Energy of Minas Gerais Co (CIG) 2014 Q4 法說會逐字稿

Good afternoon, everyone. My name is Robson Laranjo, Investor Marketing Manager of Cemig. At this point, we will start off our video webcast with results of Cemig relative to fourth quarter 2014.

We are in the presence of Dr. Mauro Borges Lemos, Chief Executive Officer, Dr. Fabiano Pereira, Chief Officer for Finance and Investor Relations; Dr. Luiz Fernando Rolla, Institutional Relations and Communication Officer; and Dr. Leonardo de Magalhaes, Controller.

You can follow up through these telephone numbers, 5511 2188 0155 or 5511 2188 0188, or also on our site, http:ri.cemig.com.br.

To initiate our presentation, we hand over the floor to our Director for Institutional Relations and Communications Officer, Dr. Luiz Fernando Rolla.

It's with a lot of pleasure that we start our presentation of the fourth quarter 2014 results. As usual, we will begin by focusing on some aspects that we deem relevant to the market, and after this we will be available for a Q&A session.

Today we are in the presence of our CEO, Mauro Borges, and also Dr. Fabiano Maia, Chief Officer for Finance and Investor Relations. They have just taken office and that's their first participation in our presentations. We will expand then to a further discussion not only on results of 2014, but strategic considerations and other important decisions in course at Cemig.

I will now hand it over to Dr. Mauro Borges. And he will speak about our new team, how it's been built, this team that will be head of Cemig for the next upcoming years.

Good afternoon, investors, gentlemen, and madams. It's a pleasure to be here establishing this remote communication with you.

I'd like to say, to begin with, that at this opportunity I would like to restate what I had said before on some other occasions, reinforcing our strategic focus on the restructuring of our management team based on professional experience and qualifications, having the point of view of the state of Minas Gerais' government.

They decided to add to the holding, Cemig, new staff to reinforce Cemig's management team, a team that's well experienced and with renowned experience in their respective fields of activity. This is our focus.

We do not see the management of Cemig as in any way accommodating political interests, but rather to deliver robust results to the shareholders, to the associates, and to fulfill the very essence of the role of a public utility, which is to serve the public.

So, my position here as the Chief Executive Officer, having a view of my background, my curriculum is absolutely technical. I was the Minister for Foreign Trade and Commerce and Industry, but my profile fits with the new statement that we intend to implement here, a technical staff, career professionals.

Dr. Rolla is a top example of this policy that we made a point to implement, and we also attracted people that are equally qualified, acknowledged, and recognized in their competence. And that could add to the quality of this team.

Dr. Fabiano Maia, for example, is a career professional with the Treasury of Brazil with broad experience in public administration. And he is bringing with him important values to add to the qualities of our Cemig management team.

So, all the new management officers are highly technical in their background. And that has to do with this aim to bring new competence, new values to our management team. And I will be available to you to clarify any other point.

Of course this also applies to the Board of Directors. Yes, we have adopted the same policy for our Board and the Boards of all of our affiliates so that everyone could contribute to reinforce and forge a very solid Board with very technical qualifications, professional qualifications, improving the quality of governance of the Cemig Group.

We adopted the same policy, therefore, with the Board. The Minas Gerais' government is the major shareholder. For example, it is also part of it -- a member of the Board is at the same time the Secretary of the Treasury of Minas Gerais. This is part of our strategy and is part of the new ideas brought by the new administration of Governor Pimentel.

This is part of what they plan for the economic development in general of the state. And this will be so from now on, having a view of Fernando Pimentel's position as the Governor and his instructions that are very clear, very clearly put to me in the sense that we should reinforce the professional profile in the governance of Cemig.

The holding is the mirror to provide the image to be replicated by the other companies of the group, the affiliates. And we will not have any political bias in ruling and governing our company.

We will proceed with our presentation. I would like to have you still hold the microphone. We will have a lot of interaction here.

This first slide brings a lot of indicators, the most visible in our balance sheet, and it brings a comparison with 2013. The numbers are pretty high, having a view of the large scale of the group.

Cemig has grown a lot in recent years. And we have got to this threshold, almost BRL20 billion, of net revenues, which is very substantial, especially having in view the fact that cash generation keeps as solid as net revenues.

