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Eneva SA (ENEV3.SA)
A key solution to enhance electricity supply in Brazil: Initiate with Buy
Buy
Bruno Pascon
+55(11)3372-0103 | bruno.pascon@gs.com
Goldman Sachs do Brasil CTVM S.A.
We initiate on the power generation and E&P company Eneva S.A. Victor Hugo Menezes
+55(11)3371-0857 | victorhugo.menezes@gs.com
with a Buy rating and a 12-month sum-of-the-parts DCF-based price Goldman Sachs do Brasil CTVM S.A.
target of R$17.0, implying 31% upside vs. 23% for the sector. We Gabriel Francisco
+55(11)3371-0705 | gabriel.francisco@gs.com
view the companys Reservoir-to-Wire model as one of the key Goldman Sachs do Brasil CTVM S.A.
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average dispatch assumption for the thermal plants), (2) the
potential participation in upcoming greenfield generation auctions
for the companys wind (426 MW) and closing of the cycle (382 GS Factor Profile ____________________________
MW) projects that could unlock an additional R$6.0-7.9/share, as per
our assumptions, and (3) improvements in the availability conditions
of its coal plant Itaqui (365 MW).
2018E-20E free cash flow yields of 20.6%/year vs. the average
15.9% and 12.0%/year for its industry peers. Key risks include (1)
Source: Company data, Goldman Sachs Research estimates.
lack of natural gas supply for existing PPAs, (2) lower coal plant See disclosures for details.
Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result,
investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this
report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC
certification and other important disclosures, see the Disclosure Appendix, or go to
www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research
analysts with FINRA in the U.S.
Goldman Sachs Eneva SA (ENEV3.SA)
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15 November 2017 2
Goldman Sachs Eneva SA (ENEV3.SA)
Table of Contents
Detailing Enevas business model 4
2. Why Enevas model is center-stage in the discussion to improve the power supply robustness in Brazil 12
Revisiting Brazils power S&D and assessing dispatch scenarios for the Parnaiba Complex 16
How to evaluate E&P assets and assess the economics of the Parnaiba Basin 22
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Disclosure Appendix 55
15 November 2017 3
Goldman Sachs Eneva SA (ENEV3.SA)
Eneva is a power generation and integrated natural gas E&P company, with 2,155 MW
of fully operational generation capacity, and is the operator of 7 natural gas fields with
18.5BCM in 2P reserves in the Parnaiba onshore sedimentary basin in Brazils Maranhao
state. The companys current natural gas production of 8.4mn m3/day is fully connected
to its 1,429MW natural gas thermal complex (Parnaiba complex) and, based on our
estimated average dispatch levels of 50% for the complex per year, the existing
reserves should cover the remaining 10-11 years of useful life of PPAs.
Eneva is the only company that operates under the Reservoir-to-Wire (R2W) model in
Brazil, which basically consists on building thermal power plants supplied by the
companys onshore natural gas reserves. In our view, this business model is among the
key solutions for electricity supply in Brazil given (1) its marginal cost competitiveness
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vs. other thermal generation sources (we estimate R$191/MWh vs. R$257/MWh for
nuclear and R$315/MWh, (2) its relatively short construction period of 2-3 years vs. 4-5
for coal and 7 for nuclear and (3) its suitability to supply peak demand periods and
mitigate spot price volatility. In addition, we highlight the attractive returns of such
integrated energy platform, generating real levered IRRs of 15% at the power plant level
and unlevered IRRs of 20-25% at the wellhead based on Enevas current PPA prices.
15 November 2017 4
Goldman Sachs Eneva SA (ENEV3.SA)
result, the efficiency of the companys power operations is measured by the variable
component of the revenues, which is ultimately determined by the power plants
availability conditions vs. the contracted availability level at the time of the auction to
build up the plant, that needs to be observed during the entire 20-year PPA period.
If the company was an independent power producer (i.e., not being the supplier of the
fuel for a portion of its thermal plants), the cost of the fuel purchase would have an
100% pass-through nature whenever a given power plant is called to dispatch. This
results in a neutral impact on the thermal plants economics as long as the plants
availability is equal to the levels required by the regulator.
However, in the case of the natural gas thermal plants (two-thirds of its installed
generation capacity), the company is also the supplier of the natural gas. Therefore, the
more efficient the company produces fuel on a cost basis, the higher the return for the
E&P component of the business (as the PPA price of the thermal plants implies a fixed
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natural gas price in US$/MBtu that allows the company to benefit or be penalized if the
cost of the natural gas is lower or higher vs. the PPA reference). As a result, should the
natural gas production price mirror the sale price embedded in the PPA, the EBITDA of
the E&P business would be zero vs. the current R$300mn/year reference (or 25% of
the total estimated EBITDA of the company between 2018-21E).
With respect to Enevas coal plants (the remaining one-third of the installed generation
capacity), the company does not own its coal resources and the cost of the commodity
is fully passed through to the PPA based on CIF ARA prices. Given that one of its plants
has an availability below the 95% requirement (UTE Itaqui), there is a negative impact
on the variable portion of this plant upon dispatch for Eneva (although still EBITDA
positive given the fixed revenue component of the plant of R$419mn/year).
15 November 2017 5
Goldman Sachs Eneva SA (ENEV3.SA)
(Neuquen basin) of 30,000 km2 (the world second-largest shale gas and fourth-largest
shale oil recoverable resources).
Currently, the entire production capacity of 8.4mn m3/day comes from three fields
(Gavio Real, Gavio Branco and Gavio Vermelho), but Eneva already discovered natural
gas in four other fields (Gavio Azul, Gavio Branco Norte, Gavio Caboclo and Gavio
Preto) that, once developed, could support further capacity increases or lengthening of
existing PPAs or, at least, fully de-risk the scenario of gas supply regardeless of the
existing plants dispatch levels.
The existing 18.5BCM of 2P proven reserves (for more details about the classification of
reserves and an overview of how to evaluate Oil & Gas resources, please refer to the
section How to evaluate E&P assets and assessing the economics of the Parnaiba
Basin) has been consumed at a pace of 1.56BCM per year at the current thermal
dispatch levels of 50% per year.
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Thus, given that Eneva has already found natural gas in four additional fields, the
development of such contigent resources depends on the economic assessment of
future needs of natural gas and which are the alternatives for monetizing such
resources. The learning curve with the onshore natural gas business development has
been accretive for Eneva, with (1) finding costs being reduced to R$0.06/m3 in 2016
(from R$0.13/m3 in 2014), and (2) development costs reaching R$0.06/m3 in 2017 (vs.
R$0.12/m3 in 2014).
15 November 2017 6
Goldman Sachs Eneva SA (ENEV3.SA)
Parnaiba complex, the plants are only 40-70km away from the SIN. Eneva is currently
the only company that has implemented this model but we expect other companies to
follow given the economics of this model and our view that natural gas thermal plants
will become the key solution to improve the electricity supply robustness in Brazil
(discussed further in the section Why Enevas model is center-stage discussion to
improve the power supply robustness in Brazil).
The attractiveness of the model is that by selling electricity at an average PPA price of
R$216.5/MWh (as of YE2016), Eneva was able to (1) obtain a 15% levered return in real
terms at the thermal plant level, and (2) secure a natural gas sale price of US$4.5/MBtu
vs. the US$1.2-1.5/MBtu production cost implying a 20-25% unlevered return in real
terms at the wellhead (thus for the E&P business). We believe such economics can be
maintained in future developments, as upon the discovery of further natural gas
resources and according to our project finance models for greenfield natural gas
combined cycle plants, the company would require an electricity price of R$191/MWh,
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which would represent one of the cheapest sources of electricity in Brazil and aligned
with the average contracted electricity price in the Regulated Market (ACR) of
R$175-200/MWh (as of YE16). (see our 2017 Outlook note for further details on our
marginal cost estimates in Exhibit 3).
In addition, we highlight the Ministry of Mines and Energy (MME) already included up to
17 GW of new combined cycle natural gas plants in the 10-year plan (2017-2026)
elaborated by the Electricity Planning Company (EPE), out of which 5.0 GW are in the
form of traditional power supply and up to 12 GW are in the form of peak demand
coverage.
15 November 2017 7
Goldman Sachs Eneva SA (ENEV3.SA)
1. Predictable cash flow generation based on long term PPAs - Enevas generation
volumes (70% of EBITDA) are contracted through PPAs, with a weighted average
remaining life of circa 10-11 years (as of 2017) and possibility of renewal for another
15 years (per regulatory contracts) upon the discovery of additional gas reserves. Per
the terms of the PPAs, base prices are adjusted for fluctuations in inflation on an
annual basis. Such predictable / fully contracted cash flows imply a free cash flow
yield of 20.6%/year for the 2018-20E period, which compares favorably with its pure
generation, transmission and integrated utilities peers trading at 12.0%.
2. Pioneer fully integrated energy platform in Brazil - Eneva is the pioneer in Brazil of
the fully integrated energy platform model, in our view. As per our Project Finance
assumptions for greenfield natural gas-fired power plants and our onshore E&P
development model, we see an average levered IRR of 15% at the power plant level
(75% of equity value) and unlevered IRRs of 20-25% at the wellhead based on
Enevas average PPA prices (25% of equity value).
3. Positive track record in generation projects development and asset
optimization - The company has a proven track record in developing greenfield
natural gas-fired thermal plants, based on (i) average of 14 months between
beginning of construction works and first MWh injected into the electricity grid vs.
historical construction period for the sector of 24-30 months, and ii) capex of
US$600k/MW for open cycle plants (or 25% more efficient vs. industry references
for the regular cost to build up such plants of US$775-850k/MW as per our estimates
and historical projects). In terms of assets optimization, the company runs 1.4 GW of
15 November 2017 8
Goldman Sachs Eneva SA (ENEV3.SA)
natural gas thermal plants with 154 employees (less than 3% of total fixed revenues)
and total fixed costs represent less than 8% of its fixed revenues.
4. Above average growth opportunities - We see an additional R$17.4/share NPV for
Eneva with the development of companys mapped portfolio of growth projects, out
of which R$6.0-7.9/share does not require additional natural gas reserves (namely, a
wind generation complex and the closing of the cycle of the Parnaiba I plant). We
expect visibility about the gradual development of such initiatives to materialize until
1H2018 period based on companys estimates.
