CPFL Energia's CEO Discusses Q2 2012 Results - Earnings Call Transcript

CPFL Energia S.A. (CPL)

Q2 2012 Earnings Call

August 7, 2012, 10:00 am ET

Executives

Wilson Ferreira Jr. - CEO

Analysts

Presentation

Operator

Good morning ladies and gentlemen. Thank you for waiting. We would like to welcome everyone to CPFL Energia second quarter 2012 earnings results conference call. Today, we have here with us the executives Mr. Wilson Ferreira Jr., CEO of CPFL Energia and other officers of the company.

This call is being broadcasted simultaneously through the Internet at the website www.cpfl.com.br/ir and on that address you can also find a banner through which the presentation will be available for download.

On phone all participants will be on a listen-only mode during this call; during the company's presentation. After the presentation there will be a question-and-answer session. At that time further instructions we all be given. (Operator Instructions) Another important information that this teleconference is being recorded.

Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the belief and assumptions of CPFL Energia management and on information currently available to the company.

Forward-looking statements are not guarantees of performance and involve risk, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of CPFL Energia and can cause results to differ materially from those expressed in such forward-looking statements.

Now I will turn the conference over to Mr. Wilson Ferreira Jr. Mr. Wilson, you may proceed.

Wilson Ferreira Jr.

Good morning to all investors and analysts for joining us this morning for our conference call for the second quarter of 2012. I would like to start this presentation on page three of the slide deck you received.

For the second quarter 2012 highlights, the first highlight goes to sales and the concession area, strong sales up 5.3%; we are going to be there on that later. Another important point, commercial startup of two biomass operations, Bio Ipê 25 megawatts; Bio Pedra 70 megawatt, both in May of 2012, but with the acquisition of Ventos Wind Farms in June we are also declaring interim dissidence in the amount of R$640 million referring to a 100% of the results off group in the first half of 2012.

Investment in the quarter amounted to R$715 million, we will give you more on that momentarily. An important observation for our credit rating AA+ positive by Fitch to the issuance of subsidiaries debentures. On the global scale Ba2 credit rating, Aa3.br national scale by Moody’s to CPFL Renováveis and important credit ratings confirming to solidity of the group in both operations.

In addition to that, we have an important 40% increase in the average daily trading volume of our stocks and ADRs, creating almost R$50 million daily. And finally, the Agencia Estado, the Distinction Award for Companies 2012; a recognition to companies that despite an unfavorable international scenario managed to deliver outstanding results to shareholders. These are the main highlights for the second quarter of 2012.

Moving on to page four, we’ll get in more details on the highlights. We’ll start with the sales of energy in the concession area. You can see the strong growth in the captive market, up 5% and 6.2% of the consumers those pay the tariff to use the distribution system and that grow 6.2%. So 5.3 % increase (inaudible) gigawatt hour in this quarter in the concession area of our eight distribution companies.

In the bottom of the slide we see total energy sales, direct sales to end customers. In addition to the 5% increase in the captive market of distribution companies you can see in the bottom, the green bars, the effect of conventional generation and trading to customers outside CPFL Energia customers group amounting to a 13% increase. And in here, we see for the first time sales in CPFL Renováveis totaling 820. Having the set of sales on the right, we see growth year-on-year 13.3%

Operation, are considered in the revenues of the group. On the right side of the slide, we can see that we grew slightly more than Brazil in our service 5.3% vis-à-vis 5%. This is due mainly to a strong growth in the Southeast market that grew 3.6% in the seven distribution companies of the group notably and São Paulo grew 5.4% areas granted to TUSD, the South group 6.4%. Our RGE operation grew 4.8%.

On slide five we see details of sales by market segment. On slide five we observe that off this 5.3%, we had a strong growth in residential segment, 10.4% to 9.6% for the commercial segment, practically stable for the industrial segment and segment others, mainly the rural segment and public service, growing 8.4%.

It is true that for a more balanced comparison we would consider the same number of days, billing days; so when we compare, considering the calendar of the year, considering the number of billing days, reported growth of the residential segment, we had more billing days in the second quarter of 2012 than in second quarter of ‘11. We’re making adjustments. The growth of the residential segment would be 6.8% and the commercial segment 6%. So these are very strong and high value and they are certainly responsible for high revenue results in the distribution activity.

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