Companhia Paranaense de Energia (ELPC) 2018 Q4 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 fourth 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 business outlooks, projections, operating and financial projections 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 this conference today, Mr. Daniel Pimentel Slaviero, CEO of the company; Mr. Adriano Rudek de Moura, CFO and IR Officer; Ms. Ana Letícia Feller, Business Management Officer; Mr. Eduardo Barbosa, Legal and International Affairs Officer; Mr. Vicente Loiacono Neto, Governance, Risk and Compliance Officer; Mr. Cassio Santana da Silva, Business Development Officer; Mr. Franklin Kelly Miguel, CEO of Copel Commercialization; Mr. Maximiliano Andres Orfali, CEO of Copel Distribution; Mr. Moacir Carlos Bertol, CEO of Copel Geração e Transmissão; and Mr. Wendell Alexandre Paes de Andrade de Oliveira, CEO of Copel Telecom.

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 to Mr. Daniel Slaviero, CEO of the company.

Good morning, everyone.

Thank you very much for being with us in this conference call for the results of the fourth quarter of 2018.

I would like to start by highlight that it is a great honor and also great responsibility to be a head of Copel right now, the largest company in Paraná and one of the largest in Brazil.

This is a company that is part of the lives of millions of consumers.

And it is crucial to the development of our state, and it is a reason of pride of -- for us and Paraná.

I thank the opportunity to thank the Gov.

Carlos Massa, Jr., whom, as a legal representative of the controlling shareholder, has trusted me to -- with Copel employees turn this into a more efficient company, so that we can do better what we already doing well, which is to generate, also commercialize and distribute energy.

This is our DNA, and it's already a priority in our management.

Before going into the details of the presentation, I should highlight so that you start this journey, and so that we can meet our broad targets we have ahead.

I was careful in bringing aboard 18 of seasoned executives that are qualified in their expertise areas.

They have a technical profile, and they are very competent, trying to maintain the right balance between the internal and external options for the company, but above all, that are totally in line with the pillars of our corporate strategy, which I'll mention further on.

So I would like to say that our CFO is here with us, Mr. Adriano Rudek de Moura.

He is in this position for over 2 years.

He has prior experience in several multinational companies.

Ms. Ana Letícia Feller, Business Management Officer; Vicente Loiacono Neto, Governance Risk and Compliance Officer, both career professionals in the company that have been in these positions before.

For Legal and Internal Affairs Officer, we have Eduardo Barbosa, who has great experience -- great technical experience.

For new business, we have Cassio Santana da Silva, who has leadership positions in important multinationals.

For Copel Distribuição, we appointed Maximiliano Orfali as the CEO, and for Comercialização, Franklin Miguel.

Both are career professionals at Copel that have been in these positions before with great results and with great competence.

For Copel Telecom, we have the engineer, Wendell de Oliveira, who also has had experience in other multinational companies.

And finally, for Copel Generation and Transmission, the new CEO is Mr. Moacir Bertol, electrical engineer who has had several important positions recently in the Ministry of Mines and Energy.

Our selection process follows a strict assessment of the needed competencies for these respected positions in all companies of the group, and it goes beyond of the new demands -- the new requirements demand in the Law 13,303 and best practices.

I am sure that this new management, along with the other leaderships of Copel, where we also have experienced career professionals, a brilliant technical group as well as with the support of the 7,600 employees, altogether, we will start a new cycle in the company, a cycle that will take the company to a new level of profitability, cash generation, operating efficiency as well as innovation.

Having thanked everyone, having introduced everyone, I now turn to Page 4 of our presentation with the highlights for 2018.

Even during a year where we had a political transition and macroeconomic scenario return recovery, Copel has reached its all-time high results.

This is a reason that makes us very proud.

We are very happy to say that net income was a record of BRL 1.4 billion, 30% higher than what we had in 2017.

I also should highlight here an EBITDA in the fourth quarter of BRL 757 million, a total of BRL 3.1 billion, 9.5% higher than what we had in 2017.