1. Lack of natural gas supply - Eneva has been using 100% of its natural gas
production of 8.4mn m3/day to cover the dispatch of its 1.4 GW natural gas-fired
thermal plants (Parnaiba complex).If dispatch levels were to significantly rise above
our estimated 50% average for the complex, the company might have to develop
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additional reserves to fulfill its PPAs, which could bring volatility to the stock
performance / risk perception of the case.
2. Lower coal plant availability - Should Enevas coal plants TPP Itaqui and Pecm II
(50% stake) encounter below-average availability conditions (e.g., additional
maintenance stoppages) vs. their contractual commitments of 95%, the companys
EBITDA and earnings could be negatively impacted by associated electricity purchase
costs.
3. Lower success rates in exploratory campaigns - Eneva has a portfolio of
environmentally licensed natural gas thermal projects that could be developed upon
the discovery of additional natural gas resources and the conversion of such
resources into proven reserves. In case of lower success rates in exploratory
campaigns, the potential development of such projects could be jeopardized and the
company may incur higher expenses in additional campaigns to de-risk such
development.
15 November 2017 9
Goldman Sachs Eneva SA (ENEV3.SA)
In our TP of R$17.0, we value only the operating assets of Eneva, out of which the last
one became fully operational by May 2016 (Parnaiba II thermal plant). We believe the
NPV of such assets is currently overdiscounted in Enevas valuation. With the offering
being priced at an EV/EBITDA multiple of 4.9x (as of 2018) vs. 6.0x-6.2x for its peer
group, we see the economics of the 10-11 years PPAs as not fully appreciated by
investors.
In our opinion, there are two main concerns from investors regarding legacy assets for
Eneva: (1) potential lack of natural gas supply to fulfill the PPAs under higher dispatch
assumptions for the Parnaibas thermal complex, and (2) the sub-optimum availability of
its coal thermal plants, particularly for UTE Itaqui given higher maintenance
requirements.
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While we share investors concerns about the availability of Enevas coal thermal plants
(and fully reflect the associated impacts in our model), we are less concerned with the
situation of the natural gas supply and dispatch levels for the thermal plants. We outline
briefly below our arguments with respect to both (1) natural gas supply conditions and
risk reward, and (2) our expected thermal dispatch levels. For a detailed assessment of
the dispatch discussion, please refer to the section Revisiting Brazils power S&D and
assessing dispatch scenarios for the Parnaiba Complex.
Natural gas dispatch: more of an opportunity rather than a risk, in our opinion
Currently, 100% of the natural gas production of 8.4mn m3/day comes from three fields
(Gavio Real, Gavio Branco and Gavio Vermelho) out of the seven fields that Eneva
found natural gas. Such production has been consumed at a pace of 1.56BCMs per year,
implying a 10-11 years reserve life given the companys 18.5BCM of 2P Reserves (for
details about reserves category and how to evaluate E&P resources, please refer to the
section How to evaluate E&P assets and assessing the economics of the Parnaiba
basin).
While some investors have raised concerns about natural gas dispatch levels at the
thermal plants and implications for the model, we highlight that (1) the higher the natural
gas dispatch, the higher the front-loading of the 20-25% real returns vs. the 15% return
at the thermal plant as per our project finance model assumptions, and (2) the
incremental EBITDA in the scenario of higher dispatch levels vs. our model assumptions
would suffice to finance exploratory and development of additional natural gas reserves.
Hypothetically assuming a 100% dispatch proxy vs. the 50% assumed by our model,
our estimated EBITDA for Eneva would increase to R$1.65bn/year vs. our R$1.25bn/year
(all else equal) an incremental cash generation of R$300mn/year (net of taxes) that
could be used to finance the R$100-300mn full costs in the development of additional
gas reserves (we note the company is currently undergoing a deleveraging process).
With the higher EBITDA and front-loaded IRR, we believe market concerns are based
primarily on the risks that additional exploratory campaigns may not yield any results and
Eneva would run out of natural gas in 5-6 years vs. the PPA life of 10-11 years.
15 November 2017 10
Goldman Sachs Eneva SA (ENEV3.SA)
Moreover, given that the Parnaiba region has a geographic isolation from structural gas
pipelines, we believe one viable option (given the lack of intrastructure in the region) to
monetize gas in the region is to develop gas-fired thermal power plants (TPPs) and sell
electricity to the grid. As a result, Eneva could potentially acquire proven reserves from
pure E&P players that operate in the Parnaiba region in order to de-risk gas shortages to
cover the already in-place PPAs. There are more than 72,718 km2 in concession blocks
in the Parnaiba Basin from E&P players (Petrobras, Ouro Preto, Galp and Vipetro) that
could be potential targets for Eneva, and increase the companys gas reserves (for more
details please see Appendix 2).
As such, we see any announcement of additional natural gas discoveries, the conversion
of resources into proven reserves, and M&A activity as a key catalyst for the stock
(de-risking the supply of existing PPAs and / or unlocking additional power capacity to be
built).
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15 November 2017 11
Goldman Sachs Eneva SA (ENEV3.SA)
Brazil has had a predominant renewable component in its electricity mix since the early
stages of the power sector, when the large hydro power plants were built between the
1940s and the 1960s. With the advent of the 2001-02 power rationing owing to poor
hydrology, there was a concentrated effort in building up thermal power capacity to turn
the system less rainfall/hydrology dependent an effort that was only resumed by
2007-08 when the coal plants of Eneva were auctioned. Since the introduction of the
new sector model rules in March 2014 and the implementation of auctions for new
generation capacity, there was a heightened focus on developing run-of-the-river hydro
plants in the Amazon region, combined with biomass, small hydro power plants and,
more predominantly, wind capacity during the 2009 and 2015 period. More recently,
there has also been some focus on developing solar power plants given lower
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development costs.
While from an economic point of view we believe there shouldnt be issues in the
continued development of unconventional renewable sources as the government has
been providing the proper returns for investments from a supply robustness point of
view, the fact that Brazil has been developing sources with above-average dispatch
variability has turned the sector excessively dependent to rainfall conditions. In fact, as
discussed in our Reshaping Brazilian Power Utilities note (July 30, 2017), the
reservation capacity of the power system in Brazil which is measured by the amount
of months in a year that the existing reservoir capacity could cover the demand without
a single drop of rainfall declined from eight months in 2005 to 4.3 months in 2016.
With the dry season in Brazil lasting seven months every year (May to November), the
Beta of the spot electricity price (measured by its volatility) increased significantly.
Depending on the level of rainfall vs. the historical average, the spot price could vary
between the minimum R$30-35/MWh to the maximum of R$800-850/MWh in a matter
of months.
Given this context, since the new Ministry of Mines and Energy (MME) cabinet took
office on May 12, 2016, the government introduced an open dialogue practice in order to
discuss, among other things, how to guarantee the supply of electricity in the lowest
possible cost in Brazil, while offering a secure and predictable business environment to
reinstate the secular defensiveness of the power sector and providing a correct pricing
signal for short term electricity prices.
As a result of this consultation process (an ongoing one), it became clear for the
government that, on top of continuing to develop unconventional renewable sources,
Brazil would need to put in place more thermal capacity both as base load and also peak
demand coverage in order to improve the robustness of the power supply. Among the
three key alternatives (natural gas, coal and nuclear), natural gas thermal plants emerged
as the most competitive source in terms of marginal costs and also the most adapted to
cover peak demand in the new power sector that started to be designed, given it
provides the system with baseload capacity.
15 November 2017 12
Goldman Sachs Eneva SA (ENEV3.SA)
Therefore, the MME with a coordinated effort to look at the natural gas chain both
through the eyes of the energy (Gas para Crescer and REATE initiatives) and utility
(Public Consultation #33) sectors considers the R2W model as a key one to be
replicated to the other sedimentary basins in Brazil (Sao Francisco, Recncavo Baiano,
Paran, Amazonas, Parecis, Solimes).
Key advantages of a natural gas thermal plant vs. other thermal sources, in our view:
1. It has the lowest marginal cost amongst the thermal sources: We estimate
R$191/MWh vs. R$257/MWh for nuclear and R$315/MWh for coal based on our
Project Finance models and our estimated 13% levered IRR in real terms for
greenfield generation projects.
2. It has the shortest construction period (onshore resources): A combined cycle
natural gas thermal plant can be constructed in 2-3 years vs. 4-5 years for coal plants
and 7 years for nuclear plants.
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3. It is the most suitable source to supply peak demand: Peak hours demand are
regular and therefore the government can set specific time for the dispatch of the
thermal plant within the 24 hours of the day. By having a predictable dispatch
assumption, companies can optimize the pressure in natural gas wells so that it
could maximize the useful life of a given field.
4. It reduces the systems operational costs and spot electricity price volatility:
Similar to Chile, it is important to have backup thermal capacity that would only be
dispatched upon scenarios of stress in hydrology. According to our estimates, if
Brazil had invested in LNG-fired thermal plants during the 2013-2016 period, our
analysis implies it could have reduced the negative impact from the GSF (Generation
Scaling Factor) by 50% (from R$46bn to R$23bn) by capping the spot prices at the
sources average dispatch prices of R$275-325/MWh vs. witnessed levels of up to
R$800-850/MWh (or to 25%-35% of the value if it had invested in onshore natural
gas plants). Therefore, by increasing the natural gas capacity, the electricity systems
costs will reduce significantly, as well as the volatility in spot prices and GSF negative
economic impacts.
15 November 2017 13
Goldman Sachs Eneva SA (ENEV3.SA)
Eneva has a proven track record in developing greenfield natural gas-fired thermal plants
(62% of its equity value):
n 154 professionals to run 1.4 GW of commercial natural gas capacity (< 3% of total
fixed revenues);
n Start-up of Parnaiba II (July 2016) led to 75% increase in fixed revenues vs. 16%
reduction in operating costs in 1H17 (yoy);
n Fixed costs account for < 8% of fixed revenues.
For the E&P business (21% of the equity value), the company was able to reduce since
2014 (1) drilling costs by 16%, (2) lead time of drilling from 25 to 14 days, and (3)
pipeline costs by 16%, or a combined cost per unit reduction of 31% (from R$10.5mn to
R$7.2mn).
The only portion of the business that lacks operational upgrades are the coal-fired
thermal plants (11% of its equity value) that, could lead to an incremental EBITDA of
R$50mn/year based on our model assumptions on top of the current R$150mn/year,
when and if turned around.
