Refinitiv StreetEvents Event Transcript
E D I T E D V E R S I O N
LIGT3.SA - Light SA
Q3 2024 Light SA Earnings Call
Nov 14, 2024 / 02:00PM GMT
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Presentation
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Unidentified_1 [1]
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Good.
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Unidentified_2 [2]
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Morning. Ladies and gentlemen, welcome to lights webinar to announce the results of quarter 3, 2024.
Today's meeting will be conducted in Portuguese and simultaneously translated into English to change your language. Please click on the button interpretation on the bottom of your screen.
This meeting is being recorded and the replay will be available on the company's IR website where the other materials used in this presentation can also be downloaded.
All participants will be in a listen-only mode during the company's presentation after which we will open the floor for questions and at this point, further instructions will be provided before proceeding.
Let me emphasize that any forward-looking statements that may be made during this presentation relative to the company's business prospects, projections and operating and financial targets are based on beliefs and assumptions of the company's management as well as on information currently available to them.
These forward-looking statements are not a guarantee of performance. They involve risks, uncertainties and assumptions and they refer to future events and therefore depend on circumstances that may or may not occur.
Investors should understand that general economic conditions, industry aspects and other operational factors may affect the future results of the company and may lead to results that differ materially from those expressed in set forward-looking statements.
After all due legal announcements, we will start our presentation today with Mr Alexandre Nogueira CEO for the company's initial remarks followed by Mr Rodrigo Tostes co and Ir director who will comment on the company's results. Now, I would like to hand the webinar over to Mr Alessandri. Mr Nogueira. You may proceed.
Good morning, everyone. Welcome to Light's earnings call for the third quarter of 2024.
Today on our call, we're going to cover some important progress that we made in implementing the company's judicial recovery process. Starting with this process in September, the company successfully finalized the payment of around 30,000 creditors who had up to 30,000 vis to receive as provided for in the plan. We also had a capital increase of 300 million vials from the holding in our distribution business in October. The company completed the scheme of arrangement, a legal process that takes place abroad that will allow the plan to be implemented for external creditors as well. Once again, the vast majority of creditors, more than 99% voted in favor of this process. And just this week, the company concluded the process of recognizing the effects of the judicial recovery in the United States through Chapter 15.
Good afternoon.
With the end of this first stage abroad, Light announced the results of the choices made by creditors in Brazil and abroad.
As set out in the judicial RGO organization plan, the calculation of the allocation showed a significant demand from creditors willing to convert their credits into equity in light with a limit of 2.2 billion reals set out in the plan which was exceeded by 50%.
Okay.
This interest in owning a piece of the company showed once again, the creditor's support and confidence in light's recovery.
The company is now in the process of implementing the swaps over the course of the fourth quarter. And at the end of this process, we will have a reprofile debt with less cash flow pressure in the short term as well as longer payment terms.
Light's new financial reality resulting from the implementation of the measures set forth in the plan will be reflected in the company's results from the fourth quarter onwards.
Now on the company continues to focus on transforming its operation acting with a customer oriented approach and operational efficiency in the areas where it can safely proceed. Light is managing to combat losses and improve its revenue. This quarter, our distribution business collection over the last 12 months was up, year over year and reached 98.8%.
This growth combined with an efficient cash management has ensured our soundness with a position at the end of the period of over 2 billion Rios in cash Light is undergoing an intense transformation but this is without neglecting the investments required to guarantee quality service to the population of Rio de Janeiro. As usual, we are preparing our operation for the period of greatest demand which is during the summer and we are strengthening our field team to increase the efficiency of our response to extreme weather events.
Since October, the company has formed 54 new fully operational teams.
In addition to another 51 teams currently dedicated to other fronts of the operation and prepare to reinforce the service to the population during the summer plan.
I I would also like to highlight our team's efforts and work on the project to renew the supply system for Ilya Governador and Ilya Jaketa.
