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Summary

 

 

 

Rio de Janeiro, May 15, 2015 - Eletrobras (Centrais Elétricas Brasileiras S.A.) (BM&FBOVESPA: ELET3 and ELET6 – NYSE: EBR and EBR-B – LATIBEX: XELTO and XELTB), the largest company in the electricity sector in Latin America, parent company of 13 subsidiaries, operating in the generation, transmission and distribution segments, a participation company named Eletropar, and a 50% interest in the social capital of Itaipu Binational Company, announces its results for the period.

 

Eletrobras presented, showed an overall consolidated net income attributed to the controlling in the amount of R$ 1,255 million in the first quarter of 2015 (1Q15) as compared to a net loss attributed to the controlling in the amount of R$ 1,174 million in the fourth quarter of 2014 (4Q14). In the first quarter of 2014 (1Q14) the Company presented a net income attributed to the controlling in the amount of R$ 1,034 million. This result were influenced mainly due to the new generation and transmission tariffs regarding the assets whose concessions were renewed as per Law 12,783/13 and by certain facts that we hereby highlight:

 

In a positive way: i) Compared to the 4Q14 the revenues from sales in the spot market (CCEE) increased by 17%; ii) Reversal of provisions related to onerous contracts in the amount of R$ 75 million in the 1Q15, see item I.4; iii) Reduction of 18.9% in the electricity purchased for resale in the 1Q15 compared to the 4Q14; iv) Monetary adjustment of the remuneration of indemnities relating to Law 12.783 /13 in the 1Q15 of R$ 495 million; v) Positive effect from shareholdings in the amount of R$ 41 million compared to a negative effect of R$ 556 million in the 4Q14; and vi) Net results due to foreign currency exchange rate variations with a positive result in the amount of R$ 341 million in 1Q15 and  R$ 169 million in 4Q14; vii) recognition of the CVA (Variation Compensation Account of items  of the "Amount A") amounts and other financial components in the amount of R$ 282 million.

 

In a negative way: i) Compared to the 4Q14 the revenues from the Generation segment in 1Q15 decreased by 7%; (ii) Provision for contingencies in the amount of R$ 252 million, with the majority part from provision and expenses for compulsory loans; iii) provision for PCLD of customers and resellers in the amount of R$ 102 million; and iv) Debt charges of R$ 1,009 million.   

 

HIGHLIGHTS OF THE CONSOLIDATED RESULTS OF FIRST QUARTER OF 2015:

 

·         Net Operational Income – NOI in the amount of R$ 8,599 million;

·         Electricity purchased for resale in the amount of R$ 2,923 million;

·      Personnel expenses in the amount of R$ 1,325 million;

·      Net operating provisions in the amount of R$ 327 million;

·         Net results due to foreign currency exchange rate variations with a positive result in the amount of R$ 341 million; and

·          The EBITDA of the Eletrobras Subsidiary Companies summed a total of R$ 1,806 million.

 

 

I. ANALYSIS OF THE CONSOLIDATED RESULTS (R$ million)

 

 

I.1       Financial Highlights

 

Main Variations in Results (1Q 2015 x 4Q 2014)

 

The result of 1Q 2015 increased 206.9% when compared to the 4Q 2014, whereas a net income attributed to the controlling in the amount of R$ 1,255 million was registered in 1Q15 as compared to a net loss in the amount of R$ 1,174 million in 4Q14.

Net Operating Income, in the amount of R$ 8,599 million registered in 1Q15 a 12.1% decrease as compared to 4Q14, when it was registered an amount of R$ 9,781 million. Excluding the sales revenues in the spot market (CCEE), the revenue from construction and the CVA impact, the NOI would have shown a decrease of 0.5%, from R$ 7,183 million in the 4Q14 to R$ 7,149 million in the 1Q15. In the analysis by segment, the following highlights as presented:

»     Generation income registered a 4.0% increase, from R$ 5,379 million in 4Q14 to R$ 5,596 million in 1Q15. Such increase was mainly due to electricity sales within the spot market (CCEE). The total energy sold went from 64 TWh in 4Q14 to 60 TWh in 1Q15. Construction revenue was registered at its equivalent value as cost of construction.

