Centrais Eletricas Brasileiras SA - Eletrobras (EBR) 2021 Q1 法說會逐字稿

Ladies and gentlemen, thank you for waiting. Welcome to Eletrobrás conference. Welcome to our first quarter 2021 results. This event is being recorded. (Operator Instructions) This presentation will be available in the IR website from Eletrobrás. (Operator Instructions)

Before we proceed, let me remind you that this call may contain forward-looking statements. Such statements, operational goals and financial goals are basically beliefs and expectations of Eletrobrás Board of Directors and information available to the company. Forward-looking statements do not ensure performance since they involve risks and uncertainties and therefore, are dependent on circumstances that may or may not occur. Investors must understand that general economic conditions and other operational factors may influence the results of such future considerations.

Today, we have the new Chairman of Eletrobrás, Mr. Rodrigo Limp; Ms. Elvira Presta, Financial Director and IR Officer; and Mr. Pedro Jatobá, Generation Director.

With that, I will hand the floor over to Mr. President, Mr. Rodrigo Limp. Mr. Rodrigo Limp, good afternoon. You may proceed.

Good afternoon, Marcelo. And welcome to our first quarter 2021 results from Eletrobrás. I would like to greet investors and analysts as well as the members of our Board, Mrs. Elvira, Mr. Jatobá.

Now before moving on to the results, I would like to acknowledge our former Chairman Wilson, who has led the company and who has brought about great positive results that will be presented during this call. It is a great pleasure for me to lead this first conference call at Eletrobrás as a Chairman, especially considering the positive results that we are about to present.

You all have access to the deck of slides that was made available on our website. Let's start with our corporate and operating highlights. I'll begin with Slide 4 and 5, and I will hand it over to Ms. Elvira, who will move on with the presentation.

On Slide #4, we see that our ROL was BRL 8.2 million, which was 8% -- an 8% increase compared to the first quarter 2020. Our EBITDA was at BRL 3.8 million, an 11% increase as compared to the first Q of 2020, and our net profit was at BRL 1.6 million, a 31% increase year-over-year.

Let's look at our recurring net operating revenue. We reached BRL 8.2 million, 8% above first quarter last year; recurring EBITDA was at BRL 4.9 million, which is a 30% increase as compared to the first quarter last year; and our recurring net profit was BRL 2.74 million, which represents a 48% increase as compared to the same period last year.

Our dividend, we had BRL 1.5 billion declared and approved in the company's assembly. And these were paid in February 2021, accounting for BRL 2.3 billion, totaling BRL 3.8 billion that will be paid out up until the end of 2021.

Debentures. We issued 2 different series, totaling BRL 2.7 billion. The first series has a maturation of 5 years, considering the CDI plus 1.8%. And then the second series has a maturation date of 10 years, totaling BRL 1.5 billion. And the reference will be the IPCA rate plus 4.9%.

Another highlight is the net debt-adjusted-EBITDA ratio at 1.4x, which is the lowest value we have achieved. And we achieved this number because of the restructuring process that started. We were at 1.4 and we went down to 1 point -- we were at 1.5, and we got down to 1.4, which is a great result.

On Slide #5 is the other highlights. In Angra 3, which is the main investment made by Eletrobrás in 2021. We see that in February this year, there was a public notice for contracting civil work in part of the electromechanical assembly. Proposals will be opened next week on May 20 in a public session. On March 26, we had the first AFAC worth BRL 850 million, totaling BRL 2.4 million scheduled for 2021.

The Board of Directors has recently approved the preference right totaling BRL 83 million from the SOTE and BRL 218 million from CSLE. We also presented the results of the rationalization process for SPEs. In late 2020, we had 94 participations. We decreased that by 11. By late March 2021, we should get down to 83. In our assembly, new members for the Board of Directors were elected. New members for the fiscal council and executive Board members were elected.

36% of our members are independent, and they partake our Board of Directors. With regards to the provisional measure 1031 from 2021, which was published in February, Eletrobrás capitalization and then resolution CPPI 176 that you find the role of BNDES in the execution and monitoring of the process of Eletrobrás follow-on responsibility. So BNDES will execute and monitor the process, and Eletrobrás will be accountable for the follow-on after the provisional measure has been approved, which is under discussion in the House of Representatives.

