Eneva S.a. · BMFBOVESPA:ENEV3
Eneva — Investor Day (July 2014)
43 slides from Eneva's investor day presentation, Jul 3, 2014
Slide 1: ENEVA Investor Day
ENEVA Investor Day July 3, 2014
Slide 2: Agenda
Agenda
Slide 3: Agenda
Agenda 9:00 Introduction and Management Presentation 1 9:10 Fabio Bicudo, CEO / Frank Possmeier, Executive Vice President 9:10 Regulatory Update 2 10:00 Fabio Bicudo, CEO 10:00 Operations 3 11:00 Roel van der Stok, COO / Frank Possmeier, Executive Vice President 11:00 to 11:30 Coffee break 11:30 Fin
Slide 4: Introduction and Management Presentation
1 Introduction and Management Presentation
Slide 5: Management Team
Management Team Fabio Bicudo, CEO Roel van der Stok, Chief Operating Officer o Former Co-head of investment banking at Goldman Sachs and o Former COO of E.ON Anlagenservice. Also served for E.ON as responsible for Brazilian utilities sector coverage. Prior was MD power plant group manager in Germany
Slide 6: Management Structure
Management Structure o Investors Relations Chief Executive Officer o Human Resources Investors Relations Officer o Communication Fabio Bicudo o Institutional Relations o Internal Audit Executive Vice President Chief Administrative Officer o HSSE Frank Possmeier Chief Legal and Chief Development and
Slide 7: Regulatory Update
2 Regulatory Update
Slide 8: Ongoing Regulatory Discussions (1)
Ongoing Regulatory Discussions (1) Parnaíba II Delay 350 Avg. CVU Reduction: R$12/MWh 300 250 Average CVU (R$/MWh) 200 150 ENEVA w/ Parnaíba: R$101/MWh 100 Parnaíba II CVU: R$59/MWh 50 0 SIN wo/ ENEVA SIN w/ ENEVA Average CVU (ENEVA without Parnaíba II): R$ 111/MWh Average CVU (ENEVA with Parnaíba I
Slide 9: Ongoing Regulatory Discussions (2)
Ongoing Regulatory Discussions (2) Parnaíba II Delay Project Overview ENEVA Proposal to Aneel Part of 1.4GW Parnaíba Thermoelectric Complex, a unique “gas Discussion with Aneel over the last 2 months to reach a balanced to wire” case in Brazil solution for Parnaíba II o Regulatory penalties related
Slide 10: Ongoing Regulatory Discussions (3)
Ongoing Regulatory Discussions (3) ADOMP / Unavailability Charges Itaqui and Pecém I Pecém II and Parnaíba I & III Filed in Jan, 2014 a lawsuit against Aneel questioning On Jun 26, 2014 filed a request for an injunction with a hourly-based unavailability charges Federal Court aiming to get the same
Slide 11: Additional Regulatory Studies
Additional Regulatory Studies Potential discussion to restructure PPA Applicability Terms of the request 1 • Dispatch > 80% (during at least 6 consecutive months) Additional Maintenance • Coal: [up to 3 months/year] • Gas: [up to 1 month/year] 2 Temporary reduction of • 5 years duration; or •Install
Slide 12: Operations
3 Operations
Slide 13: Parnaíba Gás Natural
3.1 Parnaíba Gás Natural
Slide 14: Cambuhy/E.ON Investment in Parnaíba Gás Natural
Cambuhy/E.ON Investment in Parnaíba Gás Natural Securing ENEVA’s power plants gas supply Successful rescue plan of PGN Shareholding Structure In 2H2013, ENEVA and E.ON led efforts to rescue PGN from Current OGP’s judicial recovery process and secure the gas supply for Controlling Block (63.7%) ENEVA
Slide 15: Parnaíba Gás Natural (PGN)
Parnaíba Gás Natural (PGN) 3 commercial gas fields fully committed to supply ENEVA power plants Overview Only part of Parnaíba Basin is yet licensed and explored Declaration of commerciality for 3 gas fields: Gavião Real, Gavião Azul and Gavião Branco o Santa Vitória discovery in Jan, 2014 (well OGX
Slide 16: Parnaíba Generation
3.2 Parnaíba Generation
Slide 17: Parnaíba Complex Overview
