Rio de Janeiro, March 6, 2015.
Consumption grows by 3.0%
Quality indicators improve by32.9% (DEC) and20.6% (FEC)
Total energy consumption grew by 3.0% year-on-year, totaling 6,694 in 4Q14, 2.5% higher than in 4Q13,driven by the growth of4.9%in the residential segment and 6.0% in the commercial segment.
In 2014, net revenue, excluding construction revenue, wasR$8,289.9 million, an upturn of 25.6% in relation to 2013.In the quarter, also excluding construction revenue, net revenuetotaledR$2,988.6 million, 75.7% above the figure recorded in 4Q13, primarily explained by the recognition ofthe regulatory asset or liability (CVA) balance in the distributor’s net revenue.Net revenue, excluding construction revenue and the booking of CVA, would have come to R$7,270.0million in 2014, a 10.1%increase in relation to 2014, and R$1,968.8 million in 4Q14, a 15.7%increase in relation to 4Q13.
Consolidated EBITDA[1]closed the year at R$1,809.7 million, moving up by 6.7% over 2013. In 4Q14, consolidated EBITDA wasR$933.9 million, up 173.3% from 4Q13,chiefly due to the recognition of CVA balance in Light SESAand equity income gain from the dilution ofthegeneration company’s stake in Renova Energia.Excluding these effects, EBITDA would have totaled R$1,332.4 million in 2014, down14.1% on the adjusted EBITDA recorded in 2013, and R$288.0 million in4Q14, a 5.5% decrease in relation to 4Q13.
In 2014,net incomewasR$662.8 million, a12.9%increase over 2013. In4Q14, net income totaled R$520.1 million,moving up by 303.2%in relation to 4Q13.Excluding therecognition of CVA balance and equity income gain, net income came to R$299.1 million in 2014, a 39.1% reduction in relation to 2013, and R$45.1 million in 4Q14, a 56.8% decrease from the adjusted income recorded in 4Q13.
Non-technical energy losses in the last 12 months, calculated as a percentage of billed energy in the low-voltage market (ANEEL criterion),posted areduction of 0.4 p.p.from3Q14, reaching40.9%in December 2014.
The Operating Quality Indicators DEC (equivalent length of interruption indicator) and FEC (equivalent frequency of interruption indicator) came to12.35 hours and 6.60times, respectively,an improvement of32.9%and20.6%in relation to the same period last year.
Collections totaled 98.6%of billed consumption in 2014, down 2.0 p.p. from 2013. Provisions for Past Due Accounts (PCLD) represented 1.3% of the distribution company’s gross billed energy in 2014.
The Company closed December with net debt ofR$6,076.5 million, an increase of9.6% over September 2014. The net debt/EBITDA ratio stood at3.70x.
On March 6, 2015, the Board of Directors proposed the distribution of R$157.4 million, R$0.7719 per share, as dividends, referring to the results of fiscal year ended December 31, 2014. This proposal is subject to approval by the Annual Shareholders’ Meeting to be called.
BM&FBOVESPA: LIGT3 / Conference Call: / IR Contacts:OTC: LGSXY / Date: 03/09/2015 / Phone: +55 (21) 2211-7392/2828/2660
Total shares: 203,934,060 shares / Time: 3:00 p.m. Brazil // 2:00 p.m. US ET / Fax: +55 (21) 2211-2787
Free Float Total: 97,629,475 shares (47.87%) / Phone: +55 (11) 2188 0155 // +1 (646) 843 6054 / Email:
Market Cap (03/05/15): R$ 2.712 milhões / Webcast:ri.light.com.br / Website: ri.light.com.br
Presentation of 4Q13 results (comparative period)
Management reassessed the criterion for the presentation of contractual debt amortization with the pension plan in the cash flow statement, which led to a reclassification of the 2013 period for comparison purposes.
For more information, seeExhibit VIof this report.
Table of Contents
1. The Company
2.1 Distribution
Energy Balance
Operating Quality
2.2 Generation
2.3 Commercialization and Services
3. Financial Performance
3.1 Net Revenue
Consolidated
Distribution
Generation
Commercialization and Services
3.2 Costs and Expenses
Consolidated
Distribution
Generation
Commercialization and Services
3.3 EBITDA
Consolidated
Distribution
Generation
Commercialization and Services
3.4 Consolidated Financial Result
3.5 Debt
3.6 Net Income
3.7 Investments
Generation Capacity Expansion Projects
4. Cash Flow
6. Capital Markets
7. Recent Events
8. Disclosure Program
EXHIBIT I
EXHIBIT II
EXHIBIT III
EXHIBIT IV
EXHIBIT V
EXHIBIT VI
1. The Company
Light S.A. is a holding company that controls subsidiaries and affiliated companies in three main business segments: energy distribution, generation and commercialization/services. In order to increase the transparency of its results and provide investors with a better basis for evaluation, Light also presents its results by business segment. The Company’s corporate structure on December 31, 2014 is shown below:
2.Operating Performance
2.1 Distribution
Total energy consumption in Light SESA’s concession area (captive clients + transport of free clients) came to 6,694 GWh in 4Q14, 2.5% up from the same period in 2013, due to anincrease in all classes, except for the industrial segment, which posted a 7.9% decrease, reflecting the lower consumption by electro-intensiveindustries (steel and aluminum producers and chemical companies).