And also we have met an all-time high in operating cash generation of BRL 3 billion, a 22% increase vis-à-vis 2017.

This was thanks to hard work and competent work of the team, especially in the fourth quarter where we had a net income of 193% higher than the same period of 2017, totaling BRL 390 million, as you can see.

And the EBITDA in the fourth quarter was of BRL 757 million.

Further on, we will go into the details about the main reasons for these improvements, but I should highlight that this was only possible, thanks to a broad program of cost reduction with the help of all Copel's areas.

And this will continue further on, and you will have all my support.

We are already mapping other initiatives that will be implemented in the short and the medium run.

Some very short-term measures have been taken in my management in these first 90 days, such as the return of leased buildings, reduction in management, support and administrative positions.

These are some small examples that stressed our belief that the reduction of cost and efficiency improvement will be a brand of this new management.

Another example that I find that is very relevant to be highlighted was the reduction of 120 employees in the last 2 years.

And being that in 2018, we had 634 basically, thanks to a voluntary redundancy program that we called in December of 2018, representing 11% of our headcount.

That will allow us to have savings in 2019 of BRL 200 million.

Another important highlight is the start of commercial operation of relevant projects, such as Colíder HPP, Baixo Iguaçu HPP and Cutia Wind Complex.

Therefore, we end a long cycle of great investments the company has made in the past years.

Right now, we are totally focused in concluding 100% of these projects, which have already started its commercial operations, but without meeting their maximum capacity, when -- we would then have a total increase of 718 megawatts installed capacity of Copel, increasing our total capacity.

It's important to highlight that these 3 undertakings, especially Colíder, which was a hard work of our team, had already its first plant in operation.

The commercial operation was approved on March 19, and these projects will bring an additional revenue to the company now starting in 2019 of BRL 400 million.

In Baixo Iguaçu, we have a partnership with Neoenergia Group, and we are already operating 2 turbines, one in Cutia Complex.

We already have in operation 127 wind turbines of a total of 149, that is over 85% of the installed capacity already in full operation.

And we estimate that it's all going to be concluded now in the -- at the end of the first quarter.

An important highlight is the recognition of the quality of Copel group.

We are acknowledged by our clients as the best distributing company in Brazil for the second year in a row.

In the consumers award, representing the consumer view considering ANEEL's quality index and Copel Telecom was considered the best broadband operator in our country.

In addition to that, we have received several awards and acknowledgments regarding information disclosure, management quality, volunteer program as well as sustainability.

Of course, going through our corporate governance, and then I should highlight also and I should mention an award that made us very proud.

In December of 2018, we were recognized by B3 as the best state-owned company in corporate governance.

We were ahead of large companies, thanks to our profile.

And Copel was the only state-owned company to participate in this award, and we ranked the first.

We got the first prize.

I should say that it is very important to have the governance -- corporate governance and compliance, and that they are the pillars of our business.

It's also crucial recognize that our results are thanks to the largest equity of this company, the 7,600 employees that work hard to maintain an excellent service.

In 2018, once again, we are among the 150 best companies to work at.

And this is a survey made by Guia Você S/A., and that's a great achievement that proves that Copel is dedicated and committed in everything it does.

More than anything, we want that these undertakings are seen by the market.

We already have good signs that this is happening partly by the appreciation of our shares, and we'll continue encouraging the continuous strengthening of the relationship of our investors and market analysts in a way that we can all share the trust and the confidence that we are on the right path.

Now turning to the next slide and checking the business prospective.

It is crucial, and I would like to give a special highlight to the results of Copel Distribuição that has reached in 2018, an EBITDA of BRL 800 million, an increase of 7x more than an EBITDA of 2 years ago and an improvement of 42% vis-à-vis 2017, therefore, reducing our regulatory gap to 23.8%.

And then we should, once again, thanks to Max and his team for their works in 2016 and -- to up to 2018, reducing our regulatory gap from 86% to 26% (sic) [23%], showing, therefore, a significant improvement in efficiency and cost control.

