Good morning. This is ENGIE Brasil Energia conference call, where we will discuss the results for the first quarter of 2019. All participants are connected only as listeners, and later on, we will open the Q&A session when further instructions for participation will be given. In case it is necessary to have help from an operator during the teleconference, just press star zero. We should remember that this teleconference is being recorded. This presentation, followed by slides, will be simultaneously transmitted through the internet at www.engie.com.br/investidores. A slide presentation and the company's earnings release are also available on that website. Before proceeding, I would like to clarify that all statements that may be made during this conference call regarding the business outlook of the company should be treated as forecasts, depending on the country's macroeconomic conditions, the performance, and regulation of the electric sector, besides other variables.
Therefore, they are due to changes. With us today are Mr. Eduardo Sattamini, CEO, CFO and IRO of ENGIE Brasil Energia, and Mr. Rafael Bósio, Investor Relations Manager, who will talk about the company's performance in the first quarter of 2019. Right after, we will have a Q&A session. We remind you that journalists who wish to ask a question can do so by email, sending them to the company's press office. It is now my pleasure to turn the call over to Mr. Eduardo Sattamini. Please go ahead, sir.
Thank you. Have a good day, everyone. I would like to clarify the fact that I have the accumulation of three functions, but we are in the process of decision, and our colleague has gone for other challenges.
Soon, we will have good news in relation to the new officers, and most likely, we have some of the internal resources being considered. It's a pleasure to be here with you again and share solid results for the first quarter of 2019, showing the solidity of the company and how perennial our business is. In spite of the hydrological surprises that we had in this period when January was very dry and the prices skyrocketed in the month of February, of course, this caused impact on everyone operating in the market. We had some issues related to some commercializing companies, but somehow, this is gone. This is history. The regulation of the hydrological system as of March and April has been bringing spot prices at lower levels than what we had seen in the past.
Now, talking about the net operating revenue, as you can see on slide five, when we see the highlights for the company for the period, we can see that the revenue has been increasing quite significantly, especially when compared to the previous year when we started the activity of trading in January, bringing better results and lower margins. As we can see, there is a reduction in the average revenue of the company. This is likely to be diluted along the time after the start-up of the trading activity. We are not likely to be having this exaggerated growth and this discrepancy of one year in relation to the other. We had BRL 190 million, nearly BRL 500 million. 40% was related to trading, but we have been having regular activities related to the generation operation in relation to prices when compared to the previous period of last year.
Also, some plants have been included to our portfolio, and this all contributed to the net operating revenue. We had a small reduction in the purchase for resale, and this has affected our EBITDA. When we look at the information, we can see that the results do not consider the trading activities. Therefore, the result was better than that of last year in the short-term market in comparison to the first quarter of last year, BRL 20 million, and the short-term was BRL 100 million. This, considering all the fluctuations for half of the year, we have had positive results in the short-term market. In terms of GSF, we had a secondary energy amounting to 50%, and that made the seasonality by the companies had this increase of 50% in the required energy. The allocation was 50% higher than the seasonality.
In 2019, this factor was 12.5% only. In relation to net income, we had a 15.6% increase. This was driven by the increase of the EBITDA level, and we had some elements that contributed to it, such as the worse financial results driven by the growth of the company based on leverage aspect. The capital structure is leveraged, and that will lead to an increase in the financial expenses. This year, we had an increase in inflation when compared to the same period of last year. On the other hand, we had a reduction in the tax burden, in the effective rate, and this has also contributed in a positive way to the net result. In terms of energy generation, we saw a growing trend in this aspect. Also, in wind energy, we have been increasing our capacity. We can now move on to page six.
ABE has a very important highlight. On April the 5th, we had the confirmation of the successful operation of acquiring the Transportadora Associada de Gás. When we take part in a consortium of a Canadian fund called CDPQ, where we hold 32.5%, and we also acquired 70% stake in Transportadora Associada de Gás. We had the subsequent event, Umburanas increased its commercial capacity, adding 360 MW to the generating complex. This has been a great achievement to us, and this was achieved in record time in terms of construction deadline. When we started in the end of 2017 and in last, and one year and a half, we had the complete park fully operational as a consequence of our acquisition. We mentioned that this would be a leveraged purchase, and it's an equity with leverage.
