Cosan SA (CSAN) 2023 Q1 法說會逐字稿

Good morning, everyone. Thank you for waiting, and welcome to Cosan's Earnings Conference Call for the first quarter 2023. (Operator Instructions) The video conference is being recorded and will be made available on the company's IR website at cosan.com.br where the complete material of our earnings call can be found. (Operator Instructions) Please note that the information contained in this presentation and in statements that may be made during the earnings call regarding Cosan's business prospects, projections and operating and financial goals constitute the beliefs and assumptions of the company's management as well as information currently available. Forward-looking considerations are not a guarantee of performance. They involve risks, uncertainties and assumptions as they refer to future events and, therefore, depend on circumstances that may or may not occur. -- overall economic conditions, market conditions and other operating factors may affect Cosan's future performance and lead to results that differ materially from those expressed in such forward-looking statements. Today with us, we have Mr. Luis Guimaraes, CEO; and Mr. Ricardo Lewin, CFO and IRO. I will now turn it over to Mr. (inaudible)

Good morning, everyone, and thank you for participating in Cosan's earnings conference call for the first quarter of 2023. We started the year with strong results in the portfolio with contributions from all businesses. Let's now go through the main financials and operational highlights of each business, starting with Raizen on Slide #3. -- since this quarter closes the 2022-2023 crop year, and Raizen has already held its conference call. I will focus on the highlights for the year. Raizen added the crop year with expansion in all segments, achieving record global income and adjusted EBITDA of BRL 15.3 billion. The year was also marked by the focus on operational excellence, continuity of the renewables expansion cycle and record E2G production in the pilot plant, reaching 30 million liters. In the Renewables segment, EBITDA increase reflected the sales expansion, highlighting the increasing global customers for both industrial and fuel applications. We have also significantly advanced in the power agenda. We became the fifth largest energy trader in Brazil with more than 24,000 connected customers. In sugar, the year's result was boosted by the greater volume sold with higher prices due to better pricing amid a more positive scenario for the commodity, which compensated the pressure on margins due to higher costs. Marketing and service EBITDA also present growth, considering the impact of the tax credit in the period. In Brazil, sales remained stable and the operation was affected by better operational margins besides pressure from business environment due to greater supply of products on the market and inventory losses. In Latam operations, the year was marked by an increasing volume, market share and profitability despite a complex macroeconomic scenario and the scheduled stoppage of the refinery in Argentina. Let's now move to Slide #4 to present Rumo. We had a quarter with growth in EBITDA and margin due to the increase in yields, reflecting the greater competitiveness of the Rio Grande model. The transported volume, on the other hand, decreased mainly due to a higher frequency of criminal incidents in the Bajada Santista region that have already been controlled by the public authorities. Despite this drop, as already published, Rumo had a record volume in April, a 30-day month, showing the efficient use of the company's capacity. The strong crop will allow Rumo to capture solid transported volumes during the coming months this year. It's worth mentioning that the (inaudible) expansion project is on schedule and on budget. As already highlighted in Rumo's conference call. Going now to Slide #5 to talk about Compass. We had another robust operational and financial partner with EBITDA growing 36% above the same period last year. All of our natural gas distributors companies performed strongly despite the downturn in the industrial activity. This will reflect the continuous work on mix of segments and efficiency driven by Comgás and our new assets, (inaudible). The residential segment, there was intense work on expanding connections that were more than 160,000 in 2022, which equivalent to 400 new ones per day, made with great operational efficiency using technology and solid processes. -- (inaudible) consolidation work continues at full speed. And this quarter, we've begun to see concrete results from the new business model. We can highlight the expansion works of sugars in the region of Gramado in the south of the country. The concessionary is about to complete the connection of the city, which until now has not been served by natural gas. It is yet another competitive supply alternative being offered to the region with high growth potential. The construction works of the Sao Paulo regasification terminal continue to advance and are closer completion with the start of operations scheduled for the second semester of 2022. A -- despite the negative effect of the state decision on the tax benefit that impacts Comgás accounting net income, Compass portfolio has leveraged to preserve its ability to grow and distribute dividends to its shareholders during the 2023 financial year. In addition to prior year cost reserves, Compas remain capitalized after the disposal of equity interest carried out in 2022, and the divestment process in other 5 distributors is still ongoing in accordance with the portfolio management strategy. Compass also had other assets that continue to grow, such as (inaudible) and the marketing service segment. Let's go to Slide #6 to talk about Moove. At Moove this quarter, the EBITDA was leveraged by the increase in sales volume in its operation. We grew 1.4 percentage points of market share in Brazil when compared to the same period of the previous year, reaching a participation of almost 20%. Global growth took place while preserving the EBITDA margin of more than 10%, reinforcing the company's service commercial and supply strategy. It's worth mentioning that the result was also impacted by the consolidation of PetroChoice and (inaudible) acquisitions made in the second quarter of 2022 and both grew versus the same period last year. Finally, we remain focused on the integration of PetroChoice, which is proceeding as expected and is in line with our international expansion strategy. Moving to Slide #8, let's show the land segment. The land segment reflects the agricultural property management business, represented by the company's direct stake in Radar, (inaudible). In order to provide more transparency about this business, this quarter, we made a more detailed section in the earnings release. First quarter 2020 EBITDA presented relevant growth of almost 4x compared to the first quarter 2022, explained by the first full quarter of (inaudible)consolidation. The land portfolio ended the quarter with around 318,000 hectors of owned land with a total market value of BRL 14 billion, which means a market value for (inaudible) BRL 4 billion