CPFL Energia S.A. (NYSE:CPL)
Q4 2015 Earnings Conference Call
March 21, 2016 10:00 AM ET
Gustavo Estrella - IR, Finance
Wilson Ferreira Jr - CEO
Vinícius Canheu - Credit Suisse
Miguel Rodrigues - Morgan Stanley
Good morning and thank you for waiting. Welcome to CPFL Energia's Fourth Quarter of 2015 Earnings Conference Call. Today, with us we have Mr. Wilson Ferreira Jr, CEO of CPFL Energia; and other officers of the company. This call is being broadcast simultaneously on the Internet and the Investor Relations Web site of CPFL Energia's www.cpfl.com.br/ir, where you can also find the banner for download.
We would like to inform you that all participants will be in listen-only mode during the company's presentation. Afterwards, there will be a question-and-answer Session when further instructions will be given. [Operator Instructions] I would like to remind you that this call is being recorded.
Before proceeding, we would like to 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's management and on information currently available to the company.
Forward looking statements are not guarantees of performance, they involve risks, uncertainties and assumptions as they relate to the 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 may also affect the future results of CPFL Energia and may cause results to differ materially from those expressed in such forward-looking statements.
Now would return the conference over to Mr. Wilson Ferreira Jr. Mr. Ferreira you may proceed.
Wilson Ferreira Jr
Thank you very much, Good morning. Welcome everybody and investors and analysts that accompany us in this fourth quarter of 2015 earnings conference call and also update you about the whole year as well.
I would like to start by Page 3 and where we make an introduction, where we are starting from this year, we understand that 2015 was a very positive year from the regulatory view point. In 2016 regarding the rainfall perspective we believe that the worst of the crisis of the electric sector and hydrologic crisis is over. So I would like to start on the hydrologic scenario on Page 4, where do you see a demonstration of that. We have the data of last Friday, we got to about 555% of storage in our regulatory equivalent of INPS.
The out focus to get to close to 60% at the end of this month and on the lower part, you have the very clear reasons why we have this good situation, if you take that three summers. In this summer we have always being the lower end 2012 to 2013 to 2014, 36% below and the previous on 10% in the wet period, this same normal steady 2% to below LTA from ’14 to ’15, and year as you can see on the chart we’re already 6% above the LTA. So this is very satisfactory, this is fundamental for us to have a final solution to the same related to dispatches. But here we are talking about mainly the South-East and Central-West. As you can see we are in a very comfortable situation, as you can see 127% in January, 86% February in ACTW and again 100% in March 2016. This is a comfortable situation so we can well imagine that by the end of April or the wet season, we will be very close to these curves of the last 20 years, which gives us a very comfortable outlook from the view point of Energia.
So two other utilities on Page 5, we have the perspective for 2016. We are considering 90% of the ATL, we are higher than that and 40% of thermal dispatch. In November 2016, the reservoir levels will be in line with 1987 to 2015, this is very important, you can see that we can -- we get close to 60% near April if the same leveled of storage are maintained, the one that we had about three months. So this way, looking at the scenario of load which is practically stable 0.9% higher in fact, and the thermal dispatch 61% of the thermal situation, in the work hypnotics, we would have a 50% dispatch and we would get to 31%, and then the real condition estimated by the OMS that would be close to 49%. So you can see that we will be turning the page on the problems that we have faced in the last three years.
Now Page 6, another fundamental thing was solved at the end of 2015 in our case. And for a modest company at the beginning of 2016 regarding the GSF, which was another big concern, that was addressed.
On Page 7, you have this specific case of CPFL. We have 41 plants, 7 HPPs and 34 SHBPs. It was a level of 716 megawatts average, several of the mills [ph] in our case is not exposed to this kind of risk and of the BRL7.60. We had 65% regulated market and 35% free market. All this 65%, 455 megawatts average that you can see below. They were all renegotiated and the product that we choose was SPC which is a maximum potation. So the GSF estimated by ANEEL in 2015 was BRL43.5 megawatt hour, the risk premium adopted by the choices we made was 9.5 megawatt hours. So we are entitled to a reimbursement of BRL32.55 per megawatt hour, with a positive effect on no adjusted EBITDA of 2015 of the BRL134 million, with full coverage to all contracts of CPFL involved in this market.