And our guideline, our target is to have 2019 an EBITDA -- regulatory EBITDA, we want to reach the regulatory EBITDA in 2019.

We'll do all that without losing our main focus, which are our quality indexes.

And then -- in the chart here, you can see that we have our ELC, EFC indexes that are better than the regulatory ones, thanks to Copel's team's commitments that are relentless in their work and in serving our consumers.

Our commitment is to improve even more the quality of these services by the modernization program that is going to integrate automation and remote control of the electrical grid and also the installation of a smart equipment as we have done in Ipiranga, and we are doing that also in (inaudible) in Paraná, the first in the country that will be fully covered by regulators and intelligence measuring devices, all integrated in the same communication system.

These technological innovations will contribute to the reduction of operating costs and investments in -- for 2019 will be of BRL 135 million, the highest of the decade.

And that decision is also a part of our strategy to increase the remuneration base, RAB, for our next tariff review of 2021.

I also would like to highlight another important initiative, which is the recent opening of the Smart Copel, a most modern distribution, modern center -- operating center.

This unit will centralize all operations of our Paraná team.

Another major about to hear is electrical modernity.

In 2018, we will have the largest electric highway in the country.

It will connect Paranaguá to Foz do Iguaçu.

Very briefly, turning to my final remarks, so that I can turn the floor to our CFO.

I would like to highlight that the other businesses, as I said, also had significant results in generation in addition to the focus in the conclusion of important projects.

The priority right now is to have the efficiency and the productivity improvement program and also having new synergies such as HPP (inaudible) that we would like to increase our productivity and to become more competitive, so that we can think in a sustainable expansion in the medium and the long runs.

In transmission, we are over 4,600 kilometers of lines, and that allows us to have an annual allowable revenue of BRL 700 million.

And up to 2019, we'll conclude SPE Mata de Santa Genebra, and in the next 2 weeks, we will start operations of the underground transmission lines.

Uberaba and Curitiba center works that have the state-of-the-art in terms of energy transmission and high voltage.

We also take over the operations Uirapuru, an undertaking that corresponds to 120 kilometers in operating lines in Paraná with annual allowable revenue of BRL 32 million.

In commercialization, this market in Brazil is in constant development.

We are facing a challenging moment.

But even then, our commercialization company reached BRL 1.3 billion, a significant growth vis-à-vis 2017.

And I should highlight the focus that we're going to give to this company because we consider it to be strategic to Copel's group once we consider the dynamics of the free market and also serving the consumers that will migrate to that category.

And Telecom, we have very attractive assets with high capacity grid and backbone of great reliability that have a footprint in the 399 cities of our state by a grid of -- an optical grid of 34,000 kilometers.

And I have said that and I will repeat, we are willing and very much willing of leaving the assets that are not in our asset -- that are not in our energy DNA.

And we are moving fast in the studies of segregating these assets internally, so that we can move on in governance and take that to the Board of Directors and present that to the market.

Now to conclude, what we foresee what we have for the future?

First, focus and continuous improvement of our profitability and strict control of cost reduction and the discipline in capital allocation.

Our goal of the regulatory EBITDA, this is a commitment of all our management.

We are going to work hard to bring that result, and as I mentioned, divestments.

Copel Telecom to start and then Copel Dis that will be reassessed as well.

And for sure, with that increase of the cash generation, especially coming from new projects, we will be focusing reducing leverage.

This is also a continuous work of meritocracy.

We will have priority investments, generation, transmission, distribution.

And we will be especially focused, and we will be working every day focused in renewing the approval for Foz do Areia plant, which is the main asset, 1,676 megawatts in generation.

This is the largest asset in Copel's portfolio.

All these investments, we will always be focusing on the best returns for the company.

And in the last years, the important learnings that we had were improvements in our governance to approve new investments.

I would like to highlight once again how important it is, and the market already knows.

It has been disclosed yesterday to the controlling agencies that we have new members in the Board of Directors, and they will have more independence.

These new members will have more diversity, and they will help Copel.

