Companhia Paranaense de Energia – COPEL (NYSE:ELP) Q4 2024 Earnings Call Transcript

Companhia Paranaense de Energia – COPEL (NYSE:ELP) Q4 2024 Earnings Call Transcript February 28, 2025

Operator: Good morning ladies and gentlemen, and welcome to Companhia Paranaense de Energia, Copel’s Video Conference to discuss the Earnings of the Fourth Quarter of 2024. This video conference is being recorded and will be available on the company’s website, ri.copel.com. The presentation is also available for download. Please be advised that all participants will only be watching the video conference during the presentation and then we will begin the Q&A session when further instructions will be provided. Before proceeding, I would like to note that the forward-looking statements are based on the beliefs and assumptions of Copel’s management and on information currently available to the company. These statements may involve risks and uncertainties as they relate to future events and therefore depend on circumstances that may or may not occur.

Investors, analysts and journalists should consider that events related to the macroeconomic environment, industry and other factors could lead results to differ materially from those expressed in such forward-looking statements. This video conference will be presented by Mr. Daniel Slaviero, CEO of Copel; Mr. Felipe Gutterres, CFO of Copel, as well as directors of the subsidiaries will be available for the Q&A. I would like to turn the floor to CEO — the CEO of Copel, who will start the presentation. Please, Daniel, you may proceed.

Daniel Slaviero: Good morning. I thank you all for attending our video conference and it is with great pleasure that we present another quarter with sound results. 2024 was the first full year in which Copel operated with its new legal nature, a corporation without a defined controller. Among the many deliveries we had during the year, I would like to highlight one of the most important ones, the formation of a new C level. At the beginning of January, the team received Fernando Mano, who took over the leadership of Copel Geracao e Transmissao. Mano this is your first earnings conference call with us. Welcome to Copel and I am confident that your experience and knowledge of the industry will be of great value for the company’s new moment.

Now, talking about the highlights of the quarter, I begin with our financial results. In the year-to-date, we had a fourth quarter with an adjusted EBITDA of BRL1.3 billion and net income of almost BRL600 million. In the year, we closed with adjusted EBITDA of BRL5.1 billion and net income of BRL2.8 billion, almost BRL3 billion. In this quarter, these robust results were partially offset by the performance of wind parks as a result of curtailment, ANEEL availability and the unavailability of some wind turbines at Brisa and Cutia. This is a temporary event that will be equated in the coming periods and we have been working quickly and assertively to correct this, this installment that is manageable. We remain focused on the excellence of the operation of our assets and the delivery of sustainable results.

With that said, the main highlight was Copel Distribuicao, which contributed significantly to the company’s results. With efficiency and EBITDA of almost 46% compared to the regulatory level. I’d like to point the robust dividends proposed for this year and this general meeting. In addition to the BRL1.3 billion already paid, we are proposing to our shareholders an additional BRL1.3 billion in additional dividends totaling BRL2.3 billion of dividends for the year of 2024. So, ladies and gentlemen, this means a payout of 86% and dividend yield of approximately 8.4%. This proposal, as I mentioned, will be taken to the general meeting of April and the first payment is expected for until June of this year. But what’s relevant here is that we have proven in practice what we’ve been saying to the market that Copel is a company that combines good dividends and is mindful to the good opportunities for capital allocation.

Our focus is to generate value to the company based on the activities as an integrated player in energy. Now I present a brief summary of the deliveries that happened since our last conference call in November. First, we guaranteed Copel’s 100th anniversary with a renewal for an additional 30 years of our three main power generation plants. Aligned with that was the payment of the grant bonus of BRL4.1 billion. And this event was very important, among other things, because it helped us reach a better leverage level. Felipe will give you more details of the financial results and indicators. Next, three operations that are essential for the execution of our strategic plan since the follow-on. The asset swap with Eletrobras, where we consolidated the HPP in Maua and Transmitter in Mata de Santa Genebra, sale of small assets of hydropower generation for BRL450 million and finally the exercise of the preemptive rights and the sale of Baixo Iguacu.

