SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K/A
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
For the month of June, 2018
Commission File Number 1-14668
COMPANHIA PARANAENSE DE ENERGIA
(Exact name of registrant as specified in its charter)
Energy Company of Paraná
(Translation of Registrant's name into English)
Rua Coronel Dulcídio, 800
80420-170 Curitiba, Paraná
Federative Republic of Brazil
(5541) 3222-2027
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F ___X___ Form 40-F _______
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes _______ No ___X____
3Q17 Results
Copel records EBITDA of R$643.7million in the third quarter
LIST OF CONTENTS
* Amountssubject to rounding.
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1. Main Events in the Period
COPEL recorded EBITDA of R$643.7 million in 3Q17, an increase of 50.9% over the R$426.6 million recorded in 3Q16. The result was impacted by the R$158.1 million related to the reversal of estimated impairment losses and the nonrecurring negative effect in 3Q16 of R$206.4 million related to RBSE remeasurement.
Copel's recurring EBITDA came to R$485.6 million in 3Q17, a 25.0% drop from the recurring EBITDA of R$647.5 million in 3Q16, mainly reflecting higher costs with energy purchases, primarily due to the GSF of the period, partially offset by (a) a 4.7% increase in Copel Distribuição's grid market; (b) a 5.85% adjustment applied to Copel Distribuição's tariffs as of June 24; and (c) the lower balance with provisions and reversals, mainly related to labor, tax claims and allowance for doubtful accounts (PECLD). More details initem 2.
Result of Copel Distribuição
Copel Distribuição recorded EBITDA of R$134.1 million in 3Q17, 41.6% up on the R$94.7 million recorded in the same period of 2016, primarily reflecting the average adjustment of 5.85% on the tariffs as of June 24, 2017, the 4.7% increase in the distributor’s grid market, and the lower balance recorded in provisions mainly related to labor issues and allowance for doubtful accounts.
Manageable costs, excluding estimated losses, provisions and reversals, showed a real decrease of 3.4%, reflecting lower costs with pension and healthcare plans and third-party services, partially offset by the increase in other costs, due to higher losses with the deactivation of goods and rights. It is worth noting that, even with the 9.15% adjustment applied to salaries as from October 2016, the cost of personnel and administrators increased by only 1.0%. This performance reflects the reduction of 228 employees, due to the policy of not filling job vacancies. More details initem 4.2.
Reversal of impairment
In the third quarter of 2017, there was a reversial of R$158.1 million in impairment losses related to TPP Araucária (R$69.1 million), Bento Miguel Wind Complex (R$61.6 million), TPP Figueira (R$15.4 million), Cutia Wind Complex (R$5.9 million) and other hydraulic generation assets in Paraná state (R$54.0 million), partially offset by the provision for losses of the HPP Colíder (R$43.3 million) and Compagas (R$4.6 million). The reversal was basically due to the reduction in the discount rate and, in the case of Araucária, to the change in the plant’s expected dispatch.
Copel Distribuição joins the Special Tax Regularization Program
In June 2016, Receita Federal do Brasil - RFB issued a new understanding through Cosit’s Reply to Inquiry No. 101/2016, stating that CVA taxation, currently classified as Sectorial Financial Assets and Liabilities, should occur at the time of the respective accounting record (accrual basis) rather than at the time of the transfer to tariffs(cash regime). This understanding is supported by the execution of an amendment to the concession agreement in December 2014, in effect since December 2014, which ensures that any residual balance of Sectorial Financial Assets and Liabilities will be indemnified at the end of the concession term.
* Amountssubject to rounding.
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Given this context, in view of the manifestation of the RFB, the Company, which taxed the CVA's operations on a cash basis, the Company assessed the benefits offered by the Special Tax Regularization Program (Programa Especial de Regularização Tributária – Pert), established by Provisional Measure 783/2017 and regulated by Normative Instruction 1711/2017, as well as its impact on the Company’s financial results and cash flow, and decided to join the program in August 2017, consequently changing the system of taxation of the CVA to accrual basis.
Based on this decision, Copel Distribuição rectified all accessory obligations between December 2014 and July 2017, with the calculation of all tax overpayments and underpayments.
Considering the respective benefits of joining Pert and all the effects of the change in CVA taxation, Copel Distribuição's net income was positively impacted by R$113.7 million.
Restatement of comparative balances
The Company’s management adjusted the consolidated financial statements at March 31, 2017, December 31, 2016 and March 31, 2016 as follows:
Fair value of concession assets
In order to better present its operational and financial performance, on December 31, 2016, the Company reviewed its accounting practices and concluded that the adjustment of the expectation of the cash flow of the indemnified financial asset of the Copel Distribuição concession, originally presented in the line item financial income, would be better classified in the group of operating revenues, together with other revenues related to its activity. This allocation reflects in a better way the business model of electricity distribution and provides a better presentation regarding its performance. As a result, the Company reclassified retrospectively the amount of R$6.9 million from financial revenue to net operating revenue in 3Q16, totaling R$129.3 million in the first half of 2016.
Investments
During the preparation of our unaudited consolidated interim financial information as of September 30, 2017, the Company's Management identified an investment by its indirect subsidiary UEG Araucária Ltda. in a Multimarket Investment Fund, which held shares of other investment funds that in turn invested in a private company, whose main asset was a real estate development. As of September 30, 2017, such investment corresponded to R$157.1 and was recognized under “Bonds and Securities”, in current assets, because, according to information delivered by the management of UEG Araucária to the Company’s Management,that investment was made in a wholly-owned fund, whose benchmark was 103.5% of the CDI (Interbank Deposit Certificate) rate and that was composed of shares issued by other investment funds and government bonds, with immediate liquidity and that were available for sale. This investment amounted to R$165.7 as of December 31, 2016.
* Amountssubject to rounding.
4
In order to determine the value of such investment and its accounting classification, as well as the extent of any possible impact, the Company's Management used independent appraisers and legal advisers in accordance with best governance practices, including an internal investigation into the circumstances of the investment. The valuation has already been concluded and the investigations are in their final stage. These investigations found that the investment occurred strictly in the UEG Araucária and violated Copel’s investment policy, which authorizes investments in wholly-owned investment funds only to the extent such funds invest exclusively in bonds issued by the Brazilian federal government or by financial institutions controlled by the Brazilian federal government.
Based on the information available during the preparation of the consolidated financial statements for 2017, we concluded that it is necessary to recognize a provision for the impairment of the investment in light of its specific characteristics, including the status of its underlying real estate development and the outlook for its future cash flow generation. We also determined that this provision should have been recorded in prior years because the information known during the preparation of those consolidated financial statements was already available at that time and should have been considered in preparing the consolidated financial statements for 2016 and 2015.
In the course of preparing our consolidated financial statements, were analyzed all legal and corporate documents of the investment fund and it was concluded that from July 2015, UEG Araucária started to have significant influence in the private company, even though indirectly. Thus, from July 2015, the remaining balance of the investment, until then classified as a financial instrument measured by its fair value, became measured and disclosed as an associate, and the effects of the change in the asset classification were recordedin the company's profit or loss of that year.
Supported by a report prepared in March 2018 by independent appraisers engaged by Copel, the Company's Management determined the fair value of the financial instrument as of July 2015 and the remaining balance, already considered as an investment in associates, was reduced by a provision for devaluation, so that the Company's shareholders' equity was reduced by R$125.0 million and non-controlling shareholders by R$31.2 million. The balance of this investment on December 31, 2016 is R$9.6 million.
Until September 31, 2016, the allowance for impairment is R$ 48.3 million, consisting of a negative effect of R$47.1 million as a result of equity in earnings of subsidiaries, R$3.3 milion in financial expenses and the positive effect of R$2.1 million in financial income.
* Amountssubject to rounding.