In spite of this additional leverage of the company, the Fitch Ratings reanalyzed our level, and they confirmed our level as AAA or as BB. This rating has been maintained. We have a stable outlook and still one notch above the sovereign rating. On page seven, we talk about the approval of the debenture issue that will provide working capital to finance implementation of the company's business plan. In the general meeting, we approved the distribution of complementary dividends in the amount of BRL 76.7 million. The total payout of 2019 would reach 100%. On May the 7th, we will trade the ex-dividends, and the payment will still be decided because this will depend on the decisions by the Executive Board. We are likely to make the payment of the second half of the year.
On page eight of the presentation, we can see that the main highlight would be the inclusion of a consortium with 90%, and the other participations continue as they used to be. On slide nine, it's important to say that we have 55 operated plants with installed capacity of 8,276 MW. We are going to continue growth, as shown with all the data, and adding new capacities for the years to come. We expect that the commercial aspects will be shared with you during the presentation. We have 1,000 km of transmission lines which are under construction in Paraná. Once again, we have a matrix. We start to have a matrix with electrical energy and complementary sources of energy. On slide 10, we maintain our leading position in the market, as we can see from the data related to the energy sector.
We have 9.8 of installed capacity. Now, with the entry of Campo Largo 2 project, Umburanas, that would add 8.8 of installed gigawatts, and as to transmission, we'll provide more details. In relation to natural gas, on slide 11, we have a characteristic that the TAG is made up of 4,500 km of high-pressure gas pipelines, 3,700 km on the coast, and 800 km in the Amazon. The contracted capacity is more than 70 million cubic meters a day. We have 12 compression stations, so that you can understand what is the extent of all this project. We can see that there are lots of stations entering and exiting energy. On slide 12, we show the contracting level, 100% contracted for the next 12 years, and with all the contracts which are valid as of today. The maturity dates are very long, November 2033, December 2025.
These are contracts which are long that will provide cash stability to this asset in the first years. We will be able to have the freedom to discuss the competitiveness of the company. We hope to perform as we have in the energy sector in 2019. We understand that we are going to undergo a modernization process, and we are likely to have good results considering this scenario. On slide 13, today we have a small share, and we expect to grow in this market, preferably using greenfield projects. There is also the possibility of other acquisitions, provided they bring about value to our investors. On slide 14, we can see the distributed solar generation, and it is still a small share of our business, but we are beginning to see positive results already.
It's still an activity that depends on volumes for an exponential growth. We hope that in the years to come, these solar activities will provide more stability and generate value. On slide 15, we discuss again the conventional and encouraged energy. This is the total portfolio of energy. We still have the strategy to strike a balance between the regulated and free market to the degree possible and bring about good results in this market as well. In terms of data, the cost would be more polarized from 326 clients in the first half to 523 in the first quarter of 2019, a growth of 60.4% in the number of clients. Of course, we have applied different dynamics. We are modernizing, increasing our sales force, modernizing the way we do business, bringing automation to the business, segmenting.
With this, we are going to operate much closer to the client and offering much value to them. On slide 16, we show that the free market is ever more important to us, and there is a concern of diversifying risk. We do not have any major concentration in any of the sectors, but we are always optimizing the management of our portfolio. We are going to try to mitigate the risk so that the results can be perennial. On slide 18, we talk about the energy market. The hydrology is not very significant. From the hydrological viewpoint, the year has not been favorable. We have a very high volatility in terms of spot price. This is our intention, what we intend to show on slide 18. On slide 20, we talk about the commercial strategy.
The level of contracting is very high for the next years. We are focused on the sales of future contracts with the purchase in order to form our portfolio so that the portfolio will have products of longer duration. This is how we have worked. With that, we decrease the risk of contracting, energy contracting for the future. On slide 21, we can see modeling. We can understand that we had a reasonable gain in terms of bilateral sales. We had results of 150 MW considering this period of years with higher amount in 2020 and 2024, where we have a large concentration of energy which has not been contracted yet. We work with the renewal of contracts and the clients who renew the contract every four years. We are going to focus on that. Talking about expansion, we still discuss Gralha , the project.
