Centrais Elétricas Brasileiras S.A. – Eletrobrás (NYSE:EBR) Q4 2022 Earnings Call Transcript

Centrais Elétricas Brasileiras S.A. – Eletrobrás (NYSE:EBR) Q4 2022 Earnings Call Transcript March 15, 2023

Operator: Presenting the team from Eletrobrás here, Wilson Ferreira, the Junior, the President of Eletrobrás; Elvira Presta, Investor Relations and Financial; Camila,, Governance, Risk and Compliance; Pedro Jatobá, Generation Director; and Rodrigo Limp, Institutional Relations; Élio Business Strategy and Participations and José Barros, our Legal Director. We inform you that this video call is being recorded and will be made available in the site of the investor relations of the company’s where there will be this presentation in both languages. So I will highlight whoever needs simultaneous translations we have these two available in the globe on the bar — at the bar below of your screen, so you can choose your language of preference, Portuguese or English.

For those listening in English, there will be an option to block the original audio in Portuguese. For the question and answers, Q&A, we tell you that you should send them by clicking on the bottom of your screen. Your names will be mentioned and then you can ask your questions aloud. At this moment, you will be requested to open your microphone and then you can ask your question. Some declarations during this teleconference related to the perspectives, business perspective of the company, projections, operational matters and financials constitute the premises of Eletrobrás and will be available made available by the company. Future ones will not consider as performance because will be considered risks. The investors should understand that general economic conditions and other operational conditions could influence the results of such future conditions.

Therefore, I’d like now give the floor to Wilson Ferreira the President of Eletrobrás, that we can start the presentation. Mr. Wilson, you can move on.

Wilson Ferreira Junior : Thank you. Thank you, ladies and gentlemen. It’s a satisfaction to be here to share the results of this company, this fourth quarter, closing the year of 2022. I am five months as head of the company, I’m really, really happy to be here. And especially to be together with my team that is here. And I thank them not only be able to make this presentation today, but also be the one on — one of the dates most brief where we have reported our results. We’re talking about the 13 of March, but especially the content of these results, which I believe can be very well appreciated by each one of you. So let’s just start with these highlights. I’d like to move on onto the next slide. We have here the main events.

In these five months, as I mentioned, there are five themes that are very relevant. I believe that the first one is something that is really important for the company, for the perspective of the company. It’s the fixation of the voluntary dismissal plan. It has R$1.2 billion cost, estimated cost. We have over 1,000 people who have been dismissed up to February. We’re going to make a report that more specific of this program, will have another 1,000 more until April the 30. We haven’t taken a lot of care. It’s a recognition of all the professionals in the companies that built this company, but it’s also something that establish besides the perspective of bringing new people to the company, something that doesn’t happen since 2009. The second theme that is very relevant then in this — in the enterprise, private enterprise and deciding the future of bridges, first of all this, the regional funds we have already made it, and fund of most R$900 million and over R$300 million to revitalize the Sao Francisco Basin.

Also for decarbonisation of the Amazon, especially in these times of climate change. We have believing that revitalization the Basin of Furnas. This has some deposit already made last year into the provision of R$ 5 billion, and other another deposit that we make annually, March and April of over R$600 million. So these contributions are important, be it for the development, or the regional development, or also from the tariff review, but also for the events that may happen in the capitalization revitalization of the company. So three themes that is very important also first of all, in this compulsory loan, we know who participated, the company refers to these loans over R$26 billion. We had here the approval by the Board Advisor, in policy of agreement.

We manifested this publicly in the markets that are working on and satisfaction of being this first trimester that we start this activity. We have a reduction of R$1.3 billion in the provision stock and also being with a positive reduction of over R$563 million. It’s a policy that shows that the advantage that the company has to bring forward resources so that we can reduce our provisions contiguous and also put resources in the economy and most of us we have industries on the other side that can benefit from this agreement, and take on these actions to get the society. We also had here in the beginning, in January 5, the beginning of the year, the 185 EGM, where we made the payment, the incorporation of the minority stocks for our control the companies and they now become 100% belonging to Eletrobrás.

And finally here the very important moment within a very, very volatile market, especially in our vision of valuing the company is very diverse, which we find it today, we started buying back shares. So we had here the authorization to the acquisition of 10% of total shares in the market over 202 million ON shares and over 27 million PN shares in a timeline of 18 months because it creates advantage because this brings this clarity that this company is creating, is adding. So it’s a very important perspective that will be reinforced along as we share with you how shares are moving forward. And going on to the next slide when we talk about our transformation process that started, in our start here in September. And we have here the first, the guideline, strategic guideline for the company to have long term view creating value to maximize the generation of value for all the stakeholders in the company, and their shareholders, collaborators, consumers and contribute to this.

So that we have an improvement in our business environment in Brazil. And also in relative terms to the environmental process. It’s a process that supports on the transformation of resilience of business resilience. Here we have to lead this process of offers of quality service to clients and offer health and safety and development for our collaborators, our employees, and also sustainable growth. This capitalization will create a perspective in economic and financial so that the company has virtuous growth, focused on the themes related to renewable energy, to the transmission of electric energy, to the commercialization of new geographies, and also something very important for the company to be able to have a rigorous process of growth. Of course, also taking care of a being excellence in efficiency, which is a new process as is the face of the company and also great team, great focus on governance and Board of Directors very focused on this vision and strategy.

And also a transformation that is very relevant, also seeking of innovation and technology. We have a real conditions that we’re going to show later on that we can develop even more in the solutions that assures our competition in the market and in the process in having more open — more productive operational process and more reality in this technologies. And this brings this vision, this Green Major, looking this global leadership in renewable solutions of infrastructures and low emissions. So this page summarizes in some way the track record that we want to follow in Eletrobrás and responses directly to the transformation in creating value and add value to all the — whoever or everyone we have a relationship with. Here we have this evidence in which just in five months in my first participation here together with my colleagues in reporting the November result, we have brought the slide that we already showed how the company has moved and has been driven, and what we seek the leadership in terms of renewable energy.

We were a second player in this globally and with the least level of intensity in emissions. So we are second place in each one of these aspects. But we are moving very quickly. In this quarter we saw growth, the buying — with the purchase of Santo Antônio Energia and at the conclusion of the third machine. And we are also considering here the operation of our assets together with Santo Antônio Energia, and also we had last year in a better situation with this view of a lot of rain, and we had a lot of reduction the intensity of a transmission. So we are here confirming that the company continues growing towards the leadership of a capacity of installed capacity. Looking at the leader, the first place, we had a strong movement here of over 1,000 megawatts and we have another 1,000 megawatts in the second quarter.

