Braskem S.A. (BRKM5) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. At this time, we would like to welcome everyone to Braskem's conference call with investors. Today with us, we have Roberto Simoes, CEO; Pedro Freitas, CFO; Marcelo Cerqueira, Vice President of Manufacturing, Brazil and Global Industrial Operations; Rosana Avolio, Investor Relations Director; Thiago Fontana Gemignani, Case Maceió leadership team; Almir Viana Cotias Filho, Vinyls leader; and Filipe Alves Tavares, Case Maceió, legal. We would like to inform you that this event is being recorded. [Operator Instructions] We have simultaneous webcast that may be accessed through Braskem's IR website at www.braskem-ir.com.br and the MZiQ platform, where the slide presentation is available for download. Please feel free to flip through the slides during the conference call. There will be a replay facility for this call on the website. We remind you that questions, which will be answered during the Q&A session, may be posted in advance on the website. Before proceeding, let me mention that forward-looking statements are being made under the safe harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of Braskem management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events, and therefore, depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Braskem and could cause results to differ materially from those expressed in such forward-looking statements. Now I'll turn the conference over to Mr. Marcelo Cerqueira. Mr. Cerqueira, you may begin your conference.

Good afternoon for everybody. So why don't we start with some introduction and some information, and then I will pass to my colleagues to complement all the information. So if you can see in the slide, we start our operation in Alagoas in 1975. It was a company called Salgema that time that in the 90s, it changed the name for Trikem. And in 2002, together with other companies, merged to form Braskem. So we have 2 main assets in Alagoas, the chlor-alkali plant in Maceió and the PVC plant in Marechal Deodoro. The picture on the right, you see the chlor-alkali plant on the center. It uses salt to produce chloro -- chlorine and caustic soda. In EDC, that is the feedstock for -- to produce PVC. And the chlor-alkali plant also received ethylene from the cracker in Bahia. So this is our production chain of the Vinyl business. So our commitment in Alagoas is to create value in the region, generate jobs, income, revenue and tax for the state. And even with the eruption of the activities in the chlor-alkali plant in May 2019, we decide not to cut the jobs and the people who are working to restart the plant. We generate around 2,000 jobs, 500 direct jobs and about -- outsourced jobs, which generated revenue of BRL 1.5 billion per year, and that local taxes, around BRL 150 million. And we are the pillar of our production chain in Alagoas. We account for 3% of the whole GDP and this support more than 60 companies in the plastic and chemical chain in the state. Can you change the slide? So this second slide, some technical details. On the right, you can see an example of a salt mine. The salt layer is about 1,000 meters down in the underground of the Maceió City. So it's like a rock. So the way we extract it, it's with water that comes from a pipeline that you can see in blue. It promotes a dissolution, forming the brine that goes up because of the pressure, and then sent to the plant to produce chlorine and caustic soda. So in the -- on the left, you can see 2 pictures. This is how you can see the wells on Alagoas. So it's like a small tree of pipelines, very simple, and it's connected to the plant. So we have 35 wells, all of them operation. The depth is about 1,000 meters. All of them licensed by the mineral agency and the environmental agency, according to the Brazilian regulation. And we decide to stop the extraction of the salt in May 2019, last year. So -- in this region. So can you change the slide, please? So in March 2018, an earthquake happened, and that impact some regions in Maceió. In the picture on the -- your left, you can see the Maceió City. On the left is the Lagoa Mundaú, and most of our wells are close to the lagoon in this green area. And the quake hit this area close to the lagoon also. So since then, we decided and we adopted a very responsible, transparent and active posture and reinforce the commitment and protect people of this region and also to understand the geological phenomenon. Can you change? So since then, we have been implementing many, many actions, including the mine closure plan and the actions defined with the authorities. If you look at the time line in 2019, we hired independent geological studies to support our decisions, and we decide to close the mine, the south mine. We created a safe zone, a protection area close to our mines, based on international study made by the IFG, it's a German Institute with high expertise in this kind of salt mines. And we signed cooperation terms with the city hall to develop several actions in order to protect the people in the region. So in 2020, we made a huge advance in the process. We signed an agreement with public defenders and with the prosecutors. That established actions to reallocate the residents of the region based on risk areas that was defined by the civil -- local civil defense. And we start the compensation program of the resident that we call PCF. We had a huge advance in the PCF last year with a relocation of many people of the region and including large structures. So we have more detail in the other slide that we'll see from Thiago. So we are advancing in the areas with monitoring systems and the execution of the mine closure. We made many amendments to the agreement that we signed at the beginning of the year with the authorities, and that led to the termination of the civil action related