Of course, during our presentation we will also go back to these numbers, explaining especially with Dr. Fabiano the percentage growth of net income. We will talk about that later.

But, what's important to stress in this first slide is that the context within which these figures were generated was a context with very high prices in the spot market, allowing us to achieve these numbers.

As we've said, very positive gains, for example, with the incorporation of CVA Distributor and some losses with, for example, the Madeira exposure and some other negative impacts that led to equity contribution down BRL388 million.

So, we'll delve into these points and we will bring highlights of 2014, very relevant data. We selected a few points that we find especially relevant for our discussion. First, regarding generation, Mr. CEO, indeed it has an important role to play for Cemig in our long term strategy

For sure. I do believe that generation is and will continue to be our main vector, our main compass, for growth.

This is the very face of Cemig. That's where we concentrate the top competence of Cemig, in engineering, for example, and as a researcher of this area for capacity building and corporate competence. That's where we indeed always concentrate our competence, our technical competence.

And Cemig is a unique company in terms of the level of competence in the generation engineering area. This is a quality that makes Cemig stand out among competitors, and we say that with a lot of pride. And this has been going on ever since the very incept of the company.

I am sure that the strategy there takes into consideration generation as the main driver of growth for the company. I think it's correct and it should continue so. And that's where we exploit the best opportunities for the company in the market due to our top competence also concentrated there.

So, it's almost impossible to think of a distributor, Cemig, without the generation competence, and transmission is the vehicle. This comes from the time where the company was still verticalized. We fostered competence in the three areas, but no doubt producing energy is what we know best.

You have reinforced the point that the portfolio of Cemig is a low risk portfolio because we have this very strong concentration of cash generation in the power generation, transmission, and distribution areas.

Of course, our expertise also encompasses distribution, for example, but it's now going -- a transitional phase in view of the negative context with higher prices right now. But, under the proposal set by the federal government and other players of giving guarantees to companies in the sector, this ensures us that we will have the conditions to grow as strongly into the next stages.

Natural gas will also become a major growth driver for Cemig. Yes, as I say, I've talked to Ricardo Charbel, our Distribution Director. We say, well, this is our pet, so to say. As a company of public utility, the quality of the service of our company, we will be measured especially by how well we deliver at the end.

That's our quality seal, so to say, or quality label. If we are lousy at that point, then our brand will be compromised. So, I renew here my commitment to our investments and to keep the high level performance seen in the last three years by the company in that sector.

We have evolved a lot recently. We are resuming the position among the top 10 distributors in Brazil. We are the largest in the country, so we know that indicators tend to be against us in that regard. But, we are comfortable to resume our position among the top 10 in Brazil, and we are committed to our investments.

Our budget planned for 2015; and I have our Financial Officer here with me, he also gives a lot of emphasis to this effort. And in the case of Gasmig, the natural gas area is one of the most promising in the power sector in Brazil, in the power markets of Brazil.

We are heading towards a hybrid thermal model no doubt here in Brazil where gas plays a fundamental role in increasing our generation capacity, our thermal generating capacity. We are quite well prepared to fulfill that role, to play that role, and we have an excellent market also for gas distribution in the market of Minas Gerais.

Our concession runs up to 2052. It's just been renewed. It's a virgin market for gas distribution, and the same all over the country, a county that still has a very small, comparatively, gas market as compared to more developed countries. And this will be an important driver for Cemig growth, Gasmig, and probably other developments coming from it heading towards that direction.

Within the generation area, power from renewable sources has been all over the world indeed a priority. We aim at growth and the setting up of a growth platform that could deliver very significant growth in terms of installed capacity in the future, and with returns that will allow us to become really sustainable without any necessity for other capital injections. So, this opens tremendous possibilities, isn't it?

Yes, we see Renova as our vehicle for growth in the area of renewable sources. Renova has a very significant market value by any measure. And indeed we are very well prepared to grow further in the area of renewable sources by means of this vehicle, namely Renovo.

It's a leading company in the renewable source market, the site where we have our wind farm, and we have won the bid together with an American partner. It's a controlled geographical denomination. There's a lot of sun, a lot of wind in the site. We can provide almost continuous generation of power. It's a beautiful site, really an envy of others.

