AXIA Energia SA (AXIA6) Earnings Call Transcript & Summary

Ladies and gentlemen, good afternoon to all. Thanks for waiting. Please you're very welcome to the Eletrobrás teleconference about the Relevant Fact, which has been launched by the company yesterday on the 24th. [Operator Instructions] Right now, I would like to pass on the mic to the President Mr. Ruy Flaks Schneider. Good afternoon, Mr. Ruy. Could you please take the floor?

Good afternoon, ladies and gentlemen, listening to this teleconference. As the President of the Council from Eletrobrás, I would like first to say that I'm very happy to talk to you all. It's natural that the contents of a Relevant Fact, such as the one that has been broadcast yesterday on the 24th of January, has incited many different interpretations. But most of all, it was surprising. As it always happens in this situation, there's a tendency for people to take conclusions. There are early conclusions. Ladies and gentlemen, what I would like to say to start is that we need to avoid what [indiscernible] quick judgments. Let's avoid reaching conclusions, early conclusions based on fast judgments. The President Wilson Ferreira Junior has a cast of contributions that have been very important for Eletrobrás. And furthermore, for the electrical system in Brazil and also for the Brazilian society, for almost 5 years, the President, Wilson, has been very competent, and he has been restless and totally dedicated to Eletrobrás. And he's truly identified with the objectives of the company, with the sanitation of the company and bringing it to where it is today. So first of all, I would like to make it clear that the administrative counsel. And I believe, of course, by expansion, everyone who is consciously observing, dedicated analysts of the Brazilian reality concerning electricity, they will know that this is confirmed. Mr. Wilson Ferreira Junior has had many achievements that have been essential for the Senate for the -- improving the health of the company and bringing it to where it is today. But what happened is that there are needs of personal kinds and observations and things that have to be respected. And because of that, our companion Wilson Ferreira Junior has handed in his resignation because he has faced personal situations that he needs to attend to. It's important for me to mention all that Dr. Wilson stays as a member of the Administrative Council of Eletrobrás. And Eletrobrás now is initiating -- working with the leadership of this Administrative Council, Eletrobrás is starting a process of identification, selection, analysis of potentials to substitute candidates that will come and follow-up on the trajectory that has been very important that engineer Wilson Ferreira Junior has had so far. It's also important to mention that this council has decided to count on their accessory with the acting of a specific company that will subside the council of -- with those information that are essential for a decision of this nature. Ladies and gentlemen, it's important to notice that our Eletrobrás is coming from a process of raising that has been very well conducted by President Wilson. It faces future challenges not only to continue but also to reach new heights. And this is very well registered within our development plan. I invite all of you to get to know this plan because this is our reference, our essential reference. The administrative council unanimously has approved this development plan. And it is truly committed, strongly committed to its implementing. So this is the affirmation that it's most important, most clear, the most -- the firmest that can be made as continuity of procedures, of continuity of efforts. Ladies and gentlemen, it is truly a shame that President Wilson has been led to this decision due to personal reasons, but he will continue with us as a member of the administrative council. And we councilors will continue to follow-up on the successful trajectory of our company. That is already the main company of commercialization and generation and transmission of electricity in South America, and we're going to reach the position of being one of the main companies in the world. Also incorporating other factors such as sustainability as the environment and governance. Therefore, what we are following, what the Ministry of Mines and Energy has been affirming time and time again, the commitment is to make Eletrobrás stronger, more efficient and more competitive. So we will be dealing with this, we'll be fermenting this, the electricity sector, the energy sector, we are going to bring more income, more jobs and will also be contributing with the well-being of the Brazilian society. The rest of it, we don't need. And with that, I finish my speech, and I will pass on the word to President, Wilson Ferreira Junior, but please always keep that in mind, there is a continuity that is continuous, that is ongoing, and it reflects on the addition of our business development plan. Now right now, we'll pass on the word to Mr. Wilson Ferreira Junior, the President of Eletrobrás.

