Jonel Iurk - CEO Adriano Rudek de Moura - CFO and IR Officer

Andre Sampaio - Santander Marcelo Sa - UBS Lilyanna Yang - HSBC

Good morning and thank you for waiting. Welcome to Companhia Paranaense de Energia Corporate Conference call, to present the first quarter of 2018 results. We would like to inform you that all participants will be in listen-only mode during the company’s presentation. Afterwards, we will have a question-and-answer session when further instructions will be given. [Operator Instructions]. Before proceeding, we would like to clarify that forward-looking statements are - be made during this call, related to Companhia’s business perspectives, operating and financial projections and target our beliefs and assumptions of the company’s management as well as information currently available. Forward-looking statements are not guarantees of performance, involve risks and uncertainties and assumptions as they refer to future events and therefore they depend on circumstances that may or may not occur. General economic conditions, industry conditions and other operating factors may affect the future performance of Copel and may lead to results that differ materially from those expressed in such forward-looking statements. In this call we have the presence of Mr. Jonel Nazareno Iurk, CEO of the Copel; Mr. Adriano Rudek de Moura Companhia Paranaense, CFO and Investor Relations Officer; Ms. Ana Leticia Feller, Corporate Management Officer, Mr. Harry Francoia Junior Legal and Institutional Relations Officer, Mr. Jose Marques Filho, Business Development Officer; Mr. Vicente Loiacono Neto, Governance, Risk and Compliance Officer; Mr. Sergio Luiz Lamy, CEO of Copel GeT; Mr. Antonio Sergio de Souza; CEO of Copel Distribuicao; Mr. Adir Hannouche, CEO of Copel Telecom and Mr. Antonio Justino Spinello. CEO of Copel Comercializacao. The presentation that will be made by Copel’s management may follow at the company’s website, ir.copel.com. Now we turn the floor to Mr. Jonel Iurk.