Another page let me turn, on a problem that was relevant in the last couple of years, to the sector and mainly to generators, now the 13, which was another concern in 2015. And we will show you the perspective regarding the pressure on difficult steps of those, we carried out many important actions in last year mainly regarding the ETR and tariffs flags and the tariff realizement as we call it, but this has already started 2015 with cash in balances and by the end of the year. The situation when it started to deteriorate and on Page 9, we already show you a very positive perspective for the next few months, so the reference that I had made regarding tariff realism actions that meant an increase of 53.3% on our tariffs, 39% of the PTR, HRs and EPRs besides the 14% of the tariffs flags.
You can see on the right that the third quarter of 2015 was the one where we had the peak of the use of the cash by made of CDE BRL1.9 billion of credit vis-à-vis the systems or customers and this situation improves in the last quarter already, also due to the reduction of the tariff banners 1.7 billion and as you can see on the lower part of the chart with the lower tariff established for Itaipu and lower CDE quota, besides the perspective -- the hydrological perspective therefore lower thermal dispatch. Our expectation is that by September this year we will have these firms totally coming back to the distributors cash. So this was a big financial problem to most of the DisCos and the situation will change by September this year at least as far as our group is concerned.
When we get to 2016 will problems in 2016 starting on page number 10 regarding over contracted position. On page 11, we have a little bit of this moment and the perspectives for the solution to these thing that will occur to most DisCos in Brazil. Given that in the last few years there was a reduction in consumption in the previous year was practically maintained stable, the outlook for this year, the perspective is flat, but the contracts that were signed in the past in order to cope with the perspective that we saw for consumption at the time we will determine this over contracted position higher than the regulatory limit of the 105%. Because of that ANEEL submitted a discussion, two things.
The first about 10 days ago and that should be voted next week by the agency themselves and because of this provisional management we have the methodology to recognize and voluntarily surplus coming from the contracts that are quoted from 2012 to now, we have the situation and this provokes to most of this DisCos together with the regular contracts and the auctions carried out A minus five, A minus six, A minus one, that they would have over contracting positioned, we will expect that this will be voted tomorrow however it's not as the agenda so due to the need or emergence of the decision we will expect this to be voted by next week and this proposal alone is enough to solve the problem in the short run for CPFL.
The reduction that comes from this AP004 is 4% and in the short run this effects the whole sequence of contracting by DisCos within the short turn there is a 4% reduction placing all the CPFL DisCos within the range of 105% up. So this is very important for all the companies and specifically for CPFL because by itself it's on the short term problem. It is also true that we are dealing with something that is already underway with the big migration of customers, because of that there is another [indiscernible] underway and the contributions ends today. And there is a postponement or suspension of contracts for new energy. There is a good potential of plans that are delayed so a methodology is being created to reduce bureaucracy, so that this can be done quickly. It's important to stress that there is a reasonable potential here to do this kind of job. We know the large plans that are delayed or then large number of plans that are delayed. So with this action alone and together with one on the right, referring to migration of customers which has a higher volume today increasing this over contracted position because there is no regulation to deal with this migration of special customers, specifically.
So in 2013, there was CH085 which discussed a root to adjust DisCos’s contract position due to migration of special customers, so that we could have the proportion, a restitution of contract. As we have the exit of these special customers, this is being discussed with ANEEL, and I believe that the three proposals taken together will make this team of over contracted positions be solved in a very transparent and sale manner because of the moment that we are living today. It is true that, we might have an important solution for the sector in the next few days, regarding the conclusion of PA004 and this is very important because of the needs of DisCos fourth -- future auctions. And finally the challenge that we will be facing is a microeconomic scenario that everybody will be facing, because of all this turbulence and volatility that the country has been leaving.
On Page 13, we have the scenario that is used by CPFL as a reference for its forecast. For a long time, we have been using IBGE and LCA and you can see our main figures here, figures that are being the basis for our future planning process. In the GDP thing, we had a drop of 3.8 and we believe there will be 3% drop this year, recovery only in this 2017. The results steamed from variation in the industrial production on the right that’s up to 8.3 last year and expected to drop an additional 4.7 this year, to rebound in 2017. And total payroll that affects mainly residential dropped 5% last year. This year, we expected to drop an additional 3.1% rebounding in 2017. I would like to remind you that we having an expectation because of the restatement of contracts inflation was 10.7 last year. We believe it will be 7.2 this year. So higher than the limit and going back to the center of the target or higher than the center of this target in 2017 with 5.3%. This means that we have to be very careful in terms of developing activities in the energy sector.
Just to end this point, I would like to mention that I think it's important to have these things of 2015 solved and as you can see we are addressing all the possibilities for 2016.