5
Provision for Contingencies - Taxation regime for sectorial financial assets and liabilities
In 2017, Copel Distribuição recognized prior period adjustments in the account of provisions related to tax litigation due to the taxation of sectorial financial assets and liabilities. The impact of these adjustments represents, on December 31, 2016, an increase of R$32.0 million in provisions for litigation, in non-current liabilities, and an increase of R$10.9 million in deferred tax assets non-current, so that the Company's shareholders' equity was reduced by R$21.1 million.
Cutia Wind Complex - Schedule Revision
Due to the delay in the licensing process and the need to revise the positioning of the aerogenerators because of the "wake effect” (efeito esteira), which influences the efficiency of the aerogenerators due to the loss of wind speed, the start-up of the Cutia Wind Complex, originally scheduled for October 2017, was postponed to June 2018.
In accordance with the Reserve Energy Agreement (CER), estimated revenue for the period between October 1, 2017 and the start-up of each generating unit of the wind farms will be retained and used to offset reimbursements due arising from any annual and/or four-year generation that is below the contracted amount. Any positive remaining amount will be recorded as credit. It is worth mentioning that, pursuant to the CER, failure to deliver energy does not subject the wind farms from the Cutia Wind Complex to financial exposure in the Short-term Market.
Revision of the 2017 Investment Program
In September 2017, the Company's Investment Program underwent a new revision in order to adjust the physical and financial schedule for 2017, which fell from R$2,876.6 million to R$2,331.3 million. In the first nine months of 2017, the Company carried 75.8% of the 2017 CAPEX, totaling R$1,766.7 million. See more details initem 5.
TPP Araucária - Execution of Gas Agreement
In October 2017, the Company's Board of Directors authorized the execution of fuel supply agreements between Petróleo Brasileiro S.A. – Petrobras and UEG Araucária Ltda – UEGA, for the Araucária Thermal Power Plant (TPP Araucária), which took place on the eleventh day of that month.
The agreement provide for the supply of up to 2,190,000 m³ of natural gas per day, with no mandatory withdrawals (take or pay). The gas will be distributed by Compagas (51% Copel), the concessionaire in charge for this service in the state of Paraná, pursuant to State Decree No. 7,835, of September 22, 2017.
Through order No. 3,474, of October 13, 2017, Aneel authorized the reinstatement of the commercial operation of TPP Araucária, as of October 14, 2017, for a fixed period until November 30, 2017. As a result, TPP Araucária became available again in the National Interconnected System (SIN).
* Amountssubject to rounding.
6
In addition, on November 24, 2017, the 1st Amendment Term was signed to the agreement in question, whose main purpose is to extend its validity until December 31 of this year and the possibility of presenting a corporate guarantee of its parent company as a guarantee of payments. See more details initem 8.5.
Fitch has assigned Copel and Subsidiaries Ratings
On August 15, 2017, Fitch Ratings assigned the 'AA- (bra)' Long-Term National Rating to Copel and its wholly-owned subsidiaries (Copel Distribuição, Copel Geração e Transmissão and Copel Telecomunicações), with a Stable outlook. According to the agency, the Company's rating, which in the last 6 years was of 'AA+', was revised due to Copel's consolidated credit profile and due to the gradual increase in the Group's financial leverage.
According to the Agency's press release, Copel’s and its subsidiaries’ ratings are based on the strong generation of operating cash flow and the adequate financial flexibility of the group, which has proven access to the capital market. The analysis also reflects the group's performance as an integrated energy company, with important generation, transmission and distribution assets.
Subsequent Offering of Shares - Follow-on
In August 2017, the Company completed studies related to a Subsequent Offering of Shares - Follow-on and decided not to proceed with the process, understanding that there are other cash generation alternatives that may continue supporting the Company's strategic sustainable growth plan, focusing its efforts to complete ongoing projects.
Copel completes 20 years on the New York Stock Exchange
On August 28, 2017, Copel celebrated 20 years of being Listed on the New York Stock Exchange (NYSE), with the Company being honored at the Closing Bell, a ceremony that includes banging the gavel and ringing the bell that signals the end of daily business on the NYSE, the world's largest financial center.
In 1997, Copel was the sixth Brazilian company - and the first in the Brazilian electricity sector - to have its shares listed on the NYSE.
‘Mais Clic Rural' Program - Automated Substation and Reclosers
The São Valentim substation was inaugurated on August 10, 2017, in Dois Vizinhos, in the Southwest region of the state of Paraná. With investments of R$4.1 million, the unit is part of the Mais Clic Rural program, launched in 2015 by Copel Distribuição, which envisages significant investments to modernize the electric power system that serves the main agribusiness hubs in the state, thus improving the quality of the electric power supply in integrated productive processes highly sensitive to interruptions of electric power.
The substation will meet the agribusiness needs of almost 700 rural consumer units and grant more reliability tothe electric power supply in the region. The new substation has a "compact" construction standard, applied for the first time in Copel, which makes it possible to reduce the area of land occupied by the construction.
* Amountssubject to rounding.
7
Also in August, we concluded the first phase of the project to implement a new technology that will be used to reduce shutdowns in rural areas throughout the state of Paraná. In this first phase, 916 automated reclosers were inserted in the electrical grid, resulting from an investment of R$12.5 million, which should benefit around 70,000 rural properties. For each installed equipment, four shutdowns per month on average are avoided. In addition, it also optimizes the maintenance and services of Copel's technical teams, who need to move only in cases that require a more complex inspection and maintenance in the distribution networks.
Copel Distribuição is elected the best distributor in Latin America for the fifth time
On August 22, 2017, Copel Distribuição was elected the best company in its segment in Latin America for the fifth time in the last seven years. The announcement was made during the international seminar promoted by the Regional Energy Integration Commission (CIER), in Montevideo, Uruguay. In addition, Copel was also recognized by clients as a benchmark in information and communication and in social responsibility.
Copel Renováveis - Restructuring and new Interim CEO
As of September 1, 2017, in order to optimize the management of operating activities, the Company began the organizational restructuring of its wholly-owned subsidiary Copel Renováveis, whose activities will be absorbed by Copel Geração e Transmissão. In order to make it possible to carry out Copel Renováveis’ corporate activities until its activities are terminated, since this subsidiary will remain active until the conclusion of the restructuring processes, as of October 2, 2017, Mr. Cristiano Hotz has been appointed as the Interim Chief Executive Officer, cumulatively with his positions as Legal Officer and Institutional Relations Officer of Copel.
Copel and Shell do Brasil sign a letter of intent to structure a strategic partnership
On October 16, 2017, the Government of Paraná, Copel and Shell do Brasil signed a letter of intent to study the feasibility of a Strategic Plan of natural gas in the state of Paraná. After it is formalized, the two companies will discuss the terms of the partnership agreement.
The oil company Shell do Brasil was selected by Public Call 06/2015, opened by Copel, which was in force for two years. Through this call, the Company interacted with several players in the gas supply chain and selected a partner that was in line with Copel's strategic interests of analyzing, structuring and enabling projects in the natural gas segment in the state of Paraná.
The first stage of the partnership, after signing the agreement, is the joint development of technical, economic and financial studies to establish a business model that will bring return on investments and meet the demands of natural gas and electric power for the development of the state. The initial forecast is that these studies will be developed throughout 2018.
* Amountssubject to rounding.
8
Initially, the Strategic Plan includes the construction of new pipelines, new thermal power plants and the expansion of the non-thermal power market in the state. Through this new infrastructure, it will be possible to promote the development of the state, contribute with the generation of steady and reliable electric power to the Brazilian electric power system and generate greater competitiveness in the natural gas market, helping to reduce prices.
UN chooses Copel to coordinate the Global Compact’s office
Copel was chosen by the United Nations (UN) to coordinate the office of the Global Compact Cities Programme in the South Region of Brazil. The announcement was made in New York during the Global Compact Leaders Summit held on September 22, 2017.