15 November 2017 14
Goldman Sachs Eneva SA (ENEV3.SA)
Eneva has a portfolio of growth generation projects of 2,650 MW, out of which 2,224
MW from natural gas-fired thermal plants and 426 MW from wind power plants. On top
of such projects, the company has also two additional sources of growth being (1) the
closing of the cycle of the Parnaiba I thermal plant (382 MW), and (2) the potential
repricing of existing PPAs for another 15 years (per regulatory contracts) upon the
maturity in 10-11 years, in order to match the plants concession terms.
Both the wind and the closing of the cycle are projects that dont require additional
natural gas discoveries and we estimate could add R$5.97-7.86/share to Enevas current
SOTP equity value, when and if developed. We estimate the remaining 2,224 MW of
greenfield natural gas plants and the potential re-pricing of the existing PPAs would
require the development of additional 63.2bn m3 of reserves vs. the existing 18.5bn
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m3. We provide our assumptions for each of the projects in detail in the section
Detailing Enevas growth opportunities.
Based on our proprietary model for the closing of the cycle of Parnaiba I, in
1 Parnaiba I closing of the cycle 5.27 6.31
addition to dispatch assumptions between 50% and 100%.
Assumes a real levered IRRs between 11% and 15% (in line with the
5 Renewal of existing PPAs 0.60 3.50
variation of the Brazilian CDS over the last two years)
15 November 2017 15
Goldman Sachs Eneva SA (ENEV3.SA)
Revisiting Brazils power S&D and assessing dispatch scenarios for the
Parnaiba Complex
In our view, we see two dispatch dynamics for the Parnaiba complex during the
2018-2027 period (the range of the majority of Enevas PPAs): (1) 50% dispatch levels
until YE23, reflecting of transmission restrictions in the North subsystem that prevent a
higher dispatch scenario (given the excess supply generated from hydro power plants in
the rainy season mainly from HPP Belo Monte and Tucurui), and (2) 75-80% dispatch
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levels from 2024 onwards, with the full start-up of the transmission assets which were
previously owned by Abengoa by YE23, therefore allowing low cost energy exports to
other Brazilian sub-systems (mainly from TPP Parnaiba I and II). In the section below, we
outline the main assumptions for our dispatch scenarios.
North sub-system installed capacity breakdown (Oct-17) HPP Belo Monte installed capacity ramp-up (MW)
The current supply capacity of the sub-system is more than enough to cover its demand
of 4GW, and therefore could export its excess electricity to the rest of the country with
a lower marginal cost (CVU) vs. the maximum spot price of R$533/MWh allowed by
regulator ANEEL (anything beyond is considered out of merit dispatch). Nevertheless,
15 November 2017 16
Goldman Sachs Eneva SA (ENEV3.SA)
the current sub-systems export capacity is constrained at 5.6GW due to the delays in
transmission lines previously owned by Abengoa (that will be re-auctioned), which are
expected to be fully developed only by YE2023. As a result, higher thermal dispatch
from low marginal cost power plants is prevented given excess supply generated from
hydro power plants, and therefore TPPs with higher costs are dispatched in other
sub-systems to cover their own demand needs.
Exhibit 7: Thermal dispatch in the North sub-system could be higher in case there were no exports limitations
16,000.0 700.0
Lower marginal electricity prices in
14,000.0 Start-up of HPP Belo the North; if there were no exports
limitation, N's TPPs would have 600.0
Monte's operations
supplied the SE/CO
12,000.0
500.0
10,000.0
400.0
8,000.0
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300.0
6,000.0
200.0
4,000.0
2,000.0 100.0
0.0 0.0
Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17
Hydro generation (MW) North sub-system spot prices (R$/MWh) SE/CO sub-system spot prices (R$/MWh)
In the scenario of continued transmission constraints, based our proprietary S&D model
for the North sub-system, we estimate that the average dispatch levels of the Parnaiba
thermal power plant complex should remain in the 50-60% levels (in-line with dispatch
observed in 2017), despite the low CVU of Enevas TPP (Parnaiba I and II with CVUs
below R$120/MWh). Our analysis assumes (1) normalized hydrology scenarios of 100%
of the historical average, and (2) electricity demand growth of 3% yoy (as per our
regression models).
15 November 2017 17
Goldman Sachs Eneva SA (ENEV3.SA)
Exhibit 8: Base case reservoir supply and demand model for the North sub-system
Assuming 0% discount to historical rainfall levels and 3GW exports addition in Mar/18
Total Supply North sub-system Rainy season 2017/2018 Dry season 2018 Rainy season 2018/2019 Dry season 2019 2018 2019
Reservoir hydro generation (MW) 6,427.0 6,386.8 6,962.3 6,664.5 6,547.6 6,832.3
Belo Monte generation (MW) 2,893.3 1,694.8 4,661.2 2,510.6 2,504.7 3,684.8
Installed capacity (MW) - eop 4,278.0 6,111.0 6,722.0 7,333.0 6,111.0 7,333.0
Capacity additions (MW) 611.0 1,833.0 611.0 611.0 2,444.0 1,222.0
Load factor (%) 72.3% 32.4% 72.3% 34.2% 53.1% 53.1%
Total Hydro generation (MW) 9,320.4 8,081.6 11,623.4 9,175.1 9,052.3 10,517.1
Electricity exports capacity (MW) - eop 8,600.0 8,600.0 8,600.0 8,600.0 8,600.0 12,600.0
capacity additions (MW) 3,000 0 0 0 3,000 4,000
North sub-system Demand (MW) 3,940.3 4,137.9 4,062.2 4,270.3 4,059.7 4,189.6
yoy (%) 2.2% 2.9% 3.1% 3.2% 2.9% 3.2%
We highlight that dispatch levels in the Parnaiba complex are highly dependent on
hydrology scenario, given 80% of the North sub-system power capacity comes from
hydro resources. As a result, for illustrative purposes, we have developed a sensitivity
analysis of the average dispatch for Enevas gas fired TPP under different hydrology
scenarios. As per our proprietary S&D model, assuming (1) hydrology of 70% of the
historical average (in-line with 2017), we estimate an average dispatch of 78%-92% and,
(2) hydrology of 50% of the historical average (worst rainfall observed in the dataset
available) we estimate an average dispatch of 100%.
15 November 2017 18
Goldman Sachs Eneva SA (ENEV3.SA)
Exhibit 9: 30% discount to historical rainfall - reservoir supply and demand model for the North sub-system
Assuming 30% discount to historical rainfall levels and 3GW exports addition in Mar/18
Total Supply North sub-system Rainy season 2017/2018 Dry season 2018 Rainy season 2018/2019 Dry season 2019 2018 2019
Reservoir hydro generation (MW) 4,668.6 4,443.0 4,919.8 4,720.7 4,554.9 4,839.5
Belo Monte generation (MW) 2,893.3 1,694.8 4,661.2 2,510.6 2,504.7 3,684.8
Installed capacity (MW) - eop 4,278.0 6,111.0 6,722.0 7,333.0 6,111.0 7,333.0
Capacity additions (MW) 611.0 1,833.0 611.0 611.0 2,444.0 1,222.0
Load factor (%) 72.3% 32.4% 72.3% 34.2% 53.1% 53.1%
Total Hydro generation (MW) 7,561.9 6,137.8 9,580.9 7,231.3 7,059.5 8,524.3
Electricity exports capacity (MW) - eop 8,600.0 8,600.0 8,600.0 8,600.0 8,600.0 12,600.0
capacity additions (MW) 3,000 0 0 0 3,000 4,000
North sub-system Demand (MW) 3,940.3 4,137.9 4,062.2 4,270.3 4,059.7 4,189.6
yoy (%) 2.2% 2.9% 3.1% 3.2% 2.9% 3.2%
Exhibit 10: 50% discount to historical rainfall - reservoir supply and demand model for the North sub-system
Assuming 50% discount to historical rainfall levels and 3GW exports addition in Mar/18
Total Supply North sub-system Rainy season 2017/2018 Dry season 2018 Rainy season 2018/2019 Dry season 2019 2018 2019
Reservoir hydro generation (MW) 3,513.0 3,165.6 3,477.1 3,332.2 3,245.3 3,416.1
Belo Monte generation (MW) 2,893.3 1,694.8 4,661.2 2,510.6 2,504.7 3,684.8
Installed capacity (MW) - eop 4,278.0 6,111.0 6,722.0 7,333.0 6,111.0 7,333.0
Capacity additions (MW) 611.0 1,833.0 611.0 611.0 2,444.0 1,222.0
Load factor (%) 72.3% 32.4% 72.3% 34.2% 53.1% 53.1%
Total Hydro generation (MW) 6,406.3 4,860.5 8,138.2 5,842.8 5,750.0 7,101.0
Electricity exports capacity (MW) - eop 8,600.0 8,600.0 8,600.0 8,600.0 8,600.0 12,600.0
capacity additions (MW) 3,000 0 0 0 3,000 4,000
North sub-system Demand (MW) 3,940.3 4,137.9 4,062.2 4,270.3 4,059.7 4,189.6
yoy (%) 2.2% 2.9% 3.1% 3.2% 2.9% 3.2%
Long term dispatch to reach 75-80% and bring robustness to Brazils power S&D
Since 2015, the Brazilian electricity market has experienced an 8% cumulative demand
reduction on the back of the downturn in domestic economic activity (reaching pre-2013
demand levels) resulting in an oversupply status in the Brazilian power market. As a
15 November 2017 19
Goldman Sachs Eneva SA (ENEV3.SA)
result, there were only 4 auctions for new generation capacity took place between
2015-17, and therefore the contracted capacity increase for the next decade is limited to
a 1.7% CAGR (or a 27.2GW addition).
Source 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Biomass 129 172 324 71 155 0 0 0 0 0
Wind 2,818 2,755 1,048 0 0 0 0 0 0 0
Hydro 5,148 5,000 2,162 0 0 142 0 0 0 0
SHP 232 218 123 264 0 0 0 0 0 0
Solar 940 1,029 670 0 0 0 0 0 0 0
Thermal 591 28 340 1,521 0 0 0 0 0 1,405
Moreover, 3Q2017 distribution volumes have shown signs of an inflection point in power
demand as the Brazilian economy starts to recover, which combined with the below
average rainfall levels and the auctions to un-contract electricity to address the power
distributors over-contracted status, have reduced the previous power oversupply and
started to pressure upwards marginal costs. As such, assuming our electricity demand
growth of 3% per year, we estimate that by 2025 demand would exceed the already
contracted generation capacity in the country (in the absence of further auctions).