On Page 14, we have the highlights, the first one is negative. Sales dropped by 5.3% and in the concession area, residential minus 2%, commercial minus 2.2%, industrial minus 9.6%, aggravating the scenario of industrial consumption on the lower part. We have the results of 2015, a reduction of 4% and the sales in the concession area of distributors the same 2% residential, seems to have reached the bottom commercial minus 1%, industrial minus 6.9%. In spite of all this reduction we continued our investments, we invested almost BRL0.5 billion in the fourth quarter closing the year with BRL1.428 billion, 30% higher than our investments in 2014. We renegotiated the hydrological risk as I said to 458.8 average. We have the issue of the company's ratings SNP as doubly AA minus, which AA maintained, this was recent it was a weak ago. There is a recognition on the part of rating agencies mainly regarding the liquidity of the group contributing to the maintenance of the rating perspective and entry of CPFL Energia's shares in the IBrX-50 and becoming a component stock of the ICO2 Carbon Efficient index in January 2016 so this is very good news. They were maintained in the ISE index for the 11th consecutive year and CPFL was classified as the member of the sustainability yearbook 2015 prepared by RobecoSAM responsible for the review of the DJSI.
So these are the main highlights of the fourth quarter. Now just to talk about sales in the fourth quarter and afterward we will tell you about the year.
On Page 15, we see a drop in the captive market of 4.1 as I have already mentioned in the green area. You see the free customers especially industrial a drop of 8.5% and the total in the concession area and 5.3 minus as I said, and the negative highlight here is that the industrial sector with the 9.6% drop on year-on-year comparison reaching 5.3 negative. The positive outlook occurs in our valuation of contracted demand over the same months of 2014, since June we kept the contract demand higher positive on a year-on-year comparison mainly in the off period and off peak and the peak a slight reduction of 0.8 June, 0.9 September in December the demeanor was different so peak going up and off peak continue to grow at 1.6%.
The participation of industrial that was once upon a time 40 and now it's 39% you can see that this breakdown is more or less kept. You can see that in this specific area of the concession area of growth in the concession area mainly in the southeast and south the group had the performance that was lower than Brazil, Brazil dropped 3.3 and we dropped 5.3 in our concession areas in volume in the southeast 4.3 and I DisCos 4.9 and in the south we had a slightly better performance fees of Brazil the south going down 8% and we are going down 7.1%.
On the next page, sales in 2016 will drop of 4.3%-3.3% in the captive market very close to what we had said to the at the beginning of the year 3.3 and to USD dropping by 5.8. We had already said that the biggest contribution was the drop of 6.9% in industrial. I had said 40% industry for the whole year but as you saw due to the drop at the end of the year there was a loss of relative share to 39% and the figures in the comparison between the regions, but CPFL you can see 4% drop and here 2% to 3%. Last year we had an increase of 0.1% in our generation results capacity in renewable from 915 to 930. You can see renewable and conventional.
Page 17, delinquency which is the cause of concern to many analyst and investors on the after part of the slide. We see the evolution of the number of total days that we have delinquency up to deemed, non-verification of payment. The good news is that we had a reduction in December and we expect it to drop as we see the dropping down of tariff banners and you can see that in terms of billing from 19 and the last 12 months is stable 0.83, 0.84 and this figure is relatively stable and what's has been establishing this is the account of the group beside the increase in the accounts and the decrease is salaries and increase in employment. As you may remember last year we had the removal of some customers, the lower income customers that had incentives. So in number of builds it's practically half in the B group 116,000. And it has not stopped dropping in spite of the index of D90 over the revenues is kept constant practically.
It's important to highlight that all the actions and we make many reports to you about that between 30% and 50% of cards and all the instrument available to the company you can see this is the evolution of the provision for doubtful accounts. You can see 60% here on our tariffs, 50% in allowance for doubtful accounts as you can see on the Slide. This reinforcement is important because if I look at the percentage of recoverable revenue over billings in the last 12 months, we had -- we expected 12.9, 2.9 in the fourth quarter of ’14 and 4.25% in the fourth quarter of ’15. Keeping this alliance allowance of doubtful accounts, 50% higher than we expected around BRLmillion, BRL35 million.
And finally on page 18, we bring the results of the fourth quarter. The first line I think is the reported result IFRS, in the second line what we always have, incorporating the proportionate consolidation of our assets, it's different from the IFRS and our consideration as regards to the sector of financial assets and liabilities and non-recurring items. So starting with IFRS on the fourth quarter of 2015, we have a drop of 8.7% on net revenue reaching 4.507 billion and this is related to that consolidation of assets and liabilities they had in the last quarter of 2014 so looking at the recurring value it's approximately switching an increase of 15 million.