The financial component from the RBSE, which has not impacted the first quarter's results. These results should be perceived by July 2021. And this will impact the next 2 tax cycles from July 2021 until June 2022 and July 2022 to July 2023. And this -- the amortization should happen by 2028. Financial rights will remain at Eletrobrás.

So these are the main highlights. With that, I will hand it over to Ms. Elvira, our Director, who will move on with our presentation. She'll talk about the sector and the economic context. Elvira, over to you.

Thank you, Rodrigo. Good afternoon, everyone. I would like to greet all analysts and investors who are present in this call today as we present our first quarter results.

On Slide #6, we got good news. The first chart at the top of the slide, we see that the daily energy load in Brazil is on the right. If we compare this quarter with the same period last year, we saw a 4.3% increase. The first quarter of last year was really impacted because of the pandemic in Brazil. Actually, in the end of the quarter, the blue line represents last year. So only the final 10 days of the first quarter saw a decrease last year. That's what we can see on the chart to your left-hand side. Here, you see the consumption last year. So good news is that the energy load is on the rise right now. Last year, we saw a 2% decrease as compared to 2019.

In the right-hand side, you see our PLD. The difference is settlement price. We saw a decrease last year because of the peak of the pandemic, then we saw a price increase at the end of the year, and then prices went down once again. Now since the wet season is ending, we see a slight trend upwards.

Now on Slide 7. We see our market share. This quarter, we kept our 29% share that was present in our annual balance sheet. And Eletrobrás Energy was more allocated, accounting for roughly 33% of energy generated, but that is a 7.1% decrease as compared to the same period last year.

At the bottom part of the slide, your left-hand side, you see our energetic balance between the amount of energy allocated in a free and regulated environment. Here, we see that we have a reduction in the percentage of 3 environments. We moved from 33.3% to 27.5%, and we have 5.3% of uncontracted energy in 2021.

To your right-hand side, you see the generation income in the first quarter as compared to the same period last year. We see a slight reduction. Last year, we had BRL 5.9 billion in revenue, and this year, BRL 5.8 billion in revenue. This is a slight reduction, which can be explained because of the lower volume and also because of the lower price as we can see in the chart on the slide.

In green, we see the ACL. In the first quarter last year, we were selling at BRL 172 average price, and now we're selling this energy at BRL 163 average price. And in regulated environment, we moved from BRL 227.49 to BRL 219.57 average price. Now despite this slight reduction as compared to the first quarter last year, we see an increase in the average price as compared to the fourth quarter last year.

Moving on to Slide #8. Here, we see our operational results for transmission. We still account for 43.1% of transmission lines of the country. And the charts that make us really proud show the performance of our operations. To your left-hand side, you see operational availability of transmission lines. We've hit all-time highs, closing the first quarter with 99.96%. We've seen a reduction of 20% in disturbances in the Eletrobrás system as compared to the same period last year. And over the past 5 years, we haven't had any major shutdowns.

To the right-hand side, you see a chart that portrays the disconnections and discount, which is what we call variable portion. This is also reducing discounts on our revenue because of these disconnections.

The next slide, #9, we see the ESG highlights. We have a great focus on getting the certificate for our operations so that we can issue new green bonds. We had the CBI certification before for the transmission lines, aside from what we had for wind and solar energy. We also work to engage our suppliers on climate change SDGs.

In the past quarter, we received the Bloomberg Gender Equality Index stamp. With this new Board, 18% of the Board of Directors are women, 33% of the Executive Board are women and 20% of the fiscal council are women.

With that, let's move on to the financial performance. We see these results on Slide 11. This is our income statement. The first columns show you the results considering the IFRS and to your right-hand side, our recurrent operations considering the protocol that we have in the company. I'll quickly go over the summary, and then we'll get into the details.

Our gross revenue increased by 8%. As Mr. Chairman, Rodrigo Limp, has mentioned, this increase in revenue comes from transmission mainly because of the readjustments in prices that we saw last year, mainly in the second and third quarters. We've seen a reduction in operational costs. There was a 6% reduction, PMSO was 5% for SRF and for recurrent, 2%. I'll tell you why this variation happened in a few moments.