adjusted for our respective stake in each fund. The main crops are sugarcane, grains and fibers, which represent 98% of the total market value of the portfolio, which predominantly located in the Southeast, Northeast and Midwest regions. We can go now to Slide #8 to talk about value. On this slide, we present the effects of the acquisition of the stake in Vale head on Cosan's results. In this quarter, we received BRL 402 million dividends from Vale related to our 4.9% stake, which had a positive impact on our EBITDA. Of the amount received, we transferred BRL 215 million referring to the adjustment of the cost of derivatives to the banks involved in the operation that impacted our financial expenses. Considering the price movement in the period, the equivalent market-to-market impact on the results was positive and the shares were negative. As shown in the graph on the slide, the net result in this quarter of all transactions related to (inaudible) was negative in BRL 207 million. In addition, our CEO, Luis Henrique was elected in April as an independent Board member of the company's Board of Directors. Let's go to Slide #9, which shows Cosan's pro forma results. At Consent Corporate operating expectancies, excluding the dividends from Vale increased due to the exercise of long-term compensation plans. In the consolidated results, the increase in pro forma adjusted EBITDA was driven by solid expansion in all segments. Net income for the quarter decreased due to the negative impact of mark-to-market update of Vale and also causing shares due to the total return swap in the financial result and also due to the impact of the provision related exclusion of the tax on circulation of goods and services, (inaudible) benefit in the corporate income tax and social contribution on net income calculation basis, record until then at Comgás and (inaudible). It's important to highlight that these are noncash effects recapping the tax incentive history. From the beginning of 2021, these companies begin to recognize the exclusion of tax benefits from the corporate income tax and social contribution on net income calculation basis, in line with the opinion of their external legal advisers and base it on all the prevailing (inaudible) prudence at that time. In March 2022, the first panel of Spero Court of Justice as Tejada, were affirmed their understanding of 2017 about the no application of corporate income tax and social contribution on presumed (inaudible) credits. There was over 50 decisions in that sense. A month later, in April 2022, the second panel of the asset (inaudible) decided otherwise unfavorable to taxpayers. Since then, we have reclassified the probability of loss from remote to possible as disclosed in the financial statements since the second quarter 2022. More recently, at the end of April, there was a trial at the first panel of (inaudible) with an unfavorable result for taxpayers. In view of this, the company decided to set up a provision for the amount used approximately BRL 1.5 billion. Bear in mind that the provision in this quarter has no cash effect. Having said that, I want to reinforce a few important points. First, as you can see in the financial statements, the recurring results of Compass and Moove companies that were affected by the provision remained robust and growing. In addition, so far, the asset got judgment has not been published. That is, although we have made the provision for all the past effects, we need the judgment to conclude on the applicability and the real impact in the companies. Finally, in addition to the possibility of appeals by the (inaudible), and that matter can be analyzed by the Federal Supreme Court, (inaudible), Cosan Group is willing to work with the authorities to address the best issue fairly and considering the central purpose of the tax benefit that was to stimulate investments that were made decently by the company. In any case, we will keep the market informed about the developments in this matter -- moving on with the presentation. Regarding Cosan's consolidating investments, we had an increase compared to the same period of 2022, which is mainly explained by the expenditures at Raizen with second-generation ethanol whom with (inaudible) expansion project and Compass based on business planning and in line with their guidance. Let's go to Slide #10, which shows our group's financial highlights. Regarding the indebtedness, the reduction in gross debt is expanded mainly by the net amortizations at Raizen. Highlighting our capital allocation agenda during this last quarter, we resumed our movement of increasing the total return swap position of Cosan shares. Leverage was 1.7x EBITDA at a great level for the company and its reduction of 0.3x compared to the same period of 2022 is due to the increase in accumulated EBITDA in the last 12 months in addition to reducing net debt, mainly due to the cash flow generated at Raizen. If we adjust the effects of the stake in Vale acquisition, the net debt-to-EBITDA ratio would be 2.1x. Cosan has a comfortable debt price monetization schedule, especially considering the flexibility and optionality that we have in the financing structure for the acquisition of stake in value. the duration of our debt is approximately 5 years. Even though it's not related to the first quarter, I would like to reinforce other subsequent events. First, we approved at the shareholders' meeting the distribution of BRL 800 million in dividends, which will be paid on May 31. We also had the election of the Board of Directors members, which I would like to highlight a change in the composition. Now with 50% of independent members, including 2 women, which reinforces our evolution in the governance and diverse agenda. In addition, we had issuance of debenture in the amount of BRL 1 billion with payments of the principal bullet in 5 years, showing the company's access to liquidity and allowing increase in the debt duration. Before closing, I want to go to ESCG agenda on Slide #11. In March, we signed the letter of commitment to the 100% transparence movement, an initiative of the UN Global Compact Brazil network that works to engage companies in combating corruption, which reaffirms the company's position of adopting the best corporate governance practices. Regarding our business, both (inaudible) Compass published a 2022 sustainability reports. Among Rumo highlights, we had the expansion of energy efficiency in radio transport and the mitigation of climate change-related impact in addition to the safe real-world operation. Compass brought several achievements, such as the review of its ESG strategy and the definition of public commitments to be met by 2030. In addition to the milestone of 36% of leadership positions being held by women in the company's businesses in relation to ESG, we will soon publish content sustainability report, which will bring important advances in this journey. Finally, I would like to invite everyone to participate in Raizen, which will take place on May 24 and inform you that our Cosan will take place on September 12. With that, I finish my presentation here, and we can start the Q&A session. Thank you.

