Companhia Paranaense de Energia (ELPC) 2017 Q4 法說會逐字稿

Good morning, and thank you for waiting.

Welcome to Companhia Paranaense de Energia Copel Conference Call to present the results of the fourth quarter of 2017.

(Operator Instructions).

Before proceeding, we would like to clarify that forward-looking statements that might be made during this call related to Copel's business prospectives, operating and financial projections and targets, are beliefs and assumptions of the company's management as well as information currently available.

Forward-looking statements are not guarantees of performance as they involve risks, uncertainties and assumptions as they refer to future events and, therefore, they depend on circumstances that might or not occur.

General economic conditions, industry conditions and other operating factors may affect the future performance of Copel and may lead to results that differ materially from those expressed in such forward-looking statements.

Participating in this call, we have Mr. Jonel Nazareno Iurk, CEO of the company; Mr. Adriano Rudek de Moura, CFO and Investor Relations Officer; Mr. [Gilberto Fernandes], Corporate Management Officer; Mr. Harry Françóia Júnior, Institutional Relations Officer; Mr. [José Marques Filho], Business Development Officer; Mr. Sergio Luiz Lamy, CEO of Copel GeT; Mr. Antônio Sergio de Souza Guetter, CO of Copel Distribuição; Mr. Antônio Justino Spinello, CEO of Copel Comercialização; and Mr. Adir Hannouche, CEO of Copel Telecommunication.

The presentation that will be made by the company's management may be followed at the company's website, ir.copel.com.

Now we would like to give the floor to Mr. Adriano Rudek de Moura, CFO and Investor Relations Officer of the company.

Good morning, everybody.

I thank you very much for participating in our call.

I would like to start our talk by introducing the new members of the Executive Board of the company that have just taken office.

Starting with our new CEO, Jonel Iurk, civil engineer, mathematician, who was a Business Development Officer of the company between 2013 and '17, and recently, he was President of Compagas, the company in charge of distributing natural gas in the state of Paraná, of which Copel holds a stake of 51%.

He will be replacing Guetter, who will go back -- goes back to being the CEO of Copel Distribuição.

Besides the new CEO, also, we have the new Corporate Management Officer, Deonilson Roldo; the New Business Development Officer, José Marques Filho; and the new Institutional Relations Officer Harry Françóia Júnior with -- honor us with their presence in this call.

Now I would like to turn the floor over to our new CEO, Jonel Iurk who, will make a brief remark about his main challenges.

Thank you, Moura.

Good morning, everyone, and I also thank you very much for participating in our call.

It is a great satisfaction and pride that I become the head of Copel, a company that is a benchmark in the Brazilian electric sector and has been achieving important steps.

As was mentioned by Moura, I was a member of the Copel Executive Board as Business Development Officer between 2013 and '17.

And then I was able to see in depth the need and opportunities.

Besides, I have been following very closely the relevant subject that's involving the sector.

I would like to reaffirm our commitment with the continuity of a transparent management and offering results and, lastly, further strengthen the Copel positioning in the market where we operate.

And we will be keeping focus on the efficiency of our current businesses as well as opportunities for new business.

Nevertheless, without waiving our financial discipline, that will continue to require a sustainable return of our investment.

We will continue to work in the conclusion of the projects that are underway, and that will allow us, as of this year, an additional contribution to our cash generation.

And we will also maintain our program of cost reduction that was established in mid-2017 that has reached, in 6 months only, a reduction of over BRL 350 million vis-à-vis our target for 2017.

I would like to mention that we will continue to strengthen our corporate governance, aiming at transparency and ethics, always essential values of our company.

Just to give you one example, in 2017, Copel was recognized as the best among the public companies assessed in a study -- an unprecedented study realized by the International Transparency Association Brazil that measured the level of transparency and the activities of the 100 biggest companies and 10 biggest Brazilian banks.

And this result reflects the efforts undertaken in the last few years to improve further transparency of our management, including a new department, governance, risk and compliance area by 2017, something unprecedented in the sector.

And we will continue to deliver a top-quality service which is fully recognized by our clients in all our fields of operation, and this commitment resulted for the sixth time in 7 years with the leadership of Copel Distribuição in the perception of the Abradee award.

And for the first time in 7 years, we also achieved the title of the best distribution company in Latin America in the opinion of consumers and the reason for being -- of our concessionary, which improved -- further improved its regulatory quality indices but are much better than the minimum required by ANEEL.

