Energy of Minas Gerais Co (CIG) 2022 Q4 法說會逐字稿

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goes away. If we lose market, this will be a defeat for us. Just as all of our victories will show, when people say, we want to stay with you. This is the work and our team has to do. So there is an old saying that says, "You only know who are your friends, if you eat a bag of salt with the other people."

And so my dad used to say that it takes a long time to eat a bag of salt. So we have a long time to develop this relationship. And I think this relationship that we are going through of process improvement, to have at the end that, yes, from our consumers, our clients work with us. I think that is our job, and we are doing -- we are working on it.

In addition to the governance, team, technology and service, another topic that is really important is Cemig is a privatization. All of you know that Zema, when he was elected and then reelected, he said that he wanted to privatize Cemig. This is no secret. It was openly said in his election campaign. And this is a task that has part of it to be executed by the administration and another part by the state administration because that has to be approved by the administration of the state.

And so we have to convince the congressman that this is good for the state, good for the population. And they have to say yes to this project. And once they say yes, we have to work for that. And if they say no, we will continue being a state company and improving always.

If you compare Cemig's results in the last 2 or 3 years, you see that we are in an upward trend. We have one -- another indicator of nonrecurring events, and sometimes are not accurate, but you will see a history of improvements in our results in the past few years, being a state-owned company.

So if it's not approved by result, that's okay. We'll continue working and dedicating ourselves because we know that working on a state-owned company is not dancing with my sister on the ball. It's a dance with the most beautiful lady of the ball.

But if we cannot be privatized, we will be a state-owned company that is a very strong one. But I do believe that we should convince them because we have arguments, we have data. Not only objective data, but the subjective argument as well. Why is it better? So the objective data is that, of course, the company will have a greater value.

So there's different mechanisms here. We have companies that have been sold. We have companies that we sold just a part of that stock. So the market value of Cemig for the state now is around 17%. And if that becomes privatized or if that increase capital, it will be worth more.

And if this amount is -- it will be plus 30% or some more percent. So that is what this part that the state has will be even more valuable because Cemig is going to be even more valuable. So we're not removing value, we're adding value to people.

And on the other hand, the state is also part of this, people when I say it. And also, we will have ability and management being a state-owned company. There are several -- at times that a private company doesn't have because there is a lot of bureaucracy. There are a number of committees to manage state-owned companies.

So I'm not criticizing it and I'm not praising it either. These are things that are there, they exist. And sometimes, that takes too longer. There are a lot of rules that end up taking to postponed actions -- reactions that could be faster. So that's the fact.

It's -- this is not only a (inaudible), you just have to look at it and you will see it. This is a subjective approach. But the objective one is that it's going to value more. The subjective arguments are there's going to be improvement in management and agility and the administration. We have to take that into consideration because that is important.

And finally, I would like to talk about the results, Cemig's results. They have been very good as we have seen it. Of course, you, as investors, have to approve that or not. And so far, you have approved it because we are growing market value that, in a very relevant, very -- well, when Cemig reached BRL 31 billion, BRL 32 billion not long ago. And then it came down a little bit, but it came down because of the stock market because it was 110,000 points. It's now 198,000.

So that's not an excuse. Yes, we could have stayed and remained on the top, but we did suffer a little bit with the drop of the stock exchange. So we took 50 steps forward to back, but that's okay. Part of us that have to do with our work and also part of that has to do with the market. So there are consistent -- our results are consistent. More than that, they are repeatable. These are not onetime off results. And because they are repeatable, that shows that the company is on the right track.

So the indexes that we have with our regulating agents are all met. What was supposed to come down, came down. What was supposed to go up, went up. So we are meeting all the indicators defined by our regulating agents. And there are other indicators also, such as management and the company to use it. And we are also doing very well, and these are the indicators.

Any company in Brazil with a capital cost of 15%, 20%, and most of the companies are there in that range -- that level of leverage. The companies have a 15% to 20% to run a project. The project has to provide you 25% of return. How are you going to allocate 15% to 20% of capital to have a return of 21%.

You should -- you would be crazy to do that. So we need to understand that we need, in fact, to have that capital allocation done right in a very specific way, especially -- and moments of high capital costs, such as now of 15% to 20% of capital cost.

Right now, it's not easy to have a project that will pay off. If you take that to pay at this rate and to have a return that is lower than that, it wouldn't make any sense. We have to be careful, unless it's something needed. The ceiling is falling and we have to fix the ceiling. So we will need to do that. But if it's not that, really, we have to choose very well where we are going to allocate the capital to make sure that the company does well.

And a wrong capital allocation is just like cancer. If you have that, I'm not a physician, but anyway. Well, we don't need to be a doctor to know that, but if you have a cancer, it will eat you up. And when you find that out, you were dying because you would not find it out because of the failing symptoms.

And this is capital allocation. It you allocate it now -- and the return term of the project, if it is 4 years from now, in the midterm, you already know. If you have done something wrong or not. So if you're not doing well, you know that you're not doing well and you can prepare yourself. So capital allocation is a relevant art, and that's part of the final -- part of this presentation of mine.

And to conclude here my remarks, I think that there are many challenges today and this is really something comes to me. A huge challenge is to reinstall people. But when you take people away from a position where they are for a long time in a very comfortable way, and when you kick back, the person has to be reinstalled in a better place. That's an art because you want to take people away from that place.

People have to leave the place where they are comfortably installed so that they can be transferred and reinstall themselves somewhere else. But can you make someone to do that? Of course not. But we can provide a plate full of food, but we cannot make the person eat.

So this is a plate. But if you move provide the food (technical difficulty) then we have to do everything that we need, so that people -- that the company really can move to where we wanted to be, a competitive company, a company that does a great job. And at the end, the capital market is over, but people (technical difficulty).

Well, thank you, all, very much. Have a nice day and a nice event. Yes, I'm done a few minutes before the time I had allocated. That's it for myself. Thank you.

Thank you very much, Marcio, for your participation. Now moving on, I would like to invite our President -- our CEO, Reynaldo Passanezi Filho, and he's going to talk about our strategic plan from 2023 to 2027. (foreign language)

I could directly talk with no presentation, but I think it wouldn't make things easier. This is something that we are used to doing.

Well first, welcome. Thank you very much for being here with us. This is the first thing that we would like to say. We would like to thank you very much. I am going to thank the investors and to congratulate the team. And I think the results that we are delivering here are good. We can bring results to this amazing team that we have.

And in fact, we have prepared here for you the best of Minas. And the best of Minas, so we understand that Cemig is also part of the best of Minas. Congratulations, Carol and Leo for this event's organization. But we brought to you a great breakfast. We have cornmeal cakes, so that we can have a nice conversation.

And we are bringing to you some of Cemig, that is a symbol of Minas Gerais. And I would like to start by saying that Minas Gerais is changing itself -- it's transforming itself. This is something that is important for me and for you. Cemig -- not Cemig, but Minas Gerais in 2022 had the largest relative share of Brazil's GDP.

In the last years, Minas reached the largest relative share of 9.2% of the GDP. 4 years ago, it was 8.7%. So it's almost 0.5% more of the GDP in Minas' share in Brazil. So that for us means more market, and it shows how much we -- how important it is our function to develop the state's administration. Minas is doing well. And of course, if Minas is doing well, we can bring even more results so we can move forward.

So what do we want to show you? We have this -- because if we accelerate value creation and Cemig's transformation, we can have results. Marcio said it very well. We have a strategy that is very clear. And the strategy is the same, it's a strategy to focus in Minas and win. This is our strategy.

And what we are doing now is that we are accelerating this strategy. You see our new investment plan. It doubles our investment value in the next 5 years. We are accelerating a transformation process for Cemig and also for value creation.

Our dream, what makes our eyes sparkle really is to keep on generating value, creating value. We have seen it, how much the stocks are appreciating with a known strategy, and the company providing more agility, bringing more results and making more people happy, supporting Minas Gerais' development and at the same time, being a machine to create value. So we are having happy clients. We are providing results and we can drive Minas Gerais' development. And at the same time, we are accelerating value creation. And that's what I am going to show you today.

And then I want to talk about something that Marcio touched upon. That's a macro scenario, our overview. How do I see the company's management? This is how we see it. First, what is the company's strategy? And when I got here, in fact, we reviewed the strategic planning. And this review is still valid. As I said, we are accelerating. This planning was declined in 2021.

The first one is, to understand strategy. Then after understanding the strategy, we wanted to have efficient capital allocation because it was very inefficient in the past. We were destroying value with minority shareholding outside of Minas Gerais that would just divide the attention of the administration and we're destroying value for the company.

We are aiming for operating efficiency in the company and we are renewing and revitalizing people, our people area. And that's what we are going to see here. We are going to see a little bit of the strategy, a little bit of capital allocation, the efficiency. And to do all of that, people.

That's it. That's what management is about. To know what you want is the strategy. To know how to use your money well, generate value, create value. Capital allocation, to look for efficiency in your operation. And for -- to do all that, you need people. So that's what we will be seeing here.

First, we start with strategy, and the strategy. And I like strategy because it allows us to say no, because the number of things that come up to us, then that's good. Because if I have a strategy, I can say no because that's not in our strategy. Otherwise, everything is an opportunity would be crazy. So the strategy is to focus on Minas Gerais and win.

This was the first great result. And I clearly remember a chart that (inaudible) brought to us. And one of the alternatives was to try again. And I said, "No, we are not going to try again because to try again, it means any risk to see it happening again."

Which was a wrong movement to have the minority shareholders holding companies outside of Minas Gerais. So there is a very clear message, to focus in Minas Gerais. And there is a indirect message here, which is not focusing outside of Minas Gerais and not focusing on anything that is not the company's core business. That's why we are leaving Axxiom and other minority shareholding areas.

So we are not going to focus in everything that's outside of Minas Gerais. So its easier to say, no. It is not interesting for us to invest in anything in Para. And to win and to win means to generate value. With this capital allocation. When we say the focus in Minas Gerais and to win, it's not only to focus in Minas Gerais, but also we want to add value to the company and to add value to our investors.

So by a process of results maximization and sustainable management. That's how we are going to do it. That's clearly the way that we are going to concentrate our investments in Minas Gerais. And to be concentrated is to be -- in assets that generate value. That's why we say focus in Minas and to win.

So whenever I invest on something, that will provide me greater profitability than the regulatory one. I'm generating value. If I (inaudible) and have a better efficiency than the regulatory one, I'm generating value. So we are focusing in Minas Gerais. We are having cautious investments and we are generating value.

So I think this slide is very clear. If you consider from 2009 to 2018, Cemig invested outside Minas Gerais and this amount is adjusted by IPCA for 6%. So we invested outside of Minas Gerais' BRL 34.1 billion. So we invested 3 Cemig's and investments outside of Minas Gerais. That's right. Yes.

So we -- considering Belo Monte, Santo Antonio, Light, Renova, Taesa, if we add all that up, we invested a minority shareholding stakes with no control, BRL 34 billion. That's cash that was flowing out of the company. And it was not coming back to being invested here in our market, in our captive market.

That will add and we need to make sure that when it ends, they will continue choosing Cemig. And we did not invest in the main market. We only invested BRL 1 billion in this main market. Unfortunately, these BRL 34 billion did not generate value, they destroyed value. That's why our strategy is to focus in Minas Gerais and win.

Because this was not only taking up our time of management, but also it was destroying value. And this what we have done. We clearly changed the strategy. A strategy that -- I believe it's a common sense of strategy. What is the main characteristics of Cemig? What are we pride of to invest in our core business, distribution, transmission and generation?

And Minas Gerais, with a trading company, a huge trading company, (inaudible) talk more about that. So we have already divested and recovered over BRL 6.5 billion in cash. Over 2/3 of our investment plan is already carried out. So if we add up Light, Renova, Santo Antonio, Axxiom, Ativas are these the one, Marcio, but we also have a slide later on.

And if you add up that, and here we have to add, not only the amount that we have sold, but also what did not have in terms of capital injection. And all the risks that we'll no longer have and also the tax credit. So when we left -- give an investment, for instance, like when we left the Light, we not only sold that, but we no longer needed to have capital injection that we would have to add BRL 1.5 billion to bring -- keep my share, but we also recovered the tax credit.

So I have the gain of tax credit. I also gained because I did not have the capital injection. And obviously, we -- so the stocks -- so only that has represented a cash that we are bringing in to invest here in Minas Gerais. And we'll see how much investments here have increased.

So we invested BRL 2.8 billion a year on average since -- in the last 4 years, '19, '20, '21 and '22. That's 7x our historical average. So we also lost half of our generation complex. So I say BRL 1 billion, but actually when we consider the power plant losses, it's much more. So we have invested 7x more than our historical average in Minas obviously because all this investment was outside Minas. So we're generating more cash, and we are investing it, a 100% in Minas.

Marney will be talking about that, but -- yes. A very enlightening figure is the number of substations from 2019 to -- 2009 to 2018, we opened about 5 substations a year on average. Last year, we opened 45 substations. So that's a huge example of what that means to Cemig's cash not to invest in Rondonia or [Para] to (foreign language)

And we're going to talk about our 5-year investment plan.

(foreign language) On average, that's 5 substations a year. Then in 2022, our market valuation was posted at 28.2%, 2x the energy industry index and almost 6x the BOVESPA index. So clear value creation. And that's what we want to do. We want to speed up that process.

And speeding up that process means following the strategy, prudent capital allocation, efficiency, which we're going to talk about on the next slide. And doing all that, to generate value to shareholders and society. This is a value generation machine, and that's what we want to do.

So the second comparison. First, we have prudent capital allocation. Whenever we invest, and the return on investment is higher than the regulatory average, then you're generating value. And we can do that better than the regulatory work.

And the other thing that generates value is when we're able to cost less than in regulatory term. If you look at distribution, everyone knows you have a value for PMSO, operating expenses and another one for losses. That is added to the tariff paid by consumers. So you have the basic tariffs plus capital.

The return on capital than PMSO and then we pay for losses. In the past, we were never able to keep to what was in the tariff. We were more expensive than the regulatory PMSO or regulatory expenses, and we had more losses than the loss that is included in the tariffs.

In 10 years' time, we managed to consume BRL 7 billion out of tariff that was cash, that was leaving the company because we were outside the regulatory limits and outside technical -- regulatory, technical and commercial losses. But now we are within those parameters. This is a huge adjustment.

It's over BRL 700,000 a year, 7 billion divided by 10. That's about 50% of our PMSO plus losses. So we made an adjustment that was more than 15% and -- we had two buildings. We left one of them. That was the Aureliano Chaves building. That cost about BRL 40 million to BRL 50 million.

We had two airplanes, plus the hangar. The hanger alone cost a few million reals a year. That's not counting the actual aircraft. We also had post-retirement benefits, perpetual retirement payments, which is a right to inheritance after retirement, but life insurance added to that.

We were also able to negotiate. That's no longer available. So if you add those things up, it had a huge effect on breaking operating expenses plus losses to within regulatory parameters. That makes a huge difference to cash that stays in the company that used to go somewhere else. And that cash is reinvested into those BRL 2.7 billion or use in opening as we did 45 substations.

And that's what allowed us. And my hat goes off to Leo. 5x net debt over EBITDA to less than 1x net debt over EBITDA. That's 5 to 6 notches that we've gained. And our rating now is double A+. So in 4 years' time, to get 6 notches given by rating agencies, that's quite a lot because it takes a long time.

People reviewing ratings is not something easy to do. And obviously, right now, it makes a huge difference, having competitive cost of capital because of our rating. So these are the key points for me: Strategy, focusing on Minas and investing, winning, capital allocation but always prudent capital allocation within Minas and consistent efficiency to generate cash so that we can carry out our investment plan.

That is what generates value. And for the first time in history, we are within regulatory loss limits. And these are the results. Our share price has gone up. Total shareholder return was 235% from October 2018 to 2022.

In terms of dividends paid out, we're talking about BRL 5 billion in market valuation BRL 28 billion. Total shareholder return used to be minus 25% from 2015 to 2018 and October 2018 to 2022. It's 235% up. So that's the kind of value creation we want to have and continue to have.

Is this Gasmig? Right now, we are executing the company's largest investment plan in Minas, and we will show you that. Last year, we invested BRL 3.5 billion. In 2017, BRL 1 billion; 2018, BRL 900 million. It's 3.3x more.

And we'll be talking about the future in a minute, and we want to increase that BRL 2.9 billion in distribution, BRL 137 million in generation, BRL 340 million in transmission plus Cemig SIM plus Gasmig. We will break these down in a minute, but this is the overall message.

We have broken the distribution record. We will capitalize on BRL 7 billion in this tariff review coming up in May. Concrete example being the 45 substations, with an annual average of 5 in generation. Thadeu is here, our Chief Generation Officer.

I love it. The best of Minas, for you and that symbol, it was his idea and our communications department use that. He's not an expert, but he has great communication idea.

Generation. It had been a long time since we had invested in new plants -- sorry, what? This year? BRL 1 billion. We're executing on (inaudible). So that's another 180 megawatts. But that's years later since we build any new plants.