The Cities Programme’s proposal is to establish partnerships with multiple sectors, including the government, companies, civil society and universities, in order to develop innovative projects and seek solutions to urban challenges. All projects must take into account the social, economic, environmental, political, institutional and cultural dimensions. The initiative began in Melbourne, Australia, the New York office is the second to be inaugurated and the Brazilian office will be the third.
Copel is among the 150 Best Companies to Work For
Copel is among the 150 Best Companies to Work For, according to the selection made by Guia Você S/A, the country's largest survey of organizational environment that was created 21 years ago with the mission of valuing the companies that best take care of their employees. The announcement was made in a ceremony held in São Paulo, on October 17, 2017.
Copel launches a public call to build partnerships with startups
In October 2017, Copel launched a public call (No. 05/2017) to invite startups interested in innovative partnerships from several technological segments related to its areas of operation, in order to search for projects – products, solutions or services – that can add value to the Company's business. In exchange, the selected startups will receive from the Company a financial contribution, professionals for specialized mentorship and the infrastructure needed to implement the product, solution or service in Copel’s environment, in addition to contacts and exposure to Copel's partners.
Initially, the proposals must include, in their context, tools that will help streamline the procurement and hiring processes, reduce costs with manual processes, reduce the number of work accidents, make improvements in infrastructure that affect the performance of quality indicators, implement technologies that reduce the consumption of traditional systems, provide distributed generation, and develop a more efficient use of information.
* Amountssubject to rounding.
9
Issue of R$500 million in Debentures – Copel Distribuição
On October 25, 2017, Copel Distribuição carried out its 3rd issue of simple debentures, not convertible into shares, unsecured, sigle series, for public distribution with restricted placement efforts, under CVM Instruction 476/2009, in the total amount of R$500.0 million. 50,000 debentures were isssued, with par value of R$10,000, maturity within five years from the issuance date and payable in two installments on October 20, 2021, and October 20, 2022. The debentures will earn interest corresponding to the accumulated variation of 126% of the average daily rates of Interbank Deposits – DI. The amounts raised will be used to pay the 2nd installment related to the amortization of the nominal unit value of the debentures from the 1st Issue of Debentures of Copel Distribuição.
Issue of R$1.0 billion in Debentures – Copel Geração e Transmissão
On November 03, 2017, Copel Distribuição carried out its 2nd issue of simple debentures, not convertible into shares, unsecured, sigle series, for public distribution with restricted placement efforts, under CVM Instruction 476/2009, in the total amount of R$1.0 billion. 1 million of debentures were isssued, with par value of R$1,000, maturity within five years from the issuance date and payable in three installments on October 20, 2020, October 20, 2021, and October 20, 2022. The debentures will earn interest corresponding to the accumulated variation of 126% of the average daily rates of Interbank Deposits – DI. The amounds raised will be used to fully redeem the 2nd issue of Promissory Notes and increase working capital of Copel Geração e Transmissão.
Waiver of Responsibility - Baixo Iguaçu HPP
On November 7, 2017, Aneel recognized an additional 46 days of waiver of responsibility for the delay in the implementation of the Baixo Iguaçu HPP, barring any penalties and contractual, commercial or regulatory obligations arising from the delay. The project already had 746 days of exclusion of liability, therefore, its concession term will now expire on October 30, 2049 and supply of the Energy Commecialization Agreements shall begin on November 12, 2018.
New CEO of Copel Comercialização
Mr. Antonio Justino Spinello is the new CEO of Copel Energia, Copel’s subsidiary responsible for operation in the free energy market. Mr. Spinello has built his career at Copel, he holds a bachelor’s degree in Business Administration and specialization degrees in Technical Management of Electricity Concessionaires (UFPR) and Restructuring of the Electric Power, New Businesses and Energy Efficiency (UFRJ). At Copel, he was a Market and Regulation Superintendent at Copel Distribuição between 2003 and 2014 and recently held the position of Finance and Regulation Superintendent of this subsidiary.
* Amountssubject to rounding.
10
Sanepar Units Program
On November 17, 2017, Copel Holding and Copel Comercialização submitted the request for the conversion of shares and for the adhesion to the Units program of the Companhia de Saneamento do Paraná - SANEPAR.
Copel Holding, holder of 36,343,267 preferred shares issued by SANEPAR, requested a conversion of 7,268,655 preferred shares in common shares and the formation of 7,268,653 Units.
Copel Comercialização, holder of 7,956,306 common shares of SANEPAR, requested the conversion of 6,365,044 common shares in preferred shares and the formation of 1,591,261 Units.
The tables below summarize the operation.
In addition, the Company will participate, as a seller, in the public offering of secondary distribution of deposit certificates of shares (“Units”), each representing one common share and four preferred shares, issued by Companhia de Saneamento do Paraná - SANEPAR, according to the documents of the respective offer.
Copel's interest in the operation includes the offer, initially, of 5,251,954Units held by Copel Holding and 1,149,763 Units held by Copel Comercialização.
Pursuant to the decision rendered on June 28, 2016, under CVM Administrative Procedure No. RJ2014/13261 and article 24 of CVM Instruction No. 400 of December 29, 2003, as amended, up to and including the date of conclusion of the Bookbuilding Procedure, at Copel’s discretion in common agreement with the Offering Coordinators, the number of Units initially offered will may be increased by up to 15% of the total Units initially offered, that is, up to 2,458,197 of the Company and owned by Copel, of which 2,016,699 Units held by Copel Holding and 441,498 Units held by Copel Comercialização, under the same conditions and at the same price as the Units initially offered ("Additional Units"), which will be used to meet any excess demand that may be verified at the moment the Unit Price is fixed.
* Amountssubject to rounding.
11
It should be noted that due to the provisions of article 4, paragraph 1, of the Law of the State of Paraná nº 18,875, of September 27, 2016 ("Law 18,875") and of the fact that the equity value of the shares issued by the Company, calculated based on your financial information as of September 30, 2017, is R$9.99, the Price per Unit must be at least R$50.00. If the Price per Unit at the end of the Bookbuilding Procedure is less than this amount, the Restricted Offer will be canceled.
On September 30, 2017, the Company has R$470.7 million in its assets, in the account "other temporary investments" related to COPEL's interest in SANEPAR.
* Amountssubject to rounding.
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2. Financial Performance
The following analyzes refer to the third quarter of 2017 and to the first nine months of the year compared to the same period of 2016.
2.1 Operating Revenues
In the third quarter of 2017, net operating revenue totaled R$3,643.7 million, a increase of 25.0%, compared to the R$2,914.1 million registered in the 3Q16, which is mainly explained by the 57.9% increase in the “use of the main distribution and transmission grid” line, arising from the non-recurring negative effect of R$206.4 million in 3Q16, related to the re-measurement of RBSE.
Comparing only recurring revenues, Copel reported a 16.8% upturn in net operating revenues in 3Q17, resulting from (a) the 16.7% increase in “electricity sales to distributors”, mainly due to the sale of 1,128 GWh by Copel Comercialização; (b) the 11.8% increase in the “electricity sales to final customers” revenue, due to the tariff adjustment of Copel Distribuição effective as of June 24, 2017, which adjusted the energy tariff (TE) by 10.28%, and to the 0.8% growth in the volume of energy sold to final customers (anchored in the growth of the residential and rural segments); (c) the 11.9% improvement in the “use of the main distribution and transmission grid” line, due to the 4.7% growth in the grid market in 3Q17, the adjustment applied to the APR as of July 2017 and Copel's tariff adjustment, which adjusted the TUSD by 0.85% as of June 24, 2017; (d) the positive result of R$417.9 million in result of sectorial financial assets and liabilities (over the R$64.4 million recorded in 3Q16), due to the increase in the hydrological risk (GSF), from 82.8% in 3Q16 to 64.2% in 3Q17, and in the average PLD in the period (R$436.20/MWh in 3Q17, versus R$112.05/MWh in 3Q16). The following variations are also worth mentioning:
(i) the 29.3% increase in “revenues from telecommunications”, due to the expansion of services to new customers;
(ii) the 9.9% decrease in “other operating revenues”, mainly due to lower revenues from fines; and
(iii) the 1.1% drop in “distribution of piped gas”, due to the 7.0% decrease in natural gas consumption, mainly in the industrial sector.
