZONAS, and in our analysis, we consider the risk to be probable;
2. The following table summarizes AMAZONAS' estimates of contingent liabilities related to labor litigation according to the legal audit performed.
Loss risk | Distributor | Provision | |
classification | Number of cases | Loss amount | (BRL) |
estimate (BRL) | |||
Probable | 298 | BRL 55,039,473.40 | 55,039,000.00 |
Possible | 1,868 | BRL 299,364,915.59 | |
Remote | 540 | BRL 116,243,292.65 | |
Total | 2,706 | BRL 470,647,681.64 | 55,039,000.00 |
3. Specifically with respect to the cases analyzed in the present audit, we have the following scenario:
Loss risk | Distributor | LPA | Provision | Difference | ||
classification | Number of | Loss amount | Number of | Amount at | (BRL) (B) | (BRL) (A-B) |
cases | estimate (BRL) | cases | risk (BRL) (A) | |||
Probable | 9 | 11,236,527.85 | 35 | 15,570,759.05 | 11,236,527.85 | 4,334,231.20 |
Possible | 31 | 46,317,199.62 | 10 | 16,902,942.34 | 0.00 | 0.00 |
Remote | 16 | 29,041,775.27 | 11 | 0.00 | 0.00 | 0.00 |
Total | 56 | 86,595,502.74 | 56 | 32,473,701.39 | 11,236,527.85 | 4,334,231.20 |
4. According to AMAZONAS' Financial Statements, there are labor court deposits amounting BRL 160,052,000.00. Statements containing court deposits and appeal bonds from Caixa Econômica Federal and Banco do Brasil were not provided.
Legal Auditing Executive Report | AMAZONAS |
Introduction | Page 13/16 |
H. | CIVIL, COMMERCIAL AND EQUITY LITIGATION | |
1. | The following points are highlighted: | |
(i) | AMAZONAS is involved in a total contingency of BRL 12,930,544,000.007, in respect of which the total amount of BRL 1,239,579,000.00 was indicated as having a probable loss risk, which was already provisioned on 12.31.2016; | |
(ii) | a total of 56 relevant actions were analyzed according to materiality criteria, in which AMAZONAS is listed as a defendant; | |
(iii) | among the actions analyzed and mentioned above, there are four public civil actions in which the following matters are mainly discussed: quality of provision of electric power supply services; indemnification to consumers who suffered damages due to the intermittence of the electric power distribution system; adoption of measures to improve energy supply services in order to avoid the occurrence of blackouts and rationing. Among the public civil actions there is still one with the purpose of assessing a possible abandonment of the Balbina environmental protection center. The estimated contingency for these actions is BRL 59,079,095.90, with a possible risk of loss; | |
(iv) | AMAZONAS is a defendant in 21 lawsuits filed by Independent Power Producers ("PIEs"), which aim to receive amounts arising from discussions related to the agreements entered into with the Distributor. Of these, 14 cases are already involving a total estimated contingency of BRL 965,517,000.00, amounts which were already provisioned on December 31, 2016; | |
(v) | there are also several collection actions filed by individuals and legal entities against AMAZONAS for compensation for damages caused or resulting from electric power supply services rendered by the Distributor; and | |
(vi) | there are also actions related to civil distribution certificates that were not included in the available legal action worksheets. For more information, see Section 8 (Civil Litigation). |
7 Amounts are rounded
Legal Auditing Executive Report | AMAZONAS |
Introduction | Page 14/16 |
(vii) The legal audit performed in the relevant civil actions, in accordance with established materiality criteria, verified a need to adjust the accounting provision for civil actions to a total amount of BRL 38,555,119.86
2. The following table summarizes the civil actions involving the Distributor, and the respective commercial and equity contingent liabilities according to the information provided.
Loss risk classification | Number of Actions | Amount (BRL)* |
Probable loss | 420 | 1,239,579,000.00 |
Possible loss | 3,284 | 11,680,031,000.00 |
Remote loss | 56 | 10,934,000.00 |
TOTAL | 3,760 | 12,930,544,000.00 |
* Amounts were rounded |
I. | TAX LITIGATION | |
1. | In this section, the following points are highlighted: | |
(i) | It was possible to analyze data on thirty (30) administrative and legal proceedings that may represent liabilities for the Distributor, considering a materiality criterion which corresponds to BRL 5,000,000.00; | |
(ii) | In the Checking Account reports, information was extracted that includes twenty-six (26) tax and social security notes, of which seventeen (17) are not included in the progress report, regardless of the cutoff amount; | |
(iii) | AMAZONAS is involved in a total contingency of approximately BRL 2,643,063,132.44, of which BRL 490,616,136.20 relates to litigation and BRL | |
2,152,446,996.15 is not litigation-related, according to the provision report submitted by the Distributor, which are distributed as follows: |
LITIGATION | NON-LITIGATION | |||
Loss | Updated Sum of | Updated Sum of | ||
Amount | Amount | |||
Threshold | Amount | Amount | ||
Possible | 19 | 434,721,623.12 | 15 | 1,554,901,097.64 |
Probable | 4 | 224,307.62 | 9 | 212,978,553.38 |
Remote | 21 | 55,670,205.55 | 31 | 384,567,345.13 |
TOTAL | 44 | 490,616,136.29 | 55 | 2,152,446,996.15 |
Legal Auditing Executive Report | AMAZONAS |
Introduction | Page 16/16 |
issued for most of the relevant properties owned by AMAZONAS. Possible irregularities in the built-up area of real estate may prevent (i) issuance of certain permits, such as the Operating Permit and Inspection Permit from the Fire Department; (ii) registration/endorsement of any lease agreements; as well as generating (iii) imposition of administrative sanctions and penalties (warnings, fines, closure of the establishment, etc.).
4. Acquisition/Lease Restrictions (Foreign Nationals). Considering that, according to information provided by representatives of AMAZONAS, some of AMAZONAS' own properties are located in a rural area, it is worth mentioning that currently there are restrictions applicable to the acquisition or lease of land by foreign nationals or Brazilian companies controlled by foreign nationals, which include the need for prior authorization from the National Colonization and Agrarian Reform Institute ("INCRA") or the National Congress, as applicable. In addition, it is worth noting that said restrictions also apply to corporate transactions resulting in the assignment of rural properties to foreign legal entities, such as mergers, acquisitions, consolidations and changes in control. Acquisition and/or lease of rural property by foreign nationals or by Brazilian companies controlled by foreign nationals in violation of applicable legislation (Laws #5.709/71 and 8.629/93) may be considered null for all legal purposes.
May, 2017
Eletrobras System Distributor Privatization
Deliverable #
Status Report on the Amazonas Employee Complementary Pension Fund and Health Care Plan
Mais Energia B Consortium
To the
National Bank for Economic and Social Development ("BNDES")
Av. República do Chile n° 100 Rio de Janeiro RJ
C/o: Mrs. Lidiane Delesderrier Gonçalves - Manager of OCS Contract No. 028/2017 May 2017 Dear Madam,
Pursuant to our OCS Service Contract No. 028/2017 (Contract) signed February 14, 2017, between BNDES and the Mais Energia B Consortium (Consortium"), please find enclosed our deliverable for the work performed in connection with the Eletrobrás System Distributor Privatization Program.
Our findings are detailed in this document, which is entitled Deliverable # 6: Status Report on the
Employee Complementary Pension Fund and Health Care Plan (Report) for AMAZONAS, dated May
2017. The work carried out does not constitute an examination performed in accordance with financial statement auditing standards. In performing our review, we used unaudited historical information and data provided by the Consortiums management either orally or in writing, or obtained from mentioned sources.
Our work was developed solely for the purpose of advising BNDES in connection with the evaluation of AMAZONAS as required by the Contract. As established by Decree 8.893, BNDES is the entity tasked in with implementing and monitoring the utility privatization process.
In case disclosed to third parties, the Report should be made available in full so that any applicable waivers and qualifications can be acknowledged by all recipient parties.
Yours faithfully,
PricewaterhouseCoopers Corporate Finance & Recovery Ltda. acting as consortium leader
/s./ /s./
Rogério Roberto Gollo Carlos Eduardo Silva Teixeira
This document is a true copy of the original signed version delivered to BNDES and in the possession of Eletrobras.
Table of contents | |||
1. | Executive summary | 4 | |
2. | Plan types | 4 | |
3. | Plan statistics | 4 | |
4. | Analysis of assumptions and recommendations | 5 | |
4.1. | Discount rate | 5 | |
4.2. | Wage growth projection | 6 | |
4.3. | Biometric tables | 6 | |
4.4. | Turnover | 7 | |
4.5. | Time of retirement | 7 | |
4.6. | Family composition | 7 | |
4.7. | Health care cost growth rate (HCCTR) | 7 | |
5. | Independent calculation of actuarial results | 8 | |
6. | Independent review of actuarial commitment | 9 | |
7. | Conclusion | 10 |
1. Executive summary
This report contains our analysis and findings regarding the review of actuarial assumptions and calculations of mathematical provisions recorded in the balance sheet of Amazonas Distribuidora de
Energia S.A. (AMAZONAS) for the fiscal year ended 12/31/2016.
Our analysis aims to provide a better understanding of the risks and opportunities associated with the business in view of commitments related to the post-employment benefits payable by the company.
The post-employment benefits referred to above include two retirement plans and a temporary health care plan. Key features of these post-employment benefits will be described below.
Actuarial commitments were measured by an independent actuarial firm, Mercer Gama Consultoria, based on the CPC 33 rules established by the Accounting Standards Board, whereas our analyses were based on actuarial reports, registration databases, regulations and other technical documents made available by the actuary and AMAZONAS.
2. Plan types
02-A Plan: This is a structured, defined-benefit capitalization-based retirement plan funded by both AMAZONAS and its employees. The plan is being phased out since 2/2/2000 and is now closed to new registrations.
02-B Plan: This is a structured, variable-contribution retirement plan covering disability and death risks funded by both AMAZONAS and its employees.
Severance Incentive Plan (SIP): This includes a temporary 5-year health care plan introduced in 2013 for employees who at that time had over 20 years of employment with AMAZONAS and were retired by the INSS. This plan is fully funded by the company.
3. Plan statistics
Below are the participant statistics identified for each of the plans.
2A Plan (DB) | ||
Active participants | 21 | |
Average age | 57.43 | |
Average salary | 12,061.40 | |
Retired participants | 17 | |
Average age | 66.6 | |
Average benefit | 2,232.83 | |
Pensioners | 8 | |
Average benefit | 1,410.08 | |
Aggregate monthly benefit | 49,238.74 |
2B Plan (VC) | ||
Active participants | 1,516 | |
Average age | 47.31 | |
Average salary | 8,167.20 | |
Retired participants | 64 | |
Average age | 63.33 | |
Average benefit | 2,914.43 | |
Pensioners | 30 | |
Average benefit | 2,157.84 | |
Aggregate monthly benefit amount | 231,238.72 | |
SIP | ||
Active participants | - | |
Beneficiaries | 137 | |
Average age | 63.35 | |
Average cost | 279.43 |
4. Analysis of assumptions and recommendations 4.1. Discount rate
The discount rate must be determined based on high-performing corporate securities or bonds. Where the foregoing are unavailable, market returns on National Treasury bonds should be used instead. The currency and term of these financial instruments must be consistent with the expected currency and term of post-employment benefit obligations.
We point out that, for purposes of calculating the present value of actuarial liabilities, the rate adopted is net of inflation. The effect of inflation impacts exclusively on the projected expense for the subsequent fiscal year.
The rates used in calculating the company's actuarial commitments are:
02-A Plan - -10.96% p.a. (considering an actual rate of 5.71% and inflation of 4.97% p.a.) 02-B Plan - 11.01% p.a. (considering an actual rate of 5.76% and inflation of 4.97% p.a.) SIP Plan - 11.40% p.a. (considering an actual rate of 6.13% and inflation of 4.97% p.a.)
We understand that the rates applied are adequate to the calculations since they are consistent with the average rate of public bonds (NTN-B), which as of 12/30/2016 varied between 5.7% and 5.9% p.a. above inflation, as obtained from ANBIMA. The rates applied are therefore adequate to discount the long-term liability. We believe that a positive or negative 0.25 p.p. variation in the range is acceptable.
4.2. Wage growth projection
This assumption should reflect the expectation of the company regarding the projection of wage growth throughout the participants' career. In general, wages are adjusted for inflation, merit, and promotion.
We noted that actual market rates range from 0.5% p.a. to 3% p.a., according to data developed by the post-employment benefits committee of the Brazilian Institute of Actuaries (IBA).
The rate of wage growth adopted in the calculations of liabilities of the plans maintained by AMAZONAS is 7.07% p.a. (considering an actual real rate of 2% and inflation of 4.97% p.a.).
We noted that the rate used is consistent with market practices and we understand that it was adopted based on the expectation of the company regarding the projection of wage growth throughout the participants' career, and that it also reflects the results verified in hypothesis adherence studies developed by an independent actuary.
It should be noted that this premise does not apply to SIP.
4.3. Biometric tables
Biometric tables are statistical studies that rely on the occurrence of events observed in a population in order to estimate the incidence of such occurrences in the future.
Such events can be classified as mortality, disability onset, turnover, among others categories and have a direct impact on post-employment benefits.
4.3.1. General mortality
According to CNPC Resolution No. 9 dated November 29, 2012, which amends CGPC Resolution No. 18, the suitability of a biometric table used for longevity projections should be determined by means of a specific study, the results of which confirm adherence, in the last three fiscal years, between the demographic behavior of the mass of participants and beneficiaries within the plan and the respective biometric table used.
The general mortality table adopted for the benefit plans was the AT-83 Basic Female. According to the independent actuary's report, the table was adopted based on technical studies that confirmed its adherence to the profile of the population in the plans and therefore its suitability to discount the actuarial liability.
4.3.2. Disability onset
The table used for the pension plans is the Light Fraca table. According to the study report prepared by the independent actuary, the mass of participants was not enough to allow for a study confirming that the table was suitable to match the plan population. However, since this table is customarily employed in the market and its adoption does not represent a significant risk to the plan, we believe that it is adequate for the calculations.
It should be noted that this premise does not apply to SIP.
4.3.3. Disabled mortality
The disabled mortality table employed for the pension plans is the AT-1949 relieved by 2 years. According to the study report prepared by the independent actuary, the mass of participants was not enough to allow for a study confirming that the table was suitable to match the plan population. However, since this table is customarily employed in the market and its adoption does not represent a significant risk to the plan, we believe that it is adequate for the calculations.
It should be noted that this premise does not apply to SIP.
4.4. Turnover
The turnover assumed for the pension plans was null, meaning that future participant terminations in the coming years are not expected to bear a significant impact on plan liability.
Considering the plans features, we understand that the assumption adopted is adequate for liability calculation purposes.
It should be noted that this premise does not apply to SIP.
4.5. Age of retirement
The age of retirement assumed for the pension plans was the moment in which the benefit vests in full.
The study report provided by the independent actuary provides no information on the source of this assumption. Notwithstanding, this assumption is in line with market benchmarks and is a conservative one given that the commitments will be paid in over the short term.
It should be noted that this premise does not apply to SIP.
4.6. Family composition
The family composition assumption adopted for the pension plans was 95% of married participants and age variance equal to 4 years.
With regard to active participants, although in line with usual market practices there is no information in the actuary's report on the source of this assumption. Notwithstanding and considering the features of the plans as well as the small impact that may result from its adoption, we understand that the assumption is adequate.
With regard to PID, one dependent of the same age of the participant was considered for this assumption.
With regard to the beneficiaries, we understand that this may not be best practice on account of the potentially high impact of this assumption on implemented benefits. The royal family assumption is recommended instead.
4.7. Health care cost trend rate (HCCTR)
A rate of 3.00% above inflation was assumed to reflect the growth of health care costs due to sector-specific inflation. We understand that this rate is in line with general practices of the market, where rates fluctuate in the range between 1% and 4.5%, according to data developed by the post-employment benefits committee of the Brazilian Institute of Actuaries (IBA).