Parnaíba Complex Overview A unique case in Brazil power generation sector with 910MW already in operation Parnaíba III Parnaíba II Parnaíba IV 1 GE GT x 168,8MW Parnaíba I 2 GE GTs x 168,8MW + 1 Wärtsilä GM x 7,3MW 4 GE GTs x 168,8MW + 1 GE ST x 181MW 3 Wärtsilä GMs x 18MW Gas Treatment Unit Parnaíb
Slide 18: Overview of gas plants operations
Overview of gas plants operations All gas turbines in continuous operation for over 10,000 hours with high availability o Parnaíba I historical avg. availability: 96% o Parnaíba III historical avg. availability: 91% First inspections executed by GE with no major findings Maintenance interval extende
Slide 19: Coal Fleet
3.3 Coal Fleet Itaqui, Pecém I and Pecém II
Slide 20: Coal generation portfolio overview
Coal generation portfolio overview 1.4 GW of installed capacity in full operation Itaqui Pecém I Pecém II Capacity: 360MW Capacity: 720MW Capacity: 365MW Fix. Rev.¹: R$317.3MM/year Fix. Rev.¹: R$600.3MM /year Fix. Rev.¹: R$284.9MM /year CVU: R$103/MWh CVU: R$99/MWh CVU: R$108/MWh
Slide 21: Itaqui (1)
Itaqui (1) Availability¹ Main issues and action plan 100% 4 Declared: 95% 90% Equipment Cause Action Plan Status 80% 80% 78% Manufacturing 70% 74% 1 Boiler fans bearing problems Exchanged 1 2 Design modification and 60% 2 Mills Wear executing overhauls 50% 3 FGD system Installation improved and 40%
Slide 22: Itaqui (2)
Itaqui (2) Variable Cost x Variable Revenue¹ Variable generation cost inflated by high coal logistics cost (R$/MWh) Problem Consequence Action Plan 261 Simplify engineering by splitting the very 232 long belt into several sections Higher truck Status: New engineering project underway Coal conveyor t
Slide 23: Pecém I (Unit #1)
Pecém I (Unit #1) Availability¹ Main issues and action plan Equipment Cause Action Plan Status 100% 5 90% Declared: 90% Oil pipes improved, 80% 1 Turbine fire Oil leakage fire extinguisher system commissioned 75% 70% 60% 59% 2 Hydrogen seal Material failure Exchanged 52% 50% 3 4 3 Boiler leakage Con
Slide 24: Pecém I (Unit #2)
Pecém I (Unit #2) Availability¹ Main issues and action plan 100% 4 Equipment Cause Action Plan Status 90% Declared: 90% 85% 80% 76% 1 Generator cooling fan Assembly failure Reassembled 74% 70% 60% 2 3 2 Bag filters Cleaning system Valves exchanged 50% 40% 1 3 Turbine control valve Oil leakage Repair
Slide 25: Pecém I
Pecém I Variable Cost x Variable Revenue¹ (R$/MWh) 151 154 Variable generation cost already at recurring levels 136 139 138 134 127 118 117 119 109 117 118 110 107 105 102 108 100 o Diesel costs reduced by ~50% with more stable 111 110 114 106 107 110 105 104 100 102 105 106 99 99 97 95 93 operation
Slide 26: Pecém II
Pecém II Availability¹ Variable Cost x Variable Revenue (R$/MWh) 100% 96% Declared: 95% 90% 93% 80% 70% 60% 50% 122 125 125 114 118 118 113 111 108 40% 111 106 30% 101 101 99 99 99 92 88 20% 10% 00% Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar
Slide 27: Summary of coal operations improvements
Summary of coal operations improvements Main remaining risks o Continued high dispatch scenario with reduced maintenance time o Auxiliary equipment design and installation Improvement plan for coal plants o Optimization of organizational structures to reduce costs and improve team performance o Expe
Slide 28: Financial Stabilization and Cost Reduction Strategy
4 Financial Stabilization and Cost Reduction Strategy
Slide 29: Financial Stabilization
4.1 Financial Stabilization
Slide 30: Financial Stabilization on Course
Financial Stabilization on Course May 12, 2014 May 20, 2014 Jun 30, 2014 • Signing of term-sheet with banks for: • R$100MM short-term • R$150MM of fresh cash expected to • R$1.5Bi capital increase bridge financing from be raised during Initial Preemptive o Phase I: R$316.5MM cash-only (in place); an
Slide 31: Process and Roadmap of Stabilization (1)