to the residents in the end of 2020. And we also signed an agreement with the federal and the state prosecutor for the termination of the social and environmental public civil action. And also, we signed an agreement with the prosecutors of the label prosecutors for the termination of the labor PCA. Can you move to the next slide? So our action, we have based them in 2 main pillars. The first one is safety of the people. So in removing the resident from the risk areas with our financial compensation program, psychological support, actions to maintain that areas and protect the residents that is living there, and the actions to prevent disease proliferation through pest controls and monitoring. Those are some examples on the first pillar is -- of safety of the people. And the second one, to understand of the geological phenomenon. So as I mentioned, we had studies to support us in our decision. We made some -- many actions around the drainage and sewage works. We are monitoring the soil. Now we have a robust system that is monitoring the area. We continue to study with sonars to access the condition in our south wells. And we're working permanently to close the site wells aligned with the mineral agency. So we are working in 4 -- the next slide, please. We are working in 4 front, main fronts. That's legal fronts with the objective to provide legal security to the actions implemented by the company; and the technical front conducting studies to understand the phenomenon for directing actions focused on safety; and also the implementation front is to -- the objective is to implement all the actions that comes from the legal front and the technical front. And we are also working in -- restart the chlor-alkali plant. So this is a relevant front that our intention is to restart it in a few days. Okay. Now we will pass to Thiago, to complement the information.

Good afternoon. I hope you all can hear me. So my name is Thiago Gemignani. I'm part of the leadership team of the Maceió case. I'll try to bring additional color to some of the things that Marcelo mentioned in the introduction. Beginning with Slide 12. So in Slide 12, we try to frame the main workstreams or action fronts that we have going on in the Maceió case. The first one is the relocation and compensation. That encompasses all the support for relocation, compensation of residents and also large structures that are located either on the risk area, protection area, that's the safety zone that Marcelo mentioned, and also the monitoring areas. So we'll talk a little bit more on the map afterwards to give more color on that. The second work front is more on the tech side is related to the closing and monitoring of salt wells. As Marcelo mentioned also, we have 35 salt extraction wells. And there are a lot of studies that went -- that are going on. They've already been conducting for some time. And based on the findings of the sonar and studies and experts, there is a plan for stabilizing and also closing those wells. We'll talk also a little bit more about that. The third action front is related to socio-urbanistic measures. We've been doing some in this workstream in 2020, but it's actually something that's been -- will be a lot more focused in the next 2021 onwards, given the agreement that we made at the end of the year. The fourth workstream is on -- related to environmental study is also related to the agreement we made at the end of the year and relates to the study of -- to understand if the salt extraction activities created any environmental impact in the region. And the final one, the additional measures relates to additional aspects that support, in many ways, the first 4 workstreams that I mentioned and also some of additional agreements on cooperation agreements we made in order with the city hall to give some support. The structure of the presentation will have one or 2 slides to give more details on each one and try to give also a summary in terms of final considerations in each one of them to give an overall context of the action fronts on the case. Moving to Slide 13. So this is the first aspect to understand on the relocation compensation is, actually, here we have the risk evaluation map, and we can say that this defines a lot of the scope of action on relocation and compensation. If we look on the left side of Slide 13, we have the green area, yellow area and gray area. All these areas are the ones that are focus of the relocation and compensation program. The yellow one and the green ones are -- they were added actually in the agreement that we made at the end of the year. The gray ones, you can see that there are different zones definitions. They are -- either of the original agreement that we made in January 2020 or a couple of amendments that happened throughout the year. There are a few messages related to the risk evaluation map and the relocation and compensation program. First one is that in our understanding, this risk evaluation map, and that relates again to the scope of action of Braskem, of the company, represents a comprehensive and conservative view of the company once it encompasses all the recommendations from the civil defense. It is based not only on risk carriers, but also on what civil defense defined as a monitoring area, and also includes the recommendations on -- from technical experts and technical studies on long-term potential, long-term scenarios of impacting the region. So it's actually, again, the risk that we foresee -- that's foreseen now by the civil defense, the monitoring areas by the civil defense and also potential long-term scenarios. So these are very comprehensive in our understanding and conservative view. Another message here is that these areas, again, is of the knowledge of the market, there were additions throughout the year, and this is because everything begins on the technical