Centrais Eletricas Brasileiras SA - Eletrobras (EBR) 2021 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Please be welcome to Eletrobrás Earnings Conference Call for Fourth Quarter 2021. Presenting Eletrobrás in, we have here Mr. Rodrigo Limp, President of the company; Mrs. Elvira Presta, Financial and RI (sic) [IR] Director; Mrs. Camila Gualdo, Governance, Risks and Conformity Director; and Mr. Pedro Luiz Jatobá, Generation Director. We tell you that this earnings conference call is being recorded and is going to be available at the company's IR website, where is going to be available the presentation in both languages.

We may tell you that who may need a simultaneous translation, we have this too available on the globe icon interpretation located on the inferior center on your screen. While you select it, please choose your preferential language, Portuguese or English. Participants who want to listen the earnings conference call in English, please there is an option to silence the original audio in Portuguese clicking and muting original audio. (Operator Instructions)

Before we proceed, we'd like to -- may let you guys know that all the statements that may be through this earnings conference call relatives about the company's perspectives, projections, goals and financial operations, they constitute and beliefs and premises of Eletrobrás. These informations are only available at the company. Future considerations are not guarantee of development. They involve risks and uncertainties, and they should be for not happening. Investors may understand that these conditions may influence on other results.

Now I'd like to give the word to Mr. Rodrigo Limp, President, for us to start our presentation. Mr. Rodrigo, please move on.

Thank you. Good afternoon to all of you. Right now we want to say hello to everybody on the company and all of you that are with us today. We are very happy to be with us in this earnings conference call on this presentation on the fourth quarter of 2021. Since we presented before, most of our stats here, RI, finance here in this presentation. And since we said before, we're going to have a Q&A session to get about any doubts on this annual results -- on the results that we showed up last Friday about the presentation. I'm going to present you guys the main highlights about the operations and finance situation. And then Elvira will present the details about the financial information, about the demonstration about last week.

Starting this presentation, I would like to put on the first slide. The first slide is about the sector and economical context about Eletrobrás. That will be done -- we are evolving our results about the country. And comparing 2020 and 2021, we had a development of 8%. And about the pandemic situations, and now that we are starting back on our situation, working, we have this growth. On the fourth quarter, we have development of 2.5%. And about other relevant information about the electric information, we have the GSF and about the PLD. On our last conference call, on the beginning of November, we had really low results, about 50%. And about the hydro crisis that we had on country on the last few months, it had been reversed. Now we have a really comfortable situation on a national scale, and it's reflected on an improvement on the GSF.

This is even comparing to 2020 comparing in the last 2 months. And we had an increase on the rain that happened. In a similar situation we had the PLD. And we had a bigger impact on the hydro situation crises, we had all numbers. And on the last quarter, we have an increase on a short rate market. And on the next slide it show the performance on the generation 2021. We had about 30% of almost all the energy produced in Brazil and part of this is generation. We had a quoting energy situation, very significant. And when we watch the balance, the call today show about 40% in the margins, the profit. We have the -- like a small number comparing to the other structure of the company. And we checked this. It's a significant number on the energetic number, but on the margin -- gross margin, where, essentially, you had a lower number comparing about the energy.

And on the next slide, here we have the presentation about the development on Eletrobrás. We have 2 graphics here to show on the transmission lines and on the transformers. We had like a high development, high numbers, and it contributed a lot to -- contributed about the hydro crisis to the operator to use the energy supplies on the market. We can look at this at about availability on the transmission situations in the last few months. On the last quarters or the last few years, we had like very similar numbers and high numbers, around like 99.8%. And it was a really good improvement on the company. The situation is even more positive when we check about the transformers that we had [aggressive] in the last few years. On the last quarter of 2021, this was the biggest one, if you check on the other years.

And about the turnoffs, they were like the lows -- it was lower comparing to the last quarter of 2020. And the transforming -- the substations, we have 15% cuts. And for turbine problems we had like this down numbers as well comparing the last quarter of 2020, and this proved the holding numbers of our company. In the next slide, the financial highlights. Like I said Elvira, she's going to show with more details on the presentation. On the received, bigger received margin comparing 2020 and then 2021, we had a growth of 28%.