So this revenue increase, so the fact that throughout the years especially goes to the tariff increases although on the fourth quarter we have a non-recurring item from the last quarter of ’14. EBITDA and IFRS there is a decrease of 35% a drop of BRL237 million and in the proportionate and recurrence values we’re talking about a decrease of 7.7%, 70 million reaching BRL844 million. The EBITDA is my guide in the last line of the net profit net income with a drop of 22.8% which is 363 million in the last quarter or a decrease of 10.7% as BRL255 million.
At the bottom of the Slide either on the consolidation or the total assets, but liabilities of the item either on the consolation or the total financial assets and liabilities for that quarter. And our non-recurring items. The total financial assets and liabilities of the year of ’14 in GFF and energy purchases that is verified here both in ’14 and last in ’15 both for Geracao and Renovaveis. The effect of the renegotiation of the GFS the risk of premium, the insurance reimbursement for the Bio Pedra plant as the addition of this fourth quarter the impairment of two assets and accounting procedure recommended by our auditor and the non-recurring effects CPFL Renovaveis that occurred in the last fourth quarter of 2014. So which would be the fact when we adjust the EBITDA. We have 70 million in the last quarter of ’15 and different considering the structural financial assets on this previous year there is an effect of 428, so the recurring value of ’14 turned it into 428 from 1005 for the fourth quarter of ’15, removing 161.
After this we move on to Page 19, as I see the evaluation of the main item, so we’re now discussing the comparison of the 25% but the drop of 7.7% right now as you can see on the chart, there is important negative effect on distribution for the currency variation and the dollar was volatile last year, and in the last quarter. The increase of 10.9 in the IPCA or the 10.5 of EGPM it's an important variation. We will talk about the results of our manageable cost in a minute. But in the last quarter we have a very close value to that of the inflation. The drop of the market and the distribution area was 33 million, a decrease in the result, the adjustment of ETR and CDA Santo Antonio, highlighted in our release, regarding a procedure obtained by Piratininga and applied to all our companies. Deal also allows for doubtful account the additional 12 million and because the cost of the collection actions that we implemented to maintain this allowance of sell through accounts.
The sale of assets in the fourth quarter a small amount, legal interjection of BRL17 million, is a positive result, the pass through of fiscal things, of 15 million as a procedure to avoid the volatility on the pass through of these simple things and other items amounting to 12 million. So this distribution is clearly what is responsible in the last quarter for the negative variation of our business. Conventional generations report 10.4% positive results, the seasonality strategy contributed with 9 million the better performance of EPAZA in 20 million since September of 2012 and other smaller amounts of 3 million. For renewable generation and important highlights of an increase over growth of 57.7% or 64 million on one side because of the lower energy purchase of SHPPs biomass plant for 15 million, lower fine in Bio Formosa was 11, asset write-off of 5 million and the commercial startup of -- contributing with BRL33 million to these results.
CPFL Renovaveis for the first time is having an EBITDA as a company higher than BRL 1 million but an important growth phase delivering the projects that we'll have this year. For commercialization services and holding the result was 6.2% higher or BRL 2 million, in the previous year we were working with a multi ability ceiling and the company had checked results. We are very pleased with the results on commercialization we had and the five products, so the bottom line, to the generate conventional and renewable generation activities were positive, commercialization also positive. Distribution was negative results in mostly due to the volatility of the exchange rates and the drop off markets that are the main elements to determine this variation.
On Slide 15 we have the manageable expenses, based on our cost per expense management program and I think this is the main result if you look since the implementation in recurrent values on the right side, business is of 18% equivalent to BRL326 million at this time reaching BRL1.430 billion we would have if it weren't for that action, but it was an expressive result and significant result and I this reduction occurs both on MSO and the contracts and also in personnel in real terms. And the year from '14 to '15 the actions throughout the crisis brought a decrease in real terms of 6% when compared to the IGP-M of the period.
If we see the comparison of nominal value year we had an increase of 2.8% and inflation of around 10% so it's 6% less as reported and in the whole series we're maintaining the level of BRL 1.350 billion - L1.400 billion over the last five years. The company's been growing and the nominal costs are being maintained stable. And this is very important especially at this period of crisis. Now on Slide 21, from the results considering the 10% decrease on this last quarter, resulting from the reduction of 7.7% in EBITDA was a better financial result of 54.7% decrease, a negative net financial results, contribution of a 150 million positive, the variation of DisCos concession financial assets was 96 million, the restatement of sectorial financial assets and liabilities and the resources that we have at CVAs, CVA at 59 million a type of currency variation that was positive in this negative EBITDA of 50 million which is transparent in the effects of results. We have the arrears of interest and fines, installment payments, so that's some works that we had developed to manage delinquency of such by these arrears and these net financial expenses negative and 59 million as you can see all the companies result in the fourth quarter 2014 the CVA on average was 11.7 and in fourth quarter of 2015 14.4, these depends over financial revenues and the tax that we did not have in 2014 and others, that 17 million. We had an increase in 3.2% in depreciation and amortization in Geracao and Renovaveis, increase of income tax and social contribution also earned 65 million. So we then refer to profits of BRL255 million.