side. So there were new developments on the technical, new understandings from the civil defense or new studies that came throughout the year, and they led to inclusions on technical -- on the scope of action and to give security also on the legal side, that were also results of amendments or [ agreements ] with the authorities. The last message on this slide is that it's important to understand that we believe we made significant progress in the relocation in the areas in the map. And we can see -- there is the legend here, there's a percentage of relocation with some of those areas. The green, yellow area, again, we don't have percentage related yet because they were just included as part of the December 30 agreement. But the other areas are close to 100%, 95% -- 97%, 98%. And the other one that is 79% is actually the one that entered in October. So we can see that the program -- we already have a way of operating that is being successful, we believe, in a very sensitive topic. So it's very important that we are being able to move forward. And I'll give an emphasis on this 100% relocation in the areas that are since the beginning, considered the most priority areas. Moving to Slide 14. Again, the name of the program on the chapter already says that it's relocation and compensation, but it's important to understand 2 different dimensions. We give -- and this is the first step on any contact with the resident and even with a large structure. We give all the relocation support, availability of social technicians, all the support to find a new place for the person to move, all the logistics support that they need and the financial support to go to a new place. So this is the whole relocation support program. And we have the financial support. This is actually more -- both are individual, of course, but it's also related to understanding and analyzing individual situations, defining eligibility, making proposals of compensation, signing homologation of agreements and the compensation payments. So these are 2 workstreams. We have more than 400 people from the company and different specialist partners on different paths of the process that support us and help us in this program. Going to Slide 15. Again, this is just a couple of -- a few highlights on the numbers we achieved in 2020. And we also believe, again, a lot of way to go, a lot of work to do, but we believe that we made important achievements in 2020. I'll give some numbers and some color to them. So we relocated -- and these are the numbers from end of the year, 2020. We've relocated close -- more than 9,000 families. And it seems that to have a gap with the 15,000, but it's important that the agreement that we signed in December 30 have added close to 4,500. So again, where we already began, the numbers are very advancing and well. And now we believe this will also be true for the new areas that were included. We made, until the end of the year, more than 3,400 compensation proposals. In January, we closed above 4,000 proposals. So again, we were able to keep the pace and advocacies throughout the year. And one of the most important KPIs for us that we have a 99.7% of acceptance. It shows that the program is healthy. It shows that we are -- and this is very important, we are doing fair proposals so people can be compensated by the situation and restart their lives in a proper way. As mentioned, it's not only residents. We do have large structures in the area like schools, hospitals and other commercial structures there that demand a more customized approach given the complexity, especially for the relocation part of the process. We have already relocated more than -- close to more than 30, and they are close to 50. Again, this numbers also encompasses the new ones that were added throughout the process. Only talking about the compensation process, more than 10,000 meetings were held. So this shows that it's a very intensive process with the community. And this is very important. It's a close. It's not procedure. And there is a lot of process, but there's a lot of context and understanding and helping the people in the program. We disbursed approximately BRL 500 million last year. This will be much more intense in the next year since 2020 was a year of ramp-up also. Slide 16. As I mentioned, I'll give in each of the action fronts, so give some considerations here. Final consideration is just as a summary, I would say. First one on Slide 16, again, the provisioned amount that we have in the company are in parallel to that scope that I mentioned at the beginning, and it's parallel, in this way, in a very comprehensive way, scope that considers, again, monitoring areas, all the risk areas from the civil defense and include all the recommendations on specialized independent studies looking to potential long-term scenarios. So this is the first message that we think it's important. The company's priority continues to be advancing on financial compensation program and keep accelerating as much as possible so we can, as soon as possible, solve the situation for everyone in the region. So including relocation, as we mentioned, and compensation. Also, in addition, another priority for the year is, in terms of negotiation, is dealing with possible measures related to public concessionaires that either have assets or are connected to -- impacted by the -- potentially impacted by the relocation process in the area and also individual lawsuits that exist or -- against the company. A last point here is also in the agreement that we made at the end of the year in the public interest civil action of the residents, it was created a technical group. And it's also to give more security on the framework, where the phenomenon is going to be monitored and study the digital center areas for the next 5 years. So it's something that we feel it's important for the