Financial Performance - Net operating revenue for 2018 was R$24.98 billion, a decrease of 15.5% from R$29.44 billion in 2017[30] - Operating expenses for 2018 were R$11.04 billion, significantly reduced from R$25.91 billion in 2017[30] - Net income from continuing operations for 2018 was R$12.26 billion, compared to R$1.45 billion in 2017, marking an increase of 748%[30] - The company reported a net income of R$13.35 billion for the period, a significant recovery from a loss of R$1.73 billion in 2017[30] - Total current assets increased to R$46.85 billion in 2018, up from R$37.36 billion in 2017, representing a growth of 25.5%[29] - Total liabilities decreased to R$125.20 billion in 2018 from R$130.22 billion in 2017, a reduction of 3.9%[29] - The company’s financial result improved to a loss of R$578.07 million in 2018, compared to a loss of R$1.74 billion in 2017[30] Asset and Investment Overview - Total assets as of December 31, 2018, were R$181.21 billion, up from R$172.98 billion in 2017, reflecting a growth of 4.3%[29] - Cash and cash equivalents decreased to R$583.35 million in 2018 from R$792.25 million in 2017, a decline of 26.4%[29] - The company invested R$4.6 billion and R$5.2 billion in capital expenditures in 2018 and 2017, respectively, with a budget of R$5.7 billion for 2019 to maintain market share[52] - The company may need to invest approximately R$14 billion annually to maintain its current market shares of 30.5% in generation and 47.3% in transmission segments[52] Regulatory and Compliance Issues - The company identified a material weakness in its internal controls, which could affect the reliability of its financial statements if not remedied[34] - The company is subject to rules limiting its indebtedness and must submit annual budgets for approval by the Ministry of the Economy and the Brazilian Congress[59] - The company has faced challenges in complying with financial ratios required by certain financing agreements, necessitating waivers from creditors[59] - The company is at risk of future anti-corruption actions that could result in significant fines, reputational harm, and operational distractions[58] Market and Economic Conditions - Brazil's economy contracted by 3.9% in 2015 and 3.6% in 2016, with a rebound of 1% in 2017 and 1.1% growth by December 31, 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 created instability, affecting investor confidence and potentially leading to economic slowdowns[72] - Changes in tax laws and potential increases in tax burdens could adversely affect the company's profitability and operational capacity[80] Operational Challenges - The company is exposed to potential losses of R$2.2 billion related to the inefficiency clause for Amazonas D if Provisional Measure No. 879/19 is not converted into law[41] - The average physical guarantee for the company's hydroelectric plants decreased by 4% compared to the original amount, which could impact revenues and expenses due to energy purchase requirements[49] - The company is exposed to risks related to the construction and operation of electricity generation facilities, including delays and cost overruns due to regulatory and environmental challenges[84] Environmental and Safety Regulations - The company has implemented environmental policies and management procedures to comply with safety, health, and environmental laws, but non-compliance could lead to significant penalties and reputational damage[91] - Environmental regulations require the company to obtain licenses for new facilities, and the current review of environmental legislation by the Brazilian Congress may impact operations and financial results[91] - Eletronuclear invested R$100 million annually in modernization and safety requirements for nuclear plants[62] Strategic Initiatives - The medium-term strategic plan (PDNG 2019-2023) focuses on profitable growth, operational excellence, governance enhancement, sustainable performance, and personnel appreciation[60] - The company aims to achieve a global leadership position in clean energy production by 2030, while maintaining competitive rates of return[109] - The company is actively pursuing market expansion through investments in new energy projects, with a focus on sustainability and efficiency[165] Divestment and Asset Sales - The company sold six distribution companies for an aggregate sale price of R$273 thousand and 26 SPEs for R$1.3 billion, as part of its strategy to divest non-core assets[109] - The company auctioned its participation in several distribution companies, assuming debts totaling R$13.2 billion, including R$10.5 billion for Amazonas D and R$2.1 billion for Ceron[40] - The company raised approximately R$1.3 billion from the sale of interests in 71 Special Purpose Entities (SPEs) in September 2018[160] Electricity Generation and Supply - The company generated 71% of its energy from renewable sources in 2018, including 89% from hydroelectric power[109] - 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] - The installed capacity of the company was 49,801 MW as of December 31, 2018, with an additional 5,850 MW planned for development by 2026[115] Financial Liabilities and Debt Management - As of December 31, 2018, the company recorded total loans of R$13.9 billion, compared to R$10.3 billion in 2017 and R$13.2 billion in 2016[158] - The consolidated long-term debt was R$42,306 million as of December 31, 2018, up from R$39,236 million in 2017 and R$39,787 million in 2016[160] - The company’s foreign currency debt in U.S. dollars was 25% of the total debt as of December 31, 2018[160] Customer and Market Dynamics - The distribution network served 1,001,390 consumers in Amazonas D and 1,158,036 in Ceal as of December 31, 2018[145] - Total electricity losses for the distribution business were 34.4% in 2018, an increase from 32.7% in 2017 and 26.2% in 2016[149] - The average response time to restore electricity supply in Amazonas D was 669.51 minutes in 2018, an increase from 396.77 minutes in 2017[150]
Eletrobras(EBR_B) - 2018 Q4 - Annual Report