5. | Independent actuarial calculations |
02-A Plan | |
Reconciliation (in R$) | 12/31/2016 |
Present value of actuarial liabilities (PVL) | (26,627,102.00) |
Fair value of plan assets | 26,063,730.00 |
Surplus/(Deficit) | (563,372.00) |
Non-recoverable surplus (effect of asset limit) | 0 |
Total (liabilities)/net assets to be recognized | (563,372.00) |
Total (liabilities)/net assets to be recognized (% of PVL) | (2.12%) |
02-B Plan | |
Reconciliation (in R$) | 12/31/2016 |
Present value of actuarial liabilities (PVL) | (2,231,655.00) |
Fair value of plan assets | 1,471,454.85 |
Surplus/(Deficit) | (760,200.15) |
Non-recoverable surplus (effect of asset limit) | - |
Total (liabilities)/net assets to be recognized | (760,200.15) |
Total (liabilities)/net assets to be recognized (% of PVL) | (34.06%) |
SIP | |
Reconciliation (in R$) | 12/31/2016 |
Present value of actuarial liabilities (PVL) | (836,241.17) |
Fair value of plan assets | |
Surplus/(Deficit) | (836,241.17) |
Non-recoverable surplus (effect of asset limit) | |
Total (liabilities)/net assets to be recognized | (836,241.17) |
Actuarial obligations were determined according to the principles and standards established by the regulatory bodies, namely the National Health Agency (ANS) regarding benefits related to health care, and the National Superintendency of Complementary Pension (Previc) regarding retirement and pension benefits, and are accounted for in accordance with the rules laid out by the Accounting Standards Board. (CPC-33 of the Brazilian Securities and Exchange Commission - CVM 695.)
6. Independent review of actuarial commitment
The actuarial commitment was calculated by an independent actuary. We recalculated the installments of Vested Benefits and Granted Benefits as shown below, and believe that the calculation methodology and process are adequate.
02-A Plan | ||
Present Value of Obligations (in R$) | Actuary | PwC |
Granted | 7,097,938.00 | 7,194,595.88 |
Vested | 19,529,164.00 | 19,226,916.30 |
Total | 26,627,102.00 | 26,421,512.18 |
Difference (R$) | (205,589) | |
Difference (%) | 0.77% | |
02-B Plan | ||
Present Value of Obligations (in R$) | Actuary | PwC |
Granted | - | - |
Vested | 2,231,655.00 | 1,786,340.05 |
Total | 2,231,655.00 | 1,786,340.05 |
Difference (R$) | (445,310) | |
Difference (%) | -19.95% | |
SIP | ||
Present Value of Obligations (in R$) | Actuary | PwC |
Granted | 836,241.17 | 826,704.00 |
Vested | - | - |
Total | 836,241.17 | 826,704.00 |
Difference (R$) | (9,537) | |
Difference (%) | -1.14% |
Considering the inherent subjectivity of actuarial calculations of mathematical provisions related to benefit plans, we understand that the differences identified indicate the reasonableness of the calculations.
Such subjectivity results, for instance, from the manner by which ages are considered for the purpose of finding the probability of death (whether full or fractional or rounded); the method of rounding flow figures (number of decimal places considered taking into account that the probability of death considered in our calculations has 6 decimal places, for example); whether income payments are accelerated or in arrears (i.e. made at the beginning or end of the period); asset family composition assumptions in retirement, among other instances where small choices can produce relatively small effects however with potential large absolute values.
Therefore, we understand that the differences presented are acceptable from an actuarial technical point of view, and we understand that the liabilities recorded are properly calculated.
It is noteworthy that in determining the results for the 02-B plan, we identified a more significant difference compared to the results recorded in the balance sheet. According to our analyses, the calculations prepared by Mercer Gama involved an interpolation of individual results from the date in which a participant becomes eligible for normal retirement until the next birthday, which in practice implies postponing the retirement date by up to one year. Given the characteristics of the plan in which the defined-benefit portion is linked to contributions expected to be made during a participant's future employment, an increase in the period during which the participant will remain active implies an increase in liability. We understand that this discrepancy is associated with the parameterization of calculations in the system.
7. Conclusion
Our examinations were based on information provided by both the actuaries responsible for managing the plans and the company, and we considered this information to be appropriate for the preparation of this report.
Our numbers were calculated according to practices that we deem most appropriate when applicable, and should be taken into account together with the considerations below.
With regard to the family composition assumption, we understand that the best practice involves the use of the royal family for the beneficiaries. The impact of using an average family can be significant depending on the population of the plan.
The post-employment benefit obligations recorded in the balance sheet, even where figures are presented for some plans with incidental differences which in our opinion relate to the methodology or assumptions adopted, would not, if altered, pose any insolvency risk to the plans.
The defined-benefit 02-A plan and the variable-contribution 02-B plan have insufficiencies of R$563,372.00 and R$760,200.15, respectively, that were accounted for as deficit but do not necessarily represent a financial imbalance, as such deficiencies relate to the volume of future normal and extraordinary contributions expected to be carried into the plans and that will be accounted for in the assets at the time when these assets are used to support future plan commitments, thus defeating potential insolvency or liquidity risks.
To calculate the present risk in the portion of vested benefits of the 02-B plan, a monthly average real contribution (MARC) is used as per the regulations. Mercer Gama provided us with a calculation formula (salary based) which was used to determine the contributions by active plan participants on a constant basis. We understand that the MARC should vary according to the rate of wage evolution as indicated by the wage growth assumption, which is not in effect. Additionally, we were not provided with a methodology for calculating the percentages at which the MARC is levied on the salaries; in other words, there is a possibility, the impact of which we could not measure, that the mathematical provision calculated for the risk benefits of active participants is improperly sized compared to good practice.
The Severance Incentive Plan (SIP), which affords only health care for a fixed term of 5 years, has a liability of R$ 836,241.17 as of 2013. This liability is expected to decrease in view that this is a fixed-term plan with only two years remaining and new registrations are not allowed. The plan has an inherent deficit resulting from the fact that it does not have an asset to cover benefits and is funded by the flow of contributions.
We understand that employing a capacity factor to measure health care liabilities is not the best practice in the situation. Medical costs increase according to specific sector rules. For this reason, we understand that there is no loss of benefit value over time due to inflation and therefore the use of a capacity factor is not appropriate.
From a legal perspective, our understanding is that plan benefits have been supported by regular and extraordinary contributions established on the basis of actuarial evaluations prepared by an independent actuary and reviewed by the regulatory body (Previc) in the case of the pension plans.
With regard to SIP, legal compliance is secured in that contributions are made according to the general rules of the plan.
To the
Banco Nacional de Desenvolvimento Econômico e Social (BNDES - Brazilian National Bank for Economic and Social Development) Av. República do Chile nº 100 Rio de Janeiro - RJ
Attention: Ms. Lidiane Delesderrier Gonçalves - Contract Manager OCS 028/2017 October 2017 Dear All,
In accordance with our service contract OCS 028/2017 (Contract), executed between the BNDES and the Consórcio Mais Energia B (Consortium) on 02/14/2017, we present the result of our work made in the context of Privatization of the Distributors of the Eletrobras System.
The result of our work is detailed in this document Product 11: Privatization Modeling Proposal (Report) of Amazonas, dated October 2017.
Our work was developed aiming solely at the objective to assist the BNDES, in the quality as responsible for the performance and follow-up of the privatization of concessionaire companies as per Decree 8.893, in the evaluation of Amazonas, in accordance with the Contract and it was carried out on the basis of information provided by the administration of Amazonas and on the premises that this information is true and complete. This information has not been subject to tests or verifications, except when expressly defined in the scope of our works.
In the case of access to the Report by third parties, it must be made available in full, provided that the applicable safeguard and limitations are known.
Sincerely,
PricewaterhouseCoopers Corporate Finance & Recovery Ltda., as leader of the Consortium.
Rogério Roberto Gollo | Marcio Jose Soares Lutterbach |
** This document is a true copy of the original signed version delivered to BNDES and in the possession of Eletrobras.
2 |
Summary | |||
Introduction | 6 | ||
Section I - | Privatization context | 7 | |
1. | Approach | 7 | |
2. | Context | 9 | |
2.1 | Overview | 9 | |
2.2 | Institutional and Management Model of the Brazilian Electric Industry | 10 | |
2.3 | Financial assessment and sales modeling conjuncture | 12 | |
3. | Relevant aspects of the Privatization Process | 14 | |
3.1 | Deverticalization of Amazonas | 14 | |
3.1.1 | Context | 14 | |
3.1.2 | Legal aspects and background of deverticalization | 14 | |
3.1.3 | Effects on the schedule and on the sales process | 16 | |
3.1.4 | Scenario without deverticalization | 16 | |
3.2 | CCC | 17 | |
3.2.1 | Context | 17 | |
3.2.2 | Negotiations | 17 | |
3.2.3 | Negotiation operationalization | 18 | |
3.3 | Other critical points, necessary adjustments and recommendations | 18 | |
3.4 | Consent need in Financing Contracts | 19 | |
3.5 | Deposit of Shares Owned by Eletrobras at FND | 22 | |
3.6 | Remaining aspects to be considered | 22 | |
3.7 | Payment methods | 23 | |
4. | Purpose of the Auction | 24 | |
4.1 | Purpose of sale | 24 | |
4.2 | Assessment of sale feasibility | 24 | |
5. | Relevant Aspects of Valuation | 25 | |
5.1 | Relaxation of regulatory parameters | 25 | |
5.2 | Debts | 25 | |
5.3 | Total liabilities | 27 | |
5.4 | Risks and Contingencies | 27 | |
5.4.1 | Types of contingencies | 27 | |
5.4.2 | Current status of contingencies | 28 | |
5.4.3 | Negotiations to deal with contingencies | 29 | |
6. | Assessment of Synergies | 30 |
3
7. | Adjustments on the Privatization model | 35 | |
7.1 | Context | 35 | |
7.2 | Base amount of valuation Average between valuations of Services A & B | 35 | |
7.3 | Relevant adjustments for privatization of Amazonas | 36 | |
7.3.1 | Adjustment to comprise updated balance sheet until June 2017 | 36 | |
7.3.2Adjustment related to Advance Payments for Future Capital Increases (AFACs) | |||
38 | |||
7.3.3 | Tax adjustments Tax Losses and Negative Base | 39 | |
7.3.4 | Adjustment of the relaxation of regulatory parameters | 39 | |
8. | Capital and Corporate Structuring | 41 | |
8.1 | Proposed capital and corporate structuring Overview | 41 | |
8.2 | Minimum adjustment of the capital structure Stage 1 | 43 | |
8.2.1 | Symbolic value of shares sale (privatization) | 43 | |
8.2.2 | Capitalization alternatives | 44 | |
8.3 | Investor capitalization Stage 2 | 44 | |
8.4 | Eletrobras corporate stake option | 45 | |
8.4.1 | Justification | 45 | |
8.4.2 | Eletrobras corporate stake threshold | 46 | |
8.4.3 | Participation of Eletrobras in the governance of the company | 46 | |
8.4.4 | Procedure for Eletrobras to increase its shareholding stake | 47 | |
8.5 | Classes of shares | 47 | |
9. | Shares offering to active and retired employees | 48 | |
9.1 | Mechanism | 48 | |
9.2 | Definition of active and retired employees | 48 | |
9.3 | Offer General Conditions | 49 | |
9.3.1 | Offer take and differentiated conditions | 49 | |
9.3.2 | Offsetting differentiated conditions to Eletrobras | 50 | |
9.3.3 | Offer Procedure and Purchase Limits | 50 | |
9.3.4 | Follow-up by minority stakeholders of investor underwriting | 50 | |
9.3.5 | New controller shares repurchase obligation | 50 | |
9.4 | Shares not acquired by active and retired employees | 51 | |
Section II - | Privatization proposal | 52 | |
10. | Summary of Amazonas privatization proposal | 52 | |
10.1 | Amazonas Corporate Structure | 52 | |
10.2 | Amazonas Sales Price Definition | 52 | |
10.2.1 | Result of economic-financial evaluations | 52 | |
10.2.2 | Balance update adjustment | 53 |
10.2.3 | Regulatory parameters relaxation adjustment | 55 | |
10.3 | Sale vs. Liquidation Evaluation and consequent pure concession granting | 55 | |
10.4 | Potentially convertible liabilities | 56 | |
10.5 | Eletrobras capitalization value Stage 1 | 56 | |
10.6 | Shares offering to active and retired employees | 57 | |
10.7 | Investor capitalization Stage 2 | 58 | |
10.8 | Amazonas final corporate structure | 59 | |
10.9 | Investors Obligations | 59 | |
10.9.1 | Financial obligations | 60 | |
10.9.2 | Obligations defined in the Purchase Agreement | 60 | |
11. | Amazonas privatization schedule | 61 | |
Section III - Auction Model Proposal | 62 | ||
12. | Model and Procedure of Auctions | 62 | |
12.1 | Proposed model | 62 | |
12.2 | Sequence | 63 | |
12.3 | The right to participate | 63 | |
12.4 | The right to withdraw bids | 64 | |
12.5 | Bid procedures and values | 64 | |
12.6 | Auction Value base for Combined Discount Index in the Regulatory Flexibility and | ||
Grant | 66 | ||
12.7 | Auction´s 2nd stage ranking criteria | 68 | |
12.8 | Auction procedures | 69 | |
12.9 | Scenario without deverticalization | 70 |
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Introduction
This document refers to the report of Amazonas Privatization Model Proposal, produced by the Consórcio Mais Energia B. In it, proposals are included regarding the distributors privatization modeling, including conceptual models, technical recommendations and calculated values.
The report is divided into three sections, presented below:· Section I - Privatization Context· Section II - Privatization Proposal· Section III - Auction Model Proposal
In Section I - Privatization Context, among other topics, the approach used to structure the modeling, the parameters that were used as guidelines to the analyses developed and conceptual aspects of the modeling are explained, including its main proposals, rationale and legal basis.
In Section II - Privatization Proposal, the technical and quantitative specifications of proposals made in the previous section are presented. The corporate structure is set out thereof as well as the results of the valuation, the calculated values of adjustments in the capital structure and Amazonas's shares, in addition to the share offer conditions to employees, investors obligations and expected privatization schedule.
In Section III - Auction Model Proposal, procedural aspects of the auction of the distributor are detailed. In this section, recommendations are made concerning the model and sequence of auctions, auction variables, base of values for investors offers and classification criteria and the definition of the winner.
Finally, it should be noted that this document has been developed based on Amazonass other privatization processes documentation. Among other items, there served as input for this Privatization Modeling Report, the result of the economical and financial evaluations conducted by Services A and B, as well as the legal, tax, accounting-equity, technical-operational, actuarial, human and environmental resources diligences developed by Service B.
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· Fiscal and tax aspects: relevant fiscal and tax aspects were considered, as well as tax required adjustments, for the definition of the value and the process of privatization and sale of companies· Risk mitigation: as part of the process of definition of the selling price, it was necessary to evaluate the impact and value of not yet provisioned contingencies, as well as possible alternatives to mitigate them, considering the prospects of Eletrobras and the investor in order to reduce risks related to the sale transaction· Stakeholders and investors: to enable and optimize the process of privatization and sales modeling, the study considered the perspective of several Stakeholders (such as, regulating entities, government agencies and consumers), as well as investors, who had their interest in acquiring distributors and their points of view analyzed through market sounding studies· Evaluation of synergies: the possible synergies between the companies were also evaluated and considered in modeling, analyzing the opportunities for synergies of their operations to find possible levers of value· Groupings of grants: likewise, possible groupings for sale of companies were analyzed in order to enable and leverage the value of the sale of the six distributors that are part of this process of privatization· Process and sequencing of the auction: auction models and their procedural aspects, as well as the sale of sequencing alternatives of the distributors were reviewed to increase the possibilities of sale of the distributors and also to create value· Use of tariff lever: in modeling, alternatives were included regarding regulatory levers which provided a review of the level of balance of the grants relating to companies in privatization process, eventually correcting potential lags
When evaluating the nine perspectives addressed, the study made for the modeling of Amazonas sale, along with other distributors, sought to be comprehensive and evaluating all relevant aspects to the process of privatization of the companies, identifying alternatives of the sales process optimization.
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2. Context
2.1 Overview
The process of privatization of Eletrobrass Distributors was started in the 90s and resumed in 2016 through Decree 8.893/2016, which qualified as priorities within the framework of the Partnership Program in Investment (PPI) the privatization of the distribution companies and designated the BNDES responsible for the implementation and monitoring of the process of privatization.
In this context, the BNDES hired Consórcio Mais Energia B to assist it in Privatization, involving from economic and financial valuation until the full diligence of current operations. Having completed the basic elements that allow attributing the value resulting from the distribution grants of electric energy, it remains to define how the privatization will actually take place. Such modeling combines corporate aspects, the form of capitalization, sales process, in order to increase the chance of success in attracting investors, as well as offering maximum competitiveness to obtain better conditions of offer to be received.
The guidelines emanated by the sectorial and macroeconomic policy makers, regulators and planning entities, establish the need to offer a quality service in the respective grant areas. One believes that the attraction of an operator from the private sector will have full conditions to raise the efficiency level and to remunerate the necessary investments to the full compliance with the market.