In the next slide I’ll briefly mention the rationale behind these movements, but I point that in addition to all of that, in November of last year we opened a share buyback program and we’ve already executed BRL120 million in this first phase. So starting with the asset swap with Eletrobras. In addition to executing 100% of Maua and Santa Genebra, as I mentioned, the rationale of this operation is to optimize our asset portfolio, simplifying our operating structure and guaranteeing high predictability of cash. On the other hand, Eletrobras will receive 100% of Colider and BRL365 million in cash at the closing of the deal. This operation brings immediate benefits to Copel because in addition to the gains in terms of synergy, we can offset approximately BRL170 million of tax losses accounted in Colider.

This transaction generated a lot of value to Copel. In Baixo Iguacu, in turn, the objective was to potentiate the company’s returns, making the most of an opportunity to recycle assets and minority stakes. As I mentioned, we exercised our pre-emptive rights and we saw in this opportunity a chance to sell our 30% stake, which were sold for BRL570 million to DK Holding Investments, also known as Energia Prod. The main message here is that we are an agile company, disciplined in capital allocation. I would like to congratulate our partners Felipe Gutterres, Fernando Mano, Diogo Mac Cord and Yuri Ledra for leading the teams to conclude these deals. This indicates how much our new management and our employees are aligned in the search for alternatives that bring always the best possible results for the company.

And to conclude, all of that is behind us because now we have for the coming months and the year 2025 a very positive year for the company. So first, we’ll conclude with excellence our investment program for Copel Distribuicao, aiming not only at the quality of services provided, but also the integration of investments made during the entire cycle for our next upcoming tariff review. Second, operating excellence, as we talked about in the beginning, but in all of our businesses we can extract as much value from our assets. Third, the bid of the capacity reserve. We are very focused also to make the most of this opportunity with the two assets that will be for that [indiscernible]. And finally, the consistency in the strategy of energy trading, where we’ve already seen some windows and the volatility is being tapped into by Rodolfo and the trading team.

And finally, we’ll be strict in executing and reaching our efficiency targets that we set forth for this year’s budget. Now I turn the floor to Felipe, who will detail the results of the fourth quarter.

Felipe Gutterres: Good morning. Thank you, Daniel. I’d like to once again begin by stressing an essential point of our thesis that was extremely important for our results. We are an integrated company with a diverse portfolio with long term concessions. Once again we had a challenging quarter at Copel GeT and Copel Com affected by the effect of the curtailment, wind and unavailability of wind assets, modulation and detachment of energy prices in submarkets. At times like this our business models reinforced their importance because we were able to reduce risks and ensure robust results even in an adverse scenario. This quarter we delivered adjusted EBITDA of BRL1.3 billion, BRL715 million coming from Copel Dis and BRL613 from GeT.

This result was 12% lower than the BRL1.4 billion of fourth quarter of 2023 due mainly to the smaller mix of sales at GeT, the deviation of generation of BRL93 million, 49% above the fourth quarter of 2023 caused by the wind volume below certification, curtailment of 13.1% in fourth quarter of 2024 compared to 8.3% in fourth quarter of 2023 and the unavailability of the generating park resulting from maintenance and installations as well as a higher volume of energy coming from MMGD of BRL180 million. And to conclude the additional litigation provisions of BRL63 million, especially due to civil lawsuits. On the other hand, our business in grid stood out with an increase of BRL23.6 in EBITDA at Copel Dis offsetting a lot of the results mentioned before.

In the next slides I’ll give you more color about the results of each business unit starting with distribution. Copel Distribuicao generated EBITDA of BRL715 million in fourth quarter of 2024, the highest resulting result — recurring results in the history of our distribution company, 23.6% higher than the same period of last year. This result was mainly driven by the growth of 2.5% in the billed grid market and the readjustment of 2.7% of TUSD in June of last year and the reduction of 36% in expenses with personnel, a result mainly due to the voluntary severance program from 2024. These effects were partially offset with the highest volume of the offsetting system of MMGD. We closed 2024 with an EBITDA efficiency almost 46% above the regulatory EBITDA, confirming our continuous trajectory of efficiency in our operations.