And about EBITDA, we had a negative EBITDA in the fourth quarter of 2020. And now we had BRL 2.4 billion positive in 2021 and this capability of getting a margin growth. And gross margin we had a development comparing to 2020 we had about 50% positive. This is about IFRS -- these values. In recurring value we had these numbers. We had a 21% positive EBITDA on the recurring engine and the EBITDA we had 16%. And the gross margin, we have the development of 18% better than the IFRS.

And on the next slide, on the highlights fourth quarter 2021, the financial highlights in the positive side. We had a recognition of AIC to be paid to Amazonas and Boa Vista. They had -- it was an amount of -- it was good. The other companies were already contemplated on the last quarter, and it was like a positive number of BRL 439 million. And at the Rol, we had 27% of new bilateral contracts and imported energy to resales on Uruguay and the reversion of PCLD CEA on positive BRL 276 million. And we got a low on PMSO of 9%. I'm going to have more details ahead. And this resulted -- and we had this number, BRL 21.6 billion positive and EBITDA on BRL 20.9 billion positive, and the relation about the debt and EBITDA at just 1. It shows like the company is solid.

On the negative side, negative highlights. And about Santo Antônio Energia, we had a negative BRL 1.4 billion in 2 parts, this being BRL 706 million provision to passive and being discovered and BRL 697 million to loss about equivalent on the societary participation. This is about SPE in the other companies that were under discussion on this ACR discussion. About the compulsory loans, we had a number of BRL 1.1 billion, being this BRL 803 million about provision -- personnel provision and the rest about the Selic situation. In these numbers, we had to check about the statements about the criteria about the last quarter that we contemplated this evaluation on the fourth quarter as well. And we had some process check that were in provision.

And about the taxes on the process that they weren't checked out on STJ situation that was favorable to us. And we did this. Another thing to check, it was the PCLD Amazonas D, about BRL 1 billion, being BRL 620 million about holding and BRL 425 million is about the Eletronorte. We had to check. About contingency, we have BRL 778 million being the BRL 349 million about the work and provisions about CGTEletrosul. And this we end the financial highlights.

And going to the next slide about the ESG highlights. We had some acknowledgments on this last quarter of 2021 on the second year trade. We were on the Standard & Poor's Sustainability Award. We had the maximum grade on Water Security and B concept in climatic changes. And in the first place, on the electric sector and 84th place general on these companies on the ranking. And for the fifth straight year, we had the excellence level on the Sest Governance situation. We had also the stamp Pró-Ética company. She's with the CEO. And we had for the second straight year for all the companies -- all the Eletrobrás companies, the Gender-Equality Index from Bloomberg.

And on the next slide, we have also about ESG. We have some things to say about the sustainability -- supplies sustainability. We now contemplate as well -- since the last quarter, we have a duty diligence ESG about the environment and human rights. And it favors a lot that -- not only Eletrobrás, we follow about the principles and best things to do. And we demand that the suppliers -- that they do it as well, that we value this as much. We have the sustainability trail. This is aligned with the EAD situational framework about the sustainable polyhedro ESG. And we have hot site as well about the environmental politics. We have 5 institutional movies talking about this environmental politics.

And I end this presentation, the first part. And now I pass the word to financial developments. Please, Elvira, you can go ahead.

Thank you, Limp. Good afternoon to you all. Thanks for the opportunity for all of you guys to be here to get our presentation. Our President -- he did an opening informations -- general information about the fourth quarter. And now we have the -- on this info the details -- the reported informations, on the blue column about the IFRS and the recurring in the green one. And also about the nonrecurring events to get the analysis on the results. Talking specifically about receipt -- about margin, since we showed up, we had a really good quarter about the receipt -- the margin. As you can see on the recurring around 20% positive. This happened since in generation, transmission segment. Both segment had great results and the highlights. Some of them were also mentioned -- already mentioned. We were importing energy from Uruguay. This was a good like margin. You have to highlight this as well. It's going to be ahead. And we have also a cost to import this. We have to analyze this.