From the regulatory point of view, as a result of Public Hearings 094/2016 and 032/2017 of ANEEL [Brazilian National Electricity Agency] and Public Consultation MME 37/2017, several softening measures were introduced into the regulatory parameters, with the tariff model allowing conditions to bring back to balance the grant. It is unanimously manifested, both the discomfort with the precarious situation of the assignment condition, and the support to the efforts undertaken, so that one is successful with the privatization.
A process of evaluation of market interest (Market Sounding) allowed identifying the existence of companies with recognized competence in the industry - particularly in social economic, geographic realities and similar environmental realities - with capacity to execute the reorganizations required for this process, confirm the reasoning of attractiveness of the privatized companies for potential investors and understand the major elements of concerns. One may also establish a rather specific map of the different level of interest of the market among the several grants.
In this line, the vision of the sector investors could be obtained as to issues such as the grouping of the grants, the process of sale, sensitivity to different corporate models, the structure of capital to face the program of investments, the economic impact of the incorporation of investments to tariffs and the very contingencies bequeathed to the future operator, always with a view to optimize the competitiveness in the future auction.
In short, from this context important lines of direction derive for the model that will be sketched as follows:
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· Incorporation of new investor who will be focused on the improvement of the service and economic, financial and operational recovery of the company· Prioritization of solutions that allowed the transference of all the grants to the investors - seeking models that minimize risk of auctions without interested stakeholders· To make possible alternatives and solutions that allow generating value to the current stakeholder without losses to the consumers and the public power, including mechanisms that make possible the capture of value in the medium and long terms in the future operation, since there is the need for capitalization of the distributors to make possible the privatization auction· Search for factors that lead to the increase of the rivalry between the potential interested stakeholders, in order to provide greater competition
Such guidelines lead to solutions that are highlighted by the mitigation of failure risks, simplicity and pragmatism in the search for alternatives for privatization. Below, we present how the modeling should be structured so as to maximize the success of the process.
2.2 Institutional and Management Model of the Brazilian Electric Industry
The characteristics and peculiarities of the Brazilian electric industry have been considered in the study developed. Both its institutional model and its legal framework have been analyzed and used as parameter for the analyses proposed.
Recently, new laws sought to address emergent challenges within the national scope (as for example Law 12.783/2013, with provision on grants of generation, transmission and distribution of electric energy, reduction of sectorial encumbrances and affordability). In this context, for this report, as noted in the previous section, Decree 8.893/2016 is of particular importance, which resumed the subject of privatizations of the Distributors, being the BNDES responsible for the execution and follow-up of the process.
In fact, the edition of Law No. 13.360/2016, resulting from the conversion of MP 735/2016, brought a series of changes for the industry, including the supposition by CCEE of the competences attributed before to Eletrobras on the management of the account of Global
Reserve of Reversion (RGR), as well as the Account of Energy Development (CDE) and of the Account of Fuel Consumption (CCC) from May 1st, 2017, at no hard to the performance of Internal or External Control Agencies of the federal public administration on the management of these accounts.
Additionally, Decree No. 9.143/2017, that regulated Law No. 13.360/2017, by bringing provisions on the commercialization of electric energy, tried to provide the incentive to efficiency, to the correct allocation of the risks among the consumers and investors, as well as mitigate the obstacles to attract new investments to the electric energy industry, especially when establishing that the auctions of new energy and existing energy can be carried out fairly ahead of time and more relaxed, in addition to the possibility of the distribution agents to negotiate with free consumers and other agents from the Free Environment Contracting (ACL), sale contracts of backed by excess of energy contracted, as per ANEEL regulation.
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Furthermore, it must be highlighted that, by means of the Public Consultation No. 33 (CP 33), of the Ministry of Mines and Energy (MME), already closed, on Improvement of the legal landmark of the electric industry, proposals of legal measures had been discussed that make possible the future of the electric industry, searching sustainability in the long run
In addition, Law No. 13.360/2016 amended Law No. 12.783/2013, with the objective to make possible the bidding of companies under direct or indirect control of the Union, States, Federal District and Municipalities, whose grants had not been extending, foreseeing the possibility of the Union to promote bidding associated with the transference of the shareholding control of the concessionaire, granting a new grant contract for the period of 30 years. This law also establishes the possibility of inversion of the qualification phases and judgment of the auction, so as to guarantee greater speed and efficiency to the bidding process.
It should be stood out that, as far as the bidding of distribution or transmission grant associated to the transfer of control of legal person, provider of public service of electric energy is concerning, dealt with Law No. 12.783/2013, it became necessary to edit a regulatory decree, with the purpose to, among other conditions: i) to establish requirements to be observed by the controller of the responsible legal entity for the provision of the service of distribution of electric energy, for such bid; ii) attributions of the BNDES in the execution and the follow-up of the privatization process; iii) criteria for new concession without control handover (Decree Draft that regulates the bid of distribution grant associated with the utility control handover of legal entity provider of public service of electric energy).
The new grant contract applicable to the mentioned bid associated with the shareholding control handover of the concessionaire, whose draft was elaborated by Aneel at the request of the MME and submitted the public consultation, was object of new public consultation in the period of 08/28/2017 to 09/06/2017, in virtue of adjustments proposed by means of Ordinance MME No. 342/2017, due to the fact that it was noted the existence of unbalance regarding the operational costs, losses of electric energy and loans with resources from RGR, made to assure the continuity of the service provided under the assignment mode and that, by force of provisions of Law No. 12.783/2013, should have been assumed by the new concessionaire, which could make impracticable the intended bid.
Another point to be considered is with regard to the tariff process concerning the provision of public service of electric energy distribution by agency or entity of the federal public administration. It is highlighted that the Ordinance MME No. 388/2016, which approved the terms and conditions for the provision of such services, in accordance with art. 9, Paragraph 1, of Law No. 12.783/2013, was amended by Ordinance MME No. 346/2017, published in the DOU [Federal Official Gazette] on 08/31/2017, to establish that in the tariff process of year 2017, ANEEL should make flexible, in a temporary way, the regulatory parameters relating to the operating costs in order to enable the economic balance of the grant being bid pursuant to art. 8 of Law No. 12.783/2013.
It is further highlighted that the tariff relaxation resulting from ANEELs Technical Notes 351/2017, of 07/24/2017, and 149/2017, of 09/08/2017, which restores levels of regulatory parameters such as DEC/FEC, PMSO and RGR - aiming at the economic-financial balance of the grants of electric energy under analysis.
Finally, it is stood out that, considering the schedule foreseen for conclusion of the privatization process, as one will see below, it is quite probable that Ordinances MME 420 to
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425/2016 that designated the Distributors of Eletrobras (Amazonas, Boa Vista, Ceal, Cepisa, Ceron and Eletroacre) as responsible for the provision of the public service of distribution of electric energy until the supposition of a new concessionaire or up to December 31st, 2017, whichever occurs first, deserve to be amended to extend such service provision deadline for a period that suffices to the conclusion of the privatization process.
2.3 Financial assessment and sales modeling conjuncture
As it shall be shown below, in Item 5 Relevant Aspects of Valuation, in the course of the due diligence and financial evaluation of Eletrobrass distributors, relevant issues were identified affecting significantly the value of the stakeholder of the companies.
Initially, it was assessed that these organizations have amounts of debts of high values. These debts were accumulated by Eletrobrass distributors over the years, both with the Holding
Company (with loans of various types) and with suppliers. Such debts, in turn, often continue to be rolled over or have increasing cost in relation to the non-payment of the principal or even of interests.
It was also identified that the distributors of Eletrobras have contingencies additional to those provided on the balance sheets of significant value. These contingencies, from judicial and administrative proceedings and tax aspects, fiscal and labor not yet materialized, among others, also contribute to the reduction of the value of the equity of the companies.
Additionally, it has found in financial and operational evaluation that these companies demand high values of investments in the early years of the new grant. These investments are required, both to facilitate the improvement of financial performance expected and to meet regulatory metrics of service level.
Thus, even in a valuation in which there is the expectation of bold operational and financial performance optimization of the six distributors of Eletrobras in the privatization process, the factors listed overlapped to improvements, resulting often in a negative value to the stakeholder.
It should be emphasized that the financial evaluation has already considered the new draft of the grant contract, resulted from contributions in the Public Hearing No. 094/2016 and the Technical Note No. 182/2017 of ANEEL. The regulatory body also reviewed and identified that these grants are unbalanced, granting regulatory parameter relaxation (Technical Notes No. 351/2017 and No. 149/2017, this last part of the Public Hearing No. 032/2017) to bring the grants back in balance, which will result in increased tariff revenues and reduction of loan value of RGR. Consequently, the financial evaluation conducted by the Consortium considered the relaxation made by ANEEL.
It is also highlighted that, in accordance with the Decree Draft that regulates the grant bid of distribution associated with the transfer of control of legal entity service provider of electric energy, dealt with by Law No. 12.783, of January 11th, 2013, the distributors of Eletrobras to be privatized that are in areas of grant benefited by the relaxation of regulatory parameters, deriving from the Technical Note No. 351/2017 must have specific treatment. If the value to the stakeholders of these companies is positive in light of regulatory flexibilizations granted, the relaxed parameters must be readjusted so that the value to the stakeholders of these companies is equal to zero. Thus, the possibility that the consumers of the areas of the grant in question are burdened with additional exceptional tariffs to those necessary for the companies holders of the grant operate under financial balance is eliminated.
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Thus, the financial evaluation and modeling of sale of the companies conducted by the Consortium considered the necessary legal and regulatory aspects for the privatization process.
The modeling performed also tried to structure sale alternatives so these companies could increase their financial attractiveness and legal security to the investor. So, facing a scenario where the stakeholder values of these companies are negative or equal to zero, one optimized their sale potential.
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3. Relevant aspects of the Privatization Process
3.1 Deverticalization of Amazonas
3.1.1 Context
The complexity of the privatization of Amazonas Distribuidora (Amazonas-D) has been widely documented in the economic-financial evaluation reports and in the legal and accounting diligences of the equity, among others. It stands out as the main obstacle to the transfer of the control of the company the separation of the business of generation/transmission (now incorporated into the Amazonas subsidiary-GT) of the distribution business (including distributed generation into the interior of the Amazonas - Amazonas-D).
In the current configuration Amazonas-GT is a subsidiary of Amazonas-D, and there is an evaluation prepared for its division and incorporation to Eletrobras holding. After this split, the Amazonas-D would be configured for a pure effective dedication to a grant contract of electrical energy distribution.
However, the division depends on negotiations of themes that transcend the Eletrobras group. These negotiations involve Petrobras and Companhia de Gás (Cigás) consent to transfer the Gas contract from Amazonas D to Amazonas GT, among other factors. Among the most complex aspects involved in this negotiation, stands out the discussion of responsibility and allocation of contracted gas surplus related to electricity power generation verified demand. In addition, negotiations are influenced Amazonas D debt related to Petrobras, which total amount would be partially offset by sector funds (CDE/CCC) receivables. However, these receivables are also object of discussions with ANEEL.
Consequently, aspects of interdependence and circular relationships between these negotiations and decisions result in the impossibility to define assertively the privatization schedule of this company. Therefore, in order to proceed with privatization through the sale of the company associated with the granting of the concession, as a recommendation of this Consortium, it is required that Eletrobras be able to proceed deverticalization previously. Otherwise, it will remain to the government and the competent authorities the possibility of granting a new pure concession without the sale of Amazonas-D.
It is important to note that the valuation and modeling of privatization of Amazonas consider the company already deverticalized throughout its analysis. Thus, any impacts produced by the process of deverticalization of the distributor shall be observed, and may be considered in future analyses.
3.1.2 Legal aspects and background of deverticalization
Law No. 9.074/1995, in its article 4, paragraph 5, provides that the concessionaires, permissionaires and the authorized public service power distribution companies working in the National Interconnected System (SIN - Sistema Interligado Nacional) are not allowed to develop services of generation and transmission of electrical energy, among other activities.
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This same art. 4, in Paragraph 7, of the referred Law No. 9.074/1995, determines that the concessionaires or authorized generation companies also may not be related or controllers of companies that develop activities of distribution of electric energy.
In this sense, Eletrobras and Amazonas deliberated that the generation and transmission activities carried out by Amazonas were segregated from their electrical distribution activity, procedure known as deverticalization.
At Amazonas, this process of deverticalization began with the establishment of a new company under the Eletrobras system for purposes of generation and transmission of energy, called Amazonas GT. As a result, the process followed with a corporate reorganization consistent to assets drop down linked to the generation and transmission of electric power from Amazonas for Amazonas GT, culminating, at the end of the process, with Eletrobras assuming all of the shares of Amazonas GT.
The first step of this corporate reorganization, which consisted of carrying out a capital increase at Amazonas GT, involving assets, rights and obligations related to the activities of generation and transmission by Amazonas, has already been held..
The second step, in principle, would consist of:
i. Assumption by Eletrobras, of debt that Amazonas has before Petrobras because of gas purchase contracts through debt assumption instrument;
ii. Private issuance by Amazonas, of debentures convertible and exchangeable for 100% of the shares issued by Amazonas GT, to be fully underwritten and paid in by Eletrobras, with the totality of the credit held next to Amazonas, derived from the Assumption of Debt; and
iii. Redemption of the Debentures by Amazonas, by means of delivery to Eletrobras, of the totality withheld debentures by the Company at Amazonas GT, operation not yet concluded, due to dependence on partial segregation of the Contract of Purchase and Sale of Natural Gas (OC 1902/2006)
The partial assign of the Purchase and Sale Contract of Natural gas (OC 1902/2006) concerning the potential consumption of PIEs of the capital, Manaus, to be transferred to Amazonas GT, depends on the previous consent of Petróleo Brasileiro S.A. (Petrobras). This, in turn, requires the outstanding debts to be traded as a condition for the agreement with the assign of the purchase and sale gas contract required to deverticalization.
According to the information provided by Eletrobras, the parties are discussing the possibility of not carrying out the procedures relative the issuance and redemption of debentures described above, because of the difficulty in obtaining the consent of Petrobras in assumption of debt described in item (i) above, and, instead, hold a restitution payment of other debts not related to this contract and the transfer of the shares of Amazonas GT owned by Amazonas D in return.
Based on information supplied by Eletrobras, in case of an agreement with Petrobras, it is expected that the process of internal procedures of deverticalization at Eletrobras to be completed within 60 days after the execution of the agreement, which respective schedule and
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related documents were not available to this Consortium until the delivery date of the modeling report.
It must be considered that deverticalization was approved by AGE No. 162 of Eletrobras, having also received approval by ANEEL.
Still, once defined the agreement, Amazonass sale modeling could be resumed and the documents should be evaluated by the Consortium.
Thus, considering the applicable legal seal to electricity distributors to develop services of generation and transmission of energy, as well as that the concessionaires or authorized companies of generation cannot be affiliates or controller of companies developing electric power distribution activities, the privatization of Amazonas cannot be started until its deverticalization process is completed, excluding specific cases that permit distributors to select generation or transmission assets, such as part of isolated system in the interior of the state of Amazonas.
3.1.3 Effects on the schedule and on the sales process
In view of the aspects set out in previous items, it is necessary that deverticalization is completed. so that the distributor will continue with the process and schedule set out in Item 11 Amazonas Privatization Schedule of this report - including corporate adjustments and in capital structure, among others.
Therefore, in the case of progression of understanding between Eletrobras and Petrobras, the corporate and financial adjustments to be made at the distributing company must consider the effects of the economic and legal definitions laid down in the agreement. Capitalization that need to be made by Eletrobras, as well as the availability of debt credits for any adjustments in the structure of capital if it is an alternative within the interest of Eletrobras must also be evaluated.
Finally, it is recommended that, once considered the effects resulting from the deverticalization of Amazonas, the proposals contained in this report for the distributors are followed.
3.1.4 Scenario without deverticalization
In the case of deverticalization of Amazonas does not occur or is not performed within the time limit set by the competent governmental bodies, the alternative of selling pure concession must be considered by the responsible authorities.
The sale of the pure concession´ is defined as the bidding for granting the distribution concession disassociated from the transfer of control of the current operating company (Amazonas D). In this case, the current company would be remunerated by the value of non depreciated assets.
In this scenario, despite the change in the object of sale of the auction, there is no change in its processes and parameters. However, the bidding of the concession would be led by ANEEL under terms of Article 15 of the Draft of the Decree and Article 3, Item II, of Law 9.427/96. The details are described in Section III - Auction Model Proposal.