We saw an increase in the operational provisions of 182% for IFRS, and for recurrent, minus 35%. We saw an increase in shareholdings mainly because our transmission companies also benefited by the price decrease that happened last year. And because of that, our EBITDA increased by 11% for the IFRS and 30% for the recurrent basis. The financial result was also better than as compared to the same period last year. We highlight here the reduction of our debt because of the renegotiations for liability management in the company. And finally, our net income went up by 31% in the IFRS results and 48% in our recurrent space.

Moving on to the next slide, #12. I wanted to tell you about the revenue generation. There was a slight decrease during this quarter, a 2% decrease, as you can see in the first chart to your left-hand side. BRL 5,900,000,000 was our revenue in the first quarter last year, and now we're slightly above 5.8 billion. This difference is roughly BRL 100 million. That can be explained by a mix between lower volume and lower prices.

So let's start talking about ACR, our regulated marketplace. In the first line, we saw that the volume was roughly 2.3% lower as compared to the same period last year. And the average price that can be seen in the second column also had a slight decrease, moving from BRL 227.49 to BRL 219.57, which can be explained and can be seen in this 3% decrease in revenue in our regulated contracts.

Now for hydro quotas, you know that this regime readjusts the fee according to the inflation rate. So the volume is the same, but there was a price correction from BRL 57.13 to BRL 64.38, which represents a slight increase to our revenue. Now for nuclear quota, there was no change in volume, but this small reduction of 8% in our revenue is mainly due to the previous price readjustment last year. The revenue that was supposed to be paid because of nuclear field was above what we actually used. So that is naturally adjusted the following year, and that's what we see in this minus 8% in the chart.

Now for free market, ACL, we've had bilateral contracts, and we see a reduction in volume. The main one was a reduction in the Eletronorte contracts. That's what we see in the charts at the bottom part of the slide. I won't get into the details, but we basically had a reduction in Eletronorte with a lower volume and a lower price. Part of this is regarding SPEs that were sold in the restructuring process that went about, and we also saw a reduction in Furnas in the free market.

Now for the regulated marketplace, to your left-hand side, you see that the main operation was Eletronorte contract that was done, and the new contracts that was signed right after that could not keep up with the same fee because of the revenue reduction.

Moving on to Slide #13. Here, we can see the charts. Here, you see our gross revenue. Dark blue bars, our recurring gross revenue, we see that there is not a great difference between them. We saw an 8% increase in our revenue, moving from BRL 9.1 billion to BRL 9.8 billion. And as you can see in these bars in the middle, there was a significant increase in our transmission revenue. And that is a result of the revision process that went about last year.

And in 2018, there was a correction by CAE and OC. And generation, as I mentioned before, contributed negatively because of all the reasons I mentioned in the previous slide, totaling BRL 104 million and BRL 208 million negative for the regulated marketplace.

Slide #14. Here, we see our PMSO, which is basically our operational costs: people, materials, services and others. There was a decrease in the IFRS of 5%, but some of these topics are seen as nonrecurring. So in recurring services, there was a 2% decrease.

I would like to highlight personnel. We see this slight increase of BRL 82 million, which is 7%. It happened because of some factors. The first one is the fact that our collective agreement is usually signed in May. Now last year, because of all the challenges that we faced because of the pandemic and remote work, the union negotiation extended a bit and only ended in January this year. And some of the benefits of this agreement was that as they were negotiated, they were actually suspended. So those expenses were only recorded this quarter, aside from the increase of medical costs, which created a BRL 38 million increase. Aside from that, we also had the contract of the actuarial debt contract that is corrected according to the IGPM. The IGPM was truly high.

In other slides, you will see that we had some other expenses and provisions that went up this quarter only because of the IGPM index increase. So this is the most relevant regarding personnel. For material, there was a 42% reduction that can be greatly explained because of some maintenance shutdowns that happened last year in the first quarter. That did not happen this time. So there's less material being used because there was no maintenance during this period.

Now from Am GT and Eletrosul, there was a reduction of inputs and price renegotiation. With regards to services, there was a reduction from -- for BRL 63 million. That was a 14% decrease and for the -- there was a termination of contracted labor in the first quarter 2020. In the holding, there was a strong work that was done with OBZ that helped us reach this 2% reduction to our PMSO.

