Good morning, and thank you for waiting. Welcome to CPFL Energia First Q 'nineteen Earnings Results Conference Call. Today, we have here with us Mr. Gustavo Estrella, CEO of CPFL Energia Mr. Pan, CFO of CPFL Energia as well as other officers of the company.
The presentation will be available for download on the website, www.ttsl.com.bricar. Be informed that all participants will be in listen only mode during the company's presentation. After that, there will be a question and answer session and further instructions will be given. It's important to mention that this conference call is being recorded. The call will be held in Portuguese by Mr.
Gustavo Estrella with a clarification in English, we will have the participation of Mr. Pan, who will speak English to our listeners. 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 beliefs and assumptions of the Tejas de Neuvia Management and on information currently available to the company. Forward looking statements are not guarantees of performance.
They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that gender economic conditions, industry conditions and other operating factors could also affect the future results of SEPEPE Energia and could cause results to differ materially from those expressed in such forward looking statements. Now I would like to turn the floor to Mr. Gustavo Estilo. The floor is yours, Mr.
Estilo. Good morning, everyone. I would like to thank you very much for being here with us for this call regarding the results of the first quarter of 2019 at Tecnico de Neuja. Let's start on Slide number 3, where we have our main highlights in the quarter. The first of them is related to an increase in the load in concession area.
We have a growth of 1.9%. We are going to go into details a little bit further ahead, but this 1.9% is related to 2 free clients that left our concession area. They have migrated to the basic network. If we adjust the consumption of these 2 clients in this load, then we are going to get to an increase in consumption in the concession area up to 12 0.5% in the comparison phase, which is around the same amount of growth that we had in consumption in 2018. And here we have our results, the growth in the EBITDA of 12.1 percent, BRL1531 1,000,000,000, also an increase in our net income of 36 percent reaching BRL570 1,000,000.
And our leverage is of net debt of BRL14.9 billion and a leverage of 2.7x net debt over EBITDA. Our investments in the quarter were off BRL445 1,000,000. And let's remember that our forecasted investment for 2019 is BRL2.2 billion a year. In this quarter, we had BRL445 1,000,000. Our tariff adjustment here for Cebecilico based in the beginning of April, we had an increase that was significant of 9 point 6 3 percent of the parcel B, reaching BRL2.532 billion with an average effect to our consumers of 8.66%.
I think it's important to highlight in here probably 2 important effects in tariff adjustment. The first of them is the transfer of the IGPM, which in the period was H27, significantly higher than IPCA amount in the period. This is the last 12 months and now. So ex Q factor that had a positive effect to the company basically because of the reduction of the indicators that we have decided in Saip, they were better and that had a positive effect in our HQ factor. Turning now to Slide number 4.
We have our highlights in EBITDA. You can see in the pie chart on the left. The share of the distribution segment, 64% in the business of the growth, 20% of conventional generation, 12 percent of renewable energy and 4% of commercialization services and others. And the performance of the different businesses we see here is the distribution segment with a growth of 23.6%, basically still reflecting the tariff adjustments and also tariff reviews that we had over 2018 associated to the growth in the energy consumption. And this is a significant result and a positive result for the company in the quarter, followed by conventional generation.
Here, we had a drop of 6.5%. Pan is going to detail that. But basically, here we have 2 nonrecurring impacts. The first one is positive. In 2018, there was a effect of the agreement, our HPP in Santo Grande that there was an agreement in 20.15 that allowed us to have a positive impact in 2019 in 2018 of BRL17 1,000,000.
And another nonrecurring effect in 2019 is the increase of investments related to our CCC deposit with BRL10 1,000,000 of investment. Here, We have anticipation of investments considering the high levels of generation that we had in our PPP, we did anticipate investments and also we had one time off investments and that has affected our cash in BRL10 1,000,000. Renewable generation, there was a drop of 15.7 percent. The two effects as well here ago, performance of wind, which is still low in the quarter. Just as we had that in the last quarter out of 'eighteen.