In August, we completed the restoration of the submarine cable that takes power from the mainland to the islands. And in October, we delivered the new underground transmission network and submarine transmission network which will reinforce the existing network year-to-date until September. The company had spent more than 300 million vials on this renovation on the institutional front light launched an important program in October, the Pro Rio the energy recovery and default reduction program with the aim of drawing up permanent strategies to tackle two major problems, nontechnical energy losses. In other words, illegal connections and payment defaults. The program promotes joint action between the public and private sectors supported by a strategic pillars, political and institutional technological behavioral operational, social, economic regulatory and legal.
After an initial diagnosis. The aim is to draw up measures to permanently combat losses lastly but also very important light continues to focus on the sustainability of the concession with a view to renewing the contract which expires in 2026.
The company will contribute to the public hearing started by Anna to regulate the Presidential decree from May which set out the guidelines for renewing distribution concessions. The document stipulates a differentiated treatment both for the recognition of nontechnical losses and the quality criteria in high risk areas within the concessions and the high risk areas. The resolution of this aspect is fundamental to the company's economic and financial sustainability, reducing commercial losses and payment defaults are crucial issues for the operation and for light positioning since a more balanced market will allow our distribution business to target the appropriate resources towards improvements in the provision of services and the operation of its assets with direct benefits for end consumers of electricity.
I will now hand the webinar over to our CFO Rodrigo Tostes who will give you more details on the company's results.
At the end of this presentation, we will be available in case you have any questions to please go ahead.
Thank you, Alex and good morning.
As you heard from Aice Shadri at the opening of our webinar, the company has been making satisfactory progress in the strategic pillars that will support the future that we're building for light this quarter. I'm going to comment on the operating results as usual. And I'm also going to give you an overview of the new profile of our debt. Once all the approval processes for the expected restructuring of the new instruments is completed, we only have left the delivery of the new bonds.
An important sign that we are moving in the desired direction in this restructuring process is that this quarter, our statements will only have an emphasis related to the risk of implementing the plan with us having overcome those more imminent uncertainties relative to our operational continuity that initially caused us to abstain from giving any opinions starting with the highlights of the quarter on slide. Number four, I would like to stress the message that the company continues to focus entirely on actions to preserve its cash and improve the financial soundness of our distribution business, which as we know is where the main short and medium term challenge lies. In this sense, we achieved important results for the distribution business. In the period we ended quarter three 3, 2024 with a solid consolidated cash position of 2.4 billion Rials. This result meant an increase of more than 300 million reals compared to the position we had in December last year.
The second point which is being celebrated by the company is the consolidated net income of 157 million Rios in quarter third, the collection rate continues to improve and reached 98.8% in the past 12 months.
The 12 months that ended in September, this indicator was up by more than 0.8% point year over year.
And this was driven by the multiple initiatives implemented by the company throughout 2023 which are now generating a positive impact in 2024 year-to-date. The distribution adjusted EBITA was about 1.2 billion an increase of nearly 27% year over year and finally the adjusted EBITDA minus CapEx. Another important indicator that we use as a proxy for operating cash generation reached 501 157 million Rials up to 190 million rials year-to-date compared to the same period in 2023.
Now moving on to slide 5, we will briefly comment on the evolution of our distribution market.
In the year-to-date, we saw total market growth of more than 2% year over year with the positive dynamics in the three main consumption segments, residential, commercial and industrial, accounting for a total expansion of 523 gigawatt hour in the period.
This expansion was partially offset by the result of the other category where we saw a drop of 142 G due to an atypical behavior recorded in quarter three in the concessionary segment.
On flight number six, we have the distribution this adjusted EBITA in the first nine months, the distribution company adjusted EBITA was approximately 1.2 billion, an increase of more than 250 million year over year.
This growth is due first to the expansion of the net margin in line with the growth of the build market as we saw in the previous slide and the positive evolution of the PCLD resulting from initiatives to protect revenue and increase collection.
These results more than compensated for the increase in PMSO expenses and contingency provisions on flight number seven.
Here I briefly comment on the distribution company's consecutive operating cash generation measured by the adjusted EBITA minus CapEx year-to-date. The indicator has reached 545 million an increase of 119 million year over year or a percentage change of more than 50% year over year year-to-date, it reached 554 million an increase.