(Operator Instructions) Our first question is from Pedro Soares (inaudible) side analyst from BTG Pactual.

I have a couple of questions, please, to Luis and Ricky. They're about Vale. Could you give us some more color on how much you would say you're devoting of your time to Vale -- what was the situation you found at the company like, how different was it to what you imagine when you acquired the assets. And another question on the same topic is, have you got any additional information for us about the 1.6% additional stake that could or could not have been exercised? Have you made any decisions on that?

Thanks, Pedro, for your questions. Considering what we shared with you when we made the investment. One of the main points was to be part of the company's board with other Board members and shareholders. So I'm very happy because the company led this initiative very well. The Governance Committee did it very transparently, very clearly, there was a shareholders meeting and there were no major issues. And in my opinion, in our opinion, we have elected some very solid members of the Board with diversified expertise. So I have been a member of the Board since the 1st of May. And what we'll do from now on will be sharing with you on the sell side, buy side, we have (inaudible) who is responsible for Cosan's investments in Vale and we'll cover shareholders issues. It's important to make everything clear about governance, -- and my role as a member of the Board and the company's opinions with regard to that will be exercised by the person who manages that investment, which is Leo and company issues will be managed by the company itself. But generally speaking, we're very excited. We're still very excited. This is a very important stage for us -- having a Board and the team working together and to have the privilege of being part of that and to make sure that we're all working for the best and to generate value for the company. So in short, nothing has changed in terms of our conviction of when we made this investment 6 or 7 months ago. Now as a Board member will have the opportunity to make closer contributions to the management together with other members of the Board. Right now, about your second question, we will exercise, we're very happy with the 4.9% that we have currently. And as we said from the beginning, our position includes different optionality triggers, among which we'll be improving our thesis along the way, and there are stages still to come. So far, we have kept with the stages we had proposed and will be part of the Board, will be part of other committees that will be set up by the Board, and we will be sharing that with you over the coming days.

Next question is from Guilherme Palhares (inaudible) side Analyst from Bank of America.

We have a couple a little more on the financial side. Lewin, you talked about the provisions for this half of the year. And looking forward, what are those reserves like? What can we assume? And what are the implications of that on the dividend flow from Comgás all the way to cause considering the Supreme Court of Justice ruling. Could we say that the company would rather pay taxes on full results considering the tax benefits instead of creating that legal reserve for the tax benefits to make sure that those dividends continue to flow all the way up to the holding level. And the second question about the dividends flow as well, to understand those dividends you've received from Vale from Raizen this quarter -- how much of that has gone up to the holding so far? And how much of the subsidiaries are under Cosan 8 or 9, which are the main ones to be affected by that?

Could you take that, Lewin? Would you like to take that?