 

»     Transmission income showed a 26.6% decrease, from R$ 1,526 million in 4Q14 to R$ 1,120 million in 1Q15, influenced by a decrease in the revenue from construction which was registered at its equivalent value as cost of construction.

»     Distribution income showed a 13.1% decrease from R$ 4,112 million in 4Q14 to R$ 3,575 million in 1Q15. The supply of electricity registered a 2.6% increase from R$ 3,037 million in 4Q14 to R$ 3,117 million in 1Q15. The recognition of the CVA and other financial components presented a 61.8% decrease in the 1Q15, from R$ 740 million in the 4Q14 to R$ 282 million in the 1Q15.  The volume of electricity sold went from 7.5 TWh in 4Q14 to 7.1 TWh in 1Q15. Construction revenue was registered at its equivalent value as cost of construction.

-Electricity purchased for future resale registered a 18.9% decrease, from R$ 3,605 million in 4Q14 to R$ 2,923 million in 1Q15.  This result was mainly due to the variation accrued by the PLD (Preço de Liquidação das Diferenças) values.

 

-The Fuel for the production of Electricity line registered a 32.0% decrease. Throughout 4Q14 it registered a net expense in the amount of R$ 440 million, whilst in 1Q15 it registered a net expense in the amount of R$ 299 million due to lower reimbursement from CCC as shown on Law 12,111/99 in CGTEE and Amazonas Energia in the 4Q14, and due to a reduction of generated energy of thermal plants Santa Cruz and Camaçari.

 

-Throughout 2014 the full amount of the Personnel, Material and Service (PMS) line showed a 22.7% decrease from R$ 2,594 million in 4Q14 to R$ 2,004 million in 1Q15.  Personnel decreased by 19.2% from R$ 1,640 million in 4Q14 to R$ 1,325 million in 1Q15. The Third party services decreased by 29.6% from R$ 878 million in the 4Q14 to R$ 618 million in 1Q15 and the material line item decreased by 19.1% and from R$ 76 million in the 4Q14 to R$ 61 million in the 1Q15, see item I.7.

 

-Operating provisions went from a provision of R$ 1,033 million in the 4Q14 to a provision of R$ 327 million in the 1Q15. In the 1Q15, the operating provision were influenced mainly by provisions for contingencies in the amount of R$ 253 million, provision to cover doubtful credits of customers and resellers in the amount of R$ 102 million and provision for losses on investments in the amount of R$ 22 million (see item I.3). The provision were partially compensated by the reversal on onerous contracts in the amount of R$ 75 million (see item I.4).

 

-Shareholdings line registered a 107.4% variation, from an accounting of a negative result in the amount of R$ 556 million in 4Q14 and a positive result in the amount of R$ 41 million in the 1Q15.  The variation was due mainly to the negative results obtained by SPE Madeira Energia S.A (Santo Antonio Hydroelectric Power Plant) which was the strongest influence related to equity investments variation in affiliated companies.

 

 

-Net Financial Result line registered a net revenue of R$ 655 million in 4Q14 as compared to a net revenue of R$ 593 million in 1Q15, which represents a 9.4% decrease. This variation was mainly due to a 97% decrease in the revenues from a derivative operation, a 50% decrease from financial borrowing partially compensated by positive effect 102% regarding the currency variation and by the 16% decrease in debt charges expenses in the 1Q15.

 

I.2 Net Operating Income (NOI)

 

Throughout 1Q15 the Net Operating Income (NOI) registered a 12.1% decrease as compared to the previous quarter, from R$ 9,781 million to R$ 8,599 million in 1Q15. With regards to the 1Q14, the Net Operating Income registered an amount of R$ 7,008 million, representing a 22.7% increase.