With regards to nonrecurring PMSO, we can say that during this quarter, there were some issuances that were to be done last year, 240 employees last -- this quarter, this year and we're getting close to our goal of 12,088 employees. We have 12,200 roughly now.

Moving on to Slide 15, operational provisions for the first quarter this year. This is always a point of concern for us in the company. In the first quarter this year, we had BRL 1.1 billion of provisions. In the same period last year, we had BRL 400 million roughly. In the first line, in blue, you see the contingencies. As I said before, this has a lot to do with the IGPM index increase.

Chesf has the K Factor process, which is basically a dispute with the construction company from the Xingó plant that is corrected by the IGPM index. And in Furnas, we've had some civil actions roughly totaling BRL 180 million. And the others have to do with the GSS process. And Chesf is the only one that has such process that is -- of regarding hydrological risk. And if ANEEL does not finish that resolution on GSF, we still have this contingency in place.

I'd like to highlight the compulsory loan in green, BRL 436 million this quarter. What happened was the judicial homologation of reports with aviation in relation to the repetitive. Unfortunately, that still happens. We got many lawsuits is in place, and they are about to be executed. There are some repetitive lawsuits that have been classified in the Supreme Court. But in some cases, there are some first-level decisions that do not follow the jurisprudence or case laws. So we provisioned that value, but we still -- we're still defending ourselves.

Regarding PCLD, some adjustments were made. We updated the accounts receivable in Chesf and also because of the IGPM. So this poses no new risk. These are old prices that are being corrected according to the IGPM index. This is pretty much what I had to say.

Well, actually, let's move on to the next slide, #16. Here, we see the EBITDA chart. There was an 11% growth for IFRS, 30% for recurring. In the dark blue bars, we see that we moved from BRL 3.8 billion in the first quarter last year to BRL 4.9 billion this quarter.

Now what explains that growth? BRL 600 million comes from our recurring revenue, which, as I said before, has a lot to do with the price review on transmission; and BRL 300 million on the asset equivalents from STE and other participations. There was a lot regarding transmission. We see the chart at the bottom that highlights exactly that.

You've heard the company has had transmission revenue in Eletrobrás. We've seen a reduction in operational costs, reduction of our PMSO and some recurring provisions. Here, you also see a reduction. So these are the results of our EBITDA growth.

Moving on to Slide #17, we're going to talk about net income. Here, we see an expressive growth of 31% considering IFRS and 48% on recurring base. We moved from BRL 1.8 billion to BRL 2.7 billion. This growth is basically the EBITDA. And I also want to highlight financial results, mainly because of the reduction of debt charges, which is worth more than BRL 500 million. And that is the result of the work that has been done over the past years. We've been renegotiating our expensive debt. And that is reflected on our debt charges. We also had an increase on Eletronorte's derivatives. We have an agreement with Albras on commodity prices, and that translates into derivatives that created this BRL 400 million increase.

With regard to our taxes, we had to pay more because these provisions can be deduced from the taxes. So there is a higher load tax wise, which creates more payments. That's why our net income is BRL 2.7 billion for recurring profit and BRL 1.6 billion for IFRS.

On the next slide, #18, we want to show you the same graph. We also show you our net debt and EBITDA ratio, which is the main metric we use to assess our financial discipline. As our Chairman highlighted this quarter, we were slightly below the year average. We moved from 1.5 to 1.4. This is the lower number we've ever had. The recurring EBITDA is at the bottom. You see this slight increase in our EBITDA over the past 6 months. And to your right-hand side, you see a table that shows you our net debt. The gross debt is BRL 46,600,000. And another quarter, we got a solid position of cash flow, which is 40 -- BRL 14,600,000. We still have some receivable funds. That should be -- should mature in early 2023, and our net debt is therefore BRL 20,500,000.

Now the final slide, Slide #19. Here, we see our investments in CapEx. This is what happens during this quarter, BRL 519 million as compared to BRL 1.3 billion, realized 40% roughly. First quarter, we're looking to fast track our investment projects, but we also know that because of the pandemic, there are some challenges in logistics, in operations and with some of our vendors that has created some hurdles for us as we look into realizing those investments.

