Companhia Paranaense de Energia (ELPC) 2018 Q2 法說會逐字稿

Good morning, and thank you for waiting.

Welcome to Companhia Paranaense de Energia Copel Earnings Call to discuss the Results of the Second Quarter of 2018.

(Operator Instructions) Before proceeding, we should mention that forward-looking statements that might be made during this conference call related to Copel's business outlook, projections, operating and financial projections and goals are based on beliefs and assumptions of the company's management and on information currently available to the company.

Forward-looking statements are no guarantee of performance.

They involve risks, uncertainties and assumptions because they relate to future events, and therefore, depend on circumstances that may or may not occur.

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

With us today we have Mr. Jonel Nazareno Iurk, CEO of the company; Mr. Adriano Rudek de Moura, CFO and IR Officer; Ms. Ana Letícia Feller, Business Management Officer; Mr. Harry Françóia Júnior, Legal and International Affairs Officer; Mr. José Marques Filho, Business Development Officer; Mr. Vicente Loiácono Neto, Governance, Risk and Compliance Officer; Mr. Sergio Luiz Lamy, CEO of COPEL Generation and Transmission; Mr. Antônio Sergio de Souza Guetter, CEO of COPEL Distribution; Mr. Adir Hannouche, CEO of Copel Telecom; and Mr. Antonio Justino Spinello, CEO of COPEL Commercialization.

The presentation will be delivered by COPEL's management and may be followed on the company's website at ir.copel.com.

Now we turn the floor over to Mr. Jonel Iurk, CEO of the company.

Mr. Jonel, the floor is yours.

Good morning, everyone.

Thank you very much for your participation in our conference call.

It is a great pleasure to talk about our result and to go into the details of the works that we are performing and advancement of the Copel Group.

The first highlights that I should mention is regarding governance.

On June 29, we held the 197th Extraordinary Shareholders' Meeting, and we approved the new Copel Bylaw, stressing even more the levels of governance in all areas and companies of the Copel Group as well as includes more details in terms of attribution, contemplating policies, forward to management transactions with related targets, corporate governance, integrity in the evaluation of performance of the statutory bodies among others, which are truly compliant with the law 13303, which are -- which is a state-owned company's law.

The consolidation of these new bylaw is really important to staff and it is a part of the plan of continued improvement of our governance in all its aspects, which is responsible for establishing policies and procedures for risk management and control as well as following up the compliance of internal roles, being one of the first companies in Brazil to have a specific area for compliance, which is totally independent and reports directly to the statutory audit committee.

In addition to the new bylaw following the terms of the states-owned law, we also have implemented severe and strictly technical controls such as elect officers at -- for our top management areas and Board of Directors of the group companies, including the ones in which we have minority stake.

We have also reviewed the code of conduct and integrity policy increasing, therefore, the company controlled procedures.

However, the measure that was important was the creation of the coordination of financial controlling under the supervision of the finance and IR area, and the objective here is to stress and to improve the control and the financial management of the companies in which we invest.

This area is already working in reviewing and aligning financial practices and policies that link Copel even closer to the daily activities of these companies.

And all these improvements maintain Copel in the state-of-art of governance practices meeting the demands of the market, and especially the demands of our shareholders.

I should highlight that the corporate governance subject in COPEL was one of the pillars of our sustainable growth strategy, including among others, the search for greater efficiency in the quality for our services and also better productivity in all processes.

Also, focus on cash generation, with the conclusion of all constructional works that are ongoing as well as with a financial discipline by having a balanced capital allocation and cost reduction, allowing to have a readjustment in the profile of our debt, reducing leverage.

And this plan is being well executed, and we have several results, which we will talk about in a few minutes.

About the results of the second quarter, as highlighted on Slide #3, we reached an EBITDA of BRL 833 million, 18% higher than the EBITDA of the same period of the prior year.

In addition to that, we also had net income of BRL 353 million, a 134% higher vis-à-vis for the second Q'17.

I draw your attention to the fact that the company had a drop of almost 7% in costs with personnel, thanks to major efforts to reduce (inaudible) cost, especially in our distributing company that reached an EBITDA of BRL 231 million in the quarter and 72% higher than the EBITDA of the same period of the prior year and know that we'll go into details on the comparison.