Yes. Thank you. Thank you for the question. I'll start with the second. Actually Vale is very clear. We received about BRL 400 million, EUR 215 million, of which were passed on to the banks that were part of the operation structure. Why? If we had kept the dividends, then the strike price would have changed. -- as in the theory, there would be a change in the strike price of the derivatives. So we prefer to pass that on to the banks and to keep the strike prices of the derivatives, the same. In terms of the preferential, there's a great spirit of 6 months in the dividends payout. So dividends will flow up to the 2 holding companies close on 9 and 10, but they haven't gone all the way up to the holding companies. So all dividends have stopped at Cosan 9 and 10. With regards to your first question, it's interesting because our intention is to go back to the way things were before 2021 when we took advantage of these tax benefits. That's what everybody was used to seeing at Comgás. And we believe dividends will flow as per usual. Obviously, if the tax benefits can be used, then there will be an effect on the dividends going up. But the idea is to continue to take those dividends up respecting the tax benefits decision because we need to pay for our preferred structure for Cosan 9 and 10 and to take up the dividends to the holding company in order to pay for the principal and interest. I hope I've asked your questions, but if you have any more, please feel free to ask them.

So let me just make sure I got it right. The dividends flow will continue. And at the same time, as we look at the dividends, dividends have stopped at Cosan and Raizen. Cosan 9 and 10 from Compass.

Actually, let me take this opportunity, (inaudible), to reiterate this because I think it's important to all investors. These tax benefits and provisions will not affect Comgás' fundamentals. Comgás has always been a strong dividend payer. The business has been growing in terms of volume, in terms of sales mix. And let's not forget that it has a very strong portfolio with ComEd, Solgas as part of the portfolio. And as I said during the presentation, there are many dividend payout levers that can be used inside Compass. I just wanted to reiterate that as a segue.

Our next question is from Luiz Carvalho. (Operator Instructions)

Luis, Lewin, Ana, I also have 2. Last time we spoke in personal lease at the end of last year, you talked about many of the group's challenges. You addressed those. If we look at all the company's projects, there are many relevant projects. The challenge at Vale, Rumo's project at Compass as well and Raizen, -- you mentioned that the company's main challenge was to deliver on all these projects on schedule, on budget -- and with policy. Could you update me on what the priorities are right now? What are you and your executives devoting most of your time to? And what are the main challenges you see as part of this process? Second question is on a macro level -- it's been about 5 months of this new administration, and I'm not about to ask you a political question, but there have been some discussions on the tax framework. So what part of that tax framework will make a contribution. We'll have a contribution from the private sector. So we've seen tax on oil exports, which -- we're also seeing -- I don't know if that was a case or not, but more appetite on the side of this administration to tax things. There are ongoing tax negotiations. So I'd like to hear from you about key topics such as the (inaudible) discussion, royalties on mining. How do you see this macro scenario? And what kind of an impact, if any, will it have on the company's the group's companies.