Well, it is worth noting that while our EBIDA continues to expand as a result of our focus on operations and generation of results, the company has maintained discipline in the execution of its investment, balancing network quality and maintenance with a guarantee of a financial balance year-to-date. The CapEx grew by approximately 59 million rhas a 10% increase year over year due to investments in the maintenance and modernization of the supply system in Ile de Govenor and Ile de Paqueta.
Moving on to slide. Eight. Here we show the EBIDA of our generation and trading segments year-to-date, this business line generated an EBITA of 503 million realio down 16.7% year over year.
This result is mainly attributable to the drop in margin due to the termination of old contracts in our trading portfolio which were more profitable than the current average due to the higher energy sales prices at the time.
In respect to our trading vertical, I'd like to take this opportunity to share a little about the transformation. We're making it like com over the course of this year, the company has undergone extensive restructuring with the creation of new business lines and expansion of its trading team, resulting in the offer of new products and the doubling of its customer base. We are preparing Lightcom to continue growing in a sustainable way and we believe in its potential to consolidate its position as a benchmark in clean and sustainable energy, delivering diversified, efficient and personalized solutions in the free energy market.
So this is the end of the considerations about the quarter's results. But before we move on to the Q&A session, I would like to make a few comments about our judicial recovery process.
On slide number nine, I would like to remind you how far we've come in the judicial recovery process. After a lot of effort, dedication and delivery by our team and our advisers. In recent months, we have completed important milestones. For example, first, the payment of more than 30,000 small creditors reclaims below 30,000 vels completion of the payment method selection process by creditors. The completion of the legal rights of the scheme of arrangement and chapter 15, the disclosure of the final choices and finally, the RC that approved the issuance of new instruments by light say on October 24th.
Now November 28th will be the deadline for the current shareholders to exercise their preemptive rights over the convertible debt along with the corporate Act to seek approval for the amendments and issuance by Lights and energy of the other instruments set forth in the plan.
I would like to stress that our internal team and our advisers are working tirelessly to deliver the new bonds to creditors in Brazil and abroad on time.
Now, moving on to the next and final slide, I'd like to share with you a little of what Light says as new debt profile will look like on the left, we can see the balance of the pro forma gross debt, which was the subject of the creditors selection of payment options. The balance of 9.58 billion reals was made up of the gross debt subject to restructuring totaling 9.1 billion Rials plus the interest set forth in the plan based on the calculation of the choices and the limits established in the plan. This amount was restructured as follows. 2.2 billion reals were allocated in instruments convertible into light say shared automatically converted when the prerequirements are fulfilled such as the renewal of the concession and increase in private capital as provided for in the plan 4.1 billion reals remunerated annually at IPCA plus 5% or the equivalent in dollars with interest paid every six months. A grace period to start amortization and maturity in eight years, 2.1 billion reals annually paid by I PC A plus 3% or the equivalent in dollars. Also with half yearly interest payments and maturity in 13 years, about 320 million of credits allocated in the non optic creditor modality whose total amount will be deducted in 30%. And this amount will be paid annually at I PC A capitalized to the principal in the same periodicity with a total maturity in 15 years, about 130 reals allocated in the financial creditor modality and remunerated annually at CDI plus 0.5%.
And finally, 238 million reals which were allocated in the creditor modality with credits of up to 30,000 reals already paid by the company in September this year.
Now, considering the renewal of our concession as our base scenario, we believe that the distribution company will emerge from this process with a capital structure much more in line with its business with around 70% of the debt index to the I PC A, which also determines the company's revenue dynamics. And with the remaining 30% of the debt pre packed to the dollar and the CD I.
In addition, if we consider the amortization schedule of the principle of new debts already reflecting the results of the process of payment method selection and the discount on the credits of non opting creditors. The company will have an approximate duration of 8.4 years. At the end of this restructurization, the distribution company will have a more appropriate capital structure with a more prolonged debt, removing the pressure to pay out the principal in the short term and with an average cost more in line with the financial reality of our operation. Consistent with our objective at the beginning of this process, which was to guarantee the company's sustainability that concludes my remarks and I hand it over now to the moderator to start the Q&A session. Thank you.