As you can see on the chart, we have been able to get Copel Distribution results closer to the regulatory level, and thanks the cost reduction plan, that cap should be even lower starting in 2019.

It's also important to say that Copel Distribution fully applied the tariff adjustment of 15.99%, of which 15% and 68% referred to transferring cost with energy and charges.

And 0.31% are regarding to adjustments of [farther beat], in which -- with the plan of cost reduction, and also market growth will help increase the margins of Copel Distribution.

And talking about market growth, and now turning to Slide #4, we can see that even below the initial projection, the gradual economic recovery is providing a positive influence in the energy consumption with a grid market of Copel Distribution, we have a growth of 2% up to the half of year.

The improvement in the economic environment, although a shy one, also has influencing the reduction of delinquency index in Copel Distribution that has ended June at 1.25%, the lowest level in the last 8 years, while provisions for ADA has been ended in the second quarter at BRL 16.9 million, a drop of 34% vis-a-vis the same comparison for 2017.

This effort is a reflection of how we are facing the matter.

Now in August, we have started a new practice at Copel Distributing company that should help us reduce delinquency, and also reduce costs with disconnections and reestablishing the energies supply.

Now when Copel Distribution grow to the consuming unit, they will offer the possibility of paying overdue invoices by using debit or credit cards and the consumers also have the possibility of paying in installment -- up to 12 installment, and the first stage of the practices we already have ordered, 237 disconnections, which is a great indicator of this new measure.

That's why Copel Distribution is recognized as one of the best distributing companies of energy in the central.

We have received the Abradee award of the best distributing company in the South of Brazil, and also, the best distributing company in Brazil as far as management of quality is concerned.

This excellence is also seen in the continuous increase of the ELC and EFC, that has -- have ended June at 4.82 and 2.98, respectively.

Figures that once again show the maintenance of those indicators at levels the mandate by ANEEL, resulting in even more quality in the energy supply for our consumers and allow us to comply with the basic requirements to maintain the concession.

Now turning to Slide #5.

Another subject that we should highlight is cash generated by operating activities of approximately BRL 1 billion in the quarter, an improvement of 10.7% vis-a-vis the same period of '17.

And the year operating activities have already amounted in cash of BRL 2 billion and BRL 359 million higher than last year.

In terms of investment, as we have been stressing, our focus is to conclude the ongoing construction works as soon as -- as you can see in this slide we have invested BRL 604 million in the second quarter, totaling almost BRL 1.3 billion after the half of the year.

And most of that amount is regarding works that are being concluded in Colíder, Baixo Iguaçu and also Cutia wind farm.

Now going into details in our investment plans.

Cutia wind farm was a project that has demanded the high demand of investment, totaling BRL 483 million up June -- up to June.

The construction works in Rio Grande do Norte are at a true phase, and the first winter winds should start operating in the next week.

Copel Telecom has invested BRL 129 million in the first half of the year, basically in the expansion of our grids to meet the growth of the coverage area demand.

And also the number of clients and Copel-G&T has invested BRL 370 million among projects such as the plant of Colíder and Baixo Iguaçu and transmission line at Araraquara-Taubaté that started operating in June, adding BRL 30 million to Copel's APR.

So I would like now to highlight the part of our operation of this transmission line at Araraquara-Taubaté, which we had 334 kilometers crossing 28 cities and the state of Sao Paulo.

And for this line, we have reached 4,724 kilometers of transmission lines in operations, now considering also our stake in FCEs.

About Colíder, the construction works have been concluded, the reservoir is full, this transmission line that will connect the plant to the national grid is ready, and only we have to finalize some details regarding the generators and also the publication of the operating license, so that we can turn the key and start the energy productions.

I should highlight that this is a very important moment in Copel's history, because we are very close to start operation in 2 relevant projects, which are HPP Colíder and Cutia wind farm that represents 630 megawatts of installed capacity.

If we consider our capacity of 105 megawatts in the HPP Baixo Iguaçu that we start operations in January, we will then be increasing our installed capacity in 718 megawatts, which is equivalent to a growth of almost 13% in the next month.

Well, these were the main operating highlights I wanted to bring to you.