Exhibit 12: Evolution of spot prices and rainfall levels in Brazil Exhibit 13: With our electricity demand growth of 3% per year,
demand could exceed the available supply by 2025
14,000.0 600.0
90,000
12,000.0 500.0
85,000
10,000.0
400.0 80,000
8,000.0
300.0 75,000
6,000.0
200.0 70,000
4,000.0
65,000
2,000.0 100.0
60,000
0.0 0.0
55,000
Jul-15
Jul-16
Jul-17
Jan-15
Jan-16
Jan-17
Oct-15
Oct-16
Oct-17
Apr-15
Apr-16
Apr-17
50,000
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
ENA - Rainfall (MW - LHS) Spot prices (R$/MWh - RHS)
Total Brazilian Supply (MW) Total Demand - Gross of Losses (MW)
In order to increase the robustness of the Brazilian power S&D, the government plans to
increase the export capacity from the North sub-system by 3GW in March 2018 and
4GW in 2020 (vs. the current constrained capacity of 5.6GW), since the excess
generation in the North could compensate shortages in the other sub-systems,
especially after Belo Montes full additional capacity is incorporated. In addition, the
transmission lines previously owned by Abengoa that experienced severe delays vs. the
initial start-up date, will be re-auctioned and are expected to be fully developed only by
YE2023.
15 November 2017 20
Goldman Sachs Eneva SA (ENEV3.SA)
As per our calculations, assuming no transmission lines restrictions and the full
connection of Belo Montes capacity of 11.3GW, the North sub-system could export a
total 9-12GW / year to the SE/CO and NE sub-systems, thereby reducing the overall
marginal cost of operation in the Brazilian matrix.
In the scenario of increased export capacity in the North sub-system, based on our
proprietary reservoir power models, we expect the Parnaiba Complex to dispatch an
average 75% given the low marginal cost of the thermal power plants. In our base case
scenario, we assume (1) Parnaiba II (with a CVU of R$77/MWh) should dispatch almost
full time (92% yearly dispatch), (2) Parnaiba I (with a CVU of R$112/MWh) should
dispatch from April through November (75% yearly dispatch), and (3) Parnaiba III (with a
CVU of R$188/MWh) should dispatch 5-6 months per year (50% yearly dispatch).
Exhibit 14: Brazilian S&D model assuming full Belo Monte capacity and no exports limitations
Brazil S&D model assuming full Belo Monte capacity and no exports limitations
Normalized ENA (0% discount to historical avregae) and no GSF cuts
For the exclusive use of OTAVIO.AIDAR@VOTORANTIMWM.COM.BR
Total Supply North sub-system Rainy season 2023/2024 Dry season 2024 Rainy season 2024/2025 Dry season 2025 2024 2025
North 7,572.8 8,764.9 15,766.6 8,764.9 11,676.5 11,661.5
Reservoir hydro generation (MW) 9,250.5 5,129.4 6,493.1 5,129.4 5,696.9 5,693.6
Belo Monte generation (MW) 11,233.0 3,635.5 9,273.5 3,635.5 5,979.6 5,968.0
Installed capacity (MW) - eop 11,233.0 11,233.0 11,233.0 11,233.0 11,233.0
Capacity additions (MW) 0.0 0.0 0.0 0.0 0.0
Load factor (%) 82.4% 32.4% 82.6% 32.4% 53.2% 53.1%
Northeast 6,038.6 5,287.5 6,177.1 5,287.5 5,640.0 5,655.5
Southeast/Center West 30,551.2 28,627.9 31,132.0 28,627.9 29,582.8 29,663.9
South 9,616.8 9,312.8 9,338.3 9,312.8 9,297.9 9,323.3
Total Hydro generation (MW) 63,029.9 51,993.1 62,414.0 51,993.1 56,197.3 56,304.2
Total supply ex-thermal (MW) 71,005.5 62,132.4 62,113.7 62,132.4 65,491.5 65,601.5
Total demand (MW) - gross of losses 74,835.9 71,947.5 72,274.8 74,249.8 72,978.5 75,520.2
yoy (%) 3.2% 3.2% 3.2% 3.2% 3.2% 3.2%
Losses 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Reservoir levels (%) eop 64.8% 31.8% 35.5% 37.6% 35.5% 40.9%
15 November 2017 21
Goldman Sachs Eneva SA (ENEV3.SA)
How to evaluate E&P assets and assess the economics of the Parnaiba
Basin
Enevas business plan revolves around the Reservoir-to-Wire (R2W) model, that basically
consists of Enevas thermal power plants being supplied by the companys onshore
natural gas fields. In this section, we explain how the E&P business works by dividing its
chain into four stages.
model is the usual method to acquire onshore natural blocks, we provide in Exhibit 15 a
summary of the Concession auctions held in Brazil to date. This model predicts a total
government take comprising (1) royalties, with tax rate ranging between 5%-15%, (2)
income and other indirect taxes, (3) special participation fees, (4) area occupation
payments and (5) reimbursement for the land expropriation.
After the exploratory blocks are granted, companies will start to conduct their
exploratory campaigns, which usually last between three and seven years. During this
period, geological and geophysical analysis will take place to try to identify the fields
real potential, with the main technique being the seismic data, which basically uses the
principles of sound refraction to determine the geological formation of the fields. If the
conclusions are positive, operators will contract oilfield services companies to drill an
exploratory well (or wildcat well) and reach the natural gas reservoir to make a final
decision on whether to continue E&P activities in the fields or to abandon them. Given
the uncertainty around the actual presence of hydrocarbons in the exploratory blocks,
the E&P is considered a high risk - high reward business.
Specifically for Eneva, the company is the sole operator of onshore fields in the Parnaiba
basin under the concession model. The Parnaiba basin is one of the four big paleozoic
Brazilian syneclises, providing above average quality dry gas accumulations with high
quality sandstone reservoirs. Out the over 100 drilled wells in the Parnaiba Basin, the
average exploratory success rate of wildcat wells has reached 37%, reducing the finding
costs to R$0.06/m3 (vs. R$0.13/m3 in 2014).
15 November 2017 22
Goldman Sachs Eneva SA (ENEV3.SA)
Exhibit 16: Enevas E&P assets portfolio Exhibit 17: Map of Enevas E&P assets
Eneva's concessions
Bid Round Field Area (km2)
9 Gavio Real 152
9 Gavio Branco 269
9 Gavio Vermelho 66
9 Gavio Azul 64
9 Gavio Branco Norte 12
9 Gavio Caboclo 66
9 Gavio Preto 261
Bid Round Field Area (km2)
9 7 Evaluation plans 5329
13 7 exploratory blocks 21,328
14 5 exploratory blocks 13,509
Total Area under concession 41,056
For the exclusive use of OTAVIO.AIDAR@VOTORANTIMWM.COM.BR
1. 1P reserves (also P90 reserves or proven reserves): the quantity of gas that can be
economically recovered with a 90% probability.
2. P50 reserves (also probable reserves): the additional quantity of gas (on top of the
P90 reserves) that can be economically recovered with a 50% probability.
3. 2P reserves: the sum of the P90 and P50 reserves, which will have a weighted
probability of being recovered between 50% and 90%.
4. P10 reserves (also possible reserves): the additional quantity of gas (on top of the
P90 and P50 reserves) that can be economically recovered with a 10% probability.
5. 3P reserves: the sum of P90, P50 and P10 reserves, which will have an weighted
probability of being recovered between 10% and 90%.
15 November 2017 23
Goldman Sachs Eneva SA (ENEV3.SA)
Conventional resources Vertical (or slightly deviated) wells In conventional fields, the natural pressure of the well is responsible for pumping the hydrocarbons up.
Once defined the best strategy to the address the fields potential, Eneva will have to
deploy all the necessary capex to set up conditions to start producing natural gas in the
future, which are key to determine what will be the daily wells capacity to produce
hydrocarbons. Over the first Exploratory Cycle, Eneva has discovered and certified over
25.5bn m3 in the Parnaiba Basin.
15 November 2017 24
Goldman Sachs Eneva SA (ENEV3.SA)
17.7 18.5
4.3
-3.4
-6.8 -6.9
important aspect at this point is what will be the wells production curve. Usually, after
its first-oil, a new well will take a couple years to ramp-up to its peak production levels,
which are the maximum productivity levels reached by this well. Then, plateau levels
should persist for 5-7 years before the production starts to deplete until the end of the
fields life (normally 24-30 years).
After Eneva starts extracting hydrocarbons from its fields, the natural gas needs to be
transported from the field to the companys thermal facilities through pipelines.
However, before the natural gas can be transported, it needs to go through a gas unit
treatment, which will then send the gas to the gas pipelines to ultimately reach the
Parnaiba complex. Once there, the natural gas will be used as fuel to generate
electricity.
15 November 2017 25
Goldman Sachs Eneva SA (ENEV3.SA)
Exhibit 21: Map of Enevas E&P business Exhibit 22: The destination of Enevas current 8.4MMm3/d natural
gas production capacity
In MMm3/d
8.4 0.3
1.2
4.9 2.3
4.6
Once the wells start to deplete rapidly, operators may pursue improved oil recovery
methods, which although are able to raise the fields recovery factors (therefore its
reserves), can raise significantly the lifting (extraction) cost. There are three oil recovery
categories, for which a provide a summary in Exhibit 23. The increase in recovery factors
following each of the methods depends on the fields characteristics.
15 November 2017 26
Goldman Sachs Eneva SA (ENEV3.SA)
Exhibit 24: Enevas learning curve with onshore natural gas development
figures in BRL
For the exclusive use of OTAVIO.AIDAR@VOTORANTIMWM.COM.BR
We have developed a proprietary onshore gas model in order to evaluate Enevas E&P
potential. Our analysis suggests potential real IRRs of 9.5% and NPVs of R$127mn for
every 5bcm developed by Eneva assuming gas prices of US$4.5/mmBtu (in-line with the
transfer price from the E&P to the Utilities segment, including leasing revenues). Main
assumptions for our model include, (1) 37% exploratory success rate , (2) a 6-year
exploratory phase with finding costs of R$0.06/m3 , (3) development phase broken
down into 4 rounds (matching the necessity of dispatch in its gas-fired TPP) with a
development cost of R$0.10/m3 , and (4) lifting costs of R$0.051/m3; all assumptions
are in in line with levels already achieved by the company.