On page 22, as an overview of the comparison of 2014 and 2015 and we can see an increase in that revenue IRS of 17% so the retain 19.159 million in the year. EBITDA as stable with the decrease of 11 million amounting to 3,750 in net income drop 1.3 million or 11 million amounting 875 million. I believe that you analyst have a preference of looking at these results in the manageable view point. And the company has an increase of 20% on revenue tariff increases have an important effects and here since from March and April amounting 18,915 billion.
EBITDA with an increase of 1.2% amounting to BRL3,948 billion and then also with the impact of the financial cost and the CVI the net income amounts through 1,924 billion at the increase of 3.2%. These difference between IFRS and the recurrent results growth, they are affected by the GSF in 2015. Estimated GFS minus risk work premium of 134 million and the expenses. On the previous year's you remember we had the spectral efforts and liabilities of CVI amounted 338.1 and the expenses with GFS in the year of 2014 amounted to 333 million. So these are the main differences determining this variations.
But considering the crises and the regulatory challenges the drop in consumption and if you look at the companies with current results. Our growth was slightly positive considering the scenario we can say it is significantly positive so what's the results on slide 23 as we did last year recognizing the volatility and the results of the market the recommendations as the constitution of Charley reserve strengthening our 2014 fiscal and the amount of BRL393 million and we also proposed the reversal of this statutory results due to stock dividends and you can see at the bottom of this presentation that the cost distributed to each of the bonus shares of 0.15 to 0.78 per share and considering it as a whole those stock dividends is equivalent to 0.39 per share.
You should note that the subsequent proposes of 2.5075704448% in the ratio of 0.02507570448% new share at the same type for each share. The total number of shares that make up the company though the capital stock will go 933,14,250 shares to 1,17,914,746 with the issuance of 24,900,531 shares to be distributor to shareholders under article 169 of law 6404/76. subscribed in pay capital, so stock will go from 5.348 to 5.741.
On the right, we had the breakdown of this result. In that income for the fiscal year individually of 865 million, results from previous year is 26, prescribed dividend another six with a net income base of 397 million. Legal reserve of 5% is 43 million, statutory reserve of the Concession Financial Assets is the reserves without cash of BRL255 million and statutory reserve from this proposal of Strengthening of Working Capital of BRL393 million. We also recommend, the payment of the minimum inventory dividend of BRL205 million, corresponding to 25% of net income of the fiscal year equivalent to BRL0.20 per share, [indiscernible] per share. The movement of these reserves for the period of 2015, the company proposes a minimum payment of 205 million and the statutory reserve for working capital and dividends of another BRL393 million.
Now we are on Slide 24, another source of concern from analyst and investors, the company reports the reserve where the net debt -- adjusted net debt over adjusted EBITDA is of 341. And as we had in the previous quarters, considering the relevant of the CVA as such we have a reconciliation if we had -- if it did not have that reimbursements of the CVA throughout the last year, we would then have our investors slightly below at 2.984. The track at the of the bottom illustrate this movement with the amounts in ’14 and the extension in 2015, since the first quarter going from 1.18 billion in the first quarter to the conclusion of the third quarter at 1907 and the last quarter was 1,682. In our understanding considering the push backs of this fiscal the next two or three months, tomorrow we will have a small [five] distributors here, in April we will have Paulista which the largest in June with RGE, we understand that these volumes will become positive for the company as of September.
On Page 25, reporting the increase in the nominal price of the debt. And this series we have the higher nominal cost and nominal in real with an important indexing on CVI and the other specialty would be in the '18 on long term interest rates, 6% on the Prefixed PSI and 3% on sanctioned plus funds. It's a comfortable situation in terms of liquidity, so with a cash at the end of the year 5.400 million, it's an almost 2.4 times the amortization of the last 12 months. Average center of 3.5% in this short is only of 13.3% of the total, so it is a comfortable scenario considering the perspective. With that acquisition is just the Group’s perspective an increase.