Good morning everybody, thank you very much for your participation in our call. A short while ago we had the opportunity to talk about the results of the last quarter of 2017. Which have been filed on the last April 12 with a reservation by the independent auditors vis-à-vis the comparative balances related to the 2016 period. We will get into more detail during the presentation but I would like to mentioned already that last Tuesday we have filed with the CVM the restatement of the financial statement already without the statement and the opinion of the results of the first quarter also do not include any reservations whatsoever. Just to emphasize I noted that we made to the market last week about the postponement of our general shareholders meeting previously scheduled for May 15, 2018, due to the aforementioned statement of our financial statement of 2017, the same is rescheduled for June 15, 2018. Now talking about the first quarter, as we said, on, slide number 3, we see that the adjusted EBITDA of 862 million is in line with our expectations, and even slightly better than the adjusted EBITDA of the same period last year and we will show you in more detail this consideration and other thing that I would like to highlight is the cash generated by the operating activities of approximately 944 million, a 37% improvement vis-a-vis the same period in 2017. In terms of investments as we have been emphasizing, our focus is to conclude the project already underway as soon as possible. And we believe that we are on the right track as we can see in the investments that totaled 633 million. Most of that refers to project that about to be concluded such as Colider, Baixo Iguacu and the Cutia Wind complex. Besides our funding plan is expected to need our level of investment this year, as well as the payment of short-term debt maturities. As a consequence, we have just concluded last week another funding operation of 600 million accumulated 1.2 billion since the beginning of the year, and then other highlight in the quarter is the encouraged retirement program, as we said in our last talk, the PDI, as we call, it was enforced in October 2013 and it was closed in March 2018. And the outlook for the closing of the program drove a large number of involvement in the first quarter 585 people enrolled in this PDI as we call it. So, with the approaching of 91 million at provision for indemnification which impacted the course in the quarter. But generating a potential savings of 162 million per year as of 2019 should these people decide to leave the company by the end of this year. Beside it’s a great pleasure that I introduce the new members of the Executive Board Mr. Vicente Loiacono Neto, Governance, Risk and Compliance Officer; Mrs. Ana Leticia Feller Corporate Management Officer. Mr. Loiacono is a lawyer and career member of the Company in the last 7 years. He held many important positions in Copel, which I would like to mention that he was an assistant to the legal and institution relations department and assistant of the Corporate Management area, Manager of the Regulatory Area of Copel Distribuicao and since March ’17 was an assistant to the Sales Office Mrs. Ana Leticia Feller is also a lawyer and she has been with Copel for 16 years of her career in the company. She held imported positions, amongst which she was a Coordinator of the Permanent Compensation Community Coordinator of the Corporate Management areas of Human Resources, member of the board of Ethical Orientation at least, and she was assistant to the Corporate Management area. At the appointment of both, this forces our policy of having career people in strategic positions in the company, and I’m sure that they will contribute even more to a management focus on sustainable development and I would like to affirm our commitment that the continuity of a transparent and result oriented management in order to further strengthen the position of Copel in the market where operate. Always aiming at a long term sustainable growth and with the dedication of all this commitment is being consolidated. And lastly, I would like to mention that according to what we have close sight to the market in this notice on May 11th, referring to the news published by the media launch date and that mentions Copel as the object of possible negotiations between the representatives of Parana state and Copel Limited in 2014 related to the acquisition of six plants of the Aratu Thermoelectric complex. And I would like to make it clear that we have no knowledge whatsoever of any requirement recommendation received from the government of Parana or any public agency for the acquisition of any of the plants of Aratu Thermoelectric complex. And we reaffirm that the company has independent management and autonomy decision making which are consistent with the pros and cons of governance inherent to the regulation of this electric sector of the CDM amongst other norms and policies that are applicable. As we have explained the Aratu Thermoelectric complex was analyzed together with another 31 projects as an asset that could maybe be invested in the range of the invitation to be 003 of March 05, 2012 with the objective of looking for opportunities in businesses in the energy area. However, none of the projects included in this invitation to bid was the object of investment by Copel because they did not see the technical regulatory or financial criteria established by the company. Lastly, we would like to inform that Mr. Deonilson Roldo, mentioned in the news is no longer the Corporate Officer, a position that he held between April 12 and May 11, 2018. Now going to Slide number 4, we can see that although timid economic recovery already has a positive impact on energy consumption with a grid market of Copel Distribuicao, delivery and growth are up 4% in line with the ones that was presented in the National Energy Market also with 0.4. In the south region there was a drop of 0.3 influenced by milder temperatures during December and we believe that there will be a redemption of the economy for 2018 in spite of all the uncertainty, however slower than we expected last year. And as you know the Central Bank indicated recently published that function as more of an estimate of the GDP already show a performance lower than expected and in spite of that the state economy once more has been delivering a good performance, the production of Parana grew by 2.6% in the last 12 months. In the sectors that gave the highest contribution to the consumption of energy was food, pulp and paper and wood. Another important factor was a generator of drugs in the state in the first quarter totally 26 new positions a 57% increase on that year-on-year comparison and another highlight is that gradual reduction of the delinquency ratio of Copel Distribuicao. We closed the first quarter of 2018 with 1.5% coming from a major effort to tackle this and besides we continue to work to reduce opposition in our ADD that closed in the first quarter at 22 million, a reduction of about 10% in a yearly comparison. The total Copel distribution company we closed the first quarter with important advancement in quality indicator such as ELC closing the period that is 3.01 and the EFC at 1.89, figures natural once again the maintenance of the indicators as leveled within the limits required by NL and which means more quality in the supply of energy to our consumers and complying with the basic requirement for the maintenance of the consortium. Going into more details about our investment plan, the Iguacu and the Cutia Wind complex was the project that required the most funds, 300 million in the period and you can enter the north of this and continue acceleration and deferred winter borne should start operation in the second half of 2018. Copel Telecom invested over 51 million with the extension of the fiber optics network of residential internet for an additional of 16 cities all located in the Northeast of Parana state and with this increase in our services the company grows from 64 to 80 cities covered by residential internet increased by 20%, its area with Copel fiber. And although large companies of the region already had connectivity connections, connectivity solutions like Copel Telecom, the new network allows us to offer extra broadband for residential and SMEs with speed up to 200 mbps. Copel GeT invested a 165 million divided in projects such as a co-leader and points and the Araraquara-Bateias transmission line, all in the final phase of implementation. And specifically, about Colider the estimate for startup is in June next and still about Colider I would like to mention that the federal court of deferred region, fully granted the advance notice of the appeal followed by Copel GeT against the request for extension from liens, charges or restrictions to rights stemming from the displacement of the planned implementation schedule. In spite of this introduction, this is an important victory in the sense of extending the company from liabilities of the factors that led to this delay in the plant. These were the main operating points that I wanted to highlight and now Moura will talk about the results of the period.