* Amountssubject to rounding.
13
In the accumulated until September 2017, Copel's net operating revenue increased by 3.2%, mainly due to the result of sectorial financial assets and liabilities and the incresase of 15.1% in the revenue of electricity sales to distributors, mainly due to the registration of R$293.3 million in revenue at Copel Comercialização. Considering only the recurring items, the Company would have ended September with a 12.0% growth in net operating revenue.
2.2 Operating Costs and Expenses
In 3Q17, operating costs and expenses increased by 15.8%, totaling R$3,159.7 million. This result was mainly due to the 66.8% increase in costs with "electricity purchased for resale”, as a result of the higher hydrological risk (GSF of 64.2% in 3Q17 vs. 82.8% in 3Q16) and the higher average PLD in the period (R$436.20/MWh in 3Q17 vs. R$112.05/MWh in 3Q16); partially offset by the impairment reversal totaling R$158.1 million (of which R$69.1 million related to the TPP Araucária, R$61.6 million to the Bento Miguel Wind Complex, R$15.4 million to UTE Figueira, R$5.9 to the Cutia Wind Complex, R$54.0 million to the other hydroelectric generation assets in the state of Paraná, R$43.3 million from the provision for losses of the HPP Colíder and R$4.6 million to Compagas), with a net impact of R$100.0 million in the “provisions and reversals” line. Also in this line, it is worth noting the 35.5% decline in provisions related to allowance for doubtful accounts (R$21.8 million in 3Q17, versus R$33.7 million in 3Q16).
* Amountssubject to rounding.
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Also noteworthy are the following variations:
(i) a 46.8% growth in other costs and operating expenses, mainly due to (a) the R$12.1 million registration of the state control and inspection rate for the use of water resources (instituted by State Law No. 18,878 / 2016, which became effective as of January 1, 2017), (b) higher expenses with authorized agents, and (c) the greater amount of losses with deactivation of assets and rights;
(ii) the 21.1% increase in costs with “natural gas and supplies for the gas business", due to the prices of the oil basket, which determines the gas acquisition price.
(iii) the 39.9% increase in “materials and supplies for power eletricity”, as a result of the higher expenditure with the Fuel Consumption Account (Conta de Consumo de Combustíveis - CCC), reflecting the thermal dispatch in the period; and
(iv) the 15.1% decrease in “charges of the main distribution and transmission grid”, mainly due to CCEE's decision to pass on to the market the surplus resources accumulated in the CONER account - given the prospect of the PLD's increase during 2017, partially offset by the the higher costs with the system usage charges – Basic Network, because of the readjustment at TUST in June 2017 and the 321.8% increase in the transmission tariff of Itaipu's energy;
(v) the0.2% decrease in manageable costs, excluding estimated losses, provisions and reversals (versus an accumulated inflation of 2.5% in 12 months), mainly due to the 12.0% drop in costs with “pension and healthcare plans”, given the lower amount invested in the “post-employment plan”, resulting from the revision of the assumptions that support the actuarial calculation, partially offset by the 3.1% increase in the “personnel and management” line, mainly reflecting the wage increase as of October 2016 and the R$11.8 million in provision for the voluntary termination and retirement of 67 employees to the PDI.Considering the inflation of the last 12 months, the manageable costs presented a real reduction of 2.7%, while the costs with personnel and management had a stable behavior, even with the adjustment of 9.15% applied to salaries from October 2016 .
* Amountssubject to rounding.
15
From January to September 2017, operating costs and expenses totaled R$8,366.8 million (6.1% up). This result was mostly impacted by the 27.6% increase in electricity purchased for resale, caused by the higher GSF and the higher PLD and the 8.7% increase in “personnel and management”, mainly due to the wage increase as of October 2016 and the R$31.0 million in provision for the voluntary termination and retirement of 170 employees to the PDI. These events were partially offset by the 29.2% reduction in "charges of the main distribution and transmission grid", mainly reflecting the CCEE's decision to pass on to the market the surplus resources accumulated in the CONER account - given the prospect of the PLD's increase throughout 2017.
2.3 Equity in the Earnings of Subsidiaries
Equity in the earnings of investees reflects gains and losses from investments in Copel’s investees and is presented in the table below.
* Amountssubject to rounding.
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2.4 EBITDA
In 3Q17, earnings before interest, taxes, depreciation and amortization reached R$643.7 million, 50.9% higher than the R$426.6 million reported in 3Q16. This increase is mainly due to the non-recurring negative effect of R$206.4 million in 3Q16 on RBSE's remeasurement and, in 3Q17, the reversal of R$158.1 million in impairment of generation assets.
In the period up to September 2017, EBITDA reached R$2,357.0 million, 8.7% lower than in the same period of 2016 (R$2,580.4 million), mainly due to the positive effect of R$771.3 million related to RBSE's remeasurement and the R$193.4 related to reversal provision for legal claims concerning Cofins, both recorded in 9M16.
Excluding non-recurring effects, adjusted EBITDA in 3T17 would be 25.0% lower than in the same period of the previous year, basically explained by the worsening of the GSF, aligned with the high PLD, resulting in higher energy purchase costs. Regarding to the accumulated in 9M17, it would be 27.4% higher than the adjusted R$1,630.2 million in 9M16, basically explained by the result of the 4th Tariff Review Cycle of Copel Distribuição and the adjustment applied as of June 24, 2017, by the 2.9% growth in the grid market, by the adjustment applied to the RAPs from June 2017, by the highest PLD in the period and by the lower amount recorded in the "provisions and reversals" line.
The following table presents the items considered in the adjusted EBITDA calculation.
2.5 Financial Result
In 3Q17, financial revenues totaled R$247.8 million, 57.7% up over the R$157.1 million recorded in 3Q16, mainly due to the adherence to the Special Tax Regularization Program (PERT), which generated a financial revenue related to interest on taxes to be offset, recorded under "other financial revenues".
Financial expenses totaled R$347.5 million, 17.0% lower than in 3Q16, mainly reflecting the impact of the reversal of tax disputes on the monetary variation.
The following table shows these changes and the financial result.
* Amountssubject to rounding.
17
2.6 Consolidated Net Income
In 3Q17, Copel recorded net income of R$389.8 million against a loss of R$111.8 million registered in the same period of 2016. Considering the accumulated up to September 2017, the net income was R$958.0 million, down 2.5% from R$983.0 million accumulated up to September 2016.
* Amountssubject to rounding.
18
2.7 Consolidated Income Statement
* Amountssubject to rounding.
19
3. Main Account and Changes Balance Sheet
The main accounts and changes in the Balance Sheet in relation to December 2016 are described below. Additional information can be found in the Notes to our Quarterly Financial Information.
3.1 Main Accounts
Cash, Cash Equivalents and Bonds and Securities
On September 30, 2017, the cash and cash equivalents, bonds and securities of Copel’s wholly owned subsidiaries and controlled companies totaled R$1,555.3 million, 18.4% higher than the R$1,313.8 million recorded on December 2016. These funds were invested, mostly in Bank Deposit Certificates (CDBs) and repo transactions. These investments are remunerated between 60% and 100% of the variation rate of the Interbank Deposit Certificate (CDI).
CRC Transferred to the State of Paraná
Through the fourth addendum signed on January 21, 2005, the Company renegotiated the CRC balance on December 31, 2004 with the State of Paraná at R$1,197.4 million, in 244 monthly installments recalculated by the price amortization system, restated by the IGP-DI inflation index plus annual interest of 6.65%. The first installment was due on January 30, 2005, with subsequent and consecutive maturities until April 2025.