 

 

 

Participation of business in relation to Gross Revenues –2015

 

 

 

 

 

 

I.2. Energy sold

 

I.2.1  Energy Sold in 2015 - Generation Companies – TWh

 

In terms of the energy market evolution, the Eletrobras companies during  the 2015, sold 60 TWh of energy, as compared to 64 TWh traded in the same period of the previous year, representing a 6.2% decrease.

 

 

I.2.2 Energy Sold in 2015 – Distribution Companies – Twh

 

In terms of the energy market evolution, the  Eletrobras Distribution System in 2015, sold 7.1 TWh of energy, as compared to 4.2 TWh traded in the same period of the previous year, representing a 71.4% increase.

 

 

 

 

 

 

 

 

I.3 Operating Provisions  

 

Note: Negative values in the table above indicate reversals of provisions.

 

Provisions for legal liabilities linked to legal proceedings

 

 

I.4  Onerous Contracts

 

 

 

 

*The table considers an increase in the amount of R$ 50 million from the onerous contract of the Amazonas Energia intangibles that does not show in the Company results.

 

 

I.5 CONSOLIDATED EBITDA

 

I.5.EBITDA of Subsidiaries Companies*

 

Throughout the 1Q15 the sum of the EBITDA of the Eletrobras Subsidiary Companies registered a positive amount of R$ 1,806 million which represents a 2% increase, as compared to the negative EBITDA of R$ 1,753 million registered in the 4Q14. Throughout the 1Q14 the EBITDA of the Eletrobras Subsidiary Companies summed a total of R$ 1,840 million.

 

 

 

EBITDA = Net income plus income taxes over profits minus net financial expenses Financial income and depreciation, amortization and depletion, as determined by CVM Instruction 527/12.

p.p = percentage points

* Source: Financial statements for consolidation

 

 

 

 

 

 

 

I.6 NET DEBT

 This value corresponds to the amount reimbursed to Eletrobras due to the acquisition and commercialization of all energy resources belong to Brazil, generated by Itaipu Binational, under the Treat signed on 26 April 1973 between Brazil and Paraguay.

 

I.7. Personnel, material and service

 

* The consolidation of CELG D was of September 2014. For comparison purposes, the personnel, material and services expenses were excluded from CELG D.

 

II. Analysis of the Results of the Parent Company 

 

 

 

 

 

 

 

II.1.Eletrobras Shareholdings

 

Throughout the 1Q15 the result regarding shareholdings had a positive impact  in Eletrobras overall results in the amount of R$ 972 million, which represents a 36.3% variation as compared to the positive amount of R$ 1,525 million registered in 1Q14, due mainly to the equity equivalence of the subsidiary companies.

The recognition of the results obtained by the companies invested by Eletrobras made a negative impact on the 4Q14 results in the amount of R$ 945 million due to the valuation of shareholding investments mainly due to the result of the equity equivalence of the subsidiaries companies, as shown below:

 

II.2.Financial Results

 

 

Along the 1Q15, Financial Results positively impacted the overall results of the Parent Company in the amount of R$ 1,243 million, as compared to the amount of R$ 373 million in the 1Q14. This variation is primarily explained by the currency variation.

Throughout the 4Q14, Financial Results positively impacted the overall results of the Parent Company in the amount of R$ 891 million, as shown in table below:

*Reviewed.

 

 

The main indexes of the loans and transfer agreements showed the following variations in the period:

 

Evolution of the IGP-M Index and the Dollar (%)

 

                        

II.3.  Sale of electricity of Parent Company

 

Itaipu Binational

 

 

a.1 Financial Asset Itaipu Binacional

 

The balance resulting from the adjustment factor from Itaipu Binational, shown on Financial Asset at the Non-Current Assets amounted to R$ 6,661 million on March 31st, 2015, equivalent to US$ 2,077 million (December 31^st , 2014 – R$ 5,469 million, equivalent to US$ 2,059 million), of which R$ 4,297 million, equivalent to US$ 1,328 million shall be transferred to the National Treasury until year 2023 represented by reimbursement obligations, as a result of a credit transaction which took place between the Company and the National Treasury in 1999. Such amounts will be realized through its inclusion in the sales tariff to be practiced until 2023.