We will have (inaudible), founder of (inaudible) and with his experience, his focus and innovation in technology, he will certainly add much to the new challenges of the company, which are to look for distributed generation, electrical mobility, smart grids, services.

Biomass, we have great opportunity there as well.

So we have 2 models here in this company: execution so that we can deliver the results, the projects, and especially investment plan; and innovation.

Having said that, I thank you very much for all of you that are here with us.

I turn the floor to our CFO.

And at the end of his presentation, we will have a Q&A session.

Thank you.

Thank you very much, Daniel.

Good morning, everyone.

Thank you for being with us this morning in this conference call.

I think it's clear that we will continue moving forward in several areas, and the sound results presented in another quarter show that the execution of our strategic plan is following perfectly our targets and market expectations.

This continuous improvement is thanks to a great alignment of all the areas of the company the -- to our strategy of sustainable growth and the financial discipline.

As we can see in our 2018 EBITDA, we are over the barrier of BRL 3 billion, an all-time high for Copel.

Our net operating revenue was close to BRL 15 billion.

BRL 1 billion of annual growth since 2016 that means 6.5% growth vis-à-vis 2017.

And remember that 2018 was a complicated year.

We had a shy economic growth, but even then, this revenue growth has strengthened our position as the largest company in the state of Paraná and one of the largest in the industry.

In the fourth quarter, we also reached an all-time high of operating results of BRL 730 million with a growth of 57% vis-à-vis the fourth quarter of 2017.

I also should highlight the generation of net operating cash, which went over BRL 3 billion in 2018, around BRL 370 million in the fourth quarter of '18.

And also here, in addition to the improvement of the operating results, we also have the positive effect of the CRC receivables operations back to normal.

This is -- that was a state administration that was partially interrupted in 2017, and we started the payment back to normal in 2018 that totaled almost to BRL 120 million.

And remember that this credit remuneration is IGP-DI plus 6.65% (sic) [1.65%].

We also have an impact from the full reimbursement of RBSE starting in 2018.

As Daniel already mentioned, another all-time high is net income over BRL 1.4 billion.

This corresponds to a net income per share of BRL 5.14, 36% better than 2017.

And therefore, dividends will be also 30% higher.

The grid market is helping as well.

This is the last quarter, and 1.8% in the last quarter, 1.9% in the year, in line with our expectations of growth.

And finally, I should stress, the investments in 2018 focused in the conclusion of main ongoing works, as I said, Colíder, Baixo Iguaçu, Cutia Wind Complex, summing up almost BRL 1 billion just in these investments in the year and around BRL 115 million in the fourth quarter.

While I should mention the drop in revenue in the last quarter when compared to '17 of approximately 6% basically because of 2 reasons.

First, there was an effect of financial sectorial assets and liabilities, which in the last quarter was negative of BRL 55 million, and in 2017, in the last quarter, was of BRL 381 million positive basically because of lower costs with electric energy purchase for resale and that was because of a lower hydrological deficit and also lower average spot price.

And the second reason is the lack of dispatch of Araucária, which is equivalent to a reduction of 17% in electric energy supply.

In the last quarter of '17, generated 195 gigawatt hours, just to remind you.

Turning to our next slide.

Here we have more details on the consolidated results of the year and last quarter.

In the bottom left, we have the breakdown for the operating results of 2018 per business.

And I draw your attention to GeT's to being the top presenting company, 60% of total but already with a relevant share here.

We have Dis, distribution company, 25%; Telecom, 4%; and others, including the results of our subsidiaries, such as Copel Geração and others.

What is most important here is to highlight the reasons for improvement in these results.

Some are Copel's management and others are thanks to non-managerial factors.

Okay.

For Copel management, we have a headcount reduction.

We were able to reduce one of the largest Copel's cost of today.

We have a payroll of BRL 1.3 billion a year.

We had a reduction of 920 employees, which was based in the voluntary redundancy program that was ended now in 2018.

The options to -- for the employees to leave the company up to December.

We had 563 of them leaving Copel in 2018.

This impact of the indemnification in 2018 was BRL 70 million, the last provision we had to both costs of this program.