In the residential segment, consumption reached 2,203 GWh in the quarter, accounting for 32.9% of the total market, a growth of 4.9% in relation of 4Q13.In 4Q14, the average temperature was 1.1°Chigher than in 4Q13.
Commercial clients consumed 2,153 GWh in the quarter, representing 32.2% of the total, 6.0% up from 4Q13. The commercial segment’s constant growth in recent years has been fueled by the expansion of the consumer base and the increasing use and ownership of refrigeration equipment in commercial establishments, especially retailers.
Industrial consumption amounted to 1,326 GWh in 4Q14, equivalent to 19.8% of the total market, 7.9% downfrom the same period last year. The industrial segment’s captive clients maintained their consumption in line with 4Q13, while free clients posted a decrease of 10.3%in relation to the same period last year.
The other consumption segments, which accounted for 15.1% of the total market, recorded an increase of 5.3% in consumption in relation to the fourth quarter of 2013. The rural and public utility categories reported respective increases of 9.3% and 3.1%, while the government category posted a reduction of 1.4% in relation to 4Q13.
Total energy consumption in Light SESA’s concession area (captive clients + transport of free clients[2])came to 26,493 GWh in 2014, 3.0% up in relation to 2013.
Residential consumption accounted for33.8% of the total market and totaled 8,950 GWh in 2014, 7.7% up over 2013, reflecting the upturn in consumption in all quarters of the year,led by the first quarter (+13.6%),due to the high temperatures in the summer of 2014.
Commercial clients consumed 8,328 GWh in the year,4.9% up over 2013.As with residential consumption, commercial consumption recorded growth in all quarters of 2014.
In 2014, industrial consumption amounted to 5,296 GWh, 6.6% less than in 2013,due to reduced consumption in the steel/aluminum and chemical sectors. Excluding this effect, industrial consumption would have recorded a growth of 1.0% in relation to 2013.The industrial segment’s captive clients maintained their consumption in line with 2013, while free clients recorded a decrease of 8.7%over 2013.
The other consumption segments, which accounted for 14.8% of the total market, recorded an increase of 3.2% over 2013. The rural, government and public utility categories reported increases of 26.8%, 1.5% and 2.8%, respectively, in relation to 2013. This higher consumption in the rural category is explained by the reclassification of some clients, who were previously treated as industrial, as a result of AneelResolution 414.
Energy Balance
Energy Losses
In the last 12 months, non-technical energy losses totaled 5,927 GWh, accounting for 40.9% of billed energy in the low-voltage market (ANEEL criterion), 0.4 p.p. less than in the 12 months endedSeptember 2014. In comparison with the 12 months endedDecember 2013, when non-technical energy losses totaled 42.2% of the low-voltage market, there was a reduction of 1.3 p.p.
Light SESA’s total energy losses amounted to 8,847 GWh, or 23.3% of the grid load, in the 12 months through December 2014.
In order to continue reducing non-technical energy losses, Light is investing in initiatives that include conventional fraud inspection procedures, the upgrading of network and measurement systems, and the Zero Loss Area program (APZ). Among these initiatives, the following stand out:
- Consumer unit regularizations: The Company conducted61,219regularization procedures in the low, medium, and high-voltage segments in 2014, 5.6% up from 57,962in 2013. Energy incorporation totaled 279.1 GWh in 2014, 13.7% up from the 245.6 GWh reported in2013.Recovered energy increased by 16.6% to179.7 GWh in 2014, versus 154.1 GWh in 2013.
- Installation of remote electronic metering devices: SMC (centralized metering system) devices are installed in areas with high loss rates, with or without the support of Pacifying Police Units (UPPs). The UPPs give Light more room for maneuver in regard to combating default or energy theft. The Company installed 10,141 such devices in UPP-protected areas in 4Q14, resulting in the incorporation of 15.0 GWh. In areas outside the sphere of the UPPs, Light installed 41,195 devices, with the incorporation of 26.9 GWh. As a result, the Company closed 2014 with 622,000 installed electronic meters, 190,000 units (+44.0%) more than at the end of December 2013.In May 2014, the Company announced that Landis+Gyr Equipamentos de Medição Ltda (“Landis+Gyr”) was chosen as the supplier of equipment and services forthe automation of overhead and underground networks for an Integrated System usingsmart grids and devices in the distribution system (“Smart Grid Project”). After the work statement phase, the contract was signed in September 2014, encompassing the supply of approximately 1 million metering devices in the next five years for R$750 million. Currently, Light and Landis+Gyr are adjusting the information technology environmentin order to receive this new communications solution.