The State of Paraná requested the Company and the Board of Directors approved, on June 16, 2016, subject to the consent of the Department of the Treasury, the Novation of the CRC Adjustment Agreement, which contemplates: (i) from April to December 2016, a total grace period for principal and interest payments; and (ii) from January to December 2017, only the principal amount, but with monthly interest payments. The other clauses would be maintained, including the maintenance of the current correction and interest rates, thus not affecting the overall net present value of said agreement.
The State of Paraná complied with the agreed terms and made payments of the monthly interest installments as from January 2017. The Company's management and the State of Paraná formalized the Fifth Amendment on October 31, 2017. The current balance of the CRC is R$1,491.8 million.
Other temporary investments
The Shareholders' Agreement, signed between the state of Paraná and Dominó Holdings, was terminated, removing from Dominó Holdings the significant influence over its investment in Sanepar. This occurred due to the conversion of common shares into preferred shares issued by Sanepar and held by Dominó Holdings. Given this fact, the investment of Sanepar which ceased to be classified as an affiliate and is now considered a financial asset available for sale. Accordingly, its recognition is no longer recorded under the equity method, butrather at fair value. On September 30, 2017, the balance of this account amounted to R$489.3 million, R$470.7 million of which is related to Copel’s investment in Sanepar.
* Amountssubject to rounding.
20
Sectorial Financial Assets and Liabilities
As of December 31, 2014, Copel Distribuição has recognized sectorial financial assets and/or liabilities in its financial statements as a result of an amendment to the concession agreement that guarantees that the residual amounts of items of Portion A and other financial components not recovered or returned via tariffs will be included in, or discounted from, the calculation of the indemnification for non-amortized assets at the expiration of the concession. On September 30, 2017, the Company had a net liability of R$122.6 million of sector financial liabilities. More detail in our Quarterly Financial Information (Note 9).
Accounts Receivable Related to the Concession
This line refers to accounts receivable related to the contracts for the concession of electric power generation, transmission and distribution activities. The amounts refer to (a) the concession fee paid as a result of the auction involving the Governador Parigot de Souza Plant – HPP GPS, won by Copel GeT on November 25, 2015 (R$601.7 million), (b) its investments in infrastructure and financial remuneration that have not been or will not be recovered via tariffs and/or APR until the expiration of the concession (R$2,077.0 million), (c) the amounts receivable from energy transmission assets of the Existing System Basic Network – RBSE and connection facilities and other transmission facilities - RPC, as a result of the recognition of the effects of MME Ordinance No. 120 and the approval, by Aneel, of the result of the inspection of the appraisal report of these assets (R$1,437.2 million) and (d) the gas distribution concession agreement - Compagas (R$97.2 million). On September 30, 2017, the balance of this account stood at R$4,213.1 million. For further information, please refer to Notes 10 of our Quarterly Financial Information.
Accounts Receivable related to the Concession Indemnification
This account refers to the residual value of the generation assets whose concession expired in 2015 (Rio dos Patos HPP, GPS HPP and Mourão I HPP). On September 30, 2017, the amount registered in this account was R$68.2 million. More details in Notes 11 to our Quarterly Financial Information.
Investments, Property, Plant and Equipment and Intangible Assets
"Investments" moved up 7.0% until September 30, 2017, due to equity in the earnings of subsidiaries and capital contributions recorded in the period. “Property, plant and equipment” increased 8.1%, due to the startup of new assets, in accordance with the Company's investment program, net of period depreciation. “Intangible assets” grew 1.6%, reflecting period investments in new assets.
* Amountssubject to rounding.
21
3.2 Balance Sheet – Assets
* Amountssubject to rounding.
22
3.3 Debt
Gross Debt
Copel's total consolidated debt amounted to R$9,526.7 million on September 30, 2017, an increase of 7.8% compared to the R$8,837.1 million recorded in 2016, mainly due to the 6th issue of R$520.0 million in debentures from Copel Holding and the 1st issue of R$220.0 million in debetures from Copel Telecomunicações.
On September 30, 2017, Copel’s gross debt represented 60.6% of consolidated shareholders’ equity, which at the end of the period was R$15,717.9 million, equivalent to R$57.44 per share (book value per share). The breakdown of the balance of loans, financing and debentures is shown in the table below:
Loans, financing and debentures maturities are presented below:
* Amountssubject to rounding.
23
Endorsements and Guarantees
At the end of September 30, 2017, the Company had R$1,513.5 million in guarantees and endorsements, as shown below.
Copel’s consolidated net debt (loans, financing, debentures, guarantees and endorsements, less cash and cash equivalents) and the net debt/EBITDA ratio are shown in the following chart:
* Amountssubject to rounding.
24
Net Debt by Subsidiary
The following table shows the gross debt and net debt of the subsidiaries:
Accounts Payables related to the Concession
Use of Public Property
It refers to the concession charges for the use of public property incurred since the execution of the project’s concession agreement until the end of the concession.
Provisions for Legal Claims
The Company is involved in a series of lawsuits in different courts and instances. Copel’s management, based on its legal advisors’ opinion, maintains a provision for legal claims for those cases assessed as probable losses. The balances of provisions for legal claims are as follows:
The lawsuits classified as possible losses, as estimated by the Company and its controlled companies at the 3Q17, totaled R$2,567.7 million, 0.3% higuer than in December 2016 (R$2,559.9 million), distributed in lawsuits of the following natures: fiscal (R$846.6 million), regulatory (R$790.6 million), civil (R$587.2 million), labor (R$319.1 million) and employee benefits (R$24.2 million).
* Amountssubject to rounding.
25
3.4 Balance Sheet – Liabilities
* Amountssubject to rounding.
26
4. Performance of the Main Companies
4.1 Copel Geração e Transmissão
Copel GeT recorded EBITDA of R$381.4 million in 3Q17, 81.3% up on the R$210.3 million recorded in 3Q16. This result was positively impacted by the recognition of R$162.7 million related to the reversal of estimated losses with the impairment of generation assets, while the 3Q16 result was negatively impacted by the adjustment of R$206.4 million related to the remeasurement of RBSE cash flow.
Copel GeT's recurring EBITDA fell by 49.3% in 3Q17, totaling R$218.7 million, mainly reflecting higher costs with electricity purchased for resale (R$195.0 million in 3Q17 versus R$12.3 million in 3Q16) due to the lower GSF (62.2% in 3Q17, versus 82.8% in 3Q16) and the 5.6% increase in “charges of the main distribution and transmission grid” resulting from the start-up of new transmission assets and the adjustment applied to the APRs as of July 2017.
Manageable costs, excluding estimated losses, provisions and reversals, decreased 2.0% in the period (versus an inflation of 2.54% in the last 12 months), mainly reflecting lower costs with pension and healthcare plans and third-party services, partially offset by the 4.5% increase in the personnel line, due to the wage increase as of October 2016 and the organizational restructuring of Copel Renováveis as of September 2017, which led to the transfer of activities and of 56 employees to Copel GeT.
Net income totaled R$164.9 million in 3Q17, 4.3x higher than in 3Q16 (R$38.7 million). The following table presents the main indicators of Copel GeT.
In 9M17, Copel GeT’s EBITDA reached R$1,514.5 million, a 26.0% decline when compared to the same period of the previous year, mainly reflecting the non-recurring events related to the recognition of the RBSEreameasurement, which improved the result by R$771.3 million in 9M16, and the recognition of R$101.7 million related to the reversal of estimated losses with the impairment of generation assets in 9M17.
* Amountssubject to rounding.