authorities, but also for the company in order to give a framework as we look and analyze the phenomenon continuously. Talking about the next workstreams, Slide 17. So talking -- this is, again, is more on the technical side. So we do have, as Marcelo mentioned, 35 extraction wells -- salt extraction wells. And there were a lot of technical sonars and geomechanical studies and recommendations by experts. And these all created a plan so that we have for closing and monitoring all those 35 wells. This plan is -- there's a protocol discussed and authorized by the National Mining Agency, ANM. Each salt extraction well has its own specific plan. So depending on the characteristics of the cavity and the status of the cavity, there might be different techniques that are being recommended. And for 4 of the 35, the recommended implementation action by experts is what the backfilling or filling with solids that's a measure that's considered for cases of more complex. It's more capital intensive. So a lot of that we -- when you talk about provision, a lot of the values, most related to this workstream are related to this 4. But in comparison, also the actions that are built for the 35, given the recommendation from several of the most renowned experts in the field. Again, as already mentioned, the National Mining Agency is subject -- everything is subject to approval to National Mining Agency. And we already have actions in progress for 20 of the 35. Again, is a very important capital program that we are moving on. Talking -- going to Slide 18, there's something that was made public by the company communicated that by the end of the year, there was a letter by National Mining Agency recommending additional measures, especially related to filling of soil that, as I mentioned, is the one that might -- is the solution more extreme or more accomplished for cases. It's more capital intensive. They indicated that other wells, not only the other captives, not only the 4 that we mentioned, would need this kind of intervention. This could lead to investments and costs close to BRL 3 billion. Afterwards, we also made public that there is a temporary suspension on this letter. After that, Braskem, the company also, of course, established a communication -- line of communication we already had, but of course, specific on this aspect, to have a technical discussion. And at this point in time, suspended the effects of that letter until the development of the technical discussions move forward. And this is -- again, we expect this to have -- to find further developments over the course of the next months. Going to Slide 19. Again, final consideration is the same framework that I mentioned. The company already presented to National Mining Agency a plan for all the 35 wells that is based on the technical recommendations of several experts in different knowledge fields. And this plan is -- the provision amounts are aligned with this plan. It is a plan of complex execution, as you might imagine. And therefore, it is object of technical discussions between the company specialists and National Mining agents. The implementation of the plan, as also mentioned, has already started for the wells where National Mining Agency has authorized -- has already authorized. And as mentioned on the previous slide, over the next few months, the company expects to conclude the discussions with National Mining Agency. And of course, will keep the market posted on these developments. Going to Slide 20 on the socio-urbanistic measures. We did -- the work actions implemented in this dimension in 2020 being like the demolition of specific buildings that were indicated with risk by the civil defense, security vigilance in the programs and also janitorial services in relocated areas. But it's going to be more of a focus going on. And as of December 2020, the agreement that I mentioned on the soco-environmental public interest civil action, define the destination of a value with a maximum value or a cap, and it's outlined to be implemented in 3 main dimensions. One of them is the relocated area, so interventions in the relocated area, being the discommissioning of various demolition, waste management, superficial drainage interventions, implementation of vegetation cover, area management, maintenance of properties of cultural interest. Again, all the projects will need to be specified with the proper technical engineering program. But again, this is an outline that reflects our -- the best knowledge at this point. But again, with a value that is defined and as a maximum, it's a cap to -- in this program. The agreement on the socio-urbanistic also relates to mobility, implementation of immediate initiatives and also long-term solutions on the mobility and also social compensation actions, so resources to enable social impact actions on multiple fronts, social, cultural, public services, among others. This will be subject of discussion and implementation over -- beginning this year. Going to Slide 21 in terms of considerations. The provisioned amount in these workstream of BRL 1.58 billion. It is a maximum cap agreed in the socio-environmental public interest civil action settlement. And this includes, as I mentioned, resources that will be available for relocated area interventions, urban mobility actions, social compensation measures and also the collective social and moral damage. And this $1.58 billion, we gave more details that also when we made it public in the sense that there is a value there, an amount that might be serves as contingency costs for 2 of the dimensions, if not, will be convertible in social -- collective, social and moral damage. The priority for 2021 for the company and also for the -- we believe, and also for the signatory authorities of is to establish the decision, governance and monitoring of the program. So we're still in the