And we also, in February -- lastly we were awarded the -- in the field of the ANEEL indices of consumer satisfaction promoted by the regulators, and it was chosen as the highlight by the National Quality Foundation for the excellent management practices world class, considered by the entity that also included Copel Telecom in the list of the best organizations and management in Brazil (inaudible) as Copel Distribuição.

The recognition by FNQ came after a rigorous process of [examinations] that required many months of dedication of the company and of the evaluation team of the foundation.

In people management, we must continue to make our best endeavors to have an ongoing improvement in quality of life in the work environment of our people.

And I'm proud to say that, by the end of 2017, we became the member of the 130 best companies to work in Brazil of the Você S/A guide, a survey that shows the dedication and professionalism of each one of our over 8,000 employees and which is the result of the perception about the improvements implemented in our people management activities.

And before giving the floor to Moura, I would like to highlight one of the many achievements of Copel during this last year, which was the invitation by the United Nations that we received in October 2017 to host the first regional center of the Global Compact Cities Programme that will contribute to the global development of -- global challenge of sustainable development objectives with many themes, such as poverty, health, education, gender equality, reduction of inequalities, all aligned with our commitment -- long-term commitment and achievements, such as this one, once again, guaranteed our presence in the very important sustainability indices, ISE of [D3], FTSE for [good] of the London Exchange and [MSCI] of Morgan Stanley, evaluations that place us among the most committed companies in the world in the utility sector.

And I would like to, once again, mention that I'm extremely proud of becoming part of this company again with the commitment of supporting many other achievements from now on.

And I would like to thank engineer Antonio Sergio de Souza Guetter for the relevant services delivered to Copel when he was CEO.

He had a very competent management, and I wish him all of the success in this new mission as head of Copel Distribuição.

Thank you very much and you can count on me.

Now I would like to give the floor to Moura.

Thank you, Jonel.

I'm sure that with your experience and your professional history, your contribution will be very relevant to Copel.

I wish you all the success in the world and all the other -- as well as to the other officers that have just taken office.

You may count on me.

So on Slide #3, Jonel had talked about our main achievements in 2017 in terms of institutional recognition.

And before talking about the financial results, I would like to mention that, during the last year, mainly in 2017, the Brazilian electricity sector evidenced, once again, how resilient it is to crisis.

After 3 years of a severe crisis, the economic environment already showed some signs of improvement: reduction in inflation rates, decrease in interest rates.

And we can see the beginning of a recovery, a timid recovery in some sectors.

Certainly, we will still have a challenge of -- a year of many challenges mainly due to the intensity in the political scenario that may affect the speed of recovery of the economy.

The 1% growth in 2017 in the GDP shows the recovery and helped the performance of our business, specifically in Paraná, where we concentrate most of our investment.

The performance of the economy was even better with 2.5% increase in the GDP in 2017, strongly influenced by the good performance of agri business and recovery of industry and services.

Agricultural exports were also players in the result of the Brazilian trade balance.

That had a surplus of about $67 billion in 2017, the best result in the historical series.

Copel, 2017 was a year recognized by major challenges, but we were able to evolve in many aspects that I will be mentioning during the presentation.

I would like to mention the annual growth of our operating net revenue of about 7%, vis-à-vis 2017, and exceeding the barrier of BRL 14 billion with a net income over BRL 1 billion.

This is one of the best results in the last few years and consolidates Copel as the biggest company in Paraná and one of the biggest in Brazil.

We invested over BRL 2.5 billion in 2017 in the many businesses.

And part of this investment, about BRL 450 million, was for the conclusion of the construction of over 1,100 kilometers of transmission lines with over BRL 100 million additional revenue per year.

With these investments, our transmission assets exceed 6,000 kilometers of lines all over Brazil and give us an annual revenue of BRL 830 million.

Distribution.

We are making a gradual increment in our asset base, mainly at improving the quality of the system.

In 2017, we invested about BRL 615 million, and for 2018, we have already approved investments of BRL 800 million.

Our distribution company is successful in the research and application of new technologies to monitor and automate a grid with focus on Paraná by means of the (inaudible).

This program uses the immediate implementation of intelligent networks and has been improving the quality of energy supplied to rural areas and which increases the quality of life and productivity in the field and also reduces maintenance costs.

In generation, we invested over BRL 975 million in projects, such as Colíder and (inaudible) HPP and the wind farm of Cutia in the final phase of construction and should be started up partially in 2018, contributing importantly to the growth in cash generation for the company.

Of course, I must say a few words about the over BRL 240 million investment made by Copel Telecom, focusing on increasing the client base and which is also concurred by a fiberoptics retail internet, which is the fastest in the country.