And also, there is a seasonalization effect in our SHPs. This effect will be offset over 2019. And a very positive performance in the commercialization segment versus another segment. We say growth of 165%. We should highlight here the commercialization with better margins in 2019 and also with better performance in services.
Now turning to Slide number 5, We have our energy sales. As I said, there was an increase in the concession area of the load of 1.9%, considering the impact of those 2 freight clients that left us and went to connect direct connection to the basic grid. If it was not like that, we would have a growth of 2.5 percent. Also, we had increase in sales in the professional area of 3.2%. Now that if I could get to clients, we would have had a growth of 3.8%.
A main highlight here is in the residential area, a growth of 8.4%, followed by the commercial area with 5.1% base. Here, what explains this high growth is the increase in temperature, especially in January February of this quarter that allowed us to have a higher consumption of energy. In terms of losses, they are stable vis a vis the losses of the prior year, 8.84% compared to 9.03% last quarter of 'eighteen and 8.82% in the quarter of 'eighteen. Turning to Slide 6. We have our hydrological scenario with the clear recovery of the scenario, especially here in the month of April May.
We are reaching a level that is higher in the month of May for the holders and then an IPS system. This is a similar situation in the Southwest region. And you can here have our expectation of the levels of the reservoirs. As you can see, obviously, we have a positive expectation. We have a drop in the stock price.
We had a peak in prices in February, and we see the curve in the downward trend. And so we will have lower prices here in May. To our right, we have the GSF projection. Now in month of May, This is the first time that we will have the GSF of Pretend, and we were having the secondary energy in the system. And the expectation of GSF now from May up to the end of the year, in December, we have an average expectation of around 16% in the average of 2019.
Now turning to Slide number 6, and I turn the floor to Pan, and he's going to talk about the results of the Q1 of 'nineteen. Excuse me. Now I would like to turn the floor over to Mr. Ben, and we'll have his presentations in English.
Good morning, everyone. Okay. Well, the Q1 of 2019, I mean, we have very good quarter compared to last year. In terms of the net revenue, we have around 12% increase and after the 4% increase also goes to the Vida. And that is 28,000,000 because of Atifio's signal impact and the lower wind farm generation explained 75,000,000.
And we have the start up of the goldfish plant, a small hydrocarbonate, if you create power for of the
Ladies and gentlemen, we will now begin the question and answer session. Importantly, with Solana Capital.
I have two questions.
The first question has to do with an increase in AGA. Could you well, it was an increase at least year on year on AGA distribution companies. I would like to better understand the reason. The second question, we saw a very strong deleverage this quarter if you consider the Q4 of 2018, 2.7x EBITDA. I'd like to understand the rationale behind it.
What is the vision by year end? What do you consider to be an optimal leverage that you would like to work with close to 2x or even lower than 2x? First of all, actually, if you look at the numbers, there was a significant increase in ADA. Our indicator, the net revenue is 0.6 and 0.9. But do you see some one off events compared to 2018?
We can see an ongoing effect of an agreement in 2018 with the local authorities, BRL 11,000,000 or ADA. But net of the effect, we continue to see a strong impact due to the increase in our ADA. And it's a combination of many factors. Firstly, higher tariff numbers starting last year. Additive debt, an economy that doesn't show faster recovery signs.
We still have high unemployment rates, low payroll. So it all has an impact on our tariffs combined to an increase in consumption. And we showed here a result for residential, which also shows a final increase in the electricity bill. So if you combine and put it all together, it makes us have an increase of EDA this quarter. And in house, we already have an action plan, a stronger action plan to fight this upward trend in delinquency.
We've increased our number of disconnections. Among many other initiatives, making it the most important one, the idea is to increase at least by 20% our volume of connections so we can fight this increase in delinquency. In April, we already noticed a drop in this volume of ADA. But certainly, that's a warning sign, and we are focusing very heavily to control and lower these ADA indicators. As for deleverage, actually, we did show strong deleverage in the current quarter.