27
Excluding the aforementioned effects, Copel GeT's recurring EBITDA totaled R$1,229.8 million in 9M17, a 4.7% drop when compared to the same period of the previous year, chiefly due to higher costs with energy purchases as a result of the higher average PLD in the period (R$291.50/MWh in 9M17, versus R$68.93/MWh in 9M16), partially offset by the higher level of uncontracted energy (21.6% in 2017, versus 16.0% in 2016).
Net income reached R$654.8 million in 9M17, a 35.8% decline when compared to the same period in 2016.
4.2 Copel Distribuição
Copel Distribuição recorded EBITDA of R$134.1 million in 3Q17, 41.6% up on the R$94.7 million recorded in the same period of 2016, primarily reflecting the average adjustment of 5.85% on the tariffs as of June 24, 2017, the 4.7% increase in the distributor’s grid market, and the lower balance recorded in provisions mainly related to labor issues and allowance for doubtful accounts.
The “sectoral assets and liabilities result” account totaled R$417.9 million and reflects higher costs with electricity purchased for resale, mainly due to the higher hydrological deficit (35.8% in 3Q17, versus 17.2% in 3Q16) and average PLD (R$436.20/MWh in 3Q17, versus R$112.05/MWh in 3Q16).
Manageable costs, excluding estimated losses, provisions and reversals, fell by 0.9% (versus an inflation of 2.54% in the last 12 months), reflecting lower costs with pension and healthcare plans and third-party services, partially offset by the increase in other costs, due to higher losses with the deactivation of goods and rights. It is worth noting that costs with personnel and management increased by 1.0%, performing under the inflation and the 9.5% wage increase as of October 2016. This performance reflects the reduction of 228 employees, due to the policy of not filling job vacancies.
Net income in 3Q17 was R$182.2 million, mainly due to Copel Dis joining the Special Tax Regularization Program (PERT), which, considering all the effects of the change in the tax regime for Securities Assets and Liabilities (CVA), positively impacted the result by R$113.7 million.
* Amountssubject to rounding.
28
In 9M17, Copel Distribuição recorded EBITDA of R$462.2 million, over the R$18.7 million recorded in the same period in 2016, mainly due to the 2.9% increase in the grid market and the reduction in the “provisions and reversals” line, mainly resulting from labor lawsuits and allowance for doubtful accounts.
Net income reached R$261.5 million in 9M17, reversing the R$256.4 million loss recorded in 9M16.
4.3 Copel Telecomunicações
Copel Telecom recorded EBITDA of R$41.5 million in 3Q17, a 31.6% increase over the R$31.5 million recorded in 3Q16, basically due to the expansion of the area of operation and services to new customers.
Manageable costs, excluding estimated losses, provisions and reversals, grew by 15.5% in the period, mainly due to the increase in third-party services, which are required to expand the area of operation, partially offset by the reduction in the “pension and healthcare plans” line.
Net income for the period increased by 48.2% compared to the 3T16, totaling R$18.8 million. The following table presents the main indicators of Copel Telecom.
Until September 2017, Copel Telecom recorded a 17.6% increase in EBITDA compared to the same period of 2016, totaling R$109.8 million. Net income was R$45.9 million, 17.6% higher than the 9M16 (R$38.6 million).
* Amountssubject to rounding.
29
4.4 Accounting Information
Accounting information concerning Copel’s interests in other companies in 9M17 is shown in the following table:
* Amountssubject to rounding.
30
5. Investment Program
The following chart shows the investment program carried out in 9M17:
6. Power Market and Tariffs
6.1 Captive Market – Copel Distribuição
Copel Distribuição’s captive market energy sales totaled 4.729 GWh in the 3Q17, which represents a reduction of 10.6%. This decrease was influenced by the reduction in consumption of industrial and commercial classes, mainly due to the migration of customers to the free market.
The following table shows captive market trends by consumption segment:
For more details visit the Notice to the Market - IR 23/17 (link).
* Amountssubject to rounding.
31
6.2 Grid Market (TUSD)
Copel Distribuição’s grid market, comprising the captive market, concessionaires and licensees in the state of Paraná, and all free consumers in the Company’s concession area, presented an increase of 4.7% in 3Q17, as shown in the table below:
The result was mainly due to the 5.6% increase in industrial consumption in the free market in 3Q17, as a result of the improvement in industrial production in the state of Paraná - which in the last 12 months until September, 2017 showed a growth of 4.6%. The sectors that contributed most to the increase in energy consumption were: food manufacturing, pulp and papermaking and manufacturing of rubber and plastic.
6.3 Electricity Sales
Electricity sales to final customers, comprising Copel Distribuição’s sales in the captive market and Copel Geração e Transmissão and Copel Comercialização sales in the free market, incresed 0.8% between July and September 2017.
The table below breaks down energy sales by consumption segment:
* Amountssubject to rounding.
32
6.4 Total Energy Sold
Total energy sold by Copel in all markets, comprising the sales of Copel Distribuição, Copel Geração e Transmissão, the Wind Farm Complexes and Copel Comercialização, came to 11,835 GWh in 3Q17, representing an increase of 5.4% in compared 3Q16.
The following table shows Copel’s total electricity sales broken down between Copel Distribuição, Copel Geração e Transmissão, Wind Farm Complexes and Copel Comercialização:
* Amountssubject to rounding.
33
6.5 Energy Flow
Energy Flow – Copel Dis
Energy Flow – Copel GeT
* Amountssubject to rounding.
34
Energy Flow – Wind Farms
Energy Flow – Copel Comercialização
* Amountssubject to rounding.
35
Consolidated Energy Flow (Jan to Sep 17)
6.6 Tariffs
Sales to Distributors Average Tariff (CCEARs) – Copel Geração e Transmissão
* Amountssubject to rounding.
36
Power Purchase Average Tariff – Copel Distribuição
Sales to Final Customers Average Tariff Copel Distribuição
* Amountssubject to rounding.
37
7. Capital Market
7.1 Capital Stock
Copel’s capital amounts to R$7,910.0 million, represented by shares with no par value. The Company's current number of shareholders is 26,564. In September 2017 the Company’s capital was as follows:
* Amountssubject to rounding.
38
7.2 Stock Performance
From January to September 2017, Copel’s common shares (ON - CPLE3) and class B preferred shares (PNB - CPLE6) were traded in 100% of the trading sessions of the B3 S.A. - Brasil, Bolsa, Balcão (B3).
The free float accounted for 45.0% of the Company’s capital. At the end of September 2017, the market value of Copel considering the prices of all markets was R$7,004.8 million.
Out of the 59 stocks that make up the Ibovespa index, Copel’s class B preferred shares accounted for 0.23% of the portfolio, with a Beta index of 1.3.
Copel also accounted for 5.4% of the B3’s Electric Power Index (IEE). In the Corporate Sustainability Index (ISE), Copel class B preferred shares accounted for 0.8%.
Copel’s common and class B preferred shares closed the period at R$23.30 and R$28.23, with a positive variation of 22.1% and 3.2% respectively. In the same period the Ibovespa had positive change of 23.4%.
On the New York Stock Exchange (NYSE), class B preferred shares, represented by American Depositary Shares (ADSs), were traded at Level 3, under the ticker ELP, in 100% of the trading sessions and closed the period at US$8.86, with a positive variation of 4.48%. Over this period, the Dow Jones Index positive by 13.37%.
On the Latibex (the Euro market for Latin American securities on the Madrid Stock Exchange), Copel’s class B preferred shares were traded under the ticker XCOP in 54% of the trading sessions and closed the period at €7.75, with a negative variation of 4.08%. In the same period the Latibex All Shares index had positive growth of 11.65%.
The table below summarizes Copel’s share prices in 9M17.
* Amountssubject to rounding.
39
7.3 Dividends and Interest on Own Capital
The table below presents the payments of dividends and interest on own capital as of 2011:
* Amountssubject to rounding.