For this year, we will have BRL 350 million in investments, which will allow the company continue to grow sustainability.

Now going to Slide #4.

I would like to say a few words about the performance of the grid market of Copel Distribuição.

The improvement in the economy in 2017 brought positive results to Copel.

In 2017, the grid market of Copel Distribuição grew by 3.4% vis-à-vis 2016 for the full year, whereas, the consumption of energy in Brazil grew only 0.8%, according to EPE data, the performance was even better if we compare it to the performance of the fourth quarter with a 5% almost increase.

Through the state of Paraná in Brazil, we see this upper trend in the economy.

And another highlight is a reduction of the delinquency rate which closed 2017 at 1.5%, maybe the lowest in our history in the last few years because of the major effort.

And that can be measured by the important reduction of the provisions for losses, estimated PECLD but closed 2017 in BRL 84 million, a reduction of almost 50% of the amount that we had in 2016.

And we had the difference here of about BRL 30 million.

And this is our focus for 2018 but should happen gradually.

Another positive impact that we had was a reversal for BRL 128 million, referring to the completion for estimated losses regarding the credit impairment due to the acquisition of gas by Compagas with Petrobras.

And its contract has a clause of future compensation of balances related to the acquisition of gas volume contracted and guarantees higher than the ones really used.

And this was a (inaudible) card due to the review of the project that it's an area for the next few years with the estimates of fully compensating the balances by 2024.

And in case the concession and beforehand for any reason, the contract for Petrobras provides for the right of sale of this asset.

And with this reversal in fact of new posting of impairment, such as Colíder (inaudible) in Cutia, the net result of the fair value of the assets was positive by -- in the last quarter by BRL 26 million.

And lastly, it is important to talk about Araucária and the impacts caused by -- in financial statement -- consolidated financial statement.

As we said in the financial statement and the material information filed on April 12 during the preparation of the quarterly statements of September 2017, the company management identified that Araucária had funds in more demand (inaudible) investment fund that holds quotas of other investment funds, which in their terms had investments in the company that wasn't listed and whose main asset is a real estate project.

And this investment was quoted on the marketable securities and the current asset funds the company management had information, but such investment referred to investments in an exclusive fund with a benchmark of 103.5% of the CDI, laid out by quotas of investment fund and government bond with immediate liquidity and held for negotiation.

Due to this reason, the company management counted on the help of independent experts to check the classification and the value of this investment as well as the scope of trustable impacts and the evaluation work has finished, and considering the information available, we concluded that we needed to make a position for the devaluation -- impairment of this investment due to specific characteristics, such as the stage of the project and the prospect -- future cash generation prospect.

We evaluated what would be the adequate period to post this position.

Because if the nature of this investment had been identified during 2016, additional analysis would have been made and would -- and that would allow us to conclude that there are signs of impairment based on the information existing at the time.

And therefore, it should be posted during 2016.

Due to the conclusions about the adequate classification and value of this investment and considering information available so far, we made a position of BRL 137 million for impairment of this investment base date December 31, 2016.

And the reclassification of the remaining balance, BRL 29 billion noncurrent assets due to the expectation of the realization terms.

And we had to resubmit the comparative balances of 2016.

And due to that, the independent auditor report about the individual unconsolidated accounting statements in the period that ended on December 31, 2017, was issued in relation to the relative comparative balance of 2016.

And it is not yet possible to obtain the appropriate and sufficient opinion if the provisions should be posted in the financial statement referring to the period ended on 31 December, 2016, and presented in the financial statement of 2017 for comparison or if it should be posted to previous period.

So this is related exclusively to the fact that -- because this is how -- should be posted in 2016 or previous year, and we emphasize that there will be no investment whatsoever in the results of 2017.

On Slide #5, about the results of the fourth quarter.

I would like to highlight the reversal of the loss of BRL 271 million posted in the fourth quarter to a net income of BRL 160 million in the fourth quarter of '17.

And with this result, we reached BRL 1.1 billion in net income in 2017, as I mentioned, 42% higher than 2016 when net income was about BRL 790 million.

And this result comes from a combination of factors occurred both in 2016 and '17.

And we will be talking in detail during the presentation about them.

To the comparison days, I would like to remind you that the net income referring to fourth quarter of '16 was adjusted by the write-off of BRL 137 million, referring to the investment in Araucária, whereas the EBITDA of the fourth quarter of '16 was impacted by the placing of BRL 567 million in impairment of generation assets mainly.