Photo by Campaign Creators on Unsplash

We also had a reduction, a relevant reduction of over 40% in our emissions reaching to 52 tons of carbon per megawatt generated. So this track record is very confirmed in these two quarters that we had the opportunity to talk with you. So this is what the company is now seeking and pursuing, and our leadership in humanity needs companies that with renewable energy, which focuses on ESG standards, so where we are involved. So all of this in a way it states what this slide says here, this theme of transformation. So privatized companies since September, we started this transformation off. I like to say to thank you to Camila who leads this effort, has brought this transformation process. And we bring you that we had a collaboration work of conception, together with initiatives, with 40 initiatives which we sum 700 makers of important deliveries — deliverables and over 40 initiatives, 70 of them have deliverables, of impact on the short term.

I will talk about some of them like for example conversion the companies, which brings advantages in terms of governance, in terms of agility of this decision process. Obviously of simplifying, but also brings the impacts in the short term. 23 of them are initiatives that provide a plan. So we had a plan. The strategy of commercialization from last year to this year we are going to complement this work. But here the revision, the strategic revision is one of them. And it’s very important to tell that in this moment seven initiatives have been concluded up to February and 13 will be concluded up to March, up to the end of March. So we are here two weeks from having half of all the initiatives concluded. And as I mentioned 17 with important impacts.

And even in this quarter, we’ll have 23 of 40 will be concluded in this quarter. And due to this concluded process, especially those 23 plans, 23 strategies that we have established, we have initiatives that we will be — there will be details so that we can have — also share with you in what way the value will be created. I just want to give an example in the following slide about this journey that we are leaving. It starts here, as I mentioned, looking at the — up to December we had the conclusion of the commercialization strategy, short term approved and implemented by the Board of Directors. We’re looking at this way to organize and in a systematic way, methodical way control all our companies from the holding and strategy that we share weekly mandates that are — that will be originated any sales, in conditions of products, in each one of the subsidiaries, remembering that in the month of December, that’s when we concluded the voluntary dismissal plan.

It was a structure with over 2,500 people. We effectively we also — we started the first group up to the first group of people up to the end of 2022. And then we started also a new structure at the top of the company. We started also the first, the first wave of negotiations of loans, already with an effective — with initial effect of reducing of R$1.3 billion in our provisions, or 26 5% in just a quarter. The bringing this advantages I will detail a little bit more up ahead, also with a Committee and the Board of Directors so that we have the serenity in the process and conclusion in this process. We also had here, due to this work the actualization of one asset of the company that maybe it’s not so visible, that is the — that is the fiscal loss.

We have a lot of credits there and in this quarter due to this process, we could be able to use over R$700 million. So it’s an intense work that continues to happen here in this journey. So when we see the first quarter of this year, that we are leaving, as I mentioned, due to that conversion of those controlled companies, subsidiaries company, integrated subsidiary companies that have already been concluded, we had already the main gains in the supplies over a R$200 million, R$120 million in CapEx and 90% of efficiency, with a baseline of R$1.4 billion, and here a reduction of R$80 million within optimization of our packs, 38% of efficiency versus a baseline of R$230 million. So work that is really important. Here we even imagine that — and I’m have no doubt that here too, that we imagined we have here the space of gain of efficiency.

We are with consultancy, we are here with a three waves of — the first wave here with great results already. And here together with the Board of Directors in the final stage of concluding our financial, our strategic plan, and our fiscal plan, a brand new one. So that is beginning here in the month of March. And I hope by the end — in this month of March that there’s no structure or additional structure that will fall, that will show, can be appointed and so that I hope that this happens and hope to release this up to the end of this month. And one of the most important things for us is the incorporation of — in the culture of the company of the meritocracy of all the executives of the company are — they have been assessed and we started the recommendation of this structure, appointing and based on the consideration of the results of this assessment.

So this will happen in this month, and of course all of these assessments will be made available in N-1, so that they can in a priority way, and having not — not having any options, internal labor who are going to go to the market. And we’ll have this systematic approach. And then we’ll have the second phase in teams of dismissals within this same period of March, over 500 people by the end of this month. And then we’ll have a view here of the second quarter starting in this April, with a new organizational structure and governance of the whole end subsidiaries implemented. So our work will happen in the second quarter and we’ll have the solution, now the defined solution of turnover in easy phase. We are now in a process of acquisition together with other assets that could that can add value to the company.

And now renegotiating that. This has been the objective of the financial directors and lawful business director. So along this trimester we will have the conclusion of over — of 85% of these dismissal, voluntary dismissal plans, over 2,100 people and parallel to this, also seen here, 832 replacements are based on those O&M, like based on new hiring in all Brazil. And again, in this trimester we will have an even bigger evidence into conclusion, this first wave of — in terms of actions and supplies in our procurement. And we hope to have a reduction of CapEx of R$200 million, 6% of efficiency with a baseline of R$3.6 billion. And also an expected reduction of OpEx of over R$160 million. So around 23%, with a baseline of R$0.7 billion, where we are included.

So this is an important activity that we really have a lot of work, but we have a great clear perspective to share with you. And in the second semester we have continued this action that we started with no judicial agreements, legal agreements with — here we’re looking at a target, — we’re looking — we’re working hard internally. We have a great potential that is not focused exclusively on compulsory loans. We’re looking here, great focus on the committee. We started working on other alternatives, labor alternatives, save tax, so that we can advance this legal agreements. But we have a strategy — we have a long term strategy for commercialization, looking at the leadership of the market starting in 2024. Now starting to Group B and then — and how the company positions in terms of each one of these alternatives — these temporary alternatives.

What is the best strategy so that we can capture and attract clients to the base? So the planned optimization of SPE, this is — we made a consultancy. We still have 74 SPEs, and we’re looking at reduction to ambition to the end of year to have 31 of them. So it means that 27 them will be objective of sales, seven will be ceased. And then with that we’ll have five acquisitions of incorporations or foreign corporations. So these purchases, these acquisitions, these act, like they’re called crossing will be new energy and also in the case of SAESA as well that we will be in a due moment, generating benefits and tax benefits that will — that are known to all of you. So just for you to have an idea that these are four of the initiatives. Now if we — if I click here, I will detail some of them, just for us to have an idea what I’m talking about the dismissal plan, the new, the top structures, the conversion of subsidiaries and some are loan negotiation.

So let’s move on to the next slide. I will start already with this view of the dismissal — voluntary dismissal plan. We have here 2,500 people that I have signed up with a potential of, what we thought would be 2,500. But it’s very important to say that this effect the recognition of the contribution of our retiree, they have an average 62 years old and 33 years working. So this process has started for everybody through the year with a guarantee that in a moment in which the company decides to subsidize, they have a guaranteed, at any moment, a recognition in terms of salary bonus that has been offered to each one of them, about nine annual salaries. And also other benefits that complement in some way this retirement. Maybe that all the employees, they are covered by pension funds, private pension funds that are — for all of them have a plan, a health plan that following the retirement can be used, the same plan individually, and the resources that we are sharing is that for this end.