Process and Roadmap of Stabilization (1) Process update Main recent achievements / Critical points ENEVA working alongside following priorities: Selected key achievements • ICB Online for Pecém II 1. Pecém II sale / Backstop execution • Progress with Aneel on Parnaiba II (deadline: July 18) 2. Solut
Slide 32: Process and Roadmap of Stabilization (2)
Process and Roadmap of Stabilization (2) July, 2014 August-October, 2014 • Conclusion of sale of Pecém II • Shareholder’s meeting o Payment of at least R$400M (50% of Pecém II) o Authorization of capital increase o Authorization of asset contribution • Parnaiba II Aneel’s final decision • Board of D
Slide 33: Cost Reduction Strategy
4.2 Cost Reduction Strategy
Slide 34: Key elements of ENEVA cost reduction strategy
Key elements of ENEVA cost reduction strategy Three key drivers to maintain cost control Cost reduction strategy based upon top-down (target of Elements of Cost Reduction (R$) R$80MM) and bottom-up (optimal organizational design), supported by external consultants 10% 65% 45MM Cost reduction program
Slide 35: Quick wins as lighthouse projects to drive the change
Quick wins as lighthouse projects to drive the change Several measures addressed for quick improvement Office layout and services Quick Wins Overview (R$) o Change of office layout and reduction from 6 to 3 rented floors o Reduction of office services 2MM Travel policies 4.5MM o Implementation of re
Slide 36: Key cornerstones are streamlining & structural changes
Key cornerstones are streamlining & structural changes Rethinking organizational size and reduction of Optimizing HoldCo Functions duplications & inefficiencies Today Tomorrow Restructuring responsibilities, reportings and processes Clear targets for 2014 2 EC members and 2 EC members and o Reductio
Slide 37: Increasing efficiency by outsourcing & relocation
Increasing efficiency by outsourcing & relocation Focusing on real HoldCo functions Only HoldCo functions with clear control tasks must be Optimizing HoldCo Functions located in Rio de Janeiro Clear Control Functions HoldCo Clearly defining and differentiating between Control and tasks Support Funct
Slide 38: Full effect on cost reduction realized beginning of 2015
Full effect on cost reduction realized beginning of 2015 Main part of savings realized in 3Q14 and 4Q14 2Q14 3Q14 4Q14 2015 Phase III Phase I Phase II Phase IV Increasing Structure program Implement Continuous cost efficiency by + realize quick streamlining + control and outsourcing and wins structu
Slide 39: Closing Remarks and Growth Opportunities
5 Closing Remarks and Growth Opportunities
Slide 40: Parnaíba I: Closing of the cycle (1)
Parnaíba I: Closing of the cycle (1) Highly competitive expansion to existing site Highlights Parnaíba Site Bottoming of open cycle gas turbines from Parnaiba I power plant provides extra 360MW Competitive project as no additional gas needed¹ Installation Environmental License issued Plug and Play:
Slide 41: Parnaíba I: Closing of the cycle (2)
Parnaíba I: Closing of the cycle (2) Highly competitive expansion to existing site Net power output: 352,8 MW Plant’s upside efficiency: 51% (previously 37%) Additional gas consumption: zero Contractor: TBD (first phase performed by Duro Felguera) New equipment Implementation schedule: 36 months CAP
Slide 42: Disclaimer
Disclaimer The material that follows is a presentation of general background information about ENEVA S.A. and its subsidiaries (collectively, “ENEVA” or the “Company”) as of the date of the presentation. It is information in summary form and does not purport to be complete. No representation or warr
Slide 43: Thank you.
Thank you. www.eneva.com.br