We had contract negotiations with prices that were negotiated above the prices that we were used to. And we had like a growth on the margins as well and bilateral contracts. In first meeting, we have the effect on the IPCA about readjustment situation. We had the conclusion about reviewing the tax situation on such. It was [Tennessee] and it was like finally set. And this would get a margin as well. About the PMSO line, comparing to last year, since we had some nonrecurring events, we check on the right these details of these nonrecurring events on the more relevant ones. And then last year, in December, we had a deal on Furnas with Light. This happened in 2020. When we took off these event, and we put the recurring margins to check, but didn't have a specific link.

A few important points that we like to tell you about the staff. If I like an increase on this views. On the recurring, it had fallen 2%. We are having some ordinary events of about changing the plans. Contributing these changes, we have this development. And about the materials, we had an increase of -- okay, paychecks, okay on the first quarter 2020, we had Candiota we're using. We had a per license that year. But the contract worked regularly and then a good volume, and it was a record this year. Naturally she consumed more material. And we had to stop some onground 1 and 2 and about -- it was about services and about recurring events.

We had the judiciary events that we had in 2020 and '21. And we have also some events that -- there are some relevant. And about the few situations that we have some checking, moderations, and we had to change the nuclear fuel. And after ending the technical evaluation, we have necessity to make this change, okay. The provisions we're going to tell you ahead, what were the principal effects. About the costs -- operational costs, when we had -- where we had more impact was about the importing energy from Uruguay because of this buying, thermoelectric use in Furnas. It was dispatched and we had the hydro crisis. It was a corresponding cost in this buying on the fuel about financial reports.

About the debt situation that we did in the past, and they started right now, they are starting being paid right now. And the debt was bigger now. The updates on the cost of the pain on some of the Selic situation, on the taxes, okay. Getting to this graphic situation to analyze, we can check on the next slide, please. We also present on the graphic information for you guys on the receipt -- book receipt on the recurring events on the columns that we can check on the -- each end about IFRS and on the middle what is nonrecurring. As I mentioned on the last slide, the previous slide, we have the main numbers here, for generized, 20% on the margin, profit. On the generating energy, we had this 20% profit. And most of it is from Uruguay import and closing contracts with higher prices. And on production, we had this annual readjustment about transmitting the info. And this brought a great profit. And it was the main events that we should check on the development on the margin of profits in BRL 2.2 billion on recurring.

And if you check on the next slide, the volumes and prices to analyze. On the right side -- on the right top area we check on the market. We have the market indicators from GSF, PLD, on the fourth quarter 2020. And indeed, we had higher prices. In the fourth quarter 2020, we had lower prices. And it was about BRL 135. And we had -- even with this lower price, we had like better negotiations on contracts, if we check on the top area. If you check which was like an average, it was lower than last year -- last quarter, but above the practice prices.

But if we check the average prices, they are above from the average prices from last year. About in the regulated events that we had like a great improvement, like if you compare from BRL 113 to BRL 300. It's like about on the dispatchment on the hydroelectric usage. As we highlighted here, we had the bigger dispatch -- big amount on the Santa Cruz use and so that was stopping and now have more generation. And this had almost around BRL 500 million positive profit on the regulated contracts.

Another good point to check on the nuclear operations, it's regulated. And the margins on nuclear and is about the provisions. And the provisions are just each time from time to time all what we made and had this adjustment. And the bilateral contracts, since we had like some SPEs consolidated that were sold and had this reduction on the SPE companies. Some of them were sold, and we had like this negative number of BRL 75 million. But once again, we have some good profits because of the Uruguay company. We have more details ahead that define the volumes -- all the volume that we had at all the prices comparing to the same time in 2020.

Going to the next slide. Now I have the graphic about the PMSO, operational tax pay. On the left side, we have the IFRS. On the right side, the recurring. As I highlighted on the left side, on the 2020, it was a higher number, specifically [onloaders]. It was about Furnas that closed with Light in 2020 -- that it didn't happen in 2021 and about the recurring one. The main highlight I would like to do was about the blue one. It's about the staff. It was the relevant one and it went from BRL 1.539 billion to BRL 1.511 billion. It was a relevant one to highlight, and that we're doing this and we're reducing these plants since we are migrating from the DB to CD.