And that's a renewable energy part that will be our benchmark, technically speaking, for growth through Renova.

Also enviable megawatt measure even compared to major European developments. Also, the megawatts that have already been contracted and the possibilities for growth will lead to substantial cash generation. And as you've said, it's a very promising partner or aspect of Cemig.

Yes, since you have all these long term contracts that are firm contracts, this is indeed an anchor for our strategy to expand Renova. That's our material basis for our expansion project.

Another investment that we are making in the generation area using existing assets was the joint venture that we have just entered together with Vale.

It's a very promising vehicle also no doubt I really like. And this has been a major source of satisfaction for me, the signing of the formal proceedings that have led to this new company called Alianca Geracao de Energia. This partnership with Vale, it is important to say, is a long term partnership.

Vale is a major power consumer. And we have this partner that structures guaranteed long term contracts and enables us to grow further. Vale, as a major group but also as a major consumer of electricity, is now bringing into our company a partnership, a very solid stock partnership, anyway.

They are not only occasional partners, but they are with us for a long journey ahead. Vale has joined this project as their strategic decision in the area of energy. It is an honor to us to have such a quality partner, and I am sure that inside Vale they have the same opinion about us.

I have had opportunity to talk to people inside Vale, and they are very satisfied to join this new company with installed capacity of 1,158 megawatts. And that allows us to go for major leverage in investments.

Going ahead, we'll now talk about Taesa, a very important partner as well. What's important to highlight in terms of the corporate governance of Taesa, they are pretty transparent and they have seen very solid profits.

Yes, it was born already big, almost 10,000 kilometers of transmission lines. It was born as a leader already and with a very solid corporate governance structure, very slimmed down -- is very slim.

The staff and especially the management staff, the top management staff, is compounded of -- it's made up of very solid technical people. The company itself is very solid and it's ready to grow.

We have lots of opportunities with new auctions coming, very promising projects we are well prepared to join in. And also, we intend to grow by means of further acquisitions. We are in a very good position to go on in our position of leaders in the country.

Distribution now. We have seen a very positive growth and development in recent years. And the group as a whole has given unequivocal examples that we can perform at a very high technical level within this context of renewal of concession contracts, one of the main requirements from the authorities. And the Minister of Energy has highlighted that will be a performance. And we have already been meeting the two requirements, operating performance levels and investment capacity.

Indeed, my position with regard to distribution is pretty tough, I would say. All the results that we may achieve, they may be satisfactory but they are always insufficient.

We always want more. Our challenge is a permanent one. As we expand our range of consumers, the diversity of consumers, the challenges get more and more complex.

And my point is this. We are always pressing forward in the distribution area. The optimal frontier of operation for the distribution area is always the next step. It's a moving target, a moving frontier.

It's like in the Alice in Wonderland universe. As we seem to be getting close to it, it moves further ahead. And it's endless in this movement. This challenge is always moving over time because this is an ever-expanding universe with an evermore demanding consumer.

I believe that we have seen experiments of distribution, distributed generation. For example, we have experience operating in this very promising segment. But, within 10 years, probably distributors that have not acquired a well advanced structure will lag behind in the market.

So, the top challenge that I see for every power company in the world, anywhere in the world, is distribution, because this is a moving end line, so to say. We are always moving, pressing ahead.

We have advanced incredibly, but we always want more. You see an Aneel survey saying that satisfaction among consumers has reached 70%, almost 70%. Why not 80%? It's very challenging but very gratifying, because this is our delivery. Distribution is our delivery to the consumer.

You mean to say that you bring forward 2020 targets to 2016?

Well, you now are in the position of even dealing with Investor Relations. You still wear your cap of a financier, but you understand my position. We must always look ahead and try to advance our position. We must be secure, realistic, but we must be ambitious, going beyond what the regulatory bodies have agreed with us.

Speaking about that, in recent weeks they've had an important -- or two important participations in the sense of reducing the operating risk of our distributors, especially the flow cash risks.

