EDP Brasil Adjusted EBITDA increases by 14.3% in the third quarter | EDP Brasil

EDP Brasil, a company operating in all segments of the electricity value chain, reported Adjusted Net Income of R$129.2 million in the third quarter of 2017, a 2.4% increase compared to the same period last year. The company adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) in 3Q07 amounted to R$535.1 million, 14.3% higher than in 3Q06.

These results disregard non-recurring effects, which have increased the previous year basis for comparison, and demonstrate consistent growth in the company operations. The figures disregard the sale of Pantanal EnergŽtica and the accounting of the PecŽm TPP insurance premium, both in 2016, as well as the reimbursement of the hydroelectric levy in Cear‡ and the updating of EDP Esp’rito Santo indemnifiable financial asset, which have occurred in 2017.

"We have closed this quarter with solid results, showing consistent improvements both in operational and economic-financial performance levels. All business units reported great results, especially Trading and Energy Management, which saw all-time highs," Says EDP Brasil CEO Miguel Setas.

In the first nine months of the year, the company Adjusted EBITDA amounted to R$1.571 billion, a 16.9% increase compared to the same period of 2016. Adjusted Net Income stood at R$381.5 million, 45.8% more than in the last year.

In 2017 the company has also continued its cost control program, keeping manageable expenses below inflation levels. The company annual balance sheet saw a small 0.2% increase in costs with with Personnel, Materials, Provisions and Others (PMSO), significantly below the National Broad Consumer Price Index (IPCA) and wage adjustments

Hydrological Risk

The quarter was characterized by an adverse hydrological scenario, with the GSF (Generation Scaling Factor) standing at 60% and the PLD at all-time highs throughout much of the period. EDP actively managed its portfolio, increasing its hedge position to an average of 184 megawatts (18%), which has mitigated, together with the GSF renegotiation, the margin loss of R$278 million.

In addition, PecŽm TPP purchased 50 megawatts to hedge the reimbursement, which resulted in an additional R$29 million gain.

Commitment to implementation

The company ability to execute projects was again demonstrated by three important milestones.

Works at the S‹o Manoel HPP have reached the final stage in the third quarter with the issuance of the plant Operation License and the first tests with generating units 01 and 02. The work has reached 97.2% of completion and the filling of the reservoir was started. The company expects the anticipation of the final schedule, and start-up should occur later this year.

The company has also ensured the smooth progress of the construction schedule for its first Transmission Line, located in Esp’rito Santo. The company has proceeded with the environmental licensing process and expects to obtain the Deployment License in the upcoming months. Altogether, the company has invested R$6.3 million in the acquisition of land and in environmental studies.

The PecŽm TPP reported an average annual availability of 91% and carried out two scheduled maintenance shutdowns, surpassing the volume required in the auction. In 3Q07 the company also carried out the first of three stages in the maintenance plan for the coal conveyor belt, which aims to reduce the cost of raw material transportation by truck and reduce the time spent on unloading coal vessels.

Investments in Distribution

EDP Brasil maintained its commitment to investing in Distribution and allocated R$413 million to grid improvements, a 19.3% increase compared to 2016. Most of the funds were invested in the deployment of measurement systems, the expansion of lines, and the construction and upgrading of substations to connect new customers.

The volume of energy supply in the third quarter grew by 2.3% compared to last year. It is worth pointing out that EDP S‹o Paulo has seen a 4.4% increase due to the growth of the industrial segment, reversing the downward trend reported last year as a result of the economic crisis. Moreover, losses in S‹o Paulo and Esp’rito Santo declined by 0.16 pp and 0.79 pp, respectively, compared to the end of 2016.

PDD - Provision for Doubtful Debtors and Default

In 3Q07 the company reported an R$21 million drop in its PDD compared to the same period of the previous year. These results reflect the company efforts in this field, including renegotiation measures for defaulting consumers, which aimed at recovering customers and avoiding possible losses.

The Age of Digitization

The company has also made major advances in one of its main IT projects: the implementation of automated administrative processes, driving efficiency and quality gains for the operation.

These digital systems have been implemented throughout the company, completing tax forms or bank reconciliation statements and receiving invoices. 15 administrative processes had been automated by the end of the quarter, and 23 more are expected to be implemented by the end of the year.