Thank you, Those are great questions. Well, I'll start by talking about our projects and our time allocation because that's very relevant. As you know, we've shared with you over the past few years, we've reiterated the importance of the partnership among the group's executives and the connection with our Chairman, the founder and shareholder of the company to create the ability to continue to take leaps both in terms of the sizes of the operations and opportunities to complement our portfolio in the 5 areas that are key to this company to the future of Brazil and the world. As you can see, in terms of becoming a member of the Board, I have left (inaudible) Compass and Leo Ponté has taken on that responsibility. So he's devoting some quality time to that. All of us, myself, Rita and Leo are required at the holding company and use at the company, Nelson, Filipe and BETO at the companies to make sure that we have the right time balance, obviously, supported by Perina, Lewin and (inaudible) play in their own roles. So we have rebalanced that in order to free up some time, so I can devote more time to Raizen and to Vale. -- obviously, always looking at moves international expansion and providing support to Lwo at Cosan Investments. But myself, Marcelo, have rebalanced our time so that we can devote more time and energy to each of our investments. As to your second point about the projects, -- they're on track. Obviously, you know that we spoke to you, but I will reiterate it. Engineering is still a challenge in Brazil. The installed capacity in this country for works is a challenge. So we're using different strategies in our projects. Obviously, major construction companies that were around in the past have been greatly reduced and so has their capacity. So there's a number of companies of different sizes, some of which are local. They're sharing projects, which means it requires more management effort on our side, but that's a combination of risk, cost and return. So we've been able to make progress on our 3 main projects: E2G, the regas terminal in Santos and expanding the North network in terms of size and complexity. But they are moving forward, considering that challenge, right? There is no surplus capacity in terms of engineering execution, sometimes something as simple as soldering something, welding something, but -- we do have a very solid team. We are dedicating specific resources to that to make sure that we are supervising things closely. As (inaudible), at the Santos terminal, we also have a dedicated team, which BETO has allocated to the expansion of the North network. And (inaudible) is fully focused on managing multiple sites. So we have an eye on all of these 3 projects. If you look at them in terms of sales, E2G has contracts at Rumo, we have annual contracts, but there's a clear demand, there is capacity. And as for the (inaudible) terminal, there is a contract to supply 3 million cubic meters with Comgás. So the challenge is the execution for them to be ready on time and ready to meet that demand. That will help us with monetization. As you know, in terms of cash generation, these are very important projects because once we have the CapEx for the E2G plant or the terminal or the North network, then cash generation and the conversion from EBITDA to cash is quite strong at all of them without any major recurring costs or CapEx -- so as of 24 in terms of value and deleveraging, we have a great trajectory ahead of us. So that's the priority, Luiz. Nothing has changed. We're on track, but we're always concerned with making sure that our partners, our team and our suppliers have their eye on the ball and are delivering. From a macro point of view, obviously, it's been 5 months, and it's been a significant administration change, I'd say, this new administration has chosen to replace. A great deal of people at the ministries, which obviously led to a slowdown and challenges. So our main concerns -- and what we see as positive. Well, in terms of concern, there are questions concerning legal security, especially with regards to taxes. It's a key topic. There are some major discussions going on in (inaudible) as we speak in terms of cash and many other topics that structural points of the tax reform, the transition of tax credits, Brazilian companies have a considerable asset in terms of tax credits in terms of PIS/COFINS, ICMS. So it needs to be looked at very carefully. -- the Minister of Mines and Energy and the Minister of Finance have already talked about how to use tax credits and debits from the Federation's balance sheet to encourage investments in green economy, and we think that's very positive. They're being inspired by the American IRA and the Green deal in Europe. So we're already seeing some signs from Minister, Alexandre, (inaudible) Minister had that. We believe that would be extremely positive for Brazil. How can we use this tax, so to speak, this function and associate that with the VAT a better direction and to use those rights and responsibilities to encourage the green agenda. That's a very positive agenda. In terms of the framework, the wording was published last night. It's hard to express an opinion on it, but -- as far as we have some kind of Compass and nothing. So I think it's positive. You've seen the interest -- the future interest curve coming to an interesting outcome. The Real is appreciating in terms of foreign exchange. It's too soon, but my concerns are basically to make sure that this administration will ensure legal security because fast issues may lead to insecurity. We wouldn't like that. And also, we must recognize this country's green opportunity. The President and the ministers must do that, that can lead to different licensing agendas, not only for mining, but for oil. I think the government needs to really go from words to practice and create responsible and sustainable mechanisms that will unlock Brazil's potential. I think there is good intention, but it needs to be put into practice and to take the tax reform forward so that it can simplify and use this huge asset as part of the government's balance sheet, (inaudible) 0.8 trillion worth of credit and 2.7 trillion worth of tax disputes that could be turned into investments and encourage major private investments. I think we need to keep an eye out for these tax issues. There are positive signs in terms of expanding the green agenda, which will drive a lot of our investments. And now with -- all these new members in the new ministries, in our case, the Ministry of Mines and Energy & Transportation, so that our gas infrastructure, mining and rail agendas can move forward and unlock Brazil's huge potential. As you know, it requires a lot of discussion. We need to be present discussed, but the role of the private sector associations and businesses is to make a contribution with concrete proposals. It's not just about raising issues. We also need to make concrete proposals. That's what our institutional relations team has been doing myself. (inaudible) our shareholder is taking part in an open discussion about this country's future opportunities, obviously, always trying to create -- the regulatory environment and legal security in order to attract investments. We also need foreign investments together with local investments so that we can move this agenda forward.

Our next question is from Gabriel Barra sell-side analyst from Citi. (Operator Instructions)

I have a question and 2 quick follow-up questions. First question is about what we've been talking to the market about Cosan -- we've been seeing major changes in the company since the corporate structure was simplified, the capital allocation, your investment at Vale. And one of the things we've been discussing is your portfolio. Please correct me if I'm wrong, Luis, but it's a long-duration portfolio with major investments being made, -- now that we have higher interest rates. One of the things that we have been discussing is the company's consistent revisions to its portfolio. So -- could you share with us what you've been discussing at the company with regards to that, the IPO window is slightly tighter this year. There are some uncertainties. The market is a bit tougher. How could we possibly think about that portfolio management via private placement as you did at Compass or maybe a direct M&A investment through player. What have you been discussing at the company for this year? It would be great to hear about that. And 2 follow-up questions are: first, about the EUR 1.5 billion provision. A couple of points. I'd like to clarify the impact of that looking forward. What will be recurring out of that 1.5 million looking on a monthly basis or an annual basis? -- so that we can understand the impact on results and the monetization of that impact. As you said, this is not a cash provision. It's an accounting provision, but it might become cash at some point. Do you have a time line for that? And on Compass, could you talk a bit more about the decision. A lot has been said about (inaudible) you talking to the regulatory agencies. A lot has been discussed about transportation, gas pipes or distribution gas pipes. If you could give us some color on that, that would be great.