So we will no longer have any impact after 2018, and we will see estimated savings of over BRL 200 million in 2018.

If we do not consider indemnification and this is good margin, the headcount cost was reduced in around 2%, even considering the wages increased in October of 2018, which was around 4%.

So we will have a real gain of almost 6%, and it will be maintained starting in 2019, considering that these openings are forever closed, this -- we'll then be seeing in our financial statements that were published yesterday.

The cost reduction also was something under Copel's management.

Here I have several examples.

In addition to the reduction in headcount, other initiatives have been included in the program.

This is a program that is ongoing for a few years.

Many contracts have been reviewed: services, fleet outsourcing, also delinquency reduction, which is very important.

In the case of the distribution company for a year, with the collection of overdue bills, for the first time, we had a surplus vis-à-vis the regulatory target.

The reduction of almost BRL 20 million in addition to interest on overdue bills, which corresponds to BRL 35 million more.

We'll see that in the operating results -- we don't see that in the operating results, but that impacts the financial results.

And there we have almost BRL 55 million of improvement vis-à-vis 2017.

In addition to that, we already have a positive impact in the greater investment in technology focusing in the reduction of cost and process improvements.

Starting in 2019, we will also see the impact from the measures mentioned by Daniel, the return of leased buildings, reduction of management assistance and head positions.

So cost reduction, efficiency improvement will be the main agenda of this management.

Now talking about the growth in the grid market, it was 1.8%, as I said, in the last quarter, 1.9% in the year.

That is thanks to the growth of 4.5% in the consumption of the free market in the fourth quarter and thanks to an improvement in production -- industrial production in Paraná, growth of 1.7% and 0.3% in October and November respectively, vis-à-vis 2017.

The areas that have contributed the most to the increase in energy consumption were the manufacturing of food-related products, pulp and paper and chemical products.

Also, the number of Copel's consumers in Copel's captive market reached 4.6 million in 2018, almost 80,000 more than 2017.

Here we also have a positive impact of the tariff adjustment applied starting in June of 2018 of 16%, and Copel Distribuidora is benefited from that; and an improvement in the hydrological scenario.

This -- I should highlight that last quarter, GSF of 81.9% in the last quarter was compared to 69% in '17.

This had a positive effect for GeT in the last quarter.

Now turning to our next slide, so that we can have a better comparison of the operating performance of each business.

We show here a breakdown of the adjusted operating results, net nonrecurring effect, especially with the remuneration of RBSE, BRL 183 million with no other impact in 2018 and also without the reduction of the impairment, which in 2017, specifically regarding to the gas contract of our subsidiary with Compagas with Petrobras with no impact in 2018 also.

And there are other impairment adjustments of other assets.

Here we had a reverse on the last quarter of BRL 35 million.

We also have labor provisions in 2017.

I have already talked about that.

So we have the redundancy program.

So net overall, this impact, the consolidated adjusted results show an improvement in the EBITDA, both in the quarter as well as in the year respectively, 6.3% and 9% without considering the equity method.

Once again, I should highlight the relevant improvement of the distribution company results.

And remember that its adjusted result is close to BRL 900 million, a growth of 34% vis-à-vis 2017, as we already mentioned.

So this is a combination of several factors, including the growth in the grid market, tariff adjustments and more important because of all that we're -- all the factors we are able to manage such as initiatives of efficiency improvement in the process and cost-reduction.

I also should highlight the significant improvement in Copel GeT in the fourth quarter of '18 with an adjusted EBITDA of BRL 502 million, a growth of 61% vis-à-vis the results of the prior year.

And as I said, this is thanks to the favorable hydrological impacts.

In the year, the adjusted EBITDA for Copel GeT was of BRL 1.8 billion, and in the comparison, representing an increase of 13% over 2017.

And here, this was a year where the hydrological impact was not as relevant.

Now Copel Telecom had a reduction of around 15% in the adjusted EBITDA, going from BRL 139 million from 2017, and basically it was because of the activation of assets.

Just an additional comment in the Others line where we post impacts of the subsidiaries.