Thank you Jonel, good morning and I thank you very much for participating and as Jonel said I would like to start by talking about the first quarter results in line with our expectations and on the same comparative basis net of extraordinary impact as you can see on this page. EBITDA, 863 million was slightly better than the one delivered in the year before in the same period. Nevertheless, the EBITDA of BRL 68 million in the quarter in this case included the extraordinary trend to 24% lower than the one delivered in the same period 2017, which was approximately R$1 billion to extraordinary of 2018 and in 2017 as we can see. Here on this page, in 2017 the growth was positive effected by a $183 million referring to the re-measurement of the acquisition assets, but negatively impacted by the impairment adjustments of 13 million here adjusted for comparison purposes in relation to the first quarter of 2018, the most relevant effect was the 91 million provisions for indemnification of 585 employees that will be encouraged retirement program that we called PBI and last year we only had 7 million process. And we will be talking about this during the presentation. We had the significant recording of provisions for labor claims in the quarter and the R$24 million. On the plant side, still this quarter the recognition of the federal revenue of the Brazil order. We posted the tax credit of R$80.2 million related to the levying of Pasep from July '88 to July '95, coming from the effects of the resolution by the federal senate 49 of 19, October 1995 that suspended. The effects of the three launches for 445 into 449 considered as unconstitutional by the Federal Court of the total 80 million, 65 million were posted under financial revenue and 25 million under other operating revenue impacting the EBITDA in this period as we show on the slide and considering the results adjusted by the subsidiaries, I will like to mention that the better reported by Copel GeT, Copel GIS and Copel Telecom were also impacted by the higher balance of provisions regarding labor claim that the provisions related also to the program of encouraged retirement to the Copel GeT, this results the strategy of energy allocation that was lower than '18, in the case Copel, the 1.4 growth in the year adjusted data to R$200 million in this first quarter and this ready first mainly the reduction in manageable cost of the subsidiary. It is important to mention that the reduction of manageable cost of Copel Digital is in the agenda of other subsidiaries as well and results from a series of measures that the company has been adopted to reduce cost among which the reduction in our payroll in the last year 291 employees who left the company and many others have already enrolled as already mentioned with a potential of an additional reduction as of 2019. Copel Telecom posted a growth of 10% to the adjusted EBITDA going from 33 million in the first quarter to a 36 million in the first quarter of 2018. And this performance reflects the expansion in the client base and the results is basically aligned with our plan and, so now said as of this result, the cash generated by the operating activity reach $944 million in the third quarter of 2018, which represents an improvement of 37%, vis-à-vis the same period in 2017, the details can be seen in the cash flow statement. Interest to finalize basically the other have to do with the better results in the wind farm that start to produce effects already. Now going to page number six. Here we can see in more detail the growth of our recurrent operating revenue 7.5% in the first quarter comparing to the same period in 2017 already exceeding 3.3 billion in revenues. Eliminating the extraordinary effects, in order to have a better comparison. As you can see that revenue from the end customers went up by 16% explained basically by the adjustment applied to the parents of Copel June 2017 that adjusted the energy tariff in about 10% and also the sale of 480-gigawatt hour to free client carried out by Copel Comercializacao. The revenue from sale to distributors dropped by almost 15% due mainly to the strategy of allocation of energy by Copel GeT as we mentioned. And the grid availability line drawn by 20% and was impacted by the elimination of the balance stemming from revenue among companies or the group. GeT Distribuicao referring to the RAP partially related to the RBSE that was recognized in the GAT revenue over 2016 and 2017, and the increase of the annual quarter of the CDUs which were recovered by via tariffs as of June 18. Telco revenue grew 24% and which reflects the increase in the client base of Copel telecom, as I mentioned before and the expected recognition in the CVA lines reflects mainly the higher costs with the purchase of energy by Copel Digital, due to restatement carried out by CGEE of the MCFE of new energy, referring to the period of June to October 2017 and by the increase in the annual quarter of the CDE we already mentioned. And finally, about 7% reduction in other operating