40
8. Operating Performance
8.1 Power Generation
Assets in Operation
Copel Geração e Transmissão
Below is the main information of Copel GeT’s power station and the power produced in the first nine months of 2017.
On March 24, 2017 Copel GeT filed an agreement with Aneel with its intention to extend the granting of the TPP Figueira, noting, however, that it will sign the necessary contracts and/or additives only after knowing and accepting the contractual terms and the rules that will govern any process related to the extension of the grant.
In addition, Copel GeT operates one plants under the quota system, as shown below:
* Amountssubject to rounding.
41
Copel was designated as the interim operator of the Rio dos Patos plant (1.7 average MW of installed capacity and 1 average MW of assured power) after the final term of the concession, awaiting the MME's decision on ANEEL's recommendation for the extinction of the plant without the reversal of the assets to the granting power. However, its operation was suspended in September 2014 due to flood damage in July of that year.
In view of this scenario, awaiting the confirmation by MME, Copel is carrying out the pertinent analyzes regarding the best use to be made of the assets of this plant, as well as the necessary actions in case of reversion of the assets to Copel.
Wind Farms Complex
Copel has 11 wind farms in commercial operation, which generated 813.5 GWh in 9M17, as shown in the following chart:
* Amountssubject to rounding.
42
Interest in Generation Projects
Copel holds interests in seven power generation projects at the operational stage, with a total installed capacity of 884.7 MW, 599.0 MW referred to Copel´s stake, as shown below:
Interest in Wind Farms
Copel has 49% interest in the Voltalia São Miguel do Gostoso I Participações S.A. wind farm complex, in the State of Rio Grande do Norte.Whose energy was sold in the Fourth Reserve Energy Auction by under twenty-year contracts, with supply beginning in July, 2015, according to the table below.
On June 17, 2017, the four wind farms comprising the São Miguel do Gostoso I Wind Complex were connected to the National Interconnected System (SIN). The Complex was able to start its operations in June 2015, when the construction of the complex was completed. Since then, the complex has received the total revenue of remuneration, in accordance with the public auction held in 2011.
* Amountssubject to rounding.
43
Under Construction
Copel Geração e Transmissão
Copel GeT is building two hydroelectric power plants that will add 405 MW to its total installed capacity, as described below.
Colíder Hydroelectric Power Plant
On July 30, 2010, under Aneel New Energy Auction no. 003/2010, Copel GeT was awarded the concession to explore the Colíder HPP for a term of 35 years, commencing January 17, 2011, the signing date of MME - Colíder HPP Concession Agreement no. 001/11.
The project is part of the Brazilian Government’s Growth Acceleration Program - PAC and will consist of a main power house with an installed capacity of 300 MW, sufficient to serve around 1 million inhabitants, based on the estimated energy potential of the Teles Pires River on the border of the municipalities of Nova Canaã do Norte and Itaúba, in northern Mato Grosso.
The BNDES endorsed the qualification of the Colíder HPP for feasibility analysis of financial support and the financing agreement, in the amount of R$1,041.2 million (Note 23). The amounts released up to September 30, 2017 total R$975.1 million.
Due to force majeure events and government acts, such as fire in the construction site, difficulties related to environmental licensing, supplier delays in equipment delivery and services related to electromechanical assembly and construction of the transmission line associated with the plant, the schedule of the project was affected, leading to the postponement of the beginning of commercial generation: the startup of the first generation unit is scheduled for May 2018 and the third and last generation unit is expected to begin operations in November 2018. As a result of these events, this project shows an asset impairment balance of R$638.8 million as of September 30, 2017 (R$595.5 million as of December 31, 2016).
The energy from the Colíder HPP was sold at an Aneel auction at a final tariff of R$103.40/MWh, as of July 1, 2010, restated by the IPCA inflation index to R$161.56 on September 30, 2017. A total of 125 average-MW was traded, to be supplied beginning January 2015, for 30 years. Copel GeT filed with Aneel a request for exclusion of liability, so that the obligation to supply the energy sold is postponed. The request was not accepted in firstinstance; however, the Company exercised its right to appeal and filed a motion for rehearing, which was denied on March 14, 2017. As Copel GeT does not agree with the decision, it filed another motion for rehearing, which was denied on a final basis on July 4, 2017. The Company will submit the issue to the judicial branch and is certain that Aneel’s decision will be reversed.
* Amountssubject to rounding.
44
The Company has been meeting its energy supply commitments as follows:
• from January 2015 to May 2016: with energy surplus of its other plants that has not been contracted;
•from June 2016 to December 2017: partial reduction in June 2016 through a Bilateral Agreement and reduction of all Energy Commercialization Agreements in the Regulated Environment – CCEARs between July 2016 and December 2017 through a Bilateral Agreement and participation in the Mechanism for Compensation of Surpluses and Deficits – MCSD of New Energy.
On December 21, 2016, the project’s assured energy was revised by Ordinance 258 of the Ministry of Mines and Energy, declining from 179.6 average-MW to 177.9 average-MW, after all the engines were installed.
On September 30, 2017, Colíder HPP expenses totaled R$2,151.5 million and total commitments assumed with suppliers of equipment and services totaled R$46.9 million.
Baixo Iguaçu Hydroelectric Power Plant
Copel holds a 30% interest in the Baixo Iguaçu Consortium (CEBI). The purpose of the consortium is to build and operate the Baixo Iguaçu Hydroelectric Power Plant, with an installed capacity of 350.20 MW, located on the Iguaçu river, between the cities of Capanema and Capitão Leônidas Marques, and between HPP Governador José Richa and the Iguaçu National Park, in the State of Paraná. With an estimated total investment of R$2.3 billion, the first unit of the plant is expected to start operating in November 2018. The work on the construction site began in July 2013, with the excavation of the generation circuit, the earthworks of the construction site and the construction of the housing areas.
The beginning of the commercial generation of unit 1 is currently expected for the end of November 2018, and of units 2 and 3 for December 2018 and January 2019, respectively. The original schedule was changed due to the suspension of the Installation License, according to the ruling of the Regional Federal Court of the 4th Region (TRF-RS), which occurred on June 16, 2014, and paralyzed the construction works from July of that year. In March 2015, a ruling authorizing the resumption of the construction works was issued. However, the Chico Mendes Institute for Biodiversity Conservation (ICMBio) enforced additional constraints on the environmental licensing, which prevented the immediate resumption of the construction work. CEBI submitted to the Environmental Institute of Paraná (IAP) all the necessary information to comply with these constraints and, in August 2015, the license was issued. After the measures discussed and agreed with the Developer Consortium, on February 1, 2016, the construction work was fully resumed.
* Amountssubject to rounding.
45
In August 2016, Aneel issued the 2nd Amendment to the Concession Agreement, in order to formalize the redefinition of HPP Baixo Iguaçu’s schedule, as well as its final closing date, acknowledging, in favor of CEBI, an exemption of liability for the delay in the implementation of the project for a period corresponding to 756 days, recommending to the MME the extension of the term of the grant and establishing that the CCEE must postpone the beginning of the supply period of the CCEARs for the period of the recognized exemption of liability.
On November 7, 2017, Aneel recognized an additional 46 days of exclusion of liability for the delay in the implementation of the Baixo Iguaçu HPP, barring any penalties and contractual, commercial or regulatory obligations arising from the delay. The project already had 746 days of exclusion of liability; therefore, its concession term will now expire on October 30, 2049 and supply of the Energy Commecialization Agreements shall begin on November 12, 2018.
At the construction site, the works are following the schedule established when the work was resumed. The assembly activities of the powerhouses and the spillway are fully in progress, as are the social and environmental programs.
Wind Farm Complex
Copel is expanding its energy generation matrix with renewable sources by building wind farm complexes in the State of Rio Grande do Norte, consisting of 13 projects with a total installed capacity estimated at 311.8 MW, as follows:
* Amountssubject to rounding.