Here we have a relevant reduction between 2017 and '18, both in the quarter and in the year.

And the reasons are: first, the comp of gas of Compagas in 2018 was higher because there was an increasing price of contracts with Petrobras, reducing the margin for Compagas in 2018.

Also, there was an impact of the lack of the dispatch in Araucária that we had to dispatch in 2017 but not in 2018.

There's effect to the subsidiary line.

And we also had a negative impact in 2018 of the TUST cost increase for the transmission company totally.

These 3 reasons totaled around BRL 100 million that we may consider as nonrecurring.

We expect that this can be offset in the next years.

Now turning to Page 12.

We have a comparison of the PMSO.

There was a reduction of 8.2% in the last quarter with headcount, including pension funds.

And this is explained by the reversal of BRL 20 million in the provision related to compensation of the voluntary program.

We expected that more employees would leave the company.

So this reversal helped in the comparison of 2018.

But if we eliminate these impacts, the personnel costs in the last quarter would only have an increase of 0 -- 2%, basically maintaining the equivalents of the quarter in 2017, therefore, considering an adjustment of the salaries of 4% in October.

So the real increase actually would actually be a real reduction of over 2%, and that's what happened in the year.

If we track the figures, we will have a reduction of our headcount expenses of 2%, even considering that 4% increase.

Therefore, we start seeing a relevant reduction in our headcount cost.

We had an increase in services.

These are regarding additional demands of external consultants, some audit services.

They tend to decrease and others as these are increases related to the write-off that I mentioned such as Copel Telecom.

So in summary, I think all manageable costs have increased 3.8%, but they should not be recurring.

So we believe that the consolidated PMSO will be reduced, especially with headcount or people due to the impact here and other measures we already mentioned.

In the next slide, we have the results of Copel GeT and also adjusted EBITDA.

I think we already talked about the main topics of GeT.

I won't go into details, but I should highlight the works.

We are significantly reducing the level of investments, 30%, both in the quarter as well as in the year and because we are concluding the main works, so the main investments in GeT now referred to Lot E to almost BRL 200 million in 2018.

And we will -- we are forecasting BRL 200 million for 2019, completing Stages 1 and 2, Phase 1 for September of '19 and March of '21, Stage #2 and -- where we would need investments of BRL 200 million in 2019.

Talking about 2019, again, in addition to that investment of SHP Bela Vista, we will have there forecasted investment of BRL 113 million.

Transmission line in Uirapuru already in operation, represent over 50% of GeT investments estimated and almost BRL 800 million in 2019, and we'll see details on that.

On the next page, we have the -- also details of effect for the distributing company.

I want to take longer on this slide, but you have information here.

You can check later on.

But differently from GeT, we are increasing our level of investment in the distributing company, as Daniel has said, by the means of modernization grid program, which also will help reducing operating costs, in addition to increase in our remuneration base for the next tariff review of 2021.

On Page 15, we have our cash generation for operating activities starting on the operating results and the variations of working capital.

We already talked about these results.

And once again, we see the origin.

In the case of BRL 3 billion, part of this origin, BRL 250 million is of improvement.

So BRL 250 million is regarding to operating result, and the other improvement that we have, BRL 280 million, come from receivables from clients, which is improving, thanks to that efforts to collect receivables.

We are also being more careful.

In terms of credit assignment, this is improvement in our asset base.

And also, what I said improvement of RBSE that had full payment in 2018 in addition to CRC receivables, as I said.

That is the main reason to explain cash improvement in 2018 when compared to the prior year.

Now to conclude this slide, I should highlight that the expectation for cash or the estimate for cash generation of projects that will be concluded will increase our base in 13% of our installed capacity.

And once again, BRL 450 million more that we estimate for 2019.

In the next slide, #16, we have our CapEx history since 2016, highlighting the amount that was directed to generation and transmission projects, reducing -- that were gradually reducing, BRL 1 billion from 2016 and up to BRL 388 million for 2018.

So we are going to be below BRL 1 billion in 2019, just BRL 250 million will be for new undertakings.