In relation to the performance of the fourth quarter of '17, I would like to mention the 20% growth in our net operating income, resulting from the higher posting of secure assets and liabilities, known as CBA, which offset part of the cost -- the distribution cost and the dispatch of Araucária, we generated about 195 gigabyte hours in November last year, allowing us to post BRL 128 million in revenue, and the adjustments applied to the distribution tariffs from June 24, 2016, and the performance of the grid market of Copel Distribuição, growing by almost 5% on a quarter-on-quarter basis.

It is also important to highlight the 5% reduction in PMSO due to the salary policy applied as of October 2017, replacing only the inflation in the period and the reduction of 1,281 headcount over 2017.

Besides, we posted BRL 271 million in provisions for losses related mainly to several administrative and labor issues and the posting of BRL 147 million because of energy purchase at Copel GeT because of the impacts of GSF and spot price and the operating performance, measured by the EBITDA was BRL 522 million in this quarter, 4x higher than the one that we had in the same period in '16, including the size of the impacts already mentioned, an important improvement in the Copel DisCo EBITDA as we will be seeing in a few minutes.

On Slide #6, we present the EBITDA reported per subsidiary.

As you can see, Copel GeT had a positive EBITDA of BRL 118 million in the fourth quarter of '17, reversing the negative EBITDA of BRL 101 million in the same period '16.

I would like to make a brief introspective regarding the results presented in the fourth quarter '16 when EBITDA of Copel GeT was negatively impacted by BRL 526 million due to the recognition of BRL 444 million in impairment and also BRL 82 million of a total of BRL 127 million as -- of Araucária, referring to the devaluation of this investment as we mentioned.

And we think it's (inaudible) 60% -- 62% of GeT taken at Araucária, and 20% is the holding stake.

As a result, (inaudible) in the fourth quarter of '17 was impacted mainly by the higher cost with the purchase of energy to the effects of the GSF at the spot markets -- spot price.

And also BRL 93 million in provisions -- nonrecurring provisions.

Copel Distribuição grew by 13% in EBITDA in the quarter, totaling BRL 111 million.

And this result is due to the growth of almost 5% of the grid market, the adjustment applied to the tariffs since June 2017 and a 7% reduction in manageable costs net of provisions and reversals, which have a higher balance mainly due to labor issues and benefits to employees.

And Copel Telecom had a reduction of 3% in EBITDA of the fourth quarter of '17 on a quarter-on-quarter basis -- on a year-on-year basis, coming from third-party costs necessary to increase our client base.

Slide #7.

Adjusted EBITDA of Copel GeT was net of nonrecurring impact to make the performance of this subsidiary more clear.

Adjusted EBITDA of Copel GeT was BRL 317 million, as you can see, 18% lower than the adjusted EBITDA of BRL 387 million in the fourth quarter of '16, impacted by BRL 147 million in costs of energy purchase due mainly to the hydrologic deficit, which reached 31% in this period.

But this factor also impacted the adjusted -- the accumulated adjusted result, and 2017, we had a cost of BRL 361 million more with the purchase of energy, when we compare it to 2016, amounted to BRL 61 million.

In terms of the performance in 2017, I would like to mention that the EBITDA reported and the comparative basis during 2016 was positively impacted by the effect of the recognition of BRL 810 million in 2016 related to the RBSE, partially offset by the posting of BRL 458 million in impairment and the adjustment of BRL 82 million in Araucária.

On the next Slide #8.

We can see that Copel Distribuição had an improvement of 4% in the adjusted EBITDA in relation to the fourth quarter of '16, amounted to BRL 143 million in the period.

And this result comes from the growth in the grid market and the reduction of 7% in manageable cost, as I mentioned before.

As in 2017, Copel Distribuição had an adjusted EBITDA of BRL 637 million, much better than the one delivered in the same period in the previous year.

And I would like to mention that our plan is to reach a regulatory EBITDA by the end of the fourth cycle, in June 2021.

And the numbers obtained so far show that we are on the right track to improve the profitability, not only of Copel Distribuição but the whole group.

It is important to mention that reduction in manageable cost of Copel Distribuição comes from a series of measures that the company has been adopting to reduce costs in owned subsidiaries, among which we have the reduction in our headcount in over 2017.

276 employees left Copel Distribuição, 175 by means of the incentivized (inaudible) and the total represent a cost of BRL 24 million in 2017 but with the perspective of an annual reduction of BRL 38 million, starting in 2018.

Starting in 2018, BRL 38 million will be benefit without the impact of the indemnification expenses.

Slide #9.

For a better comparison we have the recurrent EBITDA per subsidiary.

As you can see in comparison of the -- all the subsidiaries.