Thank you all. Good afternoon. If so -- I'm very happy to be with all of you. And thank you all. Well, I would like to thank the generosity of our council, Mr. Schneider, and he mentioned all the actions that we've been able to do with Eletrobrás. I also need to remember that I started in 2016. And Brazil -- and Eletrobrás was facing its hardest crisis. It had the losses of BRL 30 billion at the time. And after a lot of losses that we've had, and we -- then after that, we started generating better actions, and we started improving. Of course, there was a time of a scenario of crisis. And at the time, I was invited by the company to join to initiate this journey of recovery for Eletrobrás. So I'd like to mention that it was a hard time for the company at the time, and it was -- there were so many losses, and the company has shrunk. But since then, we had delays in many sites, construction sites, improvements and also it had all its bigger construction sites, Mauá 03, everything was compromised, which led the main ones and all of them had problems. And we had more than 110 sites that had delays. And there was a lot of difficulty at that time for the company. A particularity that you may remember relating, for example, to all the problems -- the specific problems that we had. It was a bad time for international transactions, and we had the company in -- not making as much profit as it should. And when we talk about our assets, it was tough. We had a company also that was well recognized internationally. We had 57% of generation of energy. And the tariffs have been established by the government. But internationally, at the time, just because of this effect, we were losing millions, more than BRL 2 million a year. And but with the guidance, the support of our council, and culturally, we had the biggest recovery plan of a state company since then. I remember, it was July. And the end of July and after that, we announced privatizations of 7 distributors of the group, which were some of the biggest ones at the time. And right after that, in the next 3 months, we went further with the privatization. And we had problems, of course, because this wasn't very common, but we insisted on that, and we finished the year with a much better position that we had when I joined. All the operational sites, we implemented more recovery systems, the implementing of services and programs to make people, help people to retire. So we were able to allocate our number from end to decrease our employees from 26,000 to about 12,000, which was very essential. We had an improvement of governance in our company. And this, of course, is because of all the great was that people have done, we have improved, we have had better people working and people believing in governance. It was difficult, of course, to select the right people, of course, to be part of the company, but we were able to find those people and heal the company having recognized professionals in their activities. And our company is very professional now-a-days. And we have -- we used the best procedures, and we work very hard on selecting all the management level in the company. We found -- we hired an independent commission to work with things such as Lava Jato, the inquiries, the Car Wash case. And we had a closing of transactions with many millions of dollars. We concluded many processes that were pending. And we were able to improve the company. I would like to mention that with all this operational improvement and making the company smaller by making some distributors privatized. What we did, for example, in São Paulo and some cities and the companies that we put together. And we used to have $30 billion of profit and the assets of the company, we were able to float in the market. We tried to improve our share prices for our shareholders. And we were then able to get -- to pay dividends. We started a recovery process for the market, making our shareholders much happy. Few companies can really turn things around as we've done. And more recently, talking about legacy from the company we were also able to develop and launch our strategical development plan. And we will -- we have had this energy improvement plan for the development then for the next 5 years. And I'm sure that this was such an improvement that made such a difference. And we gave so much support to the company, and we were able to reach where we are now that I'm able to share with you good news, of course. Things take time. But people are thinking, "Oh, just because the President will be leaving." Of course, I am working with all the right authorities. So things are going to continue going well. There will still be the dedication, my dedication and all the leadership of the company. And of course, we have such a great management team, the council team. So this will always continue. The improvement of the company is because of a group of things that happen, and that allowed us to overcome the problems we had. The company, as a whole, in all its processes when you remember where the company was and where it is today, thinking about all the financial points and how much the company has leveraged. Yes, of course, it still has many important challenges, many challenges, but within the context that we are working on we already -- in 2017, we already started seeing improvements. And now we see a reflect of all the companies, of course, they work with energy, and there was an increase in all the tariffs that was more than what we would have liked, but it was necessary. And they were about 3x what the inflation was. But for us to reach this, we need to have new improvements, we need to generate more energy and do everything that we can. And of course, we had a lot of recognition from many companies, and people think about Eletrobrás, and we -- how much we've -- how far we've come. So of course, we have to keep in mind this idea that we are making things better for the Brazilian society as a whole through Eletrobrás. And people are working together with us. We are working with the Chamber of Deputies, with the Congress to improve. So we are addressing this company. And when we talked about privatization, of course, we are getting new contracts. And we are now having this company that is actually reestablishing itself. The values of this new contract that we have are very good and this will increase. It's more than BRL 20 million, and we have a better assets. And now we understand the possibility of -- and we are working with this -- with the government, with the participation of the government, and they are characterizing us and working with us as if we were a private company with a lot of will to keep growing and follow-up on the growth of Brazil as a whole. We are working together. We have priority for this company. And there are many other companies, such