On Page 26, with the future investment perspective IFRS on the top, consolidating with the petitions recognized by IFRS. But I think it will be better to analyze it on the bottom with the pro forma investments of 1,200 million last year with an important challenge now. Regulatory enumeration remuneration for police man RJE over the next two years, increasing the distribution investments to approximately BRL1.2 million -- BRL1.4 million for the next two years. And approved cost of Renovaveis on generation and the project for the consolidation and services. This year then we will show invest closer to break 1 million. And there is a decrease because of the closure of Renovaveis projects, once new project are included this will increase but this is in the company's perspective for the five year investment plan, the pro forma of around BRL8.700 billion. But this commitment should grow and the company both on distribution and generation and generation of renewable on 27th reporting the capital markets indicators IBrX-50 is an important reference for investors one of the main stock indexes of local market and most trades shares and some liquidity CPFL joined in January 2016 sensing with the BNDS, with the Carbon Efficient Index, and staying on IBrX-50 and we remain among the 35 companies the market share of this index of approximately BRL1 trillion, market cap.
On page 28 the share performance with an increase of 2.1 compared to the decrease of 3.8 on the New York so there is a smaller job compared to Dow Jones and this is mostly related to the currency, there is also an average increase from savings volume. And the company is included in the main indexes over the last year.
These remind me remarks, with our vice president and officers to answer your questions.
Ladies and gentlemen, we will start the questions-and-answers session [Operator Instructions]. Our first question is from Vinícius Canheu from Credit Suisse.
Hello Wilson, good morning I have two questions. The first one is just a confirmation of some data you provided and the second one will be a question that I asked on the previous call about the contract and now proposal that is being developed. You said that you would be able to reduce contract and 4%, so the disclose, the average level of this over contracted position is over 109% and then which is have this decrease should be within the 100% that will be no loss resulting from it.
Wilson Ferreira Jr
Yes, the figures are below 109 and they will be below 105 especially within the next two years.
So that gives you some room for the next years?
Wilson Ferreira Jr
And my second question, we see an improvement in the environment with the CVA more control there and we’re following on the call, so there is considerable amount of assets available in the market. And I’ve been asking you if the time to take more risk has arrived or if it is the time to be more conservative considering the economic scenarios time to be more conservative at least these opportunities for the future because of the risk of the business and risk of balances. So has this changed or this proposal being more conservative to hold and there will be the positions throughout the year, or do you see a greater appetite, now, if that drives you to maybe take any initiative in terms of acquisitions for this year?
Wilson Ferreira Jr
It's not a matter of being conservative it's the matter of being disciplined. The group being disciplined I think we do have an improvement in the scenario. We are focused in the evaluation of opportunities and with the VP, but we’re in a better position but we will not let go of being disciplined. And even with the minimum dividend and that illustrates the focus of the group is to have a capital structure that is more robust and healthier we are leveraged and that is strategy to create value because of the income tax advantages and so on. But we are a company that is focused on growth.
But I would say the time is now for favorable to the buyer because the price of assets shall decrease. Of course we will analyze opportunities if we verify an opportunity, we maintain an appetite but with what we maintain above all is discipline. I think it's important when we don’t have certainty of how the market will be, we understand that this is crucial. We feel confident with the decision that we took with the dividend position or the last movement of the agency as regards Itaipu and determining this perspective of higher liquidity, of course we will use these results of our work with the M&A and Greenfields with the discipline required by the current times.
Excellent, thank you. That was very clear.
Miguel Rodrigues, Morgan Stanley.
Wilson, could you talk about your debt rollover plans, 2.3 billion maturing in the short run so what would be the refinancing cost that you estimate and to which extent you could consider amortizing part of this debt and do you have high visibility about debentures for infrastructure more specifically distribution which was a point under discussion as well.
Wilson Ferreira Jr
I will ask Gustavo Estrella to start to answer your question because he is sees very much involved in both things deferred over.
This is an important aim and we focused a lot of attention on that mainly as beginning of last year we already imagined having a very challenging year such as a lot of the cases really 2015, so we have brought this, forward and we wrote over practically all the debt that we had maturating in the short run before the scenario materialized so our situation regarding liquidity very comfortable. We're closely the year with over BRL5 billion, BRL4.5 billion. So all our needs for refinancing by the end up to the end of 2017 are totally under control, we have no exposure whatsoever to the credit market in Brazil today. You know that this market is much smaller in terms of volume and with much higher cost fee because of the CDI at the levels that they are or the spread that we have charged in the market. So today, we're monitoring the market looking for alternatives and for other solutions, thinking about 2018 maturing. So as far as 2017 our debt is totally under control, so we're very comfortable. We can look around the market and if we see a good opportunity for funding then of course we will go after it. If we don't find one then we monitor things with our eyes turned on 2018.