We also won a transmission auction. It had been years since we had won an auction. We won one last year, and we hope to win another one this year. Gasmig, also same thing. Where's Roberto? He's here. We are investing heavily again. We're building a gas pipe. The building process has been successfully concluded for (inaudible).

Again, it had been years since we had made considerable investments. Gas pipelines and distributed generation. We are market leaders. We're very proud to say that we are leaders.

And actually, still on strategy. All of this is 100% Cemig, no partnership. That's another change in our strategy. We no longer have any new partnerships. We want to do this with a Cemig know-how. This plant is 100% Cemig. Our model at Cemig SIM is also organic.

If we're going to acquire anything, we want to buy 100% of the asset. So this is a change to our previous model, which included lots of partnerships. So the process is we're not going to grow -- generate and/or likely Renova, San Antonio or Belo Monte, we're going to grow generation through Cemig engineering, Cemig teams, Cemig -- 100% Cemig capital. Even Cemig SIM given the new reality.

Now that we can use the reservoirs, doing floating solar power, so distributed generation with Cemig know-how, Cemig engineering and Cemig teams. So that was our previous strategic plan, BRL 22.5 billion. We've contracted BRL 18 billion already. This is the new one.

We announced this on Friday. Was it Leo? Or Saturday? Our strategic plan or the material fact was disclosed today. Our strategic plan was BRL 22.5 billion is now 23, 27, adding up to BRL 42 billion. So we want to speed up a strategy that is working, that we are familiar with. It will accelerate the transformation by investing in every single area, regulated market, BRL 18 billion in distribution, BRL 3.5 billion in transmission, BRL 2.3 billion in natural gas.

And in the free market, this is probably the biggest change, BRL 30 billion in generation, BRL 1 billion in innovation and IT, plus another BRL 3 million in distributed generation. So we're clearly -- I think on the trust we have in the country, we have the state support. The state is growing more than the average.

So that means we'll have a market for all this investment. And right now a large part of this, especially in the regulated market, has been contracted. So we just need to execute on our investment plan, which is highly ambitious, but it fits with the rest, this will generate value, create value and help transform Cemig and support the development of Minas state.

That's what brings a twinkle to our eyes. We can generate value, create value and to drive growth because every time we can do this with cost of capital that is below regulatory limits from generating value because we're doing it by being efficient, keeping operating expenses and losses within parameters. And if the cost of capital is below regulatory average as a consequence, we are creating value to the company, and at the same time, we're meeting market needs, keeping customers happy, creating employment and helping to drive growth in the state of Minas. So focusing on Minas, generation, distribution, transmission, excellent service with maximum efficiency, safety, focusing on results and making the largest investments in the company's history.

This is a snapshot of our divestment. Every time I say focus on Minas, that means moving away from focusing on other places and if you take a look, we used to have 191 companies when you add up all of our SPCs. We now have 55, Axxiom, Ativas, Renova, Santo Antonio, Light.

This is what we saw previously, including all the cash resources, but also the cash and interaction that was avoided as well as tax credits. -- and a lot more. We used to have, for instance -- this uses up huge management resources. When I first arrived -- our Board meeting -- our executive Board meetings are all about the shares, about the stakes. Thankfully, these assets are no longer part of our everyday life.

So there is some risk -- are no longer part of our everyday lifetime. We have relieved some -- we had to buy them because we buy power from these companies above market prices because market prices have dropped. If we had any trouble with creditors, we had to renew the PPA.

Based on those very high prices, we are free from that now. Reducing guarantees in the Renova case. We had the deep personalization risk -- I'm sorry he's the lawyer. He's knows what I'm talking about. This is considering legal entities. So that Renova that could be 100% transferred to Cemig, and that's no longer the case.

So all of these (inaudible)obviously, you're free from all these risks. (inaudible) we now have to make investments in these projects and inject capital and but we're also free of the risks. And obviously, we were only able to do that because we were bold in our management. Accepting that a company you have a stake in goes into judicial reorganization. You have to be brave to do that. You have to have good lawyers and you have to have the courage to say, "We will face that risk in the name of the company, and we will create value, and that's what we're doing. We are creating value because -- we left Renova, we left Light, we left Santo Antonio and others that seem smaller like Ativas and Axxiom in these cases."

Our operation control system used to be through a company we had a stake in. How can you have the best system in the market like that? What if there are any delays? We weren't able to, so Marcio mentioned IT. We are making huge IT changes.

We're going to have a whole new (inaudible) because we were able to let go of risks associated to companies who had a stake in. So when we talk about divestment, it's not just about the financial value that came in, it's also about being free from all this risk.

Gasmig. I have already touched on this. What's great about this is that we are making considerable investments again in the state of Minas. The first point is we have renewed the concession for another 30 years. That's the key point. Gasmig's concessions were maturing, but we have been able to extend the concession for another 30 years, which ensures huge potential.

This is one of our main value creation drivers. We have a concession for 30 years with the state of Minas Gerais and we have another 900 kilometers of network, and we have contracted the gas pipe to (inaudible) even up supporting the development of the state of Minas whilst creating value because the regulatory walk is higher than our cost of capital, as I said previously.

Cemig SIM, again, same thing. Everybody knows that Minas leads distributed generation, especially remote distributed generation. Minas is always 10% of Brazil, generally speaking, 9% to 10% of Brazil.

On any terms, the GDP, population, we always revolve around 9% to 10% of Brazil. And in distributed generation, we are -- we account for 25% of Brazil's remote distributed generation. State of Minas accounts for that. Obviously that means a huge effort by the distribution company in terms of connection.

We have to connect all of this, and it happens at huge speed. So it requires heavy investments. And we are doing that, and it's an opportunity for us. It's an opportunity because there's a lot more investment going into remote distributor generation here than the rest of Brazil.

Our target is BRL 3.2 billion. We have updated our strategy, which means these investments will be made in generation. They are 100% Cemig. We'll be using our own engineering. And we have a huge potential for innovation, which is floating distributed generation because of our reservoir. So a large part of these 540 megawatts we have here will be in floating solar power plants in our reservoirs.

So this is innovation and making the most of opportunity. And we have all the connections we won't need to invest in connections as much -- the bottleneck was the connection to invest in the reservoir, and we will debottleneck that. So that was capital allocation, investing and distribution, generation, transmission, gas, distributed generation.

This is that same chart I mentioned earlier to achieve operating efficiencies (foreign language). So we were above the regulatory limits, and now we're below 318 to 199. That's 94.8%. And again, EBITDA minus 902 plus 600. All you need is look at both ends. BRL 1 billion adjustment. We were more expensive than what was in the tariff, and now we are cheaper than what's in the tariff.

And we can't go back on this, right, Leo? Now that we have achieved this, we cannot go back on it. This has to be within technical and nontechnical losses as well as the regulatory PMSO. It's quite and achievement. We can never lose that. It's almost like you can't put on another grain of fat. We have to preserve this efficiency.

And now we're going to -- so I've given you an overview, which includes a clear strategy, prudent capital allocation and operating efficiency. Those are the three key points. Our strategy is very clear now. We know when to say yes. We know when to say no. In fact, we have been saying a lot of no's because they don't fit with our strategy.

Very prudent capital allocation. Substations still have a 50% loan. One new substation that we open has the load that is close to 50% of its capacity. So what is the risk of that kind of investment? It's very low because we're starting off with 50% load. How can anyone say that's not prudent? We have a study, and the planning department has played a key role in our making prudent investments.

When we invest in generation, we already have the DPT associated to that. In (inaudible) we're doing that, but we have already signed a PPA. So this is a free market. We are making an investment that is attached to a PPA that will ensure certain profits. Not only do we have a PPA, but we also have a turnkey project in our CapEx.

So just like financial investors do in generation business and in distributed generation, it's the same thing. It's a large market based on a discount applied to the main tariff, the distribution tariff. So efficient allocation and efficiency.

As for ESG, the environment is key to us obviously. I'll go back to this in a minute. I went back -- so I'll skip this one. So we're starting with G rather than E. We'll talk about G, but then we'll talk about E., and to everything Marcio has been saying.

So I'll start with this one. This is a major topic. We have to thank the Board for the opportunity to -- our team. The Board has approved up to 40% of Cemig leaders, made up of professionals who don't have to sit an exam. Right now, it's 14%. So it's the mix of internal and external talent and professional management, and it will make all the difference.

Because we need people to do everything I've just told you about, to implement that strategy, to have prudent capital allocation, to have more efficiency. To do all that, we require good people and also to bring oxygen and to combine talent and to have more diversity at Cemig. And that means not necessarily having people sat a public examination.

There has never been any political influence on what we do. We have no connection with the governor or any government representatives. Our management is 100% professionals. And all directors, all chief officers were hunted -- were hired by headhunters. And internal employees go through a formal assessment. So it's a formal assessment conducted by an independent company or professionals hired by headhunters.

I was hired by a headhunter, Thadeu. Thadeu was (inaudible) was -- no exceptions. And our own talent goes through an assessment. And right now, we're able to do that, not only for directors, but for all leaders. So 14% of our talents didn't sit public exams, and that brings in new oxygen, more diversity, new ideas, which also creates value for the company.

And we can see that in our climate survey. We went from 64 to 75 overall satisfaction, 86, diversity, 82%, opportunity for growth, 64%. So -- and this -- and the way we think what we want is to work so that we can have a client-centric culture.

Our family is Minas Gerais because I am -- I have in mind a catering serving the Minas Gerais clients that are here. This is a gradual change. And that's what we have been doing. We are leaving a procedure culture, and we are going to a culture where we have customer at the core, we have to consider the clients at the end that we have also deployed the procedures.

But the rationale is, first, I need to think about customer satisfaction and reach customer satisfaction. I have to follow all the rules and procedures. But when we think about the customers' pain, I have to go that extra mile and differently when I just look at procedures. So I have to work with both.

So people is a process, and I'm going to repeat what Marcio said. People is a permanent process in a number of things we have grown. We have evolved, here you see this new talent, and we have a lot to be done to evolve and that has to do with creating a customer-centric culture, and that's what's going to make all the difference when the market opens.

If I'm thinking about the client, that's what's going to make all the difference. I don't know how much time I have, but I would like to congratulate the team from the commercializing company. Thank you very much. And congratulations to the trading team, Dimas and Marcio, once again. I have to share a secret publicly, but it's not a secret, of course, because I'm saying it out loud here.

But wherever I go, I hear companies say, and they tell me, "Well, I have contracted your energy large companies, large companies contract your energy, and you put a hard ball on negotiation." And that's what we want to do. We want to play a hard ball at negotiation, but we want them to close with us, to sign a deal with us. So we have the largest market share and energy trading in Brazil.

We are leaders here in Minas Gerais, and we are very strict because we also want to ensure profitability in this leadership. So really, I congratulate you because -- I want to add an opening -- Sigma's opening. It was Friday, if I'm not mistaken.

This is a lithium company here at Jequitinhonha Valley. This is a huge transformation in Minas Gerais. This is a company that now is worth $3 billion. They are producing green lithium in Jequitinhonha Valley. Where do they buy their energy from? From us. They could buy from anyone, but they buy power from us, and that shows our capacity of delivering.

And obviously, it shows the potential that the state has. The state is seeing in terms of growth opportunities. And because new investments are coming in to Minas Gerais, so this is the culture that we have. This is the culture for the next moment when we have a market that is freer, but this is what we already have been able to reach with our trading company.

I already talked about this other slide here. We have some other important topics. I will talk about as, we talked about governance, about the professional management, all the talent, the internal and external talent that come in via assessment or headhunters. That's very professional management with no political interference. This is a culture that aims at clients and customers, especially at the core.

And here in terms of other programs, considering our social responsibility, now we have 1.2 families benefited from our low-income tariff. And that's also, thanks to simpler procedures, we were able to more than double the number of families enrolled in the low-income tariff program.

We are thinking about the clients. The customers before we had so many procedures they were not able to enroll. Now we simplified it. We doubled that number. So here, we were able to include more than the total population of (inaudible) in terms of number of families that now are under this low tariff -- low-income tariff program, and that means that they were able to save around BRL 56 a month in their energy bills, and that's money that they have to spend on food, for instance.

And that is -- just because we were able to change a special procedure and we were able to benefit that huge number of people by the means of this low-income tariff program.

There is another program that is called in the (inaudible), we have public lighting using LED 100% of the municipality.

It's a huge program, 490 towns, over 120,000 public lighting fixtures. And also, it is important for us because it decreased losses. [Energia] is also important for us to decrease losses, and we are able to take electricity to all those people that have a hard time receiving it.

So this has a huge effect socially. And also in terms of carbonization, because when we go into our zero target -- I'm not so -- that's here -- that's our ambition. Our ambition is to reach carbon-neutral up to 2040 -- up to 2030, we want to be 75%. That's right.

So most of companies is 2050. We want to be carbon-neutral in 2040. In 2030, we want to be 75% clean. And our challenge is the loss. So whenever we are able to improve losses via Minas LED and also via program Energia , we are also aiming to be neutral carbon, and this is what we are proud of.

We are in the Dow John Sustainability Index for over 20 years. We are the single company -- electrical company that is in the Dow Jones Sustainability Index for the last 20 years. And also, we got here the Carbon Clean 200. This is the certification. We are ranking the 37th in the world. And in Brazil, we are #1.

And our objective, which is very clear, is to have zero target -- target zero for 2040. 2030, we want to be at 75% I already talked about our program, Energia . I think that's it. So I am finishing within my time here.

I was able -- well, I still have 8 minutes left for a wrap up.

I would say that -- I need to say that I'm very happy to be participating in this journey. That makes a lot of difference for us. We have to keep that sparkle in our eyes. And I do wake up every day with that sparkle in my eyes to continue to carry on this transformation project.

And when you see the results, we only get even more encouraged. And so we would like to count on the support of all of you to move forward in this transformation project. And I am sure that it's already generating value, and we continue generating value. And at the same time, we will allow for a company's transformation, and this company will be the driver of Minas Gerais' development, improving the quality of service, providing -- also providing a better life for our consumers.

And that's why we are here, and we are always paying attention to that. We obviously have our own biases, and it's always important to hear from you -- to hear your opinion so that if there are any improvements to be made, we are willing to do so. All the Executive Board will be available by the end of the day here in our afternoon so that we can have a Q&A session. And we just want to be a machine to create value, to transform, to change, to generate value to shareholders, to drive Minas Gerais' development and to better serve the people from the state.

Thank you, Reynaldo, very much for the presentation of the new strategic planning phase. I would like to have you a few more minutes on the stage. We will have 10 minutes of Q&A before turning to the results of the fourth quarter of 2022 with Leonardo George. So now we'll go for a Q&A.

So should I tell a joke? So we'll have a microphone here for questions.

This is [Pedro] from JPMorgan. Thank you and congratulations to the whole team. About expansion in generation, there are R$ 13 billion invested in the next years, and we have not seen good returns, especially in greenfield. How do you intend to work with capital cost? Also in GD, this R$ 2.5 billion are under the new rule or the own rule for the GD?

Let me start by the first question. The R$ 3.2 billion is the old rule. Of course, the number of incentives that we have in the old rule was much greater than in the new rule, but we do have enough projects. So the answer is that this R$ 3.2 billion, we already have assigned projects that will allow us to reach those R$ 3.2 billion of investment.

The second question, I think your comment is that we know what is -- how low is the energy price right now? And we do have a challenge to turn projects feasible. But we can always have brownfields. If you don't have the green future, you can have brownfields. We prefer to have the greenfields and my (inaudible) is doing.

So not many times in life, you will be winning as much and I had to make that joke. So obviously, what we have done with Boa Esperanca and Jusante is greenfield. But in general, I would say that it doesn't make sense to have the largest trading company of the country and to buy outsourced energy if you also generate energy. So we changed our strategy.

We have largest trading company in the country. We have a single understanding from our clients. We see the results of our trading company, and we were doing that -- buying energy from third parties. So we have a technical capacity to produce projects to manage projects, and we have a trading company that has a single understanding of our clients, and we are going to put these 2 things together.

If I can put these 2 things together with a greenfield batter, if there is no feasibility for greenfield, we do have M&A projects that are feasible. And then what is important is to have the discipline that we are going to look for these M&A projects within my strategy that is (inaudible) very close to Minas Gerais eventually, but it has to be Minas Gerais. I'm not going to go for an investment project outside of the state.

Daniel Travitzky from Safra Bank. I have a question about the return rate. A large part of your investment in the strategic plan goes towards distribution and you have a return rate of 11% to 14%. So I would like you to compare this return rate for the distributing company, how much you see that above the regulatory level? And if you can talk about how that compares -- how the return rates compare?

And a second question, if you allow me, how do you see the risks involving the distribution contracts extension analyzing this amount of investments. Well, I think you cannot compare vast R$ 18 billion and invest in distributed generation or investing in the regulated market in the competitive market?