But it is important to mention that Copel GeT continues to give the highest contribution in terms of EBITDA, almost 47% of the total, and would be even better if it were not for the BRL 130 million impact of energy purchases coming from the spot price and the GSF because of hydrological shortage.

And Copel Distribuição practically doubled the result in comparison with the fourth quarter of '16, being the second-biggest business for the company.

In the case of Copel Telecom, the 2017 EBITDA reached BRL 134 million, supported mainly by the growth in the client base, very consistent with the previous year.

Bottom line, Copel-related EBITDA in the quarter grew by 5% compared to the same basis the previous year and 15% in the year-to-date in comparative basis.

Now on Slide #10.

We can see more details of the recurrent operating income increased 19% in the fourth quarter vis-à-vis the same period in '16, reaching almost BRL 4 billion.

Unprecedented in this quarter, BRL 4 billion.

And that's the best result in the last few years.

And you can see that the retail revenue has the growth of 14%, explained basically by the adjustment of -- tariff adjustment to Copel Distribuição in June 2017 with the adjustment of the TE by 10% and by the highest average price of the (inaudible) for Copel GeT and Copel Comercialização with a free client.

The wholesale revenue grew by 29% mainly because of the dispatch of Araucária, which generated about 195 gigawatts in November last year.

As I mentioned before, we recorded BRL 128 million in revenue from Araucária as we said.

And the availability of the grid increased by 8% impacted by the growth of the grid market of the DisCo and the tariff adjustment of Copel, which adjusted the TUSD by 0.85% as of June 24, 2017, besides of course the increase in revenue due to the start-up of new transmission assets.

Total revenue grew by 10% due to the increase in the client base of Copel Telco as we mentioned that the recognition of CBA with like mainly the higher cost with the purchase of energy by Copel Distribuição impacted by the GSF and also by the spot price in the period.

And lastly, the 10% reduction in other operating revenue reflects a lower revenue from construction and some assets that contributed to this line item in the fourth quarter of '16 have already started up in the last 12 months.

On Slide 11.

We show you the recurrent operating cost and expenses, BRL 3.5 billion in the fourth quarter of '17, 23% higher than the same period in 2016, explained mostly by the increase in the cost of energy purchase, amounted to BRL 1.8 billion with growth of BRL 534 million vis-à-vis the fourth quarter of '16 are also coming from the GSF and the spot price in the period as we mentioned before.

And in GeT, we had an increase of BRL 130 million in the cost with the purchase of energy, and the distribution company, the cost related to GSF are in the line of sectorial financial assets and liabilities, which is offset by the tariff.

And the charges for the use of the grid grew by 24% due to the higher cost with the charges of the system services due to the adjustment of the transmission -- Itaipu energy transmission tariff and also the TUSD due to the increase in the RAP that started to remunerate the assets related to the RBSE provision that reversals adjusted by extraordinary event had BRL 91 million more than what we had in the fourth quarter of '16.

And this growth stems from the higher balances related to civil and administrative lawsuits and also labor and benefits to employees.

And the manageable cost had a drop of 4% in comparison to the fourth quarter of '16, and already reflecting endeavors to control cost, which we detail in Slide #12 now, where you can see that the costs with personnel and management had a drop of 8% even of the 1.62% adjustments applied to salaries as of October '17 and the BRL 20 million provision for indemnification for retirement, and this performance reflects, among other measures, the policy adopted by the company are not replacing or not filling these vacancies, and we have been, therefore, decreasing our headcount.

And in 2017, we had 8,245 employees, a reduction of 286 people over the year.

So related to payroll costs, I would like to mention that the voluntary redundancy plan was closed at the end of March this year.

And we had about 600 people participating, and they will confirm by December this year their decision.

And the impacts of the additions will be disclosed when we disclose the result of the first quarter of '18 because of third-party services and others had a reduction of 8% mainly due to the review of all our contracts.

Just to give you an idea, this reduction of 600 people, we expect savings of about BRL 150 million for the next few years, net of the impact of indemnification.

So this is a very significant reduction, and as we said before, the idea is to continue with the policy of not hiring other people to fill in these vacancies.

On Slide 13, our leverage, an important item in our agenda.

We can see that the net debt EBITDA ratio closed 2017 at 3.1x, lower than the limit of 3.5x, particularly in the figures reported.

It's important to mention that, in December, we promoted the uniformization of our plan to implicate applicable to the securities issued by the company with another debenture holders general meeting, which approved the removal of guarantees of the calculation of the consolidated net financial debt, a reduction of about BRL 1.5 billion in the calculation of the net debt.

