Light

Investor Relations

Strengths and Strategy

Strengths

The Company believes its positioning in the segment may be reflected in the following strengths:

Company integrated with operations in a centralized and developed utility segment

Grupo Light comprises the following companies: Light S.A. (holding company); Light Serviços de Eletricidade S.A. (Light SESA), an energy distribution company; Light Energia S.A. (Light Energia), an energy generation company; Lightger S.A. (Lightger), responsible for the Paracambi SHP project; Itaocara Energia Ltda. (Itaocara); Amazônia Energia Participações S.A. (Amazônia), to participate in the Belo Monte Hydroelectric Power Plant project; Light Esco Prestação de Serviços S.A. (Light Esco) and Lightcom Comercializadora de Energia S.A. (Lightcom), both operating in the commercialization segment; Light Soluções em Eletricidade Ltda. (Light Soluções); Energia Olimpica S.A. (Olímpica); Axxiom Soluções Tecnológicas S.A. (Axxiom), an IT service provider; Instituto Light, institutional.

Light SESA distributes power to 31 municipalities in the state of Rio de Janeiro, covering an area of 10,970 square kilometers and serving a population of more than 11 million, with a total of over 4 million clients. The state of Rio de Janeiro has the 2nd largest GDP in Brazil, according to the latest IBGE data, from 2012. In 2014, Light SESA served approximately 4.2 million consumers, recording captive market consumption of 21,500 GWh.

Excellence in service provision

The Company provides services of renowned excellence to its clients and invests continuously in improving the quality of its services, by applying resources to new and modern equipment, using cutting-edge technologies in customer service, and maintaining an employee training program.

In 2014, the distribution segment absorbed the lion’s share of R$932.1 million, 30.8% up on 2013. Some of the most relevant investments were those directed to the development of distribution networks (new connections, increase in the capacity and corrective maintenance), aiming to keep pace with market growth and strengthen the network, which totaled R$337.8 million. Additional relevant investments were those allocated to improving the quality of preventive network maintenance activities, with the purpose of preventing power outages and accidents involving the population, which totaled R$211.1 million, as well as investments allocated to the energy loss project (network protection, electronic meters, and fraud regularization), which totaled R$359.7 million. Underground network investments are included in the distribution network and quality improvement investments.

In 2014, the moving average of the equivalent length of interruption indicator (DEC), expressed in time, reached 12.25 hours, a reduction of 33.42% in relation to 2013, while that of the equivalent frequency of interruption indicator (FEC), expressed in occurrences, stood at 6.56 times, 21.06% below the figure recorded in 2013.

All indicators in 4Q14 reflect the improved performance of the network thanks to the reorganization of processes in the distribution area and the initiatives implemented through the action plan initiated in June 2013. More intensive tree pruning and energy network preventive maintenance measures are having a positive impact on results, ensuring a better performance of the Company in terms of quality indicators (DEC and FEC).  

 

Client base without industrial concentration

The Company has a diversified client base concentrated in the residential and commercial segments, thus less dependent on the performance of the industrial segment. In 2014, 33.8% of the electrical power in its distribution network was directed at residential clients, 31.4% at commercial clients, 20.0% at industrial clients and 14.8% at the remaining classes, totaling energy consumption of  26,493 GWh in the year. 

The Company believes that its diversified client portfolio, combined with the characteristics of the per capita income in the Rio de Janeiro metropolitan region, mitigates the risks of a decline in consumption in its concession area, since the residential market is less susceptible to economic fluctuations when compared to the industrial market, which responds faster to reductions in the pace of economic growth and development.

 

Leading position in regulatory and institutional relationship

The Company has developed a new internal relationship model with regulatory agencies and other entities, presenting an integrated vision of the concessionaire and of the Brazilian electrical power segment. A Regulatory Superintendence is directly associated to the Presidency, created to provide clearer information of specificities in the Company's concession are to regulators, which in turn translates into a more adequate treatment in the processes of tariff review and adjustment.

In terms of institutional relationship, Light SESA has developed actions with municipal and state governments, the Rio de Janeiro Trade Association, and other institutions, which led to the negotiation of debts of some of these institutions with the Company, as well as the establishment of partnerships aiming to develop the concession area.

Light's relationship and conduct towards the regulatory authorities are based on transparency and full compliance with its duties as an energy company. The Company's relationship with the National Electrical Power Agency transcends mere compliance with regulatory standards, as the managers monitor decision-making processes, participate and promote studies and debates through initiatives that aim to strengthen the sector and optimize results for society and Brazil.