Please bear in mind that you asked this question right in the past. You asked about an atypical variation of our working capital in Q4 2018. We also mentioned that we had some advance made some advance, some payments that we had from the beginning of the year and we anticipated to December. So this quarter, we have a lower payment volume, which also contributes to lower our leverage in this quarter, 2.7. So it should have been lower at the end of the year, but when compared to 2.7 that we showed now.
So basically, this is the main reason behind the stronger drop in deleveraging. Please go ahead, sir. Following up Bruno's question, what is the digital project for the end of the year? And in order to meet this net debt over Zivida, do you plan to increase your payout? About our net debt over the prior year, clearly, we have a downward trend in our leverage until the end of the year.
Perhaps the only variable in this case would be the level of regulatory assets by year end. Our expectation today is that the Paulista tariff adjustment will begin to have a lot of our regulatory assets and the balance is expected to go down. And you can confirm a stronger reduction in our leverage that we're showing right now in the current quarter. For this year, considering earnings already disclosed, our payout is 25%. Therefore, the dividend payout expected to have by year end by December will be on top of 25% payout.
Okay, great. The next question is from Gustavo Yuti Facilitio, FBS Capital. Good morning, Cruella. If you think about our pro form a cash generation around 1,300,000,000, net of working capital would be normal, would be around 600,000,000. So we could see about 700,000,000 coming from suppliers.
If you think about Q4, I can see that the supplier line was going up. And we also had some CVA of set out over the year. Should we expect to see positive working capital from suppliers and CVA coming forward would be another BRL1 1,000,000,000 approximately cash. Additionally, how do you see the picture? First of all, we work on the strategy of defense involving suppliers.
And there is some confusion about the working capital numbers. We anticipated payment on top of suppliers, which is higher and now is lower. So to some extent, it should be adjusted. The volume is about the same that you mentioned, something around BRL 800,000,000. And there is no outlook to have a similar scenario by the end of the year.
Clearly, this is assessed on a regular basis by the company. And should there be a rationale of financial gains, we might make the necessary arrangement by year end, but not now. We can have normal cash generation as we have normal accounts payable. But what you said, maybe the main difference in our cash generation will be related to the regulatory asset receivables. On the one hand, we already are assured that all the amounts already included in the tariff adjustment, particularly for leases, with some security.
And now we start having these amounts as of now. There is always uncertainty visavis new regulatory assets. Maybe a more adverse scenario, an increase in ETA, not to mention GSF, hydrological risk. In the recent past, we saw how we
saw the strong impact in
our cash generation. In our current scenario, if we consider GSF, hydrology, the spot price, chances are we can have a volume of regulatory assets to be received by Iran lower than what we have today. It is around BRL 1,200,000,000, and chances are we'll be close to half of that by year end. So once again, it all depends on what the scenario will be by the end of the year, particularly when it comes to new assets upon realization and what we'll get by year end. Perfect.
Just as a follow on question now about EBITDA. You had a significant increase in EBITDA to some extent offsetting part of the tariffs in distribution companies. However, when you look at generation, you can see a drop in Genovave going to win operations and also seasonality. Moving forward, what about the generation that you're coming back? I believe it's feasible to have something around over top 6 drilling this year.
I think that's about generation. Generation seems to be very stable in terms of EBITDA increase. Here we are talking about the premium stock capacity with the rate is active on inflation, and we expect it to grow at least the same amount as the price adjustment. We do have 2 nonrecurring effects, as I said in the quarter, which allowed us to have a drop in the EBITDA, but that's not our perspective. These are facts that will no longer happen in the next quarters, and we should go back towards people EBITDA considering the characteristics of the business.
Next question is from Bruno Barela, Solana Caprea. Thank you very much for this opportunity. I'm not very clear about the answer to Zimano's question. Do you have an expectation to increase the payout of the current 25% or not? Well, I think that for this year well, the payment for this year is regarding the results of 2018.