And one of the challenges that we have in this market is regarding new funding sources already going to your second question undoubtedly the Company is very much involved in this team of infrastructure debentures. We have already held meetings with Ministry of Mines and Energy and with self-sales in order to find a way to expand the benefit to the distribution sector. There is no definition yet coming from the Ministry, but I would say the outlook is positive and the Ministry understands that the challenge that we face today regarding financing, very long-term investments like 20 to 30 year investments. Most of the companies today finance their CapEx with short-term capital, so I think the government is hearing this with silver book ears because it has to do with the sustainability of investment and the long-term investment facilities have to be created and of course it has to do with the infrastructure debentures.
So we're bullish about getting the source of funding for the distribution sector, but so far there is no definition from the government as yet. Thank you very much.
One second question maybe to Wilson. There was something about the valuation of sale that to be seems to be pricing to be expensive that would reduce the attractiveness of the auction, so some concessions are not reaching the targets of financial quality required by ANEEL, so how do expect this consolidation process in distribution to happen, do you believe that the players that are not reaching their targets will be looking around for prospective buyers already by the beginning of this year before they face problems because they are not reaching the targets imposed by ANEEL? So I would like to hear from you how you think consolidation will happen in distribution.
Wilson Ferreira Jr
I think consolidation is necessary and it will occur, so I don't have much doubt about that the fourth cycle and the situation of renewal of concession albeit the financial situation of some concession that are not performing, this is desirable, so 63 distributors would not make a lot of sense, so of course this will probably undergo a grouping process until you can rush analyze the number. You know the amount or number of pages that you need to report a very small concession and now you analyst are going to watch analyst go. When you about our sales which was the company that has a very positive market it's a company that was located in the market at its such a growing company that has operating performance that is lower than other such as ours.
And one of the reference is that you use in order to evaluate the company as the implicate value in the multiplication of the regulatory asset base, so the company that is more efficient has a value that already impressive, multiple with higher than the market, but in the specificities of cell gate this figure is almost 30% higher so when we talk about the price or attributed price, you would evaluate the company that will be participating and you will see whether the acquisition is possible it is only possible if you can play your technology or process fees of systems and bring the company from next per share as the performance to a why, performance higher the ‘x’. And we don’t know why but the analyst I think do not know that yet, why this price was established so we have to have a deeper understanding of the price until we can imagine the processes to have in the other companies and the cases of one linked to a lesser price.
I think this was a good thing in the process that was placed for renewal that is for sake the duration because even the operators that face problems be at regarding quality or financial they have time and being private they are not going to wait to have a probably agency because the example regarding this were not good for those who owned the company so when you have this time and if you have the adequate time and if you are seeing this adverse time that you will not be able to perform accordingly, the most adequate and more and in order to preserve the residual value of the company the best thing is to divest, to sale in the end things become easier because of geographic extremity or facility in terms of systems, so I think we will see this kind of movements.
Lilyanna Yang, UBS.
Thank you for the question. I have one question regarding M&A. Do you think that you and other selling asset in 2016 at a broader question. Would you be interested in participating in transmission because regulatory returns are better than distribution even more so when the traditional players in transmission are facing financial difficulties okay my two questions.
Wilson Ferreira Jr
Thank you for the question. Yes, we believe that state such as Rio Grande do Sul, today is an important day for them today and tomorrow when they will be holding meetings to refinance with the government but another alternative and even in order to be able to do something in the stake would be to sell off so privatize sum of the concessions and I think this will be considered more seriously now, these are assets that are facing a good momentary of the prices the concessions have just been renewed I'm talking about the stake concessions so I have no doubt that this kind of moves has a potential in the specification wise, as you mentioned, the last move that they made regarding separating or spinning off Brazilian and is on some a few things that the executives has been mentioning going into the direction that you had just refer to and this company is well placed and they have a concession and they are the most efficient concession there.
So of course if these things occur we will be assessing the perspectives and of course they are assets that would make a lot of fence in our growth process provided financial discipline is maintained.
And what about translation?
Maybe you haven't noticed that we have been getting into this segment, which shows us a criteria to participate especially to make fineable facilities that are -- where we may have an increase in terms of usage. The first one is the Paulista Lajeado substation, it was an important substation for the need of the CPFL, Companhia Paulista de Força e Luz and we saw that the players -- it was an excellent investment that we made that we was a major investment by the end of last year. We had the second asset, we participated in the auction we were the winners of Morro Agudo, and I agreeing with you that the outlook for investments in transmission have improved quite somatically, so the prices established to attract more payers, they have already reached quite good level, we are obtained a lot of attention to this and always thinking about financial discipline. You have a maturation that is of one or two years and you have financing from this BNDS and you have -- you can issue infrastructure ventures. So we have been analyzing these opportunities very thoroughly.