On the next slide, I’ll talk to you about generation and transmission, with an adjusted EBITDA of BRL613 million, Copel GeT had a PMX lower than the last year during the fourth quarter. In addition, the performance of wind complexes was negatively affected in BRL93 million due to the lower performance of wind complexes, a result of a smaller volume of winds below certification curtailment of 13% compared to 8.3% of the fourth quarter of 2023 and unavailability of the generating parts occurring as a result of maintenance and installations. In addition, there was the effect of reversion of revision in fourth quarter of 2023 and the amount of BRL83 million referring to the decision of the calculation methodology that impacted, as I said, the results of 2023 and did not reoccur in 2024.

Partially offsetting these items, there was a reduction of 30% in personnel costs in the quarter, basically as a result of the voluntary severance program. Giving you more details about trading, we closed the quarter with adjusted EBITDA negative in BRL15 million compared to BRL9.7 million positive last year. The reflection mostly of the lower trading margin due to the price variation in the submarkets caused especially by the generation from intermittent sources with an impact of approximately BRL18 million. But I’d like to stress the excellent execution of a strategy for energy trading, which reduced risks during the entire year and as in the third quarter we intensified energy sales at a moment with better market prices. We sold 500 megawatts average on the quarter for the 2025 to 2029 period and we had already sold 537 megawatts in the third quarter generating value for the group, which will be captured in the coming years.

In addition, I also — we don’t have a lot of exposure in our portfolio to modulation. So it’s a limited exposure at lower levels. With an one off impact in the results of the trader, in the consolidated context and very little materiality. So, zooming into our manageable costs in the next slide, we maintained strict control of costs, but always preserving quality and safety of our activities. The highlights of the quarter are the positive impacts in the first quarter after the conclusion of the voluntary severance program. For better comparability among periods, we have two PMSO lines, manageable costs and other costs. In variable costs, we adjusted PLR and premium per performance and in addition in the line of other costs, we isolated the effect of a study about the repatriation of GSF that happened in fourth quarter of 2023 and adjusted non-recurring losses for the disinflation of assets in fourth quarter of 2024.

With these adjustments, looking at personnel costs, we see a reduction of 26.2% in the quarter, an effect of the reduction of 1,415 employees. I am sorry, I am not listening to him. Is there anything with the sound? And if we isolate the inflation in the period, there will be a reduction of 29.5% and the costs in personnel reinforcing our execution capacity and consistency in delivery. Looking at the other lines of PMSO, we increased by BRL34 million, 13% of services of third-parties essential to strengthen the prevention and grid maintenance operations for the distribution company focused specially to guaranteeing levels of quality and safety of our concession areas. These activities also include investigation of tree trimming and maintenance close to our distribution lines.

We also had a small growth of BRL11 million under other costs with an impact of the dis-saturation of equipment that presented residual values in the company’s investment programs. I reinforce that this effect represented less than 33% in investment of Copel Dis in the quarter. Moving on to the net income analysis, speaking on, recurring terms, income exceeded BRL639 million in the quarter, 12% higher than what was posted in the third quarter. Quarter-on-quarter the result was 7.2% higher as an effect, in addition to what we already mentioned, the tax efficiency captured by the declaration of IOC. We delivered year-to-date results of BRL2.7 billion, 5% higher than last year in recurring terms and the reported results reached BRL2.8 billion, 20.3% higher than the results of 2023.

Now, speaking of investments, we executed historical CapEx strongly led by the distribution company’s investment plan responding to 88% of the total for the year focused on the regulatory remuneration base and efficiency and quality of services. The highest investment in the history of Copel Distribuicao that’s important to mention. As for the most of the investments was in line with our timeline and now we have full focus in the CapEx of 2025 and its unitization. Now about our indebtedness, due to the grant bonus payment for the renewed plans we saw an increase in leverage to 2.6% times — 2.6 times of net debt over EBITDA. And as we’ve been talking about in recent calls, this was already expected. Remember that our limit covenant today is 3.5 times net debt over EBITDA.