as [indiscernible] and now, for example. These are corporations that initially weren't privatized, but then they also started improving the same way we did. But Eletrobrás is doing great. And this is -- of course, people ask me to justify all my decisions, and it was for this to improve the company for everything to grow. And we've all taken the best decisions with the council always working together. And my intention was always to make the company grow and everything that's related to the improvement of the company as a whole. Of course, all these processes, we've had the opportunity throughout the transition of the company, working with the government. What I can say is that at the end of last year, I asked about the conditions, how we could keep on working. And we made things very clear. And when we talked about the future, we said that -- the government said that they would always try to make it viable and that they would help us to work and privatize our company. So we've taken it to the Chamber of Deputies and the Congress, and our process is moving forward. And it's been good. But of course, the pandemic was a point -- a problem for everybody, and it had this process that was already moving forward to move a little bit slower and making things not so available. But we were able -- even though there was the pandemic, of course, we were still able to keep improving and moving forward with the decisions. And even though we have this commitment from the executive and things that our minister has said and they all talk about our processes, and of course, the investment perspective, but also, we have been working together, and we've been followed by [indiscernible], all the secretaries from the mines and energy ministry. And we can see that our process has a great perception. And at the beginning of the year, I made the decision that was announced of leasing. Of course, I thought a lot about this, and we made our decision, I made my decision. And -- but still, you know I want to make things survivable in -- with the minister, so I'm still waiting for the manifestation of the results of the process that we are waiting on. But I continue working in the administrative council. The reason why I've been working with this process. And on part of the federal government, of course, and the company is always improving, and we've been thinking about everything that we've done for the last 5 years. I've been working full on and I will, of course, move on in my career, but I won't stop being connected to Eletrobrás. It's been amazing to have been the President of such an exceptional company. It's the biggest energy generation company, one of the 5 biggest ones for sustainable energy, so much -- about 80% of our energy is clean. So this is a competitive advantage and all these processes. We have this commitment for sustainability, which for Eletrobrás has always been exceptionally important, and we will continue, of course, to be commitment -- committed to that. We have, of course, we want to conclude the site of Angra 3. We also have a challenge for a Santa Cruz project but thankfully, things are moving forward. We have -- we want -- always want more innovation in the company, mobility. Of course, with the pandemics, the mobility side was a little bit tougher to continue, but it is something that we will continue working with. And for me, as President and all the things that we've done for all the maintenance and continuance of the company. Of course, I am very happy, and it's a pleasure to continue working with this company. I always say that a proof of trust in the company is that you have shares of the company. And I believe in this company. And of course, I have shares of the company. I bought shares throughout my work. And of course, I will keep on investing because I believe in Eletrobrás. It's a proof of trust. It's a proof that I trust this company, I believe this company. I always say that it's such an amazing company. It's always a great investment. So of course, thinking about this company, all the operations, all the things that have been done even throughout the pandemic that's been a tough time. But we've had -- apart from the pandemic, we've had availability, accountability, everything has been done very serious. So I'm very happy to know that this company is professional, is prepared, is motivated, there is a meritocracy implemented there. And this company will keep on overcoming everything. And I am so happy to be a part of the council. And for me, it's very important personally to have this company, be part of this company and keep on making it what we wanted to be, what we believe it can be. And now, of course, that it's more privatized and all the things that have been done. I believe, I feel that I have accomplished what I wanted to accomplish. That I've been very, very happy, and things have gone so well. And that is -- there are great perspective for the future. I am, of course, committed with all the company balance sheet that will be released soon. And of course, we continue with all the necessary dynamics. And we will keep this business growing and improving. And of course, as a member of the council, which I already was, I will keep on dedicating myself to the company. So I would like to thank everybody in the company. Everybody, that's all the support that I got, e-mails, WhatsApp, all the love that I've received from everyone, from so many great professionals, analysts, investors. So it's been so good. I felt so happy with this, with everything that I got from everyone. And I have so much respect for all of you and that also are committed to the future of the company just as I am. And for us, of course, I will stay in the Administrative Council, and I'm very happy about that. I want to thank all of you within the company, the executive directors, all the professionals, everyone. It's been a wonderful experience. All my colleagues within our company. Also, of course, President of other companies that work with us, our partners and of course, the in-house professionals that I mentioned. They turned everything around, the results around. So these was because of their motivation, their hard work. And I'm so happy to be a part of you. Thank you all. I'd like to message you about all the things that we've already been doing. As you know, I've always been transparent. And we -- I have shared all the understanding of this decision. And I wanted you to know, of course, all the companies, that are affiliated to us, I wanted to make things very clear, of what was happening. And I wanted to all understand the criteria. And as I said, we will always continue working together to improve this company. I would like to thank you all for this teleconference and for your time. It's been so great, and thank you so much for your time.