The first point was the reduction of the flag band system covers. They adjust prices having a view of general costs. This reduces substantially the accumulation of costs, and burden on the distributors will be lessened and allow us to achieve our quality targets.

Also, we were until recently in a very unpredictable environment, and this was somehow healed by these new measures. The authority regulatory body agreed that the context should be improved. They enabled us to lower the perception of risk involved, and this has allowed us to improve the quality of service to our consumers.

I brought a slide with some new numbers relative to a Gasmig. You'll see on the slide how much we have achieved already. The targets for Gasmig count on investments to be made on gas pipelines. And some cities in Minas Gerais have felt it already, with the works in progress bringing that piped natural gas across the states.

Yes, I would call it a civil authority gain. As a person working for a public utility, I see Cemig and its subsidiary, Gasmig, working towards that. This is an element, an important variable, to measure up the development of a country or of a state such as Minas Gerais. I believe that we should in fact go ahead in that direction.

It's impossible to think of real industrial development without the availability of gas. Along all these years of Brazilian industrial development, it's inconceivable that we should now lack the provision of gas, the consumption of gas as an input for industry. It's fundamental for adding value to the industrial park. Thinking in terms of the overall development of our states' industry, this is crucial.

Another point is that the gas distribution market in Brazil is still fledgling. We want to become one of the leaders, one of the drivers of this market because it is a gain for everyone involved. It's a civilization gain for consumers. It's a competitive edge gained by industrialists. I believe that this is a privileged medium for growth.

Excellent. In all these aspects that we are discussing, we have highlighted in all of them the characteristic that they are aimed at sustainability. That is Cemig seeks investments based on the principal of sustainability.

This has been incorporated in our decision process, this long term view. We have expressed our concern with the economic financial dimension of the projects. But also, we have the concern with the environment as we participate in projects that have as a basis the renewable sources.

And also, we have concerns regarding the community. We seek to reach a balance between these three dimensions of sustainability, economic/financial coupled with environmental protection and sustained by respect for the communities in which we operate, as you so well highlighted in your speech.

This leads us to the point that the community has expressed indeed recognition to Cemig's effort. And we have prospects for the future, to keep going strong in that regard.

Yes, indeed we can boast a series of prizes and recognition of our efforts. And this is part of our DNA at Cemig already. Cemig is strong in the production of energy from sustainable sources from its very origins.

The hydro sources in Brazil and through Eletrobras and Furnas, major generation plants of Brazil have always relied on the sustainable source represented by the rivers. And we intend to pursue, to go on with that direction, seeing that ever since the very beginning of the industry in Brazil Cemig has played a leading role in that regard.

And that's our DNA. We were created as leaders already, and this is something that must be reinforced, strengthened. And we should go for further diversification, but always aiming at renewable energy sources. We have no intention to go for dirty sources.

Thermal and gas plants, for example, as compared to fossil plants are much cleaner. And that's part of our plans, but in general our focus is on renewable sources to compound our portfolio of generation.

We now come to the conclusion of this first part where we focused on the strategic directions of our company. We brought some figures, but now we will go straight for results more specifically. We will dive into figures right now.

And our Finance Officer, Fabiano, will be crucial for this part. Well, this does not mean to say that we don't count on your presence, but feel free to leave if you have other commitments.

I was his professor and I would like to stay to see if I made a good pupil.

We'll resume with our first slide when we projected some indicators, and these indicators will now be explained. I'll request Fabiano to start talking about this growth in revenues that was so substantial in 2014, more than 33% growth. And what was that then, Fabiano?

Yes, Luiz Fernando. I would like to thank you for the opportunity. This is the first time I address our investors. It's a little hard to talk right after you two.

But, we did have this 33.6% growth from 2013 to 2014, strongly driven by the efficiency in commercialization of the company. And in the fourth quarter of 2014, that was the recognition of CVA with BRL1.1 billion in the fourth quarter, and also sales grew 96.8% from 2013 at BRL2.3 billion.

It's a little surprising to see that last year industrial consumption as a whole in Brazil went down. But, because of our efficiency in having our policy towards the non-regulated market, we could make up for that.

Yes, you know that very well. You were the Financial Officer at the time, and I totally agree with it, with what you said.