Obviously, the profitability in the distributing company is lower than the distribution -- the profitability in GD. But there is -- the capital considers the existing risk. So this year, but a generation has a high potential of return. And the figures are very positive. And we see that there is a rush also from Safra Bank to invest in distributed generation, a huge rush of investment in distributed generation that tends to turn to a more normal return, but that will depend on the discount that you were going to give.

So here, we have an embedded risk -- is the risk the discount that you were going to have in the final tariff in the current situation, this remains to be a profitable investment. And that's why we have a fluctuating solar generation. It costs a little bit higher than internal GD. But because the connection is easy for me. I can be agile. I can be quick. And that's what explains this investment in distributed generation.

And when we look at a distributing company, that's a whole set of things. It's not that I'm going to have A, B, or C, a specific profitability by asset, but I will have a profitability according to a CapEx. So for the situation #1 is for a total CapEx that I have invested.

And then we have 2 objects. So first, I would say that if I have R$ 10 billion of investments, I want to have 0 disallowance because if I have disallowance that is going to affect less my basis. Second, the capital cost, our capital cost is lower than the regulatory walk. So if I am able to finance lower than the debt cost that is on the regulatory walk. And I understand that it's lower than the regulatory walk. I can't generate value. So we have to ensure a debt, obviously, that is attractive.

In terms of leverage, and I have to leverage lower than the debt cost that we have at now, the regulating agents and ensure that the disallowances as minimal as possible. Let's hope so. I can't do it in the middle of the tariff review. But in the last tariff review, it was 0 disallowance. Everything that we are doing requires a huge planning in order to ensure that this is a needed investment.

And here, we -- there's an advantage here because we didn't invest much. So now we need a lot of investment and I can do it. So here, when we open a new substation in average, we have 50% to 55%, that's a lot. So it's cautious, right? And also there is a qualitative consequence, right? Because with the line that -- we have a huge line for the connection request. So if distribution is not prepared, this line won't move. We won't have the connection ability. So you connect and you connected nothing. So it's also important to meet this growing demand.

Andre Sampaio from Santander. Marcio, I have a question for you. I would like to understand what is the difficulty. What are the challenges in dealing with the company that has a natural turnaround process company. And you mentioned in the beginning of your speech and comparing that to the privatization process. So how do you bring together these 2 processes in a way that one does not get in the way of the other and to make sure that both of them can work hand in hand.

Well, these are 2 simultaneous projects, as you said. But 1 is really moving forward the turnaround projects. And here are the results. We just work on them. We carry out, and we are able to achieve some objectives. The strategic plan, as Reynaldo said, is a limit to say no. So the worst thing that we could have in the strategy is a good idea. So when you have a plan that is defined, you'll say no to any other ideas. So you have a wholesome plan because you can carry forward this turnaround project. You have a strategic plan that allows to say to define what's in or out of the projects. And you can see no to some good ideas. Otherwise, you are going to have a patchwork thing.

On the other hand, the prioritization plan now a days for Cemig is more of a preparation. I mean we have to be ready so that when you're ready to do it, we are really ready for the process with all the questions already addressed with the most relevant issues taking care of everything related to the corporate structure because that has to do with the stage.

So this is more of a preparation for when the general assembly approves some type of privatization, that could be a simple privatization, could be corporation. There are a number of options, but so -- we do have a plan that is ongoing, that is bearing results. And the other area is a preparatory area. I would say we are -- we will be ready to execute the other one -- the other plan when the time comes.

Another question about the transmission CapEx. How much of that transmission CapEx is regarding new lines and how much of that is just to reinforce existing projects in the original contract?

Most of them are just to back up improvements by far. We will have a Q&A with all the other officers. So please you can ask Marcio questions here. And no problem, you can ask anything you want, but we will be here the whole afternoon and there's going to be a Q&A by the end of the day.

My name is Giuliano from Bank UBS. So how much of your agenda today is focused in privatizing the company? That's my first question. And how much the agenda of the Board and the CEO is taken by the privatization possibility. And also on generation, out of these R$ 13.4 billion, do you have a target here for Mega? All of that is focused in Minas Gerais and how much of that is from HPP and how much is renewable?

About the agenda, we had an agenda consumer in the agenda that was huge and that was Light and Renova. That really used up and consumed a lot of our agenda. It was really that would take up a lot of our time in hours, but also our intellectual agendas. So we cleaned up that agenda and now our mindset is focused in Minas Gerais once we left the low profitability or negative profitability assets and now we're focusing on the good ones. So that allowed us to concentrate on privatization.

And here, we are working on that and we are working closely with Minas Gerais' administration so that we can show Minas Gerais' administration and tell them the reason why this is a good option for them to be able to approve it.

In addition to that, we have a preparatory agenda. There's nothing much that we can execute that we can actually do? And how this is going to be on the day after? We are just a preparation. So it's done, what are we going to do in the next day? So we had advisories that we are working with and internal actions that we are doing to be ready. But there is something that is key, we need to have the government's approval.

So now we have a favorable environment, we from management are favorable to that because of the objective reasons because that's going to improve the value of the company and also for subjective reasons as well. This is the single nonprivatized company in the country, we are the only ones. Is that right? So I think it does make sense to take that into consideration.

We always communicate with the government, and we always have meetings. And so that's also very active. First, I would like to tell you my personal opinion, just like Marcio's. Also, this is the opinion of top management. And I believe that -- as an officer, I believe that it's great for Cemig to become corporation to go through this privatization process.

So this process of acceleration and value creation is going to be even more accelerated in the movement that we might have of turning into a corporation or have the privatization of the company. So I'm thinking here as an executive.

I think this is positive of the company. The company will no longer have some management eyes and that will allow this amazing company that we have to generate even more results to the investors and to the society and also to -- we believe this is very positive for the company itself. The company will gain sustainability and long-term survival.

Now as far as our relationship with the state assembly and with our officers, we have something that we need to discuss, which is the concession -- which are the concessions. And [Alexander] is here, and he can tell you more but by November of this year, we have to request the extension of our concessions within those 49%, and I don't know the number of the decree, [it's decree 9 to 71,] our concessions are doing 26, 27 but we have to send a letter saying that we are interested in the automatic extension and this letter has to be sent by November of this year.

And we also need a report from the state house, the state assembly by November of 2023, they have also to approve the extension of these concessions. And here is more than 50% of our productive areas. So we have been discussing that with the executive power and state assembly to avoid what happened in 2015 or '17 when we lost some of the concessions, it was in 2015.

So about our CapEx, the R$ 13 billion, obviously that is associated to a number of megawatts, how much is that, (inaudible) 1.9 average and obviously it is 100% renewable and that includes the renewal of the concession grant. So part of that is [H50] because includes the renewal of the concession grant, but the investments will be in wind and the photovoltaic.

I'm sorry, they are not using the microphone, so we can't hear what is being said. So that you can understand, we have 2 options. First, we can change our head office and that needs the state assembly, and that's the option Parana's administration chose. They will ensure 100% of the renewal of their concessions by changing the corporate structure of the holding company.

And we have another option, which is to retain 49% of the SP, the concession grant that is due and then I have another private entity will take over the 51%. That's under regulation. And for the second option, we need an opinion from the state assembly. The state assembly needs to approve this model, ensuring that we have the automatic approval of our 49%, and that has to come by November of 2023. And I can also go for the auction.

I think our time is up but just one more question, please.

Well, this is Joao Pimentel from BTG. A lot has been said about privatization and the obstacles but we do need the approval of the state assembly and something very simple here. You said that you are not discussing with the state assembly. Yes, when the government intends to discuss with the state assembly? What is the timing here involved? When do you think you will be able to start and follow the process of our privatization process and we know it's a long one. Next year, we have municipal elections. We know that is a critical period of time. So we don't know when that's going to happen. That's what we would like to understand. Are you going to submit this proposal to the state assembly right now? Is this a negotiation that takes time? Do you have a time line involved here?

We want to do it right now. Don't want to waste any time. We've had meetings with the government where we emphasize the need for the government to mobilize right now with the assembly. That's what we want. We want to get the approval. But obviously, the government has its own interest. It's not just about Cemig. There is a strategy to take those topics to the assembly to get approval. From our side, we believe in it. We've been working very hard on it.

I believe that it will happen in this term, it didn't happen in the Governor's previous term, but it takes time, as you said, so we need to work hard. We need to bring in central bills and try to get immediate approvals. But it's not just in our hands because shareholders own the capital and they should be doing that. They have a power (inaudible) at the assembly, so we have been supporting that by the information to get approval for. It's not in the hands of the company's management. We just operate. The capital plan is done by the government, really (inaudible) and we're working hard to get it.

Thank you Márcio. Thank you, Reynaldo for your time. And as we heard, we will have another Q&A session (inaudible) for your time. (inaudible) now, we will hear Leonardo George about the last quarter and the year of 2022 result.

Thank you for joining us in person and thank you for joining us online. We have our foreign investors who are listening to the simultaneous translators, and we also have our investors here, analysts, bank representatives who are here with us. Thank you so much for coming to the land of Cruzeiro Sports club. I'm sorry. I apologize, but I do have the microphone. So I have the power of speech and I am going to make use of it, so I must share 4Q and the year's results with you but I wanted to talk about investments first.

Reynaldo showed you the investments we'll be making in the regulated market and competitive markets, we do have the balance to R$ 42 billion, our leverage will be kept at (inaudible) levels, low levels. So it's not to affect our rating. But in free markets, competitive markets, the future price of energy is one of the main variables for the company. So investing in the free market of R$ 13 billion we saw for generate, for instance, will be made considering future energy prices in brownfield or greenfield.

And Marcio mentioned many times during his presentation that we need to have the right capital allocation and the right capital allocation plus financial discipline in allocating resources, that's part of our everyday life and an important part of decision making. So those investments when we disclose them to the market (inaudible) that they will be adding value to our shareholders considering market variables with regards to raising fund and the future price of energy, which is a key variable, especially right now when energy prices are so low considering last few years of favorable ideology.

But we'll have an afternoon presentation by the (inaudible) about this topic. And during Thadeu's presentation about generation, we will also be hearing more details about how ready the company is for this future. How the company is very organized to make the most of the market opportunities when they present themselves.

I have to continue to talk about my football team. No, maybe I shouldn't. As I said, these investments will respect the discipline we have in allocating our funds over the next few years.

We've been doing presentations for 3 years. And when we did this presentation a few years ago about talking about the companies focused on planning. We were dealing with very difficult questions. Some investments that did not work out. Our debt profile wasn't great in the short term, there was a lot of pressure on our cash management (inaudible) divestment program at the time.

It had to do with how the company was dealing with cash pressure. Sometimes it had R$ 10 billion maturing in two years' time. It was a very tough time for the company. But in the last two years, we have been able to change history. In the past, we were also in discussions with the federal government about renewing concessions, losses that led to the loss of half of our generation complex. These were tough questions that led to a drop in our rating, the cost of (inaudible) at the end of 2017, IPCA – no not IPCA, it was the dollar value plus 9.5%, which isn't that scary right now, but at the time it was very high.

So since then, over the last few years, we have been reorganized our leverage ratios very low. We have the balance we need to make investments. Reynaldo told us we have invested in operating efficiency and we are on a whole different (inaudible). So our drivers now are our operation and our everyday life.

We have an issue with our files, so we are going to switch you (inaudible) if you don't mind Leo, and then we'll come back with (inaudible) would you be so kind?

Do you think I know my presentation byheart?

As Leonardo said, Márcio left one minute, Reynaldo left eight and you left 29. There is no way I'm going to beat that record. Okay. Yes, first slide please.

Good morning, everyone. Welcome analysts, investors. It's a huge pleasure to have you here with us. I also want to thank Reynaldo for believing and supporting our wonderful project. Leo, all the directors, all the superintendents who are here today.

And I also want to thank everyone who's working here and our clients, the hotel. Am I changing my own slides? Okay. Great. And I want to thank hotel, one of our R$ 9 (inaudible) and I want to say that we are going at 106 kilometers an hour, 106 an hour mean every -- we connect 106 new customer distribution. And those customers need investments. So if we want to speed up our connections, we need to increase investments.

And if you do it, well, like sigma did, as Leonardo (inaudible) those amazing customers we connected this year. We'll need more investment. And (inaudible) make it easier for them to join our trading company. It all starts with distribution. We need to meet the needs so that we consolidate our relationship with our clients. As I said, our solution by expansion and focusing on our clients. This is a highlight. We used to waste a lot of time, establishing relationship, no channels with our -- we have a strategic partnership with IBM, we brought them on Board with us to helping to digitize our customer care which has made our life much easier and it has allowed us (inaudible) and improving operating...

We will know that and I think it's important to say, I always say this to my team, losses and default go hand in hand in distribution. The company has to be doing well. Both in terms of losses and in terms of (inaudible) because if we stop, just (inaudible) we'll go up, losses will happen anyway so (inaudible) in distribution we'll (inaudible) have a consistent (inaudible) and that's how we work and that's what I'd like to show you right now.

(inaudible) Just to highlight our investment was record R$7.2 billion CapEx in 2018, 64 substations as Reynaldo said, last year alone on average as Reynaldo said number of substations that is what will allow us to connect our clients. So it's our heavy clients, clients that use some energy, R$ 2.5 billion for substations, 1,500 (inaudible) transmission lines, because that needs (inaudible) highlight. And we have a lot of burn downs, there's a lot of burn down and (inaudible) suffer a lot. We really have right maturity (inaudible) replacing (inaudible) worth of transmission lines. We're also connected (inaudible) generation points a 118,000 works, clients are now, they are complaining, we have to keep our deadlines.

What about revenue? This is very important. We have 235,000 meters. They are smart meters. In total [260,000] smart meters, close to 9 million clients in parallel but 64 (inaudible) is protected in our billing. We monitor that consumption and our revenue is (inaudible) good because we also monitor all of (inaudible) Also 860,000 (sic) [862,000] obsolete meters are being replaced. So more than one million [of share alone] considering a 9 million customer base.

So more than 1 million (inaudible) these meters (inaudible) you must replace all of the obsolete meters and that will stop losses on our customer base and we will also not lose any energy that's the main thing. When meters get old, everybody knows they favor customers (inaudible) and we are also focusing on the MSO that Reynaldo said, how do we reduce cost? Like this. We have 400,000 kilometers -- 300,000 (inaudible) and we want -- 30,000 kilometers single phase and these reconnectors are completely automated. They're the best (inaudible) They reconnect automatically. They bring the number down to zero without happening anything (inaudible) any temporary outage needed a team outside we had to send and you know what (inaudible) is like distances of. So wherever we've installed, we have (inaudible) the interruption by 2023, that is (inaudible) and its system reliability.

Now let's go to CapEx. 2023 to 2027, 30,000 kilometers of single phase will be converted (inaudible) teams, this will turn family agricultures into agribusiness owners. This is all about development as Reynaldo said. And this is the contribution (inaudible) we want to help rural farmers. We'll also be building 3,500 kilometers of distribution lines and we (inaudible) We have the largest number of smart meters which is zero or (inaudible) 240,000 companies have metered connections. (inaudible) It's because of our problem either they are illegal barrier or it's not allowed to have power, they are going to meet with the government.

They all felt we can make various legal that we can provide this neighborhood 6,000 families and 4,000 families have connections thanks to the flow of the distribution group. 135,000 (inaudible) is a lot of people with illegal connections. And we will only deal with this if we were other agencies to find a solution and (inaudible) we have the MORE POWER program, we will be building another 136 substations (inaudible) government program (inaudible) have full energy coming in hopefully this number will only increase from now on.

These are our substations. We had planned (inaudible) R$ 3 billion worth of investment and as Reynaldo said, our distributed generation ones come out with 100%. Yes, really, because we put our energy availability map for distribution generation. You know that there is a limit of 1 to 5 megawatts, on average 2.5 (inaudible) exclusive, was substation (inaudible) now.

We'll only open it 2 years from now, we have to deal with (inaudible) buying equipment (inaudible) place the order and then we just wait.

And everything goes together, they want to connect closer to the substation, they find the land, they get everything ready. And they just wait for the substations to be ready. And the loads revolving around 55% to 60% depending on the (inaudible) more power. We have another 200 substations, 50% more both in number and also in power, amazing great energy availability. It's all about investing in Minas. (inaudible) I asked our engineering department to come up.

We talk a lot about bent approach, last year 3.5, 4 megawatts. If it's not available, customers will go somewhere else. I want to talk about the loads that we are working on right now. We connected (inaudible) 2.2 gigawatts of loads that are required (inaudible) by the substations and the line (inaudible) available. This is a time who had these generators and we thought I can't believe this is happening in the countryside of Minas. I don't know what it's like in the country (inaudible) to be updated (inaudible) would be much better program, much better for us, much better for everyone. I'm not even talking about the climate and (inaudible) look at these minerals, look at our (inaudible) very proud to have this project at the company.

Now, these new substations and (inaudible) have to do with people moving from cities to (inaudible) pandemic and rural areas are growing considerably, and there has been (inaudible) in urban areas and rural areas, the green bars (inaudible) areas. After (inaudible) was an increase. And we also began to make more load available so that 2.2 (inaudible) in addition to the organic growth, the increase in the number of houses and flats. This goes to show that there's potential for even more.