And we understand that the additional cash generation from the new project as well in the combination of many initiatives already implemented and mentioned during this meeting, such as the reduction in cost and the physical and financial time line of some projects and the evaluation of the sale of some assets -- nonstrategic assets have already reflected to improve our leverage.

And if we consider the adjusted EBITDA numbers, results the extraordinary impact, which show a very positive trend, we already see a trend to reduce our leverage in 2017.

And by the way, I would like to mention about the success of the unit operation of Sanepar, which occurred in December last year.

And during which Copel showed the total investment of -- in Sanepar BRL 485 million, improving the cash generation at the time.

And right now, we're focused on rolling out the debt that has an average duration of about 4 years.

And we are evaluating many alternatives for funding and initiatives for cash generation, which is subjective, and we already see higher attractiveness in our financial rate.

And I emphasize that we will continue to follow rigorous financial discipline in the evaluation of new investments as well as making other endeavors, so that the projects underway may be finalized as quickly as possible according to initial expectations and also regulatory demands and the contract deadlines in order to preserve the fund flow for these projects.

Talking about nonstrategic asset sales.

As we mentioned in the last quarter, I would like to remind you that the board has already approved on February 21 the plan for the analysis for divestments.

And we are already in the final stage of hiring financial and legal advisers to help us in these evaluations.

And lastly on Slide #14, we talk about the reversal of the loss of BRL 271 million in the fourth quarter of 2016 to a net income of BRL 160 million due to the factors that we have already mentioned.

And in the year-to-date, the net income was over BRL 1.1 billion, an increase of 42% vis-à-vis the result of 2016, mainly Copel Distribuicao that reversed the loss of BRL 180 million and had a net income of BRL 347 million.

And I would like to mention the proposal by the management to be decided by the shareholders meeting, contemplating the total distribution of BRL 289 million in dividend and interest on equity, and BRL 266 million have already been declared in December 2017, could only, therefore, to a 25% payout.

The payment date for the total amount will be defined by the shareholder meeting as well.

And these were the main highlights of the fourth quarter.

And now, we are available to answer any questions that you might have.

(Operator Instructions) This is Lilyanna Yang, HSBC.

I would like to know about Copel's strategy for this year.

You have many nonstrategic assets.

Are you evaluating the possibility of divesting from some of these assets?

And secondly, could you talk about the company's deleveraging strategy?

You have many projects that are underway still.

Are you going to eliminate some of your CapEx?

And are they on schedule?

And what about your cash flow?

Could it help you in terms of deleveraging the company?

(inaudible) Thank you very much for the questions.

These are 2 important questions and 2 important items in our agenda.

Divestment, as I mentioned, there is a plan already approved by our board, and we are in the final phase of hiring the legal and financial advisers.

And this will be completed by the end of this month.

Then we will be submitting to our board in May some proposals so that we can go ahead.

So the evaluation is very thorough and very wide-ranging.

It evaluates all assets.

Regarding leverage, as I mentioned, I think we are on the right track.

And there will be a very relevant contribution in terms of cash generation from the new project.

I do not see additional risks or additional delays in the main project that should be started up as of 2018.

And the expected contribution as of 2018 or '19 because some of the projects will be generating cash as of 2019, that would be around BRL 500 million additional.

So this is a very important contribution for us to reduce our leverage.

And of course, if we sell some assets, we will be able to reduce our debt even further.

Could you talk about the asset divestments?

What do you believe is important to maintain?

And what do you intend to sell?

Well, I cannot get into many details.

But the idea is to present the more detailed plan in May.

And the idea is to achieve some cash impact still within 2018.

And I would say around the last quarter of 2018, that would be a reasonable time line for us to imagine, provided the shareholders and the board approve our plan.

Vitor Sousa from Brasil Plural.

Congratulations for the new position in Copel, Mr. Iurk.

And her question was very much linked to my question.

So in 2019, it should be -- vis-à-vis 2018, as there will be a drop in projects that will be already in operation.

My doubt has to do with the cash flow of the company.

Would you be investing in a new cycle of investment, new greenfield projects?

Or would it be more sense for Copel to pay out these funds to shareholders in the state of Paraná?

Okay.

So this is my doubt.

Are you going to get into a new cycle of investments because of there's opportunities in the sector?

Or will you be paying out additional investment?

Vitor, can you hear us?

Okay.

Thank you for the question.

2019 is a little bit far, but if we were to think about the use of this cash, we have to keep in mind that we have a concession that will be ending in 2023, a very important one.