So on the one side, we’re making resources available in the economy, over R$1.2 billion to inject into the economy to make this recognition to all of them. It’s not an obligation of removing just 2,500 people. We’re looking at — we’re working through April to reach 1,100 of this total. But we guarantee, as I said, you know, it’s a recognition to all of them up to the moment that they are still working in the company. So it’s important to highlight we are working with these replacement of the employees. So we have a process here of looking for — looking for hiring OEMs all over Brazil so that we have any type continuing the process. As I mentioned, we have over 1,000 that have it here by the end of this month, 1,500. This process is undergoing.

So in this quarter over 500 people that ends in March. So then in this investment of R$1.2 billion we have an economy in our payroll of R$95 million. And so the payback is around 13 months. So again, something very relevant that the company didn’t never had this transformation or had not had this restoration a long time ever doing this recognizing the contribution of these employees, clearly compensating people for these contribution obviously, and making a new phase where we can now resume in a vigorous rate and digital capitalization of the company, process of growth and amortization. So the next slide also talks about another important activity that will be the process of leadership. As you know the company had in our own controlled companies over four of them, plus the whole holding, a high level of redundancy.

So also with the support of consultancy we have created an organizational structure that has a concentration on the holding, of course where we can develop strategically planning our actions that the company will develop if you have a structure to have a head start so that we can have a development and depth into our strategy. So we start here with the CO, Vice President of Operation and Organizational Security. And this is — will be responsible for the management of the four controlled companies Furnas, Chesf, Eletronorte, Eletrosul with the structure, organization structure, simplified related to what is their focus, focus on commercialization and administration, if I’m asked. So these four companies will have a modernized support and also basically especially from investors relation, commercialization, financial aspect, orchestrator so that we can have the best efficiency.

We’re creating here a Vice President of Engineering of Expansion Engineer so that we can use the better CapEx and develop more advanced, this great investment. So commercialization, the commercial activity, which is core to the company will answer to over half of our activities, and have already been created with the President with that evolved and strategy and business development where we’re looking at this rationalization of SBS, the sales of the subsidiaries and the relation, our first President of Regulation and Corporate link, our Vice President of Financial, Vice President, Investor Relation, Elvira, our Vice President of Governance and Risk and Compliance, which is already taken by Camila. So we’re looking at Vice President of Supplier Service focused on this activity, Andy Everest that I have mentioned already in the rationalization of our operational service through the compensation of the union of the joint of our no shared service.

The Vice President of People, Management and Culture, to establish a management model based on meritocracy and collaboration. And as we have a culture, that is easy access to people, motivational to people, that we can attract people in the market so that in the construction that is being done here in Eletrobrás. Vice President, Legal Vice President because we are having over R$35 billion in liabilities and we have demonstrated already in this quarter that we can — what we can do to make this liability an asset for the company, and the counterparts and also Vice President of Innovation, Research and Development and IT, what is the most modern, what is the most — what is the best way that a company can grow in a most efficient way making the job easier, people’s job easier.

Employees are stakeholders of the company, shareholders, clients and so on. And I also have the support of two departments, the Department of Communication that we can do — the activity of communication is always an activity that is really, I will say, it is last due to the lack of resources that the company has, it is less — is less realized and seen by the market. And here we have an activity that is really important of communication in enterprise. After all, besides of all that it can do in the teams where its involved, in its main activity, we believe that here we will have an activity that is — that can look for clients and for B2B from a medium to long term capacity, to look at the clients in the consumer environment, consumer energy consumers and environmental, the activity or communication, to share the development of our — with our stakeholders to attract new clients, to be an activity that is really important.

And all of this supported with a view of sustainability in our ESG agenda that is different, that makes us different from companies in this sector. So have an ambition to be really a reference in this area. And some steps that are already being taken, and we’re going to put this in the answer. It’s important say that this structure has been formulated in a way that is really consciousness with a lot of questionnaires by the — all the director, so that we can go ahead in these values that are being here highlighted, but also keeping a brand, a company, our efficiency continually, especially our reliability in terms of our systems, so that we can again, make this modernization of the company, adding value and keeping our traditions. So it’s worth highlighting that the four companies in the group they have a regional presence, relevant regional presence continue to exist.

There’s always a question about that, but these companies have regional presence. They have characteristics, especially in terms of taxis and state incentives, regional incentive. They have all the resources and they are located in these companies. So in fact we are recognizing the importance of them and establishing a governance model that, a management tomorrow that will be a greater synergy among them. So now going on to the third example that I mentioned, which is the loans, the compulsory loans. We had an evolution. So we started from a stock of R$25.8 billion. This is stock that is updated by the Selic rate, has over R$204 million. We have a reduction, operational provision of R$41 million. And we had payments of liability, legal payments of R$482 million.

It’s worth highlighting — it’s worth saying we have here the first the first package of payments of legal agreements R$770 million. And so it’s important to highlight that this doesn’t sum R$1.3 billion. These agreements, they are done. Some of them can be paid in the quarter, and some of them are paid in the following quarter. But the registration of these agreements and the benefit of this agreement that is done in this, even though, when it’s, the agreement is had, it’s worth saying that we had this movement. Some of them have already been paid R$770 million, and all of these agreements have already been registered in — so it’s highlighting that our base, R$26 billion, R$1.3 billion have already been reduced in this last quarter. And this is just approved.

We also have around R$770 million, that’s called off balance of those possible provisions and remote ones, that is also object of this agreement. So almost R$2 billion that we had to judge here, and they have been eliminated due to this agreement. So we’re going to continue looking at this important gain that will allow us to choose our losses in the end. This will bring — we had a smaller exposition, a monetary exposition due to the Selic rate, and these agreements are done to eliminate totally the demands, not just that are proper, but those that are in remote now, the counterparts something that we are happy to mention. We are seeing here this position of making these agreements that is favorable to both parties. And now following here the second page, now we’re looking here the conversion of these subsidiaries, so bringing more efficient Eletrobrás.

So we make these companies to have no assemblies, to release some teams and meetings with the Board of Directors and with . So these companies, they had basically had an independent level which will also make a difference sharing the synergy and so on. So the operation was approved January 5. The shareholders had the option of withdrawing or incorporating shares. So we can see here in the right block, where we have R$286 million in investments in, which means over 5,172,000 ON shares by the holding. So the investment to these minority stakes were done — were in order 200 million, we had hear in our P&L that 202,000 over 4,361 shares, on the ONs R$226 million, 3,451,000 shares to our treasury. So this process makes Eletrobrás 100% owner of these subsidiaries, and this has generated 31 new shareholders that in exchange with one of these shares for Eletrobrás shares increasing our free flow and the number of shareholders that are investing in the company.

So this is a structure that allows our confidence and more effective account, is better coordination among the company’s agility and in the decisive process of now having 100%, and also making it possible the new structure that will simplify and will make this decision processes faster and more agile. So now moving on to one more slide. I just like to highlight and conclude here in the space of talking about transformation. So we are here with 40 initiatives ongoing that we will conclude the first one in this month of March. We’ll have here in over 20 other going. So over 30 by the end semester. We have here a lot of ambition to 23 of them that establish a strategic plan. So that we can deploy with plans that can guarantee new shares and impacts and results.