Thanks, Gabriel. I'll start with the last one. And then I'll turn it over to Lewin. Well, the discussion among the regulatory agencies are still going on, Asean Sao Paulo and A&P and Rio, they are discussing a palmonization process -- and they're trying to come to a definition based on everything that's happened, the legal proceedings, public hearing about the investments and the gas issues and the decrease -- there are no updates. The agencies are working hard on it, and they're working responsibly on it to try and find the best solution. the whole investment and construction process has been conducted by the company as was announced in the tariff review in 2019. So the company is in compliance with everything that was agreed on in terms of regulation processes. Obviously, now the terminal will be concluded in the second half of the year. That's another important piece of the state and national optionality of supply. It will increase competitiveness. It will encourage the pre-gas market. So we're confident that both agencies are competent and responsible, and they will look at Brazil as a whole to deal with these infrastructure challenges we have in Brazil. Everything in Brazil takes a while to be conceived, implemented and built. And Comgás and Compass our role models of companies in the gas industry that have been making relevant investments and positioning themselves so as to make sure that their clients and as a consequence, the gas market always goes in the best direction possible. So no news, no material news to share with you. We just believe these conversations between the very competent agencies is very important. As for the portfolio, you're absolutely right. Gabriel, we constantly discuss that Compass and Moove will always be ready for IPO or private placement moves. Our teams are very sharp I don't know if you attended the conference in New York last week, but Moove was there as part of the private held companies to be in contact with investors to share their case to listen to the market. So we're very confident given the quality of both assets that at the right time. obviously, does the use of proceeds for the business, and we'll be ready to do it, whether it be through the traditional market via IPO or via private placement. But the main point about the portfolio is the debate within each company myself, Marcelo, Lewin have been keeping work to date. Each company has in its portfolio assets that can be monetized because they provide more value to third parties. And it is our clear intention to monetize on them to improve the company's capital structure so as to make more profitable investments. I always like to use Rumo's terminal as an example, but there are other opportunities at Rumo, at Raizen at Compass as Lewin mentioned during the presentation, we're still divesting from 5 gas distribution companies, which will happen. So it's a fact it's a clear fact that we will be generating additional funds through the investments, whether it be by attracting partners to the companies at the top, wherever it makes sense or by selling full assets or partial assets at the bottom as we have done and will continue to do, if we believe those assets are more valuable to third parties or if we should monetize them as is the case of Rumo to expand the North network, so that it can fit properly within our financial and value structure. As for the provision, just to reiterate what Lewin said, this is a right. When we made a decision, it was based on legal advice, jurisprudence obviously, there was a change that took place in the following weeks, but we will continue to pursue our rights. (inaudible) This is a solid right, more than a thesis. We've done our part, and we will continue to monitor the situation. You know us from accounting terms, we needed to set up that provision because in legal terms, things have moved forward. So the right thing to do is to set up a provision and to be transparent with you. But we don't have a time line. We don't have a monetization schedule because as we said, we will pursue our rights through all means available whenever we believe they are still available to us. So we will continue to discuss the issue at the many different for that are available to discuss it. Lewin any additional comments.

Yes, let me share the figures with (inaudible) and the investors. It's important to say that there have been no losses. We will not have an upside that we used to have from the additional credit that we used to take out. So considering Compass and Moove, we're talking about roughly BRL 200 million a year at the companies. Then you need to do the math to go the way to Cosan because the cash impact on Cosan would be less than that, not in accounting terms, cash impact. And just to reiterate what Luis said about monetization. The Supreme Court of Justice has not made a ruling yet. So it's hard to know what of that will actually materialize. So our legal counsel is monitoring the situation, and we will share any news with the market as soon as we have it.

Next question is from Bruno Montanari Sell-side analyst from Morgan Stanley.

If we can go back to Vale, please. We know that this is a long duration structure. It's well protected with derivatives. But could you give us some idea about what you'll see happening over the years to make the decision to convert that into an effective stake outside the derivatives or unbundling the operation. What are the decision-making factors that you will consider over the years so that this investment can be realized. Second question is, could you give us some more color on the final stages of the regas terminal and what will be the early ramp-up for this project?

