Light

Investor Relations

Strategy and Competitive Strengths

Strategy

Light generates value for its stakeholders by striving for operational efficiency and improving the quality of services. To meet these objectives, the following initiatives were defined:

Intensify efforts to combat energy theft and reduce default

The program to combat energy theft takes into account socioeconomic conditions and diagnostic tools to identify the location and main cause of commercial losses. To combat them, the company has stepped up inspections and collections of customers in possible areas, where customers with the highest debt repayment potential are located, and where the level of losses is still high compared to less complex concessions.

Improve capital structure, operating cash generation and liquidity

Light is focused on reducing its debt level and improving its capital structure to strengthen liquidity and cash flow. It is reshaping its bank debt, extending the term, reducing costs and accessing new sources in the capital market.

Efficiently allocate its resources

By implementing and using tools to control costs and optimize investments, as well as renegotiating contracts with suppliers, Light seeks efficiency in the allocation of its resources.

Priority is given to investments that are incorporated into our remuneration base and bring effective returns to the company.

Distribute power safely and focus on the well-being of its workforce and population

Light invests in training and updating procedures for the safety and quality of life of its workforce. This concern extends to the communities in which it operates through security campaigns and the implementation of social and environmental preservation programs.

The company has been strengthening an internal culture of “sense of ownership” aimed at achieving results, valuing employees based on meritocracy, safety and ethics.

Reduce non-strategic asset exposure

The company aims to reduce its exposure to non-strategic assets and/or equity interest in which it does not have control by focusing on value creation, especially in the distribution segment. In addition, it seeks to reduce the need to make capital contributions in these assets.

Strengths

The company believes that its positioning in the industry can be reflected in the following strengths:

Anticipation of Periodic Tariff Review and credibility in the regulatory relationship

On March 2017, Aneel approved the anticipation of the Periodic Tariff Review (RTP) of Light, initially scheduled for November 2018, with the following positive effects:

  1. Incorporation into the Regulatory Remuneration Base (BRR) of investments made between 2013 and 2016 with disallowance of only 3%, making Light’s net BRR one of the largest among Brazilian distributors;
  2. Increase in the percentage of transfer of non-technical losses in the tariff, from 30.11% to 36.06%; and technical losses from 5.40% to 6.34%; and
  3. Flexibility of the goals of the quality indicators due to the complexity of the concession.

The improvements achieved at the end of the Tariff Review process were the result of Light’s development of regulatory excellence, with its strong analytical capacity and technical background, which allowed it to build credibility with the regulator.

Potential reduction of energy losses

The current strategy to combat commercial losses prioritizes the so-called possible areas, where there are safe conditions for the operation and also where the incorporation and recovery of higher volumes of energy per customer is achieved.

Working with focus and determination in these areas will be possible to achieve the regulatory goal and thus provide significant gains in EBITDA.

Efficiency in collection procedures

Initiatives for collection of defaulting customers include suspension of energy delivery, communication with credit agencies and negotiation of outstanding debt.

With the implementation and use of a new system that enables customer data integration, collection procedures, including issuance of bills, are becoming more efficient.

In 2018, despite the adverse economic conditions in the state of Rio de Janeiro, the collection rate improved in the retail, large customer and public sector segments, the latter, which has the largest volume of overdue debt.

Excellence in the provision of services

Light invests in improving the quality of its services by investing resources in new equipment, preventive maintenance, training of its staff and cutting-edge customer service technologies.

Quality indicators remain on a consistent track of good results due to operational improvements and investments made over recent years.

At the end of 2018 the quality of service indicators (DEC and FEC) were below the limit set by Aneel.

Management team with extensive experience in the energy sector

Officers have extensive experience in the energy sector with an average experience of 17 years in the sector.

The management model combines individual and collective goals, as well as variable compensation designed to attract and retain qualified professionals, aligning shareholders’ interests with those of management.

Company in concentrated and developed concession area

Light distributes energy to about 4.4 million consumers in a concession area that includes the metropolitan region of Rio de Janeiro, located in the state with the 2nd largest GDP in the country.

The company also operates its own generator park with an installed capacity of 872 MW. The integrated action, combined with the trading activity, enables a strategic balance between the distribution and power generation segments.

Robust performance in the generation segment

Light has a complex of power plants with energy sold exclusively in the free market and with low operating costs, providing stable cash generation and greater long-term predictability.

Operating in the generation segment provides flexibility to map energy trading opportunities with more attractive margins.

Diversified Customer Base

Light has a diversified customer base between the residential and commercial segments, depending to a lesser extent on the performance of the industrial segment.

The diversified customer portfolio, coupled with income distribution characteristics in the metropolitan region of Rio de Janeiro, reduces the risks related to lower consumption. The residential market tends to be less sensitive to economic fluctuations when compared to the industrial market, which reacts faster to reductions in the pace of economic development and growth.

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