I mentioned too and coincidentally, (inaudible) today with 2.2 megawatts of distributed generation. These are all the connections. And we really have to make effort to offset (inaudible) because we are (inaudible) this is a active market, which (inaudible) if you look at the total market, we're about 6% of the energy. Now, system reliability, these substations, in addition to making load available, as Dr. Marcio said we also need to improve energy supply quality and reliability. We're talking about 948 right now, regulatory is 99.9% availability of energy.

So that's GPT. If you google it, you will see that this public service index is well over all other services, (inaudible) reliability, has a very high level of public service. And to consider all these investments, all the work that is being done, we had to change our strategy, engineering and this is our logistics operation, this is how we get our material. We had to set up 2 distribution centers.

We have a third one being set up. We've requested another one. We're talking about 1.54 million (inaudible) 1.1 obsolete meters. We're also replacing (inaudible) 1.5 million meters that have to be regulatory deadline. If the posts have to be ready when they are ready (inaudible) also implemented our (inaudible) logistics. I mean images speak louder than words. We are reusing materials. This is the kind of (inaudible) we might be losing. We removed a material that hasn't been 100% used up, and you have to make use of it. Otherwise, that's a loss. So our asset management focuses with logistics.

Great. (inaudible) loss. All of these material were being directly managed with the construction company. So we brought this to our distribution center so that we can have logistic gains, we can have more control over materials (inaudible) All of this was directly dispatched by them. So when the customer will call the call center and complain, it went straight to the construction company. And the construction company would work directly with clients, but they only have their interest in mind, and that's not how they work. We need to do what the customer needs as quickly as possible.

The faster we can do that, the more indirect gains we get such as customer satisfaction, faster energy availability. As for losses, we had high levels of losses. And for 2 years and 4 months, we can't have any losses because 1 month worth of loss is difficult. We have been within the regulatory limits, losses. We did something really important. We found losses and we would negotiate with (inaudible). We can't do that. We have to go to court. We have to stop those losses. We changed that.

The other one was safeguarding the network (inaudible) What does that mean is (inaudible) there's no secondary way of getting the energy (inaudible) is precisely where most fraud can happen. And right now, there is no charge and that helped (inaudible) And obviously, we have 400 technicians now in the field conducting sessions that was one of our main gains. 40 an hour, you know 40 an hour is, 40 frauds detected every hour. That's a lot. So we have to do something. We have to find the right innovation, the right technology, the best infections possible to have the best systems so that losses can remain below regulatory limits.

And I was talking to my kids, the other day, we went to see (inaudible) shows. And there was a huge sign that I think most of you from Sao Paulo probably have seen it. Return the bracelets because this is a sustainable show. Each band that comes in brings something new. And they have the number of places, the number of -- the countries that were returning the bracelets, the most or the least. And guess who was the worst was Argentina with 80%.

And then I thought what is going to be what? How Brazil is going to rank? And my daughter said, it's going to be 100%, but the results were out, were 79%, so even lower than Argentina. So even the leaflet from mass as people take it away, can you imagine the energy, power 24 hour available. So this has to do with the inspection program, but we have a balanced point here. What if I have an electrician in each home, we won't have fraud, great, but we have losses coming down, delinquency coming down and our PMSO also coming down. Then we can invest more in losses and bring this back to us.

Well, I think we are fine here in terms of losses. I covered everything. (inaudible) that receivables collection index, that is how much we were able -- well, the billings that are due on the month over what we collect on that month. So here, we have the accumulated from other periods, but that has to do with the efficiency we're looking for. Right now, we are at 99.68% of that, the amount of billing over -- the amount of collection over the amount of billing so that our RFA indicator, collection over billing. We also have the last 12 months result. So in our delinquency, we are also with good results.

Now talking about operating efficiency. We have another example here, which is collection. Collection is expensive. But here, using digital channels, we are at 56.5% significant development. We are bringing down the lottery houses that also collect money. And that has a reason to be expensive because people don't have a bank account. They use the lottery places to pay the bills. But here, we are looking at our average tariff for collection at [0.79] per client build and I have a number of examples here and Leo likes this 1 because it involves money and whenever it involves money, he likes it.

Here, we have our default provision, our allowance for doubtful accounts. Obviously, here, we have an improvement in the accounting rules always aiming the best practices in the market, how other companies are doing it, but there was a change here but here what we really have to consider is the assertiveness of this connection so that delinquency doesn't move up, and we are reaching 2.5 million of these connections.

That's why it's a cultural thing. That's why clients pay the energy bill. Otherwise, they know it's going to be disconnected. We cannot lose sight of that. So these connections are crucial, but these connections are expensive. So what we have to do, we have to have other types of technology so that we can collect quicker or send WhatsApp, send SMS and also make our clients' life easier so that they can pay the bill -- those that don't have a bank account to only have -- only can pay with money, we can have another option for them closer to their home so that they can pay their bills. So that will improve us our results in our ADA.

And here, we have some other (inaudible) still in this area. We have campaigns for (inaudible) instant payment system -- also here, we had 2 million temporary disconnections. So we do have to be aggressive in that action in fighting delinquency. We have here 80,000 remote disconnections. And it's important to say that our client A group, all of that is protected. Second category were the clients of average voltage, all of them protected, then indirect low-voltage clients, the ones that consume the most, all of them protected, and they will perform the 280,000 clients I mentioned.

And now when we are at the low voltage, we are not going to add them to the ones that consume the most. No, we are going to add that on the clients where we have delinquency problems, fraud problems, which is the [DT0] or low voltage zero network and also safety because some of the neighborhoods you just cannot go in to make any disconnection. So it has to be a remote meter or a smart meter.

So that shows that we are on the right track.

And this is also good because many times, the clients are delinquent and not because they don't want to pay just because they can't. And a lot of those tell us I'll get my payment tomorrow or I will be paid on Monday, and then we reconnect because we trust them because it's easy to do it, and it's easy to disconnect again on Monday if they don't pay.

So it's a good relationship that we have with our clients. So for low-income delinquency, for instance, why did we have low delinquency in the pandemic period? Because disconnections were suspended for a long period of time. And when disconnections restarted again, we brought solutions, energy efficiency and also installment payments. Just as we have done with the stores when they were closed for a long period in the pandemic, we created special conditions for merchants to pay.

So this is a very humanized relationship because a lot of clients are not in that situation because they are fraudsters. It's just because they are unemployed. So we respected that a lot, and that has helped us to bring facilities to easy -- to offer easy solutions. So for instance, when we go for a disconnection, we bring in a credit card machine or allow them some time to pay using the Pix, the instant payment system.

And also, we have the regulation of the debt of public authority and hospitals. Because of prior strategies, they removed the relationship with public authorities of the public power. We did not have direct service to city administrations. Now we created a project that's called (inaudible) approximation. And our goal is zero (inaudible) with the city halls -- with city administrations, and we have 774 of them. And we have been able to control delinquency. There is one of them that there was a problem, but everything else is solved.

Credit cards option, I already mentioned, and we have that low-income tariff that already was mentioned here when we increased the number of clients enrolled, and that really helped them.

Thank you very much for your attention and in the afternoon, I'll be here available to take questions.

Thank you, Marney. We have time, Marney, for 2 questions. So if you can stay there, and we can take 2 questions now. Otherwise, we'll move on. No, we don't have questions now. Thank you very much, Marney, for your presentation.

Leonardo, please, can you come back to the floor so that we can resume your presentation?

I think now it's going to work, right? But you saw Marney's presentation and sometimes, we see our collection index as better than before the pandemic, lower delinquency, the losses behind the regulatory. But behind that, we have a number of actions that allowed us to reach those results. That is thanks to a lot of work from our distribution team, from our operations so that we could reach those results today or a collection when compared to other distributing companies.

We always compare ourselves to the best ones in the market. We do not consider the fact that we are a state-owned company, but we are always among the best ones in the quarter. And we said that our collection rates are the -- among the best ones in the electric distribution sector. There are not many distributing companies that are in the regulatory -- that are meeting the regulatory indexes, and we are, and we are proud of that.

Well, some athletical routers sent me a message because I talked about Cruzeiro. And then the presentation didn't work, routers from a competitor. Jinx to me. Well, yes, I'm being bullied by the competition here, by the competitors, the soccer team. I think it's going to work now. Very well.

This is our presentation about the fourth quarter of 2022. We published on Saturday that these results were filed on CVM, the Brazilian SEC. Now returning the slides, I don't think this is working. The clicker doesn't seem to be working.

This is a quick disclaimer. I don't think I have control of it and with this clicker. This is not working. Okay. Now it's working. These are the main factors and results. We always draw your attention to the transferring of our trading contracts from Cemig GT to Cemig Holding. This is something that we have been doing little by little, but that adds to that to our shareholders. We were able to transfer 30% of contracts. And when we talk about amounts, they are substantially higher.

And this is an interesting piece of data. Holding for Cemig H here totally transferred in terms of contracts and then EBITDA in 2022 of BRL 721 million. So just in the fourth quarter, it was almost BRL 300 million with the total of 2022 is -- total in 2022 of BRL 721 million, extraordinary results. And we understand that in addition to the tax efficiency of transferring these contracts to the holding company, we can better visualize how much Cemig commercial trading company adds to Cemig.

Sometimes our results are under Cemig GT, and that is combined with the results of energy generation. And we were not able to have that understanding of how this trading company really is, special in the market. Not only in size as the largest energy trading for final clients, but also how much value we are generating by this trading area. The figures are really amazing.

This is Cemig D. Here, we have operating efficiency and investments in 2022 are within the regulatory limits. We are the -- one of the largest distributing companies in Brazil. We have 9 million consumers. I believe we are the largest and with the quality indicators also in the regulatory limit that are established by ANEEL, our regulating agency. So we are delivering sound financial results and distribution company, meeting the regulatory indexes and also reaching the quality indicators. So we believe that we are in the virtuous cycle of Cemig Distribution and with investments that we have for next year. And we already think that we believe Cemig Distribution will jump to another level.

And for Cemig GT, we have significant results of very good results of for Cemig Generation and Transmission. Hydrology also helped here and the results were very significant. And we will see more of that in details. And we reduced our FX exposure in around $244 million. That was done in 2022, and we'll talk more about that.

Cemig GT had BRL 1.5 billion of FX exposure in 2018 -- by the end of '18. We published a plan to reduce this FX exposure, and we are moving towards that strategy, and I'll talk more about that in a minute. We have our consolidated results, and we see that [up here] results, we had a reduction of 14% of -- from BRL 8 billion in 2021 to BRL 6.9 billion in 2022. But when we adjust that by the nonrecurring areas, in 2021, we had that huge agreement of GSF and we had to post extra 1 million in the result because of that agreement. So in 2022, we had a huge provision needed to what involved the tax credits on ICMS that the tax gain that we had. And because of an approval of a law in 2022, we had to make a provision for that, and that has affected our results in [BRL 1 billion].

But even with this provision, we see the results were very robust. EBITDA close to BRL 7 billion. And when adjusted, it was 7% higher vis-à-vis the prior year. And same thing for net profit. Adjusted, it was 30% higher than the prior year. And we do believe this is an extraordinary result, a very consistent for the company. At every quarter, we can have a nonrecurring effect higher or lower. But in general, our quarterly results in the past few years have been consistent.

And when we look at the fourth quarter alone, we also understand that these were very consistent results. Adjusted EBITDA close to BRL 1.7 billion and a profit, 21% higher than what we had in 2021. Even if we do not consider inflation. The company is adding value to its shareholders with the special results.

So talking now about PMSO. I think we should talk more about that. Our adjusted cost for the results of 2021, 2022 had an increase of 17% for PMSO costs. But we should explain that if we look our personnel expenses and profit sharing, these were very controlled costs. Post retirement it's something separate. We'll be able to discuss that in this event. We'll be able to talk more about post retirement. But this has to do with actuarial issues and the higher costs this year has to do -- have to do with outsourced services, BRL 255 million vis-à-vis 2021. But as I mentioned, we should break that down and explain that. We have SG&A costs at every budget discussion. We want these costs to increase less than inflation. So we want them to be very efficient.

Not only with lower adjustment when compared to inflation, but here in 2022, the company had some expenses that we understand that are more towards investments, such as inspection targets that makes us lose loss -- to decrease losses or increase disconnections that reduce delinquency because there is a huge relation between disconnection and delinquency. And when we increase this, it might look like a loss of efficiency or higher expenses. But if you look at that ratio of revenue increase and expenses increase because of the higher number of disconnections, for instance, you see that this effect at the end of the day is good for the company. So we do have those related to inspections and also related to disconnections and some costs related to maintenance of our electrical grid.

So Cemig was spending a lot with a corrective maintenance instead of spending with preventive maintenance that is much cheaper. Of course now Cemig is changing that. We are increasing our costs in preventive maintenance in a way that we reduce our corrective maintenance costs in the midterm. But we still have those 2 types of expenses mixed here: the corrective and preventive maintenance. So they are a little bit higher because of the combination. In a period of time, the corrective maintenance will be reduced, just so that is what explains the increase of these costs.

And we also investing more in IT. That investment was approved in the strategic planning. And we did not invest in IT for a long time. And (inaudible), our IT Officer, can talk more about that in the afternoon. But IT is a cost that by nature in the past and an investment (inaudible). We have storage, a large hardware is investments. And so when you turn it to the cloud, you might think that you have more expenses with IT. But actually, it will move from CapEx to OpEx because of the tech innovations. And now you'll be more -- maybe paying more of a lease. And before, we had large hardware structures where we were capitalizing all these costs. So basically, that is what explain most of these costs that we mentioned here, and that explain that increase above the inflation when compared to our prior year.

But as Reynaldo mentioned, all the budget discussions of the company, we will not maintain our costs above inflation. This is crucial for us. These costs will be always disciplined. But as I mentioned, we have some costs that can be considered more of investment, and they will be always under the regulatory index. So these will be covered by our tariffs.

This is the cash generation of the company. Really amazed, BRL 7 billion of cash generated in 2022. Part of this amount, we are already returning the tax credits to consumers and the distribution company, BRL 1.5 million, that's relevant. That is to be reimbursed in 2023. We had amortization of loans. And when we look at the net payments, we decreased our indebtedness level, and that helped our leverage.

And we ended the year close -- with a cash close to BRL 3 billion. We have a large investment the next few years. This cash generation for Cemig is very significant. And combined with funds from the market and I think that is part of a company, a utilities company with a significant investment plan, we think this is a sustainable combination. It will maintain our leverage at low levels, and it's not going to affect our credit quality.

Here, we have our debt profile. You see that our debt in 2024, we have a larger amount due basically the bonds of BRL 4.5 billion. Most of that are the bonds. But if we were to remove BRL 600 million to BRL 700 million, which is the hedge or protection here, this is a debt that is under BRL 4 billion for 2024.

And also, when you talk about our strategy here in the Cemig day of 2021, we told the market that we had a strategy to reduce our dollar-denominated debt, that we would do it in stages. We would be reducing that debt. In the second semester of '21, we reduced BRL 500 million of that BRL 1.5 billion dollar-denominated debt. And by the end of 2022, in December, we reduced BRL 244 million more. That was the market's demand.

So today, basically, open, we have $750 million that are part of this BRL 4.5 billion here. That -- most of that comes from the bonds. And of course, these bonds will not be due by the end of 2024 for a single payment. We believe that we have to keep on reducing our dollar-denominated debt, and we expect that the market has more favorable conditions that in the second half of 2023, we are able to do a new payment in December of 2023 and already buy the bonds in the market without any premium paid. And we expect that by the end of 2023, we can buy back more dollars in order to reduce our exposure here and to have a more flexed debt profile.

Removing the pressure from 2024 compared to what we had in the prior years, which was BRL 1.5 billion. It has already reduced in 50%. So we have a much lower risk now, and that has been reflected in our ratings. They have been up even more than 5 notches in the past few years. That reflects the credit quality and everything that the company has been doing in the next few years -- in the past few years. And you see that in a scenario where the companies are going through downgrades. Several companies are going through downgrades. This is public information available in the market, and that is because of the risk perception in some of the sectors.

And we believe Cemig is in the other way, we are already AA, but we are not happy about that. We think we deserve to become AAA very soon because the company is keeping leverage at a low level, our capital allocation discipline. We reduced financial guarantees in Santo Antônio, all of that has also of impact in the credit quality of the company. So we believe that our credit quality of the company are a trend. When we think about the current management, it is an upward trend in terms of credit quality here.

And moving forward, here we have the debt cost. It has increased, but because of macroeconomic issues and that involved with interest rates, and that's not something that the company has control of. But still we have a low leverage. So we do not have any problems with the sustainability of our operations, neither the execution of our investment plans.