15 November 2017 27
Goldman Sachs Eneva SA (ENEV3.SA)
Minorities 0 0 0 0 0 0 0 0 0 0 0
FCF Before Financing (12,524) (17,078) (52,941) (103,488) (118,972) (119,996) 78,509 78,509 78,509 36,843 35,401
Equity Flows (12,524) (17,078) (52,941) (103,488) (118,972) (119,996) 78,509 78,509 78,509 36,843 35,401
Furthermore, given the higher risk nature of exploratory activity which depend on the
success rate of exploratory campaigns and also the conversion ratio of resources into
reserves which does not have a linear / normal type of probability curve, finding costs
could be considered as sunk costs once the project enters into the
development/production phase. In such a scenario, we estimate real IRRs of 21.5% at
GSe long term gas prices of US$3.0/mmBtu for the development/production phase of
projects in the Parnaiba Basin.
Exhibit 26: Development and Production phases of an onshore project in the Parnaiba Basin
Development and Production phases (R$ 000')
Cash Earnings 0 0 0 50 50 50 50 49 48 48 48
Exploration capex 0 0 0 0 0 0 0 0 0 0 0
15 November 2017 28
Goldman Sachs Eneva SA (ENEV3.SA)
While we do not take a view on any final outcome and acknowledge other outcomes
could exist outside our analysis, for illustrative purposes we outline our NPV analysis for
Enevas pipeline of growth projects, namely: (1) the expansion of the Parnaiba Complex
(2,114MW of licensed capacity), (2) the Santo Expedito wind complex (426MW of
installed capacity), (3) the Araguaina complex (110 MW of licensed capacity), (4) the
closing of the cycle of the Parnaiba I complex and (5) the extension of the companys
PPAs for 15 additional years. We note that we do not include any of these projects in our
official estimates and would see them as only additive to our investment thesis, when
and if announced.
generation capacity in the Parnaiba Complex, with its development contingent on the
closing of the cycle of the Parnaiba I and III plants and in the results of its exploratory
campaign. Based on our proprietary project finance model for R2W projects
(assumptions detailed in Exhibit 28) in addition to real levered IRRs between 11% and
15% (in line with the variations of the Brazilian CDS over the past two years), we
estimate the company would need to invest a total of R$17.4bn in the expansion,
comprising (1) R$7.3bn in the construction of a combined cycle thermal power plant, (2)
R$3.8bn in the exploratory campaign and (3) R$6.3bn in the development of its
reserves. Our analysis implies a total NPV impact to Eneva between (i) R$3.74-6.76/sh
for the complexs thermal power plant and (ii) R$3.15/sh for the E&P segment. We
highlight that under our model assumptions, the complex would require 63.2bn m3 in
gas reserves to fulfill a 20-year PPA under our dispatch assumption, which compares to
the 25.5bn m3 discovered in Enevas first exploratory cycle.
15 November 2017 29
Goldman Sachs Eneva SA (ENEV3.SA)
Exhibit 27: Free cash flow to equity model for the thermal power plant and E&P segment of the Parnaiba expansion
Units indicated
Parnaiba Complex expansion
Net Income (before IOE) (35,975) (105,483) (188,090) 126,344 137,592 153,218 168,844 184,470 200,095 194,004 206,495
Minorities 0 0 0 0 0 0 0 0 0 0 0
Depreciation & Amortization 0 0 33,083 396,992 396,992 396,992 396,992 396,992 396,992 396,992 396,992
Cash Earnings (35,975) (105,483) (155,007) 523,336 534,584 550,210 565,836 581,462 597,087 590,996 603,487
Increase / Decrease in WK (18,533) (54,340) (96,895) (170,197) 43,522 48,478 53,415 58,353 63,290 6,137 326
FCF Before Financing (2,851,188) (2,931,489) (1,987,310) 353,139 578,106 598,688 619,251 639,814 660,377 597,133 603,813
Financing / Debt Flows 2,011,057 2,099,989 1,466,687 (13,088) (317,980) (317,980) (317,980) (317,980) (317,980) (317,980) (317,980)
Equity Flows (840,131) (831,500) (520,622) 340,051 260,127 280,709 301,272 321,834 342,397 279,154 285,833
Minorities 0 0 0 0 0 0 0 0 0 0 0
FCF Before Financing (158,299) (215,863) (669,174) (1,308,088) (1,503,803) (1,516,755) 903,249 903,249 903,249 376,584 376,584
Equity Flows (158,299) (215,863) (669,174) (1,308,088) (1,503,803) (1,516,755) 903,249 903,249 903,249 376,584 376,584
15 November 2017 30
Goldman Sachs Eneva SA (ENEV3.SA)
Exhibit 28: Summary of assumptions for GS proprietary project finance model for the expansion of the Parnaiba complex
Units indicated
Power plant assumptions Parnaiba Expansion Investment and Debt Assumptions - power plant Parnaiba Expansion
FX - Base Year (R$ / US$) 3.30 Debt-to-Capital 70.0%
Real/US$ FX devaluation 0.0% Investments (%) 100%
Inflation - IGP-M (%) - annual 0.0% Capex / Installed Capacity (R$000 / MW) 3,455
Installed Capacity (MWs) 2114.00 PIS / Cofins Tax Exemption 9.3%
Firm Energy (%) 90% Capex / Installed Capacity (US$000 / MW) 1,047
Firm Energy (MWs) 1902.60 Total Investments (R$000) 7,303,754
Contracted Energy (MWhs) 16,416,774 Equity (R$000) 2,191,126
Energy Losses (%) 1.5% Debt Investment - Total (R$000) 5,112,628
Average Energy Price (R$/MWh) - Regulated Market (15 Years) 105.5 Debt Investment - EPC (R$000) 5,112,628
Average Energy Price (R$/MWh) - Free Market (After Contract) 105.5 Debt Grace Period - BNDES (years) 3.5
Average Energy Price (R$/MWh) - including gas price 190.7 Debt Period / terms- BNDES (years) - (12 / 13 / 14 / 15) 21.5
Total energy generation + Losses (MWhs) 16,666,776 Scheduled Amortizations (months) 1
Depreciation Period 20.0 Interest Methodology (juro/iguais) juros
Transmission Revenues 0.0 Cash Amortization (sim / no) no
RGR & CCC Expenses (% of gross revenue) 0.0% Real Annual Interest Rate 5.3%
Other Operational Expenses (% of Gross Revenues) 0.0 Interest Coverage - Year-1 3.0
Cofins (%) -Real Income 7.60% Re-leverage (Yes=1 / No=0) 1.0
Cofins (%) - Presumed Income 3.00% Interest Rates - (Real Selic) 5.3%
PIS (%) -Real Income 1.65% Re-Leverage Ratio (Debt-to-EBITDA) 3.5
PIS (%) - Presumed Income 0.65% Annual maintenance tax 0.0%
CPMF (%) 0.00% Fee Advisor - (%) 0%
Regulatory Charges (ANEEL / ANA) (R$/Mwh) 0.20 Annual Maintenance Rate - 24 months Capitalization 0.00
Average Monthly Wage / Employee (R$) 6,000 Fee Advisor - (R$000) -
For the exclusive use of OTAVIO.AIDAR@VOTORANTIMWM.COM.BR
15 November 2017 31
Goldman Sachs Eneva SA (ENEV3.SA)
Exhibit 29: Summary of NPV impact and FCF to equity model for Santo Expedito Wind Complex
Units indicated
Santo Expeditos Wind Complex
Load Factor assumption 2018 2019 2020 2021 2022 2023 2024 2025-40
1.32 42% 48% Net Income (before IOE) (7,991) (23,587) (41,487) 82,381 34,764 35,197 37,400 1,026,163
Minorities 0 0 0 0 0 0 0 0
Income Tax methodology
With ADENE Depreciation & Amortization 0 0 7,525 90,305 90,305 90,305 90,305 1,250,788
0.85 1.55
fiscal benefit Cash Earnings (7,991) (23,587) (33,961) 172,686 125,068 125,501 127,705 2,276,951
Without ADENE FCF Before Financing (704,921) (564,441) (495,217) 189,902 129,411 125,740 127,798 2,279,132
0.70 1.29
fiscal benefit Financing / Debt Flows 496,969 405,830 363,252 416 (64,947) (64,947) (64,947) (917,700)
Equity Flows (207,952) (158,611) (131,965) 190,319 64,464 60,793 62,851 1,361,431
Exhibit 30: Summary of assumptions for the proprietary project finance model for the Santo Expedito Wind Complex
For the exclusive use of OTAVIO.AIDAR@VOTORANTIMWM.COM.BR
Units indicated
Operating Assumptions Santo Expedito Complex Investment and Debt Assumptions Santo Expedito Complex
15 November 2017 32
Goldman Sachs Eneva SA (ENEV3.SA)
Araguana Discovery
As part of its exploratory campaign, Eneva has identified potentially viable natural gas
resources in two wells located 114km south of the Parnaiba Complex. According to the
company, should the existence of gas reserves be confirmed (i.e., considered
economically viable), the area could potentially support a thermal power plant of 110MW
of capacity. Based on the previously outlined assumptions from our proprietary project
finance model for a R2W complex, in addition to real levered IRRs between 11% and
15%, we estimate a potential NPV impact between R$0.36-0.52/sh for the Araguaina
Discovery, being R$0.19-0.35/sh for the thermal power plant and R$0.16/sh for the E&P
segment. We highlight that the complex would require total investments of R$906.2mn,
broken into (i) R$380.0mn for the thermal power plant (assuming a combined cycle), (ii)
R$197.3mn in the exploratory campaign and (iii) R$328.9n in the development of its
reserves. Finally, we estimate that the complex would require reserves 3.3bn m3 in
reserves to fulfill a 20-year PPA under our dispatch assumptions, which compare to
companys estimates of 6bn m3 of volume of gas in place in the Araguana discovery.