Now I'll turn the floor to Moura, and he we will go into the details regarding the results for the quarter.

Thank you very much, Jonel.

Good morning, everyone.

Thank you for your participation in this conference call.

As Jonel well said, we are going forward in several areas, and the execution of our strategic plan is in line with our goals.

I should highlight that -- and despite of all the uncertainties in the economic scenario and the political scenario in the country as well as negative impacts regarding an unfavorable hydrologic environment, especially in past -- last few weeks of the second quarter, we are delivering another quarter with the results that meet our expectations, and are also the market consensus that shows that we are on the right track.

And it means that we have been able to identify opportunities that helped us to offset the negative effects that are nonmanageable.

The EBITDA BRL 833 million in the quarter was 18% higher than the one that we had in the same period of '17, which was of around BRL 707 million, and that result we had positive extraordinary effects that are in the presentation basically related to an impairment reversal of BRL 18 million, coming from an improvement in the scenario of the sale of energy of generation (inaudible) in the same period of '17 have presented an increase of BRL 31 million.

Also we posted a reimbursement of BRL 72 million from asset suppliers for Brisa Potiguar wind farm, and also reported BRL 37 million for Copel Distribution related to the result of the quarterly earnings report of '18, because of recognition by ANEEL of an appeal from 2017 of differences regarding tariff subsidies.

This positive extraordinary effect amounting BRL 127 million were more than enough to offset the negative impact of additional provisions for labor lawsuits, especially regarding to one collective labor lawsuit in the amount of BRL 45 million.

Therefore, the adjusted EBITDA net of the extraordinary effect that I have just mentioned would be of BRL 751 million, in line with the results with the same period of 2017 on the same comparison base.

Considering the results per subsidiary, Copel-G&T continues in having the greater contribution in terms of EBITDA, 50% of the total and indeed we are already excluding all extraordinary effects that we mentioned.

And when compared to 2017, there was a drop of 7% in this phase.

It was mainly because of the unfavorable hydrological impacts in the same period of comparison that have been affected by a lower GSF, and also by the strategy of energy location, but we were able to partially offset those impacts with the results of the new lines of transmission, and also by the adjustment of the APR in July '17.

At Copel Distribution, the adjusted EBITDA of BRL 239 million represented a growth of 70% when compared to 2017, reflecting, in addition to the market growth, the result of several initiatives of productivity improvement and also cost reduction with personnel as well as a significant reduction of delinquency, as already mentioned.

It is important to say that the cost reduction was personnel at Copel Distribution.

This is thanks to a series of measures that the company has been taking to reduce cost in all its subsidiaries.

Among them, we should highlight this reduction in our headcount.

Copel Telecom had a growth of 16% in its adjusted EBITDA from BRL 38 million in the second Q of '17 to BRL 44 million in the second Q of '18, and this performance is basically related to the expansion in our client base.

Another highlight is that cash generation for operating activities, already mentioned by Jonel, that has reached BRL 1 billion in the quarter, and that is an improvement of almost 11% vis-à-vis the same period of '17.

In the year that operating cash generation has already reached over BRL 2 billion, BRL 360 million higher than last year, and the details can be checked in the quarterly earnings report.

And talking about the operating cash generation.

I should highlight that with the startup of operations of all projects that we are almost including, as Jonel, once again, has mentioned, we will increase our installed capacity in over 700 megawatts, which is equivalent to a growth of almost 13%.

Therefore, we may consider an operating cash generation that is going to be additional and relevant, and today, that is estimated in approximately BRL 400 million based on the current references.

Not turning to Slide #7.

We can see more details, the recurring operating revenue, which was up 2.5% (sic) [12.5%] in the second quarter when compared to the same period in '17, already going over BRL 3.5 billion.

And here we have already eliminated extraordinary effects so that we can have a better comparison.

You can see that the sales to end customers had a growth of 19%, thanks to the adjustment applied to the sale of Copel Distribution in June '17, which adjusted the tariff of energy in around 10%.

And also that was because of the growth in the sale -- the volume of energy sold to final consumers.

And we should highlight here the growth of 3.3% in the captive market of Copel Distribution and the sale of 464 gigawatt hour for free clients of Copel Commercialization.