Yes. Next slide will deal with operational expenses with a respectable growth as well. You can see very easily from the diagram the highlight is purchased electricity.

Yes, precisely. In addition to the high cost of energy, another point that was worth mentioning was the increase in operating provisions. We work throughout the year to mitigate these provisions but to give transparency to the market.

And in line with the conservative stance of the company, the total value was BRL195 million. And when we obtain additional information about these facts, we will expose it to the public. We are talking about the Parati shares option and sales option for the Santo Antonio quotas.

Also, we saw an increase in the production -- in the price of fuel in our thermal plants. But, this was somehow compensated by the results in that area too.

We will now talk about the EBITDA in comparing some results. The performance was pretty good here too. We saw some positive surprises. The consolidated EBITDA came out above last year's guidance, the previous year's guidance.

The analysis we made was the CVA as one of the key points here. In addition, the operation involved in the purchase of Gasmig had a substantial impact, and also the spot price, very high throughout the year.

So, the scenario has been changing so rapidly that sometimes it's difficult to compare with projections as recently as one year ago. If we break down all the parameters, sometimes they don't match the figures shown in the results. But, these are valid comparisons, and it shows that we are a little conservative in projecting our guidance.

Also, consolidated net income, it's hard to understand at the first time why the EBITDA grew so substantially and why the growth here is just 1.8% from 2013 to 2014.

But, when we proceed to a deeper analysis comparing expenses and nonrecurring items, we can see that we would have some 9% growth from one year to the other, demonstrating the capacity of the company to yield results to the shareholders and deliver the planning for the year.

We had this negative impact from equity accounting, so a negative equity contribution from the Madeira Energia project and other factors that affected all the generators. All these aspects, despite the provisions that had been duly made, we still have some instances to traverse in order to recover some of these values. It has been broadly announced that there are negotiations underway with the federal government.

Yes, that's a critical factor of the power sector in Brazil as a whole. This cannot be seen in isolation, as just a Cemig result. This GSF is a critical problem, having in view the water shortage that we are facing, the drought period we have just been through.

So, from the financial point of view, this is one of the regulatory pillars in the Brazilian electricity area. It is a general problem. This should be approached together with all the other players in the market and approach the Ministry of Energy of Brazil.

Top management of Cemig is working hard right now to improve this GSF, generation scaling factor, and also the FID, the general availability factor for the northern plants in Brazil.

It's extremely important to have that done, to have their participation in the overall generation of power in Brazil. And we are participating in both Santo Antonio and Belo Monte in the northern region of Brazil, and it's an important role we have to play.

Now talking a little bit about our debt, and then Dr. Fabiano will navigate with extreme ease, I believe, because he's very knowledgeable in that area.

What we are showing here is Cemig's consolidated debt profile. We see some concentration in the year 2015, during which so far we have already rolled our debt.

Average cost of the debt has increased a little bit in recent years, but we have a strategy regarding dividends that we will explain. And I have been talking to my team, and it is a very competent team. I am very pleased. That is one of the sources of satisfaction in my moving into the company.

And I have requested them to look with utmost care at this point and to provide a more comfortable financial position for the company, and try to find space in the market so as to replace the debt indicators -- indexers.

Cemig GT in special has shown a very good performance in that regard. Cemig GT has a little different profile than the other sectors of the company. Into the next years, we will work to develop this profile, possibly trying to expand the participation of IPCA indexed bonds in the two areas of Cemig. This will elongate the payments and facilitate cash flow to fulfill all the conditions for further growth. Distribution also had a positive impact, and this brought indicators to a very comfortable level.

When we look at the relationship between net debt and EBITDA, we can see that CVA meant a sharp drop in the leverage of the company that brings future capacity for Cemig D.

Mr. CEO, we have planned almost BRL2 billion for 2015, more than half of that concentrated on the distributor aimed at operational improvements. Results of 2014 were quite robust, but this new year is a more, well, conservative year with more care in managing our cash. But, this is more tied to the overall context of Brazil right now, isn't it?

Yes, I believe it has to do with the present Brazilian context. But, our strategy for growth is to go for both greenfield and brownfield investments. And in view of the advances already made in the diversification of our portfolio based on private vehicles, these projects pass through this too.