For the exclusive use of OTAVIO.AIDAR@VOTORANTIMWM.COM.BR
Exhibit 31: Free cash flow to equity model for the thermal power plant and E&P segment of the Araguana Complex
Units indicated
Araguana Complex
Net Income (before IOE) (1,872) (5,489) (9,787) 6,529 7,114 7,927 8,740 9,553 10,366 10,084 10,704
Minorities 0 0 0 0 0 0 0 0 0 0 0
Depreciation & Amortization 0 0 1,721 20,657 20,657 20,657 20,657 20,657 20,657 20,657 20,657
Cash Earnings (1,872) (5,489) (8,066) 27,186 27,771 28,584 29,397 30,210 31,023 30,741 31,361
Increase / Decrease in WK (964) (2,828) (5,042) (8,914) 2,250 2,508 2,765 3,022 3,279 403 19
FCF Before Financing (148,359) (152,537) (103,408) 18,272 30,021 31,092 32,162 33,232 34,302 31,143 31,381
Financing / Debt Flows 104,643 109,271 76,318 (681) (16,546) (16,546) (16,546) (16,546) (16,546) (16,546) (16,546)
Equity Flows (43,715) (43,266) (27,090) 17,591 13,476 14,547 15,617 16,687 17,757 14,598 14,835
Minorities 0 0 0 0 0 0 0 0 0 0 0
FCF Before Financing (8,237) (11,232) (34,820) (68,065) (78,249) (78,923) 47,000 47,000 47,000 19,595 19,595
Equity Flows (8,237) (11,232) (34,820) (68,065) (78,249) (78,923) 47,000 47,000 47,000 19,595 19,595
15 November 2017 33
Goldman Sachs Eneva SA (ENEV3.SA)
should hbe developed within five years of the TACs signature. Moreover, the regulator
should hold an appropriate auction in order to Parnaiba I have its energy sold fully in the
regulated market. We note the aforementioned auction has not been carried out, Eneva
has not developed such project, and the regulator still has to hold an appropriate auction
for the closing of the cycle of Parnaiba I.
As a result, for illustrative purposes, we have developed a proprietary model for the
closing of the cycle of Parnabia I, and estimate a potential real leverd IRR of 18.9% and
an NPV impact between R$5.3-6.3/sh, assuming dispatch levels between 50% (current
levels for the Parnaiba Complex) and 100%. Our main assumptions include (1) a 382MW
installed capacity (in line with the terms from TPP Parnaibas II Conduct Adjustment
Commitment Term -TAC - signed with ANEEL), (2) total invesments of R$1.8bn within a
2-year construction period (as per companys guidance), (3) 20-year regulated PPA, with
fixed revenues of R$109/MWh (in-line with Parnaibas II references) and a CVU of
R$112/MWh (same reference as in Parnaiba I), and (4) no gas consumption until YE2027,
For the exclusive use of OTAVIO.AIDAR@VOTORANTIMWM.COM.BR
given the additional combined cycle capacity benefits from the gas steam generated
from the already in-place 450MW regulated PPA for Parnaiba I.
15 November 2017 34
Goldman Sachs Eneva SA (ENEV3.SA)
Enevas origins trace back to April 2001, when the company was founded under the
name MPX Minerao e Energia Ltda., with the purpose of operating in the power
generation business. In November 2007, the company changed its name to MPX
Energia S.A., and a month later would complete its IPO, with a total offer of R$2.0bn.
Until 2004, the companys main investment consisted in a majority stake (51%) in
Termocear, the operator of TPP Senador Carlos Jereissati in the Ceara state, later
acquired by Petrobras. Only in the A-5 generation auction held in October 2007 would
Eneva begin to effectively consolidate its generation portfolio, when the company placed
winning bids to contract 15-year PPAs, comprising (1) 615MW for its subsidiary Porto do
Pecm Gerao de Energia S.A. (Pecm I, a 50/50 JV with Energias do Brasil) and (2)
315MW for the Itaqui coal-fired thermal power plant (100% stake). In September 2008,
For the exclusive use of OTAVIO.AIDAR@VOTORANTIMWM.COM.BR
the company contracted a15-year, 276MW PPA for its TPP Energia Pecm II (Pecm)
project.
Enevas first step towards the R2W model took place in 2009, after OGX Petroleo e Gas
S.A. (OGX) acquired a 70% stake from Petra Energia S.A (Petra) in 7 exploratory
blocks in the Parnaba Basin. In September 24, 2009, Eneva signed an MOU to acquire
part of OGXs stake in such blocks, which culminated in the creation of OGX Maranho
Petrleo e Gs Ltda. (later denominated Parnaba Gas Natural), jointly controlled by
Eneva and OGX at a 33.3/66.7% stake, respectively.
In June 2011, the company acquired from Bertin Energia e Participaes two
subsidiaries which in 2008 had placed winning bids to build LNG-powered thermal
power plants, with 15-year PPAs for 450MW and 660MW of installed capacity. In August
2011, ANEEL would grant Eneva the right to change the technical aspects and location
of the projects to the Parnaba Complex, thereby culminating in the creation of the
Parnaba I thermal power plant. In the A-3 new energy auction held in the same year, the
company would successful contract a 450MW, 20-year PPA for its Parnaba II project,
with 518MW of installed capacity.
The company signed a JV with German utility company E.ON (currently Uniper SE
following the groups corporate restructuring in January 2016) in January 2012 to develop
power generation assets in Brazil. The agreement would be formalized in April 2012,
with E.ON fully subscribing to a R$1.0bn capital increase in Eneva (ending with an 11.7%
stake). In July of the same year, Eneva would also sign the acquisition of the Ventos
wind project, currently denominated Santo Expedito wind complex.
In April 2013, Eneva signed the acquisition of a stake in the TPP MC2 Nova Venecia (later
TPP Parnaba III), with 176.2MW of installed capacity and with a 98MW, 15-year PPA in
place. The Parnaba IV plant (56MW of installed capacity) would be constituted shortly
after, in partnership with Petra and Kinross Brasil Minerao S.A. In May 2013, Uniper
and Enevas controlling shareholder, announced an agreement according to which the
former acquired 141,544,637 shares of the company. Following the transaction, Uniper
ended with a 36.2% stake in Eneva, and would exercise joint control of the company
15 November 2017 35
Goldman Sachs Eneva SA (ENEV3.SA)
with the controlling shareholder. In July, the company underwent a a R$800mn capital
increase, after which Uniper emerged with a 38% stake. The company would change its
name from MPX Energia S.A. to Eneva S.A. in September 2013.
In May 2014, the company announced an agreement with Uniper and financial
institutions to improve its capital structure, which essentially consisted of a R$1.5bn
capital increase and the restructuring of Enevas debt obligations. As a result of the
agreement, Eneva sold a 50% stake in TPP Pecm II to Uniper for R$400mn in July
2014. In December 2014, TPP Pecm I would be acquired by Energias do Brasil for
R$300mn.
The company filed for Legal Recovery (i.e., bankruptcy protection) at the Rio de Janeiro
State Court of Justice in December 2014. A detailed recovery plan was presented by
Enevas board of directors in February 2015, which would be approved by the Creditors
Committee in April 2015. As part of the recovery process, a private capital increase of up
For the exclusive use of OTAVIO.AIDAR@VOTORANTIMWM.COM.BR
In October 2016, the company announced an agreement with Cambuhy and OGX to
acquired the remaining stake in Parnaba Gas Natural, thereby finally becoming a fully
integrated R2W player.
Eneva is listed under the Novo Mercado segment of the B3, in line with tstringent
corporate governance standards (including equal voting and 100% tag-along rights) and
trading only through ON shares. The company is a full corporation, with its largest
shareholders being (1) Banco BTG Pactual S.A. with a 26.79% stake, (2) Cambuhy
Fundo de Investimento em Participaces with 22.99%, (3) Uniper Holding (subsidiary of
Uniper SE) with 6.10% and (4) Ita Unibanco S.A., with 5.89%.
15 November 2017 36
Goldman Sachs Eneva SA (ENEV3.SA)
On October 5, 2017, Eneva completed its follow on offering of 79.7mn shares priced at
R$11/share, implying a total offering of R$876mn (US$278mn). Per the terms of the
transaction, the aforementioned shareholders are subject to a lock-up period of 180 days
starting from the placement of the offer on October 5. We acknowledge the existence
of overhang risks related to potential block trades following the expiration of the lock-up
period given the current shareholder structure of the company.
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Goldman Sachs Eneva SA (ENEV3.SA)
As already discussed, the Parnaiba region has a geographic isolation from structural gas
pipelines, one of the only forms to monetize gas in the region is to develop gas-fired
TPPs and sell electricity to the grid. As a result, Eneva could potentially acquire proven
reserves from pure E&P players that operate in the Parnaiba region in order to de-risk
gas shortages to cover the already in-place PPAs. There are more than 72,718km2 in
concession blocks in the Parnaiba Basin from E&P players (Petrobras, Ouro Petro , Galp
and Vipetro) which could be potential M&A targets from Eneva, and increase the
companys gas reserves.
In Exhibit 34, we provide a complete summary of all the exploratory blocks in the
Parnaiba region. Given their exploration stage, we note that there are no information on
reserves and potential resources for the mapped exploratory blocks.