revenues reflect mainly the lower posting of revenue -- construction of revenue because some assets that contributed to this line in the first quarter of 2017 started up in the last 12 months. The next page, we detail the recurrent operating costs and expenses that reached R$2.6 billion in the first quarter of 2018, 4% higher than the percent of 2017 explained mostly by the increase in costs as a purchase of energy that about R$1.2 billion in the first quarter. With a growth of R$140 million on a year-on-year comparison also coming from the highest amount of gigawatts purchased by Copel Comercializacao that reached 681 gigawatt vis-à-vis 650 in the same period 2017. The charges for the use of the grid grew by 86% due to the higher cost recharges for the use of the system due to the adjustment in the energy transmission tariff of Itaipu and also the TUSD due to the increase in the rep, that start to remunerate the assets related to the RBSE. The provision to energy supply, adjusted by the extraordinary events had an increase of 18 million, compared to the first quarter of ’17, a growth that stemmed mainly from higher balances related to claims, legal claims. Manageable costs were stable vis-à-vis the first quarter of ’17. And if we compare to the inflation of the last 12 month that was 2.68%. There was a real reduction of 2.5% in manageable costs as we will show you on page number 8. We will have the evolution of the PMSO where you can see that net of the 91 million position related to the PDI indemnification that is to say the encouraged retirement plan payroll cost increased 0.6% even after the adjustment of 1.63% applied to salaries in October 17th. This performance reflects among other measures, the policy adapted by the company of not replacing these vacancies and it has been contributing to reduce our headcount that closed March 2018 with 8,158 employees a reduction of 336 people in the last 12 months. So, talking about our payroll cost. As Jonel said, the voluntary retirement plan closed in March and 656 employees could leave the company through this year and the potential reduction would be of 200 million as of 2019. The cost with third-party services increased by 10% and reflects mainly cost related to consultancy and auditing, services, communication, processing and data transmission, maintenance of the electric system, and the resolution of contract. According to the industries applied and the other operating cost and expenses dropped by 13% as they reflect among others the posting of 25 million related to tax credit referring to the extraordinary effect that I’ve already refer to on page 9. We highlight the level of leverage where we can see that the net debt-to-EBITDA ratio of the last 12 months is 3.3 times lower than the cap of 3.5 times of our covenants. And we understand that the additional cash generation by the new projects of the combination of many initiatives already implemented, such as cost reductions, balances of the physical and financial times schedule of some projects already are being reflected and the improvement of our leverage and we are focus on the rolling out of our debt now that have a duration, average duration of about 4 years with relevant maturities in the short-term in the next 12 months or 2.5 billion. And we continue to evaluate many alternatives of funding and initiatives for cash generation with this objective. Our funding plan is totally adjusted to meet the demand of the new investment. So, on the conclusion of the projects that are already underway as we said at the, rollout of shorter debts. And it is according to our plan. We have just concluded 600 million funding operations and we are so far having 1.2 billion in funding and I would like to emphasize that we continue to follow a rigorous financial discipline in the evaluation of new investments as well as making our best in average so that the project underway maybe finalize as quickly as possible. Maintain the regulatory demand and the contract term and maybe the cash generation provided or estimated for these projects. And lastly on page number 10, we show you the net income reported in the first quarter of 2018, 340 million a 19% reduction vis-à-vis the 417 million reported in the first quarter of '17 and I would like to remind you that adjusting the extraordinary items we have the impact of extraordinarily items impacting 2018 and 2017 and eliminating them we would have a better net income vis-à-vis 2017 and the main contribution to this income is Copel GeT with 65% of net total. Before going to Q&A session we would like to remind you that the management proposal to be decided by the shareholders meeting that was postponed to June 15th due to the restatement of the financial statements of 2017 as mentioned contemplates the total payout of 289 million in dividend and interest on equity and 266 million have already been declared in December 2017 corresponding therefore to a payout of 25% and the day for the payment of this amount will be defined in the shareholders meeting.