This is part of our results already achieved in diversifying our portfolio, innovative ventures and the history of leadership in the last 10, 12 years.

Yes, cash flow naturally, as I say -- Fabiano, I always say that to the investors. This is the slide that every financial officer likes to show, because this demonstrates the financial health of the company. And that's what we can boast about Cemig, isn't it?

Yes, certainly. As we look at our company's cash generation capacity, it's quite, quite robust. These are considerable numbers for any company in the world.

And we can see -- well, Leonardo, our Controller, perhaps he wants to add any comment because he's very familiar with these figures.

Good afternoon. As Dr. Rolla has already said, it's quite impressive, the capacity to generate cash. You see 2014, 2013 results, even as we had a BRL3 billion increase in our debt.

But, this has to do with the gross programs of the company. We had a reduction in cash, but we have made a number of investments that will ensure the cash for the company in the future through Renova, through the in-field investments in distribution, generation. I think this is a guarantee for the company in terms of its sustainability and its perpetuity into the future.

Our expectation is to go on generating values at that amount into the next years.

Yes, we have very mature assets, activities that have been yielding quite solid cash for many years. In 2015, we face regulatory challenges, but we have always responded quite well to any regulatory challenges in the past. And we are confident that by the end of this year we will see results as good as the ones we are able to show right now regarding last year.

Of course, the market has acknowledged our performance as compared to other companies in the sector, all listed companies in the Sao Paulo Stock Exchange. You can see the yield by the end of 2014, the combination of very robust dividends in 2014.

And for my distaste, I must confess the share value is a little too low for my taste. Well, these are the market conditions. And in view of the negative moment, the perception of our investors was not so optimistic, even though our delivery was quite good.

We have some other very relevant issues to communicate to you, and I invite the participation of my colleagues to explain that.

The proposal for allocation of net income, we restate 50% of the net income, a little different from what had been proposing before, given the macroeconomic and sectorial in Brazil today.

We are talking about a scenario where there has been a realignment of tariff prices. We are talking about a situation in which the economy is not expected to grow so much as in past years, perhaps some more rational consumption by the families and other participants. GSF will be probably lower than the initial budget indicated.

In addition, the CEO -- well, this was a demonstration of good common sense, this new proposal.

Yes indeed, because this proposal was quite matured. I would sum it up as a proposal based on prudence.

In a moment of difficulties, we want to keep the investment projects going. They are crucial for the future results of the company. So, a prudent attitude at this point shows a lot of wisdom, in my opinion.

We, together with the Board and the controller stockholder, the government of the state -- the Governor personally is aware of the fact that this is the safest possible policy for the growth and solidity of the company.

And also, the strategic partners and the shareholders and the minority shareholders, they are all interested in protecting the company at this moment in view of the difficulties faced by the sector, the entire power sector in Brazil.

This is a prudent attitude. We ensure the charter rights of the shareholders, of course, but we are also worried about the sustainability and long term results of the company.

So, this is one of the pillars of our management strategy, the financial solidity of the company, and having recognized a surely temporary contextual situation that we now see in Brazil.

Well, yes. I would like to emphasize that last year we distributed extraordinary dividends at BRL2.8 billion from the point of view of this strategy and a policy of distribution of dividends not in a very short term perspective, but I think more in a midterm, long term perspective with a longer time horizon, not in a specific year only.

This is a preferably understandable policy because we had a good distribution of dividends last year. It's coherent. It's understandable that we shall be more conservative this year.

Of course, we want the shareholders to share in the good results of the company, but with the priority given to the long term strategies of the company for sustainability. We don't want to just get excellent results and then get out or drop out of the market. We want to stay for the next 200 years or whatever.

Well, with this slide, we have closed our formal presentation. We are now opening to Q&A.

(Operator instructions.) [Vinicius Eboni], [OTF].

Good afternoon. I'd like to know how the negotiations are going between Cemig and the federal government with regard to Jaguara, Sao Simao. Are you nearing any agreement in what would be the terms of such an agreement?