So it’s quite comfortable, but with a structure of leverage that is more suitable. Our operating cash generation exceeded once again the mark of BRL1.2 billion in the quarter, totaling in the year BRL5 billion. Our average amortization period of around four years with more BRL8 billion maturing only after 2029 and a total of BRL17 billion. I’d also like to point that we have initiated the execution of our share buyback program. We rebought BRL50 million in December and BRL70 million in January as Daniel mentioned. I conclude my presentation here thanking each of the Copel employees for their strong work, commitment and continued dedication. We are confident that with our long-term strategy and a focus on efficiency, quality, and results we’ll continue to advance and deliver more and more value to our — all of our stakeholders.

Thank you once again for your participation, and we can now move on to the questions-and-answer session.

Q&A Session

Operator: We will now begin the questions-and-answer session. [Operator instructions] Our first question, Bruno Amorim, Goldman Sachs. Please, Bruno, go ahead.

Bruno Amorim: Good morning and congratulations on the delivery during this year. I have a question about capital allocation. I know you announced publicly that you’re running studies to publish at some time what you understand to be the optimum capital structure for the company. So could you talk a little bit about how you think about this, irrespective of what this optimum level will be, how do you think about optimizing the structure in the short term versus leaving some space in the balance sheet for future allocation, especially in the context of a relevant increase in EBITDA for the next two years in the distribution operations. So more to understand today what your mindset is about, the view in terms of capital allocation over the next two, three years? Whether you think there’s opportunities in the short term or whether it makes sense to leverage a little bit more, get a little bit closer to optimum and leave some flexibility for the future. Thank you.

Daniel Slaviero: Good morning, Bruno. I think it’s an excellent point, with all the interactions in the market. This is a question that has been raised a lot. So I’ll give you some context and then I’ll ask Felipe who’s leading this work to add to my comments. So today our covenant is 3.5. That was a reflection of the structure of the company’s legal entity as being a state held company. But now as a corporation with the AAA and the level of maturity we have, we’re operating with covenants above that between 4, 4.5. So I think Felipe is leading this study first to find what should be the best covenant limit. And second, we also want to do that if possible, with the discussion of Mercado and the market was informed today about Eletrobras agreement with the federal government and we see that as very positive, not only because it strengthens the corporation model with a limit of 10% of capital votes, but also unlocks a lot of value for the biggest company in the energy sector.

But going back to our point, I think we’re going to seek with this work to reach a capital structure. Over time it’s not going to be all at once because we’re in a very restrictive interest environment in the country. And finally, there always will be space for you to make good investments. The company’s priority is to make good investments, good capital allocation. So there’s nothing in the very short term or on the short term that is not the focus on that capacity auction and all the other agendas we’re looking at on the tariff cycle, the improvement of assets and the trading strategy that is bolder and mindful of the volatility opportunities. Good allocation is always good and good — is always a priority. But if there isn’t, we believe that direct dividends either buy share buyback, as always is a path not to allow the company to be deleveraged.

As you mentioned and starting on 2026, with the renewal of the tariff cycle and the improvement in the energy prices and the cost reductions, you saw more than 30% only in the P line due to the severance — voluntary severance program’s impacts. The company already has very well established contracted growth. So we don’t intend at all to let the company get deleveraged much beyond the current level at around 2.5. And for that we can always work on this leveraging in terms of buyback and dividends. So also considering that the payout of the fiscal year of 2024 is there at around 86%. So Felipe, I got into other subjects, but if you can talk a little bit about times and movements in the main lines of this study of the optimum capital structure.

Felipe Gutterres: First is to assure that the company is not going to work in sub-optimum ways in our capital structure. So this is the first point. The other point is that our concept being discussed, it’s much more in terms of convergence once we define the optimum structure rather than always working with a limitation, a limiter, and always working at this optimum point. So just to give you our mind side there’s convergence, but some flexibility slightly below or above as long as it’s defined, times a movement we close or conclude the studies and we’ll present them to the market with the results of the first quarter where our idea is also to present the simplified dividend or enhanced dividend policy. Our current dividend policy is very flexible, but we understand that there are opportunities to simplify this policy and make it more straightforward.