With regards to Vale, as we've been saying since October last year when we made the announcement it will be to check if our value unlocking thesis come to fruition as a minority shareholder at the company, we are in constant dialogue with the Board, with other shareholders, and that will take the company in the direction that will unlock the most value potential. It's a different model to what we've done in the past, control or co-control as is the case of Raizen. But given the size of the company and the size of the opportunity, in our opinion, we had to choose a different tack to work collaboratively and to align our objectives for the company. And to see if that will work and if production value generation through agreements that need to be signed, progress also value generation through new technologies. There's a whole set of attributes that the company does have, based on the quality of the assets and everything it has to offer. So we'll see if they evolve at the speed, we believe they can as investors, obviously, not as members of the Board. And so we have the option to do that. If they do, then we'll turn that into a direct stake. If not, we'll take the required time and then we will undo the operation. As for the regas terminal, as I said, the latest good news is that we have drilled on both sides to connect the terminal underwater all the way through to the coast and to the receiving point, which is the integration gas fire connecting the terminal to city gate. That's a key stage and it was concluded a few weeks ago. So we're now moving to the final stretch. We'll be commissioning it in the second half of the year and the ramp-up stage will start at the beginning of next year. So that will be the agreement with Comgás and Compass' team is negotiating with other clients, 3 clients, other gas suppliers, other trading companies so that we can ramp up the terminal based on our optionality agreements -- at the end with the product availability, everything is on track. This drilling was a bit harder than we had expected in terms of geology, but projects like that are always the same. There's always a surprise. But we did have time available in terms of monetizing on part of the contract that happened in that period, whilst it's still not in operation and it will -- the physical ramp-up will begin at the end of this year, beginning of next year. So we'll be using the second semester of this year to run tests, configurations to train the team and to commission so that it can deliver on Comgás' contract, which is key to complement the offer. -- and for Comgás to comply with 24.

Next question is from Andre Vidar sell-side analyst from Italy.

The first one is to Luis. The market has been saying a lot about potential (inaudible) changes in the last 2 weeks in terms of derivative pricing. Today, there was an official announcement of the new policy at the end of the day, not much has changed, but not many people talk about gas, and that's another topic the government has been talking about. It's been saying that it wants to use (inaudible) to reduce the price of gas in the country. And it's much harder to have a gas benchmark in the market than for diesel or gasoline. So how do you see the possibility of (inaudible) reducing the price of gas? And what kind of benefits and risks do you see on Cosan's different businesses? My second question is to Lewin. What do you see the company's need for funding. In our opinion, and please correct me if I'm wrong, -- you've raised debentures in '23, so everything seems to have been addressed. But in '24, maybe to address Vale's maturing installment, you may need to raise some funds in the market or to sell assets -- how do you see the company's need for funding over 2023 and '24.

To your first question, there's not much to add than what we've heard from the company itself and what they've said to the press, it's always a controversial subject, and it needs to be translated into practice into a pricing policy that will allow (inaudible) to send a sign to the market as to what the model will be. Minister Alexandre Silvera wants to grow the gas market and has captured Brazil's potential in that segment from the pre-salt, the challenge now is how to turn that into a pricing policy you always need to instruct the market because if you don't, it won't encourage investments. We don't believe in miracles. So -- they need to make sure that there is the right infrastructure for transportation, distribution, the LNG pipes need to be created along the Brazilian coast to provide options, flexibility and competition. If you consider import prices and opportunities in the market -- we went through a war last year. The market is only now getting back to normal. People are thinking, "Oh, prices are going to be terrible. It's never going to go back to normal. There are cycles. Sometimes, prices are competitive, sometimes they're not. And the infrastructure is created so that you have options so that you can ensure supply to your clients and value generation optionality so that you can move margins and optionalities posed by the market. I feel very optimistic when it comes to this whole conversation about gas, secretaries, the Ministry of Mines and Energy, which has made this topic a priority, and (inaudible) will, at some point, have to define something as they've done for diesel and gasoline. They're saying they will compete with the best alternative for each of these supply areas, which, in my opinion, is the right way of looking at it. Each administration will have their own mechanisms. And it's an important position for distributors because in this case, we offer service optionalities, but we don't run the molecule risk, which is great because it means we can make the most of opportunities as they appear in fuels at Compass, all the time, there are molecule opportunities, (inaudible) opportunities from suppliers, from clients.