 

 

Commercialization of Eletric Energy– PROINFA

 

Trading electricity within the PROINFA registered a positive net result in the period ended by 2014 in the amount of R$ 29 million (March 31, 2015 by R$ 84 million), producing no effect on net income of the company.  This value is included under the Reimbursement Obligations. The balance of resellers consumers line registered the amount R$ 515 million of PROINFA related to the Parent Company (December 31^st, 2014 – R$ 573 million).

 

III. Eletrobras Information

 

Portfolio of Loans Receivable and Payable

 

Financing and Loans Granted

 

The financing and loans granted are determined on the company's own funds, as well as sectoral and external resources funds raised through international development agencies, financial institutions and resulting from the issuance of bonds in the international financial market.

All financing and loans are supported by formal agreements with the borrowers. The receivables of these values, in most cases, are planned in monthly installments, repayable in an average term of 10 years and the average interest rate, weighted by the portfolio balance, of 6.56% per year.

Financing and loans granted, with foreign currency exchange rate variation clauses, represent approximately 42% of the total portfolio of the Company (38% on December 31^st, 2014). The remainder that predict adjustment based on indexes that represent the level of domestic prices in Brazil reach 59% of the portfolio balance (62% on December 31^st,  2014).

The market value of these assets are equivalent to their accounting value, since they are industry specific operations and formed, in part, by resources from Sector Funds that don’t have comparable parameters with other loans.

The long-term portion of loans and financing granted from regular and Sector Funds, including transfers based on the contractual expected cash flows shall mature in variable amounts as shown below:

 

 

 

Financing and Loans  Payable

 

Debts are guaranteed by the Federal Government and/or by Eletrobras and subject to charges, which averaged along 2014 at 5,23% per annum (5.20% per annum in 2014) with the following debt profile:

 

 

 

 

The long-term loans and financing expressed in millions of Reais, shall mature as follows:

 

Ratings

 

 

 

 

 

ORGANIZATION CHART OF ELETROBRAS

 

 

 

 

 

 

 

 

Investments

R$ Million

 

Social Capital

 

Capital Structure

 

As of March 31st, 2015 the social capital of Eletrobras had the following composition:

 

 

 

 

 

 

 

 

 

 

 

Share performance analysis

 

Shares

 

Eletrobras Common Shares – ELET3

 

During the 1Q15 Eletrobras’ common shares (ELET3) decreased their value by 0.7% closing at R$ 5.76. The maximum price achieved by those shares was R$ 6.04 on March 25th, and the lowest price registered was R$ 4.90 on March 11th . The quotations related are ex-dividend values. The average volume of shares traded daily throughout the third quarter was of 1.7 million shares, equivalent to a financial amount of R$ 9.1 million.

 

Eletrobras Preferred Shares – ELET6

 

During the 1Q15 Eletrobras’ preferred shares (ELET6) decreased their value by 16.9% closing at R$ 6.80. The maximum price achieved by those shares was R$ 8.40 on January 7th, and the lowest price registered was R$ 5.85 on February 11th. The quotations related are ex-dividend values. The average volume of shares traded daily throughout the third quarter was of 1.9 million shares, equivalent to a financial amount of R$ 13.2 million.

 

 

 

 

 

 

ADR Programs

 

EBR – Eletrobras Common Shares

 

During the 1Q15, the Eletrobras common shares ADRs decreased their value by 15.4% ending the quarter valued at US$ 1.81. They recorded a maximum price of US$ 2.17 on January 15th, and the lowest price registered was on March 12^th, when the price reached US$ 1.54 considering ex-dividend values. The average volume of shares traded daily throughout the third quarter was of 0.71 million shares. The balance of ADRs representing such shares at the end of the second quarter was of 88.2 million.