Always noting that what we presented at Copel Day, our manifest for capital allocation is to always look at return at the center, but always considering minimum cash to give us flexibility to face our obligations in terms of investments that are already accounted for. Even the flexibility for us to also make the most of opportunities. The focus always in the preservation of our AAA rating that we have and obviously looking at making any capital allocation in opportunities that bring a clear return above our minimum acceptable rate.

Bruno Amorim: Excellent. Can I ask a second question, a follow up? Just actually changing — switching gears a little bit, talking about the energy price scenario. The curves moved upwards. Some of the vortices of the energy price curves close to BRL200. So the question is, how have you been working on this environment? You’ve been seeing reasonable liquidity to be able to contract at those prices. Whatever you can add would be helpful? It seems that there is an upside for the non-contracted part.

Daniel Slaviero: Excellent Bruno, that’s precisely it, and what we’ve been doing and Felipe is here and he works with Rodolph with Copel Comercializa, but it’s — to make the most of this moment the fourth quarter, the volumes of energy traded for 2026 already exceeds the BRL180. That was one year before the level that few people could see, could foresee. For this quarter now, we’ve already been able — the moments when the price was above BRL200 and we made some sales, and this will appear in the results of the fourth quarter on the next conference call. So I think that’s an advantage. There is still moderate levels, nothing that expressive, but we’re not seeing any serious issues or any critical liquidity issues, the whole markets after those events with some of the traders restricted some of the credits, which, in our view, is very good.

And it doesn’t make any sense to have it and sell and then have that kind of problem. And Copel is a big generator is very cautious and attentive to all of that. But we are being able to make the most of those opportunities and volatility to be able to allocate a little bit of our energy that is not contracted and generated value not only to 2026, but also as Felipe said, Felipe Gutterres, with a view for 2026, 2027, 2028 and at some point, even a little bit a smaller amount, but a little bit for 2029 for those clients who have a longer view. Felipe be any additional detail, any comment?

Felipe Gutterres: It’s just important to note as well, in line to the definition of the strategy that we have that has been positive for us is our agility and execution as well as our discipline. Daniel mentioned it well for the average cost at a higher price.

Bruno Amorim: Great, thank you.

Operator: Next question. Guilherme Lima, Santander. Please, Guillermo, go ahead.

Guilherme Lima: Good morning. Thank you. I’d just like to confirm — I’m sorry if you already mentioned it, and I missed it. But just the timing for concluding the optimum capital structure study and the new dividend policy. If there is a timing for that. And for the capacity auction, if you can talk about the ordinance that the invitation to bid that was published and we saw some points already defining the capacity factor for plants located in the South and Southeast. If you can talk a little bit about what you see in terms of positive points and competitive edge for Copel? Thank you.

Daniel Slaviero: Guilherme, first the timing, as Felipe mentioned, the idea is to present the optimum structure view and the time that it will take — what time we’re thinking about the execution will be along with the simplification. It’s important to mention that our dividend policy is already very good. It already allows us and gives us a lot of flexibility, but we’re going to simplify and maybe not have as many steps to bring more benefits to the company in our view. Always keeping in mind that our policy privileges, bonus and investment, so the available cash flow. So Guilherme, our idea is to present all of that in May, along with our first quarter earnings conference call. So that’s the first part of your question. The second part of your question about the capacity auction.

They’re already making progress on EL this week as well approved for consultation, some items and some terms, but what we’re seeing is the minister also made comments during the week that almost 7 gigawatt of project, but just to simplify the ones that will be — how many will be ready and how many with the guarantees and the deposits to be approved for the auction, but it is going to be big. Some people are saying there’s no concrete numbers, but they’re talking about more than 10 giga for this auction. Most obviously, considering the amount of products, it will be for focused on thermal power plants, but we believe that the hydro product will have an interesting size that we’ve been able to estimate. We don’t know what — how big it’s going to be 2.5, 3, what it will be, but we believe it will be a reasonable size because it is without discussion, the most affordable sorts and the only renewable source for that auction.