We have here new investment, so that we can get this impact and we also release this strategic plan that is now concluded in this month, up to the end of this month. So we can release this new strategic plan. So we have talked a lot about that, we have shared a lot of guidelines, but still we’ll still need to integrate this document that will be the base of our strategy publicly. So following only talking about the operational challenges and operational performance of the company speaking very briefly about generation last year, so the company has 23% of the generation, installed generation capacity in Brazil, and as I said our you know clean energy sources. So we have — so by privatization or other segregation of our assets of nuclear, Brazil has by Itaipu, over 41,500 and now reaching here 42,500 in this quarter, in these two, Santo Antônio and also Curuá-Una in the second.

And this quarter we also had the operation related to our — the breakdown of the assets of this year in Eletrobrás and over 29% of our electricity generated in Brazil was done by Eletrobrás installed capacity of hydroelectric have done even better due to the hydraulic . We have 80.5% of gigawatts average now about 20% of Brazil that of physical guarantees. So here we have the performance of our sales. Just to make clear to the market that our operation here as you can see we are 16, 17,000 along the year and we have 17, now to 18.5. Basically we have just two types of assets. Assets that quota and assets that were renewed, as Tucuruí and in the condition of independent production. And also what we see 2023 is the first movement of decoding, which is 1,300 which 5.7 and moving forward.

And this — all of this that we want to bring to you is this, how can you compose and know the draft, the structure of Eletrobrás, its own resources of the installed capacity that is highlighted there on the left. And also by energy because we have here a set of assets that in general where we buy a part of the energy directly from, and this composes the resources of the company, so that it can make sales of energy. So it’s composed of own resources and also buying energy. I’m mentioning some examples where we have this type of thing. The sales of the company is also here highlighted following this. And it sells, as you can see, a less value, ’26, ’24, ’25, because it hasn’t sold the whole energy. And I just remembered that these sales together sum with the country bilateral contracts with ACL and FAE and these are go to the parts of this data, removing from the state.

And here we have the composition of ACL and ACR and the average values of sales, EE and CR and ACR and also average of purchase that mentioned. Looking at the average amount of watts mentioned here in this line. So this process generates a balance here of over capacity that we are not able to sell. And also make a relationship directly to the relevant parts, that our plants are hydroelectric, and know enough to manage these. So we’re looking at the — we are still in the month of March and only 12% of the volume is not sold, considering the hedge that we’re going to use for 2024, 34% and is way forward. Now we’re making — we’re doing this together with these clients, and who are mentioned below 48% of our commercializers, 43% are free consumers and 8.7 to generators.

So due to this energy balance, here we’re having the following page detail of our GSF. As you can see, was better last year from the year before. Clearly 2021 was very dry. And we reached the year 85%. And due to this elevated volume of water we had in our better period, but what weighs all of this scenario, you can see in the left side on the bottom, the variation of our revenues, revenues of generation in the fourth semester — in the semesters, in the years and in the last, just going to look at the right side, our overall revenue has gone up to R$24.2 billion. And it has increased to 6.8%. As you can see into the composition we have reduced our liquidity in ACR and therefore we had an important growth in the sales of 16% in the market sales, ACL and also the decrease of price of — to prices up to R$190 and you’re basically looking at yellow, we have there the regulator contracts for the company, R$200 and going up to $$288, 22% increase, and also the Cotas which are just a by inflation, growth of 11% from R$4.22 billion to R$4.7 billion.

So this year, confirmed the strategy of the company and I’m very happy to just say that has already produced effects. So we have here 12% of our capacity to be sold this year, 2022. Here we also in the next slide we have here just the important picture relative to transformation, the company that very later due to this low financial capacity. So it was in the transmission over R$1 billion, less than R$1 billion and now in 2022 we had this increase, both we had already growth of 95%, double in two years. 50% related to 2021 which has already been a good year. And also highlighting that we have 31.1% of our Brazilian system transmission, 280 stations, substations and 74 kilometers of transmission line. These 42 ventures of great sizes and though we include more transmission lines and more MVAs with our RAV of an increase of R$150 million.

We also have done a lot of work here with SBEs of 353 kilometres related to the previous year. So this year that already is very positive for the transmission that we will have auctions. Some of them already mentioned over 15 beyond that will have participation of Eletrobrás. So the next theme just to show that where this advance is producing results and may have — as you know in those variable parcel. And this starts to be charged money when it was distinct. And this is the result or global result of Eletrobrás, great work that has been done, led by Matthew and we have been able to reduce a greater reduction in our best level, 1.5, 56%. It’s a drop of 26% related to the year before, and a reduction of R$65 million. This is a positive result for the group, of the best quality of our assets.

So again, with this I end my highlights. I will move on to Limp, where we have regulatory highlights. I’d like to thank everyone who participate, my team here, Jatobá in generation commercialization, and Marcio in the transmission who has helped share this data and achieve with your team this great results. So Limp, you can move on.

Rodrigo Limp Nascimento : Thank you, Wilson. So it’s a great pleasure to be here talking to you, having to show you very briefly some themes that are regulatory-related to the last quarter and also the discussion here in Eletrobrás starting with the RBSE, which is some of the themes that is not only related to the last quarter, but has been discussed for a long time. And here I will bring some updated status. Since June last year we had some manifestation from the technical team of ANEEL and also from the from the Attorney’s office from 2022, with SGT also had — we have a little improvement in the memorandum from the same technical team. And then we had the legal impact aspect of the team and with a discussion with the Board of Directors, we decided to decided, from the Director which is partially agreed by all the members.

And then determined the new simulations and calculations that had been sent to the transmitters from August. And in this the official document, the technical area is executed. The command of the company even though it did not do any evaluation of merit. So since August, we have not had the ANEEL official position from the agency. We are in a process with the two directors Eletrobrás, together with other transmitters they have participated in the discussions directly also due to the — in our association with transmitters. And also we have talked to all the directors to make a meeting which is set for now the month of March. And they will be keep on defending our point of views since the beginning that legal security, regulatory stability based on ANEEL’s decision.

Another team that dealt with the magnitude that is less but also it’s something new, since the contract, transmission contracts that we signed due to the 579, we had recently in approval from ANEEL of incorporation of assets that were utilized for importing/exporting energy to Venezuela and Uruguay in this concession contracts of Eletrobrás and CGT Eletrosul and these were being incorporated on a base. We had remuneration when the export and export was done, export to Venezuela since 2018. So these assets were not to be remunerated. So now we start having the agreement approved by ANEEL. This brings a greater increase in the revenue of these assets. Move on to the next slide. Two themes related to generation commercialization. One of them is the minimum PLD which is — has been discussed annually and now defines the regulation agency.