The revenue for sales to distributors had a drop of almost 25% due to the strategy of -- the energy allocation of Copel GeT and also to lower GSF in this period.

The line of the grid availability had an increase of 6%, thanks to an improvement of 3.7% in the market in the quarter and also to the adjustment applied to the APR starting in July '17 discounted at the elimination of the balance coming from the revenue among the -- the revenue from companies of the group, Copel GeT and Copel Distribution, regarding the APR related to RBSE, which was posted in Copel's GeT revenue over '16 and beginning in '17.

The telecom revenue was up 19%, and that reflects the expansion of the client base for Copel Telecom, as we have already mentioned.

Now the posting of CVA line reflects mainly the major costs with purchasing energy by Copel Distribution because we had higher costs with Colíder energy coming from higher spot prices and lower GSF and also energy coming from Itaipu because of the dollar appreciation.

Finally, an increase of 31% in other operating revenues, reflecting mainly an increase in the construction works revenue.

On Slide #8, we have the costs and operating -- recurring operating expenses that were a little bit over BRL 3 billion in the second quarter of '18, a little bit over 13% of what we had in the same period in '17.

And that was because of the increase in the cost of purchasing energy that totaled BRL 1.5 billion in second Q of '18, an increase of BRL 139 million vis-a-vis 2Q '17 also because of a larger amount of gigawatts hour purchased by Copel Commercialization, which has reached, in this quarter, 782 gigawatts hour versus 210 gigawatts hour in the same period of '17.

The grid user charges, it had an increase of 121% because of higher costs with system user charges with a transmission of energy from Itaipu.

And also grid reserve energy charges and the provision of reversal lines adjusted by extraordinary events, had an increase of BRL 5 million compared to the second quarter of '17, and this growth is mainly because of higher balances related to legal claims.

And now manageable cost that are recurring had, had an increase of just 1%, BRL 7 million, mainly because of higher costs with third-party services, and we will go into details in the next slide.

Now turning to Slide #9.

We have the PMSO performance where you can see that not considering the provision related to the voluntary -- the industry program indemnity, the cost was personnel, including retirement and affected plans, it had a drop of 2.1% even after the adjustment of 1.63% applied to wages in October '17.

That performance already is reflecting, among all other measures, the policy adopted by the company of not reopening position and this is contributing to reduce our -- to reducing our headcount, which has ended June 2018 with 8,104 employees, a reduction of 349 people in the last 12 months.

Considering the enrollment in the voluntary industry program, 99 people left the company in the first half of the year, and 610 people might leave the company by the end of 2018.

And in case all of these [neural] people decide to leave the company, we would have a potential savings of up to BRL 200 million a year, starting in 2019.

These would be annual savings of BRL 200 million, starting 2019.

Copel today is clearly a more efficient company.

Our plan to improve productivity and to reduce cost is consistent, and it already shows positive results.

We are also counting on the help of specialized consulting services, and we have targets to improve in the short and in the medium term.

We are also investing in technologies to support productivity in certain operating areas.

Therefore, we are already including in our budget reviews, also for our business plan for 2019, important cost reductions in different areas.

Cost with outsourced services, it had an increase of 13%, reflecting mainly increase in work-related communication processing and data transmission and maintenance of the electric system in addition to adjustments of contracts and other costs as nonoperating expenses had a reduction of 1%.

Therefore, manageable cost had increased a little bit over than 1% in the quarter.

But if we consider the inflation of 4.4% accumulated in the last 12 months, actually, manageable cost had a real reduction of around 3%, which is a very positive sign in our results.

Now on Page #10, we should highlight a positive trend in the level of leverage.

And today, the ratio, net debt EBITDA went from 3.3x in the last 12 months at the end of the first quarter of '18, and to 3.1x at the second quarter of '18.

Remember, the limit according to the covenants is of 3.5x.

We understand the additional cash generation of the new undertakings, as I mentioned, of approximately BRL 400 million a year.

And also, the combination of several initiatives, some of them already implemented except cost-reduction, improvement in the process that could reach a additional annual savings of approximately BRL 200 million.

And also the CapEx reduction that should happen in the next year after we conclude several projects now in 2018, all of that certainly will bring down our leverage.