And we would have to be prepared for this additional investment that might be around BRL 5 billion.

And we have to think about that.

We are evaluating all the business opportunities, of course, and we are being very rigorous in participating in auctions.

We participated in some of them and not -- and the idea is to continue to look for opportunities.

If we find a good project, we have to analyze all the financials, then we make the investment.

Of course, we will be evaluating other things as well, but our focus is to generate cash and reduce our leverage so that we may have more cash to invest in the future.

About -- what you said about concessions in generation, that will be ending by 2023.

You have 2 concessions that are the most relevant in our portfolio.

What about the negotiation with the federal government and the Ministry of Mines and Energy, involved refers to these concessions.

Do you intend to renew, to extend?

Will there be a public auction, a bidding process?

So what about your negotiations regarding these concessions that are about to end?

Vitor, this is Sergio Lamy, Copel GeT.

So the major asset of GeT -- this concession ends in 2023.

The (inaudible) asset or for the (inaudible) HPP.

And of course, it is part of Copel's strategy to look for the renewal of this concession, such as we did in the past.

When we were able to get the concession in 2015 of the (inaudible).

Many studies have been carried out.

There are still other ways, and in relation to the current regulation or legislation, we only have 3 alternatives: one, there's a possibility of renewal in Measure 179 and we have already waived this.

The other one is to take the concession until the end and participating in the concession auction.

And the third one that we are still studying has to do with the provisional measures that were published by the federal government in January.

They decree, that is to say, for the privatization of (inaudible).

And evaluating the possibility of sinking ourselves into this possibility.

But again, the studies have not been concluded yet.

What I can say that, in Brazil, it is even difficult to project your past.

Because even that can change.

So we have to wait for more favorable legislation that may facilitate our objective of recovery or reconquering these concessions again.

Mr. [Guilherme Nicolo] from Itau BBA.

My doubt has to do with the headcount reduction.

You said about BRL 180 million in cost reduction in 2017 in your headcount.

Do you intend to continue that in the next few years?

Are you still having a reduction in your headcount?

And what about third-party services, the renegotiation of cost.

Can we expect this to be renegotiation for the next few years?

[Guilherme,] thank you for the question.

With relation of the incentivized voluntary redundancy program that ended in March, the addition was very relevant, 600 people appeared.

And they will come to find a decision by December this year.

In this reduction, together with the reduction that has already occurred in 2017 of about 160 -- 170 would give us a savings of BRL 150 million net of the indemnifications amount.

So it's hard to imagine whether they will confirm or not, but this is our target.

This is a very aggressive target in fact, and most of these people are allocated in distribution, which is included in improvement in the regulatory EBITDA.

So that will be a very relevant reduction in terms of cost.

We do not intend to renew these areas.

So our idea is to improve productivity and make enough investments in technology so that we can really develop the use of hydro capacity that we would have.

So we could consider this as a -- an effective cost reduction.

2019, well, this reduction would be permanent.

What about renegotiating third-party services?

Do you intend to continue with this aggressive cost-reduction policy?

Well, let me understand your question.

Are you talking about the distribution companies, [Guilherme?]

No, I'm talking in general, the reduction that you achieved so far in services?

No, this comes from the measures that we are putting in place, the cost-reduction process that was established in mid-2017, and this will continue.

Our work team is multifunctional.

We are so active, and we have already reviewed our budget for 2018 with a significant reduction.

As mentioned at the beginning of the presentation, we were able to reduce the BRL 350 million already based on the budget approved in -- for 2017 -- by -- in 2017 and we have a target that is very ambitious for 2018.

And we have been emphasizing this in all the calls, all our talks with you.

That cost reduction is part of our agenda and will continue.

And personnel is the highest cost, and I'm very happy with this participation of all these people and now the redundancy program.

Vinicius Tsubone from UBS.

This is Marcelo Sa, in fact.

I have 2 questions.

I would like to better understand your strategy to sell energy.

You have a considerate volume of energy.

What do you think of the prices for the second half?

How have you allocated this over the year, more concentrated into the first half or the second half?

How do you see the long-term energy price?

And the next question has to do with your cash flow.

When we look at the results for the quarter, it was very bad in terms of cash flow, BRL 700 million cash burnout in the quarter, and if you exclude the cash burn was BRL 320 million, the decreased dividend.

So as you have a CapEx of around BRL 3 billion for this year, I believe that you will continue to burn cash unless you sell something very relevant.

So my question is the following: let's say you don't sell any relevant asset.

Could you consider the capitalization of the company, such as happened in the past?