- Zero Loss Areas: In August 2012, the Company created the APZ Project, based on a combination of electronic metering and a shielded network, supported by dedicated teams of technicians and commercial relations personnel with clearly defined targets, whose compensation is tied to improving loss and default indicators in their respective areas. A typical APZ has around 17,000 clients. The project, known commercially as "Light Legal",which receives support from SEBRAE in regard to the training of partnering micro-entrepreneurs, has37 operational APZs and624,000 clientsin the Baixada Fluminense region and the city’s south, west and north sides.
In 4Q14,113,000electronic metering devices have been installed in the communities andthe APZs in place for more than 12 months have resulted in an average 29.0 p.p. reduction in non-technical energy losses over the grid load and an average collection increase of7.0 p.p. The table below shows the results through December2014 in the 20areas where the results have been determined:
The other APZs in areas where the results have been determined, but in place for less than 12 months, have resulted in an average 26.0 p.p. reduction in non-technical energy losses over the grid load and an average collection increase of 4.0 p.p., as shown in the table below.
Complementing the 26 areas where the results have already been determined, the table below shows the 11 APZs in the implementation phase, without recorded results, totaling 37 operating areas. The total of clients still with no results is approximately 155,000.
Collection
The 4Q14 collection rate stood at 95.7% of billed consumption, 3.6 p.p. lower than in the same period last year, primarily due tothemathematical effect from time displacement of collection in relation to billed consumption, the average tariff adjustment of 19.23% in November 2014 and the 23.0 p.p. drop in collection from the government in relation to 4Q13, when there wasan atypical collection rateof 121.0% due to the settlement of debt from a major client.
In 2014, collection rate was 98.6%, down 2.0 p.p. from 2013,due to the two reasons mentioned above.
In 4Q14, provisions for past due accounts (PCLD) totaled R$36.3 million, representing 1.3% of gross billed energy[3], 7.5 millionless than the R$43.8 million provisioned in 4Q13. In 2014, PCLD represented 1.3%of gross billed energy, totaling R$127.5 million, a reduction of R$30.8 million over 2013.
Operating Quality
In 4Q14, in the overhead distribution network, 98 medium-voltage distribution circuits were inspected/maintained, 1,206 transformers were replaced and 33,169 trees were pruned. In the underground distribution network, 5,957 transformer vaults and 13,959 manholes were inspected. In addition, 98 transformers, 78 switches and 290 protectors were maintained.
In the last 12 months, the moving average of the equivalent length of interruption indicator (DEC), expressed in time, registered 12.35 hours, 32.88% down from the same period last year, while that of the equivalent frequency of interruption indicator (FEC), expressed in occurrences, stood at 6.60 times, a drop of 20.58% in relation to the same period last year.
All indicators in 4Q14 reflect the improved performance of the network thanks to the reorganization of processes in the distribution area and the initiatives implemented through the action plan initiated in June 2013. More intensive tree pruning and energy network preventive maintenance measures are having a positive impact on results, ensuring an improved DEC and FEC performance. The improvement in the quality indicators in 2014 reflected in the reduction of 30.1% of expenses withDIC/FICwhen compared with 2013.
2.2 Generation
Light Energia sold 1,119.1 GWh in 4Q14, net of energy purchases, 10.1% down year-on-year.
No energy was sold on the captive market (ACR) in 2014, due to the expiration of the last existing captive energy sale contracts in December 2013. These contracts were renegotiated on the free market (ACL), whose 4Q14 energy sales moved up by 34.4% as a result.
Net spot market purchases came to 41.4 GWh in 4Q14, versus total sales net of purchases of 113.0 GWh in 4Q13. This result was due to the low GSF (Generation Scaling Factors), in turn caused by the national system’s exceptionally poor hydrological conditions, impacted by low average rainfall and the consequent period depletion of hydro plant reservoirs.
The GSF in October, November and December 2014 came to 87.67%, 87.73% and87.84%, respectively, versus 103.31%, 103.36% and 107.97% in the same months in 2013. The average GSF in 4Q14 was 87.24%, 17.64 p.p. lower than thefigure recorded in the same period in 2013.The average GSF in 2014 stood at 90.61%, 6.6p.p. below the average GSF reported in 2013.
In 2014, energy sales on the free market (ACL) increased by 25.6% over 2013,while spot market sales (net of purchases) recorded a sharp reduction between the periods.