We are concerned with the GSF issue, and we expect solutions to come about related by means of refinancing the development bank, BNDES, so that we can negotiate with the controller so that we can transfer this asset to our operational basis. The good news is that the purchase is nearly completed. There has been a hot commission already. We have been authorized by ANEEL to run the test. This information was published yesterday in the official journal. Next week, we are likely to be synchronizing the machine. By next week, we are likely to be including energy in the system, ramp-ups and load growth, disconnection to correct some adjustments are all activities expected. We plan to be ready to deliver energy up to June the 1st because our obligation used to be related to Rio de Janeiro area.
Since we had some issues related to the deadline, we now have the obligation to deliver the energy as of the second half of the year. We expect the commissioning to happen normally as expected in May and June so that the lines can start operating still in the middle of this year. Umburanas, we started full commercial operation of this park at the end of April and as of the next half of the year. We also, on page 27, see the information related to Campo Largo Wind Complex. All those projects will amount to nearly 1,000 MW of installed capacity in the region of Bahia. On slide 28, we talk about Gralha Azul. There is not a lot of news to share with you. We are in the process of negotiating the right of passage using the way.
It's a phase that there is not a lot of news except for the regular business in the field related to the requirements of the social environmental aspects. The transmission is likely to begin for the transmission. We separated this into different lots so that we would be able to start the construction works at different times and so that we can start collecting revenue as soon as possible. This is the strategy that we adopted. On slide 29, we talk about our pipelines. There is a very vast pipeline of wind energy. An important capacity is being developed in Bahia. We have nearly 1,500 MW in the state. We include other projects which are being included, and we may reach 2,300 MW of installed capacity as to wind energy. Photovoltaic is also being considered for the site of Alvorada in the state of Bahia.
Also in Rio Grande do Norte, Santa Agostinho. We also have other projects of Norte Catarinense, of which we are evaluating the possibility of increasing the capacity so that we might increase to 1.2 and the support for the liquefied natural gas in that region. There is the need to install new thermal energy capacity. We intend to increase the demand in that region. As to financial performance, we have been showing solidity in our results in the past three years. The net operating revenue increased by nearly 17%. EBITDA has been accompanying this upward trend. For net income, we have increased 22.3% in the past three years. We can see that we have been adding profitability and providing value to the shares. That is why our shares have been performing so well in the past year.
On slide 32, related to net operating revenue, we can see that the trading operations are included in the short-term market with a higher volume. This higher volume of sales is associated with the organic activities. We reached 20% of growth in the net operating revenue. Now moving on, discussing EBITDA, we have already mentioned what the main factors were. As we said, this is associated with the net operating revenue among other factors and some other elements that make our EBITDA perform 15% higher than the first quarter of 2018. On slide 34, net income change. We had an EBITDA reaching BRL 565 million. We had an increase of interest, and also the depreciation and amortization have contributed. Also a small impairment and increase in income taxes. The impairment is related to the plant which had been deactivated.
The asset contributed to a small loss. The net income for the first quarter 2019 amounted to BRL 565 million with a 16% growth. On slide 35, we talk about our return on equity with significant growth. We had been investing, and we have been reporting some growth without the return. Now it has become clear in 2019. The capital employed, as we can see here, has been stable at very high levels. As we can see, 23% has returned on equity in the first quarter. We remained at the same number as the previous year. This was affected by Umburanas, which contributed to a small improvement of this number. In relation to net debt, we had an increase of 1.8. We are still at a very comfortable level in terms of net debt. We are going to have leverage purchase.