Now it's important to say that we are now accelerating our investments in Angra 3. BRL 133 million was invested in the first quarter 2021. This should be accelerated in the second quarter after the public notice that will be published next week. In the first quarter, part of these events were not realized because of the impact of the COVID-19 situation. You see BRL 77 million because of the impacts of the pandemic.

With regards to Angra 3, we had to renegotiate some contracts, especially because of the Renuclear contract that was not renewed. We didn't foresee that, and that has created a problem in renegotiation that can explain this delay in Angra 3 as compared to the plan.

Now for transmission, there was also impact of the coal feed, BRL 65 million because of licenses, permits, BRL 30 million because of COVID impacts, totaling BRL 198 million. Now part of that led to cost optimization, which is worth BRL 32 million. Now for FPS, we didn't have to invest what we first saw before, so that was positive, especially in Teles Pires, BRL 26 million, and Piauí, where we did not need to invest as planned.

With that, I conclude my presentation, and I will move -- I hand the floor over to Mr. Marcelo. Once again, we are at your service if you have any questions. Thank you very much.

(Operator Instructions)

First question is by Carolina Carneiro from Credit Suisse.

Thank you for disclosing this information. Thank you, Elvira and Rodrigo. Welcome both of you. We wish you the best of success. I have 2 questions for you. The first one is regarding the report. We do not have the final test of the provisional measure. We're still waiting for these notifications, but, Rodrigo, if you can share with us what is the main positive aspect of the report? And what point of attention we should have as we wait for the vote in the chamber?

Now second question, provisions. This quarter was hard once again, as mentioned by Elvira and in the Congressman Elmar's report, which has a special mention from the unit's accountants office, you mentioned how important that is for the company's balance sheet. Now that you can negotiate, is there any relevant discussion going on so that we can think about the privatization process kind of financing in that regard?

Thank you, Carolina. Good afternoon. Thank you for your wishes of success. It's a pleasure to talk to you. Now with regards to the provisional measure, I can give you the initial remarks, and then Elvira can add to what I said.

So as I understand, we see that in Congress, they are willing to move forward. So the climate or the environment is favorable for us to approve this project. Now as this provisional measure is being discussed, we can expect some repositions of change to the tax. We haven't had the formal approval. The report there already showed some signals of proposals we wish just to address mainly with regards to Eletrobrás and others that have to do with the electricity sector as a whole.

For example, small hydroelectric power plants, some thermal plants. And there should be a new state-owned company that should be created after Eletrobrás is capitalized. We believe this debate are more ordinary. That's part of the Congress activities. These debates will go about all the way up until the moment they come to a conclusion. So maybe by next week, they should vote on this. We are quite optimistic, and we expect we can move forward with the project.

Now with regards to Eletrobrás per se, in the presentation, with regards to bids on energy, that will be important for the capitalization process. So for system, we also understand that there is a positive consequence, which is part of the law that can also create some level of difficulties or delays to the capitalization process.

So this is a superficial analysis for now considering the information that we have received. We believe that is the best way to go for now. So we're looking into this compulsory initiatives over the past years.

Now aside from Eletrobrás, the government and the Ministry of Energy has interacted with the rapporteur on small hydroelectric positioned with a great balance considering the rapporteur's proposition and what the ministry has stood for. So that's what we have to say with regards to the provisional measure. We believe that it's positive to be debating that inside the chamber. We got 1 month. And if it's approved in the chamber and in the house, then we believe this can be approved in the Federal Senate.

With regards to compulsory approach, I will hand it over to Elvira if she wants to add something to my comments.

Yes, I think you said it really well. On the propositions in the provisional measure, I have nothing to add.

Next question by Andre Sampaio from Santander Bank.

I have a follow-up question on what Carol asked you. I wanted to learn about 2 main points from you. First, what are the main points of discussion along with the Brazilian Senate. And secondly, as far as we can see, there were some weird elements to the process, but it seems that the market is willing to absorb those problems somehow because of all the potential of the privatization process.

How do you see that -- how do you see these dynamics and the market's perception on what we're willing to accept as compared to what the government is willing to accept? That's what I wanted to hear from you.