Right now, we are focused on the expansion of our debt that right now has an average duration of around 4 years, with relevant maturities in the next 12 months.

And we continue assessing several possibilities for funding an also initiative for cash generation, including a Brach study for divestment that considers the strategic relevance of several assets of Copel attractiveness in the market.

And the possible accounting and financial impact in case we decide to go ahead in such a divestment.

Additionally, our funding plan is adjusted to meet the demands of investments focusing and concluding the ongoing construction awards as well as enrolling over the short-term maturity, and that is going as planned.

Also, we have just concluded a funding process of BRL 1 billion at the end of July, and so now we have funding of over BRL 2.2 billion in 2018 so far.

So it's important to say that Fitch has just restated our long-term national rating, which is AA-minus with a stable perspective, emphasizing the both cash position of the group and also the possibility of increasing our cash generation coming from the new undertakings and also from the cost-reduction plan, which has everything to do with our vision of a high financial capacity.

We are still following our strict financial discipline and evaluations regarding new investments as well as dedicating all efforts so that all projects are finalized within our initial expectations meeting the regularly demands and contracted schedules in a way that we can maintain the flow of funds forecasted for such undertakings.

Finally, on Slide 11, we have our net income, totaling BRL 353 million, an increase of 133% vis-a-vis the BRL 151 million reported in the second quarter of '17.

And the main contribution here is still coming from Copel-G&T, with 67% of that net income.

And so right now, we turn to our Q&A session.

(Operator Instructions) Our first question is from Mr. Kaique Vasconcellos from Safra.

I have a question about your strategy of commercialization with (inaudible) Copel which has the part of it, and is that already contracted?

And so what is the level that the company considers ideal in terms of contracting for the HNB protected regarding the GSF?

And I also would like to understand what's your allocation this year?

And which impacts you were expecting for the second half of '18?

Because the GSF is very low.

This is Sergio Lamy from Copel-G&T.

About the first part of your question regarding strategies for commercialization, we all know that Copel, historically, is very prudent, very cautious regarding risks coming from a high spot price and a low GSF, and especially in the second half of the year.

For this year, specifically, we have a contracting level that is close to 80% that's already contracted for 2018.

This is duly seasonalized.

We did have now more contracting in the second half of the year, and already addressing the second part of your question.

For this year, I think we expect to have a balanced performance in the short-term market.

That means that we have no expectations of positive results, nor negative results in the short term.

We will just protect ourself against the effect of the low GSF and also high spot prices.

Now about the future, we have an expectation, and today, we have that expectation regarding 2019.

We have already 80% of contracted of our fiscal guarantees.

We do have targets defined for Copel commercialization regarding sales for future years.

And our target, once we even conclude sales during the remaining part of the year and once we meet our target, we will start 2019 with 84% of that energy.

So a little bit lower than this year.

And we believe that we'll have a less critical situation next year, but also, we do not forecast a very favorable situation, either.

And for the other years, we expect to reach the end of this year after meeting all these targets with 67% to deliver in 2020, and 40% are contracting already to deliver in 2021.

And as we get close to those years, we review our study and we do that fine tuning of our strategy of energy allocation so that we can protect ourselves against the GSF.

And I hope I have been able to address your questions.

Our next question is from Mr. Marcelo Sá, UBS.

Analyzing in further details your cash flow, I could see that most of the improvement in the cash flow came from working capital, an improvement there.

I think on Slide #5, that is very clear.

It seems to be BRL 700 million when you look at it half of the year.

My question is, what are the chances of the next quarter you might have a reversion of this working capital?

Because I want to understand what, in fact, has happened in the first half of the year?

And what of that is recurring?

And what may have been caused by an improved in the working capital?

My second question is, what can we expect in terms of CapEx for 2019, 2020?

Can you give us more details on that?

Marcelo, thank you for your question.

I will try to address your working capital.

If you see our figures you will find that we have an improvement also in our delinquency levels that helps a lot and -- in all the conditions.

And we had the benefit of the program we started last year that had a positive effect of BRL 400 million.

This is a nonrecurring item.

We did not expect to see that again, so this is basically the comparison.

But I would say that you're not going to see lower figures either, that, in fact, social contribution and income tax.

We could even maintain a small variation there and even the positive one regarding our working capital.