About the services, in the green one, we had an improvement -- sorry, about the gray one, I forgot about this material. Well, BRL 58 million to BRL 103 million -- this was about what I said ago. It was about Candiota that it wasn't working and now it is done. That's why we had this change. And now she worked regularly in 2021. And the green one, the services, we headed into immediate improvement, one more than the others. And as we can highlight, we have some services costs to check. We had an improvement on the costs about health. And because of the pandemic situation, we had a lower number on these services.

And on the next, about the provisions -- information about the provisions, about contingency. As we can see on the chart on the left side, the main comments that we can do when we check on the last line from 2020 we had almost negative BRL 4.247 billion. Now we had BRL 3.524 billion. It was like a decrease 20%. And we check this, we had the number today on the low end about BRL 803 million and as Limp told us before would have some judiciary decisions to be favorable to us. And we had some inputs that were analyzed about these new parameters that they were defined on the last quarter, and that is a number of BRL 800 million. And on the last line, about the contingency, we reclassified some risks about the tributary situation about Furnas, about CGT Eletrosul as well. We had about the risk checking. It was a relevant one.

In the passive, it was already mentioned before, about the decision they did on Santo Antônio said as well. And our President explained that the company, Amazonas Energia, it was the distributor that was sold on the end of 2018, and this debt was like checked with lower price. We have energy with Amazonas and these BRL 400 million is about this -- you're not going to be able to pay all these debts. And the holding is it is about the financial debt that keeps capital when the sales happen. And a big amount of this value, it's a prospective vision of this. It was the -- analyzed to check.

Now we have the EBITDA highlight. And when we check about recurring information about the EBITDA that we had 4 point -- that we had in 2020, BRL 4.575 million. Even now we had in 2021, BRL 5.296 million, so we had a great improvement. And on the first column, we have the growth from the margin came, even in generating and transmitting. And we had an improvement on cost improvement. It was related about the buying energy to operate in Santa Cruz and in part Uruguay as well. About provisions, what we think recurring, you can check it. This is about PCLD. This is about Amazonas Energia. And on the right side, on the nonrecurring items, we have about BRL 2.894 million. These numbers -- they complement about the compulsory loan and in the past we discovered SAESA -- these impairments and about the SAESA and about the PCLD holding. This is going to be a -- recurring debt is nonrecurring, and it's going to be analyzed.

On the recurrings about the distributed and the nonrecurring is about the Eletronorte, the financial. About the liquid profit, we had the decrease. Yes, we had a decrease about -- from BRL 4.4 million almost to BRL 3.5 million. We had an EBITDA -- recurring EBITDA. And there's most about the debts that happened on this time. And the monetary changing that we had -- it was mostly about this. We're getting close to the end. We have the financial display, and we talk about EBITDA. We have this about 1 time on the graphic on the left side. It shows the liquid debt. It shows up the yellow line it is the debt adjusted by the EBITDA. And on the inferior side, on the other side, we have the colors showing these numbers as it goes by. And on the right side, we check how these numbers they get by it.

And since we check about the checks, yes, yes. And we take out like BRL 15.833 billion and the finance needs to receive and the financial actives. We had the final number that's BRL 21.641 billion. And comparing to the last quarter as we analyze, as we go to end these numbers, about the investments, and these numbers are maybe in dollars, yes. Checking about 2021 on the fourth quarter, we had to check on the important moderation. And it wasn't highlighted here. We had the payments and it was highlighted in 2011 and it expired in 2021. It was balance to 10 years, and renewed almost 2 years ago.

We refinanced this bonus, but we had like a part of it, around 30%, but was already converted to reais. It was about BRL 3.4 billion. And we did this payment in October. In the last quarter, we covered as well the financial reports about the critical path about Angra III. The financial administration had to approve this in 2020. We had 1 -- a little more than BRL 1 billion check about this. And we had a deal to -- we had to deal with all the relevant facts with El Paso that they provided -- they would provide with Eletronorte on the payments. They have been about BRL 67 million compared to the last quarter.