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3.2 CCC
3.2.1 Context
It should also be noted that in this model, it is possible that Amazonas has values related to CCC, previously provided as amounts receivable in the balance sheet, reverted to accounts payable in view of technical decisions of ANEEL. The accounting difference in question has relevant value:
VALUES REGARDING AMAZONAS CCC | ||
A) Credits1 (assets) in Jun/17 balance | R$ 3,968,689,000.00 | |
B) Payables estimate2 (liabilities) | R$ (2,998,848,507.12) | |
C = B-A) Accounting difference estimate between credits and payables | R$ (6,967,537,507.12) | |
Note: Reference values, subject to diligence and auditors and regulators assessment | ||
1) | Source: Distributors financial statement from June 2017 | |
2) | Estimate value, not under diligence |
We understand that this issue is still under discussion between the interested parties and, therefore, ANEEL's unfavorable decisions to Amazonas can be reversed. However, the potential reversal of an unfavorable decision should not occur in a timely manner for the completion of this document or even within the timeline of privatization planned for the distribution company.
It is likely that the attractiveness of the auction to investors be compromised without definitions relating to CCC. The possible loss of credit rights and the need for return of values would remove any economic return of the business. The values under discussion are quite significant and relevant when compared to the economic value of the distributor. Thus, it is possible that the risk of loss relating to CCC does not justify the potential gains with the acquisition of the company by the investor.
In this regard, the proposed model for privatization seeks to neutralize potential effects on the appraisal resulting from the uncertainty in the amount effectively recognized of the accounting difference of CCC's credits. This proposal increases the assertiveness of the value for the privatization of Amazonas, as it enables Eletrobras to enjoy any upsides arising from the reduction of this potential loss amount.
3.2.2 Negotiations
Given the relevance of the value discussed for the valuation of the Amazonas and the unpredictability of the deadline for a final decision regarding this topic, it is recommended that the responsibility including possible benefits and burdens concerning the current discussion about the CCC credits be transferred from Amazonas to the holding company of Eletrobras. Thus, the effect of the current questioning would be neutral in the financial evaluation of the distribution company and in its sales model.
To this end, it is proposed that a transfer of the receivables concerning CCC equivalent to value in dispute be made and burdens in equal amount. This transfer would occur through the assign of current rights relating to CCC credits and financial obligations (for example, payables to CCC, other debts etc.) equivalent from the subsidiary to the holding company.
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As a result, in the case of an unfavorable decision, Eletrobras would be charged with the burden of loss, which would occur if the issue were priced on the sale model for the process of privatization of the distributor. In the case of a favorable decision, Eletrobras would reverse this potential loss, receiving the CCC credits and bearing obligations of equivalent value.
It stands out, also, that the transfer of credits and obligations related to the CCC must have the consent of the regulators and come accompanied by considerations of external auditors of the company, following the approval of the level of governance in charge.
Thus, with the absorption of these credits by Eletrobras, the impact on the values in question is considered neutral, without interference in the stakeholder value of the company or to the privatization process.
In the case of Eletrobras cannot absorb the credits as per the recommended proposal or that of any financial, technical or legal limitation occurs - that impedes the transfer of obligations in an amount equivalent to the credits, it is suggested that the holding company considers the possibility to capitalize the distributor. Such capitalization may occur at the discretion of Eletrobras, according to the best alternatives for the state-owned company.
3.2.3 Negotiation operationalization
In order to facilitate negotiations, Eletrobras should, among other things that may be needed: i) Define the value and availability of CCC rights and obligations in an amount equivalent to the subsidiary transfer to the holding ii) Analyze financial and accounting specific effects, among other aspects relevant to the company iii) Analyze corporate and legal specific requirements to follow, as well as realize them in case one proceeds with the recommendation iv) Seek the consent of regulators for the operation
3.3 Other critical points, necessary adjustments and recommendations
In the case of Amazonas, there are no other critical impeding points for its process of privatization, in addition to the issues of the Gas Contract and deverticalization reported earlier.
During the process of Legal Due Diligence of Amazonas other relevant points were described in the Report and displayed in its Executive Summary. Although not inhibitory to the process of privatization of this distributor, the new investor should be aware of them so that he can make applicable arrangements.
Among the important issues, but not deterrent, to be considered, are highlighted the contracts of financial nature, whose prior consent of the creditor is recommended in order to avoid the prepayment of the debt.
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3.4 Consent need in Financing Contracts
Some financing contracts signed by the distributors may have the need to obtain prior and express consent from the creditor in the event of a change of control of Amazonas.
Otherwise, according to the terms of each contract, there may be legal and/or financial implications to Amazonas, Eletrobras, investor and, eventually, to the privatization process, depending on the possible prepayment of debt if the commitment to payment is not assumed by the new investor.
Thereby, the financing agreements with the need for consent from the creditor are listed below, and must have their applications addressed by Amazonas and Eletrobras:
No. | Type of document | Lender | Date of Signature |
Private Debt | Petrobras Distribuidora S.A. | 12/31/2014 | |
1 | Acknowledgement Instrument | ||
Private Debt | Petrobras Distribuidora S.A. | 12/31/2014 | |
2 | Acknowledgement Instrument | ||
Private Debt | Petrobras Distribuidora S.A. | 03/27/2012 | |
3 | Acknowledgement Instrument | ||
Private Debt | Petróleo Brasileiro S.A. - | 12/31/2014 | |
4 | Acknowledgement Instrument | Petrobras | |
Purchase and Sale of Natural | Gas company of Amazonas - | 06/01/2006 | |
Gas | CIGAS, with intervenience- | ||
5 | consent of Petróleo Brasileiro | ||
S.A. - Petrobrás |
Contract No. 1 | |
Creditor: | Petrobras Distribuidora S.A. |
Intervenor: | Eletrobras |
Object: | Confession of debt due on the period July 1st, 2010 to April 24th, 2014, valued at |
R$ 2,295,290,972.71 | |
Amount: | R$ 2,295,290,972.71 |
Interests: | The installments shall be corrected by the rate of interest equivalent to the |
SELIC for federal securities | |
Grace Period: | Not applicable |
Principal payment: | 120 monthly and successive installments |
Guarantees: | Surety guarantee provided by the Union that undertakes for the loyal, punctual |
and integral payment of the entire obligation of AMAZONAS arising from the | |
contract | |
Relevant obligations: | Failure to pay (not remedied within 5 working days from the due date), shall |
subject AMAZONAS to moratorium fine of 2% on debt | |
Anticipated maturity: | The contract will be terminated in advance in the case of: |
(i) non-payment of 03 consecutive installments or alternated, provided this is | |
not remedied by AMAZONAS within 5 working days from the due date of the | |
final default installment; | |
(ii) liquidation, judicial or extrajudicial recovery request, application, | |
declaration or approval of bankruptcy of AMAZONAS; | |
(iii) protest of obligation greater than R $500,000,000.00 or filing of any | |
other judicial or extrajudicial measure in face of the AMAZONAS that can demonstrably affect the ability to pay the debt; | |
(iv) succession of AMAZONAS or any corporate reorganization that implies | |
change in the controlling interest of Eletrobras or AMAZONAS, without the | |
prior consent of the Creditor; |
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(v) accelerated maturity of any other financial contract concluded by | |
AMAZONAS, with guarantee of the Union; | |
(vi) inclusion in corporate agreement or corporate bylaws of AMAZONAS of | |
devices that imply damage or restrictions on the ability to pay financial | |
obligations arising from the contract | |
Other important clauses: | The contract will initiate its validity with its signature and it will be terminated |
with the total liquidation of the debt | |
Contract No. 2 | |
Creditor: | Petrobras Distribuidora S.A. |
Intervenor: | Eletrobras |
Object: | Confession of debt due in the period July 24th, 2014 to April 30th , 2014, valued |
at R$ 1,018,440,782.60 | |
Amount: | R$ 1,018,440,782.60 |
Interests: | The installments shall be corrected by the rate of interest equivalent to the |
SELIC for federal securities | |
Grace Period: | Not applicable |
Principal payment: | 120 monthly and successive installments |
Guarantees: | Surety guarantee provided by the Union that undertakes for the loyal, punctual |
and integral payment of the entire obligation of AMAZONAS arising from the | |
contract | |
Relevant obligations: | Failure to pay (not remedied within 5 working days from the due date), shall |
subject AMAZONAS to moratorium fine of 2% on debt | |
Anticipated maturity: | The contract will be terminated in advance in the case of: |
(i) non-payment of 03 consecutive installments or alternated, provided this is | |
not remedied by AMAZONAS within 5 working days from the due date of the | |
final default installment; | |
(ii) liquidation, judicial or extrajudicial recovery request, application, | |
declaration or approval of bankruptcy of AMAZONAS; | |
(iii) protest of obligation greater than R $500,000,000.00 or filing of any | |
other judicial or extrajudicial measure in face of the AMAZONAS that can demonstrably affect the ability to pay the debt; | |
(iv) succession of AMAZONAS or any corporate reorganization that implies | |
change in the controlling interest of Eletrobras or AMAZONAS, without the | |
prior consent of the Creditor; | |
(v) accelerated maturity of any other financial contract concluded by | |
AMAZONAS, with guarantee of the Union; | |
(vi) inclusion in corporate agreement or corporate bylaws of AMAZONAS of | |
devices that imply damage or restrictions on the ability to pay financial | |
obligations arising from the contract | |
Other important clauses: | The contract will initiate its validity with its signature and it will be terminated |
with the total liquidation of the debt | |
Contract No. 3 | |
Creditor: | Petrobras Distribuidora S.A. |
Intervenor: | Eletrobras |
Object: | Confession of debt amounting to R$ 720,532,407.39, related to the supply of |
petroleum products | |
Amount: | R$ 849,635,654.18 |
Interests: | The installments shall be corrected by the rate of interest equivalent to the |
SELIC for federal securities | |
Grace Period: | Not applicable |
Principal payment: | 60 monthly and successive installments |
Guarantees: | Guarantee surety provided by Eletrobras |
Relevant obligations: | The non-payment or termination by fact attributable to the AMAZONAS, shall |
subject AMAZON to fine of 2% moratorium on debt, regardless of notice or |
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judicial or extrajudicial notification | |
Anticipated maturity: | The contract will be terminated in advance in the case of: |
(i) tardiness in payments; | |
(ii) liquidation, judicial or extrajudicial recovery request, application, | |
declaration or approval of bankruptcy of AMAZONAS; | |
(iii) succession of AMAZON or any operation involving the replacement of this | |
by another; and | |
(iv) contract breach. | |
Other important clauses: | Not applicable |
Contract No. 4 | |
Creditor: | Petróleo Brasileiro S.A. - Petrobras |
Intervenor: | Eletrobras |
Object: | Confession of debt in the amount of R$ 3,257,365,513.24 arising out of |
contracts of purchase and sale of natural gas signed between AMAZONAS, the | |
Companhia de Gás do Amazonas (Cigás) and Petróleo Brasileiro S.A. - | |
Petrobras | |
Amount: | R$ 3,257,365,513.24 |
Interests: | The installments shall be corrected by the rate of interest equivalent to the |
SELIC for federal securities | |
Grace Period: | Not applicable |
Principal payment: | 120 monthly and successive installments |
Guarantees: | Surety guarantee provided by the Union that undertakes for the loyal, punctual |
and integral payment of the entire obligation of AMAZONAS arising from the | |
contract | |
Relevant obligations: | Failure to pay (not remedied within 5 working days from the due date), shall |
subject AMAZONAS to moratorium fine of 2% on debt | |
Anticipated maturity: | The contract will be terminated in advance in the case of: |
(i) non-payment of 03 consecutive installments or alternated, provided this is | |
not remedied by AMAZONAS within 5 working days from the due date of the | |
final default installment; | |
(ii) liquidation, judicial or extrajudicial recovery request, application, | |
declaration or approval of bankruptcy of AMAZONAS; | |
(iii) protest of obligation greater than R $500,000,000.00 or filing of any | |
other judicial or extrajudicial measure in face of the AMAZONAS that can | |
demonstrably affect the ability to pay the debt; | |
(iv) succession of AMAZONAS or any corporate reorganization that implies | |
change in the controlling interest of Eletrobras or AMAZONAS, without the | |
prior consent of the Creditor; | |
(v) accelerated maturity of any other financial contract concluded by | |
AMAZONAS, with guarantee of the Union; | |
(vi) inclusion in corporate agreement or corporate bylaws of AMAZONAS of | |
devices that imply damage or restrictions on the ability to pay financial | |
obligations arising from the contract | |
Other important clauses: | The contract will initiate its validity with its signature and it will be terminated |
with the total liquidation of the debt | |
Contract No. 5 | |
Document: | Agreement of purchase and sale of Natural gas (OC 1902/2006) Downstream |
Parties: | Seller: Companhia de Gás do Amazonas – CIGÀS |
Buyer: Manaus Energia S.A. | |
Consenting actors: PETROBRAS, Centrais Elétricas Brasileiras S.A. - | |
ELETROBRAS and Centrais Elétricas do Norte do Brasil S.A. - | |
ELETRONORTE | |
Date: | 06/01/2006 |
Object: | Supply of gas by Cigás to Manaus Energia S.A. take or pay mode, as well |
defined as the obligation of Manaus Energia S.A. to withdraw and if not remove |
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pay at least one volume of gas each month equivalent to 70% of the contractual | |
quantity. | |
The gas supplied aims thermoelectric generation for AMAZONAS, or for other | |
power generation dealer or independent power producer | |
Validity Period: | 20 years from the date of signature |
Main terms: | - Ship or pay of 100% (one hundred per cent) for the volume of 5.5 million |
m3/day; | |
- Take or pay of 70% and 80% of the annual monthly quantity of contract; | |
- Estimated investment in R$ 2,487,643,000.00 for design, construction, | |
Assembly and transportation system pre-operation, based on the conceptual | |
design of the project, with depreciation of 30 years; | |
- Payments are made in payment account opened and maintained by CIGÁS; | |
- Moratorium charges: variation of SELIC and 2% fine on the value of the | |
principal; | |
- Assignable contract only upon consent of the parties and the consenting | |
actors and provided evidence that the transferee applicant demonstrate | |
technical capacity and financial and economic to assume the obligations arising | |
from the contract, on pain of termination of the contract; | |
- ELETROBRAS signs the contract of surety and quality responsible solidarity | |
of the obligations assumed by MANAUS ENERGIA |
Contract No. 5 is obstacle to deverticalization of Amazonas, with the prior consent of Petróleo Brasileiro S.A. (“PETROBRA'S”) necessary for the process. This, in turn, requires the outstanding debts be traded as a condition for the agreement with the assign of the purchase and sale contract of the gas required to deverticalization. As mentioned in Item 3.1 -Deverticalization of Amazonas, the addressing of this topic will be party to suit of deverticalization of the distributor, prerequisite for this modeling of privatization.
3.5 Deposit of Shares Owned by Eletrobras at FND
The Nominative Share Record Book of all Distributors mentioned blockage of all shares owned by Eletrobras to the benefit of the National Privatization Fund – FND, administered by BNDES, in compliance with the Law no. 9.491/1997.
3.6 Remaining aspects to be considered
Remaining aspects shall be considered, the measures of which are within and outside the scope of Distributors are vital for the privatization process, as per the chart below:
ACTIONS ON DISTRIBUTOR’S SCOPE |
Obtaining authorization from Executive Board, Supervisory Board, Board of Directors to perform capital increases on the Distributor |
Performance of General Meeting specially convened to approve the Distributors’ capital stock, as well as an increase of capital stock by underwriting of new shares |
ACTIONS ON ELETROBRAS’ SCOPE |
Obtaining authorization from Executive Board and the Board of Directors to perform the privatization of Distributor |
Performance of General Meeting convened to approve the privatization of Distributor |
Performance of the necessary procedures to fulfill CVM [Brazilian Securities and Exchange Commission], NYSE, and Latibex |
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ACTIONS OUTSIDE THE DISTRIBUTOR’S AND ELETROBRAS’ SCOPE |
Obtaining prior approval from CADE provided on articles 88 and 90 of the Law 12.529/2011 and CADE Resolution no. 02/2012 |
Obtaining prior consent from ANEEL for share control transference (Art. 27 of the Law 8.987/95 Art 4, XI, of Annex I of the Decree 2.335/97, in addition to the provisions of ANEEL Normative Resolution 484/2012) |
Obtaining approval from the Board of the Investment Partnership Program (CPPI - Conselho do Programa de Parcerias de Investimentos) regarding operational modality, conditions and adjustments to be applied to the privatization (Law 9.491/97) |
Follow-up, surveillance, and evaluation of the privatization process by the Federal Court of Auditors (TCU - Tribunal de Contas da União) (IN TCU 27/1998) |
3.7 Payment methods
Under the Law No. 9.491/97, the payment methods in a privatization process shall be recommended by the National Privatization Council (CND), now replaced with the Board of the Investment Partnership Program of the Presidency of the Republic (CPPI), for approval by the President of the Republic. The latter may authorize remaining payment methods within the scope of the National Privatization Program, as recommended by the CPPI.