[Operator Instructions] The first question will be from Mr. Francisco Navarrete from Bradesco Bank.

First of all, everybody who's in the call, wanted to thank you, Mr. Wilson, for all the time that you dedicate, 5 years of your life, to Eletrobrás, and I speak for many people. I want to thank you for all the things that you've done, everything you put into the company. You've put not just work time, but also your heart. My question was so very pragmatically, there are things that have been improved in the company. You talked about quite a few of them. Some of them are clearly reversed, such as the sales of the distributors of Eletrobrás. This could be -- of course, some of them can't be reversed. But some things, I'm not sure how will the Congress works after how will they vote on the project of all the projects involved with Eletrobrás.? I hope things will keep moving forward. I am hopeful but it's hard to say. So in this context, my question is imagining a scenario where, let's say, this project doesn't move on Eletrobrás, what changes that have been implemented by you and the administration, which I know they are very competent, can be permanent -- said as permit and which ones aren't.

First, I would like to thank you for your testimony. Thank you so much for everything you said. First, as I said, I would choose to reinforce some things to assure you that Eletrobrás is a priority for the federal government and of course, the Ministry of Mines and Energy. This is very important. When we say that it's a personal evaluation, it's because it will -- in the sense, that will make things move faster, of course. These are declarations that have been made and that have been noted. Of course, the priority that we have for the federal government is to keep things improving. But I have -- I need to mention to our investors. If I -- of course, if I don't believe in the company and the improvement for investors, I wouldn't invest in the company myself. What has changed so far? The company has renegotiated a huge part of the -- that's -- that it had, that we had a great negotiation with banks that we've passed on all of them, they have been done the best possible way to make the company more disciplined financially because everything in our company has been done to ensure that the company is financially secure and it's a company where people want to invest. So we're talking about $5 billion a year, it's still a company with a huge amount of investors with the CapEx. There are huge investments. And when we think about this criteria, people are believing in this company. It's very adequate, and it's great. It's been done for people to approve. And we are also thinking about the financial discipline that we need always. This is the first thing to keep that moving. As we want to recognize how [indiscernible] is really believing in the company. There has been so much harmony. And we are taking care of the company. And when we think about legislation 393 that stopped many kind of openings. But we have now more than 90,000 shareholders. It's a very important manifestation of a company that really works within multi-markets. I really don't have any worry about the future of the company. I believe that the regulations, the governance, everything has been improved. Also, there has been audit and everything has been really good. We need, of course, to keep moving with our strategic plan and the company still has quite a bit to evolve. But we have a commitment to that, of course. But the company has had been very precise and very committed to improvement. So I think that the company has a brilliant future ahead of it. Of course, it can be more competitive, grow more, but this is our plan. Of course, we need more -- it needs to -- the company needs to be able to operate with even more resources. But that will give us more competitiveness. But that's something that we are already aiming at. And the company has some -- it's in so much better shape than it was before. So I am very confident. I truly believe in this company. It's a company that is more than when you think about Itaipu and so on, we have 80% of improvement, the regulation, and we had so much more. We have a huge capacity to continue for things to be and the company to always be a huge investment of [ $4 billion or $5 billion ] in profit, that's what we're aiming for. Few companies in Brazil have a huge capacity as our company has. And of course, it's a priority for the federal government. And we are all working together because we are very sure of the demand that there is and what our company can achieve. And I'm very, very proud of that. And I believe that Eletrobrás will keep on growing and keep on improving, and we'll keep things moving on. We are prioritizing the right projects, and this will continue. Thank you.