And on the last slide, the CapEx slide, about the investments, comparing what we've planned and what we made about generating and transmitting, yes. We had around 57% -- 67%. We're about realizing this. And in generating we were below the average -- a little bit below what we expected on transmitting. We have 75% almost what we did. And mostly, this was about Angra III. We are replanning on the scheduling, about what to do on Angra III. In transmitting, we had some highlights what we did -- and the main highlight was Chesf. And about SPES, we had an improvement on the imports about CGT Eletrosul to be later to TSLE. We had to save on the debenture. Well, we had -- and these were the main impacts.

And now I end in my presentation and we put available to the Q&A session.

(Operator Instructions) And now we're going to the first question. And it is from Andre Sampaio, sell side analyst from Santander.

I'd like to do 2 questions. First question about the privatization, about this issue. And the second question and we always keep questioning this about when this is going to be released.

Okay. Thanks for your questions, Andre. Starting for the second question about the [QualC] situation, about the financials that we showed on the annual reports. We put it available to show you on the graph is on 1.6. We have the auctions and what was available and was blocked from each 1 of the companies and about QualC . That was your question. We have 26% or 27% of the auctions blocked. And this is about BRL 66 million -- BRL 67 million. And on the chart, we have the ports we have and it respect per percent about TCU. And we had the first deliberation with the TCU in February, referring to the target value. And now the TCU is working on the second modeling, checking the price as a minimum price, and we don't know when this is going to be released with this issue. But we are following this. And always when they give us information, we have this, but right now we don't have information when this is going to be released.

Our next question comes from Maria Carolina, sell side analyst from Credit Suisse.

I have 2 questions. The first one, it's about recurring staff. You talked about the past it reduced and it reduced from BC to CD. If you give us a bit more details about this -- this process. I'd like to remind us how this is working on, this migration situation is working on, and the possible impacts that we could have at this year. And the second is going to be, we still see Amazonas giving an impact. And remember, you guys already talked with Amazonas as well. How they would like run these situation to reduce the impact for you guys? You guys have any news about this process? The regulator that can help you guys to diminish the uncertainty about the payments.

Thanks for your questions, Carolina. And 1 more time, starting with the second question. I'm going to ask later for Elvira to comment on this, about the Amazonas. We know about the -- it's really complex operationally to check if we're going to have some losses. Part of the isolated systems that is with the CCC that's really relevant and about the hiring situation and it affects the health of the company. We are treating frequently with the distributor, also with the regulator as well. These discussions we're having with them about hiring, flexibility of the units, but we don't have a statement about this as well. But we are checking about the efforts the company is being doing -- have been doing as in to reduce the losses -- commercial losses for the company. We do this. And if we succeed on this, we're going to improve the health of the company. And passing to Elvira, if you have a complement and about the first question as well.

Okay. Thank you. Not a doubt, you put it right. We are following this closely. It's like a really challenging situation in these discussions. Regulatory system, you're going to check it. It's really complex. We have some topics that are -- we have to -- they have to be questioned to have like a break -- a lose -- a gap for us to honor these payments. But we have a communication system really good with the distributor, and we have the intention this topic is going to be solved. But not a doubt on a short term we have to put a close to finish this provision -- to close this provision, right.

And about the benefit situation, we have -- we're already worried about this. And we have -- a lot of beneficial programs define about this. We studied about this. And our sustainability director -- they hired -- they studied about this, and they did it a plan, a migration plan, voluntary migration plan with all the staff that they can do this migration. It's not yet fully concluded. It's working on. But meanwhile, we are advancing this. This migration is carrying on. Meanwhile, it's going to be defined. We are making these numbers small, and we're like finishing the risk, making it slower, yes. And we're getting a good impact on the result on the long term. But we didn't conclude it yet, but we are already working and seeing some positive results.

Our next question comes from Giuliano, sell side analyst from UBS IB.

I have some doubts here this -- about the privatization of the company. I would like just to get the timing from your side. First of all, this delay on the fourth quarter, it can delay the process for privatization, the first impact, the situation, yes, on the approval. And the second, in the fourth quarter results, if we can impact also the minimum price that's going to be made on the privatization. I would like to know what you guys expect and about the calendar as well.