This was going to lead to figures such as 2.5 x EBITDA. Considering the contributions from different projects along the year, this is likely to be reduced. There are new projects that are going to come into operation. These figures are likely to be reduced. There is room for growth in the organic section by means of acquisition. In other words, we are not decreasing our appetite with profitable growth for the next years. On slide 37, there is some information about how the net debt has changed. This is a consequence of the investment of the period and also the 100% of dividend payout. When we look at slide 38, we see the debt profile. We can see that there has been a concentration in 2020-2022. That is the bridge loan that we made to our project.
The resources have not been approved by the development bank, BNDES. The bridge loan, 4.2 swap. We have also considered international cash that have a very low cost considering the CDI, 102% of the CDI, so that we can bring or we can find a longer-term solution that will consider infrastructure and other discounts that will make the indebtedness of the next three years to be extended to a more compatible profile to our cash generation. It is not a volume that would be of concern, but our idea is to extend this profile and continue growing with a very significant payout to our shareholders and investors. When we look at slide 39, we can see our strategy more materialized. We can see in 2019, we have negative figures when we added resources by means of receiving loans from BNDES and included to our cash.
We are recovering the investments in our cash. The total of investments for the year is BRL 5.5 billion, BRL 537 million as to CapEx, and BRL 3.6 billion. On slide 40, EBITDA and dividends, we offer a payout of 100% whenever possible. There are some moments which are more stressed, such as that which we had in 2017. In general, we try to pay 100%. Whenever it's not possible, we go to a level that we would consider to be a minimum payout level as considered by the market. I don't mean to say that we are never going to go below that, but this is not what we have been applying. If any problem occurs, we are going to announce it to the market, but we do not see any reason to change this policy for the time. The payment of dividends is planned.
We are going to reach 2.8% of dividend yield, which is higher than the market rate. We are on the lookout for a larger number of investors with this. I come to the end of the presentation, and I would like to open the Q&A session. Rafael, who is in our office in Florianópolis, will also answer your questions.
Ladies and gentlemen, we are now going to start the Q&A session. To ask a question, please press star one. To remove your question from the queue, press star two. Our first question comes from Mr. Thiago Silva from Santander Bank. You may proceed, sir.
Good morning, everyone. Thank you very much for the call. My first question is related to investments. You have been saying that you have been growing inorganically and organically.
Recently, we have seen that the company invested in TAG with gas transportation and also in the past for transmission of electrical energy. Do you consider also the distribution sector, or are you going to stop at generation transmission, or is there anything different that you intend to do? My second question is related to TAG. Could you provide some more color that in addition to the existing contract, what do you see as growth potential and the creation of value to the company? Thank you.
The first question in relation to distribution, we are not considering at the moment to start operating in distribution. We decided to be out of the segment. Why is that? Because there has been consolidation in this market.
I'm not saying that we would never consider this, but it seems that the market has dominant players with competitive advantages in relation to the new entrants. This is our point of view in relation to distribution. In relation to TAG, seeing a modernization of the market of gas is one of the intentions to add value. We want to compete to be competitive. We want to increase the gas generation. We understand that there is a gas generation capacity which is not exploited because it's basically concentrated in one dominant player. We understand the volumes are going to increase, and we foresee the possibility of growth with new substations and new points of entry and exit and new investments that can be profited in a satisfactory way. That would be the first step.
Obviously, we look at the gas market not only as an operator, but as a group. Maybe the company itself may not be allowed to operate due to the verticalization and the steps of the chain. We may operate in the distribution of gas, commercialization of gas. We understand that there will be divestment by Petrobrás as to the gas pipeline. Investment may also happen in the market, even in the distribution market, which is a natural monopoly. We foresee opportunities, and we have to be prepared. The business in itself is a profitable business because it brings about an adequate return. There are some upsides. The upsides have not been valued in the proposal, but we understand that we have capacity to capture synergies at the right moment.
Okay, thank you.
Our next question comes from Maria Carolina Carneiro from Credit Suisse. You may proceed.
Good morning, everyone. Thank you very much for the call. I have two questions. The first is still related to TAG. Could you let us know what was the step-by-step process, both for the liquidation of the operation and also for the assuming of the debt? Because the call of acquisition of TAG, you said the conditions were closed, but at that time, you did not have the cost of the financing. Just to know if there is any update in relation to this capture, if it's in dollar or in local currency, so that we can extend the cost.