And now moving forward, at Cemig, it had an adjusted result of BRL 597 million, close to BRL 600 million, 12% lower than what we had last year. Here, we have 2 issues affecting it, as we already mentioned. One of them is related to the market, and we will see a bit more of it as soon. And this was -- this market was resilient in 2022, even increasing an increase of distributed generation, it grew a little bit. But because of that cost that I mentioned that were concentrated in the fourth quarter related to maintenance of installation, some IT costs, all of them happened in the fourth quarter, and they affected Cemig's D results.

But we did have some favorable nonrecurring events that happened in the fourth quarter that also were good for the results. And that was because of energy. So mechanism that Cemig Distribution was -- had a surplus contracted, and it was able to sell part that energy and post a significant gain of BRL 200 million considering the rules of the regulation. And in the year -- well, in the net profit, net profit of BRL 318 million, very close to the EBITDA variation because of the problems -- of the issues I already mentioned.

This is Cemig's D market in 2022 compared to -- 2021 compared to 2022. If we consider here transmission and build the market, we have a growth of 1.4%, where we can see here the classes in which we have a higher consumption. We had some reclassification here, but rural came down because of a favorable hydrology last irrigation. And of course, the rural class would have a reduction in its a volume of build market.

And here, as Marney mentioned, the 6.4% that mentioned -- that Marney mentioned, that's over a total market of Cemig, we had a tariff -- we'll have a tariff review now in 2023. And the market will have an adjustment to this new reality of the company because of the distribution generation affecting our market. This is one of the main effects that we consider to be positive for the company, thus, a tariff review on this market adjustment that we will have in 2023.

(foreign language)

That said, what I had, if they have any questions, we will be available to take them.

Thank you very much, Leonardo. If you have any questions, you have a few minutes for Q&A regarding the results.

Leonardo, a quick question about Gasmig. There was a significant drop in volume, but at the same time, the EBITDA had a significant growth year-on-year. Can you explain what happened at Gasmig, please?

Well, our Gasmig CEO is here. Would you have any comments on that? This is for a question from João from BTG Pactual.

Last year was the other way around. We had an increase on distributed volume, but the thermal was down because of hydraulic favorable conditions for another type of energy, not the TDP dispatches. I think he's talking about the volume of the market where they have lower margins, right?

And we also had a tariff review last year. Although it decreased our margin a little bit, it increased because of inflation. So we went down 40% in effective margin, but because of inflation, we ended up increasing in 5%. So there was a higher number -- the collection was higher because of that and we had the TDP. And we also saw more energy, more gas. I don't know if I addressed your question.

Well, we will have a special session in the afternoon where we can go into the details, right? Can you go back to Page 9, I think, in the cash flow? I just would like to check something there. Yes, that page. What we can see here is that if you roll out the debt, you will be generating cash of BRL 3 billion, BRL 3.5 billion, considering a capital of BRL 3.4 billion.

But the projection now is to have the BRL 40 billion of CapEx over the 5 years. So it's more than double your CapEx here, right? I would like to understand how your leverage is going to behave in the process and if that is interfering in the dividends payout. And also not only the capacity of getting loans, but also the operating capacity to execute this CapEx first for distribution -- for Cemig Distribution.

And I'm starting by the end of your question, our ability to execute the program. We have investments close to BRL 1 billion and to go from BRL 1 billion to BRL 3.5 billion, which is no reality for Cemig Distribution. It's not simple. You have to have a restructuring process in your operations. And our logistics today is totally different. We have centers all over the state. We have control in the process and the investment process in our hands, and that is a more systematize way. And we have already invested BRL 2 billion to BRL 3 billion.

So Cemig organized itself to be at a higher sales level than what we had before. And with all this allowance, we have an internal process to follow-up these costs to see if they are meeting the regulatory compliance. We are very disciplined. This is multidisciplinary. And we are ready for these investments. About the other investments, we see that investments in solar energy. You can do it quickly and you start generating EBITDA.

So in our results when we consider our leverage in the long term, considering this program and the type of investments that we are doing. And of course, here, there's a caveat. We will only -- we'll be making nonregulated investments if they provide returns to shareholders. And if we say that there are no opportunities in the market to invest, we will see that investments in the free market are not attractive to the company, then we will have a discipline in capital allocation. We cannot lose that from our side.

But considering that we'll be able to make these investments and we will have opportunities in greenfield or brownfield, for those investments are leveraged, and we'll be following that the 50% of dividends payment, and that's in our bylaws. That's what -- it's in our strategic planning. So our leverage would not reach 2x our EBITDA. So we know we could reach 2.5 at the most. But thinking about our results, how much Cemig D our next revision can generate. And our operating efficiency in-house, we believe this is a sustainable program. We understand the cash generation.

In summary, cash generation and the new funding and all the investments that we are making and maintaining that 50% policy, leverage is lower than 2x our future cash generation.

I just want to make clear that this is part of our strategic plan. The sustainability of that investment plan is extremely important to us. As we said, this program is sustainable. We have the balance that we require to execute on it.

Question about the same topic. There's a wall in 2024 when you'll be paying for the bond. And the credit market right now is quite tight. So there are other instruments that are being used that are not conventional. What is Cemig's access to capital market considering that significant CapEx increase (inaudible) other options?

Well, with our normal operations at Cemig and our businesses at Cemig GT, there is no cash pressure in 2023 or to pay for any debt. Cemig Distribution has a relevant program, but we need to understand that there is a credit restriction in the market, and Cemig D has great credit quality in our industry. In our industry, there's a predictability in terms of generating resources. It's one of the very few industries that are still attractive in terms of predictable results.

It's very reliable for our investors. So during this fundraising period, the deadline will be shorter and the cost will be higher than it would be last year. Obviously, we understand that. But we don't see any problems in going to market to raise funds in these conditions to keep our distribution programs up and running. That wouldn't be a problem.

Now obviously, fundraisings had longer terms, but in the short to the midterm, things are a bit less favorable than they used to be a few months ago. But that's not just Cemig, it's everyone. But we'll be able to deal with that. I mean it's part of the game. Market conditions are not that favorable, but we have no problem to conduct a well-structured fundraising considering our investments and also our credit.

But for Cemig GT, as I said, we're not going to leave it to the end of 2024. Maybe we'll raise funds in the shorter period so that we can amortize more than 50% of that bond, which will be close to $300 million. So we can go to market and raise funds because Cemig GT's leverage right now is practically the bond. So we'd raised funds just to improve our debt profile. And Cemig GT does have the credit it takes to go to market until the end of the year. But we are monitoring the market, and there's a chance to divest as well. We're not counting on that. But if there are any divestments, we could use those funds.

But even in this challenging scenario this year, it's not going to affect our investment plan for the year. There will be a partial amortization of bonds towards the end of the year. I mean conditions would be favorable to that. But as of December 2023, we can buy the bond. Could be December, January, February, we'll monitor the market and see when things are looking more favorable.

Gustavo from Bank of America. About results, costs were higher than inflation, especially in third-party materials and distribution company. That has to do with your corrective rather than preventive pressures and might that decrease over the next few months? If you could talk about that, will there be a reduction in the next few months because of the preventive and predictive maintenance? Do you have any OpEx predictability for the rest of 2023? Or have you done most of it last year?

Well, to give you some more color, we think that investing in innovation is extremely important. We spent a few years not making any investments, and investing in technology is very important for our business. And in the short term, that means reducing costs. But we will be making more investments in IT over the next few years. That's part of our strategic plan. And we think that investing in IT is important to us, and it will help us have a more sustainable and efficient operation.

We also talked about maintenance, and we believe that cost increase, which we believe to be short term, have corrective and preventive maintenance still at higher levels. But on the same level, we believe we should be investing more in preventive maintenance than corrective because it's cheaper. But that's a short-term issue. It happened in 2022. We believe that cost will be lower. Now it will grow close to inflation rates. And those are the rules of the game, but those costs should reduce looking forward. But the message is, we have to reduce costs in other areas so that we can keep costs below the regulatory limits. We're not going to stray from that.

We're not going to say, oh, this happened, that happened, therefore our costs will be above regulatory limits. That's not going to happen. That's our strategy. We need to have expenses that make sense that help to reduce costs in the mid to the long run. But even though those costs have to do partly with investments, they will not go over that, which has been established for the tariffs.

Luisa from Itau. I have a very quick question. You talked a lot about migrating some of the GT contracts to the holding company. That -- about 30% of that spin-off has already taken place. How is that going to progress over the rest of the year? How will you conclude the spin-off?

I have the trading -- our trading officers here. I think he can probably help me with that answer. Do you want to answer that now? Or will you be talking about that later?

Good morning -- actually, good afternoon. Yes. Right now, we're migrating those contracts because we have to agree on the prices for which we bought that energy. We believe that by the end of the year, we should have migrated all the energy that we purchased from third parties because we haven't traded Cemig's -- we have traded Cemig's energy plus third party energy. So by the end of the year, we believe we will have concluded our negotiations with the sellers. And by the end of the year, close to 100% of those contracts will have been transferred. And the holding trading company will be managing all the energy that we have purchased from third parties.

Myra. You just recognized the voluntary retirement program worth BRL 4 million. So how much will you be saving on personnel because of that voluntary retirement program?

Well, that program, it's excellent for the company because we are bringing in new people, new talent, which is extremely important. These people have been in the company for a long time. I was practically born in the company. We have 25,000 employees right now. It's not as much as it should be.

When I joined the company, there were 18,000 companies. So employees joining us are usually at the beginning of their career. The company doesn't have benefits that it used to have. Benefits that were usually seen in state-owned companies, we no longer have those. We're much closer to a private company policies, but what we're saying is that new employees cost practically half of what employees who are retiring used to cost us. And it pays off in about 8 months. That's important for the company, and it's important for our operating efficiency as well.

It makes sense for us to continue to implement those programs in the future. Obviously, when that will happen depends on the company's strategy. When those programs have been implemented, they've had very positive effects on our operating efficiency. I think that's it, right, Carol?

Yes. Thank you, Leo. So with that, we conclude the morning session. You are all now invited for lunch, which will be served at Belo Horizonte, room to my left. And analysts, investors and company officers will be there to interact. We have the tables for you, and Cemig's team will also be available to answer your questions. And be back at 2:30. Thank you and enjoy lunch.

(Break)

Good afternoon. I would like to ask you all to have your cell phones on mute. So now we are going to bring our CEO for generation and transmission, Thadeu Carneiro da Silva. He's going to talk about operating efficiency and renewable energy at Cemig GT.

Good afternoon, everyone. It's a pleasure to have you here. More difficult now, right, after lunch. So I know everyone is very much paying attention. So I am Thadeu Silva. I am the officer for the generation and transmission area. I've been here with Cemig for years. This is what we have done in this past period and also what we are planning for our next month.

So this is our agenda. I'm going to talk about GT portfolio, the perspectives of the electric sector, the initiatives that we have and the opportunities. So at GT, we have frequent (inaudible) generation that is (inaudible) substation and then 53 (inaudible) wind generators and solar generators. We have 47 substations (inaudible) are aligned. These are all the companies under our management and integrated (inaudible) . We have one umbrella administration. These companies are run as a single company under Cemig GT perspective. Our electric sector at this point (inaudible) is based on energy transmission as technological revolution after (inaudible). The generation is of production here at home, we have new entrants and business models. Here we are talking about new production, leased production and other ways of generating the (inaudible) talked out market opening and that involves reinvention here. Cemig is working on that, placing that plan at the center of everything. And the evolution of regulation to -- with the technical progress that we have now.

And what are the consequences then? That expansion of the power matrix based on wind and solar that is alternative sources. Therefore, we have to have other sources to maintain the technical reliability of generation. That is batteries, the HPPs also are very important for our matrix work. As I said, HPP right now is a huge battery, and this has to be developed, especially here in Brazil with digitization and everything here.

We have an important progress here. Villani is going to talk about Cemig's digitization process. This is a project we are working on also empowering the client. The client would produce its own energy and potentialize that -- the exponential growth of solar DG. So this is very important for Cemig GT and also in Cemig [DG] and electrification as a whole. So the electrification of vehicles because we have the electric vehicles now.

And the expansion of the power matrix, we have 183 gigawatts installed, and the trend to grow is to 252 gigawatts. And we see alternative sources, such as wind and solar growing a lot. But also, look at TPPs and gas also growing. We have Gasmig in the house. So some of these projects can be carried out jointly. And for the next few years, we see an exponential growth.

Here in the first year, we see that a lot of the projects were approved. Over 3,000 projects have been approved with benefit of 50% is down from the [QSP], so on the energy supply. But starting on '27 and '28, with the market growth, the opportunities will rise again. And that's what we are considering to develop projects here for [Cemig GT] and what are the opportunities and initiatives here? These are integrated energy solutions. This is a hybridization or association. So what is that? The hybridization refers to the development of 2 sources of energy of power generation, wind and solar. They are developed together. They connect on the same point, optimizing one another. That is one completes the other. And generation by itself would be [indicative with substation 1 at its source and we] would install second one in a complementary fashion.

One example here of that are the fluctuating solar energy plants. And we have ongoing projects in our 2 plants and (inaudible). And we are also considering other projects due to that association of a solar power plant close to an [HBP]. So the work is opening now. We see an opportunity for [HBPs] that already have room to implement other routines. (inaudible) one example of that. But we also have the capability to install 2 additional routines. And we see that as a good development possibility for bringing hydrogen. We are working on it. We are learning more about it and we understand this can be a new source for energy consumption. But Brazil is a little bit behind when we compare to Europe, for instance. So we understand that we need to the fasten the development of the internal consumption of green hydrogen for energy production, ammonia production for fertilizer production so that we can have a ramp-up of this technology.

And the offshore wind plants, they are all on the same line. As you all know, the offshore wind plants are (technical difficulty). I am sorry to sound that. So we have onshore Parkland equipment available, we need that. And our shores are already organized, and Cemig is aiming at future implementation on that line.

So here privatization, (inaudible) as I mentioned, we have already requested the exact information because this type of association does not have an increase in the contract of the (inaudible) and what does that mean? You just add to the existing source and you maximize the transmission lines and the substations. So we requested that exact information for the regulating agents of [260 megawatts] and we continue developing the project.

At the same time, we are developing projects for plants of [Angra plant]. And what is the benefit of that type of plant is that since you do not have the increase in the system yields contract, it is similar to the [50%] discount from the key U.S. in this so and the model, even though this type of project has not been approved in February of the past year. It has a similar benefit, similar competitiveness to the ones that have the 50% TUSD contract.

Here is the capacity market, it was rated by the Law 1420 from 2021, we could have a specific auctions for that, for this year's auction was canceled because of no technology (inaudible) machines are developing this product interest by the -- then we are in the existing infrastructure. And what is most important thing is that the environmental impact of these additional machines installation is not has been exist, and we do have a reservoir that is red, the dam is red already, so adding the machines would not change anything and would not add anything in terms of environment, a lot of that we had in the past this could bring hydrogen. We have been working on that. We do have a memorandum of understanding science with (inaudible). This is -- that we launched in (inaudible). Well actually, this is the third best town in [Minas Gerais] and [mine] was the second one where I was born.

So the idea here is to use funds from R&D from now and to work on a better understanding of how greener hydrogen can better fit to the current matrix and how can it (inaudible). And here we have some offshore wind projects we are undergoing licensing. As I said, we do have a long-term approach here. We are just making sure that we can develop a project in the future, it is just something that still depend upon a regulatory development of producing market. And the market that manufacture (inaudible), we do have great possibilities, but there is a lot to be developed in the on-mature wind plant. That's where we have the largest capacity type in the world.

It's our average capacity of 60% of factor. So that's the factor of 60% is similar to HPPs that we have here. So these are the onshore internal ones. They are very competitive. We have -- our market developed (inaudible), so we are here already sharing the possibility of investing in the stores in the future.

And we have our current investment portfolio and investment in generation. When I started here they asked me, what are you going to do with Cemig. And I told them that we were going to -- I'll made positive growth. At the time we have very early times that’s being developed with where the 2 solar projects that are implemented now. We were able to accelerate those projects. And today, we have a very large portfolio of over 15 giga and it's being considered. And this portfolio is being distributed in wind farms onshore, offshore -- or in solar (inaudible) and thermal.

So we have a matrix and a portfolio that is very much diversified. It will be implemented. It will have a return on investment over our capital cost. So we have synergy, and we have thermal projects also being developed with Gasmig. These floating solar [fees]. Two of those projects are already approved for implementation. One of them DG of (inaudible) 39-mega feet, 89 (inaudible) and 154 megawatt in (inaudible). These plant will be in operation in the beginning of next year, little by little.

So that this power can be rated as each of these projects are very important because then we can have energy in the plant. We have a reduction in [OPAC] because we already using the team that I have in the plant to operate the DG that is where we installed the reservoir. We have one connection point in all of these plants or a limiting factor to install all of these plants is really what that connects confined availability of the line. And also it's important (inaudible) considering the (inaudible) are in the water, we do not have that much dirt. Therefore, we increased the generating possibility. And also, we have water that's important, large solar which depends on water to clean the panel. And while we have the reservoirs, we use the water in the reservoirs so that the minimum environmental impact, we're using 0.01 of water in [Tres Marias] And we have a huger reservoirs there. So this is 0 environmental impact, very much inline with our ESG policy.