And we have deliberated the payment of 25% of the net income of 2018 in 2019. This is a subject that is also on the market. Our idea is to rebuild our flow, and that's a subject that will be decided in the slow rebuilding process. Today, the way we are at, the payment is 25%. But in a possible float, redefinition in the market, the subject will be discussed.
And as soon as we have anything new decided, we'll let you know. But today's decision is 25%. Thank you very much. Our next question is from Eduardo Alcaris. Good morning, everyone.
Can you comment on the assets you are looking at for possible M and A? What is the company's focus? If there is any distribution asset or generation asset that is drawing your attention or any of those that are out in the media of C3E? About M and A, I think what we have discussed about leverage is important. The company is in a very comfortable position to participate in growth opportunities in the market.
Looking at our D and A, I believe that we do have a very clear growth path related to distribution assets. We show that here. So if you look at the distribution results of Parejo, for instance, in 2016, we can see that we can have positive results being delivered. So naturally, considering the scale that we have and the expertise that we have in recovering distribution assets, we are a significant player to participate in possible opportunities to grow if they come ahead. We do have some possibilities.
You talked about C2E. This is an asset that makes sense for Sofia, especially because of its geolocalization. There's a chance of this market being out to the market today, but we certainly will look at it if it becomes available. In addition to that, really, if the market's expectation confirms about other productizations And if we use our expertise, we will be looking at the new assets that are out in the market in order to address growth in the distribution sector. Our low income is the Generation segment.
Today we are the main renewable player. So we are a natural candidate to additional investments in renewable generation. Basically, here, the investment would be by the means of the auctions that are made every year and also with some possible acquisition movement. Once again, the company also using its expertise and its scale looks at possible growth opportunities in the renewable energy sector. And in addition to that, in the transmission segment, we have a strategy to invest in what we call niche transmission.
These are investments with less transmission lines and assets close to the ones that Tepecle already has. This way, we can have some type of synergy in our operations. Here also, the way that we work in the market is via auctions, expectations for auctions in 2019 is or the expectations are real, they should happen. And we will analyze that as it comes ahead for the transmission segment. So these are the main possible investments for the company in the coming years.
Gustavo, if I may, I would like to know more about the offering. You announced the request for NISE. If I'm not mistaken, do you have any position about this? And maybe disclose how you intend to work on this offer, maybe primary or secondary offering? Like we said, we already had the answer from this 3.
And now we have some time until October 31. And right now, we are precisely assessing and having the company ready to go to market. So that's the time we have. We have a strong discussion at the company about this topic involving possible definition for primary or secondary issue or a combination of both, but we haven't come to a decision yet. As we have a decision, then we will disclose it to the market.
Just making it clear, we have this term with Atista, and the idea is to go to market considering market conditions, our internal positions. And as soon as we make decisions, we'll let you know about it. Thank you.
This concludes the question and answer session. We'd like to give the floor to ask
to Mr. Gustavo Estrella for the final remarks. Once again, we thank you all out in U. S. We delivered in the Q1 of 2019 very positive earnings, particularly in distribution sector.
Is a highlight with another significant growth. Another important factor is the maintenance of low interest rates with a positive impact on our P and L. When it comes to net economics, we expect the government to manage to address reforms, particularly the pension reform, so we can have a more robust upturn in our economy, bringing positive impact to our business and energy consumption. We see that in house we've been focusing a lot in an increase in our efficiency, productivity and quality.
Indicators are a good evidence of that.
And we all know that the next step related both to productivity and quality comes with the implementation of new technologies. So we are focusing very heavily on the deployment of smart grid and other technologies so we can have a quantum leap in quality. That's the outlook for the future. Now the focus is on opportunities to invest. As mentioned before, we expect to have auctioned this year, operation projects, transmission projects.
The company understands that we can be involved in a very competitive manner in these potential projects, so it can bring even more value to our shareholders. So this is it, a very positive outlook going forward with the higher expectation of upturn in our economy, higher consumption and a lot of opportunities to invest. Once again, I thank you all for joining us today. Have a great day. This concludes CTSL's English Jia conference call.
Thank you all for joining us. Have a great day.