Strategy and Competitive Advantages

Strategy

Our objective is to seize growth opportunities within the Brazilian energy industry and consolidate our position as the largest and most profitable integrated electricity company in Brazil. The key elements in our strategy for achieving this objective are described below:

Estrategia

Concentration on regulated sectors

We intend to pursue organic growth opportunities within our distribution concessions, based on our competitive standing.

Our concessions still require a large volume of investments, which implies the expansion of our regulated assets base and, consequently, in our subsidiaries remuneration base. Thus, we will continue to carry out our investment plan, expanding the access to electric energy (universalization) and increasing the quality of the service we provide, as well as the automation.

We will continue to seek for operational excellence, staying at the forefront of efficiency and quality in the industry. We expect that widespread automation, smart metering, mobile workforce management, will lead to better utilization of resources and use of networks, reducing marginal costs.

Grasping opportunities in competitive segments

The large participation on the business and the understanding of the perspectives and tariff structure allow us to take advantage of business opportunities and expand the range of services offered to our consumers. By integrating trading with energy generation, we are able to further strengthen our energy portfolio and attend to customers with a wide range of profiles.

With regard to our generation activity, as electricity consumption in Brazil grows over the next decade, we will continue to explore opportunities for investment in new generation projects, including wind and hydro power generation, observed strict return rules on the investment, in order to ensure we can meet the demand for energy. Our expertise in renewable energy and large-scale hydraulic projects are in line with the government’s prospects of expanding the energy matrix, which qualifies us as potential participants in regulated auctions.

Our track record in constructing generating projects, such as Dardanelos and Teles Pires, highlights us by the capacity of management and deliveries within deadlines and according to the business plan, which means we are competitive when participating in auctions by presenting the lowest price and assurance of project profitability.

Increase our transmission capacity by participating in new energy transmission auctions and obtaining new concessions

In April 2017, in the Transmission Auction No. 005/2016 promoted by ANEEL, the Company won four transmission concessions in Brazil, as follows: Lots 4, 20, 22 and 27, which are distributed in the states of Mato Grosso do Sul, Ceará, São Paulo and Santa Catarina, comprising approximately 600km of transmission lines at 230kV and a transformation capacity of 300MVA. Such concessions have yielded attractive returns for the transmission segment. And in December 2017, in the Transmission Auction No. 002/2017, we won lots 4 and 6 which, together, comprised 4 transmission lines.

In December / 2018, Neoenergia was the most prominent competitor in the Transmission Auction 04/2018 of the Agência Nacional de Energia Elétrica (ANEEL). The company has won lots 1 (the largest in dispute), 2, 3 and 14, which include lines and substations in the states of Paraná, Santa Catarina, Rio Grande do Sul, Rio de Janeiro, Minas Gerais and Espírito Santo. The investments planned by ANEEL in these four lots are in the order of R $ 6 billion, but Neoenergia already has significant part of the investments secured with suppliers in amounts lower than indicated by ANEEL. With this result, we intend to build an additional 3,000 kilometers of lines, representing a 129% increase in the transmission business of the group. Neoenergia’s Permitted Annual Revenue (PAR) (Revenue to which the entrepreneur is entitled for the provision of the transmission service from the commercial operation start of the facilities) related to the four lots won, will be R$ 501 million (value updated dec/18).

In Brazil, there is a huge demand for investments in expansion of the transmission segment. Recently the returns of this segment were rebalanced, increasing the attractiveness of the projects. We expect new auctions to be held in the future and we will continue to assess opportunities in transmission projects, focusing on the profitability of each lot and on the operational synergies with our existing assets.

 

Our strengths:

  • We are one of the largest energy distributors in Latin America, with assets in attractive markets, a diversified customer profile and services recognized for their excellence.
  • We expect a favorable tariff review for our distribution concessions
  • We operate in the energy distribution sector, with high quality and efficiency.
  • We have one of the major integrated energy platforms in Brazil, with a large share of regulated distribution and transmission business, long-term multi-year plans and concessions and generation assets with diversified matrixes.
  • Our solid experience in developing projects in all segments of the electricity industry, when combined with competitive financing lines, represent a differential in seizing and developing new opportunities for growth.
  • High standard of governance, combined with a management team with solid experience in the sector and a holding, which is a benchmark for the industry in global best practices.
  • Proved ability to achieve growth through financial discipline and profitability.