So we are focusing concluding our works, and we will invest in what we want in terms of cost reduction and quality improvement.

So we'll be investing more -- 20% more vis-à-vis 2017 in that area.

Once again, I should stress our focus will be in the conclusion of the works in this first half of the year.

We will improve the quality and efficiency once again.

We will improve cost and the remuneration base.

And as Daniel said in the beginning, we'll maintain a new governance level for new projects with a strict assessment of risks and opportunities in a way that Copel can maintain and preserve the best choice in capital allocation.

In the next page, now turning to the end of the presentation.

We have the history of our leverage for the last years.

From 3.4x in 2016, we reached to 3.1 in 2019 vis-à-vis 2018, although we have increased our gross debt from '18 to '19 of BRL 1.5 billion with the objective to conclude ongoing works.

Part of this new debt comes from BNDES towards the -- it was the end of 2018.

BRL 813 million in 2 loans: BRL 620 million for Cutia Wind Complex and BRL 190 million for (inaudible) HPP, so more than allowing to finish these works.

BNDES funds represent an important step in our strategy to extend our debt and to diversify indicators.

Part of these funds will be in the cash of the company, partially explaining the cash increase at the end of 2018 of over BRL 900 million vis-à-vis 2017.

And this is the reason why the net debt has increased only BRL 700 million.

So although we increased BRL 1.5 billion, our net debt has increased a lot because the cash is within the company.

And this cash is focusing on businesses so the leverage is stable.

And despite of that growth in the gross debt, in December, the cost of this debt, just to give you an idea, was of 8.38% in average.

70% of the debt was CDI indexed.

So the exposure -- I can tell you that the exposure is almost 0.

So as we always stress, the control of our leverage will always be one of our main priorities.

We are not going to do anything if we are not sure about a comparable cash generation capacity and also a reasonable return.

We are sure that the leverage reduction will start to be seen in the next quarters, thanks to all the short-term actions that we already mentioned, which include: once again, the reduction of the investment plan, which has already been approved, and here, I'm talking about BRL 600 million; also the perspective of additional cash for new projects, BRL 450 million, starting now in the first quarter of '19; and the cost-reduction, just to give you an example, that has happened in 2018, with an estimate here of BRL 200 million starting 2019.

I also would like to say that our funding plan to meet the short-term demands where we will have a large concentration of maturities in May, June and July of 2019 is totally balanced and is being executed.

So we are sure that, that will be rolled out, and part of it is going to be paid in 2019, for the first time in the last few years.

Finally, we have our net income per business.

We should highlight an improvement of GeT in this quarter, thanks to positive impacts of spot price and GSF in the year.

Also, there was a significant increase of 22% over BRL 900 million.

And that corresponds to 62% of consolidated net income of Copel.

In the case of this, that already represents 26% of Copel Group.

This also reflects the improvement we already mentioned.

Net income of this was positively affected by the fact, which is that the of tariff review program, BRL 900 million.

And that is why the difference between the net income increase and EBITDA increase is not comparable.

But we have to eliminate that -- if we eliminate this benefit in 2017, the comparison would be the net income, which is approximately 47%.

So it is very relevant, and it shows an upward trend.

And to conclude, there is a reduction in the net income because of the deactivation of some clients during 2018.

And we expect that this is a onetime of situation with a significant reduction starting next year.

So I would like to end by saying that I'm very happy about the results we have so far.

We know that these results are a great achievement, but we also know that we have a long journey ahead.

But I'm sure that we will meet our targets and we will be working relentlessly to deliver every quarter what we are promising here.

Thank you very much.

(Operator Instructions) Analyst from UBS has a question.

I have 2 questions.

First question's about Copel Telecom.

You see that this is a very attractive asset, but what we have seen was a negative EBITDA in the quarter.

And when you turn to the history of Telecom, the company had an EBITDA reported lower CapEx in the business.

So I want to understand, what do you believe is the level of EBITDA that Copel Telecom should have and what do you expect to have in 2019?