Or are you not considering this possibility?

This is Sergio Lamy from GeT.

In relation to our strategy and our energy availability, we are taking a very conservative stand in this regard because of the negative perceptions around GSF still for this year and maybe for the next few years.

Just to remind you, the Brazilian reservoirs had a much lower level already in 2012, and ever since then, we didn't see a full recovery of these levels.

So this is a very critical issue of the MRE.

And also with the impact of the GSF, I think we -- they will continue for some time.

So our strategy besides, of course, looking for the best price for your product.

And we have a very well-aligned strategy in this regard, regarding selling over time in a very consistent manner.

Of course, you have to leave a provision to cover the GSF deficits.

Just to give an idea, this strategy is a winning strategy.

Copel GeT for 2018 has something about 68% of energy already contracted in long-term contracts, still 22% is noncontract and were terminated, and this happened due to the fact that by the end of last year we were not 100% sure that we would be 100% successful in the negotiations regarding surplus reserve Colíder plant.

And when we made the projection, the projection was 85% energy contracted.

And as it was successful in the negotiation of the mechanism for the Colíder plant, in fact, it's a rather good position for us because we are projecting a leverage spot price higher of BRL 200 -- megawatt hours -- 220, 228 megawatt hour.

So the energy that is in long-term contract besides covering the very strict expectation that we have in terms of the GSF for the second half of this year, it will also allow us to sell at a very satisfactory price.

I don't know whether I have answered your question or not.

For the long run, how do you see the price of energy?

You're selling energy, let's say, from 219 on.

Is there liquidity in the market?

What can you say about that?

Well, what I can tell you that -- is that there is liquidity.

This liquidity decreases as time goes by.

Liquidity is higher in the short run.

And for longer periods, you can see that liquidity starts to go down.

So there is no adequate strategy of making very large sales for the long run.

Just to give you an idea, we will close 2018 with 60% of the energy to be delivered in 2019, already contracted 70%.

I'm talking about 2020.

I correct myself.

Thank you, speaker.

It will be 60% and 40% to be sold in 2019.

And this strategy has been proven to be very adequate, and I would like to emphasize the fact that, this year, we're selling energy up till 2024, but the amounts are smaller and the prices are not extremely attractive.

Would you like to add something to that?

Spinello will be adding to what I said.

Marcelo, thank you for the question.

The prices for 2019 are BRL 205 million, BRL 207 million for conversion; and for 2020, BRL 170 million; in 2021, BRL 155 million.

Today we'll have [a pay of] 30-megawatt auction for 2019, 2020, '21.

Regarding your second question, just to make it clear, our investment plan for 2018 is BRL 2,900,000,000, is totally aligned with our funding and our cash generation that is estimated.

We have some facts to be trimmed in, if we can sell an asset, of course, this will be helpful, but this is not really mandatory for this year.

And also because we have most of the investments, we are talking about BRL 900 million approximately that are investments in Cutia Wind Farm and that we're finishing this year and with investments already linked to BNDES funding.

So this is effectively signed with them and negotiations are going very well.

So I would say that our plan is fully aligned with the funding capacity that we have, and cash flow is one of the most critical points in this regard.

And what about the capital increase?

Are you considering that?

This was an alternative that was studied in -- around the middle of 2017.

It's no longer on our agenda.

And we expect in 2018 to have an improvement in cash generation, as I said, coming from a project and also positive impacts in terms of our cost reduction.

Counting also on the improvement of the economy.

That is what everybody expects.

Just to confirm, when you talk about improvements in cash generation, if you look at December 2018 and the net debt, could we expect it to grow up?

Or will it continue to go up because, when we model, we cannot really see a positive cash generation this year, so in fact, we believe it is negative, and net debt will go up.

Maybe your math is wrong, but do you believe the next step will be dropping or...?

No, it will be stable.

Our expectation is to have this at a stable level and the debt-equity ratio will improve for the reasons that we mentioned.

So we intend to keep our net debt at the level that it is today, okay.

We have new fundings, as I said, from the BNDES to support Cutia.

This is a new funding, and other things will be happening over the year to maintain this level.

As there are no more questions, I would like to give the floor back to Mr. Adriano Rudek de Moura for his closing remarks.

I would like to end giving a special thanks to those who have helped us to draft the financial statements of 2017.

These were very tough weeks.

And I would like to thank you for your understanding and the patience on the part of our shareholders and investors that understood the reason for that.

Thank you very much, and have a very good day.

Thank you very much.

Copel's conference call is closed.

We thank you for participating and wish you all a very good day.

Thank you.