For the exclusive use of OTAVIO.AIDAR@VOTORANTIMWM.COM.BR
Block Operator Area (km2) Stake Other owner Stake Oil Round Current status Current exploration period deadline
Total 4,981.7
Total 67,736.4
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Goldman Sachs Eneva SA (ENEV3.SA)
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Goldman Sachs Eneva SA (ENEV3.SA)
Cash flow statement (R$mn) 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029-41E 2042E
Operating Income 887.0 996.2 1,057.2 1,147.3 1,250.2 1,360.8 1,681.8 1,769.9 1,919.4 1,721.0 566.6 5,184.6 -57.8
Cash Interest Income / Expenses -514.5 -442.3 -412.1 -364.5 -295.3 -245.5 -239.1 -216.1 -185.0 -159.6 -92.1 -512.4 4.9
Depreciation 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Decrease / (Increase) WC -5.3 -33.7 -62.9 -82.0 -99.8 -132.4 -163.3 -200.5 -217.7 -229.6 -307.3 -3,456.3 -162.3
(Capex) 463.1 402.5 412.0 389.8 357.3 373.2 394.9 370.8 318.0 205.3 138.2 1,369.5 39.9
Dividends -24.8 -22.5 -22.9 -24.7 -23.8 -22.9 -110.3 -21.5 -32.5 178.0 267.9 352.6 -1.2
Free CF -963.0 -345.8 -439.9 -810.6 -1,004.4 -345.0 -189.3 -489.0 -419.6 -154.6 -477.9 -787.9 0.0
Income Tax -180.8 -264.9 -429.6 -122.9 -474.7 -396.8 -47.4 -48.0 -48.6 -117.2 -106.2 -283.0 -14.7
Financing 12.9 20.8 29.4 38.1 47.1 53.4 59.7 67.8 76.6 85.0 -11.0 -69.8 -7.4
Fiscal Benefits IOE 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Free CF (ex Tax) -325.4 310.2 131.1 170.6 -243.6 644.8 1,387.1 1,233.4 1,410.6 1,528.4 -21.9 1,797.4 -198.6
0.0%
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Goldman Sachs Eneva SA (ENEV3.SA)
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Goldman Sachs Eneva SA (ENEV3.SA)
Cash flow statement (R$mn) 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029-41E 2042E
Operating Income 222.4 237.6 248.8 261.1 273.3 286.4 303.8 320.0 336.3 353.6 -26.2 0.0 0.0
Cash Interest Income / Expenses -42.9 -40.8 -40.6 -38.7 -35.2 -31.9 -28.8 -25.9 -24.8 -25.1 -12.6 0.0 0.0
Depreciation 49.8 50.4 51.9 53.5 54.9 56.2 57.2 58.1 59.0 59.8 0.0 0.0 0.0
Decrease / (Increase) WC -4.9 -5.0 -5.1 -5.3 -5.5 -5.8 -41.4 -7.9 -8.1 -8.5 203.9 0.0 0.0
(Capex) -134.8 -112.3 -10.1 -10.4 -10.7 -11.0 -11.2 -11.4 -11.6 -11.8 -12.0 0.0 0.0
Dividends 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Free CF 89.5 129.9 244.8 260.2 276.8 293.9 279.6 332.8 350.8 367.9 153.1 0.0 0.0
Income Tax -24.1 -25.4 -30.1 -32.4 -34.6 -37.0 -39.7 -42.4 -45.2 -48.2 6.0 26.0 3.3
Financing -46.7 0.8 0.9 -43.3 -40.8 -38.5 -33.5 -34.7 1.0 1.0 -326.2 9.1 0.9
Fiscal Benefits IOE 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Free CF (ex Tax) 18.7 105.3 215.6 184.5 201.4 218.4 206.4 255.8 306.6 320.8 -167.0 35.1 4.3
0.0%
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Goldman Sachs Eneva SA (ENEV3.SA)
15 November 2017 43
Goldman Sachs Eneva SA (ENEV3.SA)
Cash flow statement (R$mn) 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029-41E 2042E
Operating Income 288.5 305.1 321.7 339.3 357.5 376.5 428.6 452.3 476.0 500.9 526.9 4,737.8 0.0
Cash Interest Income / Expenses -99.1 -80.5 -69.4 -64.2 -61.7 -61.9 -62.5 -60.6 -58.4 -58.6 -56.6 -388.5 0.0
Depreciation 50.4 50.5 50.6 50.8 51.0 51.3 51.6 51.9 52.2 52.5 52.8 435.7 0.0
Decrease / (Increase) WC -6.9 -7.3 -7.5 -7.9 -8.2 -8.6 -38.4 -11.0 -11.3 -11.8 -12.3 282.6 0.0
(Capex) -10.1 -10.1 -10.1 -10.1 -10.2 -10.2 -10.3 -10.3 -10.4 -10.4 -10.5 -97.7 0.0
Dividends 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Free CF 222.8 257.7 285.3 307.9 328.4 347.1 369.0 422.2 448.1 472.5 500.3 4,969.9 0.0
Income Tax -16.1 -24.9 -27.0 -29.2 -31.4 -33.6 -42.7 -45.6 -48.6 -146.4 -155.6 -1,436.9 1.7
Financing -84.7 -216.1 -71.2 -65.1 2.3 2.4 12.7 -60.3 3.0 3.1 -55.7 -703.8 0.3
Fiscal Benefits IOE 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Free CF (ex Tax) 122.0 16.7 187.0 213.7 299.4 315.9 338.9 316.4 402.5 329.2 289.0 2,829.1 2.0
0.0%
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Goldman Sachs Eneva SA (ENEV3.SA)
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Goldman Sachs Eneva SA (ENEV3.SA)
Cash flow statement (R$mn) 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029-41E 2042E
Operating Income 71.1 75.7 79.5 83.6 87.7 92.0 100.4 101.2 106.3 111.6 3.6 64.8 6.8
Cash Interest Income / Expenses -7.5 -2.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Depreciation 7.6 7.6 7.7 7.7 7.8 7.8 7.9 8.0 8.0 8.1 0.0 0.0 0.0
Decrease / (Increase) WC -1.2 -1.2 -1.2 -1.3 -1.3 -1.4 -8.9 5.9 -1.6 -1.7 45.7 4.3 0.4
(Capex) -1.5 -1.5 -1.5 -1.5 -1.5 -1.6 -1.6 -1.6 -1.6 -1.6 -1.6 0.0 0.0
Dividends 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Free CF 68.4 78.2 84.4 88.6 92.7 96.9 97.8 113.5 111.1 116.4 47.6 69.0 7.1
Income Tax -13.5 -14.4 -15.2 -16.0 -16.8 -17.6 -18.9 -19.2 -20.2 -21.1 -12.4 -208.2 -19.8
Financing -48.3 -48.2 2.1 2.2 2.3 2.4 2.5 2.6 2.8 2.9 3.0 54.2 5.6
Fiscal Benefits IOE 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Free CF (ex Tax) 6.6 15.5 71.3 74.8 78.2 81.8 81.5 97.0 93.7 98.2 38.2 -85.0 -7.1
0.0%
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Goldman Sachs Eneva SA (ENEV3.SA)
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Goldman Sachs Eneva SA (ENEV3.SA)
Cash flow statement (R$mn) 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029-41E 2042E
Operating Income 1.6 -7.0 -7.0 -7.0 -7.1 -7.1 -7.2 -7.2 -7.3 -7.3 -7.4 -101.4 -8.2
Cash Interest Income / Expenses 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Depreciation 6.9 6.9 7.0 7.0 7.0 7.1 7.1 7.2 7.2 7.3 7.3 100.0 8.1
Decrease / (Increase) WC 0.1 3.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(Capex) -1.4 -1.4 -1.4 -1.4 -1.4 -1.4 -1.4 -1.4 -1.4 -1.4 -1.5 -19.9 -1.6
Dividends 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Free CF 7.2 2.3 -1.4 -1.4 -1.5 -1.5 -1.5 -1.5 -1.5 -1.5 -1.5 -21.2 -1.8
Income Tax -0.6 0.8 0.8 0.8 0.9 0.9 1.0 1.0 2.4 2.5 2.6 48.6 5.4
Financing 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Fiscal Benefits IOE 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Free CF (ex Tax) 6.6 3.1 -0.6 -0.6 -0.6 -0.6 -0.5 -0.5 0.9 1.0 1.0 27.4 3.7
0.0%
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Goldman Sachs Eneva SA (ENEV3.SA)
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Goldman Sachs Eneva SA (ENEV3.SA)
Operating Income 156.8 169.9 181.4 193.7 206.1 219.0 232.6 246.6 261.6 -33.2 0.0 0.0 0.0
Cash Interest Income / Expenses -90.6 -80.1 -69.5 -59.0 -48.5 -38.0 -27.4 -16.9 -6.4 -0.6 0.0 0.0 0.0
Depreciation 94.4 94.5 94.7 94.9 95.2 95.5 95.8 96.2 96.6 0.0 0.0 0.0 0.0
Decrease / (Increase) WC -11.1 -6.4 -6.6 -6.9 -7.2 -7.5 -7.8 -8.2 -8.5 201.6 0.0 0.0 0.0
(Capex) -11.3 -11.3 -11.3 -11.4 -11.4 -11.4 -11.5 -11.5 -11.5 -11.6 0.0 0.0 0.0
Dividends 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Free CF 138.1 166.6 188.6 211.4 234.2 257.7 281.7 306.3 331.7 156.2 0.0 0.0 0.0
Income Tax 0.0 0.0 0.0 0.0 0.0 -7.8 -20.4 -26.2 -29.9 -3.1 -25.0 -435.0 -43.7
Financing -142.2 -142.2 -142.2 -142.2 -142.2 -142.2 -142.1 -142.1 -142.1 -15.5 0.3 5.1 0.5
Fiscal Benefits IOE 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Free CF (ex Tax) -4.1 24.4 46.4 69.2 92.1 107.7 119.1 138.0 159.6 137.5 -24.8 -429.9 -43.2
0.0%
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Goldman Sachs Eneva SA (ENEV3.SA)
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Goldman Sachs Eneva SA (ENEV3.SA)
Cash flow statement (R$mn) 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029-41E 2042E
Operating Income 117.7 126.8 136.3 146.1 156.4 167.2 178.4 190.1 202.4 215.2 -15.6 0.0 0.0
Cash Interest Income / Expenses -99.1 -91.2 -83.3 -75.7 -68.5 -61.5 -54.9 -48.5 -44.1 -43.0 -21.5 0.0 0.0
Depreciation 81.4 81.5 81.6 81.8 82.1 82.4 82.7 83.0 83.3 83.7 0.0 0.0 0.0
Decrease / (Increase) WC -4.2 -4.6 -4.8 -5.0 -5.2 -5.5 -5.7 -6.0 -6.3 -6.5 150.3 0.0 0.0
(Capex) -9.8 -9.8 -9.8 -9.8 -9.8 -9.9 -9.9 -9.9 -10.0 -10.0 -10.0 0.0 0.0
Dividends 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Free CF 86.1 102.7 120.1 137.5 155.0 172.7 190.5 208.7 225.3 239.3 103.1 0.0 0.0
Income Tax 0.0 0.0 0.0 0.0 0.0 -5.6 -11.8 -15.1 -17.0 -18.9 11.4 71.9 7.6
Financing -65.9 -73.0 -67.9 -63.3 -59.2 -55.5 -52.1 -49.1 1.9 2.0 -559.5 1.8 0.2
Fiscal Benefits IOE 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Free CF (ex Tax) 20.2 29.7 52.2 74.2 95.8 111.6 126.6 144.6 210.2 222.4 -445.0 73.7 7.8
0.0%
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Goldman Sachs Eneva SA (ENEV3.SA)
Exhibit 49: Parnaiba Gas Natural - Income statement and balance sheet
In R$mn, unless otherwise stated
Net interest income (expenses) -75.1 -210.8 -72.6 -56.1 -13.9 -19.9
Interest expenses -119.1 -202.3 -139.4 -84.5 -63.6 -59.3
Interest income 21.3 13.5 66.8 28.4 49.7 39.4
Other financial expenses / gains 22.7 -22.0 0.0 0.0 0.0 0.0
Equity income 0.0 0.0 0.0 0.0 0.0 0.0
Non-operating result 59.8 5.0 0.0 0.0 0.0 0.0
EBT 89.4 84.0 140.2 150.0 243.6 239.6
Income Tax -33.0 -10.6 -19.6 -19.5 -36.5 -35.9
Profit Sharing 0.0 0.0 0.0 0.0 0.0 0.0
Minorities 0.0 0.0 0.0 0.0 0.0 0.0
Net Income 56.4 73.4 120.6 130.5 207.1 203.6
Net margin % 9.4% 19.3% 20.3% 31.5% 30.0%
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Goldman Sachs Eneva SA (ENEV3.SA)
Cash flow statement (R$mn) 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029-41E 2042E
Operating Income 206.1 257.5 259.4 288.9 339.8 395.2 609.5 633.6 709.9 749.3 44.5 402.8 -1.8
Cash Interest Income / Expenses -84.5 -63.6 -59.3 -45.3 -35.2 -27.7 -26.5 -23.8 -10.9 -1.7 0.0 -0.4 -0.1
Depreciation 250.6 187.3 193.5 168.3 131.8 144.4 163.9 137.8 83.5 66.8 68.2 585.7 1.8