2.3 Commercialization and Services
In the fourth quarter in 2014, direct energy sales by Light Com and Light Esco from conventional and subsidized sources totaled 1,357.7 GWh, 32.8%more than the 1,022.0 GWh recorded in the same period last year. In 2014, a energy sales amounted to 5,338.4 GWh, 28.5% higher than the 4,154.7 GWh reported in 2013.
In the services segment, the Company entered into four contracts in 4Q14. In 2014, of the twelve (12) service projects that were ongoing, six (6) were completed and delivered to clients. These include the Light Esco Cogeneration Plant, for the Rio de Janeiro Refrescos factory.
3. Financial Performance
3.1 Net Revenue
Consolidated
Consolidated net operating revenue totaled 3,294.7 million in 4Q14, 59.5% more than in 4Q13. Excluding revenue from construction, which has a neutral effect on net income, consolidated net revenue totaled 2,988.6 million in 4Q14, moving up by 75.7%, due to market growth and the booking of CVA in the revenue. Excluding revenue from construction and the booking of CVA,net revenue came to R$1,968.8 million in the quarter, an increase of 15.7% in relation to 4Q13.
The distribution and commercialization/service segments recorded respective upturns of 82.2%and 62.6%,while net operating revenue from the generation segment fell by 13.0%.
In 2014, net revenue moved up by 24.4%. Excluding revenue from construction, consolidated net revenue totaled grew by25.6% in relation to2013, due to market growth and the booking of CVA in the revenue.
In 2014, , excluding revenue from construction and the booking of CVA, net revenue came to R$7,270.0 million in 2014, 10.1% higher than in 2013.
Distribution
Net revenue from distribution totaled R$3,078.7 million in 4Q14, an increase of 63.2% in relation to 4Q13. Excluding revenue from construction, net revenue came to R$2,772.6 million in 4Q14, 82.2% up on the same period last year. This result can be explained by: (i)the R$1,019.8 million recognition of CVA balance in the distributor’s net revenueas of December 2014[4] (excluding this effect, net revenue grew 15.2% in the quarter); (ii) the257.2% increase in unbilled energy, provisioned for in accordance with the billing scale,due to high temperatures in December 2014; (iii) the average tariff adjustment of 19.23% as of November 7, 2014; (iv) the 2.5% upturn in energy in the quarter.
Revenue from demand surplus and exceeding reactive energy totaled R$13.0 million this quarter and revenue from the tariff difference related to the special treatment of non-technical losses in the concession area amounted to R$66.4 million, both of which treated as special obligations. Although they are billed, they have not been included in net revenue since the last tariff revision in November 2013. The distribution market consists mostly of the residential and commercial segments, which together accounted for 61.8% of 4Q14 energy consumption and 73.6% of sales revenue.
Excluding revenue from construction, net revenue from distribution came to R$7,317.8 million in 2014, an increase of 24.1% over 2013explained by:(i) the recognition of CVA balance in the distributor’s net revenue as of December (excluding this effect, net revenue grew 6.8% in 2014); (ii) the increase in unbilled energy; (iii) the annual tariff adjustment as of November 7, 2014; (iv) the 3.0% upturn in energy consumption in the year.In 2014, revenue from surplus demand and excess reactive energy totaled R$50.2 million, while revenue from the tariff difference related to the special treatment of non-technical losses in the concession area amounted to R$186.5 million.
Generation
Net revenue from generation totaled R$129.2 million in 4Q14, 13.0% lower than the R$148.5 million recorded in 4Q13. This reduction is explained by the decreased availability of energy for sale, in view of a larger deficit in GSF in relation to the same period in 2013. As a result, 41.4 GWh had to be purchased on the spot market in order to fulfill the contracts entered into in4Q14, while in 4Q13 the generator recorded sales, net of purchases, of 113.4 GWh.
The average sale price on the free market, net of taxes, was R$109.2/MWh in 4Q14, 3.2% higher than the R$106.1/MWh recorded in 4Q13 (weighted by the free and captive markets). Afterthe termination of contracts in the regulated market in December 2013,the trading company became responsible for the sale to end clients.
In 2014, net revenue from generation totaled R$601.6 million, an upturn of 7.7% over 2013, explained by the higher availability of energy sold on the spot marketin the first quarter of 2014 for an average price of R$658.3/MWh.
Commercialization and Services
Net revenue from commercialization and services stood at R$221.1 million in 4Q14, 62.6% up from 4Q13.
In 4Q14, net revenue from energy resales increased by 76.3% over 4Q13, fueled by the 32.8% year-on-year upturn in sales volume in 4Q14 versus 4Q13, due to the reallocation of Light Energia’s terminated contracts,as the sale to end clients started to be performed by the trading company. The average sale price, net of taxes, was R$158.1/MWh in 4Q14, versus R$118.8/MWh in 4Q13.