Thank you, Andre. In Eletrobrás, we have to define the conditions in law and then this will be detailed according to the studies that are carried out by the BNDES and then it will be approved.

Now let for Eletrobrás, also we'll assess the whole process. And we are going to see whether or not this is positive for the company's shareholders. Of course, we'll carry out our own assessment according to the legislation. And then we're going to look into the models created by the BNDES along with the Minister of the Economy and Ministry of Energy. That should be approved later by the CNPE.

And there are different parameters to that. You referenced values. We can do it all at Eletrobrás so that we are sure that this is a good project for the company.

So we've been talking to BNDES, and we've seen positive perspectives, but it all depends on the Congress approval.

The first question you asked was about the status to this (inaudible) conference, right?

I was just shortly asking about (inaudible) so this optimistic perspective for (inaudible)

When the provisional measures started, it was built (inaudible) So we were waiting for the Senate's resolution. The discussion is now happening more in the Chamber of Congressmen. This is only natural. Now once it is approved in the Chamber and in the Senate, then, of course, these efforts will need to be intensified and coordinated by the Congress. And of course, it's all the federal government's responsibility.

(Operator Instructions) Next question by Henrique Peretti from JPMorgan.

I would like to talk about the compulsory aspects. The first question is BRL 2.7 billion in the fourth quarter was a provision. And this quarter, you had more provisions. As far as I can see, this is not monetary correction from the compulsory aspects. This is there as far as I can see. Did we change our understanding? Or is there any difference in the process? Any chance you will have more and more compulsory provisions in the future? Can that happen again in the forthcoming quarters?

And the second question, in the provisional measure, the rapporteur mentions EUR 80 million of compulsory. We know that it was supposed to be 80 and 8.5 for remote. So this BRL 8 million includes what we mentioned last year? That this could be the total value that is not seen in the balance sheet?

Thank you. Elvira, can you address that one?

Sure. Henrique, with regards to the provisions in the previous quarter, we had BRL 2.2 billion of provisions in the fourth quarter, but BRL 1.6 billion was only 1 lawsuit because of an unfavorable decision that we had of a main offer. That was worth BRL 1.6 billion. And it's important to say that up to the current date, this has not been executed. We managed to sustain, and we're still advocating for the company.

Now this process or lawsuit took us by surprise because offers demanded, many CIFs goes from different branches and companies that were acquired in the future that were not present in the initial deal. Now since there was an execution decision once again, we decided to allocate BRL 1.6 billion last quarter, and the other BRL 300 million were because of unfavorable decisions in case of (inaudible)

So in the first quarter, we had this (inaudible) this is because of this report and the deviation. So it's actually very hard to make sure that we're not going to have any revision in the future or new provisions in the future because it all depends on the results or outcomes of this lawsuit that are moving forward. These are -- those lawsuits, more than 60% of them are already executed.

While the decision is unfavorable for repetitive lawsuits, we end up having to correct these provisions. Now the numbers you mentioned have to do with that. We got BRL 16 billion that are likely to happen BRL 11 billion possible and BRL 7 billion remote. That's what we have in our balance sheet.

With regards to the Brazilian Executive Active Accounting Office, we feel (inaudible) little higher, but I'm not sure. Maybe our legal superintendent will give any additional information on that. On the arranging of this estimate, the accounting office there, which is really higher than the values that we have in our balance sheet.

Elvira, I'm not aware of why the accounting office decided that our provisioning was underestimated. As far as we understand, as you have mentioned, this provision will happen according to the prices of resource issued by The Supreme Court. As you mentioned, there may be some oscillations through time because this should have been observed but it was not.

So because we want to be conscious, we decided we would provision that value, but we do not really know where that came from with regards to the Brazilian federal accounting office.

Henrique, any follow-up questions?

If the provisional measures approves that we have to renegotiate compulsory prices, how will that go about?

Henrique, we don't really know what the rapporteur will write on his reports, but our impression is that this would be one more obstacle because we're talking about the very high volume of losses with very complex calculations because that engages inflation studies, different economic plans, different economic theses.

So as far as we believe, this is a very complex topic to be discussed at this point. I believe this could be a serious obstacle to this program that we are looking for, and maybe if we can follow on that in maybe next year. So we are truly concerned if there is any provisional measure regarding this compulsory loan to this provisional measure. Someone has their mic open. If you're not speaking, can you please mute yourself? Thank you.