If you allow me another question about distribution segment, the EBITDA was weaker than we expected, we find this quarter that delinquency increase slightly. So what would be guidance for the current level of EBITDA acceptable? And would this be possible to reship this year, where the GDP is expected to increase?
Wilson Ferreira Jr
I’ll ask Gustavo to give an answer.
I think some of the topics here are important to mention, first is that in this quarter, unlike the year results, you have an important impact of the currency exchange variation and that impacts negatively our EBITDA, but it returns and this shall be adjusted first to be able analyze the distribution EBITDA more in a recurring fashion. Another saying, as you mentioned about delinquency wasn’t show the data and I think we do have a nominal increase in delinquency in absolute term considering the moments. But on the other hands, there is some stability in the percentage level these are the revenue.
And when we consider our delinquency it is increase up to this point have been offset by the increase in revenue from finds and interest that we have. There has been a slightly positive effect even when we also consider the increase on expenses that we have with a greater control of delinquency now talking about the amounts of cuts and, I think we have to be a little bit trifle with the EBITDA of the this course because there is a non-recurring effect as well of the currency variation and the other effect is outside in the other line of the results and therefore it does not affect our net income line. So when we consider the perspective of course there is an impact of the market, especially in the home markets and the reinvention market. On the industrial market we still have the preserved margin with the demand contract. But of course we suffered from a decrease in the residential consumption.
Analyzing 2016, the scenario is slightly different, we already see the perspective of increase in energy consumption from residences when compare to 2015. We have a growth of between 2% and 2.5% but the perspective of market increase for 2016 and with the tariff on the opposite from last year, because last year we had an a whole 60% increase on tariff for this year this perspective is very different. It is because of the decrease of the tariff flag, we already are on yellow and we will evolve to the green flag. There is also an expectation of a decrease in the tariff values vs budget. Which is throughout the year. Considering our DisCos, especially RGE in June and Piratininga in October. We see an expectation of a tariff decrease and be that’s in this case that will demand more than 25% of tariff decrease not including this tariff flag. So that should also bring a more positive perspective in terms of power consumption in our concession areas. But the main messages are, first reading the results carefully when considering the distributional fourth quarter of 2015 because it is the different from what is expected from 2016.
We now have a more positive outlook for distribution as of this year either because of the rebound of the market, with the expectation of, a small rebound of the market, but the expectation of the tariff reduction throughout the year. And the impact of the tariff reduce, bit up to I had a tariff at the end of last year and this will be consolidating the entire results as of 2016 the small distribution companies now are also undergoing the tariff review process in March with the perspective of regaining larger or higher margins and this is the scenario that we have for distribution. Thank you.
We now close the questions-and-answers session. I would like to turn the floor to Mr. Wilson Ferreira Jr for his final remarks.
Wilson Ferreira Jr
I think with this last question, what Gustavo said is very important. As I said, I think the year of 2015 was without a doubt the worse during this crisis. 2016 tends to be better due to a number of variables. The decrease that we verified in consumption and that we detailed to you our expectation and what we have verified already especially in February, it's more about the flat growth and the legislative consumption. So, the negative effects of delinquency we believe either with the change on tariff flag or with the reduction resulting from CVA and Itaipu, will benefit consumers. So we understand the business a positive perspective.
As regards to generation the main problem were definitely sorted and the financial aspect that disciplined group as ours always is concerned with now has a real possibility for resolution. So, what has been established for 2016 clearly better for the group than the conditions we had in 2015 and I think that now we the inspiration of our governance, our shareholders and our business culture, yes there will be a series of opportunities they will be analyzed with our discipline and on the other hand we have the internal opportunities of businesses that we have already formed for simple CPFL Energia with a remarkable site of opportunities for profit of it materializing these three market areas. You see an important migration in moments of excess or surplus.
The company has this competence and this ability to make it position and of course all processes of rationalizing cost and the productivity processes implemented in the company. So I understand that the year 2016 is a challenge for all Brazilians and for the whole country and it will be for us as well. But as we always say it is also a year of great opportunity for those who have prepared for this moment and CPFL has prepared. So we are confident in the performance of our operations due to the preparation we’ve undergone in the last two years.
We thank you for your attention to our conference call.
CPLF Energia conference call is now closed. We thank you all for your participation. Have a good day.
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