Perfect, Giuliano. Thank you. About the calendar, we've shown on the last conference, considering the capitalization conclusion about this on the results in the fourth quarter and what we have working. By what we have scheduled, the limit, the deadline is May 13. We have naturally published the offer and have some dates to conclude -- to conclude this, and the deadline is May 13. And these adjustments on the -- when we publish this, it is on the chronogram schedule, but we have other steps to -- until we conclude the process, internal steps and external steps, process steps.

About the -- we had 2 crises with the staff in January and February, but it was suspended by the syndicate. And the staff -- they are really important for these complex activities that we had to do. But with great effort we managed to keep it working, and we got covered about all the steps that were scheduled without affecting the financial aspects of the company and the [uses] and about the minimum price. With these effects, this discussion is conducted by the BNDES with the accounting premium. In this definition on the minimum price, it's going to be discussed with 2 companies in 2 sites and Eletrobrás doesn't have access on this. It is between the TCU And BNDES. And we don't have the -- we don't know -- we don't have how to answer this.

May I add one more question. There is a minimum deadline for the roadshow or you guys decide this?

This deadline happens, so the CVM analyze the offer presented, that's like 5 work days, and request any changes or complement the inflows. And the company do these changes or check all the doubts that they have and then they do a new analysis. And if everybody is okay with it, we are authorized to publish this -- no, to realize the offer. If Elvira wants to add something? It was just this. It's just this, really.

We have a formality about when it should like less the road show itself. It doesn't go with the company and about the potential interest groups whether deadline should be like followed up, the CVM decides this -- they protocol this. And they put the offer. CVM, they have the time to check it and approve and check for some doubts for some things to clarify. They have to do the statements that are necessary, and these are the steps that they had followed up. Just reinforce about the roadshow steps, it's really important, even considering the size of the offer that's going to be even the primary and the secondary, if necessary as well.

Next question comes from Marcelo Sá, sell side analyst from Itaú.

You have the AGM scheduled to April '22. And if everything runs well and if you guys be able to do this before as well, it would be great. It's going to be officialized and you're going to have this window. You're going to have this window until like May 13, right?

It's April 25. You're going to have to check on the IR -- our IR website and May 13 is the deadline to the liquidation of the offer.

As Elvira said, our deadline is 25 -- April 25.

But the date -- it can be before or after?

Only after.

Okay. Okay. Only after. Perfect. It's going to be the same. And another question about the TCU. I imagine that the TCU already made some statements to you guys and the government as well. Well, I went ahead and talked to some people. They had like not any big statements to check about the first phase of the process. Any significant situation about the values? You guys confirm this, that the statements they weren't like as big as it says.

As I said on the other question, this part, we have a part that naturally we have -- we interact with the -- in the TCU. What about the minimum price? This discussion is court situation with the court and BNDES and Minas Energia's. And that we don't know which topics are going to be like getting deep to be checked about the minute price.

That discussion about, for example, evaluation, electro nuclear situation (inaudible) that wasn't a part that could have some questions and you guys were involved, right?

No. This was already part of the Minas modeling situation with the electro nuclear situation and it is reflected on the PPI. So these demands is specifically with the BNDES. And the government gets on as well.

And now we end the Q&A session. Now I give the word back to Mr. Rodrigo Limp for his final consideration. Mr. Rodrigo, please.

Well, I'd like to thank you guys again for the interest. All of you guys, we had a lot of participants, which demonstrates the moment that we have in the company, the results, the [importance]. I want to reinforce the transparency that Eletrobrás conducts all these financial informations, all the relevant information that we have knowledge. We publish to the market on the moment that we get this information. We're going to keep doing this. This is an important -- this constant dialogue with the market, with the investors, for us to be always having -- always a transparent process with the public and always improve our results. Once again, I'd like to thank all of you and wish a great afternoon to all of you guys.

On this moment, Eletrobrás earnings conference call has ended. We thank you for all your participation, and have a good afternoon.

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