And now about CapEx.

As I mentioned in the call, we expect to have a significant reduction in our CapEx for next year.

We'd only have the (inaudible) figures, but there is some focus on that.

And if you do the math of those BRL 3 million (sic) [BRL 3 billion] of CapEx approved for 2018, BRL 1 billion is for Cutia alone.

So we do not believe this is going to be recurring for '19, and we are making all needed adjustments in order to focus in the ongoing construction work.

So we believe there will be a significant reduction for next year.

Well, can you give us more details about the CapEx between BRL 1.5 billion and BRL 2 billion?

I'm sorry, I was not able to listen to the last part of the question.

I just want to understand this adjustment about the CapEx.

You said the Cutia CapEx will not happen again.

So can we understand recurring CapEx around BRL 1.5 billion and BRL 2 billion a year for Copel?

We don't have that figure yet, Marcelo.

We are working in order to have it as low as possible.

But I can tell you that this BRL 1 billion won't happen next year.

We did not expected to have major investments, other than the regular projects that are already ongoing, unless we have a relevant project that is good for Copel, but we do not have that expectation right now.

So I could tell you that the reduction will be relevant, but I cannot give you a final figure.

So a final question then about Copel Telecom.

What we can see here is that this is a business that burns cash because the CapEx is higher than the EBITDA and also you have the expenses of the company.

So my question is, considering the success that Cemig had in selling their telecom assets, are you thinking about selling those assets?

Are you thinking about reducing the amount invested there?

Do you believe this is going to be burning cash for a long time up to the moment when you are going to see a positive cash generation in telecom?

So what is your mindset as far as the segment is concerned?

Well, telecom is a very attractive asset for Copel.

I think we have been able to validate it successfully, with syndications.

We are dealing with this topic very well.

It is attractive, it has to remain attractive with our investments are focused in technology and client expansion.

And we already have consistent results.

We haven't made an adjustment in the CapEx for this year to adjust our cash flow, but it is already fully adapted to this demand, so that we can continue the needed expansion.

But once again this is an attractive asset, and we always look at it very carefully so that we can have an alternative.

And if that's the case, one day we could divest that initiative.

So from what I understood, the idea is that you want to continue investing on this asset because it is a good asset, it make sense.

But eventually in the future that could be discussed.

But right now you will continue your operations as they are.

Yes, that's it.

Our next question is from Marcelo Britto from Citi.

I have 2 questions.

The first one is about the impact of the truckers strike.

We have seen some companies reporting lower results and lower growth because of that strike.

And some of the companies estimated the impact in the recurring growth of the company.

In the case of Copel, your grid market has increased in the quarter.

We wanted to understand, how much you believe this market could have grown if we did not had that strike?

This is one question.

And my second question, and I will go back to energy allocation.

What I wanted to understand is that when we look at commercialization and generation companies, in fact, and also the purchase of energy in these 2 quarters by these 2 Copel companies, it seems to me that it's clear that Copel was very well allocated for the second half of the year.

Of course, this is a strategic information.

But, at least, could you tell us if you were more or less allocated than the average of the participants of the MRE in the second half of the year?

Marcelo, this is Antônio from Copel Distribution.

I want to comment on your first question about the truckers strike that we had in Brazil, and it has affected all distributors just as the same.

Here in Paraná, we had a small reduction, a small drop in the market, but it was recovered in the next month.

We had an operating activity in which we directed our team to work with emergency issues only.

We also had our mobility restricted for a while, but this was quickly solved by the state administration.

I think we were one of the states that had the lowest impact in terms of mobility.

And we even didn't have -- we -- our quality standard did not go down.

Our levels for ELC and EFC were the same.

So we did have impact in our operations, but not in our results regarding quality and in the collection, we did not have delinquency.

Because of that, we have reduced our disconnections in that period.

And we have a record here, in our history here we had over 100,000 disconnections in a month.

And as you have seen in the beginning of the presentation, we are developing new ways of collecting overdue bills, helping the consumers to avoid those disconnections so that we can even improve further the collections.

Marcelo, this is Lamy from transmission.

About your second question, a very straightforward answer is that we are more allocated for the second half than most of the market.

Now going back to the first question, about distribution.