So in benefit of the price. And for the consumers, I am convinced that the hydro product will be the cheapest from all of the products that will be auctioned in July 2026 — 2027, but we’re working here to have two plants there, Foz do Areia, with 840 mega and Segredo with another1.2 gigs and firing computing for — competing for good allocation. So we have — these projects, each one of these projects has its own features and competitiveness, but we’re very confident that the hydro product for the first time will show an additional attribute in terms of power that is completely required by the operation — for the operation.

Guilherme Lima: Excellent, thank you.

Operator: Next question. Maria Carolina Carneiro, Safra. Please go ahead.

Maria Carolina Carneiro: Thank you for the call and for the opportunity. If you could talk a little bit. I’d like to see — to hear an overview of what you believe are there in terms of regulatory discussions to try and help address curtailment, of course, your portfolio is a lot more hydropower, but this quarter as well as in other quarters, we still saw a lot of stress and negative impact of this phenomenon for the company. So if you can share with us — how this topic is progressing in terms of regulation and maybe could reduce this for the companies. And the second point, you had another interesting divestments in case of Baixo Iguacu. If you could remind us, within your asset portfolio, if you have another asset or another opportunity that you are identifying — or you are looking at both to continue in this optimization process of your asset balance sheet or working on the better capital allocation, as you mentioned at the beginning of the call? Thank you.

Daniel Slaviero: Hi Carol, Good morning. I’ll start from the end of your question, which is about Baixo Iguacu. So if we look, if you remember, at the time of the follow-on, what we said was we want to optimize and simplify our structure, and decarbonization of our matrix. So we started with Banco Compagas than the small hydro centrals that we mentioned in the opening remarks, in the sense of focusing on the larger assets. And then we started the granularity. So that was the asset swap with Eletrobras that I also mentioned that was very positive consolidating the Mata de Santa Genebra. We know the assets well, all have synergies with our current operations. Within these lines of simplification, there are a few assets where we have minority stakes and our plan, we’re paying attention to all of that, but they’re smaller and less relevant for the size of transaction.

As for Baixo Iguacu, it was a movement, I’d say a window of opportunity that came up, and I think it reinforces what we had said that our company, our minds are focused on capital allocation of where we can generate the best returns for the company. So we saw that opportunity, and the competitive process that was led by our partner, and we optimize that in the way that we saw as best for the company, showing the quality and the work of the new management along with our current team, as I mentioned, that was led by Diogo Mac Cord along with our team here, our partners done excellent work. So with that said, Carol, in terms of optimization and simplification, the majority has already happened. So there may be very specific things here and there of swaps and some transmission companies where Copel has 24.5 but less expressive values.

And the next stage, I believe, it should make good capital allocation in the medium, long term to be able to add other opportunities, business opportunities that may arise, always within the scope of generation, transmission, distribution and trading of energy. Now about curtailment. This has been talked and discussed, it’s a reality that’s here to stay. It’s a reality that has been hurting a lot of companies. Fortunately, Copel as Felipe said, since it’s an integrated company with a distribution arm that has been proving significant to the results and even in generation and transmission, a lot of GeT results come from transmission, which is a very safe segment. And in generation, 18% only comes from wind power, 82% from hydro power plants, and the impact is very limited.

But nobody likes to see resources being wasted or not being accounted for. So what we believe and what would be reasonable in the short term is that classification of what is an availability was electric and availability and try to mitigate this. That’s the very, very short-term solution, at least addresses partially the impact. And a broader discussion in terms of restructuring, we do not see that in the short and medium term. I think it’s going to be a more complex discussion. You see the Ministry and ANEEL engaged and concerned, and we are monitoring as well and working hard. But in the short term, I think the reclassification of what is unavailability and what is an energy aspect at least mitigate partially. We believe that in the medium and longer-term views that tends to be a single digit, not much more than that.

