Good morning. Thank you for standing by. Welcome to CPFL Energia's first quarter 2018 earnings conference call. Today with us, we have Mr. Andre Dorf, CEO of CPFL Energia, Mr. Gustavo Estrella, CFO and IRO, and other officers of the company. The presentation will be available for download on the company's website at www.cpfl.com.br/ir. We inform that all participants will be in listen-only mode during the company's presentation. After the presentation, there will be a question-and-answer session, when further instructions will be given. Should any participant need assistance during this call, please press star zero for an operator. It is important to mention that this conference call is being recorded. 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 CPFL Energia management and on information currently available to the company. Forward-looking statements are no 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. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of CPFL Energia and could cause results to differ materially from those expressed in such forward-looking statements. I'll turn the conference call over to Mr. Andre Dorf. Mr. Dorf, you may proceed.
Good morning, everyone. Welcome to another conference call. Today, we'll be addressing the earnings of the first quarter of this year, 2018.
As usual, we have a brief presentation to deliver, showing a couple of numbers and highlights of the quarter, and then we'll be here for the Q&A. Let us begin on slide number three, highlights. In the first quarter of the year, there was an increase in load measured in our concession area of 3.7%. Here we highlight the industrial class. Later on, we're going to show a breakdown by segment or class. We also posted growth of 15% in our net operating revenue and 14% in EBITDA. It's another great highlight when it comes to our operating performance. The net debt of the company closed the quarter at BRL 15.6 billion, a leverage of 3.31 times net debt over EBITDA of the last 12 months. We also had significant funding, BRL 2.8 billion this quarter, at very competitive costs.
During the first quarter, we had a big amount of investments totaling BRL 426 million in several business of the company, and here we highlight energy distribution. We also had a conclusion of CPFL Paulista tariff review in April. After we closed the quarter with an average effect of 16.9% to be noticed by consumers. We also had a conclusion of RGE Sul's tariff review, an average effect of 22.47% to be noticed by consumers. Other relevant issues, I think you're following up the development of the electric segment in Brazil. GSF is still in the agenda for several consecutive quarters being discussed by all companies, agencies, and regulatory agencies, and more specifically focusing now on Eletrobras, the possible sale of distribution, and also due to privatization.
We also have a bill and the reform of the regulatory framework in the industry of re-modernization of the regulatory framework, which is also very important to the future of the electrical system in Brazil. Finally, distribution segment consolidation with a possible change in control of some companies. On slide four, we address our EBITDA in the first quarter. On the left at the top, we show our breakdown of our EBITDA of almost BRL 1.4 billion in the first quarter. Distribution segment accounting for 58% of EBITDA generated this quarter. Conventional generation and renewable, 41%, and 1% with commercialization services and others. The bar charts show an evolution of our EBITDA by segment. At the top on the right, we can see significant growth in distribution EBITDA.
Pretty much positively affected by revenue and cost effects, show a growth of almost 27% year-over-year. Conventional generation posted growth of 10%, pretty much related to the recognition of reimbursement from previous GSF periods. Also a drop in EBITDA for renewable generation, CPFL Renováveis of 3.7%, related to the slow speed of wind this quarter. For the second year in a row, winds are below the expected curve when compared to the historical average. We are convinced this is an outlier, which happened this year and last year. For commercialization services and others, we had a more significant drop, 44%, not in absolute terms, but percentage-wise, more related to lower margins in commercialization. On the next slide number five, we show the highlights of the distribution segment. Like I said, we had an increase in load in our concession areas amounting to 3.7%.
Also an increase in sales at 2.9%. Here we have a match between sale and verified load, which explains the difference. Like I said, another highlight is growth in the industrial segment of 5.8%, 5.6 at Paulista and 7.8 in Piratininga. These are heavily industrialized areas, which is a proxy of growth and activity in our concession areas. That's a very positive highlight of the first three months of the year. As to losses, there was a slight progress. In the first quarter of last year, we had 9.23%. We improved until the last quarter of last year to 9.01%, and now 8.87% in the first quarter of the year. At the top on the right, we show the performance of our sales. Now we highlight customers in the free market growing by nearly 3%.
The pie chart at the bottom shows a breakdown of our market, a breakdown by consumption segment. Residential, for instance, 35%, industrial 35%, commercial 17%, and rural, local administration, and others with 18%. When you compare our growth in our regions, when you compare to the market at large, we also realize that in this quarter, there was higher growth compared to the other categories. If you compare the whole concession area of CPFL with Brazil's growth, there is a higher growth of 2.9% compared to 0.7% in Brazil. The same goes for a comparison between our distribution companies in the southeast, 0.7% in the market and 3.3% growth at CPFL. In the south of the country, our growth of the country is 0.2% compared to 2% growth at CPFL, which is also much higher.
The most interesting chart of the slide, which is at the bottom on the right, it is a sales breakdown by consumption segment. Our highlight is the industrial segment and other classes of consumption growing by 3.6%, heavily affected, positively affected by rural in the south. Rainfall was lower in the south, therefore higher need of irrigation in agriculture in the south of Brazil with a positive impact on the rural segment at RGE Sul. On slide six, a recurring topic during crisis is delinquency. There's still some sign of improvement in delinquency index at the company. At the top, we have our ADA evolution as a percentage of gross revenue at 0.41. By the way, we changed our calculation methodology. In the past, we used as a base, ANEEL accounting manual, and now we are using IFRS.