The next question will be from Mr. Matheus from Navi.

Thanks for your dedication, your work, you are very well recognized. We all recognize the value that you've done, you've brought to this company. My question is, first, I want to understand how will the subsidiary council be? What will happen? Will you still be also a counselor for those subsidiaries? Or will you not be so much involved in the subsidiaries? Also, the production period, do you know until when you are going to stay? And then in this new date, there will be a new CEO? Or will that be a company in the meantime, dealing with this? So I'm just wondering about the particularities of Eletrobrás. And basically, I want to understand how this transference of knowledge and the continuity and to your successor can join the company.

Thank you, Matheus. In principle, of course, our commitment is -- for us is that I can stay in the company, I work with -- I preside more than one council, until we close our 2020 balance sheet. So in the beginning of March is the initial plan, and I will continue in the council of the subsidiaries until then, closing of this balance of all the companies. And after that, I hope that, of course, the administrative council, we've been discussing this specializing. But I hope that we can select within internal professionals that are qualified for leadership. And hopefully, they can be attracted to this position, and the administrative council will then make a choice. And I want to tell you, of course, that from now till then, it's enough time for this to happen. And I will continue, of course. And the commission will be dedicated. So I will still be in the administrative council of Eletrobrás, of course, with Eletrobrás. And I will make you all feel sure that my commitment continues to the company. I believe in this company. And of course, I will still be sharing all the priorities and everything that I need to do. This has to be done in a harmonious form. And my commitment to the company, of course is that we can have the right succession, hopefully right after I leave. But hopefully, by then, we already have the right successor.

Okay. The next question will be from Marcelo Sá from Itaú.

I would like to congratulate you for everything you've achieved. It truly has been great. And I would like to understand the difficulty level that this project that's going to Congress for us to -- for me to understand, the government, the secretary involved that are making it happen? And all of the issues that have been happening in Congress. I remember that at the end of last year, the agreement was being drawn for negotiations to restart when they went back to Chamber. And I think that actually one of the selected projects was dealing with all the senators. They were happy with advancing. But I think that now looking at the difficulties we have, where are your biggest challenges? Is it in the Chamber of Deputies, in the Senate? Where are the difficulties for really to keep our product projects moving? So just for us to understand the discussions that have passed on, on all the projects that are going through the government? And what are the difficult?