What is the potential figure?

That is my first question.

Marcelo, thank you for your question.

I should say that 2018 results for Copel Telecom was because of the deactivations that we had.

We do not believe this is going to be recurring.

And we cannot anticipate our estimates for 2019 regarding Telecom, but we certainly expect to see recovery in real and recovery for its results in 2019.

Several actions have been taken.

When we took over Copel Telecom, different measures have been taken.

They are already being executed, and we already see results.

This is a matter of time, and we are on the right track.

So let's wait for the results.

I am very optimistic about results improvement there.

Yes.

And my next question is about the company's cash generation.

When we look at the net debt, there was a relevant improvement, BRL 400 million, if you compare third quarter and fourth quarter.

If you consider other effects, cash burn is even higher, BRL 600 million.

And I would like to understand, why did that happen?

Was it working capital?

What can you tell us?

Well, cash generation, we are still increasing our debt, as I said, to focus in the conclusion of the works.

I think that in 2018, the growth of 2018 was over BRL 1.5 billion.

That debt only increased BRL 700 million because this was a cash.

We maintained that amount in cash, but we are focused in concluding the works.

So we needed these funds to conclude the works.

That's why the year leverage was stable vis-à-vis 2017.

Several actions are being taken in the short run, as I already said.

We will see an additional cash coming from new projects.

And we do not have new debt starting in 2019.

We believe that with this additional generation, we will be able to start paying debt that we have so far.

And also we are expecting to see better results coming from efficiency improvement and cost-reduction programs.

So this will -- this improvement will happen starting in the first quarter.

I am very optimistic about that.

And once again, we are addressing the problems or the investments made so far.

We have to make sure that they start generating cash as fast as possible, and this is our focus.

I am very comfortable about this leverage.

I believe it will start dropping.

Next, Lilyanna Yang from HSBC has a question.

I just would like to understand, what is the ideal level of leverage for you in terms of net debt to EBITDA ratio?

And what do you have in terms of payment for the next 3 years?

I see that you have a plan.

You have a visibility there for 2021.

And I would like to understand more.

The second question is about Telecom and Compagas.

The studies that you're running already bring you to the conclusion that you should sell these assets?

Thank you very much for your question.

I will start by addressing the second part of the question, and then I'll ask Moura to answer the first one.

About Telecom, that is advanced internally as well as Compagas, this model is being discussed.

We are interested in a model that allow us to have the largest number of players interested in that asset, which we have already said, considered to be very attractive and strategic.

And considering what happened to other companies, which have been privatized in the state of Minas Gerais recently, we see that the more open is the model, more interested or potential interested players we have.

So we are working in order to have larger number of players interested on this asset.

Hello.

You talked to dividends and leverage.

In terms of leverage, I think, the ideal today is -- the ideal would be around 2.5.

And if we think about nongrowth and we are reviewing that, which will be our strategy for new projects, and we can tell you that's going to be a very strict criteria.

Our leverage is going to reduce a lot.

So what we're going to be doing with this money 2 years from now, we don't know yet.

And 2019 is going to be the year we will reduce that.

And obviously, if we do not have good projects, we will have to pay more dividends.

But this has not been discussed internally.

This is just something that we expect to see.

That's the scenario.

Right now, we proposed a minimum of 25%.

This is already an increase of 36% vis-à-vis '17, especially because of increase in net income, but that is in the short term.

(Operator Instructions) If there are no further questions from participants, I'll turn the floor back to the company's management for their final remarks.

On behalf of everyone, on behalf of all the officers, I would like to thank you very much for being with us in this call.

And once again, I would like to stress that these are all-time high results of the company, which only increases our responsibility, especially for future investments and also for the execution of our strategic plan.

So without much further ado, thank you very much to my colleague officers, also to the CFO and IR team to -- because they organized all the results.

And we'll be always available to talk to you in a very honest, transparent and pragmatic fashion.

Thank you very much.

Ladies and gentlemen, the conference call of Copel for the results of the fourth quarter of 2018 has ended.

Thank you very much.