[Operator Instructions] Our first question comes from Andre Sampaio from Santander.

My question is whether you could give us some more details about the asset divestment process if there is something in the short run and in this regard investments or divestments.

And as I mentioned in the last call, this process is already underway and we should be concluding the contracting of our legal advisors and financial advisors in the next few weeks and this will be submitted to the Board of Directors during our next shareholders meeting in June and based on this we will be informing the market about more details.

Marcelo Sa from UBS. You may proceed.

I have two questions. One is a follow-up. Could you give us more color about the cash generation of the company in this quarter at least in the last two years I think this is the first quarter in which you generated positive cash so I would like to understand what improved in this quarter in order to lead to this and also, I would like to know your view about the energy market. From now on and this stock market in more details about your energy allocation during the year. Thank you.

Marcello thank you for the question, I’m going to answer the first part and then I will give the floor to Lamy. Cash generation first, it was significantly affected by the results net of the extraordinary impacts and we also had an improvement in our accounts receivable and this was a significant impact that will also a positive impact from the BRBFC receiving which is helping the cash generation and we start to see already some positive impacts in wind, coming from the wind energy. It is still a little bit timid but we believe that when we have all the projects up and running including Colider and Baixo Iguacu. As I said in the last call we believe that we will be adding an additional R500 million to our cash generation and we estimated for 2019. Basically, this is the reason and if you want more details about our statement about our cash flow and the whole variation viz-a-viz last year we can give this to you and I would like to give the floor to Lamy.

In relation to your question about our view of the energy market, I think that we could stress in this regard is there is a still high level of delinquency in the spot market of the CCEE. This has been affecting other companies who have credit in the spot market and there it includes Copel of course and there is a positive expectation in relation to the approval of the conversion of the provisional measure of 814. We believe that this effect could give a significant production to the reduction of the delinquency levels in the market and could transfer cash funds that are rather important for the companies and Copel included regarding the price of the spot price for energy in our view the prices are living a positive moment of favorable moment for the sale of energy. The prices are reaching attractive levels and in relation to the allocation of energy by Copel GeT, I think that you saw that we made a slightly lower allocation in the first quarter and we reserved a higher amount of energy for the second half of this year because what we foresee is a situation that is quite severe so to say in hydrology terms for this year and this would bring about very low GSS levels for the second half of the year mainly from June to September. For this reason, we have to take protection measures and we want to leave Copel in a more comfortable situation vis-a-vis negative exposures in the second half of this year. Thank you very much.

When we talk about the GSF solution, I would like to understand we believe that Copel would have a chance to recover additional protection for the amount that you sold in the free market. I don’t know whether due to regulations you could have some benefits. Do you believe we could have some benefit or not?

Well, we are extremely interested in that, we are most interested party, this is Lamy talking. We are the most interested party in the approval of this conversion. We renegotiated the hydrological phase om the regulated market, so we have no commitment with our contract for the free market. We have available percent of our sales and this makes it possible for us to foresee this perspective and we foresee major benefits for Copel GeT. Thank you.

Lilyanna Yang from HSBC.

Thank you for the question. I have two questions. If you can give us some more color about Colider and Baixo Iguacu, could you compare the return on investments on this project or these projects vis-a-vis Cutia and transmission lines. And the other question about Araucaria. Is there something to renegotiate vis-a-vi this project still.

This is Lamy from Copel GeT. In relation to Baixo Iguacu, we have a very positive outlook in terms of starting up commercially by the end of 2018. So, I believe that we will surely be able to operate commercially the first machine maybe the second and the third one would be -- the third would be started up at the beginning of next year. Of course, we are still studying a constructive technique that would allow us to start with the three machine before the end of this year but we cannot assure that the safer information would be one or two machines this year and then the other one at the beginning of next year. And by Baixo Iguacu mainly after being recognized by ANEEL that is to say the exclusion of responsibility that was mentioned in the presentation. This brings this project back to a very positive level of returns with a very good improvement vis-à-vis the others, where we have not been successful yet in terms of the same recognition by ANEEL so overall you can say that Baixo Iguacu is a project that we will be giving a satisfactory level of return. Regarding UEGA, we have already signed the gas contract with Petrobras, UEGA. And it is in force up and until December 31, this year. And we have some expectation, this is a plan that’s operated the merchant mode and due to this characterization has a relatively high variable cost. Nevertheless, there is a positive outlook for that, due to the energy conditions that we foresee for the second half of the year so there is a possibility for us to start operating this plant still within 2018.

Could you talk about transmission maybe you or Adriana and compare this to Baixo Iguacu?

Well this is difficult, because I don’t have the exact data here. But I would say that Cutia and Baixo Iguacu are more or less on the same level in terms of returns. So, these are good projects but unfortunately, I do not have the data here. While the transmission data are rather good as well, except the projects that we are about to conclude. So, this month the 500 kv transmission line of Araraquara in the state of Saint Paulo. The other transmission assets are at very good levels. Overall, I think this is the information that I could give you right now.

As there are no more question from our participants, I would like to turn the floor over to the Company for the closing remarks.

I would like to close this call by giving special thanks to those who contributed to the restatement of the financial statements of 2017 and the related documents a very big team involve the many work fronts, many weeks of hard work and that required us to postpone the meeting. I would like to thank the participation and the understanding on the part of our shareholders that understood the reasons for that. Ladies and gentlemen, Copel’s conference call about the results of the first quarter of ’18 is close. Thank you very much.