The Law also requires disclosure of selected items on the conditions for disposal of the concerned company’s shareholding control, through publication at the Brazilian Federal Official
Gazette and in nationally recognized newspapers. In particular, the following shall be disclosed:· Any dividend payments to the Federal Government (or to companies controlled by it) and contributions of capital to the capital account provided by it over the last 15 years;· Creation of special shares and the powers defined to them (as applicable).
For the event of Amazonas privatization, the defined payments are recommended to be made in full through the stock exchange (B3), by means of the effective currency, upon sale settlement.
The remaining procedural aspects shall be detailed in the Request for Proposal of Privatization, Manual of Auction Procedures, Procedural Manual for Offering of Shares to Active and Retired Employees and associated agreements.
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Since Amazonas met the requirements of these four perspectives, it was concluded that the company would be able to be sold in an auction associated with the concession granting, as soon as the deadlocks to negotiation thereof would be solved.
5. Relevant Aspects of Valuation
5.1 Relaxation of regulatory parameters
It should be taken into consideration that the companies’ valuation already considers, among the flow perspectives, the consequences of the Technical Notes 351/2017 and 149/2017 of ANEEL, the latter being the result of the Open Court 032/2017, providing for loosening of regulatory metrics for financially unbalanced concessions, including Amazonas.
Such ANEEL Technical Notes loosened for the company the regulatory values of the PMSO and RGR metrics of the designation period. As a result, there is increased financial setoff through tariff to the distributors and the resulting decreased volume of RGR loan, increasing the revenues thereof and, accordingly, its cash flow.
Such parameters shall be loosened from the tariff process dated 2017, initiated on November 01 of this year, up to the first regular review of the new utility to be contracted by means of a bid, estimated to be held in 2023.
Such parameters shall be used as auction variables, with their methodology and values being explained in Item 12.6 - Auction Value base for ‘Combined Discount Index in the Regulatory Flexibility and Grant’.
5.2 Debts
The indebtedness levels of Eletrobras distributors are quite high, and the debts may be divided into three major groups: Debts with Eletrobras; Debts with Specific Third Parties and Debts with Other Third Parties. Debts with Eletrobras in turn may be rated according to their origin: Ordinary Resources, RGR, Banco Mundial and Eletrobras related parties.
a) Debts with Eletrobras: refer to funds with the Holding or through it by means of onlending. Since Eletrobras itself holds the credit rights, the debts may be used by the company as means to optimize the capital structure of its distributors.
o World Bank: Eletrobras holds funds obtained with World Bank for the purpose of investing in improved infrastructures, project named by the companies as “Projeto Energia+” [Project Energy+]. Such funds are then lent to distributors as loans and financing.
o RGR (Global Reversal Reserve): Refers to amounts raised by Eletrobras for the distributor with the Global Reversal Reserve (RGR). Thus, the sums are due by the distributor to Eletrobras, associated with funds raised from the RGR. The amounts found in the balance sheet, as of the base date of this report (12/31/2016) are mostly from loans obtained prior to the designation period.
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RGR pre-PPST (temporary service provision period): Amount of debt arising out of the pre-PPST period, when the funds were aimed at financing investments of the distributors.
§ RGR PPST (temporary service provision period): Debt amount arising out of the PPST period, initiated in November 2016. Within the scope of the concession agreement termination and beginning of such period, the RGR onlending changed their purpose to maintaining the companies’ activities ensuring the so-called “Appropriate Remuneration”, as defined in the Technical Note 331 dated September
13, 2016. By the end of this Item, the estimated sums of the debts with RGR are provided until the end of February 2018 (date estimated for entry of the potential investors in the operations), considering the fund-raising operations in the service provision period.
o Ordinary Resources: Own fund onlending by Eletrobras to the distributors, through loans, usually with low financing cost and for the purpose of covering operating deficits. Therefore, this debt is directly due from the distributor to the Holding, without involving Third Parties.
o Advance Payment for Future Capital Increase (AFAC): Refers to funds contributed by Eletrobras at the distributors for future capital increases.
Usually, AFACs are paid-up as capital within up to one year of their composition, but that is not a requirement, and they may be kept in the balance sheet as distributor debt. Currently, only Eletrobras is responsible for contributing AFAC sums in the distributors.
o Related Parties: Refer to debts contracted with other Eletrobras distributors or companies, except the Holding. Among the major related parties with effective credits we may mention, for instance, Eletronorte, Furnas and Chesf.
Like in the case of the debts contracted directly with Eletrobras Holding, the company has preference over the funds, and may use the same alternatives as mentioned in the prior item. However, in this group of debts, there are legal and corporate aspects required to be noted vis-à-vis any measure. It should be stressed that variables such as the cash flows, the amount and the own capital structure of the creditor companies may be affected due to an attempted use of such credits.
b) Debts with Specific Third Parties: Debts of such nature are mostly overdue payment liabilities concerning fuel supply agreements (therefore, rated as debt by the Accounting-Equity Due Diligence), due by some of the distributors which are parties to this privatization process. Among the major creditors, we have Petrobras and Cigás.
c) Debts with Other Third Parties: refers to debts contracted with other parties than Eletrobras, its distributors, Petrobras or Cigás. The remaining creditors of the distributors and debt instruments are considered in this group, among which there are domestic public banks, such as Caixa Econômica Federal, private financial institutions and other funding agents. The procedures of the Accounting-Equity Due Diligence also included to the balances of Debts with Third Parties the amounts concerning overdue payments with suppliers, including, for example, overdue liabilities with CCC (Fuel Consumption Account).
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from both the reviewed sums provisioned and from identification of unmapped contingencies and their estimated value.
Contingencies, type of rating and amounts derive from the legal, accounting-capital and environmental audits conducted at Amazonas.
There are three types of contingency, according to their probable loss of the concerned sums and, accordingly, incorporation into the valuation process, as listed below:· Probable: o High risk of losing the sum involved in the judicial and administrative proceedings o Usually priced in valuations, decreasing the equity value· Possible: o Potential risk of losing the sum involved in the judicial and administrative proceedings o Usually not priced in valuations, being eventually dealt with in specific negotiations between the selling and the purchasing parties· Remote: o Low risk of losing the sums involved in the judicial and administrative proceedings o Usually not priced in valuations
5.4.2 Current status of contingencies
Find below the amounts and percentages of contingencies for Amazonas, according to their risk rating level.
In R$ MM | ||||
DETAILING OF AMAZONAS CONTINGENCIES | ||||
Likely | Probable | Remote | Total | |
Litigious | 373.23 | - | - | 373.23 |
Taxes | 589.75 | 12,589.68 | - | 13,179.43 |
Labor | 9.47 | 113.45 | - | 122.92 |
Actuarial | (0.45) | - | - | (0.45) |
Total | 972.01 | 12,703.13 | - | 13,675.14 |
In % | ||||
DETAILING OF AMAZONAS CONTINGENCIES | ||||
Likely | Probable | Remote | Total | |
Litigious | 38% | 0% | 0% | 3% |
Taxes | 61% | 99% | 0% | 96% |
Labor | 1% | 1% | 0% | 1% |
Actuarial | 0% | 0% | 0% | 0% |
Total | 7% | 93% | 0% | 100% |
Note: ‘Litigious’ contingencies refer to materialized lawsuits and include actions from different areas (taxes, labor, civil, environmental, and regulatory). The others refer to risks mapped in the respective diligences, which do not have materialized suits. | ||||
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The tax contingencies rated as ‘Possible’ of the distributor refer to PIS [Social Integration
Program], COFINS [Contribution for Social Security Financing] and ICMS [Tax on Goods and Services Marketing] amounts accruing over CCC reimbursements. In addition to the risk of losing such values not being indicated as ‘Probable’ by the audit, it should be stressed that they should carry tariff coverage if effectively charged from distributor, neutralizing their economic effect.
In addition to the provided contingencies, there are also contingencies concerning environmental adaptations in the amount of R$ 184,495,398.57 required for distributor. Such values, however, were previously deducted from the equity value in the company’s valuation.
It should be stressed that the base date of the contingencies is 12/31/2016 and that such sums are in addition to those provisioned in the distributor’s balance sheet dated December
2016. The full details of the contingencies are in the audit reports.
5.4.3 Negotiations to deal with contingencies
Dealing with such distributor contingencies is relevant to enable eventual adjustments to the company’s price between the selling and purchasing parties. However, after developing several legal and financial analyses on contingencies, it was concluded that Eletrobras would avoid keeping future liabilities – after privatization – with the purchaser related to contingencies, in addition to eventual legal provisions allowing for the purchaser to question or file actions in the future to Eletrobras.
Thus, the adjustment definition shall occur prior to entering into the share purchase and sale agreement. Therefore, we recommend the distributor privatization to consider prior corporate adjustments between the parties as part of distributor’s sale price definition. As a result, new value adjustments or corrections concerning these items shall not be conducted after the privatization.
Contingencies whose assessments are Probable Loss, due to the high chance they have to lose the sums involved in the respective proceedings, should be deducted from the stakeholder’s value prior to transferring the shareholding control. Likewise, contingencies rated as ‘Possible’ and ‘Remote’ Loss should not have their value deducted from the company’s sale price.
· ‘Probable’ Contingencies: their amount shall be discounted from the equity price due to decreased chance of success in the proceeding and resulting probable loss of the value involved in the claim;· ‘Possible’ and ‘Remote’ Contingencies: their amount shall not be discounted from the equity price considering the chance of success in the proceeding and reduced probable loss of the value involved in the claim.
It should be stressed that several possibilities were analyzed to deal with contingencies, but all of them were proven to be financially unfeasible, with great operating complexity or with legal hindrances and risks.
In addition, Eletrobras was identified, due to its State nature and current financial condition, to have legal and financial limitations to offer warranties to the investors in relation to such contingencies.
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purchasing company, being questionable to advance its pricing in the minimum amount· Companies can be privatized at different times – e.g., such as Amazonas, which would not match the different nature groupings· Ungrouped concessions can increase competitiveness between the bidders, increasing competition and resulting into higher final price, but differently from pre-estimated synergies, avoiding the risk of empty offers for a grouping
It should be stressed that grouping can be used for pragmatic aspects, deriving from objective assessment aspects (e.g., grouping to minimize the required capitalization) and the own interest of investors (mitigating risks that a less attractive concession is not successful in the privatization).
In summary, a wide assessment, allied to the discussed context, does not construe as consistent the synergy incorporation to the minimum price and, accordingly, inexistence of returns to the proposed model.
Such recommendation occurs vis-a-vis the instruction that no concession groupings should be conducted since it is construed that an open model shall tend to increase the competition between the stakeholders. Thus, there would be not only an increased number of offers –avoiding the chance for auctions without bidders – but also increased prices offered. Such prices, in turn, would be more appropriate to the level of synergy the investors shall have when inserting such companies into their management model.
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7. Adjustments on the Privatization model
7.1 Context
The privatization model is made from the results of the due diligence reports and economic-financial assessments. However, for the final proposal of capital and corporate structuring of the distributor, it is necessary that additional adjustments are conducted.
The adjustments are carried out for the privatization model to meet the required legal instructions and comprise the latest information available concerning the economic-financial condition of the distributor.
Adjustments made follow the stages provided below:
ADJUSTMENTS FOR PRIVATIZATION MODELING |
= Mean of Services A and B |
(+/-) Consolidated adjustments |
Balance Sheet Adjustments |
(+/-) Asset and Liability Adjustments |
(+) RGR PPST Reincorporation |
(-) Reclassification of AFACs as Debt |
(-) Tax Adjustments (Tax Loss and Negative Base) |
= Adjusted Equity Value |
(-) Reduction adjustment of tariff relaxation |
= Final Equity Value |
The following topics describe the adjustments made. Their amounts are detailed in Section II - Privatization proposal.
7.2 Base amount of valuation – Average between valuations of Services A & B
Under Decree 2.594/98, providing for the National Privatization Program, Amazonas sale model shall consider the financial assessments conducted by Services A and B contracted by the State-owned bank, conducted with the base date of December 2016.
Within such context, based on the equity values drafted by Service A reported through the Letter AD/DEADE3 No. 14/2017, it is proposed that the equity value considered as basis for the financial and corporate model of Amazonas shall be the simple average of the equity values defined by Service A and Service B. The formula is below:
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For positive variation, the stakeholder’s value is reduced, and, for negative variation, such amount is increased.
The adjustments excluded the accounts of ‘Liabilities’ concerning variations in the provisions for contingencies, litigations and civil, tax and labor claims. The reason is the probable overlapping between the new provisions made in the statements (after the valuation base date of December 2016) and the amounts of contingencies made by the Consortium. The amounts made are related to the same topics, in addition to the amounts of provisions of the financial statements and discounted from the stakeholder’s value. Thus, the adjustment related to provisions for contingencies is avoided to occur in duplicate, leading Eletrobras to make increased contributions than those actually required.
Detailed amounts and the adjustment balances are provided in Item 10.2.2 - Balance update adjustment refer to the consolidated balance between the amounts of December 2016 and June 2017, which may be positive or negative. Balances of fiscal benefit and negative CSLL [Social Contribution on Net Income] basis were also updated to June 2017.
The resulting amount is used as basis for the adjustment in loosened regulatory parameters. The adjustments were solely applied in the equity value, not being extended to any other income.
7.3.2 Adjustment related to Advance Payments for Future Capital Increases (AFACs)
Furthermore, if the distributor has AFACs, another adjustment is made, with the amounts concerning AFACs being considered as debt. Until the updating of the balance sheet dated June 2017 – last updated until this report was concluded – no existing AFAC was used to increase the capital.
Thus, we suggest no new capital increase by using the AFACs of distributors by Eletrobras. As an alternative, its amounts shall now be construed as debts in the balance sheet (and may be used as an additional alternative for the capitalization to be conducted by Eletrobras outlined in
‘Stage 1’, as well as the remaining options provided).
Taking into account that, once approved, the CPPI Resolution with definitions of financial and corporate adjustments to be made in the distributor under privatization, it is not advisable that new corporate amendments are made. It means that, if paying-up of the AFACs is after the CPPI publication, there is great chance that the numbers established in such CPPI Resolution will not comply with the distributor’s capital stock after capital increase by using the AFACs.
Thus, conflicts will be avoided concerning the number of shares to be subscribed, as well as their underwriting amount, in addition to eventual legal conflicts or non-compliances.
We should also consider that there are no relevant financial benefits in paying up the AFACs instead of considering them as debt. The effect upon the equity is neutral, since the new indebtedness amount shall be part of the adjustments of the model. Eventual savings of the distributor with debt taxation costs (e.g., IOF) shall be offset with benefits of the reduced basis for collection of the distributor’s income tax and with adjustments for inflation of the AFACs
(e.g., SELIC), which shall be due to Eletrobras.
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It is also stressed that the eventual paying-up of AFACs requires several levels of approvals, including internally at distributor and Eletrobras, as well as externally from the respective governmental agencies (e.g., MME, GCEST and PGFN).
Finally, we note that, until the latest information available for this report, the distributors’
AFACs funds solely derive from Eletrobras. Detailed adjustments and amounts related to the AFACs are found in Section II - Privatization proposal.
7.3.3 Tax adjustments –Tax Losses and Negative Base
In the first semester of 2017, the distributors used part of the Tax Losses (Individual Taxpayer Income Tax – IRPF) and Negative Base (Social Contribution on Net Income – CSLL) to liquidate tax debts. Since the economic-financial analysis of the distributors considers the use of these benefits positively in their cash flow, once used, such benefits must be excluded from the evaluation.
Thus, for the financial modeling, the balances of Tax Loss and Negative Base used between January and June 2017 have been deducted from the tax balances existing in December 2016, base date used in the economic-financial analysis.
7.3.4 Adjustment of the relaxation of regulatory parameters
The adjustment in the relaxation of regulatory parameters aims at complying with ANEEL Technical Note no. 149, dated September 8, 2017, in order to reach the economic equilibrium of the concessions of designated distributors, defined under the terms of Normative Resolution no. 748/2016.