We will now open the floor for questions to ask a question. Please click on Ray's hand and we will call your name and open your microphone. If at any point, your question in it is answered. You can exit the waiting line by clicking again on raise hand.
You can also use the Q&A window to send your questions. The Q&A button is on the bottom of your screen. Our first question is from Ricardo Pisin TCOS Investo.
What do you expect? What is the expected date for the swap?
Okay. The first question is about the expected date for the swab the company has already started the development of this material with its advisers. We do not yet have a deadline. We are striving to finish as soon as possible and we expect that this will not take long and should be completed in the coming months.
The next question is from Conrado Hummus.
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Unidentified_1 [3]
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How are you coping with the record rating.
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Unidentified_2 [4]
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Pmt at 69%?
The expected renewal already includes the change in this measurement.
Hello, Conad, good morning. This is Alexandre.
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Unidentified_1 [5]
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Now in respect to losses and default, we.
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Unidentified_2 [6]
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Are.
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Unidentified_1 [7]
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Expecting.
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Unidentified_2 [8]
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To offer differentiated incentives to companies that have high risk areas in their concession area, which is the case of light.
We are now reviewing the conditions and we will contribute to the public hearing that is under way offered by an L and we will timely offer our inputs about this specific aspect regarding Light's concession area.
The next question is from Daniel Straberg.
The right of preference of the convertible debentures should be manifested by November 28th.
Hello, Daniel. No, there's no obligation but it can be, it can be expressed. It's optional. You can express this right until November 28th.
The next question is from Carlos Carlos. You can ask your question now, good morning.
I really liked your presentation. And my question is Rodrigo, when will the new bonds after the judicial recovery, the convertible debentures and etc, when will they be in the accounts of the debenture holders and creditors that.
When will these bonds be available to them? Thank you.
Hello, Carlos. Good morning about the registration and when you're going to see those mountains after we swap them with B three, then they're going to be negotiable and available to you.
Thank you.
The next question is from Giuliano A GGI Giuliano. Your microphone is open now.
Hello, good morning.
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Unidentified_1 [9]
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I have a question.
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Unidentified_2 [10]
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There was.
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Unidentified_1 [11]
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A discussion at a this week about the.
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Unidentified_2 [12]
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Limit leverage and they mentioned the name of four companies and among them was light and they were focusing on the need to increase the capital by more than 4 million miles.
So I have three questions here.
My first question is, do you believe that instruction by an will actually take place? Number two, will you be able to increase your capital by the amount required?
I think the amount and the term will be discussed, but I think it will be about 90 days.
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Unidentified_1 [13]
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And third.
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Unidentified_2 [14]
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What will happen with the concession if you do not fulfill that requirement? Thank you.
Hello, this is Alic and thank you for your question, Giuliano.
We are monitoring the situation, we're monitoring what will be a ruling. Of course, this is an analysis that is made under the current contract.
Light also has a differentiated view of the renewal of the concession like we mentioned in our presentation and the condition for implementation of the plan. But what I can anticipate and tell you now is that light is closely monitoring the entire process? Thank you.
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Unidentified_1 [15]
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Alison. Can.
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Unidentified_2 [16]
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You.
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Unidentified_1 [17]
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Just tell us what could.
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Unidentified_2 [18]
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Happen theoretically if you cannot fulfill that requirement?
The your contract is the 2015 contract, right? Yes.
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Unidentified_1 [19]
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Okay.
Our jake is that.
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Unidentified_2 [20]
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Light fits into that situation and we're also pursuing the financial capacity after what was established in the degree and actually the the decrease from May.
Thank you.
This question and answer session is now closed. Now I will hand the conference back to Mr Rri for his final remarks.
Thank you all for your time. This is.
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Unidentified_1 [21]
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The end.
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Unidentified_2 [22]
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Of Lights webinar for Q3 2024. Thank you all for attending. And I would like to once again stress that our investors relations team is always at your service. Should you have any questions in the future? Thank you for attending and have a great day.
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