The operator on the past year was a little bit more restrictive than what could be — and I believe that they are monitoring and analyzing this. I don’t know if you have anything else to add, any elements to share with Carolina everyone.

Felipe Gutterres: No, I think you mentioned it well. We are very well protected when we look at our portfolio for generation and transmission, that’s a smaller impact. But of course, we continue through the associations and the agents and the support of the Ministry and ANEEL seeking a solution that won’t come in the short term, but seeking a solution for the curtailment issue.

Maria Carolina Carneiro: Excellent, thank you.

Operator: The next question is in writing from Francisco Navarrete, Bradesco BBI.

Francisco Navarrete: Good morning. I would like to ask about the performance of wind assets. This quarter was slightly below compared to the other quarters. Could you give us more details of why and how this could be recovered?

Daniel Slaviero: Excellent, I think Navarrete, we mentioned — it’s an excellent point. Thank you for your question. In addition to the curtailment and the wind harvest that in 2024 was not very favorable, we have very one-off temporary issues. So Mano, if you can bring more details and see how we are addressing it and the small dimension that it has in our portfolio and the companies wind power plants.

Fernando Mano: So as Daniel mentioned, we had a curtailment, and we continue with a considerable 13% curtailment this quarter compared to 8% in the fourth quarter of 2023. So curtailment remains a point, an issue and some specific parts. We had resources below expected, especially parts where we had good commercial conditions. So that remains a factor that have a second effect, as mentioned. And thirdly, we have one-off issues that are controlled and part of the day-to-day of the plants, we have corrective maintenance and preventive maintenance, especially in the beginning of the year that have been addressed, are being addressed. We have very strong tools for predictive analysis, and we’re consolidating these tools. And we’ve been working on the specific points we identified along with the OEM suppliers.

So things that are being addressed that we shouldn’t see an impact, a relevant impact. And adding to this, Navarrete is that in addition to everything that was mentioned, that was very specific in Brisa and Cutia and temporary transient. So in the coming periods, this has been addressed is that it was in the quarter more affected in these terms, especially due to the ADA. So — specifically this quarter, there was an impact, a little bit worse due to this detachment of the spot price rather.

Operator: Next question in writing, Reinaldo Verissimo, Investor.

Unidentified Analyst: Congratulations on the results. Does Copel intend to participate in the next transmission auctions in addition to the generation auctions, is there any possibility that Copel will go beyond the state of its origin?

Daniel Slaviero: Hello, Reinaldo. Excellent points. First, looking at 2025, the transmission auction in October in our analysis doesn’t have any asset that could make sense for us. So we do not intend to participate. The transmission segment overall is a segment that we have to look at very cautiously because we’ve seen historically lower and lower results. So that’s a point of attention. But what we focused as you mentioned in your question, is precisely the capacity auction. And in terms of the borders of Parana, I think Copel for quite some time transcends its activity. Copel’s operating in 10 states now with Colider, it is going to be nine states, but we didn’t have that limitation in the past. So [indiscernible] Copel is the second biggest generator there with almost 1.2 gigs of energy.

So — but we are very well known by Copel Distribuicao and the concession in state of Parana. So there wasn’t, and especially not now, the distribution segment is a segment that we believe is very attractive. It’s a segment where we’ve been developing over time, a lot of expertise in operation and serving our customers and reforming the grid vis-a-vis the climate events. And it’s also a segment where that we believe is very stable, but it’s a segment that doesn’t have any product on the shelf. There is no asset available. But what I’m saying is that, what we’ve already developed over time and with the arrival of [indiscernible] and the new team and the changes that he’s been making there, I believe we’re developing a management model that definitely, if there is a good opportunity, could be expanded beyond the borders of our state.

Operator: Our next question in writing. Mr. Antonio Rizzo, [indiscernible].