If we were to post based on ANEEL, it would be 0.43, which is very close to IFRS 0.41. We no longer have the peak of 0.90% of our gross revenue in the second quarter of 2016. There is no change in our efforts to fight fraud and delinquency. We still have a high volume of spending in these initiatives. An example is our collection actions, as we can see at the bottom on the right. This chart shows that in the first quarter alone in 2018, we had 417,000 disconnections due to fraud or lack of payment. On the left, we also show the number of overdue bills as a percentage of revenue. This is over 90 days, a slight recovery to 0.97% of gross revenue. On slide seven on page seven, we show some highlights related to energy generation.
The first highlight is a negative highlight related to wind generation. Like I said before, wind generation is below our forecast at 32% related to slower wind. We also show the performance of the spot price or PLD showing high volatility. We tend to talk about volatility of the spot price, and this chart shows us the broad variation over BRL 500, almost BRL 100 in a short time frame. On the right-hand side, we show our installed capacity, a slight progress of 0.8% due to new startups at CPFL Renováveis. At the bottom, we can see the NIPS reservoir level, not so concerned compared to previous years. There was some improvement this quarter compared to previous quarters, however, below historical averages.
We closed April, as we can see on the left, at 46% of our average capacity in the reservoir, above more critical years, and therefore, without any risk of supply for the current year 2018. Now I give the floor to Gustavo Estrella. He's going to talk about the financial results.
Turning to the results of the first quarter, I think this is a quarter with positive results. Remember that we now are already following up the results with the integration of RGE since the beginning of last year. Now we have just one comparison base. There is a growth in the net revenue of 15.1%, the EBITDA 14.3%, and net income of 80.7% growth. Considering the group's business, we have a highlight in the distribution segment with a total variation positive of BRL 167 million vis-a-vis 2017. The main effect here, as Andre has mentioned, is the recovery of the energy consumption. We already have growth, again, a relevant growth in our concession areas, and obviously, this provides an important effect in our results. In addition to that, we have the effects of the tariff reviews.
The tariff reviews, not the ones for 2018, but the ones for 2017, that will affect the comparison of the first quarter of 2018. We have the concession financial assets with a positive effect of BRL 16 million. A special highlight in the OPEX line with the PMSO lower in BRL 62 million. First, I should highlight legal and judicial expenses, BRL 39 million, and our allowance for doubtful accounts that as we have shown, with a drop and a positive result of BRL 21 million. Turning to conventional generation, we had a positive total variation of BRL 29 million. The main effect here is the GSF variation. We have a seasonality issue related to GSF.
Here, especially regarding a change in the accounting criteria of GSF, on the posting criteria of the GSF, where we now start posting that by the competent system with a positive effect in this quarter because it partially offsets itself over 2018. In this first quarter, it has a positive effect of BRL 21 million. In commercialization, basically here we have a margin loss, and when we compare that to 2017, with an effect of BRL 32 million in commercialization. For renewable, we have a total variation of BRL nine million. Here we have positive and negative effects. The main negative effect here is the performance of our wind farms, especially here because of lower wind speeds when we compare that to 2017, and here this effect is of BRL 36 million in our results.
Partially offsetting this effect, we have the stake of the short-term auctions, MSD, the surplus and deficit compensation mechanism, with a positive effect of BRL 12 million in our results. We also had the start-up of the Xajará complex with an EBITDA increase of BRL 11 million. Turning to our net income, we had a positive variation in our financial results of BRL 129 million. The main effect here is the drop in the interest rate, bringing us a reduction of BRL 158 million in our financial expenses. We have there lower interest rates, BRL 149 million, and also a drop in our leverage, including Assets and liabilities that are regulatory, which also impact our financial results with a positive variation there at BRL 15 million. Turning to slide number nine, we have a snapshot of our indebtedness.
You can see that in this quarter we have a leverage of 3.31 times net debt over EBITDA. A slight increase vis-à-vis the end of last year. The main variation here is that in spite of the EBITDA's improvement from 2017 to 2018, here we have the variation of our net debt, especially explained by the variations of regulatory assets and liabilities, and these assets are now integrated in the tariff review of the companies. Now we start to receive them over 2018, but they do have a negative effect in our total leverage of the group when we compare December 2017 to March of 2018. About cost. It's still in a downward trend. We have a nominal cost of 7.6%, significantly lower when compared to prior quarters. That breakdown, we see that we are largely exposed to CDI.
This year, we have made a swap for a fixed rate, taking advantage of this lower interest rate. We are already very limited in terms of exposure to the CDI and more now we are under the prefix rate. With that lower interest rates, we have that kind of plan for 2018. Turning to slide number 10, we have our debt profile and liquidity of the company. We end the quarter with a cash of a little bit over BRL 3 billion. When we see in the chart, we see that this is enough to pay all our maturities in 2018. This is influenced by the funding we had in the beginning of January, a funding of BRL 2.8 billion. Therefore, we are extending our debt and refinancing the company in the long term.