The least and the maximum PLD, but also based on our. So in this discussion that was performed by ANEEL in the last end of the year. There were some discussions on the criteria, the criteria adopted by ANEEL, which was a criteria that has already been adopted by them by many years, which is the greatest value between ANEEL and Itaipu, so R$69 was established based on January 1, 2023. Some commercializers was granted to injunction and some of them were not defined or defined. And then some of them were considered a process you reached, they have not been affiliated to Itaipu and more. These decisions have not had effect. They have not the legal possibility to implement the decision because it was not defined what would be the value to be considered, that should be considered for our minimum PLD.

So this was not implemented. And also there’s an occasional discussion, where this would only happen to the whole market or not. And what we’re clear about this change of rule of PLD along the year without a due process of discussion, regulatory process will also affect the financial condition of the sector. We also had the last year for the 709 approval, which you know talks about the fiscal guarantee or revision of the — as we had plans from new contracts that they started with a process of physical guarantees. So they had a reduction of physical guarantee over 7% of physical guarantees. So these plans did not go through the process of revision last year, since five years and the other plans with — or they have with — which were 36 — 1.2 megawatt average with a reduction of 2.2%.

So that is of — and then also related to the plants of Eletrobrás, it already had been — had already gone through a process of physical guarantee. The other plans not under this — marked under this process, we had a reduction of 35 megawatts average which are negative 0.23% inside Eletrobrás portfolio. So this team they saw has a judicial process included. So generators, they started — they filed a lawsuit at the end of the year defending the alteration of the critical period adopted by the Ministry by the defined value of a future guarantee and the suspension of this Law 709. And this request had an urgency request, and it was denied, yesterday by the judge. So the discussion now has ended. And possibly there will be some appeals, but in the first moment, the judge has denied that this urgency requested by the authors.

So this law 709 continues to be in effect and also as a legal security to the sector. And also another discussion has gone through to know audience discussion and the carrying the physical guarantee of the process. So moving on to the next slide, this theme is in fact a relatively new, where there’s a direct relationship with our recognition by the service provider, by the hydroelectric. So with this part of the energy there could be — if it were to do so, it cannot be exported. That was developed by the law is 49 recognized by the Ministry of Energy and Mines. So it was possible the exportation of this energy but it was a modality that was a swap where you generate a credit or debt in the neighboring countries and then compensate it. Was not one modality that is commercial, like the one that is.

That is one that had open audience participation and also there was another law that generates to energy coming from hydroelectric plants. So we have identified that, but the exportation of this of thermal electric energy and in blue the energy of turbo energy and this can offer values to buy these energies. So sources here which is responsible to define, to develop this process the beginning of the year was R$75, what was the POD plus 10% CCEE identifies that the competition among the segments of thermal electric, hydroelectric and the potential of acquisition from the importer parts to improve the process of defining the legal, the least. It goes on to — in our graph in this black line and they increase over these values in exporting level.

We have R$241 and we have observed a great increases in terms of production, especially since the end of February. And this has generated the — generate exportation so much in the enterprises but the amount of export it is automatically we had a greater energy allocated to MRE, which reduces the GSF. And this also benefits the generators and the consumers of energy, especially those that have the hydrologic risk and no impact. So this benefits the consumers and also generators looking at the total amount. And then the increase the minimum price also adds benefits to the consumer. And that part of energy data goes besides the GSF also the amount of energy that is also caught and also as the generators, increase of revenue there for the generators.

And this generates a greater proportion of energy by the Union States and cities by the CFURH which is strengthen the roles of the hydroelectric. So I think this is a new process that no doubt adds significantly to the relevant results to the hydroelectric plants. So moving on to the next slide that we will talk about Santo Antônio Energia, where we had a moment in the proficient would be the better detail by our Director of EDA . And here today, we have, considering all the credits that we have, together with Amazona with R$7.7 million, we have a provision over R$7 million, which is over 90% of the debt. So when we look at the whole thing, these are a number of provision credited for them to clarify that these amount has — R$344 million refers only to the IC, which is the assets that happens to the privatization of the distributor.

So it’s a creditor has guaranteed, has been paid in a way that without any default, and also had a little value of GSF which there is no default for Eletrobrás and Eletronorte. In the same way, we had provision values, and this value that is as shown as non-provisional value is in the flow of the Eletronorte and Amazonas. So here I would like to highlight the looking at in a prospective way our sales with Amazonas what the expenses where they has with the independent and especially those who depend on the default that they had with Eletronorte. We have already in terms of R$270 million made by the distributor, we have received directly from CCE, which is a part of the CCC due to the decision of ANEEL from 2020. And we have here a new action now to receive the rest of this amount from CCE, which would reduce our exposition to the risk of default coming from Amazonas.

We had a statement from ANEEL last year suspending some of these actions and in the new Director view, if they approve the process as by the technical error our current exposition with Amazonas will be restricted to values of average ACR. So we are looking at R$20 million. So it’s also important to highlight since May 2022, Amazonas is 100% insolvent with — due to the law that was made when they had a monthly payment of CCE due to the exposition or involuntary position and also some actions that we have done with the distributors. So in that type of scenario of insolvency, it’s much better than those that those seen in 2000 and beginning of 2002 where we had a default in the between January and April. So I think this is the last slide of the highlights regulatory.

So very quickly, the main themes. Our hydroelectric, the last POD the Amazonas situation, and things that have been less discussed, but we are following up. So I end up my part here. So then we can go on into financial performance. I’d also like to thank you and say — just one slide to give the floor to Elvira.

Elvira Baracuhy Presta : And also so we are reporting this result that is due to a series of events, many of them non-reoccurring. So for the good understanding of the performance of this quarter, so changing this slide, I would like to report here, our net income of R$90 million, but we have a variation that is great reporting one for ’20. And if we eliminate some factors that are known as non-reoccurring, we would be talking about an EBITDA of R$4 billion, but this will be the last line would be very different. And here we’ll be talking about R$2.5 billion in profit. But we’re talking about R$500 million loss especially because these things happen, especially because the carrying having these provisions is a PCLD of Amazonas disadvantage that Limp has already mentioned of R$2.5 million that eliminates completely our the risks related to this gain.

So it’s a pity, but we’re going to keep on going fighting for this and negotiating. We are working on contributing with ANEEL, interacting with ANEEL, so that we can have a good solution for Amazonas. But we have done all the things necessary in the provision. So R$2.5 million, so we generate a great value, which is the — so the PDP, so the dismissal of voluntary dismissal plan. So we have here — we are we have provisional R$1.2 billion. We also have here we have done this transition with Amazon Energia. And in the first moment we had the provision of Teles Pires of R$169 million. We are sure that the conclusion of this operation will have the adjustment that will happen in the operation of sales that should be positive. But in this moment with the Teles Pires, which so made R$469 meters.