first move steps after the agreement was settled. And working and defining the recommended measures in 2021, we believe, we'll begin implementing actions, but it's -- which will be the first step, a lot of work in defining together with the signatory authorities within that amount that was defined. The agreement also an important point, provides for the eventual joining of other interest parties to the agreement, and this will be object of negotiations over the next months. So this is something that we'll monitor and advance, we expect, over the course of the year. In the environmental study workstream, Slide 22. I have only one slide. Again, as part of the settlement that we did on the socio-environmental public interest civil action in December 2020, it was to find the logic and the rationale for environmental study that has already been -- has already begun in some of its steps, with the objective of verifying whether the salt extraction, salt well extraction activities, created any environmental impact in the region, including biodiversity, water quality and -- among others. Some important things, important points in this study. When the study will be conducted by a technically-recognized company, the -- aligned with the authorities and also in a scope that is aligned -- prealigned with the authorities. So we begin the study in a mutual -- we'll begin the study with a mutual agreement on the company and the scope that makes sense for both parties. It is a plan of multiple steps and -- which -- and we are in the initial phase of this study in the data collection, and we expect completion of this study by the second semester. As mentioned in the National Mining Agency workstream discussion, the company will also keep the market posted once -- and if we have further material developments in this dimension. Going to the last workstream, additional measures. This encompasses actions that were -- actions related to technical cooperation agreements with the civil defense and the City Hall of Maceió. And also -- and this last 3 bullet points that we can see in the Slide 23, a lot of the costs and activities and infrastructure we need to put in place also to guarantee that the other workstreams happen in the proper way. So being external adviser for the relocation, compensation program, infrastructure for the -- to attend -- to serve the residents and also the management of the program being communication, legal, compliance, everything that needs to go on in the backstage also so that the program can -- the activities can be implemented as expected. Slide 24, I won't go in details here. We have 4 corporation terms the City Hall of Maceió and civil defense. They go from equipments to be provided to the civil defense to have a better structure to monitor the phenomenon, civil interventions, in risk and demolition for -- where necessary, were indicated as a more emergency risk situation by the the civil defense, building inspection and also to support the civil defense in the development of evacuation plans, emergency plans, if necessary, if that situation ever came to happen. Slide 25, we talk a lot about the Residents' Center. Again, to serve the residents and the PCF as we call it, the compensation and relocation program. We include -- we have more than 400 people from social technicians, lawyers, facilitators, back-office structure, IT, planning teams. So it's a huge structure and process that we move so that we can achieve the objectives we have to serve the residents since the beginning. And we created what we call the Residents' Center as a place with more than 2,000 square meters and 100 rooms. So it was a whole structure to receive the community in a proper way and give follow-up and make the process move either in the compensation or relocation. As natural, unfortunately, due to COVID pandemic, the Residents' Center is closed, but we moved the entire program operation to remote operation. And it -- since like March last year, actually, and it's working again. We've managed to achieve important developments over the course of last year. We'll keep monitoring and see when -- if and when we can go back to the Residents' Center. It was a place where we concentrate a lot of the services that we provided people, but this didn't -- it's important to say, this didn't prevent us from keep doing what we need to do in all the services, all the support that we need. We just adapted ourselves in the way we serve the residents. Slide 26 is one example of an important program that we have, Animal Care Program. As you might imagine, it's a huge -- it's a relevant area that's being relocated, and there were like abandoned animals. And we could not look at this and not act in order to create the right social environment in an adequate way. So we made a partnership with the university UFAL in Alagoas on that piece and create a program to rescue, health treatment to -- vaccination programs even for those that are not abandoned, for the people -- animals that were not abandoned. So it's an important program that shows our social care appropriation in creating the right environment and working every way that we feel it's -- that we believe it's important for the residents in the area. Going to Slide 27. Finally, the expected spending in additional measures were dimensioned, aligned with the plan presented on the other action front. So again, we have all these costs of support, experts, structure, everything is in line with what we presented. And also, it will keep being a priority for the company to implement initiatives that are still pending on the corporation terms and enable the entire support and structure necessary for the measures defined in the other workstreams. So thank you. I hope I was able to go through all those points. You will pass to Filipe Tavares, who will talk about the legal front of the case.