That's the beauty of being involved in fuel and gas distribution in our opinion. (inaudible), you saw that we issued a 5-year debenture with a bullet principal worth BRL 1 billion. That was about 2 or 3 weeks ago. And the clear message here is that we haven't exercised any firm bank guarantees, everything was done through the market. So it goes to show that the companies have good credit, a good debt profile and therefore, access to liquidity -- we shared a debt amortization chart with you during the presentation. This year, we had BRL 6 million of the principal to be amortized. And in addition to that, there's the second (inaudible) installment and the Vale installment. The first point is that we have set up -- this finance structure because it reinforces our flexible structure, and it gives us optionality. So this structure can be brought forward if the time is right or it can also be delayed if it's convenient when amortization time comes. So there's a lot of flexibility. There is no pressure in 2024. But obviously, we want to have options. We want to have the optionality. And to do that, we have some capital sources, as we said during the call about Vale. The first one is the lab management through the local market or the external international bond market so that we're ready whenever there's a window, we can access those markets. The other alternatives, as Luis said, companies are constantly looking at their management portfolio -- at portfolio management so that they can invest and pay out more dividends. A classic example of that is the sale of 80% of (inaudible) 16 and 19 at Rumo. And if there is a window, we might do our portfolio management at our main portfolio as long as we don't lose control over any of the companies. But I just want to reiterate that the structure that we have set up allows us not to be pressured by the market.

Next question is from Regis Cardoso sell-side analyst from Credit Suisse.

I'll try and be objective -- could you give us an update on Compass specialty (inaudible)? What kind of potential have you mapped to replicate Comgás' experience the different regulatory framework? If you could give me a general update, that would be great. And what about the other distribution companies as well? And a follow-up question about ICMS and the provision, just to make sure I got it right. So the recurring effect looking forward will be BRL 0.2 billion -- on a pretax basis, right? And also about Vale, that 1.6, wouldn't it make sense to convert that into a structure that will give you the right to vote and considering the cost difference between the 2 structures and still about Vale, considering the color maturity in 2024 is renewing that structure a net cost or net premium because I got the impression that you were giving up on an upside at a higher price, and you would only make something at the top range. And sounded like it was a net premium to receive as a receivable, not payable. So what is the instrument to roll over that instrument, if required?

Okay. So an update on (inaudible) and then I'll talk about the 1.6 and Lewin can talk about the ICMS, the provision and the maturity. Everything goes well at (inaudible). We have all the teams in place. Obviously, they are different models in the different geographies. We have Solgas. -- we have the other distribution companies, which have the state stake involved. We've been welcomed by Mitsui and all the states where we're present. We do see a clear potential that we mapped when we made the acquisition to grow among the residential and commercial segments. -- and considering the regulatory framework, and that is reflected in the company's figures their ability to solve existing problems in the many different states, pending issues with clients, regulatory issues are all being addressed by (inaudible)'s team. And obviously, the opportunity to replicate the technology model to reduce the cost of connection by using more modern material, different methodologies, suppliers, safety practices. We're very confident and very excited obviously realities and speeds will be different depending on the corporate structure we have at each of the companies below. But so far, so good. I think this quarter's results were very good. The profitability is in line. Actually, it's above our business case when we approved the investment. Considering the company's spin-off and exercising our preference, our idea and is to conclude that divestment still in 2023. Obviously, it's not just up to us, but it's part of our portfolio management to monetize on these 5 distribution companies. As for the 1.6 -- if we convert that into a different structure, then it will become a day. And right now, we're carrying a smaller debt than most of you had projected when we made the acquisition. We don't think now is the right time to do it. We feel comfortable with the 4.9% from an economic and from an stake point of view with other shareholders, spend -- so far, as I said, so good, we will continue with our 4.9% because we don't want any more debt pressure, and we believe that to be a comfortable position right now on all aspects, economic governance and stake.

Regis, I'll start with Vale's structure. Obviously, if we want to renew that, there is a negotiation of the strikes. We could keep the same strike values, but it might generate a premium to be paid or received depending on the market. So I couldn't tell you now whether that's a net cost or net price. There will be a premium to be paid or received depending on what the market looks like down the line. What we are renewing is the financing. And in order to be a risk-free operation, the put option net present value is the value of the debt. So they will be making that adjustment. In terms of the provision, you're talking about BRL 200 million recurring effect. Yes, that's precisely it. But as I said on a different question, it's not that we're giving up something. If you look back, we didn't have that benefit. So we're not using that benefit anymore. So the BRL 200 million isn't before tax. It is the tax. So it's BRL 200 million. And let me take a wild guess. Let's say it's roughly 150 to 180 at Compass and the rest at Moove. But that's at the company base. As I said, the cash is relative that relates to (inaudible), you need to do the math to get to that. This is the consolidated accounting effect on the companies at the top.

The Q&A session is now concluded. I will now turn it over to Mr. Ricardo Lewin for his closing remarks.

I just want to say thanks to all the investors, to all the sell-side investors for joining us. If there is any news, we will be sharing it with the market. Otherwise, I'll see you during the next earnings call. Thank you, and have a great week.

Cosan's First Quarter 2023 Earnings Video Conference has now concluded. For further questions, please contact the Investor Relations department. Thank you so much for joining us, and have a great day.