Decrease / (Increase) WC 0.9 -2.1 0.5 -0.7 -1.1 0.9 -12.9 0.5 -2.0 -0.5 31.9 -19.8 0.0
(Capex) -17.1 -122.1 -385.0 -77.6 -428.6 -350.0 0.0 0.0 0.0 -68.1 -68.1 0.0 0.0
Dividends 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Free CF 355.9 257.0 9.2 333.7 6.7 162.8 734.0 748.0 780.4 745.8 76.5 968.3 -0.1
Income Tax -19.5 -36.5 -35.9 -44.6 -52.9 -62.9 -103.7 -114.5 -134.7 -150.5 -107.8 -2,096.3 -212.2
Financing -591.5 114.9 -159.2 -137.3 -80.9 -104.7 74.4 -143.2 -192.9 -45.1 0.0 1.0 0.0
Fiscal Benefits IOE 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Free CF (ex Tax) -255.0 335.4 -186.0 151.8 -127.1 -4.7 704.6 490.4 452.8 550.1 -31.3 -1,127.0 -212.2
0.0%
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Goldman Sachs Eneva SA (ENEV3.SA)
Disclosure Appendix
Reg AC
We, Bruno Pascon, Victor Hugo Menezes and Gabriel Francisco, hereby certify that all of the views expressed in this report accurately reflect our
personal views about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be,
directly or indirectly, related to the specific recommendations or views expressed in this report.
Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs Global Investment Research division.
GS Factor Profile
The Goldman Sachs Factor Profile provides investment context for a stock by comparing key attributes to the market (i.e. our coverage universe) and its
sector peers. The four key attributes depicted are: Growth, Financial Returns, Multiple (e.g. valuation) and Integrated (a composite of Growth, Financial
Returns and Multiple). Growth, Financial Returns and Multiple are calculated by using normalized ranks for specific metrics for each stock. The
normalized ranks for the metrics are then averaged and converted into percentiles for the relevant attribute. The precise calculation of each metric may
vary depending on the fiscal year, industry and region, but the standard approach is as follows:
Growth is based on a stocks forward-looking sales growth, EBITDA growth and EPS growth (for financial stocks, only EPS and sales growth), with a
higher percentile indicating a higher growth company. Financial Returns is based on a stocks forward-looking ROE, ROCE and CROCI (for financial
stocks, only ROE), with a higher percentile indicating a company with higher financial returns. Multiple is based on a stocks forward-looking P/E, P/B,
price/dividend (P/D), EV/EBITDA, EV/FCF and EV/Debt Adjusted Cash Flow (DACF) (for financial stocks, only P/E, P/B and P/D), with a higher percentile
indicating a stock trading at a higher multiple. The Integrated percentile is calculated as the average of the Growth percentile, Financial Returns
percentile and (100% - Multiple percentile).
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Financial Returns and Multiple use the Goldman Sachs analyst forecasts at the fiscal year-end at least three quarters in the future. Growth uses inputs
for the fiscal year at least seven quarters in the future compared with the year at least three quarters in the future (on a per-share basis for all metrics).
For a more detailed description of how we calculate the GS Factor Profile, please contact your GS representative.
M&A Rank
Across our global coverage, we examine stocks using an M&A framework, considering both qualitative factors and quantitative factors (which may vary
across sectors and regions) to incorporate the potential that certain companies could be acquired. We then assign a M&A rank as a means of scoring
companies under our rated coverage from 1 to 3, with 1 representing high (30%-50%) probability of the company becoming an acquisition target, 2
representing medium (15%-30%) probability and 3 representing low (0%-15%) probability. For companies ranked 1 or 2, in line with our standard
departmental guidelines we incorporate an M&A component into our target price. M&A rank of 3 is considered immaterial and therefore does not
factor into our price target, and may or may not be discussed in research.
Quantum
Quantum is Goldman Sachs proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used for
in-depth analysis of a single company, or to make comparisons between companies in different sectors and markets.
GS SUSTAIN
GS SUSTAIN is a global investment strategy focused on the generation of long-term alpha through identifying high quality industry leaders. The GS
SUSTAIN 50 list includes leaders we believe to be well positioned to deliver long-term outperformance through superior returns on capital, sustainable
competitive advantage and effective management of ESG risks vs. global industry peers. Candidates are selected largely on a combination of
quantifiable analysis of these three aspects of corporate performance.
Disclosures
Coverage group(s) of stocks by primary analyst(s)
Bruno Pascon: Latin America-Energy, Latin America-Utilities.
Latin America-Energy: Cosan SA, Ecopetrol, Ecopetrol, Petroleo Brasileiro SA, Petroleo Brasileiro SA, Petroleo Brasileiro SA, Petroleo Brasileiro SA,
Ultrapar Participacoes SA, YPF Sociedad Annima.
Latin America-Utilities: AES Gener SA, AES Tiet Energia SA, Alupar Investimento SA, Cemig, Cemig, Copel, Copel, CPFL Energia, CTEEP, Enel
Americas SA, Enel Chile SA, Enel Generacion Chile SA, Energias do Brasil SA, Eneva SA, Engie Brasil SA, Engie Energia Chile SA, Equatorial Energia,
IEnova, Sabesp, Sabesp, TAESA.
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Goldman Sachs Eneva SA (ENEV3.SA)
As of October 1, 2017, Goldman Sachs Global Investment Research had investment ratings on 2,717 equity securities. Goldman Sachs assigns stocks
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15 November 2017 56
Goldman Sachs Eneva SA (ENEV3.SA)
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Sell on an Investment List is determined by a stocks total return potential relative to its coverage. Any stock not assigned as a Buy or a Sell on an
Investment List with an active rating (i.e., a stock that is not Rating Suspended, Not Rated, Coverage Suspended or Not Covered), is deemed Neutral.
Each regional Investment Review Committee manages various regional Investment Lists to a global guideline of 25%-35% of stocks as Buy and
10%-15% of stocks as Sell; however, the distribution of Buys and Sells in any particular analysts coverage group may vary as determined by the
regional Investment Review Committee. Additionally, each Investment Review Committee manages Regional Conviction lists, which represent
investment recommendations focused on the size of the total return potential and/or the likelihood of the realization of the return across their
respective areas of coverage. The addition or removal of stocks from such Conviction lists do not represent a change in the analysts investment rating
for such stocks.
Total return potential represents the upside or downside differential between the current share price and the price target, including all paid or
anticipated dividends, expected during the time horizon associated with the price target. Price targets are required for all covered stocks. The total
return potential, price target and associated time horizon are stated in each report adding or reiterating an Investment List membership.
Coverage groups and views: A list of all stocks in each coverage group is available by primary analyst, stock and coverage group at
http://www.gs.com/research/hedge.html. The analyst assigns one of the following coverage views which represents the analysts investment outlook
on the coverage group relative to the groups historical fundamentals and/or valuation. Attractive (A). The investment outlook over the following 12
months is favorable relative to the coverage groups historical fundamentals and/or valuation. Neutral (N). The investment outlook over the following
12 months is neutral relative to the coverage groups historical fundamentals and/or valuation. Cautious (C). The investment outlook over the following
12 months is unfavorable relative to the coverage groups historical fundamentals and/or valuation.
Not Rated (NR). The investment rating and target price have been removed pursuant to Goldman Sachs policy when Goldman Sachs is acting in an
advisory capacity in a merger or strategic transaction involving this company and in certain other circumstances. Rating Suspended (RS). Goldman
Sachs Research has suspended the investment rating and price target for this stock, because there is not a sufficient fundamental basis for
determining, or there are legal, regulatory or policy constraints around publishing, an investment rating or target. The previous investment rating and
price target, if any, are no longer in effect for this stock and should not be relied upon. Coverage Suspended (CS). Goldman Sachs has suspended
coverage of this company. Not Covered (NC). Goldman Sachs does not cover this company. Not Available or Not Applicable (NA). The information
is not available for display or is not applicable. Not Meaningful (NM). The information is not meaningful and is therefore excluded.
General disclosures
This research is for our clients only. Other than disclosures relating to Goldman Sachs, this research is based on current public information that we
consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. The information, opinions, estimates and
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Goldman Sachs & Co. LLC, the United States broker dealer, is a member of SIPC (http://www.sipc.org).
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Goldman Sachs Eneva SA (ENEV3.SA)
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