The investment in transmission. This is our best business. In transmission, it is only up to a -- we already have 2 billion and we have studies already for these studies and the studies that are approved, products approved, the product contracted and the projects that are revisions in here are the projects that we have already requested. That is the whole process that we have with the regulating agents to approve the investments. And these investments have a sizable return for the company. And at the meantime, we focused and (inaudible) to bring in new professions right here one for an auction of 2022 through build 105 kilometers of (inaudible) transmission lines. We have an estimated capital of BRL 119 million. We are already working on this project and [partner] auctions. We will continue considering a lot in (inaudible) that have sooner and why? Because here we have great benefits in both in transmission and in distribution. So we are able to bring in this benefit to the project and, therefore, we can be more competitive than the market, and we can deliver return that shareholders expect for that kind of impact.

So we have the next lot here. We know that in the auction that we'll have in the middle of the area. We have some loss (inaudible) and a lot of the investments and transmission will be made here in Minas Gerais and we are already considering some loss for this auction, obviously, always guarantying return on investment, and we'll be very careful about that.

Now talking about the renewable projects, we are implementing the 2 solar plant invoice (inaudible) and here, we are working on a land that is (inaudible). And so 2 of them are being developed in our house. And we use plants that we already had (inaudible) and so we were able to combine a good location with other benefits and these projects are being done with trading area that we're able to turn feasible to long-term PPAs. So this already something new for us, and we are able to work well and these are ongoing projects advanced already and these should become operational in September of this year. And here, we have a floating -- floatable take projects. These are the largest ones for Brazil.

These projects are already approved for implementation. The first one is going to be here in (inaudible). Here, we have SHPP of 9 megawatts, we are going to add another 39 megawatts there. So the synergy is huge. So the added sources even greater than the existing sources there differently from the other plants here in (inaudible). It will have an extra client of [150 -- 500] megawatts plant and (inaudible) might just be added another solar plant of 78 megawatts. And we have another project of [260] that's also being developed. These are highlights. We are already working with the benchmark. For Brazil, we started with a first plant of 1-megawatt that came from an investment in Santa Marta. This was a laboratory for our engineering, both in terms of development and implementation and it can bring in the track reports from other companies from out of Brazil for that type of (inaudible).

The recovery of the wind farms in Brazil. We have 2 wind farms in (inaudible) and (inaudible) and [Volta do Rio]. And here, we had a partner investment funds from [Taesa] and the manufacture (inaudible).

So we developed a process here to separate the asset. And we remained in 2 wind farms. So we had 6 of the 28 wind generators in operations. So all of them are operating now. We have availability over 98%. We increased the revenue of these wind farms. And we have the highest tariff of our plants of BRL 808 per megawatt. So we add BRL 1.25 million at every megawatt here. So we turned these platforms around in the way we work on the contract -- on the O&M contract. We acquired the needed equipment for the project and we started the remote operation of all generators in our operations center. We're in (inaudible) and very few companies does that in Brazil, and we do. We recover the transmission line that flows the energy from (inaudible). They were not [thread] at all and we were able to increase the availability of these wind farms. So this is a very special highlight that I brought here.

And here operating efficiency of all our assets, our HPPs have been working as the state-of-the-art of engineering. We are at [96.0] (inaudible) availability. And the benchmark in the sector is 78%. That reflects on our revenue on the lower cost of energy purchasing, so that we can either contract and that (inaudible) company's result same thing with the wind plan. We went from 50% and now are at 89%. These are figures from last year. This year, we are already at 98% rollover power plants. Also 94% significant increase compared to what we have in transmission lines. And since we are here above (inaudible) [92.02], and we are at 99.96%, 99.97%. Was a highlight for the availability of our lines that ensures the permit revenue. Therefore, the return on investments from our shareholders.

Other efficiency highlights. Corporate factor optimization sold, we worked on those corporate factors of those companies in the portfolio that could not maintain underpin (inaudible) profit and we invaded those companies (inaudible) this allows us to optimize not only the expensed, but also the daily actions. We avoid people to be -- we avoid the extra governance about these companies. Also we have all our large substations, and they are 100% remotely managed. So this means a reduction in OpEx in the last substation that will be in operation as for year or restrictions that we have in the (inaudible) region. We are able to bring in (inaudible) will come in the end of the year with improvement to allow the operate. And then also I like our main clients, all the large ones are remotely operated.

That means that today we only have people there. And working hours from Monday to Friday through (inaudible) is at the vanguard of that type of operation and the sector. And we have some 192 megawatts installed, and we can have a contingency plan so that this be done out of the working hours. We did not have any negative consequence a very much on the contrary. We are being considered the benchmark and the factor for other companies' implementation, and we are divesting in some SHPPs and these SHPPs are very small. They end up getting a value from our operations. And I have to spend and invest in my engineering in an asset of less than 1-megawatt. Let me using the time and money to develop larger projects and so they end up eating up the value of some of our operations.

So we started divestment process. We were going to divest from 15 assets. And I think in August, we will have the auction here in (inaudible). So these are our drivers continue to focus on project development and our own products for low -- generation, especially in the (inaudible) to continue for disruptive products in line with the company's ESG policy. We want to be competitive in auctions and efficient and implementation of all the projects.

We have created a project management office according to the PMI methodology. All our development engineers do have the [PMPs] particularly and that ensures that all our projects follow the same implementation methodology. We started this methodology and (inaudible) level was 40%. And now we are already over 90% of what we are delivering vis-a-vis what we had planned, and that is a lot progress in the fleet. We are applying the best practices in terms of project management by using this methodology by -- and transmission and generation -- actual generation, we will try to maintain the high-level of availability like the ones we are talking about, with all executed investments and also with our labor develop in training of this labor. And also we'll be focusing on operating efficiency, doing more with and since we started the management decreased BRL 10 million a year of our IP for generation and transmission, and that goes how we are aiming to meet with our assets here at (inaudible).

That's what I had to bring to you. I was able to (inaudible).

Thank you very much (inaudible) for your presentation. We have a few minutes and to ask a question to deals about generation and transmission please raise your hand if you have a question.

JPMorgan. You have a long pipeline of projects in different moments, in each one of them you have a cost structure that is different for a solar project or is it similar? And if it is similar, what would it be?

Well, the difference is in the floating one. So when we developed the modeling, there is a difference, although the inverse of modules are the same. But the fluctuating ones have a higher CapEx. But on the other hand, our OpEx is lower because we have an optimization. We have a number of plants concentrated. We have less cost with water. And we also have an increase in efficiency because of the water, the temperature is constant. So you increase the efficiency there. So we do have an increase in CapEx, but it's offset by the OpEx because of what I explained. But we are able to maintain the real return on investment between 11% and 14% just like the other plants. And that's why.

I have a few questions about these projects. Are they already contracted?

No. No, they are approved by the Board. The business model has been approved. And right now, this is our schedule. We are going to start the contracting stage and up to -- while we have that, we are developing the benchmarking. We're developing the best technology we going to bring in the best supplies to [menageries] in order to bring down our costs. The main cost here is in the transportation of some of the machines, then we end up spending a lot with the transportation. And if we bring in the manufacturers to closer to where we are, we will be saving on the cost of the fluctuating (inaudible).

What is the CapEx for 12-megawatt. Do you have an idea?

5,800, about the auction for transition.

2 questions. First are you interested -- and placement is not bad in this position. And if you are, are you going to have a partner and do you see any bottleneck related to labor for these transmission auctions by the end of the year.

Yes, we are considering that. We are considering some of the lots here in Minas Gerais with strategic planning as (inaudible) just said. The strategic plan is good because they see focusing Minas. So we are going to be focusing on Minas a lot. We are going to go into them by ourselves alone, we develop our projects ourselves. But we do have a strong engineering team and a good team for the development and implementation of engineering projects. So we already have that competitive advantage.

About the bottleneck. We are following that up with the buyers. We will already start with 3 contracts so that we can be competitive and ensure the cost during the auction process. So if we are awarded the auction will just conclude the contract. And to close this kind of contract, we will need to dollar productive capacity and financial help, and we are taking all of that into consideration and we do not -- what could be a bottleneck for this next auction, but that could happen in the future ones.

Do we have one more question?

About the generation CapEx you disclosed, what's the split between greenfield and brownfield? And have they been included in the previous figure?

Yes. That total amount considers a CapEx average per megawatt. So we're trying to find synergy with the trade income to keep market share. We're looking at the contracts that are being terminated over time, so that we can have contracts directly with Cemig. So we want to make those greenfield and brownfield investments. And so there's no split. I can tell you right now. If we have good return on certain projects that are greenfield will invest in those if the brownfield will invest in those. We're looking at which projects were being approved. What are the implementation requirements? There will be new projects as the semester terms, but they will be coming in cheaply to the market. So that's an opportunity. We're looking at acquisition of greenfield projects for our pipeline, something that we weren't doing a while by. So may would the developer project for subsidiary companies, and we couldn't make the most of those opportunities. But now they're in our pipeline. Now we are ready to make investments and together and return on investment for our shareholders.

So the actual return you've commented on (inaudible). Are you talking about -- what kind of implicit price for new cell energy?

We're expecting an average discount on Cemig distribution tariffs. Considering listing our 16% average discount, and then we'll have to look at degradation, reinvestment, CapEx, replacement, which is -- are the variables we consider for major plants.

(inaudible) How much of them have been contracted? You talked about longer periods and (inaudible). Can you give us an idea of price?

100% contracted right from the start. That is what made their development possible. Dimas is going to talk about the amount during his presentation, but as of September, we will be adding energy to those consumers. And we'll also have high production for lease at these plants.

You mentioned floating distribution generation at your plants but you need to extend the concession at from a point, for instance, the generation CapEx is disclosed. How much of that are you considering in your estimates? And how far have you discussed this with the Ministries in terms of expanding the concession fee?

We hope it's very similar to what Copel has done in the process. I took part in the process and our assumption is very similar to that of Copel. I think those are the closest to reality at the moment.

The extension of the concession fee will influence the associated plant just to meet the concession fee. But the floating wise will be at 13.8% or 138 of the distribution company. So we don't have a direct relationship with the concession. We have authorization to use the water reflection in the plants. But it's not directly connected to the concession. Within that amount, I couldn't tell you what the exact figure will be for the concession fees. But within that amount, there is the 49% renewal for the 3 plants that will mature soon. We sent the letter in February. And as Reynaldo told you, we are negotiating with the general meeting so that we can get the approval for the import led in September and the Nova Ponte letter in November. So we will mention our intention to renew by selling 51% of controlling shares of those plants.

Once again, thank you so much, [Adele], for your presentation. Thank you. Thanks. Now we will hear from Dimas Costa, Chief Trading Officer, (inaudible) and international countries, which is Cemig's trading strategy, where he's been very successful.

Good afternoon. I don't have many slides. I shared this with you in our last meeting, but I just wanted to give you an update. What is Cemig's trading mission? Consolidation. We have roughly 15% of the market traded with end consumers. The second phase has about 11%, and we will be maintaining that leadership position with a 12% growth per year, and we should have 4.4 gigawatts by the end of [2032], according to our strategy.

The free market is practically fully consolidated in the A1, A2 and A3 group and practically all of A4, but the main issue is the retail market. We have competitive prices. I will be sharing Cemig's strategy with you, which has been very successful. We were in a short position for the 3 years, '23, '24 and '25, and we will continue this strategy. Of course, there are talent (inaudible) with management. Everything we're doing follows a risk management policy.

We also heard about digital channels. I will be saying in a minute that we are coming to a order, and it will depend on the robust [variety] system. I'll talk about some products and marketing. You can visit our website, and you will see that we have institutional marketing. And right now, with this new retail frontier, we need to have results-oriented marketing, like any other retailer.

Before I (inaudible) our presentation, I just wanted to say (inaudible) we want to get to 2028. The generation business is buying the pipeline. There are some brownfield opportunities and pipeline opportunities. I'll talk about what will happen in the next 5 years. This is how -- this is where we are right now.

This black outline is our current load, and this is the surplus. This is made up of hydraulic, wind and solar energy, thermal energy and energy. Subcontracted energy, which is surplus energy. We also have some reserve energy. And this is a (inaudible) surplus.

For the next 5 years, we're hearing about 2-digit prices. Why? Because the hydrologic situation is extremely favorable. El Niño is supposed to hit us, and you will know that there will be a lot of rainfall in the South and the Southeast. It practically doesn't rain in the Northeast, where we have wind generation.

But last year, it rained so much in the Northeast that generation decreased, but now the trend is for generation to be much higher. So this is -- let me just have a drink of water. This is an optimistic scenario because we haven't included something here, which is Eletrobras thermal power plant that adds up another 8 gigawatts with a 70% influx, (inaudible) 5 to 6 gigawatts that would be part of this.

We don't believe these thermal power plants will come into it, because there's some saturation already. It wouldn't make sense to have that available. It would be about BRL 40 per megawatt if these thermal power plants come into it. So this is what we have included in our load projections. There are 6 gigawatts that have not been included.

We believe that out of the 6 gigawatts which have not been included, if half of them come into it, that's another 3 gigawatts coming in, and will make the over contracting even worse. [Dale] mentioned what will happen by 2028, but we believe that by 2030, we will need any energy in the free market or the regulated market, unless it's compulsory by Eletrobras.

Another element that isn't here, but will come into as of next is that distributed generation is in here. We have 16 gigawatts peak, and that's removing the load. So we say that this load here doesn't consider distributed generation. So this load here will drop. So not only is it not growing in the country, we also have distributed generation removing load.

So this over-contracting trend should last till 2030, 2032. So it's a huge challenge for us, to all generation companies, distribution companies, low-price scenario ahead and a challenge for the investments that will need to be made to meet market demands.

This is our successful strategy, comparing our portfolio management plus the price. This is our balance from January 2022 until now, our energy balance positions. And those were the funds we had for '23, '24 and '25. So we had a lot of energy in a high price scenario, and we heard from our fund manager for the whole (inaudible). MGE, which was surplus energy sales, was sold for [BRL 240].

So it gave us BRL 200 million worth of net income, and it comes in as part of the tariff. Because that's consumer energy, but we were able to sell it, and the whole market believed that. So the Board of Directors and the Executive Board must give us autonomy considering the risk scenario. We can run up to 15% risk in our portfolio. So we lost a lot of energy during this time.

By the time we got to May and June, we were in the red, but we made the most of the high prices here, and then it became stable, wait for rainfall, there some consolidation. Our hydrology department is fantastic, and they have been supporting us in our decision-making process. So there was a managed appetite for risk.

So we decided to sell energy here. And right now -- and then prices dropped, as you can see here. BRL 69, BRL 79 spot price. Next year, '24, close to BRL 126. So in a short position right now, there's no energy. And now we making up for those losses in our balance. Things are becoming more stable. So we're buying little by little.

We sold energy for BRL 220, BRL 250, and we're buying it for BRL 70 to BRL 90. So it was the right strategy and brought great results to our trading area. I mentioned our strategy, and this is our strategy. We're trying to reconcile prices whilst at the same time trying to increase our margins.

These are the prices for the period, both sale prices and purchase prices. This is just for third-party energy, not GT. We sell the generation energy, but it's for a transfer price. This is reflecting sale prices and purchase prices. So this is the result of our strategy.

But obviously, it's not all a better process. There's quite a challenge. Had huge gains until 2025, but this is where the challenge comes in. You're all familiar with this chart, which shows our market. This is the current market with a 2% growth forecast. So [2.644] by 2032. This is conventional energy, incentive-based energy.

Remember, I said there was a surplus supply. And we're in a short position. So we still have this up to 118 by 2025. This is energy we still have. We haven't sold it, and this is the challenge, because the gray bar is in our portfolio. The PPAs have been signed. This is third-party energy, because this is our own energy.

So there is a reduction. We're not considering the full renewal of plants, so the main challenge -- well, there are 2 challenges: selling this energy at competitive prices in a low price scenario; and to recover this. Because in order to meet these market demands, look at my deficit as of 2026. 500, 600, 1,000, 2,000.

Obviously, if we can recover this and if we renew the plants, then there is the price scenario [Pedro] has shared with us, right? It's making greenfield projects unfeasible, because we're not going to invest in greenfield projects that don't pay for our sale price.

Petrobras alone has 8 gigawatts being concluded here. There's 2 gigawatts coming in every year, and they haven't got a market for -- Eletrobras hasn't got a market. Not just Eletrobras. There are other generation companies in the same situation. So we do have an opportunity to buy energy, just that the margin will be smaller because these aren't our projects. But we will have an opportunity to buy energy and to resell it.

So those are our 2 challenges: being able to sell this energy at a higher prices than we bought it for; and to make up our balance through brownfield projects, greenfield projects or by buying energy. We are market leaders right now, and we can't lose (inaudible). If you lose a client, it's very hard to get them back. And this is our priority: to keep this market.