Thank you, Thiago. Good afternoon, everyone. From a legal perspective, as you may appreciate, this case has brought us many challenges. And in Slide 29, highlighted here, the main lawsuits that were filed against the company in the context of the geological event. First, we have 3 public interest civil actions, which tackle, the first one, claim for reparation for workers who used to work in the region that's being occupied. The second one, the reparation for all the residents that had to leave their homes to start their life in another area. And another one that tackles the socio-environmental reparation, which focus on the stabilization of the area and also the compensation from an environmental and social standpoint. These 3 lawsuits combined represent for the company, in 2020, over BRL 36 billion in liability. And last year, as a result of the negotiations and the settlements that the company reached with the authorities, we have reduced significantly these liabilities. We also emphasize here class action that was brought against the company last year. It's still in its very early stages, and it claims for reparation of our American depository receipt holders due to alleged noncompliance with disclosure obligations of the company. So going to the next slide. We'll start speaking -- giving a little bit more detail on the first public civil action, which focused on the reparation of workers. We have reached the settlement with the labor prosecutors office to bring down this civil action. It was a BRL 3.7 billion claim. We've also preliminary injunction request to freeze BRL 2.5 billion from the company's bank accounts back in October 2019. This request was denied by the labor justice in Brazil. And in parallel, the company advanced the negotiations with the labor prosecutors office. And in February, we reached the settlement to pay BRL 40 million to implement a program for the recovery of business and to promote educational and work capacitation program that will benefit the workers and students of this affected area. Going to Slide 31, we bring here details on the public civil action that focused on the reparation of the residents of this area that's being de-occupied. In the beginning of last year, in January, we reached the -- a first settlement with the authorities. As you may understand and appreciate, all the actions here have a technical background. So we started the relocation and compensation program to meet the relocation support and compensation of those residents of the safety zone area, which the company started implementing back in November 2019. And further going on in the beginning of the year based on the risk map of the civil defense, which also indicated another area that needed to be de-occupied, given the risk of building collapses, the initial program built for the relocation of the safety zone was also extended for residents of these risk areas. So in January 2020, the settlement encompassed over 4,500 properties and families. And throughout the year, the civil defense updated its assessment of risk of the area, which was also reflected in new updates of the map. And by means of negotiations between Braskem and the plaintiffs of this particular lawsuit, we also included these new areas of risk that were identified in the program. In September 2020, we reached an important mark of the technical understanding of the case. The company concluded, by means of its independent technical experts, an assessment of the impact to the surface of the geological phenomenon, both from an actual present standpoint and also a potential of impact in the future. The results of these studies were shared with the authorities. And the civil defense and the geological survey of Brazil reviewed this information together with the data that they had collected in the field. They gave one last new update on the risk map in December 2020, which was the basis for the negotiation of the final settlement in this lawsuit, which resulted in the termination of the public interest civil action focused on the reparation for residents. So our first settlement in January 2020 had a dimension of about 4,500 properties and families. And the settlement we reached in the end of the year cover the whole risk area, including from a potential perspective in the future. And we expect to have -- to receive in the Residents' Center and in our compensation program over 15,000 properties and families as a result of this settlement. Going to the next slide, Slide 32, we will speak a bit more on the social environmental reparation public civil action. But just before I go there, to close the last one, as I spoke of the new dimensions of this