Thus, the Draft of the Decree that will govern the bidding of distribution associated with the transfer of control of legal entity providing the electric power service, as per Law 12.783/2013, establishes that, in case the value to the stakeholder of Amazonas resulting from the valuation is positive (which also considers the adjustment of the balance update) based on the relaxation of regulatory parameters, the value of relaxed parameters must be registered so that the value to the stakeholder is zero. That is, in case Amazonas had negative value to the stakeholder before the relaxation of regulatory parameters, and such relaxation results in positive value to the stakeholder, the value of the relaxed parameters must be reduced to the amount necessary for the value to stakeholder to be equal zero.
The relaxed regulatory parameters of Amazonas are listed below:
RELAXED PARAMETERS |
- PMSO |
- RGR PPST |
The adjustment of the relaxed regulatory parameters is applied to values of equity value (average of services A and B), corrected with the other adjustments specified (balance update, RGR PPST, AFAC, Tax Loss and Negative Base).
In order to zero the value to stakeholder, the relaxed values of the relaxed parameters shall be adjusted. The reason is that they have a direct effect to the first years of the concession and
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raise the rate to the consumer in a period in which other exceptional rate adjustments are in force.
As detailed in Section II - Privatization proposal, the relaxed values will be used as variables of the privatization auction, after the eventual adjustment of these parameters to zero the value to stakeholder. In addition, the RGR PPST will also be used as an auction variable.
It is also worthwhile noting that in case the value to stakeholder of the distributor is negative after the regulatory flexibilization, it will not be necessary to adjust the value of relaxed parameters. In this scenario, the relaxed value shall be fully valid as a base for the bids of investors in the auction.
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This stage, as well as its premises and parameters, is detailed in Item 8.2 - Minimum adjustment of the capital structure – “Stage 1”.
Investor capitalization – “Stage 2”
“Stage 2” is a stage after “Stage 1”, and optional to Eletrobras.
It is important to stress that the capital structure of privatized companies needs to be balanced after the sale. This equilibrium is important to assure that the company will have financial health to honor its obligations – such as investments forecasted for the period of concession – and overcome eventual adverse conditions.
This, the modeling determined that the investor stakeed in acquiring the company, in addition to buying the shares held by Eletrobras at the company of symbolic value, will also invest funds and resources to balance the capital structure of the company.
This stage, as well as its premises and parameters, is detailed in Item 8.3 - Investor capitalization – “Stage 2”.
Eletrobras corporate stake option
In order to allow Eletrobras to have economic and financial benefits in the future with the privatization of its distributors, the modeling foresaw the possibility for the state-owned company to remain as a stakeholder of the companies sold, holding only a minimum percentage of corporate stake right after the disposal, being able to increase its corporate stake by up to 30% of the total shares of the distributors within up to six (6) months after the auction.
For such, Eletrobras is entitled to increase its corporate stake up to the limit of 30% of the shares of the capital stock of Amazonas, case in which the investor shall assign its right to subscribe such new shares to Eletrobras, so that it may formalize such increase. Considering the financial conditions of the company and the credit amounts of the debt held by Eletrobras with its distributors, Eletrobras may also pay such new shares by exchanging such debts into investment. These rules will be defined in the Stakeholders Agreement to be signed by Eletrobras and the investor, and such agreement will be an attachment to the Purchase and Sale Agreement of the distributor.
Finally, it should be stressed that this alternative is not effectively part of the privatization, but an alternative available to Eletrobras, to be evaluated by it. Therefore, the intent is to include in the purchase and sale agreement of the distributor that Eletrobras may manifest its stake in increasing its corporate stake in the distributors after the privatization, within up to six (6) months from the date of the auction.
In order to be eligible to increase its corporate stake in this stage, Eletrobras must hold one (1) share at the end of “Stage 1”. In case Eletrobras chooses not to increase its stake, such remaining share shall be sold to the investor within six (6) months from the date of the auction.
This stage, as well as its premises and parameters, is detailed in Item 8.4 - Eletrobras corporate stake option.
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quantity of active and retired employees eligible to purchase shares; 3) a margin of safety for the number of eligible employees, active and retired; 4) the number of shares of the company; 5) the minimum values to each lot of shares of the company.
The capitalization value also considered the reality of six distributors in privatization procedure by Eletrobras, part of the same initiative. An uniform value was defined to all, considering the similarity of the financial situation in which they are found, as well as the proposed auction model, in which its sales operations interconnect. The definition of a homogeneous sales value of the companies, considering their financial situation, allows for a clearer and greater understanding of the privatization procedure of these companies to investors and to society.
Details on the number of shares and values, among other aspects, are listed in Section II -Privatization proposal and in the Public Notice to the privatization procedure of Amazonas.
8.2.2 Capitalization alternatives
It is recommended that the choice on the alternatives to perform the adjustments to the capital structure of Amazonas should fall exclusively onto Eletrobras. The choice shall be made according to the most attractive options and to the reality of financial availability and credit of the company at the time of the operation.
Recommendation made, it has been noted that Eletrobras could use three main alternatives to make the capitalization, all resulting in subscribing shares of the distributor: (i) conversion of debt credits by distributor to Eletrobras; (ii) assumption of debts of the distributor with third parties; and/or (iii) cash contribution to the distributor’s capital structure.
· Conversion of debt credit of distributor: requires that Eletrobras should waive the right to amortization and interest of the debt credits, which, in part, would be of doubtful liquidation without the privatization. However, no demand is made in terms of cash disbursements by the company;· Assumption of debts of distributor with third parties: requires disbursement of cash for the payment of debts with third parties, according to the negotiation occurred;· Funding of financial resources to the distributor: requires disbursement of capital to allow the contribution to capital.
In order to define the best alternative of capitalization to Eletrobras, a specific analysis shall be carried out by the Holding.
8.3 Investor capitalization – “Stage 2”
Even after the adjustment to the capital structure by Eletrobras to a symbolic value, the recommendation, for the purposes of conclusion of the privatization procedure of Amazonas, is to conduct a new capitalization of the company, however this time by the investor, against the underwriting of new shares. This capitalization has the attributions of:
a) Avoiding the participation of investors effectively committed with the success of the company or without the due financial conditions to make the investments necessary for the organization;
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b) Optimizing the capital structure of the company. After the “Stage 1”, against a symbolic equity value, the capital structure of Amazonas shall consist of approximately 100% of debt. Thus, the company is not duly capitalized to make the investments and other demands of cash;
c) Demonstrating to society and stakeholders that the privatization of Amazonas has attracted an investor committed to contributing with resources sufficient to cover the investments in the first five years of the concession, fundamental to lever efficiency and the level of service of the company.
The definition of the capitalization value considered the estimate of investments forecasted for the company by this Consortium. To establish the amount of capital required, the estimated value of investments in capex was used for the first year of the concession, in effective terms and pursuant to the base date of the valuation.
The investment forecasted for the first year of the concession after the privatization of Amazonas is equivalent to approximately 20% of the amount of investments estimated for the entire tariff cycle. Thus, after its sale, the distributor will be sufficiently capitalized to meet its initial cash needs and proportionally to the investments forecasted for the period.
It should also be considered that the demand of investments forecasted to Amazonas is expressive. According to the parameter used, the amount of capital required from the investor represents a relevant amount in absolute terms. Similarly, when relative aspects are analyzed, approximately 25% of the enterprise value calculated to the distributor is achieved.
It should be noted that, even in the case of Eletrobras does not exercise, in part or as a whole, the option to increase its corporate stake, there will be no damages to the operation nor to the investor. Although the leverage is higher, the capital structure of the distributor would have been more balanced with the contribution of the investor. Consequently, the company will remain prepared to make the relevant investment forecasted for the first years after the privatization. Similarly, the reasons expressed above, which justify the capitalization of the investor, would have been duly met.
It should be noted that, in addition to the capitalization forecasted for the investor, optimizations of the capital structure tend to be made progressively by the future investor. Thus, new contributions of resources may be demanded so that the financial equilibrium of Amazonas is continuously achieved or even to face cash demands. Accordingly, in case Eletrobras decides to remain as a stakeholder of the distributor and does not accompany the investor in eventual future increases of capital of the distributor, it shall be diluted. The same principle applies to eventual minor stakeholders (including Active and Retired Employees).
The capitalization values of the investor are listed in Section II - Privatization proposal.
8.4 Eletrobras corporate stake option
8.4.1 Justification
The privatization modeling considers the possibility of Eletrobras continuing as a minor stakeholder of Amazonas after the disposal of the shareholding control of such distributor.
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When holding a shareholding stake, even if assuming the risks as a stakeholder of the company, Eletrobras may recover part of the investments made with the receipt of dividends or future increase of value and subsequent sale of its shareholding stake.
In such case, Eletrobras shall have the right to increase its shareholding stake at Amazonas after the privatization of the company, having as an alternative not only the contribution to capital, but also the additional conversion of debts into shares. Thus, the state-owned company will not necessarily need to contribute to the capital of Amazonas in case it is willing to exercise the respective option, using the credits of remaining debt eventually held against the privatized company.
The structuring of this alternative to Eletrobras occurs to provide it with an option to generate additional value from the privatization. For such, a financial valuation shall be carried out by Eletrobras, considering, among other aspects, the TIR and VPL of both scenarios.
8.4.2 Eletrobras corporate stake threshold
The corporate stake of Eletrobras should be limited to 30% of the shares of the company. The threshold of 30% was established based on benchmarks and good market practices, in which minor stakeholders have limited participation in the governance and/or management of the company.
The established percentage, in addition to allowing Eletrobras to hold relevant economic stake in the company, will not be equivalent to that of future investor, which will provide the investor with autonomy to act.
The capitalization to be performed by Eletrobras shall also follow the same profile of share categories currently existing at Amazonas. Thus, eventual risks of legal inquiries related to specific corporate adjustments to the privatization procedure may be mitigated.
However, the stakeholders agreement set forth in Item 8.4.3 –Participation of Eletrobras in the governance of the company shall be observed. Therefore, the degree of attractiveness of Amazonas privatization to investors, main resource holders and risk takers, should be kept when assuring autonomy in the management of the company.
Such evaluation was also carried out based on market analyses, which included interviews with market experts and potential investors. In general, investors tend to accept the participation of Eletrobras in the company, however without substantial participation in the management of the company.
8.4.3 Participation of Eletrobras in the governance of the company
In the presented model, although Eletrobras holds shares of Amazonas, the state-owned company should preserve minimum rules in the management and governance of Amazonas. Thus, the attractiveness of sale of the distributor would not be reduced duet to the sharing of its management, allowing the highest degree of freedom to the new investor.
For such, it proposes that, regardless of the shareholding organization of Amazonas after the privatization, a stakeholders agreement with the following parameters shall be established:
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MODEL OF PROPOSED AGREEMENT | |
Participation Option | Eletrobras option to increase the participation in the distributor up to 30% |
Conditions for the increase of capital | Accompany or increase the participation via debt conversion |
Purchase priority | Valid to investor and to Eletrobras |
Tag Along | 100% |
Effectiveness of the agreement | Regardless of controller succession |
The objective of this configuration is to preserve the attractiveness of creation of value of the company, overcoming eventual barriers resulting from the sharing of decisions of the company after the privatization.
It is worthwhile noting that, even though not having a role in the management of the company, Eletrobras shall have its rights as a minor stakeholder duly protected. Privatized, Amazonas will become a business corporation, one of the legal requirements for a company engaged in the distribution of electric power. In this case, the rights of the minor stakeholders will be governed by law, as well as the requirement of observance of good corporate governance practices (including the conduction of external audit and the disclosure of financial statements).
In addition, Eletrobras shall have specific aspects set forth in the stakeholders agreement and in the obligations of the eventual investor when acquiring Amazonas. The rights of Eletrobras are protected by the conditions detailed in the Public Notice to privatization of the company, and the specific conditions of the purchase and sale agreement of the distributor, including the stakeholders agreement.
8.4.4 Procedure for Eletrobras to increase its shareholding stake
The purchase and sale agreement of the distributor and the stakeholders agreement establish that Eletrobras will have up to six (6) months from the date of the auction to decide on its stake in increasing its shareholding stake by up to 30% of the shares of the capital stock of Amazonas. Once the decision is made, Eletrobras shall communicate it to the new controller so that it becomes effective.
In case Eletrobras is stakeed in increasing its participation, the legal and usual procedures for the capitalization of the company shall be observed, considering the rights of minor stakeholders – including active and retired employees acquiring shares of Amazonas. The investor shall not accompany such capitalization, in order to dilute its stake in the distributor and for Eletrobras to achieve the maximum threshold determined for its shareholding stake.
As mentioned, the capitalization to be made by Eletrobras may also be made using debt credits held by the state-owned company with Amazonas. The financial conditions of the capitalization, i.e., the market value per share, shall be the same of Stage 2 and of the auction.
8.5 Classes of shares
During the procedures of increase of capital of the distributor, the assumed premise is that the distributor will observe the legal rules applicable to the matter.
In case the new controller is stakeed in rearranging the corporate structure of the company, it may issue new classes of shares or create groups. This should occur provided that the legal
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rights of minor stakeholders are observed, as well as the contractual obligations resulting from the privatization procedure.
9. Shares offering to active and retired employees
9.1 Mechanism
According to the applicable legislation, the active and retired employees of the companies directly or indirectly controlled by the Government, included in the National Privatization
Program (“PND”), herein the Investment Partnership Program (“PPI”), are assured the offer of at least ten percent (10%) of the shares representative of its capital.
The offer to active and retired employees is made in parallel with the privatization auction, and its implementation is conditioned to its success, i.e., against the effective transfer of shareholding control.
To take part of the offer, active and retired employees must be qualified according to the criteria established in Item 9.2 – Definition of active and retired employees. After such qualification, active and retired employees shall indicate the number of lots of shares they are willing to reserve, without any purchase obligation.
Each qualified active and retired employee may receive the same number of shares, regardless of title, either at the present or upon retirement.
To negotiate the shares, the active and retired employees must be qualified and must hire a custodian agent, authorized institution accredited with B3, new denomination of BM&FBOVESPA.
9.2 Definition of active and retired employees
For the purposes of the Offer to Active and Retired Employees, active or retired employees of the distributor shall be considered as the following:
1) Employees with labor links with the distributor on the date of publication of the Public Notice in the Federal Official Gazette;
2) Retired employees who meet any of the following requirements: a) Hold labor link with the distributor on the date of request of their retirements; b) Have the last contribution to the social security made as an employee of the distributor; c) Have the last contribution to the social security covered by the distributor, as a result of voluntary dismissal plans; The details on the eligibility criteria of active and retired employees for their eligibility to the auction, including specifications of CNPJ [Corporate Taxpayer ID Number] of companies eventually related, shall be included in the Public Notice to the privatization of Amazonas.
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9.3.2 Offsetting differentiated conditions to Eletrobras
The discount offered to the active and retired employees must be offset to Eletrobras by the investor, as per Article 30, Paragraph 5 of Decree No. 2.594, of May 1998. Such offset shall occur directly, with the total value being paid in conjunction with the liquidation of the auction.
After the stage of offer to the active and retired employees, shares that have not been sold shall be purchased by the winner of the auction, for the same price as previously offered, i.e., with the same discount offered, since the investor already is responsible for the costs of such discount.
9.3.3 Offer Procedure and Purchase Limits
A single offer of shares shall be made, extensive to all active and retired employees of each distributor, of 10% of the total amount of shares held by Eletrobras after the adjustment of the capital structure of “Stage 1”.
Based on the value of the shares for the disposal to the Investor, the value of shares for the Offer to Active and Retired Employees shall be calculated with the application of the discount of 10%, as indicated in Item 10.6 - Shares offering to active and retired employees. In order to allow the Offer, the shares will be grouped so that a lot of shares has value equivalent to R$ 0.01 (one centavo), minimum effective unit for money transactions.
After the qualification stage, the maximum limit of lots of shares that each active and retired employee may acquire will be defined (“Purchase Limit”), through the division of the number of lots offered by the number of qualified persons.
9.3.4 Follow-up by minority stakeholders of investor underwriting
As presented in Item 8.3 - Investor capitalization – “Stage 2”, the investor shall increase its interest in the capital stock against the underwriting of new shares following the liquidation of the auction. At that time, the persons who have acquired shares through the Shares offering to active and retired employees already are considered stakeholders of the company.
The value per share (or lot of shares) for the eventual follow-up of the capitalization by the active and retired employee shall be equal to the price per share for the investor underwriting.