Yes, Mr. Vinicius, [spoken in Portuguese.] What I would like to know and what I can -- what I'd like to say and what I can say is that we are indeed involved in this negotiation process with the federal government, the union. And this process is going on as smoothly as possible.

The union, meaning Brazil, the federal government, has reached a defined level of tariff. And we want to maintain and expand our capacity to deliver power to consumers and to the industry of Minas Gerais in special, because it's important for the overall Brazilian economy.

It's a very positive negotiation between the two parties on the part of the federal government and on our side as well. The state government also is taking part in these negotiations.

We have had contact with the higher court which is judging this injunction, and our attitude is to believe that a negotiated solution is better for all sides involved. I believe that this is also the way -- the federal government and the state government and the higher court and Cemig's understanding is the same. We are all interested in reaching a satisfactory solution to the country as a whole.

(Operator instructions.) Vinicius Eboni, OTF.

Just one more question. Has Cemig taken any action to minimize the impacts expected for this year? And what is the GSF level as projected by Cemig for this year?

Vinicius, for some time already Cemig has been taking action to increase its protection against the water shortage risk. We have been doing that ever since 2013.

We increased very significantly -- well, one of the actions we took was to acquire the three new plants. Now we are in position to absorb a GSF impact quite significant.

The outlook this year is worse than last year. Last year it was 90%. And this year estimates are that it should be much below that, at around some 80%. That's the overall expectation of the market, and we do believe that should be the figure we might expect.

[Philippe Elau], Bank of America.

Good afternoon to all. Two questions, first about the distributor. Do you have any indication from the federal government on the renewal of the concession? I've heard rumors about a possible charge on that.

And about Gasmig, I would like to know whether you're still negotiating in the partnership that was announced last year.

Good afternoon, Philippe. With regard to Gasmig, I'm sorry it is yes, positively. We do have a strong interest in the association with Gas Natural Fenosa, which is a company -- a major player in the distribution of gas globally speaking, around the world, and we intend to profit from their participation.

And this is a player that has been tested already in the Brazilian market. The structuring of this business -- or of this deal has been remade somehow as the new top management of Cemig has taken office. We are aiming at reaching a solution as quickly as possible, and we are looking into new developments in that regard in the market of Brazil.

As for the distributor, we haven't received so far any information from the federal government as for the concession. But, Minister Braga has spoken of some conditioning factors for renewal of that concession. We have no restrictions affecting us because we have fulfilled all the conditions posed.

But, you mentioned a possible payment of money for that renewal. ABRAGE, the Brazilian Association of Power Distributors in Brazil, they have already expressed their concern in that regard. You know quite well that the financial balance has been affected by recent tariff restructuring initiatives by the government, but right now we must wait and see what the Minister of Energy will say about it.

(Operator instructions.) We now close our Q&A session. I would like to hand over the floor to the company for final remarks.

And a final message for our investors and shareholders, yes, a very simple message, very brief. Every time we have a very strong winter, we expect a promising spring. That's how we see the electrical sector in Brazil now at this moment.

We see a very difficult moment with a crisis popping up. But, this is a moment of challenges and this opens opportunities. Brazil is right now a major frontier for investments in the power sector. We are getting ready for this new moment that will surely come.

That's a strategic position of ours, all the preparation of the group, the holding, the affiliates, Cemig GT, Cemig D, and Gasmig and all the affiliates. We are all preparing the group for making the best of the opportunities that are already showing up right ahead in the horizon.

We see already the promising spring that will unfold as soon as we overcome this tough moment with the water shortage and the major regulatory difficulties. We have no doubt that the country will make a move towards a much better regulatory environment and the water shortage will pass.

And we are ready right now in 2015 for making the best of this upcoming spring. And we are confident that the future of the company is promising.

I would like to thank you for your attention. We know how precious your time is. We tried to convey relevant information in the most transparent way possible. If we haven't solved all your doubts and queries, we have our phones open to you. The Investor Relations are always ready to hear you.

We are running 24/7, but we have to expand now to 30/8 perhaps so that we can solve any doubts that you may have about us. Many thanks, and have a good afternoon.

So, the video webcast of Cemig regarding the financial results of the fourth quarter 2014 is now closed. Good afternoon. Thank you.

Statements in English on this transcript were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.