 

 Strategy

The Company's main goal is to add value to its shareholders, by constantly developing electrical power generation, distribution and commercialization markets in Brazil. In order to reach such goal, the Company has developed its management processes based on operating efficiency, focused on increasing revenues and reducing losses and defaulting clients, reviewing processes in order to achieve sustainable reduction in managerial costs, directing reasonable investments towards distribution, and development of the generation segment through new investments.

Prioritizing the energy loss prevention plan

The Company’s concession area historically faces a high level of energy losses, and combating these losses is the Company’s priority. The program is structured around different operating areas that include a complete loss prevention program, supported by cutting-edge technologies, institutional articulation with other institutions interested in reducing informality, and the government, through participation in slums urbanization programs and raising the population's awareness about the illegality and criminal character of energy theft. 

In order to continue reducing non-technical energy losses, Light is investing in initiatives that include conventional fraud inspection procedures, the upgrading of network and measurement systems, and the Zero Loss Area program (APZ). Among these initiatives, the following stand out:

•    Zero Loss Areas: In August 2012, the Company created the APZ Project, based on a combination of electronic metering and a shielded network, supported by dedicated teams of technicians and commercial relations personnel with clearly defined targets, whose compensation is tied to improving loss and default indicators in their respective areas. A typical APZ has around 17,000 clients. The project, known commercially as "Light Legal", which receives support from SEBRAE in regard to the training of partnering micro-entrepreneurs, has 37 operational APZs and 624,000 clients in the Baixada Fluminense region and the city’s south, west and north sides. 

•    In May 2014, the Company announced that Landis+Gyr Equipamentos de Medição Ltda (“Landis+Gyr”) was chosen as the supplier of equipment and services for the automation of  overhead and underground networks for an Integrated System using smart grids and devices in the distribution system (“Smart Grid Project”). After the work statement phase, the contract was signed in September 2014, encompassing the supply of approximately 1 million metering devices in the next five years for R$750 million. Currently, Light and Landis+Gyr are adjusting the information technology environment in order to receive this new communications solution.

•    In 2014, non-technical energy losses totaled 5,927 GWh, accounting for 40.9% of billed energy in the low-voltage market (ANEEL criterion). In comparison with the 12 months ended December 2013, when non-technical energy losses totaled 42.2% of the low-voltage market, there was a reduction of 1.3 p.p. Light SESA’s total energy losses amounted to 8,847 GWh, or 23.3% of the grid load, in the 12 months through December 2014. 

 

Increasing participation of the energy generation segment in the Company's activities

One of the pillars of the Company’s strategic plan is to increase the share of energy generation in its results. With this in mind, the Company has announced several projects to boost installed generating capacity, which now totals 971 MW. 

 

Actively operate in the energy commercialization segment

In the energy commercialization segment, the Company is currently developing a customer loyalty program among captive market clients, based on the provision of energy efficiency services that reduce energy costs incurred by such clients. The Company is also involved in selling power to clients in the free market and selling power from new generation projects, particularly the Paracambi and Lajes SHPs.

Considering that such activities represent low fixed costs for the Company and provide opportunity for gains from the commercialization margins, the Company intends to continue increasing its participation in the energy commercialization and service provision segment, with the purpose of diversifying its revenue sources and promoting integration with its generation activity. In 2014, energy sales amounted to 5,338.4 GWh, 28.5% higher than the 4,154.7 GWh reported in 2013.

 

Commitment with corporate governance and sustainability

Light is listed in the BM&FBovespa’s Novo Mercado trading segment, the highest corporate governance level, with the adoption of corporate rules that balance the rights of every shareholder, such as the granting of 100% tag along rights to shares issued by the Company. Additionally, the Company is part of the ISE (Corporate Sustainability Index) portfolio since 2007, and has been included in such index for eight consecutive years.

Dividend distribution policy

Light has a distribution policy of at least 50% of the annual net earnings as proceeds. Additionally, the Company has been distributing more than the mandatory minimum since 2007.

On December 17, 2014, the dividends approved at the Annual Shareholders’ Meeting held on April 24, 2014 were paid, in the amount of R$364,838,033.34, with R$32,018,793.53 corresponding to the mandatory minimum dividends, and R$332,819,239.81 related to net income for fiscal year 2013, corresponding to a dividend yield of 11.3% and payout of 84.6% of net income for 2013 adjusted by legal reserve. The net amount per share is R$1.789, without the retention of withholding tax, pursuant to Article 10 of Law 9,249/95.

 

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