9.3.5 New controller shares repurchase obligation
The active and retired employees will be entitled to distribute the acquired shares in the following differentiated conditions:
a) Under the scope of the Offer to the active and retired employees b) In the underwriting of capital with the investor
In case the active and retired employees who acquired shares of the Distributor are interested in selling such shares to the new controller, they may make such sale after three years from the date of the liquidation of the auction. The repurchase of these shares shall be made at the price per share acquired, up to the total maximum value of R$ 100,000.00 (one hundred thousand Brazilian Reais) per Active or Retired Employee.
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Moreover, for the repurchase, the value of the shares acquired by the active and retired employees shall be added 10%. Following that, such total must be adjusted by the SELIC of the period for the purposes of inflation adjustment of the values. These values are detailed in Section II - Privatization proposal.
The addition of 10% to the repurchase value is defined as a form of assuring differentiated conditions to the active and retired employees with a substantial value, since the sale of shares for the privatization of the distributor is made with symbolic value. It is a benefit for the participation in the capitalization of the company and also an stimulation for employees to contribute with the financial and operating success of the company.
The price per share (or lot) shall observe eventual adjustments resulting from grouping, split, bonus, and/or additional underwritings of shares or equivalent operations. Details of the values are also presented in Section II - Privatization proposal.
It is worthwhile noting that the active and retired employee are not prohibited from acquiring shares from Amazonas sold by it to third parties. However, in case such sale occurs, the obligation and respective share repurchase conditions are cancelled. Exceptions apply to cases of heritage and eventual legal provisions.
9.4 Shares not acquired by active and retired employees
The shares offered in the Shares offering to active and retired employees, eventually not acquired by active and retired employees, shall be purchased by the investor. The purchase shall occur at the differentiated value (already with the discount), since the investor will already be entitled to offset the discount to Eletrobras.
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Section II - Privatization proposal
10. Summary of Amazonas’ privatization proposal
This summary will present the recommendations of Consórcio Mais Energia B in relation to the privatization of Amazonas. The evaluations and recommendations are presented in an objective manner, according to the instructions presented in Section I - Privatization context.
They are intended to guide the actions to be taken by Eletrobras and entities responsible for the privatization procedure of the company.
10.1 Amazonas’ Corporate Structure
The corporate structure on the base date of 12/31/2016 is organized according to the table below:
CURRENT AMAZONAS’ CORPORATE STRUCTURE | |||
Total shares | 6,276,666,628 | ||
Capital stock | R$ | 4,610,171,103.19 | |
Nominal value of shares | R$ | 0.73449354 | |
Interest | Shares | (%) | |
Eletrobras | 6,276,666,628 | 100.00% | |
Minorities | 0 | - % | |
Classes of shares | Shares | (%) | |
Ordinary | 6,276,666,628 | 100.00% | |
Preferential | 0 | - % |
10.2 Amazonas’ Sales Price Definition
10.2.1 Result of economic-financial evaluations
The economic value of the shares of the company was determined according to the base date of 12/31/2016. Following on, the values were defined, considering the average of the prices for Services A and B, demonstrated in the table below:
ECONOMIC VALUE OF AMAZONAS - MEAN OF SERVICES A AND B | ||
Service A | R$ | (8,431,847,736.90) |
Service B | R$ | (8,895,677,256.91) |
Mean of Services A and B | R$ | (8,663,762,496.91) |
The definition of the economic value of Amazonas followed the definitions and instructions of Decree no. 2.594/98, Article 30, Paragraph 3, taking into account several aspects relevant to a valuation:
a) Improvement of the operational efficiency level of the company, equal to or even higher than the efficiency levels of the market; and
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b) Evaluations of relevant due diligence for asset valuation (Legal Due Diligence, Accounting-Equity Due Diligence, Technical-Operational Due Diligence, Actuarial Due Diligence, Human Resources Due Diligence, and Environmental Evaluation Report).
The detailing of the relevant information of these reports for the modeling are described in Section I - Privatization context.
10.2.2 Balance update adjustment
As mentioned in Item 7.3.1 – Adjustment to comprise updated balance sheet until June 2017, the entries of the balance of Amazonas were updated to reduce the difference of values between the base date of the valuation (December 2016) and the last available publication of results (June 2017).
The balances of the adjusted values are listed below, by entry, and consolidated in a table, including the positive or negative effect they have to the adjustment value:
ASSETS (IN R$ 000) - AMAZONAS | Dec/16 | Jun/17 | Adjustment |
Current | |||
Cash and cash equivalents | 71,343 | 80,098 | 8,755 |
Securities | 28,706 | 237,988 | 209,282 |
Clients | 609,707 | 656,331 | 46,624 |
Taxes to be recovered | 22,495 | 2,318 | (20,177) |
Reimbursement rights | 897,600 | 227,666 | (669,934) |
Warehouse | 122,987 | 115,001 | (7.986) |
Services in progress | - | - | - |
Regulatory asset | - | - | - |
Sureties and judicial deposits | - | 9,361 | 9,361 |
Financial asset | 77,062 | 37,202 | (39,860) |
Assets destined to disposal | - | - | - |
CDE repayment | - | - | - |
Others | 185,907 | 131,794 | (54,113) |
Non-current | |||
Clients | 105,791 | 97,988 | (7,803) |
Taxes to be recovered | - | - | - |
Taxes to social contributions | 1,421,805 | 1,469,858 | 48,053 |
Sureties and related deposits | 413,730 | 448,734 | 35,004 |
Reimbursement rights | 3,573,069 | 3,827,883 | 254,814 |
Regulatory asset | - | - | - |
Others | - | - | - |
Investments | 17,107 | 17,107 | - |
Total asset adjustment | (187,980) |
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LIABILITIES (IN R$ 000) - AMAZONAS | Dec/16 | Jun/17 | Adjustment |
Current | |||
Loans and Financing | 88,542 | 150,671 | 62,129 |
Lease | 136,662 | 136,907 | 245 |
Debt charges | - | - | - |
Suppliers | 4,819,380 | 5,317,607 | 498,227 |
Taxes payable | 93,433 | 48,306 | (45,127) |
Social and labor obligations | - | - | - |
Reimbursement obligations | - | - | - |
Accounts payable to related parties | - | - | - |
Estimated obligations | 42,298 | 58,663 | 16,365 |
Sectorial charges | - | - | - |
Post-employment benefits | - | - | - |
Regulatory liabilities | - | - | - |
Research and development | - | - | - |
Financial liabilities | 103,157 | 115,906 | 12,749 |
Others | 160,071 | 140,245 | (19,826) |
Non-current | |||
Loans and Financing | 1,898,681 | 2,432,864 | 534,183 |
Lease | 1,032,842 | 987,943 | (44,899) |
Suppliers | 8,055,796 | 7,921,897 | (133,899) |
Taxes payable | - | - | - |
Reimbursement obligations | 1,157,893 | 1,157,262 | (631) |
Accounts payable to related parties | - | - | - |
Provision for unsecured liability in controlled | 158,036 | 225,357 | 67,321 |
Post-employment benefits | 2,160 | 2,160 | - |
Regulatory liability | - | - | - |
Sector charges | - | - | - |
Advance for future capital increase | 117,446 | 117,446 | n/a |
Research and development | - | - | - |
Others | 63,270 | 59,657 | (3,613) |
Total liabilities adjustment | 943,224 |
CONSOLIDATED VALUE OF ADJUSTMENTS (IN R$ 000) - AMAZONAS | |
(+/-) Asset Adjustment | (187,980) |
(+/-) Liabilities Adjustment | (943,224) |
(+) RGR PPST Reincorporation | 1,000,596 |
(-) Reclassification of AFACs as Debt | (117,446) |
(-) Tax Adjustments (Tax Loss and Negative Base) | - |
Consolidated value of adjustments | (248,054) |
The consolidated value of the balances of the entries for the respective period was used as the adjustment value:
AMAZONAS VALUATION ADJUSTMENTS | ||
Mean of Services A and B | R$ | (8,663,762,496.91) |
Consolidated adjustments | R$ | (248,054,062.03) |
Adjusted Equity Value | R$ | (8,911,816,558.94) |
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10.2.3 Regulatory parameters relaxation adjustment
As described in Item 7.3.4 – Adjustment of the relaxation of regulatory parameters, in case the ‘Adjusted Equity Value’ is greater than zero, the relaxation of the regulatory parameters must be reduced to result an equity value equal to zero. In the case of ‘Adjusted Equity Value’ smaller than zero, there will be no reductions to the relaxation of the rate parameters and no adjustment will be made to the equity value.
AMAZONAS TARIFF RELAXATION ADJUSTMENTS | ||
Adjusted Equity Value | R$ | (8,911,816,558.94) |
Reduction adjustment of tariff relaxation | R$ | - |
Final Equity Value | R$ | (8,911,816,558.94) |
Reduction percentage of tariff relaxation | - % |
10.3 Sale vs. Liquidation Evaluation and consequent “pure” concession granting
One of the relevant alternatives that Eletrobras stakeholders have is to evaluate the economic feasibility in selling Amazonas associated with the grant of the concession.
In case the state-owned company is willing to sell the company associated with the concession, the respective auction shall be held. Otherwise, or if the proposed adjustments are not accepted and/or made by Eletrobras, the auction shall only be held for the sale of the concession.
Thus, a comparative analysis between the sale price of the distributor associated with the concession and the eventual liquidation price of the company was developed. Thus, it is possible to assess if the sale would be more attractive to the state-owned entity.
Since the sale price considers adjustments to the equity value, the adjustments were also considered in the estimate of the liquidation value. However, exception was made to Tax Adjustments and Negative Base, since these had no impact to the liquidation value, and to AFACs, since they could be paid if the distributor is not sold.
As shown below, in the case of Amazonas, the best economic option is to sell the company, considering the value of assets and of the concession. The balance between selling and liquidating is favorable for the first option, according to the table below:
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CONVERSION AND ASSUMPTION OF AMAZONAS’ DEBTS | ||
Final Equity Value | R$ | (8,911,816,558.94) |
Stage 1 - Eletrobras Capitalization | R$ | 8,911,866,558.94 |
Debt conversion | R$ | 2,406,252,266.03 |
Debt assumption | R$ | 6,505,614,292.91 |
Adjusted Equity Value – Post Stage 1 | R$ | 50,000.00 |
Price per share for Eletrobras underwriting | R$ | 0.73449354 |
Total shares subscribed by Eletrobras | 12,133,349,104 |
The number of new shares subscribed by Eletrobras from these operations is defined pursuant to the price of issuance of the shares.
This is the stage in which the privatization of Amazonas occurs in technical terms. After the adjustment of capital, 10% of the shares shall be offered to Active and Retired Employees, 90% of the shares less one shall be sold to the potential investor, and one share must remain as property of Eletrobras. The possession of this one share is necessary in case Eletrobras wishes to increase its corporate interest.
The capitalization values presented consider that the negotiations of the issues related to the CC are duly settled. As indicated in Item 3 – Relevant aspect for the Privatization Procedure, due to the relevance of the CCC value, the solution related to this topic is a critical factor for the success of the auction.
10.6 Shares offering to active and retired employees
As mentioned, the Brazilian legislation requires that, in a federal privatization, part of the shares directly or indirectly owned by the Government should be sold to the active and retired employees in differentiated conditions.
Thus, the shares of the distributor held by Eletrobras shall be offered to its active and retired employees, according to the conditions below:
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OFFERING TO ACTIVE AND RETIRED EMPLOYEES FROM AMAZONAS | ||
Conditions of differentiated offer | ||
Base value of sale share | R$ | 0.00000272 |
Discount over the disposal value for the Investor | 10.02% | |
Share value for differentiated offer | R$ | 0.00000244 |
Shares to be offered | ||
Amount of Eletrobras shares | 18,410,015,732 | |
Percentage of Eletrobras shares offered | 10.00000816% | |
Total amount offered | 1,841,003,076 | |
Ordinary | 1,841,003,076 | |
Preferential | 0 | |
Total valued of shares offered | R$ | 5,000.00 |
Value of shares offered with discount | R$ | 4,499.03 |
Value of compensation payable by the Investor | R$ | 500.97 |
Lots of the Shares offering to active and retired employees | ||
Value of the lot of shares with discount | R$ | 0.01000000 |
Total quantity of lots in the Offer to Active and Retired Employees | 449,903 | |
Amount of shares in the lot | 4,092 | |
Amount of Ordinary shares in the lot | 4,092 | |
Amount of Preferential shares in the lot | 0 | |
Re-purchasing process1 by the investor | ||
Lock-up period | No lock-up | |
Re-purchasing deadline | 03 Years | |
Base value per share for re-purchasing purposes | R$ | 0.00000272 |
Base value limit of shares to be re-purchased | R$ | 100,000.00 |
Increase on base value of shares | 10% | |
Share value with increase | R$ | 0.00000299 |
Correction Index | SELIC | |
Re-purchasing price per share | R$ 0.00000299 + SELIC | |
1) In the defined modeling, the repurchase conditions by the investor of the offered shares are | ||
exclusive rights of the active and retired employees acquiring them, or by individuals that may | ||
acquire them by succession (due to death of the original purchaser). In the case of sale of the | ||
shares to third parties, the repurchase benefits will be cancelled. |
The investor shall offset Eletrobras for the offer of shares with differentiated conditions to employees (according to Decree 2.594/98), in addition to complying with the obligations included in this report, as indicated in Item 10.9 - Investors Obligations.
Shares eventually not purchased by the active and retired employees must be acquired by the investor at the end of the sale of these shares, at the price including the proposed discount. The acquisition of the remaining shares at the discount price shall occur so that the investor is not encumbered, twice, for the financial offset made to Eletrobras in relation to the sale of the shares to the active and retired employees, since the offset to the state-owned company will be made.
10.7 Investor capitalization – “Stage 2”
In the proposed sales model, for the purposes of liquidation of the auction, the investor willing to purchase Amazonas shall make a contribution of capital with the underwriting of new shares at the company. Such capital shall be paid in national currency.
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CAPITALIZATION OF INVESTOR ON AMAZONAS | ||
Adjusted Equity Value – Post Stage 1 | R$ | 50,000.00 |
Value to be paid by the Investor | R$ | 491,370,787.84 |
Adjusted Equity Value – Post Stage 2 | R$ | 491,420,787.84 |
Amount of share to subscribe to the Investor | 180,922,878,687.576 | |
Price per share subscribed | R$ | 0.00000272 |
10.8 Amazonas’ final corporate structure
At the end of the privatization procedure, Amazonas shall present the corporate structure described below, considering the full adhesion of the active and retired employees to the offer of shares:
AMAZONAS’ FINAL CORPORATE STRUCTURE | ||||
Total shares | 201,043,849,012,596 | |||
Capital stock | R$ | 14,068,005,253.69 | ||
Nominal value of shares | R$ | 0.00006997 | ||
Interest | Ordinary shares | Preferential shares | Total Shares | (%) |
Investor | 180,939,447,700,231 | 0 | 180,939,447,700,231 | 90.0000% |
Eletrobras | 1 | 0 | 1 | 0.0000% |
Active and Retired | ||||
Employees | 20,104,401,312,364 | 0 | 20,104,401,312,364 | 10.0000% |
Other Minorities | 0 | 0 | 0 | % |
Shares per Class | Total Sharess | (%) | ||
Ordinary | 201,043,849,012,596 | 100.0000% | ||
Preferential | 0 | % | ||
Note: assumes the total follow-up by Active and Retired Employees of the capitalization made | ||||
by the investor. The final corporate structure, however, shall vary in accordance with the degree | ||||
of adhesion to the offer by the Active and Retired Employees and to the follow-up rate of the | ||||
capitalization. |
The final corporate structure will vary depending on the rate of adhesion of the active and retired employees of Amazonas to the offer of shares.
Shares eventually not acquired by the active and retired employees will be purchased from Eletrobras by the investor. The final participation of Eletrobras, however, shall not be changed.
In case Eletrobras chooses not to increase its corporate interest, the remaining share held by it shall be sold at its base price to the investor within six (6) months from the date of the auction.