What we are doing today, as usual in the group, is to work in the refinancing for 2019. That's what we are working on right now, we expect that in the next few months, we already start working on maturities of 2019 then. Turning to slide number 11, we have a snapshot of the conclusion of the tariff review process of our two distributors, CPFL Paulista and RGE Sul, with positive results. We have here at Paulista, the net regulatory asset base of BRL 5.2 billion, and we were able to maintain the regulatory WACC at 8.09%. We see here the performance of the regulatory EBITDA. In the third cycle, it was BRL 662 million and for this cycle now, 1 billion and 33. There is an increase of 56%. Obviously, we start to see the impact starting in April.
That's when we had the tariff review process. In a similar analysis at RGE Sul, we have an additional challenge considering the company has been acquired at the end of 2016. The challenge was in the process of developing that base pre-tariff review. That is just one year, 2017. Here we post almost BRL 2.4 billion in terms of the net regulatory asset base, and here in the performance in the regulatory EBITDA, this was even higher, starting at BRL 232 million up to 435, an increase of 82% vis-à-vis the third cycle. Once again, we start noticing the differences starting May of 2018. We now end our presentation, we turn the call back to the operator to start the Q&A session.
Ladies and gentlemen, we'll now begin the question and answer session. If you have a question, please press star one. To remove your question from the questioning queue, please press star two. The first question is from Bruno Vaella, Solana Capital.
Hello, Estrella, Dorf . I have three questions to ask. Firstly, I would like to have a better understanding of the dynamics of losses at RGE Sul. There was a drop of 60 basis points for non-technical losses, but also 75 basis points increase in technical ones. I'd like to understand if things are related, and what about this increase in technical losses, very strong from one quarter to the next. The second question, well, there was a strong impact of BRL 770 million in the supplier account cash flow, consolidated cash flow. That's another point I would like to understand, what is behind this strong impact? Lastly, could you tell us more about consumption at Discoms in the second quarter with the closing of April? Thank you.
Thank you for your questions, Bruno. Good morning. Luís Henrique is in charge of regulated operations, and he's going to answer the third question about Discoms' consumption after we close the quarter, April and May. Hello, Bruno. How are you? In terms of consumption, April was slightly above our expectations, mostly due to temperatures. In all our distribution companies, consumption was slightly higher than what we had in our previous budget. We still have this trend, like Gustavo said, of an upturn. It is very mild now, but it is an upturn in consumption, particularly in the industry, as we said before. As to residential, this is also related to temperature. It does have an influence. We had high temperatures from April onwards vis-a-vis the historical average for this month. As to losses, could you repeat the question? I think you wanted to know about the technical aspects, right?
Actually, you had an increase in technical items, but a strong drop in non-technical items. Is there a relationship between both due to this inverse move? What is the reason? If they were isolated events, what would lead to this increase in technical losses? Ever since we acquired the company, we've been calculating again and reassessing every piece of information, not only losses, but also other technical information. This variation, by the way, in the measurement process at the border, we are working again all the calculations about technical losses. The technical losses, if we consider load seasonality, because it does have an impact on losses, we are doing all the calculations again. The global one is not so heavily affected, but we are trying to have a better balance between what is actually technical and non-technical.
Within ANEEL's rules, because we also had some changes there. Today, for instance, high voltage by distribution, no longer for load flow. There are many new procedures being adopted so we can come to a more adequate and correct number in this breakdown between technical and non-technical. Before we give the floor to Gustavo to answer the second question, just a general comment on consumption, Bruno. There was a more vigorous growth in the fourth quarter of last year. General consumption in Discoms, our concession area, we still have very strong growth in the first quarter, but it is not so vigorous in April and May. It's still growing, but more moderately compared to previous periods.
Apparently, it is something we see in many segments of the economy, which had a very vibrant growth in the first quarter but are failing to keep up the same trend over April and May. Okay. Bruno, let us talk about variation of suppliers. This is basically cash management. That's something we do particularly at the end of every year, postponing payments of some suppliers. Cash restriction, for instance, at a company, that's when we work on this kind of operation, and we did it last year. I postpone the maturity after an agreement with the supplier. I postpone the payment, and usually it happens over the first quarter of the following year. Basically this is what happened. This is not a regular move of the supplier's account, but this is a postponement of maturity for some suppliers, and then we concentrate payment in the first quarter.
I close the previous year with a high balance for suppliers, and this balance is adjusted over the first months of the following year. This explains this move. Great. Thank you very much, gentlemen.
As a reminder, if you want to ask questions, please press star one. Once again, to ask a question, please press star one. We now end our Q&A session. I will turn the floor back to Mr. André Dorf for his final remarks.
Thank you very much. I would like to say that we are still working on optimizations and efficiency gains, focusing on short-term results. At the same time, we are evaluating and investing in opportunities, business models, digitization that will create value in the long term. Once again, thank you all for your participation in this call and for trusting us over this period of time.
The conference call of CPFL Energia has ended. Thank you for your participation, and have a nice day.