RESULTS 2Q21
Conference Call
July 30, 2021
(in Portuguese with simultaneous translation into English) 11 AM (Brasília) / 10 AM (NY) / 3 PM (London)
Tel: +55 (11) 3181-8565
International Participants:
Tel: +1 (412) 717-9627 | +1 (844) 204-8942
São Paulo, July 29, 2021: CESP - Companhia Energética de São Paulo ("CESP"), (B3: CESP3, CESP5 and CESP6) discloses its results
for the second quarter of 2021. The information was prepared in accordance with International Financial Reporting Standards ("IFRS") and accounting practices adopted in Brazil, except where stated otherwise.
CONTENTS
2Q21 Results | 3 | |
Message from Management | 4 | |
Company Profile | 6 | |
Generation Complex | 6 | |
Operating Performance | 7 | |
Commercial Performance | 8 | |
Financial Performance | 15 | |
Indebtedness | 20 | |
Capex | 21 | |
Free Cash Flow | 22 | |
Retirement Plan (Vivest) | 23 | |
Contingencies | 25 | |
Regulatory Matters | 28 | |
ESG Agenda | 30 | |
Capital Markets | 33 | |
Appendices | 34 | |
2
Results | 2Q21
2Q21 RESULTS
CONSOLIDATED FINANCIAL HIGHLIGHTS
(BRL thousand) | 2Q21 | 2Q20 | ∆ | 1H21 | 1H20 | ∆ | ||||||||||
Gross operating revenue | 596,414 | 544,905 | 9% | 1,230,614 1,085,767 | 13% | |||||||||||
Net operating revenue | 525,163 | 485,532 | 8% | 1,082,048 | 946,072 | 14% | ||||||||||
Gross operating result | 181,885 | 204,476 | -11% | 373,658 | 438,681 | -15% | ||||||||||
Cost and expenses | (392,880) | (187,608) | 109% | (602,137) | (439,351) | 37% | ||||||||||
EBITDA | 229,654 | 397,800 | -42% | 675,137 | 706,992 | -5% | ||||||||||
Adjusted EBITDA1 | 221,717 | 287,276 | -23% | 504,109 | 623,447 | -19% | ||||||||||
Adjusted EBITDA margin | 42% | 59% | -17 p.p. | 47% | 66% | -19 p.p. | ||||||||||
Net income | (18,129) | 137,798 | n.m. | 97,669 | 191,611 | -49% | ||||||||||
Net debt | 1,406,412 | 1,220,615 | 15% | 1,406,412 1,220,615 | 15% | |||||||||||
Net debt/EBITDA LTM | 1.2x | 0.9x | 0.4x | 1.2x | 0.9x | 0.4x | ||||||||||
Net debt/ adjusted EBITDA¹ LTM | 1.6x | 1.1x | 0.4x | 1.6x | 1.1x | 0.4x | ||||||||||
- Net revenue grew 8% in 2Q21 to BRL525 million, driven mainly by the growth in trading operations by CESP Comercializadora.
- Adjusted EBITDA of BRL222 million in 2Q21, down 23% on 2Q20, explained by the negative effect from the hydro crises, impacting volume and price of energy purchased.
- Operating cash flow after debt service of BRL274 million, representing a cash conversion ratio2 of 123% in 2Q21.
- Reduction in total contingent liabilities of BRL636 million3 compared to March 2021, due to the settlement of lawsuits, the revision of estimates based on the evolution of lawsuits and favorable judicial decisions.
- Net loss of BRL18 million in the quarter, compared to net income of BRL138 million in 2Q20, basically explained by the effects from the reversal of probable contingent liabilities in 2Q20 (BRL134 million), which did not recur in 2Q21.
- Adjusted EBITDA excludes allowance for litigation and write-off of judicial deposits
- Cash conversion ratio = OCF after debt service / Adjusted EBITDA
- After inflation adjustment and interest. Considers settlements, revisions and decisions up to July 2021
3
Results | 2Q21
MESSAGE FROM MANAGEMENT
The second quarter of 2021 was marked by deterioration in Brazil's hydrological situation. We are experiencing a period with the lowest inflows since 1931, which affects the industry as a whole. Given this scenario, CESP took advantage of windows of opportunity in the market to acquire all the energy required, so far, to ensure its energy balance for this year.
The Company's energy balance management strategy is based on detailed planning with proactive management and highly disciplined execution of energy trading to create value and mitigate hydrological risk.
On the commercial front, CESP has been working to seize opportunities in future energy sales, mainly as from 2024. This quarter, we advanced in our go-to-market strategy, which aims to expand and diversify the client base to reduce costs and maximize results.
Another important milestone for CESP was the upgrade in its ESG rating by the main ESG risk rating agency, MSCI, from "BBB" to "A" (on a scale from AAA to CCC). It is worth remembering that in the last 18 months we received two upgrade notches in the ESG rating of this agency. Since the start of the year, with the launch of its ESG platform, CESP has reported, even more transparently, on the advances in this important agenda, with the upgrade further confirmation that we are on the right path.
On the internal aspect of the social front, the quarter marked the creation of the Diversity
- Inclusion working group, which is addressing the topic by first conducting a diagnosis to support the creation of action plans for becoming an even more diverse and inclusive Company.
In the management of contingent liabilities, we remain focused on optimizing the portfolio of pending lawsuits seeking ways to continually mitigate risks. At end-2Q21, contingent liabilities stood at BRL10.6 billion and, during July 2021, we obtained an additional reduction of BRL390 million, bringing the total to BRL10.2 billion.
As a result of the water crisis and to comply with determinations from the federal power regulators, the Company is reducing the flow rate of the Porto Primavera HPP to preserve water stocks at plants with accumulation reservoirs located upstream and with this target make it through the dry period by ensuring the governability of the hydro cascading arrangement. The entire process is being conducted with effective controls and monitoring actions that include reports to environmental and regulatory agencies, in accordance with the Working Plan duly approved and monitored by the Brazilian Institute of the Environment and Renewable Resources (IBAMA), Ministry of Mines & Energy (MME),among other federal agencies.
In 2Q21 Adjusted EBITDA4 was BRL222 million, down BRL65 million from the same quarter last year, which is basically explained by the hydro crisis, impacting energy volume and price, as a result of the worsening of the GSF in the period.
4 Adjusted EBITDA excludes provisions for litigation and write-offs of deposits.
4
Results | 2Q21
Strong cash generation remained a period highlight. Operating cash flow after debt service in 2Q21 came to BRL274 million, representing a cash conversion ratio5 of 123%.
CESP reaffirms that it will continue to manage its business diligently and transparently with a focus on accelerating the delivery of results and consequently creating value for its shareholders.
To all who have accompanied us on this journey, thank you very much.
MARIO BERTONCINI | MARCELO DE JESUS |
Chief Executive & Investor | |
Chief Financial Officer | |
Relations Office | |
5 Cash Conversion Ratio = Operating Cash Flow after Debt Service / Adjusted EBITDA.
5
Results | 2Q21
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CESP – Companhia Energética de São Paulo published this content on 29 July 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 July 2021 22:38:04 UTC.