Finally, regarding the federal accounting office. As far as I can see, the value that was mentioned involves other liabilities, not only the compulsory loan. I will double check that and the IR department is at your full service to address that question.

Mr. Limp, you want to add something to what was said?

I think that's it, Elvira. This is a very complex topic. There are hundreds of lawsuits, hard to think of this provisional measure that we're not really know what will be like for that to get in the way of our time line for capitalization for that reason.

Henrique, any follow-up questions?

Yes. Thank you. No, that's okay. Thank you.

Next question by Andre Sampaio from Santander Bank.

Can I talk about golden shares? Do we know exactly what the rapporteur should propose? Should we have influence from this golden shares?

Thank you, Andre. As I said, we haven't being able to see the final report. But as far as we know, there was no change to what the executive branch projected for the provisional measure. As far as we understand, this would be positive as compared to the original proposal.

(Operator Instructions)

Marcelo, as we wait for the next question, I just wanted to clarify something. I double checked with my accounting team, so we can better address the previous question. On the TCOs report, as I said before, this report on the federal accounting office (inaudible) likely and probable cause of Eletrobrás (inaudible)

(inaudible) golden lawsuits (inaudible)

I will read a question that got to us in our webcast. One of the suggestions would be to use the resources of the new state-owned company that would belong to Eletronuclear for dividends. Minority shareholders are also entitled to this dividend. How would they be paid in this scenario?

Thank you, Marcelo. The question was by Bruno [Race]. Well, during the process of creation of this company and the capitalization process, we'll have to assess all of that during the process. If that happens by the federal government on behalf of Eletrobrás, we'll also have to carry out our own assessment as long as I can understand from the congressman Elmar proposition. He talked about Itaipu after the debt has been paid. Slide 23, which would not necessarily affect the electro nuclear plant.

But this is present in the bill that was approved and in the model that is to be defined. I think we still have to detail that, both in the bill and in the model created by BNDES that will later on be approved. And this will naturally need to be approved in the Eletrobrás assembly so that shareholders can approve whether or not that is good business for the company.

I'm not sure anyone from Eletrobrás wants to add something to this question?

Well, with regards to your question, I would say that this process hasn't been defined yet. We're still waiting on that. We're studying and creating a model on that as done by the BNDES so that we can define how we're going to segregate the Eletronorte participation and Itaipu participation. Because of different reasons, they can't be prioritized. Itaipu, because of the -- by national treaty and Eletronorte because of the constitution. So we're still not sure how that will segregate a little bit (inaudible) options under (inaudible) to be approved and some of BNDES studies.

So that we can truly know how that can be done, we're going to hire a company to give us a valuation. BNDES is studying that, but Eletrobrás will also study that because at the end of the day, this approval of what will be presented as a final proposition is something that will be done by the board of directions of Eletrobrás and by the assembly of shareholders. Because of some conflicts of interest, the provisional measure determines that the central government can't vote, so we'll have to also assess that.

Next question by Daniel from Safra Bank.

Rodrigo, good luck as the new Chairman of the company, and good luck to all the Board of Directors. I wanted to talk about the plants and the prices. Was that debated in light of the provisional measure? (inaudible). Secondly, (inaudible) these complements that (inaudible) at the fee or the prices impact to the plants?

Limp, you want to start?

Well, yes, I was part of the ministry until not long ago. So I think, of course, comment based on my experience, but the provisionary measures should not have a tax impact. And for that, some measures were impacted versus -- so that there's no impact in prices. The first one was including [Madeira] as we included. We will have more value generation. Otherwise, we distribute that. We can minimize the price impact. We also changed the perspective (inaudible) change price change in CD ratio always for new consumers (inaudible)

In this case, Eletrobrás will have a process model. For this period of time, (inaudible) values and prices, just how energy will be sold according to that. And of course, Eletrobrás will run a formal investment to make better decision.

The board will make a proposition, they cancel all the (inaudible) and then this will be taken to the assembly. We are truly concerned about the prices. In fact, we understand that the government is also looking into mitigating those issues. I think that's what I had to say. Elvira, you want to add something to what I said?