46
8.2 Transmission
Assets in Operation
The chart below shows the transmission concession agreements and the design of the substations park and the transmission lines in operation:
Assets under Construction
Copel GeT is substantially increasing its share of the transmission segment through own investments and partnerships in SPCs. The projects have a joint total of 1,813 km of transmission lines and 4 substations and will generate APR of R$298.9 million of which refers to Copel Get stake. Copel’s interest in the transmission projectsis available in the table below.
* Amountssubject to rounding.
47
8.3 Distribution
Concession agreement
In December 2015, the Company signed the fifth amendment to the Public Electricity Distribution Concession Agreement no. 46/1999 of Copel Distribuição S.A., extending the concession term to July 7, 2045.
The concession agreement imposes economic and financial efficiency and quality conditions. Failure to comply with the conditions for two consecutive years or any of the limits at the end of the first five years will result in the termination of the concession. From the sixth year following execution of the agreement, any breach of quality criteria for three consecutive years or economic and financial management criteria for two consecutive years will result in the opening of a forfeiture process.
The following chart shows the goals set for Copel Distribuição in the first 5 years of renovation:
* Amountssubject to rounding.
48
Operating Data
In the distribution business, Copel serves more than 4.5 million energy customers in 1,113 locations, belonging to 394 municipalities in State of Paraná and one in the State of Santa Catarina. Copel Distribuição operates and maintains the installations in the 13.8 kV, 34.5 kV, 69 kV, 138 kV and some of 230 kV voltage levels.
Compact-Design Distribution Lines
Copel Distribuição has continued to implement compact-design distribution lines in urban areas with a high concentration of trees surrounding the distribution grids. This technology reduces the number of trees cut down or trimmed, and improves the quality of power supply by reducing the number of unplanned outages. In September 2017, the total length of compact-design distribution lines in operation was 9,393 km.
Secondary Isolated Lines
Copel Distribuição has also invested in low-voltage (127/220V) secondary isolated lines, which offer substantial advantages over regular overhead lines, including: improvement in DEC and FEC distribution performance indicators, defense against illegal connections, improved environmental conditions, reduced areas subject to tree trimming, improved safety, reduced voltage drops throughout the grid, and increased transformer useful life, due to the reduction of short-circuits, among other advantages. The total length of installed secondary isolated lines closed September 2017 at 17,076 km.
* Amountssubject to rounding.
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Quality of Supply
The two main indicators of power supply quality are DEC (outage duration) and FEC (outage frequency). The trends for these indicators, as well as for total time service, are shown below:
8.4 Telecommunications
Copel Telecomunicações has an optical backbone, a high capacity intermunicipal transmission network, and the access, a customer service network. The access network can be multi-point (GPON) or point-to-point (conventional), thus connecting the customer to the network's transmission Copel Telecom and providing the contracted services.
In September 2017, the backbone cable network extended for 10,140 km and the access network extended for 21.051 km. Currently, we serve the 399 municipalities in the State of Paraná and another 2 in the State of Santa Catarina.
* Amountssubject to rounding.
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8.5 Equity Interests
Other Sectors
Copel holds interests in companies in the gas, telecommunications, sanitation and service sectors, as shownbelow:
8.6 New Projects
Project Portfolio
Copel holds interests in different power generation projects.When these projects go into commercial operation, they will add 327.3 MW of installed capacity to the Company's portfolio.
* Amountssubject to rounding.
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Copel, in partnership with the companies Brennand, Minas PCH and Silea, is also developing studies in the lower reaches of the Rio Chopim that will lead to the feasibility of another four (4) hydroelectric projects. As for wind power generation, there are studies for the feasibility of new wind farms in the State of Rio Grande do Norte, where Copel already has wind assets. The short-term objective is to register such projects in the EPE to enable participation in the upcoming auctions to be organized by the Federal Government. The technical characteristics may be adjusted until the effective energy commercialization of the projects, since Copel's engineering is conducting optimization studies, in order to make the projects more competitive.
Interest in Feasibility Study
Hydroelectric Potential Surveyed Along the Piquiri River
The feasibility studies for the four hydroelectric power plants making up the hydroelectric potential of the Piquiri River, in Paraná, were submitted by Copel GeT and accepted by Aneel in 2012. The following table features these plants, which have a joint installed capacity 459.3 MW:
Oil and Gas Exploration and Production (Paraná GásExploração e Produção S.A) On November 28, 2013, in the 12th round of Bids of the National Petroleum Agency (ANP), the consortium formed by Copel (30%), Bayar Participações (30%), Tucumann Engenharia (10%) and Petra Energia (30%) (the latter acting as operator) won the right to explore, develop and produce oil and natural gas in four blocks in an 11,327 km² area in the midwestern region of the State of Paraná. The consortium’s total investment will come to R$78.1 million in the first phase of exploration, for the term of four years granted by the ANP. Copel and its partners Bayar, Tucumann and Petra signed concession contracts for 2 blocks in May 2014. At the end of 2016, State Law No. 18.947/2016 was sanctioned, suspending por ten years the environmental licensing of any drilling or exploration activity of shale gas by the hydraulic fracturing method, better known as "fracking". |  |
* Amountssubject to rounding.
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Due to the ruling rendered regarding the Public Civil Action referred to above (in the lower court), issued on June 7, 2017, stating the nullity of the bidding procedure and the respective agreements signed for the areas of the Rio Paraná Basin, and the lack of compliance prospects of the object of ANP’s 12th Round of Bids, the consortium resolved to request to ANP the discharge from its contractual obligations under the 12th Round of Bids without charges to the bidders, with the consequent refund of the signature bonus, reimbursement of the guarantee costs incurred and discharge of the guarantees presented (application filed at ANP on June 6, 2017).
9. Other Information
9.1 Human Resources
Copel’s workforce closed 3Q17 at 8,418 employees distributed. The table below shows employee number trends in the Company and its subsidiaries in the last four years:
At the end of September, Copel Distribuição had 4,539,406 customers, representing a consumer-to-employee ratio of 773. Compagas, Elejor and UEG Araucária, companies in which Copel holds a majority interest, had 163, 7 and 17 employees, respectively.
* Amountssubject to rounding.
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9.2 Main Operational Indicators
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9.3 Conference Call 3Q17 Results
Information about 3Q17 Results Conference Call:
> Friday, December 01, 2017, at 10:00 a.m. (Brasília time)
> Telephone: (+1 516) 300 1066
> Code: Copel
A live webcast of the conference call will be available at:ir.copel.com
Please connect 15 minutes before the call.
Investor Relations – Copel
ri@copel.com
Telephone: (+ 55 41) 3222-2027
The information contained in this press release may contain forward-looking statements that reflect management’s current view and estimates of future economic circumstances, industry conditions, company performance, and financial results. Any statements, expectations, capabilities, plans and assumptions contained in this press release that do not describe historical facts such as statements regarding the declaration or payment of dividends, the direction of future operations, the implementation of relevant operating and financial strategies, the investment program, factors or trends affecting the Company’s financial condition, liquidity or results of operations are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties. There is no guarantee that these results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.
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Exhibit I – Consolidated Cash Flow Statement
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Exhibit II – Financial Statements – Wholly Owned Subsidiaries
Income Statement – Copel Geração e Transmissão
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Income Statement – Copel Distribuição
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Income Statement – Copel Telecomunicações
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Exhibit III – Financial Statements by Company
Balance Sheet by Company
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Amounts subject to rounding.
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Amounts subject to rounding.
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Amounts subject to rounding.
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Income Statement by Company
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Amounts subject to rounding.
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Amounts subject to rounding.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| COMPANHIA PARANAENSE DE ENERGIA – COPEL |
| | |
| By: | /S/ Jonel Nazareno Iurk
| |
| | Jonel Nazareno Iurk
Chief Executive Officer | |
FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.