The second question, the call was not very clear, and I'm not sure if you managed to give information about a possible participation in the next auction of renewable energies, A- 4, - 6, that you could put up one of the phases of the project in the auction. Thank you.
I am going to start talking about TAG, and then Rafael will provide more details because he has been following very close all those activities with our finance team and discussing all the phases. First, TAG. The financing is done in the consortium that comprises the two vehicles of ENGIE, and this is going to be leveraged. A reverse merger is likely to be done so that the financing would be in the source that generates the wealth so that we would have no fiscal loss in this operation.
In a simple way, the funding is done with the shares that are connected to part of the in part in foreign currency, which would be 70% of the value of the acquisition. This is the structure of the funding. The Brazilian part, the national part, includes major local banks. They are being responsible for the funding by means of loans. With that, we would complete the capital structure for TAG. In relation to energy, the idea is to leverage. We have been leveraging the acquisition, and the progress has already been done. We are still waiting for the final schedule, which is the approval by CADE. Recently, we started running the 15 days so that CADE can continue the process that will allow us to complete the business.
By the end of May and beginning of June, we are likely to have the closing of this operation. From then on, we are going to transfer the benefits of the property of the assets, asset TAG. In general terms, this would be it. All the details related to the cash, I will share with you only when the deal is completely carried out. I'd rather share this information only when the agreement is already signed. The releases also have to be adjusted, considering that the part of the financing is made in foreign currency. Adjustments need to be made. The profitability of the transaction is not going to be affected in a dramatic manner, considering all those adjustments.
Whenever we take part in renewable energy auctions, we consider the amount that's going to be in the auction, and in this case, it's going to be very low. The competition is going to be very fierce, most likely, and we might not have the appetite that some of our competitors might have, considering their need to grow or the competitors' position as developers of projects. Considering our projects, what we want is to have projects that bring significant profitability. We imagine that the competition is going to be high, but we are going to take part anyway because we have to be there giving the best possible offer and to see if there is any technological news that might benefit our company.
Only to add, Carol, only to add to the answer, we're going to try to be present in the next auctions.
We are going to continue developing or starting the projects in the free market, such as Santo Agostinho, as it so happens of wind farm, of which we are going to start building in the second half of this year.
Okay, thank you.
We'd like to remind you that if you wish to ask a question, press star one, please, while we collect questions. Please wait while we collect questions. Our next q`uestion comes from Mr. Marcelo Farias from Banco do Brasil. You may proceed, sir.
Good morning. I'm Marcelo from BTVM. In relation to the allocation of BRL 3.5 billion for the acquisition, in addition to this volume, is there going to be any guarantee? Is Banco do Brasil going to provide any guarantee?
It's temporary, not permanent. All partners at first have to ensure, considering all the loans, if there is any effective variation.
The idea is to have it all well-structured, well-defined, which is an alliance. We have the possibility during the operation, together with a partner, to have a reserve account or replace this reserve account by a collateral, a guarantee, and then invest in other activities. In a marginal manner, we will consider other types of guarantees. The idea is to work on the traditional way.
Once again, we would like to remind you that if you wish to ask a question, press star one. Please wait while we collect questions. We complete the Q&A session at this time. I would like to turn the call over to Mr. Sattamini for his final remarks. You may proceed, sir.
I would like to thank you for attending our conference call.
We are in a very delicate moment in the electric sector with the default rate high in the short-term market, and we understand that this is a solution that has already been defined by the agents, and due to political reasons, the solution has not been implemented. I would like to say that we have to talk to the Brazilian legislators. We have to provide a solution to our sector and consider all the regulatory framework. The sector has to work more freely in the short-term conditions. This is the message that I would like to leave to everyone. We have a very nice level, but what we see is a concentration of lack of public interest, and we do not want to see this kind of process in the market. I would like to thank you all for attending this call.
The conference call of ENGIE Brasil Energia has come to a close. I would like to thank you for participating, and thank you for using Voitel.