So we’re talking about $$2 billion. It’s more than the debt that we will report. But two effects are there, there’s two edition. The first one is the one that is reoccurring, that happens from the process, the process of privatization, the amortization of new assets, the new generators that will be renewed. And the obligations of a CDE that would happen long period of 30 years. So here in the trimester partly, we have been looking at R$1.5 billion. What is this as a negative effect because in the last year, we didn’t have this positive, side that corresponds to the sales of energy of all volumes? So it started from — for the ongoing year. So here we have this for 2022, we had only the payments without the kind of part of income or revenue.

So we don’t. So that has to be explained up ahead, but the way in which we have reported the transmission revenue, we have made a great effort, as I mentioned, when we look at our regulatory, we’ve seen a growth of our revenue. Even though the way to report this transmission revenue as a remuneration on an ongoing assets considering that we have a variation, important variation of PCA, 3.4% in 2021 to 0.7. We have here a cut of R$1.4 billion. So adding these other effects, we’re talking about R$4.2 billion plus R$2.6 billion. We’re talking about R$7 billion. We had here a positive highlight. So we have, as we’ve already mentioned the agreements, the compulsory loan, and off the consolidation of revenue of SAESA even though it had relevant EBITDA, that we’re going to look on its efficiency.

But it’s important that we’re talking about a quarter, they had this data as a conclusion of a petition process, without considering the revenues. So especially related to all the management decisions, we have made especially in the voluntary dismissal plan, which I believe are important. But it affects our recurring EBITDA. So we’re talking about R$4.4 billion without these effects. And now the results in the last line are R$2.5 in the quarter. So this is evident that the way that the company will take in the following quarters. So Oliveira it’s on you now.

Pedro de Oliveira Jatobá: So thank you. Good afternoon. Let’s move on to the next slide. So here, I will detail some of the main effect. Wilson has already highlighted some events that are very relevant. So starting with, as you know, this model, the chart here on the left shows our results, the fourth quarter this year, compared to the third quarter last year. And here in the column on the right, we talk about the adjustments of what we consider events not recurring. And so here we can see mentioned here in revenue, the first line, our gross revenue that had this fall of 9%. It has as a main reason of this reduction, this effect on IFRS in the transformation that has impacted R$1.4 billion in reduction. So we’re going to show ahead, although from a regulatory point of view, the impact may be different.

So it’s a question of context. So next generation, so can highlight will have a greater increase in revenue for the consolidation of Santo Antônio Energia R$1.2 billion. And also we had less import of Uruguay of — because Uruguay also has the cost of buying energy. So in the revenue part these are the main highlights. In the PMSO, which I will show later a graph that is more detailed, it is important in the PMSO. That we had an impact from the impact of PDV, from the dismissal voluntary plan, mainly by this impact. And we also had our collective agreement last year that was agreed. And also had here in the surface area some expenses from the transformation plan that has been detailed by Wilson. So in this first moment, we’ll see increases in the expenses of consultancies.

But we will be compensated by the gains that we are already showing. So in cost and operational costs we have a highlight here related to the less importing from Uruguay. So we don’t have the revenue. We also don’t buy the energy. So this didn’t happen due to the less necessity, in the activity of 2002 where we had the full reservoir. So a different situation what had happened 2021 where the country had to import energy. So here we have the consolidation. So not an issue yet, we’ll bring revenues and also bring the acquisition of energy. So no new points in this parts of cost. And in the depreciation, and amortization, Wilson has already mentioned, we had amortization of new contract with the privatization of some activation of R$70 billion, R$75 billion for the next 30 years.

So this is already being — having the amortization. In Eletronorte, we have a positive effect related to goodwill. In 2021, we had the GSF law that allowed, we had register as a cost reduction in that time, the contract at Tucurui was going to be — is going to expire for around three years. So 2026, as there was a renovation of this contract, it allows prolong the period of this amortization. So this is the impact that is also positive. And also the financial result, the most important point to highlight the consolidation of Santo Antônio Energia. We also bring in our financial expenses of R$420 million. We also have an increase of SELIC, the rate that impacts the expenses also mentioned by Wilson in the presentation, like the impact of the capitalization that in this moment of 2022 was still not followed up by the revenue that will come in 2023 with exports and also this correction of duties.

And also a special project added R$900 million. And from a positive side we had revenue of financial application with a positive currency exchange had a main impact. So moving on to the next slide, we’re going to see that in the detail of the composition of the gross income. So year after year, so as we can see in the previous slide, the great impact that shows here in red are R$400 are the results of the effect of less information in PCA was 0.7%, in the same period was 3.4%. So this reflects, as I mentioned the next slide please. So we here try to bring in a more didactic way these effects. So we have the table on the superior parts of this slide, talks about the fourth quarter 2021. And then the other ones, the fourth quarter, 2022. This is what we call regulatories, ANEEL alarm and also we have to follow a TRS, we have to follow the laws.

So there’s no difference in the way of accounting this. So we had a R$5 billion and it’s equal in, the same industry concepts and below into that in the same way $$6 billion each side, helps in the transmission due to new accounting rules that are different from the regulatory rules. So as you can see last year, the regulatory revenue was R$3 billion and then the R$3.9 billion which is highlighted in green, which in the increase is R$860 million in the regulatory revenue as Wilson mentioned. But in the grey area, the accounting is in the contractual assets, which has increased. So where we had 22 in the first line, it was 59. It has gone up to 61. So we increased our contractual assets, which is reasonable investment. We have gone up R$1.2 billion, but as the IRFS says that we need to adjust this by the indexes of PCA that have gone down to 0.7. So this revenue also falls in the view of IFRS.

So this explains this variation in our revenue. So the following slide we detail, as we do every quarter how the negotiations in several segments have happened in the regulated industry and also what is the spot contract and also short term one. And so it shows here the revenue, the average cost. The first dark blue, we have in our regulated contract, we have an expressed advantage is centered on Santo Antônio Energia. So we highlight that R$100 in the increase of Santo Antônio Energia, which has increased the average price seen in first line to R$282 million. This has increased the revenue. So the quota as we have already highlighted we only start quota in 2022. In 2022 we had seven gigawatts. So the price is a contractual adjustment, which has been 15% increase in revenue.

In the bilateral contract we had positive impact, the volume of Santo Antônio Energia, as we can see there was an increase of almost 20% increase in volume, and an average price of — it has a small fall, so 186 which is reflect the prices, following due to the PLD that in the right side has a highlight, the PLD in the first quarter was R$135. And now in this quarter we had R$55. And also CCE the most important to highlight is that the greatest reduction was not properly by what will be the sale, the spot sale, but by the reduction of importing energy to Uruguay due to the hydroelectric situations in this moment. This has done to — due to the smaller PLD. So now we move on to the next slide, talking about revenues. Here we highlight that PMSO.