10.9 Investors Obligations
The purchase Amazonas, the interested investor must undertake to the following obligations established in the sale proposal:
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10.9.1 Financial obligations
i. Underwriting and payment of capital at the company ii. Pay Eletrobras the offsetting amount related to the differentiated conditions of the Shares offering to active and retired employees of Amazonas iii. Purchase from Eletrobras the remaining shares of the offer made to the active and retired employees iv. Fulfill the requests related to the offer of shares to the active and retired employees in accordance with the differentiated conditions established
The values of the financial obligations are defined below:
INVESTOR OPERATIONS ON AMAZONAS | ||
Total paid during disposal of Amazonas control | R$ | 45,500.97 |
Total value from sale of shares | R$ | 45,000.00 |
Amount of sale shares | 16,569,012,655 | |
Price per share | R$ | 0.00000272 |
Value compensation to Eletrobras for the offer to active and retired employees | R$ | 500.97 |
Capitalization - Stage 2 | ||
Amount of subscribed shares | 180,922,878,687,576 | |
Price per subscribed share | R$ | 0.00000272 |
Value to be paid by the Investor | R$ | 491,370,787.84 |
Other Obligations | ||
Re-purchase of remainder from the offer to active and retired employees | ||
Re-purchasing price | R$ | 0.00000244 |
Re-purchasing amount | Totality of remainder | |
Maximum value to be re-purchased | R$ | 4,499.03 |
Re-purchase of shares from active and retired employees | ||
Re-purchasing deadline | 03 Years | |
Base value per share for re-purchasing purposes | R$ | 0.00000272 |
Base value limit of shares to be re-purchased | R$ | 100,000.00 |
Increase on base value of shares | 10% | |
Share value with increase | R$ | 0.00000299 |
Correction Index | SELIC | |
Re-purchasing price per share | R$ 0.00000299 + SELIC |
10.9.2 | Obligations defined in the Purchase Agreement |
Certain additional obligations are recommended, namely: | |
i. Comply with the corporate clauses related to active and retired employees, according to the model proposed below: |
Contractual obligations proposals | |
Private Pension | Maintain current conditions for two years |
Health Insurance | Maintain current conditions for two years |
Re-qualification of dismissed | |
personnel | Structure re-qualification program compatible with the best market practices |
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ii. | Comply with the governance clauses related to the stakeholders agreement with Eletrobras, according to the model proposed below: |
Proposed Deal Model | |
Option for Eletrobras to increase participation on the distributor up to | |
Participation Option | 30% |
Conditions for capital increase. | Follow or increase participation via debt conversion |
Purchase preference | Mutual for investor and Eletrobras |
Tag Along | 100% |
Deal validity | Independent from controller succession |
11. Amazonas privatization schedule
A proposal of schedule1 presenting the key stages of the privatization procedure was developed for the privatization of Amazonas. The objective is to offer an overview of the procedure, complemented by a detailed schedule in terms of specific reports and legal drafts.
The schedule considers the legal requirements of term and the time necessary to make the corporate and financial adjustments, as well as the observance of contractual and corporate aspects. We have observed that this schedule is preliminary and may be subject to changes and adjustments to meet the requirements of the privatization procedure.
It is worthwhile noting that the proposed schedule was developed considering that the deverticalization procedure of the distributor is already concluded, as per Item 3.1.3 - Effects on the schedule and on the sales process.
Activity | Term |
Publication of Resolution CPPI | D + 0 |
Data Room Opening | D + 9 days |
Shareholders Meeting of Eletrobras | D + 50 days |
Shareholders Meeting of Distributor | D + 63 days |
Conduction of Public Hearing | D + 70 days1 |
Publication of the Public Notice to Privatization | D + 92 days |
Auction | D + 145 days2 |
Auction homologation | D + 168 days2 |
Shareholders Meetings of the Distributor | D + 177 days |
Liquidation of the auction and execution of the agreement | D + 177 days |
Shareholders Meeting of the Distributor | D + 207 days3 |
Note: Depending on the effective date of the CPI resolution and the internal deadlines for the corporate procedures | |
of Eletrobras (at times considered in business days), the estimated terms may be changed | |
1) According to Article 39 of Law 8.666/93, 15 business days before the publication of the Public Notice will be | |
necessary. Considering that six public hearings shall occur, two weeks have been estimated. Thus, in case more days | |
are necessary to hold these public hearings, the schedule will be changed | |
2) Suggestive term, since such terms are stipulated by the Public Notice | |
3) Suggestive term, however not smaller than 30 days from the date of the last Shareholders Meeting of the | |
Distributor |
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Product 11 Privatization Modeling Proposal
As established in the regulation above, the regulatory aspects mentioned below have been made flexible for the area of concession of the distributor:
RELAXED PARAMETERS |
- PMSO |
- RGR PPST |
As a form of allowing the reduction of the power rate charged against the consumer, the relaxed parameters shall be used as auction variables. They will be reduced by the bids of investors participating in the auction up to the limit of the relaxations performed by the regulator.
Once the relaxed parameters have a limit, the regulation also established the possibility of offer of values of grant by investors, with their resources being destined to the Government. The grant offer is subsequent to the reduction of the relaxed parameters and has no capped value. Thus, there are no procedural limits for the bids placed by the participants of the auction.
To reduce the operating complexity of an auction with several parameters, the proposal is to establish a single variable for the investor offers. This variable is a reference Index, exclusive and of crescent value, the Combined Discount Index in the Regulatory Flexibility and Grant referred to as Index.
In order to meet the regulatory requirements, the Index value will begin with 0.00 (zero) percentage point (p.p.) and shall not have capped value, with up to two decimal points for bids. The Index will also have two combined intervals, the first representing how investors are willing to reduce the tax relaxed, and the second representing how much they are willing the offer as grant value.
The intermediary values of the Index are described below:
- Values from zero (0.00) to one hundred (100.00):
o The offers in this interval will be related to the discount percentage in the relaxed regulatory parameters offered by the investor, with the percentage being applied linearly to all relaxed parameters in the area of concession of the distributor;
o The values will be used to define the final regulatory parameters of the area of concession of the distributor, according to the Draft of Electric Power Distribution Concession Agreement resulting from Public Hearing 94/2016 of ANEEL and Public Inquiry 037/2017 of the Ministry of Mines and Energy -MME.
- Values above one hundred point zero one (100.01):
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Product 11 Privatization Modeling Proposal
o The bids in this interval consider only the values additionally to the initial one hundred (100.00) p.p. and refer to the value of offered grant, with the payment being made to the Government;
o The value offered by the investor shall be multiplied by a pre-determined reference money value to each one (1.00) percentage point of the Index after 100.01;
For exemplification purposes, we indicate the following cases:
- Index equal to zero (0.00): The tariff is not reduced, nor the grant value. The agreement will be signed with the whole Regulatory Flexibility that served as the base of the auction;
- Index equal to one hundred (100.00): The investor completely waives to the relaxed, without offering grant value. The concession agreement shall be signed without adjustments resulting from the auction, to be applied over the relaxed factors (as per the Draft of Electric power Distribution Concession Agreement resulting from Public Hearings 94/2016 and 032/2017 of ANEEL);
- Index equal to one hundred and ten (110.00): The investor completely waives to the relaxed and offers as grant ten (10) times its reference value for each percentage point. The concession agreement will be signed without adjustments resulting from the auction, to be applied over the relaxed factors. The reference grant value of each percentage point (for instance, R$ 5 million) will be multiplies by 10, and the resulting grant value (in this case, R$ 50 million) will be destined to the Government.
The Index will be valid both to the first stage (in closed envelope) and in the second stage (live bidding). After opening the envelopes, in case of bidders classified to the 2nd stage, the bids of investors for the highest Index value continue in live bidding until one of them is declared winner.
12.6 Auction Value base for Combined Discount Index in the Regulatory Flexibility and Grant
The values of the first interval of the Index (from 0.00 to 100.00 p.p.) refer to the Regulatory Flexibility, in which the offered discount is applied linearly over the values of the relaxed parameters by the regulator.
In this context, the values of the regulatory parameters used as variables of the auction should be fixed. Thus, investors will know the amount in which they bids will be placed and that will base the auction. This recommendation also aims at avoiding legal inquiries prior to or after the auction, which may compromise the privatization of the distributor.
For such, the PMSO value and the RGR PPST to be used as auction variables should be fixed. These values will depend on the future definition of ANEEL to be used in the auction and will be informed upon the publication of the invitation to privatization. The additional RGR values eventually not part of the auction will be fully offset via tariff.
The table below shows the Consortium estimate for the base of values of the auction variables for the auction of the distributor:
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Product 11 Privatization Modeling Proposal
NOTE BASE ESTIMATE VALUES FOR AUCTION | AMAZONAS | |
l | Index (BID) | Auction Result |
2 | Contract: Sub clause on Tariff Coverage of RGR | Auction Result |
3 | Relaxation PMSO 2017 | 288,773,710 |
4 | Regulatory PMSO 2017 | 625,875,184 |
5 | Pre-Auction Discount | 0.0% |
6 | 2017 PMSO Relaxation Post Pre-Auction Discount | 288,773,710 |
7 | Contract: Item II Sub Clause 3 Clause 19 of the Contract | Auction Result |
8 | Regulatory PNT 2016 | N/A |
9 | PNT Relaxation | N/A |
10 | Adjusted Relaxation | N/A |
11 | Contract: Item III Sub Clause 3 Clause 19 of the Contract | N/A |
Note: Non-Technical Losses (PNT) are not applicable to the case of Amazonas |
EXPLANATORY NOTES | |
1 | Value offered by the auction winner |
2 | Value to be defined on the Contract Clause that rules the tariff recognition of RGR |
3 | Relaxation base for Operational Costs of 2017 (estimated by the Consortium, according to item 43 of NT 149/2017) - |
will be informed by Aneel for the Auction | |
4 | Operational Costs considered on the Tariff Process of 2017 (estimated by the Consortium, according to item 43 of |
NT 149/2017) - will be informed by Aneel for the Auction | |
5 | Adjustment to zero Equity Value, as instructed on the Decree Minutes |
6 | Relaxation base for Operational Costs of 2017, adjusted by Pre-Auction Discount |
7 | Value to be defined on Item II, Sub-Clause 3, Clause 19 of the Contract |
8 | Non-Technical Losses considered by the Tariff Process of 2016 (NT 149/2017) |
9 | Relaxation base of Non-Technical Losses (NT 149/2017) |
10 | 2017 PNT Relaxation adjusted by Post Pre-Auction Discount |
11 | Value to be defined on Item III, Sub-Clause 3, Clause 19 of the Contract |
The values of the second interval of the Index (above 100.01 p.p.) are related to the grant value. As explained, the Index value offered by the investor above 100.00 p.p. shall be multiplied by a reference value to each percentage point related to the grant. The reference value must be monetary, in Real, and defined in the Public Notice to the auction.
The reference value should be based on parameters related to the context of the privatization of the distributor. Thus, the reference value will be established in a logical way and shall maintain a relationship with the other aspects of the auction.
For that, two initial possibilities were identified for the definition of the monetary reference value of each percentage point offered as grant value:
i) Value with magnitude order near the monetary value estimated to each percentage point of the first interval of the Index (part related to rate relaxed discount);
ii) Percentage of the Enterprise Value of the distributor.
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Product 11 Privatization Modeling Proposal
The preliminary values estimated by the Consortium to each one of the two presented possibilities are listed below, as a form of support for the definition of the reference value of each percentage point related to the grant:
REFERENCE VALUE ALTERNATIVES FOR EACH P.P. - GRANT FROM AMAZONAS | |
i) Value1 estimated for each Index p.p. | R$ 15.0 Million |
ii) Value1 regarding Enterprise Value | R$ 5.6 Million |
Enterprise Value | R$ 2,223.7 Million |
Percentage Base of Enterprise Value | 0.25% |
1) Approximate value |
12.7 Auction´s 2nd stage ranking criteria
Bids placed in the 1st stage will be considered as classified to the 2nd stage of each auction, in the case· of: Being the bid with the highest Combined Discount Index in the Regulatory Flexibility· and Grant Being a bid in the interval of classification
The interval of classification will be defined upon the publication of the Public Notice and is demonstrated as an example in the table below. The representativeness of the interval of classification was also considered in relation to the Enterprise Value of the distributors.
The interval value suggested was secured in relation to its estimated absolute value and its representativeness in relation to the Enterprise Value of the distributor. Thus, an interval was proposed in which these two aspects could not be extremely high or low, stimulating competitiveness of investors in the auction.
Considering the differentiated round in relation to the others and the expressive weight of the relaxation of regulatory parameters to the distributor, Amazonas has an interval of classification smaller than the other companies.
Bids will be considered in the interval of classification if their difference to the offer with the highest Index is smaller than or equal to the specific classification interval of the auction. Since there is no limit for the value offered by the Index, the interval of classification shall observe the best bid placed.
Interval of Classification | |
Auction | 6th |
Company | Amazonas |
Interval of Classification | 10.00 |
For example, in case the highest bid is of an Index equal to 75.00 in the auction of the distributor, bids greater than or equal to 65.00 (75.00 less 10.00) will be considered as classified. Similarly to this auction, in case the best bid is equal to 110.00, offers greater than or equal to 100.00 will be classified. The Interval of Classification may also be changed until the final draft of the Public Notice is drawn up.
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Product 11 Privatization Modeling Proposal
The monetary values of each percentage point (p.p.) of discount in the Index related to discount in the regulatory flexibilization is not fixed, ranging in accordance with the estimate made. Similarly, the nominal values to the Interval of Classification will range.
The estimate of the Consortium of the approximate average of the monetary values of each percentage point of variation and of the interval of classification is presented below. These are estimated values of reduction in the Enterprise Value of the company, which, on its turn, reflect the Equity Value (value to stakeholder).
CLASSIFICATION INTERVAL FOR AMAZONAS AUCTION | |
Approximated value for one (1) p.p. variation | R$ 15.0 Million |
Classification Interval | 10 p.p. |
Estimated value for Classification Interval | R$ 150.0 Million |
Estimated percentage of Enterprise Value | 6.7% |
The estimate of value for one percentage point of variation is made based on the economic-financial evaluation model of this Consortium. To every percentage point of discount conceded, the relaxation parameters are adjusted, with key reflections to reductions in the value of Installment A. It also includes the discount to be given in RGR PPST, considering the present value of the amount accumulated until June 2017.
It should be noted that this estimate is based on the average of values found by the Consortium for progressive reductions to the Index in relation to discount in the regulatory flexibilization, since the curve of values is not linear. That is, different values will be obtained to different discount levels to the Index.
The investor, on its turn, shall make its own estimate, according to the modeling of valuation of the distributor, so that it may guide its bid in the auction.
12.8 Auction procedures
Prior to the public auction sessions, interested parties must hand the qualification documentation in conjunction with the economic bids, in sealed envelope.
For an investor to have its bid considered valid in one of the auctions, such investor shall deliver envelopes to all auctions of each round, even if without bid or with the indication of non-interest. For instance, even though the investor is exclusively interested in the company of the 4th auction, it shall hand envelopes to all other auctions of the round.
This procedure aims at mitigating eventual asymmetries of information from investors in relation to which or how many investors are bidding to each company.
The 3rd, 4th, and 5th auctions will allow bidders to exercise their right to participate in the 2nd stage, if so desired, as demonstrated in the figure below. The right to participate must be delivered duly filled and signed. The validity of the right is conditioned to the prior delivery of a valid economic bid to the auction in screen.
The chart below illustrates the sequence of deliveries of bids and the right to participate in the auctions.
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Product 11 –Privatization Modeling Proposal
tariff. In addition, the transfer of agreement for the purchase and transmission of electric power and sectoral charges linked to the new concession shall be determined.
The Draft of Decree – regulation of Paragraphs 1-A, 1-C and 1-D, Art. 8 of Law No. 12.783, of 2013, establishes in its Article 5, item III:
Paragraph 1 – The winner of the bidding mentioned in the header shall, according to the rules and deadlines to be defined by ANEEL in the Public Notice, acquire from the party responsible for the provision of the public service of electric power distribution the reversible assets and facilities linked to the provision of the service, for value equivalent to the installment of investments not amortized and/or depreciated associated thereto, valuated by the methodology of the New Replacement Value – “VNR”.
Paragraph 2 – The winner of the bidding set forth in the header shall compensate the party responsible for the provision of the public service of electric power distribution for the outstanding balances, when positive, of eventual insufficiency of payment or reimbursement by the tariff, related to financial values to be calculated based on the rules previously established by ANEEL, including those constituted after the last tariff change.
Paragraph 3 - ANEEL shall define the obligations of purchase of energy, transmission of energy, and sectoral charges, to be assumed by the new concession holder, from the effectiveness of the new concession agreement.
The purchase values shall be object of specific reports, to be validated by the regulator. The purchase values for the acquisition of the Regulatory Remuneration Base preliminarily estimated by the Consortium are presented below:
ESTIMATE ACQUISITION VALUE | ||
Estimate acquisition value | R$ | (838,871,261.00) |
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CENTRAIS ELÉTRICAS BRASILEIRAS S.A. - ELETROBRÁS | ||
By: |
/S/ Armando Casado de Araujo
|
|
Armando Casado de Araujo
Chief Financial and Investor Relation Officer |
This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates offuture economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.