I like to say that this is like a retail market. This is the new frontier. When you talk to trading companies, they say, I'm going to the retail market. Prices are flat. When you have low prices or high prices for a long time, it's very hard, and that's what trading companies are. It's like a retail market, but the retail market isn't that large.

This is Brazil. 153,000 clients, but consumption is only 3,550. This is a potential market. And our portfolio is 4,400. We have 4,200 right now. So this is the frontier. It's the whole market. Look at the average consumption. So these retailers, if there's an 80% migration, as the public sector, irrigation, many of these clients [can't] migrate.

So let's say, 80% migration. That will give us 3,000 megawatts on average across Brazil and 123,000 consumer units. Cemig, out of the incentive-based market, we serve more than 20%. And in the free market, 1%. So we can serve 20% of the Brazilian market by December 2028, 600 megawatts on average, including 24,000 consumer units.

So the challenge -- and I'm going to tell you what we're preparing to do. We are going to be the largest retail trader in the country. We're getting ready for that. We have created a department that will be focusing on this very personalized negotiation. But for the free market, we have a dedicated department. We need to adapt products to clients because they have 0 take or pay. So you have to give them discounts. After they've matured, maybe they will add something else. But right now, they want discounts because that's how they can have some gains.

And also customer service is being digitized and automated. We have a robust platform that is being implemented. We have a new portal. It's a new trading portal, not a conventional portal. Funds can go straight into our portal. They can become part of a loyalty program. They can score points. They can win prices. But this is what you need to sell to the retail market. When you see telecom [sell], all those retail networks, that's what you see. This is in portal. It's a contract that goes into an IT system. There are different options, guaranteed discounts. This is all key if we want to win in this scenario. And we're getting ready for that.

In the second half of the year, we're going to go in to this market full steam ahead, even though it's only for 2024. But we're going to start working hard this year so that we can win over a large share of this market. This is retail, but I say it's cash and carry because this is Cemig getting ready for this low-voltage client migration, which includes commercial and industrial plants and then rural residential plants.

In Minas alone, we're talking about 9 million consumers. So you can imagine the size of this market, the scale of this market. This is peanuts next to what's coming. But when we're ready for it, bring it on. It doesn't matter, hundreds of thousands, 1 million. We will have the platform. We will have the expertise to deal with it. And it's unavoidable. I think that as of 2030, 2032, there will be no last resort. I mean these will be clients who cannot migrate.

Luisa, you mentioned -- I gave you some wrong information. I said that, by the end of the year, we'll be migrating all of our contracts to the holding company. But by the end of the year, it should be 80%. 100% is only next year. Okay?

So this is a major change. This is the inflection point at Cemig when it comes customer relations. The world will be changing, and we need to change with it. It's a whole different approach.

This is how everything I'm telling you happened. In 2005, at Cemig GT, those of you who are older will remember this, during Dilma's term as minister, Cemig was -- didn't have a vertical structure, so we couldn't operate in the free market. Then in 2005, a pool was created where all generation companies had to add some energy to that pool and then they would buy from that pool for the distribution company.

So in an unprecedented initiative, we migrated all of our clients to the free market with a 2% discount, and we observed each of the individual agreements. Prices were renewed, but it was like a blue ocean. We had over 60% of the free market at that time. And then naturally, all the other generation companies saw the advantage of operating in the free market.

Then in 2010, I don't know how we're going to manage incentive-based energy for each client. So we created a 60% take or pay, and it could go up to 130%. And that allowed us to have 30% of the market. Now that's gone down to 20% of the incentive-based energy market across Brazil. Over 50% of our energy is traded outside Minas.

And then in 2018 -- actually, 2015, when we lost our plant, it was practically impossible to buy third-party energy. So in an unprecedented initiative, we had some energy auctions. We offered that to our free market, and that was copied by other generation companies, but it had never been before, and we were able to add about 500 megawatts to our reserves. That was extremely positive.

And now we already have a retailer. I like to joke, but we have a retailer. We have 50 to 60 clients, and that's nothing compared to what's coming. But we do have products for some of our retail clients. And the main thing is the reduction of the average ticket.

In January 2010, average consumption per unit was roughly 11 megawatts, and that dropped because Cemig started losing its plants. It started losing competitive hedge, and other major players started their own production. So Cemig decided -- we went from 300 clients in 2010 to -- we have about 4,000 now. We have smaller clients, but the profits are higher. So you can see how our average load dropped and the number of clients increased. We went from 200, 300 to 4,000, 4,200 right now. And the load went from 10 megawatts to about 500 kilowatts on average.

And that's a result of trying to understand what would add more value to the company and meeting the need for speed in the market. When I say we're going to be leaders in the retail market, we will be leaders because we have the expertise, and we are getting ready with a digital platform, marketing strategies, new products.

So that's it from me. Thank you so much and I'll be happy to take your questions. Thank you.

Thank you very much, Dimas, for your presentation, please. You can stay here on the stage. Let's see if we have any questions for you. Raise your hand if you have a question, please.

This is Victor from JPMorgan again. We saw Thadeu's presentation. It is very interesting and now yours as well about the growth of the Cemig GT. It's actually DG and self-production. These are 2 growth drivers that we continue to have a surplus. So it created a problem for you, right? You have to sell this energy from the HPPs?

Well, Boa Esperança and Jusante actually, these were a client that had their contracts due. For Boa Esperança, it was a single client. It's a large client. Their contract was due, and we renewed part of that. And we already have next entry for next year. For Jusante, we have 7 SPEs. So we developed the [leasing] system, and we worked with clients that have their contracts due.

So what is the strategy that we see here? We have some pipelines and [to those backing] for other pipelines because some of them won't be able to make it run. So what we want to see in this growth is self-production. As I said, we have a market. I have some contracts due. We are trying to work on the price reduction because even for self-production, that's difficult if they go out in the market and they have an average price for 10 years of conventional energy of 100, 110 or 20. And when they add a cost of BRL 60 of charges, and we use [some of] the energy for 180 of self-production, it's almost breaking even with the production.

So our challenge is to have self-production as something feasible, aiming for cost reduction, CapEx reduction so that we can look for clients that have a low load factor that can benefit from ICMS. So our engineering here with those area is really to identify those clients that have contracts close to renewal and third-party contracts. You saw the energy deficit.

So that's what we are looking for now, this filling in this energy, that self-production. If we improve market conditions, we might have a PPA for generating companies and now sell it in the market. But right now, we want to have self-production with this market, and we have lots of clients.

They are our clients because they trust us. They want to have self-production with Cemig. So we around -- we have around 1,000 mega of clients with self-production.

Of course, we will have to balance that out, right, because growth here of production is going to create a problem for the rest of the sector. I understand that in self-production, you have a greater return. That's a return that will pay off your investment. But at the same time, if you grow your self-production and on distribution, that will make your life more difficult if you have generated capacity because if you don't do self-production, someone will do it. If you don't have (inaudible), someone will do it. I understand that. But as -- Dimas, after, you create a problem to yourself and for everyone that is working on that because you still have to sell energy from (inaudible). You still have to sell someone the conventional energy.

And grow via self-production is going to meet your demand.

That's a problem -- that's a circular reference. That's not a sector problem, not necessarily. It can be brownfield and it's self-production. It's a self-production. That is energy sale. If I have the client as a self-reducer, I am selling them energy in a way that is satisfactory to them because of the charges and all the taxes that can be avoided, and I'm selling it to this client, adding higher margin. And if I were to sell in the market, that's why our target is self-production. You have up to 2032. Eletrobras Power will be welcome. It's going to be affordable, very much affordable.

I would like to understand your opinion about the possibility of reviewing the ceiling of the spot price and how the trading company is affected by that.

That's a good question. What is your name?

I am Daniel from OraBank.

Well, you know that there was a legal movement to request a spot price at BRL 15. But what's being discussed nowadays (inaudible) is spot price. And you understand that you don't -- not every type they don't -- the calculation would be between BRL 48 to BRL 53. This is a discussion about the spot price Eletrobras is trying to include that the improvement. The difference of BRL 41, BRL 48, BRL 53 considering or not hydrolized risk. But if you add improvements in investments into spot price, it doesn't make sense.

But some people talk about the spot price at 2030. If that happens, we will see the whole industry breaking. If you can imagine distributing companies that are over contract that buying energy at BRL 240. And if they have to sell at [7], it's already bad. And imagine if it's 2030 and also generate our over -- have this oversupply. So I don't think it's -- we are going to be at the minimum spot price. And the spot price is something that is going to really give some support to generating companies. But if the spot price goes down to BRL 20, we're going to have to go into a commercial agreement with everyone in the sector to work something out. But this is being discussed. And it's between BRL 48, BRL 53. That's what I hear in terms of the discussions.

When do you think this discussion will be concluded?

Well, market really wants that answer from the regulating agency by the end of (inaudible) Otherwise, we do not have any predictability for next year. And Enel also is working hard to define it in this first semester. We are open. I have an open position of [84] in [24]. I'm not buying because if this comes down to 2030, the price is going to come down to BRL 40 or BRL 50. So if I buy now at BRL 80 or BRL 76, it doesn't make any sense.

So you see that the market is just at a halt, waiting for this definition. Do you think it's going to be defined this year?

Yes, this semester.

I am from Santander. I have a question on the spot price. There are some discussions around the model update, the inclusion of other projects that are still being developed. Also a change in the risk aversion. What do you know? What do you have about that? What do you have for next year? And how can this affect in the sector?

Well, this is what I just said. This was inevitable but it will all depend on the adopted model. So Eletrobras wants to include improvement. They want to this relative to [88] so there are different models being discussed. And now it will depend. We don't know if it's going to be an average of the plant. Things have not been defined. The model has not been defined. The model will direct the price, so the model will actually guide the minimum of the spot price because the model is going to define the minimum amount, right?

Yes, exactly. You're right.

This is Bruno from S&P. A quick question. This price scenario worries you about the possibility of having more clients in the free market and signing new contracts for you, Cemig? And also as a systemic effect, other trading companies with weaker contracts to have a larger number of contracts in delinquency?

You're talking about the low price, how that's going to affect the market and leading companies and the generating companies. Well, for Cemig, can you go back to the slide? This is it. Look at that. For Cemig, and I usually say that these companies that are over-contracted, I talked about the Eletrobras but this is a very complicated situation because when we see 8 gigawatts that align.

But I have a challenge here, which is to sell this that I purchased more at a higher price than what I would be selling now but I have an opportunity here. The strategy here is that I'm not going -- I'm going to buy energy here cheaper than what I can sell for. So you will tell me, I have profitability sometimes of 15%. I won't be able to get it. If I get 5%, it's very good.

At this price, we have here an adjustment of inflation and everything. And so I have this challenge but the retailer will allow me to (inaudible). And so in the beginning, I will sell with a discount. And the discount is a price that is totally detached from this. But when the market becomes mature after 1 or 2 years, that's then its price. So the challenge, this is the challenge for us.

What if you have too much energy or and the trading company?

Same thing. Well, an additional comment here. In 2026, for Brazil, this is an eternity. There are a number of things that might affect this like hydrological behavior that might be different. These past 2 years were very atypical compared to the last 10 years. Some areas you have more hydrological impacts. And you talked about retailer trading that because of a cemetery in new market, it will allow you to have greater margins in the beginning.

So the generation market has to deal with the challenge, but we have to see how all of these variables will behave so that we can find. You can see how we are going to deal with all these variables when they perform until 2026 as the commercial strategy where I have a 5-year contract. I know I'm eating up my margin. Here, I'm selling it at a lower price than what I bought, not a lot.

So in average, I am able to still, at [26%, 27%] with a good margin because I accumulated some extra 15% to 20% because of the price that we purchased and but that's inevitable. If I stop selling in the market, you never stop, right? [26% , 27%] that's same thing. But this horizon here. 26% , 27% I haven't expect maintained a good margin here. But looking forward, just like (inaudible) it is [28] a price could be improved but considering that scenario.

What I said was (inaudible) grain and a number of T plants, if we removed load from it's trying to have an over contracting in this period. So if it rains so much, we will have that challenge. But now when I turn to group B, that's something different because I have a greater profitability, the costs are higher. That's the second current here. Here, I still have the retailer that (inaudible) that I have 20% and that's what I told more (inaudible) And I would like to be talking about 30% to 40% of the market next year because we are going to come in hard next semester with a strong campaign for retailing.

Yes, we always have one or another client that purchased in (inaudible) and now the realized prices to their competitors ended the contract before and they say, "Oh, I have a financial down" that happens in the 3 or 4 clients asked about that. And then, I tell them, well, no one can say that even. Not even in the pandemic. Some of 10 clients claim an imbalancing, financial and economic imbalancing. But that's what happens.

I have 2 questions in line with Bruno's question. Do you have flexible contracts today where clients are already letting go of the flexibility? And second question, when you do your over-contracting accounts, what do you have for the contracts for 2005 and '06 because these contracts are now to (inaudible) happen. So these are the 2 questions.

So there's biomass, the TPPs are not contracting will be uncontracted later on, and then they will have to work it out in the contracting later because we see a lot of oversupply of energy, but we don't see what's coming out here. We already see all of these thermals, they leave in '24, '25. I'm not saying that they are out of the grid here of the -- No, these are large (inaudible), but the expensive one will be leaving in '24, '25. They are not included here.

So what you see here end it is growth (inaudible) are different one. So this scenario here is a scenario that after today here with the (inaudible) . Next year, it will be considered. So this load will come down the way because it is removing load from the distributing companies. So it's going to come down. Eletrobras TPP is just the [700] that have been auctioned that are included here, the one in the north. The other one, 7,300 are not here. So this is (inaudible) 2030. (inaudible) included here is the increase of loading as concluded here because now we bring in the load from Paraguay and now they have the right to [50%]. And there is a huge migration there. So this is already included. We are going to see a supply reduction from Paraguay. And here, we are not considering (inaudible) because we have (inaudible) , but that's not signed yet. So this tends to be worse scenario if we reached '27 with 18% here this the backwards. In the end of the last question was the first one.

Okay, about me. I mean, it has 3 types of contract, one large clients that flexibility, so it's then vary from 80 to 110, but we have [just signed] 100%. We have for incentive-based energy (inaudible) [130] with pandemic, consumption came down. So client were [260] That's in the contract, you have to follow it. And for others, we have 100% of (inaudible). For them, we have a discount [captive] market, and they have [few instruments] So we have these 3 types of contracts in terms of flexibility.

My question is about respective (inaudible) In the next few years, considering that we are going to hit over a lot of energies (inaudible) comparing the specially into the main (inaudible) that is [2032] in the last 2 years. So I'd like to understand what the overview for the next few years.

Well (inaudible) , if the trend would be to be just on up to 6, 7 years ago, no one talked about because [GSF] when it rains, we have just one another month is going to be one. But as hydraulic availability decreases, things change. And why it goes below 1? Because some generation is displacing hydraulic HPPs when it's not is the wind power plant and the wind is generating. So when you switch load than [wind] the space alone from a trend will be up 0.9.

Of course, the plant will be [1, 1.1] . The trend in average is around 0.9 of GSF. And you see that we have inverted energy so we add energy to the plant, and we could run it through (inaudible), but we can't because of regulating so it ended up being discarded, but it could be terminated. So these are the details model. Well, thank you, Dimas. Thank you all very much.

Now continuing event at the Q&A session. So I would like to bring to the floor our CEO, Reynaldo Filho the presentation in the morning and the afternoon, the regulation, and you go (inaudible) and Please come to the stage and take your seats for our Q&A session.

So we will start with the questions to ramp it up, and then I'll open the floor to anyone else that once to take this opportunity and I would like to start the question with (inaudible).

How is -- What is your opinion about the tariff review that Cemig went through in 2022?

But the tariff review, last year's tariff review actually was the second cycle of tariff review that Cemig went through, and it followed the same methodology of the first tariff cycle. And with that, we had some stability in the market. The uncertainties and the idea of distinct methodologies, that disappeared, but not only that, [it] followed the technology of most of our gas [combustion] companies in Brazil and which are based in the best practices. So I think it was very good in terms of methodology, stability and best practices.

It was done in a very transparent fashion. We had 2 public tenders led by the regulating agents, the State Secretariat of the economic development. The first one to define a regulatory walk and the second for the required revenue. And it was also interesting because it allowed to tap into all the investments we had done. We also included in it our future investments so that we can have economic balance for the concession contract in the next 5 years. [That's it. Thank you.]

I have a question to [Danilo Gustan] from [Pomi Bank]. And you talked a lot about growth in the [E G]. So you talk about the footing project. And I would like to hear from you how CMIG is prepared to take in, to absorb all these projects of the company, and the other projects that are ongoing as well. Can you give us an update on the development of those? And when do you expect it to conclude these projects?

Thank you. Good afternoon, everyone. Well, the Cemig team is going to complete 4 years now in the middle of the year. And during this period, we developed a process to access clients digitally. And today, we have a scalable platform in our CRM, also using the same tool that is being developed to the retail market. And with that, we have been able to bring in these clients to Cemig's [same] database.