 

EBR - B– Eletrobras Preferred Shares

 

During the 1Q15, the Eletrobras preferred shares ADRs decreased their value by 26.8%, ending the quarter valued at US$ 2.10. They recorded a maximum price of US$ 3.09 on January 7th. The lowest price registered was US$ 1.96 on March 12^th, considering ex-dividend values. The average volume of shares traded daily throughout the third quarter was of 0.18 million shares. The balance of ADRs representing such shares at the end of the third quarter was of 25.5 million.

 

Latibex (Latin American Stock Market at Madrid Stock Exchange)

 

XELTO - Eletrobras Common Shares

 

During the 1Q15the common shares listed on Latibex program increased their value by 12.2% ending the quarter valued at € 1.60. They recorded a maximum price of € 1.89 on January 22. The lowest price registered was € 1.44 on March 16^th, considering ex-dividend values. The average volume of shares traded daily throughout the third quarter was of 11.2 thousand shares.

 

XELTB - Eletrobras Preferred Shares

 

During the 1Q15the preferred shares listed on Latibex program decreased their value by 21% ending the quarter valued at € 2.01. They recorded a maximum price of € 2.66 on January 7th . The lowest price registered was € 1.82 on February 11^th, considering ex-dividend values. The average volume of shares traded daily throughout the third quarter was of 10.4 thousand shares.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of Employees

 

Parent Company

 

 

By Region

 

Outsourced Employees

 

Turnover Index

 

 

Partnerships – Parent Company

 

Generation

 

 

 

 

Note: In 12/31/2014 the Wind farm Artilleros had 8 units connected to the grid under test. The beginning of the commercial operation will be in 2015.

 

Tansmission

 

 

 

 

*SE associated to TL.

 

 

Risks related to Laws and Regulations

 

As stated in note 4 to Eletrobras' financial statements as of and for the three-month period ended March 31, 2015 as prepared in accordance with Brazilian generally accepted accounting principles ("Brazilian GAAP") and filed with the Brazilian Securities and Exchange Commission, following media reports regarding the alleged involvement of Eletrobras and/or its affiliates in relation to the investigation by the Brazilian Federal Prosecutors into Operação Lava Jato (Operation Car Wash), our Management has adopted certain measures aimed at identifying any potential illegal acts relating to this investigation.  On April 25, 2015, Eletrobras became aware, through certain media reports, of a plea bargain agreement entered into by the former president of a construction company within the context of Operação Lava Jato.  According to these reports, at the time Eletrobrás Termonuclear S.A. – Eletronuclear ("Eletronuclear") selected the consortium of companies for the mechanical assembly of the Angra 3 power plant consortium to develop the Angra 3 nuclear power plant, there were alleged negotiations for the payment of financial benefits to certain employees of Eletronuclear, including its president.  In addition, there were allegations of arrangements entered into to allow certain companies to be declared the winners of this public procurement procedure.  The president of Eletronuclear has requested a temporary leave of absence and has been since then replaced.  Eletrobras' board of directors has approved the adoption of measures to engage an independent firm to conduct an investigation into these allegations pursuant to applicable Brazilian and U.S. laws. 

As the investigation is still in its initial phase, no conclusive results have been reached.  Accordingly, the possible impact resulting from this investigation, if any, are unknown and cannot be estimated by Eletrobras in relation to its financial statements as of and for the three-month period ended March 31, 2015.  Eletrobras is currently unable to determine if any adjustments or additional disclosure in relation to these allegations is required in relation to its financial statements as of and for the period ended March 31, 2015 prepared in accordance with Brazilian GAAP.  Accordingly, the limited review report included in our interim financial statements is qualified in respect of the same subject.

 

 

BALANCE SHEET

values in R$ thousand