So the first graph as we can see the superior was IFRS, and this is recurring. So as you can see in the superior table, so we have an increase. But this has to do an event, has to do with that dismissal plan with this — which has accounted to R$1.2 billion. So when we look at the recurring and we can also have — we have explained we have some events that were extraordinary mainly, expenses with consultancies is because of this transition. And after the consolidation of Santo Antônio Energia, which we are — we start bringing the expenses from Santo Antônio Energia, in this quarter. I would like to highlight that only R$18 million but another trimester from Santo Antônio Energia R$900 million. But we had a positive impact, now we are carrying, which is the end of this arbitrary, and then you could be able to capitalize part of these revenues in the past that was due to the performance of the plant and he has done that the expenses of the quarter has been less than usual.

The most important to highlight is that so the positive impact on the P because the reoccurring people we excluded, the business plan has gone up 4% even though we had a — we have an agreement of 12% in collective agreement. So it shows that we are being more efficient in the expenses related to people. Moving on to the next slide, we’re going to detail the main impacts on the provisions. So starting with the left side, this table shows what were the — what constituted this fourth quarter, in 2021 fourth quarter and 2022 in the previous, in 2021 we had done — had a provision of, as you can see in the last slide R$2.5 billion. They have reduced to 1.1 to varying rate. So it’s R$2 billion last. So that we have done a constitution of R$2 million, of Amazonas, they have as already commented, and which is highlighted in this green on the left side.

So even having R$2 billion in Amazonas, we still have a fall in the volume of provisions. So this explains in a great part by the compulsory, also highlighted by Wilson due to the negotiations there to be started with allowing us to reduce over R$500 million in the provision compared to the constitutional R$7 million the previous year. So this — and also we had important highlight that it’s here in yellow, the repairment provisions, even though we had the constitution of Teles Pires already explained by Wilson. This happened because — the statement of declaration is a trigger to make the provision of the operation that we are buying. But even though one of the asset is being bought, another one that is being sold, and the conclusion of this operation is what allows us to account the gain with the plant that is being sold.

So as these operations still depends on the authorization, the possession. And now we had to register the part that we have already, the information of the loss. So these are the $$468 million and this has reversions related to what is being provisioned in the previous quarters. So I think they were the main points that show a reduction of our level of provisions. So moving on to the next slide, we have the EBITDA graph, showing the variation among these, quarters. And we can see these columns in blue and the other, the adjusted basis. We move into events that are non-reoccurring, that basically are related to these compulsory provisions and NFE, PCBF, Amazon. And we seen that the revenue falls into the first — in the first column R$1,400 , and this fall in the red is due to transmission.

And last index of PCA. So in the expenses part, the positive effect is related to less import of — less importation and also in the provisions, we also have some reversions already of operations that have been recovered and less provision constituted as shown in the slide before. And for the next slide to conclude the view of the net profit, base there was a reduction of 27%. And we explained that due to the previous slide variation of EBITDA, either explained R$ 400 million they have R$100 million that is the most relevant to highlight below in the left side, is the expenses related to the capitalization. The expenses of this revitalization process. And then investments in Amazon. This is around $$900 million as we have already mentioned.

And the consolidation of Santo Antônio that brings financial expenses and also positive impacts on cash and also exchange rate. Another point I’d like to highlight is that in the income tax a positive effect of R$995 million and also the JCP that has been agreed with our controlled, brings tax growth. We had some agreements that have been celebrated, that already mentioned the payment being made. And most important the revision of the income tax rate from Tucurui because with the extension of this, now we have taken the expenses from Sudan based on this, as the contract from the plant of Tucurui before acquiring this we were not able to use the full benefit. So now it only translates into a tax benefit. So depreciation, amortization, we have already mentioned.

We have impact from Santo Antônio and also an impact on the R$75 billion that we have to achieve the capitalization. And this will be depreciated along the time. So moving on the slide of debt. So it’s a slide that we show every quarter. So on the left side, or the superior side, we see the net debt and EBITDA. And the yellow line represents the indicator of net debt and EBITDA there for 12 years. We have shown since the last third quarter that net debt has gone up due to the consolidation of Santo Antônio Energia, which brings R$20 billion in debt. So we’ll see the EBITDA a bit low along the month. So it’s also important to highlight if we had 100% of the debt of Santo Antônio Energia already consolidated we only have six months of EBIDTA in this consolidated because we only started this on the Santo Antônio consolidation in the third quarter.

And only in the following semester we will have this reflection of Santo Antônio and also we had a debt of R$59 billion with great solid cash condition, which brings net debt to R$35 billion. So this R$35 million, and it’s important to highlight that we were able to make — December we had capital, we have an acquire of — in commercial in an operation that went very well. And we had an obligation on the short term in this year, the dividends that we will pay of almost R$900 million, should be paid over the two months. And also we have the work of a legal, couple of sorry loans and the first instalment of CDE which last year, we put R$5 billion and now we had and now in April we will have this hold of R$570 million that will still be corrected and it will be R$590 that we will pay in April.

And the last slide, before we come back to the President, and then the last slide, which is a very important slide that highlights the evolution of our investments, the acceleration that we have already been showing after privatization. So the blue line reflects the CapEx 2022 and the green one the CapEx of the previous year. So the accumulated in the year we have been able to do 20% above, related to the value in the previous year over R$ 1 million more. And this acceleration is clearly seen in the second quarter where we start to show agility of the company operating as a private company. And then on the right we see — we highlight some investments in the generation we had. We had the wind park in Eletrosul in the State of R$230 million invested there.

In Chesf it’s important to highlight the plan that we are doing of modernizing the assets of these old plants. So bridging Paulo Afonso IV behind the transmission, we have already shown how much we have advanced in transmission that has increased 100% related to last year. It has doubled really in two years. We have almost R$ 2 billion investment improvements and that bring revenue. At SPES, the main highlight is the fund with Furnas. This support with 72% of the capital as we have. So I end my presentation of the financial detail and I come back to Wilson.

Wilson Ferreira Junior : Thank you Oliveira. I think it’s now show the last slide, which is exactly this one of the recognitions and the demonstration of our link to this ESG agenda especially with that setup of recognitions that we have in this quarter. The Transparency Trophy which is very well known, in the business environment that we have here. And we are here in the second consecutive year, and satisfaction to have recognition by Elvira, by our Financial Director, as the CFO of the Year 2022, in the 29th Edition of the Ibef, in Sao Paulo. We also had the Capitalization of the Year. We have New York and London in the end of this month, the follow-on of the Deal of the Year, which another important process for Brazil, globally speaking.

And for the third consecutive year we are in the first place by Merco in the ranking of Brazilian Energies in the electric sector as the best reputation Brazil. In the sustainability book from S&P Global, one of the most sustainable companies of the world, 82 out of 100. So the companies in the group Eletrobrás have been recognized again by the Bloomberg as seal of Gender Equality, very, very high, something very, very important. So being a key thing here in the agenda of portfolio of B3 . Also with increase of scores and participation is the greater liquidity in our — that we have been offering and the commitment that we had with biodiversity here. We have adhered to the Platform of Action by Nature, the Positive Impact by the CEBDs for the implementation of our guidelines on the Task Force of Nature related financial disclosures.