And what's interesting is that the distributor generating market is very much a retailing market. We have short-term contracts, and we really need to have a good relationship in these relationships so the client can come into the business and work with us. And these clients are also very price-sensitive because this is a standardized product. So we have been working with competitive -- price competitive accounts. And this has been done with available growth.

We now have 88 megawatts that are allocated. We expect that -- and we have projects that will be coming into this year, next year that will double our capacity. Our sales machine is well oiled for that. And we expect that in the next 2 years, when we have the fixed DG process that are being developed [at mi gatine] and with another area of the company, that we will be able to access a much larger area in the market in Minas Gerais.

Thank you. Now changing tack, let's talk to Marco Soligo. We talked about capital allocation, reinvesting in Minas and part of that strategy is divestment. 2022 had many successes and Reynaldo touched on many of them. Marco Soligo, what are the next [premises] for 2023? What [do you] expect until the end of the year? What have you been doing in order to be able to conclude the sale of the other assets?

Good afternoon, everyone. Talk about divestments.

You talk less and do more. And that's what we're doing. If you look at the management message in the report, there's a paragraph that makes it very clear. Cemig will be divesting in assets where it has a minority stake or where it's a co-controller. So we're working toward that end.

Now Carolina, whether we're going to be able to do all of it, part of it, I couldn't really tell you. Whether it's going to be in M&As, divestments, you have to be patient, persistent, calm. You have to put yourself in other people's shoes, and that's what we're trying to do. And we believe that's how we managed to do it in 2022. So that's it. Rest assured that every day we are working very hard with my team to do that. Thank you, Carolina.

Thank you, Marco. [At this] we have Henrique Motta. One of the main aspects of the legal questions, there was a change in the way the article is written in the ICMS. I would like to hear from you, what are the changes taking place in the legal department, so that we can be successful in our litigation?

Thank you, Carol. Yes, the example you mentioned about [peace] and [cofen] is a great example of what it's like to live in Brazil in 2022. A lot of legal uncertainty and that is reflected in the company's issue. There's a great deal of volatility, a lot more than we lawyers would like to see. And we work towards achieving as much predictability, there's a time for maturation in the mid- to long term. But we try to bring as much legal certainty to investments as possible.

We're going through a very special time. We're going through a turnaround at the company, and it's above anything else, much more cultural. And legal business supporting a governance change to provide more transparency. And so that it can be the -- as we heard from our CEO this morning. As the President, the Chairman of the Board Marcio said this morning, we want to have more independence, and that's what Cemig is doing to prepare for years to come. These will be competitive years, and we have had some concrete results of the work we've been doing.

There's a great deal of uncertainty, a lot of doubt. We can't ignore that, but things are looking up for Cemig. Cemig will become a lot more competitive. And that is the way forward for Cemig, whether it's state-owned or privately held. There are different scenarios that don't depend on the company, but more on the controlling shareholder, but we still have to be competitive no matter what's in [arden]. And we will be ready for that based on what has happened, owing to the State-owned Company Act in 2016. It helps the owned companies to be more competitive.

There are some new government rules that are more favorable, and also different contracting rules to those we saw between 2003 and 2016, that came from the A666 that standardized public hiring. With the new act, state-owned companies can hire employees according to their own needs. And those needs vary among different state-owned companies. The reality is very different. So as of 2016, we have been able to hire people more quickly to meet the company's needs. [Ozias], our hiring and logistics officer, has been emphasize how important that is.

Thiago has been supporting them, but it's a profound management [person]. It doesn't happen overnight. It takes years. We still have some remaining contracts from the 866 Act, but this is ongoing work and it has already brought concrete results. There are regulatory issues and legal issues that we have to deal with. But it's the way forward for the company to become more competitive. And that is what has been guiding us.

And Legal has always been broadly supported in any legal matters, legal issues that will arise from the transformation process. That business is usual. So it's our job to provide support to the different areas so that they can be managed.

Henrique, I have a question for you. We have all the directors and officers here on stage, but they're also going forward with the continuous improvement of the company. One of the key points to deliver the investment plan, especially in the distribution company, is hiring suppliers. And so my question is to you [Olidias]. How do you see that challenges this? What changes have been made to the company so that a lot of the amendments that are being made, the contracts have been signed already so that Marney can deliver a robust investment plan.

Good afternoon. Thank you for the question, Carolina. Well, not just Marney but also Thadeu and all the other officers. Otherwise, they will get jealous. I'm just joking.

But Thadeu contracted BRL 800 million for [serensa, juse] right? But we did implement some changes with the team supported by management we changed our supply chain. We have changed our hiring contract. The main ones apply to every distribution and generation from alternative sources. And in making those changes, I mean, they had to be made quickly. It's almost like changing a tire while the car is moving. So the investment was being implemented, 15 billion [and turn into] worth of [power].

Whereas in 2019 we were [through for] 2.53 billion. And now it's 14. So there has been a revolution that had to take place while the investment plan was being implemented. But we've had the support from the Board. [Representative Agnocio], the executive of the board, represented Reynaldo. Contracting was important but logistics is even more important. Can you imagine distributing all that material, mobilizing the teams to provide that services at the distribution company, generation company and transmission company.

We have one more question to our HR director, [Uso]. One of the main topics we discussed at this conference this far that the next cost reduction. [Full year is also fit] we've already worked on life insurance, post-retirement life insurance, and then there are the other health care plans. Could you tell us how you see the challenge of post-retirement challenge. What else can we expect on the subject? And also could you talk about the pension fund, post-retirement pension fund?

Thank you, Carolina. Well, post-retirement is one of our areas of turnaround at Cemig. We're talking about millions, so it's material and it requires complex solutions. You can't decide on things like that quickly. A lot of people are involved. There's a legal framework. Negotiations are required. You also need technical workarounds, good consultants to provide us with support. Many things have to be done. We have been working on it for a long time.

We're working on 3 main strokes. First one for life insurance. So we've concluded that we'll no longer have life insurance post-retirement for people who no longer work for the company. And then the health care plan, which is managed for us by Cemig. And we've [blocked] the new health care plan, which is paid for by the company for actively working employees.

And when they retire, that cost is then transferred to employees and no longer paid for by the company. We had some people who have come on board voluntarily, and we have a number of other people who will we will be bringing in soon. And also under the health care plan from the legal point of view and negotiations point of view, we are negotiating with unions and we're also negotiating with retirees.

And the third front, our pension fund, that's managed by Forluz. The main one that most of the impact is [Plan A]. Most people have already retired, they are not actively working any more. With the defined benefits plan we're getting organized with Forluz. We have put a proposal forward which is being analyzed by [Serlay] and before the end of the year, we will be offering retirees the possibility to migrate some benefits, to migrate to a financially based plan. So the more people migrate to that, the bigger our post-retirement reduction will be. As I said, they require complex solutions. It doesn't happen overnight but we are on the right track.

Thank you, [Woodson]. And before we move on and we ask questions from the audience, one of the main points that had results in the fourth quarter was the pressure on cost because of preventative maintenance and IT expenses. So we have our IT director here with us. Can you tell us about the benefits of these IT investments at Cemig, please?

We have been revising our strategic plan as we heard about today. And based on that, we are investing in digitizing the company on many fronts. I think the main one is a business opportunity to establish a 10-year partnership with IBM to digitize our customer relations. We are using AI in our communication channels. We have started many communication channels with our clients. We have different AIs being used, on WhatsApp, on the telephone, apps such as WiSAT.

And we also have an opportunity to start ahead because as we heard, in the retail market, if we have data reception and intelligence, we can use that to provide offers that will more competitive edge through value of the products. We're also working on a platform. Cemig has some in-house developed product, we're migrating to a market platform. And the main thing of this transformation is the fact that we are updating the operate the distribution company electric network.

We heard this morning before [ABMS]. We can sum it up by saying [wise] managing electrons. We have interaction. We have the immersion of the power flow and to provide high-quality service and to provide network reliability and more efficiency, which is [effect] reliability, which is a requirement by the regulatory agency. We're also preparing to deal with large data volumes. We talked about smart meters, collecting new data, much [efficiently] than conventional means.

That's a very rich source of information that will allow us to sell our services much better. So we're migrating to a market platform, dealing with large data volumes, digitizing access to information by clients and by making heavy investments in cybersecurity as well. I think in 2020, you almost saw that it was quite difficult for the power industry. There were many attacks. So there was a need to invest in protecting data owing to legal requirements, but also against cybersecurities, hacker attacks and so on.

So we are revisiting our systems architecture and taking everything to the cloud to have more resilience, lower operating costs. We know that architecture incurs an operating cost. CapEx needs to be turned into OpEx, so we need to be able to use these resources more intelligently so that we can be within the regulatory OpEx limits forever. It's a strong investment cycle.

And in telecom also, they are migrating to an automated network, reconnectors, teleservice and support generation and distribution services spend. It should be as automated as possible. So heavy investments, which help our ramp-up in distribution, trading, and generation.

Now we're open for questions. Joao Pimentel from BTG. You've raised your hand, please go ahead.

My first question, I have 2. The first one is to Marco. Could you talk a bit more about divestment? Cemig has been talking about that divestment for a long time. But obviously, Cemig's situation has improved over time, especially considering leverage. What is the priority behind that divestment? [Does it drain] the pool of potential divestments the company has looking forward. There will be on [tax on] capital. Will it be fiscally advantageous to sell Taesa right now? Is this still on your plans or is it no longer a priority?

What's your name again? If you look at Note 16 in our report, you will see the booked value. And you can infer that there will be capital gains from selling that asset. That divestment is as relevant as any other in our portfolio. That's all I can say. And we're trying to divest of that one, like we are all of it. And that's all I can say. You work for a bank, so you know what it's like.

About the tax credits. In the event of selling this asset, there are also tax credits coming off the sale of light. And if you consider the tax rule, 1/3 of those tax credits can come from the sale of Taesa and then there's another 2/3. But according to tax rules, when you sell Taesa, it's as if those light tax credits could be used to offset gains at Cemig holding company. Since our holding company is currently generating earnings, we could use those credits [that] underline to offset the light tax credits we have.

What I mean is if Taesa is sold, it would allow us to offset 1/3 of light credits. And at the same time, those 2/3 of light credits that cannot be offset right now because they are related to the sale of assets, we could change the status of that and we can offset that group [to thodray]. What I'm trying to say is that Taesa sale is very positive in terms of offsetting credit -- tax credits. We can't do it right now, but again, it will allow us to offset other tax credits that are on our balance sheet [and this to confer]. So it would help us in terms of tax efficiency and operating efficiency.

I have one more question to Danilo, please, about DG. You talked about DG returns, but not in terms of traditional. We were talking about that at lunchtime -- how do you see the DG return for DGs that fit within the new rule, because it's close to 12 14 right now, deleveraged, if I'm not mistaken. So who would fit in the new rule to capture [tourge over time]? How do you see the price assumptions? And what kind of returns do you see on these new projects?

We're getting close to the industry's profitability. DG's profitability in the power industry outlier was worth about [14]% on average. So for these projects, after this new act that was passed on January 7, we've gone back to 1 digit and a low 1 digit. We have quite a large portfolio of power projects in GT with the previous Act, so we're exploring that pipeline right now.

We couldn't run an actual simulation because we haven't issued any expert reports after the act was passed. But we believe returns will revolve around 1 digit, low or medium low digit. Current stock levels of that DG plus the discounts through the 45, not the new ones. I think that, that inventory when the market is deregulated in '26 for industrial and commercial clients in Group [P], that will be extinct, the DG.

And the other one you asked about isn't competitive enough with retailers. So the stock will be finished, and I think retailers will start in '28 because that DG will be unbeatable in '26 if current captive market prices are kept. BG will completely take the Brazilian market. But then that would be over -- and the other one isn't competitive. The other one is the rooftop, what you sell to third parties. The portfolio we showed you with the [540 challenge] has been included in our previous [rule]. So in our strategic plan, we have ensured profitability for the project before that act.

Do we have any further questions?

Still on DG. Rooftop is what has grown the most in Brazil. So it's a question mark in the industry. What will it be like moving forward after the transition? I know that this started not too long ago. But in January -- in February, there is still some effect in terms of new connections. How do you see that on...

You mean in terms of requests?

request for new connections.

Oh, new rooftop connections within the rule. Well, thankfully there are still some effects. Long may they last, because until January 6 there was a ramp up and there were many requests; actually an overload of requests. Of course, many of them didn't happen because of high costs, but the requests after January 6 dropped by 80%. We're only getting 20% coming from rooftop. I don't think rooftop will continue -- well, I think rooftop will continue because there is an advantage. And also, we have the sellers' shares, right? There's an example of that right here.

Rooftop, it's nice property which is local self-consumption. Local self consumption, if size property won't be affected by the new rule, because it won't be exporting surplus energy at the distribution company. So it's not subject to the [coolish] rule. So the high local self consumption, the best scenario is low load and then you will be exempt from the regulation.

2022 was a very different year because in the last 40 years -- 40 days, there was the ramp-up, as I mentioned. We couldn't consider that as the average. Until January 6, things were one way and then they changed. As I said, we only have 20% of the requests we had in the previous period without a ramp-up effect.

[Gupert], we can't hear the question because it's not being asked in the microphone.

Yes. Rooftop will resume because it does have its advantages. There's no point in hiding that. And we changed our strategy so we can keep up with that. Remote isn't as advantageous as it used to be.

Just double checking. That auto single digit, the return you mentioned, that's for nonlocal. That's for remote, right? And how much for local? What kind of level are we talking about?

We don't operate local, so... we have operated mini DG up to 5 megawatts remote. That's what we call subscription energy. That's our business. We don't fund local self-consumption.

But would it make sense to imagine it's a positive return because you think it's going to continue?

Yes. It's more exempt from the new rules when compared to remote. Especially if there's no surplus energy to go through the distribution network and to generate future credits. But that's not our core business.

Any other questions? No questions. So I would like to thank you very much for asking your questions and make your comments. We are now towards the end of our meeting. But I would like to invite our CFO and IR Officer, Leonardo Georgio de Magalhães, for the final remarks.

Thank you, Carol. Well, just a quick summary, like 30 seconds. Thinking about all of us here gathered, Reynaldo started as CEO in January of 2020. And after 2 months, the pandemic started, and our discussions with the market that year were very much focused on how the company would deal with the pandemic in its operations. We were concerned about collection, our daily cash follow-up. And in the initial days, our collection dropped because the lottery places were closed. We didn't know how we were going to tackle delinquency. A different reality from what we had gone through.

After 2020, the company was able to go over that most difficult moment in the pandemic. And then in 2021, we talked about our strategic planning and we published it. We talked about our vision for the future of the company in the long term. We were able to bring to you a bold investment plan, bolder than what we had in the prior periods. Also in the financial area, how we were going to tackle bonds, leverage divestments.

And after the 2 years in our event of 2022, we were going to hold a Cemig Day by the end of 2022. We postponed it up to now 2023 after the review of our strategic planning. And this strategy execution that we had since 2021, the company was able to deliver several of its proposals, several of its promises and objectives that were in the strategic planning that we designed in 2021. We were able to divest in most of the assets that we understood that were no longer covered in the company.

We increased significantly investments in Minas Gerais, especially in distribution. For instance, we invested almost BRL 3 billion by the end of 2022, and investments close to -- compared to investments close to BRL 1 billion in prior years, and we are very much motivated for the future. As Marcio mentioned, when he was considered for the Chairman of Cemig and he said that being a Chairman of a state-owned company, that is not something that really would motivate him. And you see that now, he is really thinking about the good things that we can do for the company in the next few years since he is very much excited about it.

Reynaldo showed everything they know how the company changed how the company was before and how the company is now in all aspects: in terms of level of investments, financial health, customer service, the quality of the company, all the rating agencies, the classifications, everything that shows what we have been doing and all the positive results Cemig has been posting in the past 2 years. All of that added to the other presentations from our officers, you can see that all of them were very much and are very much motivated about our actions and their actions in the company.

So we thank you all the opportunity for being here with us. This company is an obligation that we have with the market. Our IR area is available to you at any time. We can take any questions that you might have about our strategies or any other questions that we might not have been able to answer. And finally, we would like to thank Carol and the IR team for organizing this event. It's very nice to have these in-person events once again, right? (foreign language) I was going to say that the IR team is available 24/7 but it's not very nice, right?

Well, I was talking [to Andre] at 6:30 a.m. this morning, so yes, it is literally 24/7.

Thank you very much. It was very nice to have you in person. And I hope that at our next Cemig Day, we can talk to you again and to bring to you new deliveries of the company. And this is from now on, that we'll be considering our strategic planning, and we will always be considering what we can add value for our shareholders.

Thank you very much. I would like to thank you all for being here with us. I would like to thank my team, the [7] of our members. We are going to end with a typical coffee break outside. Typical for management I assume, [They welcome you all very much] and we hope to see you again in the new investor's meeting, I hope you all have a nice afternoon. And for those of you that will go back to your towns, have a nice trip back. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]