I guess that's it. You said that.

Can I chime in? Just wanted to add to what -- the sentiment mentioned. You said that the resources will be allocated for our customers' market, which would exclude customers from the free market. How do you see that? Do you think that can create any kind of struggle?

Well, I think so, yes. This is a proposal by the rapporteur. And of course, I believe Congress will discuss that. There are different arguments to both sides for the free market and for consumers, but we also have to minimize prices impact to final consumers. This debate was ongoing in Congress and the rapporteur also debated the exceeding production from Itaipu at CD, which can also contribute to the price reduction. But of course, this is something that should be debated in the chamber this week. Well, I wouldn't be able to tell you exactly what the final outcome will be.

Next question by Marcelo from Itau Bank.

Welcome to Eletrobrás, Mr. Limp. You've been addressing many questions about the provisional measure, but there is an aspect of Mr. Nacimento's report that I wanted to clarify. The first thing is the possibility of having probing for contracts at a lower value based on the price from the bids from 2019. Can the company do that? And if so, would that happen voluntarily? Or would this be mandatory according to the rapporteur? That's the first question.

The second question is regarding flexibility. The way the text was written, it's not clear to me what practical measures will be taken considering the report. They talk about prioritizing some elements, but they don't really touch on incentives or resources that will be used to make it work or if that's only going to be a public tender organized by the government. I just wanted to know in practical terms, what is the intention behind that?

I wanted to talk about the company, too. Eletrobrás has a very high volume of contracted thresholds, and the results should be good this year considering the expectations, mainly in the third quarter. What is the company's strategy for the next years considering contracting surveillance? Would we want to reduce the amount of people that was hired or should that change considering the prices in the short term?

Well, I can address the 2 first questions, and I can hand over to Elvira. Mr. Jatobá is also here. He can address that question. I guess he can help us answer that.

With regard to Proinfa and thermal plants, these issues are not directly related to Eletrobrás. So Infa was going to be the intermediary only. If that's going to be postponed or not, that can't -- well, we wouldn't propose that as a compulsory measure. I think this should be something this agent should look for, especially the federal agents, but we still have to look into the final text.

Same thing for thermal plants, have this -- it -- they will be hired in the same tender or if a new modality will be proposed. It's hard to answer that question now, since we don't know what the rapporteur will propose. Just giving you some overview.

Regarding our sales strategy, I believe Mr. Jatobá can help us address that question. Mr. Jatobá, as the Director of Sales, can you please -- Director of Generation, rather, can you please give us your insights?

Hello, can you hear me?

Yes. Yes, we can, sir. Mr. Pedro Jatobá, can you hear us?

Thank you, Marcelo, for your question. We are now going through a restructuring process at Eletrobrás with regards to commercialization. Our goal is to expand our participation in the free market, and we want to revisit our distribution strategy. Just like other players in the market, we're following up on different changes that are going about in the market and different initiatives that are now being implemented.

We are also planning our positioning strategy. I agree with your assessment. Our expectation is to see a press increase for PLD that should increase and improve our results of energy in the short term. However, we are reviewing this strategy, and we believe that by the second half of this year, we should have some concrete elements to present in the short term.

This concludes today's question-and-answer session. I would like to hand the floor over to Ms. Elvira Presta for her final remarks.

Thank you, Marcelo. Once again, I want to thank you all for joining us this afternoon. Thank you for your questions. Thank you for your interest. I also want to ask our new Chairman, Mr. Rodrigo Limp, to conclude our conference. Rodrigo, over to you.

Thank you, Elvira. Thank you, Marcelo. I also want to voice my thanks to all of you. Thank you for your questions, and thank you for this great opportunity of clarifying these doubts and present the results to you and present our overview on the provisional measure that is underway and some other aspects of the corporate, especially with regards to the electricity sector.

This is a valuable opportunity for us. So as a company, it's also, since we are -- since we care about transparency towards the market. So thank you very much once again. We are at your full service if you need us in the future. We'll soon have another earnings release. Thank you very much, and good afternoon, everyone. Thank you, Marcelo, for mediating this event.

Thank you very much. At this point, we conclude Eletrobrás audio conference. Thank you very much for your participation and have a good day.

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