And in the United Nations we are the only company funded by the United Nations to participate in the opening, in the form of companies that human rights in Geneva, in Switzerland. So we know our presentation today even to give a better clarity to you here of this six months specifically in the last quarter that has been very challenging and very fulfilling. So I close here the presentation. We open here to questions for my colleagues. So we are at your disposal.

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Q&A Session

Operator: So now we will start the questions and answers. . Our first question is from Marcelo Sá, sell side from Itau. So you can open your microphone, so that you can ask your question. So go ahead, Marcelo.

Marcelo Sá : Hello everyone. Thank you for the call. I have two questions. The first one is to talk a little bit about the balance of energy. So you’ve sold a lot of volume of energy, and the average price has gone down as we expected. And we tried to make an accounting reconciliation to see we have some difficulty due to the contracting in this period. So I’d like to comment a little bit what will be this rate that you have closed some contracts? And the other question’s related to the use of fiscal credits. So if you plan to use Furnas to optimize the payment of taxes, as you have a fiscal credit, we have some companies that are not able to use, while Furnas pays a very high rate of taxes. So if you — when you’re planning to implement this plan? Thank you so much.

Wilson Ferreira Junior : Thank you, Marcelo. Just like to start with — by the last one. We’re doing a great work here in about optimization of fiscal incentives and have a lot of credits. But the volume of credits is so big that I would say that this transition is not just the first one that we will be evaluating. In the first moment we are certainly looking at keeping the four companies we have in this process, a lot of credit to be incorporated. And obviously as we spent three years in this transformation process where we participate two years, observe and evaluate, are there alternatives. So this first moment we have conditions and we have enough credit to be optimized by the company, in a way that this Furnas is not something that we would consider to start our transition.

There’s a lot to do before there. Related to the energy balance, I’ll ask Jatobá and the team that you can talk a bit about that. But looking at the last quarter of the third and the fourth quarter, the variation is not so relevant, because the numbers that we’re sharing with you, we have 15% of the volumes for 2023 not contracted before 2/12. So there is some for sale naturally, but not so big that it would change the perspective. So Jatobá if you can then complement please.

Pedro de Oliveira Jatobá: So perfectly President. We must — we are here living in a moment of reduction in the market prices. But this is a conjunction of over offer to the accumulation of projects in the portfolio, and also the favorable positions of technology. So what we are seeing, looking for effectively capturing bigger values. And also — and I don’t know long term, and that’s something that we could see a mix where we have regulatory and also new contracts that will come in. And then that will be a difference that you will see. And also as the President mentioned, we have a new policy of commercialization that integrates all the companies into one, is a policy of management of risk that is very sophisticated. That allows effectively this — in that criteria to say this is a criteria, taking in consideration the risk.

Marcelo Sá : Thank you. Thank you so much for participation. You can now give me an idea of prices of ’23, ’24, ’25 that you’re looking at, so that we have an idea, given that we have a lot of contracted energy.

Wilson Ferreira Junior : The price we evaluate within the market situation, especially in the hydroelectric system, where a great influence of reservoir is also related to demand. So we evaluate this and what we look at those niches in the market where the prices are more attractive. Remember that we have a strategy in a free market for 2024-2025 and certainly these layers are layers that where you have a capacity of basically to practice better prices than those constitute the consumers from the free market. Also allow complement Marcelo that we show you here the configuration of the PLD. So we operate here with a PLD and a base. So the only way for you to have to sell at a better price is for you to sell volumes of energy in a greater terms.

So recently, we in our water subsidiary or in our car company we participate in auctions in terms of four or five years where we are able to operate with prices R$130, R$140 per megawatt water — megawatts hour. So this is what Jatobá mentioned. The way you which you have — we have great volumes of contracted, by a greater term, so long term. So this type of solution is not over 100 days and this may be the main advantage of Eletrobrás. We are operating in a moment in which the price, the base price, the average price of energy is based and we are avoiding to make a sales movement of projects of short term projects that we would make available, that seek in some way, verbalize the volumes of energy at greater price, greater terms and greater deadlines, which will be greater price.

So just show a couple of minutes that in fact, the medium term, naturally the prices go to the marginal cost of expansion, which is above the value that is being practiced in the market in the short term now. And that is the reason why we extend this product in a contrast related to the short term.

Operator: Our next question is from Maria Carolina in Canada, in the sell side Credit Suisse. So her questions, she asked her question first. So we’ve seen a revolution of loans in this first semester. So she gives more details on how many the number of a process that has been settled, or in negotiation. These are negotiations are within the expectations. Can we await for similar volumes or negotiations for this period. Paula would like to mention, Paula is our queen of compulsory loans. So I’d like to highlight something of a concept here. Obviously, we have here a segmentation of this process. So we are here in this first moment in the segmentation, then look at the grid process, where we believe that other counterparts, which are companies and we can generate a benefit of this resource in a definition market, it has a restriction.

So but we should not part with our advantage, is the volume of capital that is finite. And we are renewing this allocation of resources that we’re going through. It has to generate an advantage for the company. So it’s a resource that the Board of Directors approves in terms of absolute value that we’re not going to say which one it is. That provides us this possibility to make negotiations that bring almost a minimal value of that. So that is this allocation of resources is profitable to the company. So we have a trade-off that we’re using here, looking at the what, we know that the financial market is also — is now needs resources and disruption to make an agreement with advantage of the company, when the interest rate is very high becomes a benefit for those who offer, like in our case, but then the company that can they make an agreement and recognizing that the cost of taking these resource in the market would be much bigger.

So we’re in the first moment that we’re looking at the top of the pyramid in the process that has the condition to make us this — to give us this offer. But if you’d like to complement Paula.

Paula Prado: So you mentioned well. Would just like to add Eletrobrás also wants to use the resources in its own process. So we have a judicial process, we have guarantees. We have — we also make an approval — we try to make — enjoy better agreements, since these agreements is very strategic, but we’re not going to mention the details. But along the year you will start to see behavior in the reduction of liabilities. So it’s a great allocation of resources, we can tell you, recognized by — and remembering that we take these liabilities. So it’s less than half of our provisions of compulsory loans. We evaluated by the SELIC rate. We have an effect of every quarter in the financial expenses that is high due to the high SELIC rate. But it needs to have an appropriate location to have these payments in accordingly.

Operator: Thank you. Thank you for the answer. The second question, Maria Carolina is the following. So the energy balance and new sales of 140 megawatts near the — I would like more detail on the term of these contracts and the level of prices. So in the past, we had 140 megawatts energy prices and that further contract and medium and long term. The short term, say 100 megawatts hours. Can you mention something about this?