Well, the difficulties that we had last year, of course, there were manifest in Senate. And we had, of course, this reference and everything is moving on the trends that it needs to move on. First, the Chamber of Deputies then the Senators. As you know, we had already had many interactions with the chambers -- with the chamber, talking about we had progress and kept us moving forward. And then we felt that there were manifestations and some issues in the Senate, especially from the northern part, and we saw these issues, and we tried to interact with the senators to keep things moving forward them to, of course, trust in this project. I think all the important negotiations throughout the way the government of evaluating, the creation that you mentioned of with the leveling and also talking, for example, about, like you mentioned about Amazonas, the Amazon and all the issues and sharing flexibility in the Northeast region and so on. This, of course, has been a little bit difficult within the Senate. But the government, of course, what they want is how the process moves forward. So although things are moving forward, it's natural that sometimes there is a change in priorities within the Senate and then the National Congress, we'll try to mitigate a big part of this process. Of course, we expect the new things would have a certain delay in the Senate. Because they have -- there is always a little bit of issue when we talk about privatizing. But they are dealing with these disciplines. And there were -- when we saw the difficulties, we try to deal with this and things are moving, and they are -- we're asking them to change the level of priority. And of course, we will keep on pushing for things to happen, tell them about the importance of our projects and that we need the priority for this challenge should be addressed. And I think this project will move forward quickly. The company is ready -- once the Congress and the Senate approves everything, then we are ready to continue all our projects. And clearly, this is an issue that we'll keep on dealing with. Thank you.

The next question will be from Pedro Manfredini.

Mr. Wilson, just to reinforce what my colleagues have already said, your work at Eletrobrás has been amazing. And what was very clear, and I always remember the privatizing of the distributor all the events that were with the unions. And I think you had so many things that you proved, and you did such a wonderful job. So I hope in the future, we will still prosper. So what kind of profile and what message would you leave to the person that will be a successor? Could you give maybe some tips of some council or some advice, advice to these people that will succeed you? What would be your advice?

Thank you very much for your words. I -- of course, I want to -- when we think about privatization, it's something -- of course, we had so many actions, and I devoted myself to -- for things to happen. And I really believed in this process. When somebody is joining a company, a big company like this, and you have a job like the one I have and my successor will have, you really have to believe in it. And you have to have knowledge, you have to understand all parts of this job. And something that I want to mention here is that people have to support whoever is the CEO. And the message that I would like to tell you about, I think the profile would have to be somebody, of course, who understands about energy, as somebody that has this capacity of understanding the business and as part of this process of modernization and improvement, have an understanding of this. The person who has a capacity of governance, which is very important because we need -- our operation needs governance by participating with many -- our biggest companies and working with all the CEOs of this company, the governance was essential. We have to -- also, you have to understand the politics. I always said this, and I want to share this with you, too. Eletrobrás is called Eletrobrás System. And for you to understand, we always -- when I started at the company, I wanted to create a connection and for people to understand that our companies were working together, and that there was a collaboration competitiveness with other companies outside, of course. So we are all working together. So the main message is that the person that it needs to be capable to maintain this articulation, this collective articulation that keeping the group together. This is the main message, I believe. And of course, as a person, of course, thinking about personally, people need to be persevere. People need to follow, then have hope. I believe that you need to have hope and also to persevere on that. People, it's necessary to really be able to understand, to connect all these companies, make all the companies within our system work together. This is necessarily and to persevere is essential. And just reminding you, we were a group with 17 units. And we were able to get all these companies together then them. And we simplified the structure now with a lot of governance. We structured, we improved this governance, and we need a leadership that will continue this work of connecting all these companies and keep moving forward with that. That was amazing. Thank you.

Great. From now on, we close off the Q&A session. I will then pass on the word to Mr. Wilson Ferreira Junior for his final considerations. Please, Mr. Wilson, continue.

Once again, thank you very much to each one of you for being here in this call. I would like, of course, again, to reaffirm that I believe, and I trust the future of Eletrobrás, also my commitment to the company. And I believe in this and I will continue commitment to the company. I will always have this commitment. And I will be committed, of course, with regard to my successor and within the company and keep on developing it. And that will -- it's been great to share with you how sure I am about the future of this company. I'm very, very happy. I've been very happy that this company has been a huge challenge, of course. I felt almost like I was leading -- let's say, that the main theme of the electricity comparing it to football. The main theme, not the second league or anything like that. And I feel so great to have been able to work with Eletrobrás and being able to make it improve, and thank you so much for your time and the trust.

Right now, the teleconference of Eletrobrá is finished. I'd like to thank you all for your participation. And I hope you all have a great afternoon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]