Unidentified Analyst: Thank you for the opportunity. If possible, could you talk a little bit more about the trend of price of energy in 2025, 2026 covering a little bit about the level of the reservoirs transmission lines, minimizing specific issues of energy peaks, et cetera?

Daniel Slaviero: So Antonio, this is such a broad question that it would merit its own conference call. I’ll answer part of it, but please feel free Felipe and Mano to add because it’s a great question. So what do we see? The report high levels — so we have a good level of rainfall in the beginning of January. Temperatures are milder. We have the reservoirs here at levels that are higher than 2024 even. And still, we are seeing prices varying at a higher level and peaks of even 2015 — 215, 220 for the coming year, a period where normally the prices would be relatively low. And this has repercussions referred to what, first, there’s a hybrid new wave that’s new model that is a lot more sensitive to the rainfall and it gets a lot closer to what happens in operations in the real world.

So it is very healthy in our view, a very adequate for prices. So we believe that this is something that must continue for us to have that the sign of prices being a lot closer than what we see in practice. And even with all of that with the level of the reservoirs in January, and I tried to dispatch more than [indiscernible] with thermal power plant. So that shows that at peak moments, there is a very relevant need of power that’s both hydro or thermal power. That’s one point. And then there’s the distributed generation size. That’s something that’s unavoidable. The agencies have to look at that more cautiously because it’s the only source that’s growing, and it’s growing basically based on subsidies that are still permeating. And fortunately, that was [indiscernible] on the offshore that was only going to correct the portions.

And there’s a final element that you mentioned that are the transmission lines. In September, October, that was more critical. I think there was a big line there for the outflow. And if that comes in, it normalizes somewhat. So long story short from all that I think that the scenario for this industry so that to have reliable operations, you need to have a price signal that’s closer to the real operation of the system. And that will lead to periods or moments of higher prices, be it intraday due to the — our price or longer periods. I went up on for a little bit longer. But Felipe, anything to add to this, any point?

Felipe Gutterres: Just to add that this should continue over the year, and this need for power that we see.

Daniel Slaviero: Mano, any additional comments?

Fernando Mano: No, I think you addressed it very well.

Daniel Slaviero: And Antonio, I think that on this point here and this price level, we spent two years with the price at the basis are very close to it. So 2024 is close to that on average price at Copel with a P-mix above BRL200 migrated to a P-mix close to BRL175 million. So I’m saying overall because there’s still the regulated market. So with this recovery, we are certainly going to see Copel in 2026, 2027 with a very virtuous growth with the recovery of prices, the new tariff base that has been discussed broadly and the level of efficiency that we’ll have with the structure operating as a private company, a privately held company. In addition to the operating excellence of our assets that was a strong focus, we are going to have a company certainly in a path to change level that was going to open opportunities for new investments and growth or for better and more significant payments of dividends.

Operator: The questions-and-answers session is concluded. I turn the floor to Mr. Daniel Slaviero for his closing remarks.

Daniel Slaviero: As was said here during this presentation, I would like to thank you all very much for your presence and attendance the day before carnival festivities begin. But that shows that the number of people participating in questions. The interest that Copel has been seen from the Brazilian market. So remembering that today, we’re more than 380,000 shareholders. And we got here in 2019 close to 40,000 shareholders. So that shows the growth and visibility of the company. Another point is, a quarter with a lot of deliveries, consistency and the delivery. And as I mentioned, in the beginning, one of the main deliveries and levers was people, talent, talent retention is the crucial talent we already had in the company and mostly the attraction of new talents.

So in January here, concluding in February, we approved this week at the Board a new structure for short term targets, we had already approved the targets on the long-term package in May of last year. April of last year in the General Shareholders’ Meeting. So that has a strong alignment in the company that intends to generate value consistently with a culture of ownership and the best management practices. So all of this together in this context, make us here at Copel, me, my partners here at the company, all of our employees are very confident and excited with a lot of enthusiasm for the coming months, quarters and years at Copel. Have a great carnival. Thank you very much.

Operator: Copel’s earnings conference call is concluded. We thank you all for attending. Have a great day.