Would you say that the grid market could have grown 4%, 4.5%, if it were not by the strike?

Do you have any type of estimates regarding that?

We did have a loss of 1.6% of the market in that period.

But the growth in the half is already at 2%.

So of course, there was an impact in the market, but this is already being recovered, with the market recovery of 2% in the quarter, actually, not half of the year, in the quarter, I'm sorry.

(Operator Instructions) Our next question is from Mr. Thiago Silva, Santander.

I have a question about the next auctions, and these are greenfield projects.

Are you looking at them?

Are you interested in those auctions?

Auctions for transmission and for generation?

And on the other hand, are you interested in any divestments of your assets, especially renewable assets and also transmission assets as well?

Well, and if you allow me another question considering that you are at 3.1x your net-debt-EBITDA ratio, what would be the fine leverage if you are interested in bringing down this leverage or if it is at a level that you consider to be good?

Thiago, I will start by the end, and then I will turn the floor to Lamy so that he can talk about the auctions and also Marques will talk more about auctions.

Our leverage, well, we want to be close to 2. And was focusing on the debt extension, as I mentioned, because it has a duration of 4x -- I'm sorry, of 4 years.

I think that if we are able to improve that level 3x, a little bit below that, it's sustainable.

So that's -- I would say this is our target for future years.

That's where we are going to, that's our direction.

Thank you for your question.

Yes, Copel has to think about the long term, and we have made major investments in the first few years.

In fact we are analyzing the auctions of this year.

We are very much interested in the renewable energy and totally in line with our financial area.

We will check when we intend, in our undertaking, to divest.

I can tell you that this new auction is being analyzed very cautiously.

The A-6 makes us feel comfortable because they have a linear level of investment that go away from the urgent needs of cash that we have.

We are still analyzing the wind energy.

We have interest in that as well, and also we are analyzing something related to photovoltaic energy.

And in the case of transmission, we have a very interesting package of transmission in our assets, and therefore, we are very competitive.

Well, no, about divestment.

To date, we have ongoing 20 projects.

We already have an understanding because we have to be very detailed in this project if we are going to divested, and that will only be made if we have funds in the future to have equivalent or better project in the future.

And so I believe that in -- within 3 months we will have a very fine tuning in terms of planning for divestments.

And our next question is from Miss Lilyanna Yang, HSBC.

My first question is, what you were doing today to minimize risks of additional delays and startup of operations of new project?

And my second question has to do with hydrology and your expectation to have Araucária dispatched in the short term.

And how we can understand that perspective of the better use of the assets for the next year and the remaining years after that?

This is Lamy from G&T.

Thank you for your question.

We have several actions already implemented, and I think that also we had an important evolution in our learning curve, regarding the assets out of Paraná, and they are already bearing fruit.

You can prove that when you check the recent investments.

All of them are already being built on time.

We are in the schedule and some of them even ahead of schedule.

So when we talk about scheduling and the construction work dates, I think -- I can tell you that this is -- it has problem and this is not happening in these recent projects.

We do have other projects such as Colíder, but this is a project that started in 2010, if I am not mistaken.

And -- but right now we are not facing problems anymore and that is thanks to the actions that we have been taking when we plan our construction work.

Now regarding your question for Araucária plants.

We have 2 strategies there, one of them in the short term.

Obviously, we already have here -- for ANEEL, we submitted to ANEEL the approval a new unit variable cost for UEGA that provides us a very possible perspective and that's an optimistic perspective and that we can still dispatch, now in the second half of this year, and because we are considering these values in our costs.

And then in terms of our long-term strategy, we are working with A-1 auction that has -- that is already being posted by the government, that's going to be happen by the end of December.

We are starting to work on that right now, and we have a great expectation there.

And this -- and bidding in this auction so that we can have strong plans for '19 and '20 for Araucária; this is our goal.

Well, I just hope that I have answered your questions.

If there are no further questions from participants, we turn the floor bank -- we turn the floor back to the management for their final remarks.

Thank you very much for your participation.

I believe that Copel is on the right track, a soundtrack and always, in order to see the best interest of our shareholders.

Thank you very much.

Ladies and gentlemen, the conference call for Copel regarding the results of the second quarter of '18 has ended.

Thank you very much.