Energy Company of Parana Earnings Call Insights: Petrobras and Costs

On Friday, Energy Company of Parana ADR (NYSE:ELP) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here’s what the C-suite revealed.

Petrobras

Carolina Casu – Santander: My question is the growth issue of power. We have seen some companies being accessed in the company with third price which is a bit better and what we have seen in the mild stock market. So could you give us an update for 2013 so you have had about 200 megawatts to sell, please correct me if I am wrong. So could you update me to still presumably new regarding this contract or have you been sought out by the markets, because it is still with energy. That’s my first question. And the second one regarding Araraquara we know that much the (indiscernible) talked about a lot of being less precise because of the better water situation last year, but perhaps now this is being taken up again, Petrobras (NYSE:PZE) is not talking so much about this. But do you still have something, are you still talking to Petrobras (NYSE:PZE) about the possibility of the growth in some contract, so do you have Araraquara’s energy sold in the auction.

Unidentified Company Speaker: Thank you Carolina for your questions and thank you for being here at this conference call. And regarding our first question, (indiscernible) is managing to close all the energy portfolio, turning to market at the end of last year. And the third quarter of last year and the beginning of this year. There was about 20% of energy available for sale at the end of March of this year we have 13.7% of energy to be filled for 2013, this means more or less 270 to 300 megawatts and we are managing to close our contracts for two or three years, to deliver into 2013, 2014, 2015, and it’s attractive prices. We are benefited by the increase in the (Indiscernible) and today we are managing to replace this energy, for three customers with tariffs which vary from R$90 to R$105, R$180, perhaps R$110 per megawatt hour. Regarding Araucaria, of course, COPEL continued to trade or to negotiate with Petrobras (NYSE:PZE) just to be able sign a long term contract for gas at prices which will allow us to have a good return. We have not yet closed anything. Our conversation continue, but what is of interest is that the Araucaria due to the hydrological issues it said would dispatch energy and it has been just patching up its capacity since March of this year by the end of the month of May, we are sure that it will dispatch this and from then on, it will depend on the hydrological conditions. Probably in June, we’ll be doing it still and this is important to us as you know the plant (indiscernible) to Petrobras (NYSE:PZE) but the greater the outlay, the greater the revenue of COPEL as we show in the sale. Therefore, regarding Araucaria, we are greatly positive and they are producing to full capacity. I’m not sure how long this will continue, but I think that by the end of May, we can continue to produce. So this has been producing March, April May, so this will increase our revenue. I hope I have answered your question.

Costs

Vinicius Canheu – Credit Suisse: Now on your personnel costs, there are two questions. First, we have seen the impact of your (career) restructuring and I want to know if there is any increase which might come along from this review or new review takes of this (career) restructure. Secondly, you said that your personnel costs might go up 8% in 2013 because of those who joined up to the Voluntary Redundancy plan. So how has this compared to your target and when do you think you’ll be able to achieve your target and what can be done to achieve this target? Can this program do this or do you have a deadline built in mind? Can you help me with these?

Ricardo Portugal Alves – Chief Financial and IRO: Well, there is no forecast of additional salary adjustments because this (career) plan was concluded at the end of last year. Obviously the effects of this plan are appearing now in 2012. Regarding what we call the (PSV) which is the plan for the – which is the voluntary plan for redundancy succession, we have until the end of the year a total of 555 employees who will resign and this is almost half of our initial target. Although this target will be increasing a little, so of those 555 employees according to the wage average therefore give us a drop in the – of 8% in the payments, it could be higher. Our initial target we said that by the end of 2014 about 1,300 employees would leave. We reviewed our human resources that they would review all of us and there was a slight increase in the total number of employees who could be laid off by the end of 2014. It could be about 1,500 employees. What does this mean, these are employees who have been in the Company more than 20 years so over the age of 50. These employees’ plans are now up for the program. So the number of employees has gone up a little bit compared to the initial target and if the number with this 555 there should be an increase of 8% and in the next few years we would have a lot of joinings back of 2013 and 2014. I would say that by the end of this program, 1,300, 1,400 people will sign up and resign and as I have said these are employees who have been with the company for more time so we have some extra benefits, they have higher wages and the impact is significant. We also must not forget that some of the employee, joined up to the program at the (indiscernible) has to make a provision and endemically this person will receive. So this includes its personnel, when he will be earnings for three months calculated (indiscernible) you have to return the payback of this program.