Eletrobras(US:EBR)2019-04-30 20:43Financial Performance - In 2018, the company reported net operating revenue of R$24.98 billion, a decrease of 15.5% from R$29.44 billion in 2017[30]. - The company's net income from continuing operations was R$12.26 billion in 2018, significantly up from R$1.45 billion in 2017[30]. - The company reported a basic net income per share of R$9.62 for the period, a significant recovery from a loss of R$1.30 in 2017[30]. - The company proposed dividends of R$1,250 million for the fiscal year ended December 31, 2018, reflecting a recovery in net income[32]. - The total liabilities amounted to R$125.20 billion in 2018, compared to R$130.22 billion in 2017, indicating a reduction of 3.8%[29]. - The company reported a net income (loss) per share of R$8.43 (basic and diluted) for 2015, worsening from R$4.60 in 2014[31]. - The company incurred a loss of R$553 million in 2018 due to the difference between the book value and sale value of certain SPEs classified as held for sale[36]. Assets and Liabilities - Total assets increased to R$181.21 billion in 2018, compared to R$172.98 billion in 2017, reflecting a growth of 4.3%[29]. - The company held cash and cash equivalents of R$583.35 million as of December 31, 2018, down from R$792.25 million in 2017, a decline of 26.4%[29]. - The company classified R$15.42 billion as assets held for sale as of December 31, 2018, a substantial increase from R$5.83 billion in 2017[29]. Operational Changes and Strategic Plans - The company plans to conclude the sale of remaining SPEs in the second quarter of 2019, pending regulatory approvals[27]. - The company plans to reduce consolidated indebtedness and increase cash flows by selling shares in certain SPEs as part of its Business and Management Plans for 2019-2023[36]. - The company aims to simplify its structure to focus on core operations in generation and transmission, reducing leverage and exposure to non-core businesses[109]. - The medium-term strategic plan (PDNG 2019-2023) aims for profitable growth, operational excellence, and sustainable performance, with a focus on reducing financial leverage and improving operational efficiency[60]. Regulatory and Compliance Issues - The company identified a material weakness in internal controls affecting the reliability of financial statements, which it is attempting to remedy through a consulting firm[34]. - The company is subject to certain rules limiting its indebtedness and investments, requiring approval from the Ministry of the Economy and the Brazilian Congress for its annual budgets[59]. - The company must comply with financial and non-financial covenants in its financing agreements, which could impact its financial condition if not adhered to[59]. - The company is currently facing potential material adverse effects on its financial condition due to ongoing discussions regarding a new regulatory framework in the energy sector, which may increase competition and lower energy prices[88]. Market and Economic Conditions - Brazil's economy contracted by 3.9% in 2015 and 3.6% in 2016, with a rebound of 1% growth in 2017 and 1.1% in 2018[74]. - The Brazilian real depreciated by 32% in 2015, appreciated by 20% in 2016, and further depreciated by 17.1% in 2018, highlighting significant currency volatility[80]. - Political corruption allegations have led to instability, affecting investor confidence and potentially impacting GDP growth and market volatility[72]. - The Brazilian Government's measures to control inflation have included maintaining high interest rates, which limit credit availability and economic growth[80]. Energy Generation and Capacity - As of December 31, 2018, the company contributed approximately 31% of the installed power generating capacity within Brazil, with net revenues of R$25.0 billion, down from R$29.4 billion in 2017[102]. - In 2018, the company generated 71% of its energy from renewable sources, including 89% from hydroelectric power[109]. - The company had an installed capacity of 49,801 MW as of December 31, 2018, with an additional 5,850 MW planned for projects throughout Brazil by 2026[115]. - The total electricity generated in 2018 was 135,786,836.38 MWh, an increase from 133,952,710.37 MWh in 2017, with hydroelectric generation at 106,735,388.94 MWh[123]. Environmental and Safety Regulations - Environmental regulations require the company to obtain licenses for new projects, and non-compliance could lead to significant penalties, including fines and operational shutdowns[91]. - The company has implemented environmental policies and procedures to manage waste and comply with sustainability principles, but changes in environmental laws could adversely affect operations[91]. - The company is involved in the Procel program aimed at improving energy efficiency and conservation across Brazil, which has been in place since 1985[174]. Legal and Litigation Matters - The company settled an investor class action lawsuit for U.S.$14.75 million (R$59.1 million) in May 2018, denying any illegal acts[56]. - The company agreed to pay a U.S.$2.5 million settlement to the SEC for inadequate internal controls, concluding the SEC's investigation into alleged irregularities[56]. - The company has provisioned R$24.2 billion for legal proceedings, with R$22.3 billion related to civil claims[64]. Transmission and Distribution - The total length of the transmission lines owned by the company was 63,479 km, a decrease from 63,833 km in 2017[137]. - The company invested R$1.4 billion in transmission activities in 2018, representing 53% of the total investment budget for transmission activities of R$2.7 billion[142]. - Total electricity losses for the distribution business were 34.4% in 2018, up from 32.7% in 2017, with commercial losses at 24.8%[149]. Future Projects and Investments - The company plans to invest approximately R$30.1 billion in its generation and transmission segments from 2019 to 2023, utilizing net cash flows and accessing capital markets[106]. - The company is preparing a market sounding to assess the attractiveness of potential partnerships for the completion of Angra III in 2019[62]. - The company is involved in the construction of approximately 312 km of transmission lines and three new substations in the state of Rio Grande do Norte, with a 100% participation from Chesf[163].