program that can -- throughout the -- this year and the next until December 2022, we expect to receive these 15,000 families and -- at a cost estimated in BRL 5.2 billion. So now back to the social environmental public civil action. This was a very broad and complex lawsuit brought against us by the federal prosecution office in Maceió. It focused on measures that needed to be taken to stabilize the area and also in the identification of -- which would be the social and environmental damages of the geological phenomenon, seeking for reparation or compensation of such damages. So we entered into these discussions, and it went throughout the whole year, last year, always supported by the technical studies -- independent studies hired by the company. So the first commitment that the company presented in this settlement is to conduct the studies to understand the phenomenon and define the necessary actions. We have advanced very much in this front. Many studies have been concluded, and the actions and measures taken by the company so far have a technical background. And tackling the core of the lawsuits, we also focused on adopting the necessary measures to stabilize the cavities and monitor the soil. This has to do with the mining closure plan that the company has to undertake and is followed up by the National Mining Agency in Brazil. This, at this point, the measures that the company knows from a technical standpoint and is implementing, has an estimated cost of BRL 1.2 billion that have also been provisioned. And the second dimension, which is the identification of potential environmental impacts and damages, I don't want to be repetitive. Thiago already spoke a little bit about this. We have hired an independent technical study that will go throughout this year and is expected to be concluded in the second semester and will give us an assessment of what would be, if any, potential environmental impacts in the region. And then the parties in this agreement will agree upon the measures that need to be taken by Braskem. So, so far, we still don't have any cost estimated as we need to have the conclusion of this particular study. In the third and last dimension of this lawsuit, we have agreed with the federal prosecutor's office and also the state prosecutor's office in Alagoas with a cap, a fixed amount that will be destined to interventions in the occupied area, urban mobility alternatives and social compensation projects. This amount is of BRL 1.6 billion, including collective collateral damages that may also -- must also be paid by the company. Going to Slide 33, we'll tackle a bit the class action that was brought against the company in August 2020. As I said in the introduction, these lawsuits [indiscernible] in its very early stages. It has as defendant Braskem and certain of its current and former executives. And it's based on the allegation that the defendants made false statements or omitted information related to the geological event in Alagoas to the market. The company has engaged a specialized U.S.-based law firm to represent the defendant in this class action. And at this point, we still cannot predict with reliability any future development or impacts of this lawsuit. I'll now pass to Almir Cotias to give us an update on our vinyls business operation.

Good afternoon, everyone. I'd like to give you an overview about the vinyls business. When we say vinyl business, we are talking about industrial and commercial operations that we have in the PVC, chlorine and caustic soda. We have assets for making those products in 2 different states of Brazil. We have assets in Alagoas and also in Bahia. Alagoas is by far the most relevant. In Alagoas, we have the caustic soda and chlorine plant is the plant we decided to shut down in 2019. And in that plant, we use a brine, as Marcelo explained in the beginning. So we -- the plant makes the caustic soda that we sell to the market and also the chlorine that we use [ actively ] to make the EDC that will feed the PVC plants that we have in Alagoas and also in Bahia. 2/3 of the PVC production of Braskem is in Alagoas, and we ship the EDC to Bahia to make the PVC or to feed the PVC plant that we have there. As said before, we are in the process of starting the chlor-alkali plant in Alagoas. We are in the commissioning phase. We expect to have this concluded in this quarter. And for Bahia, we decided to shut down a small chlor-alkali plant that we have there in the beginning of 2020. It's a very small, old and in the end-of-life cycle of the assets, so we decide to permanently shut down. Going to the next slide. Regarding the business model, we temporary use it for running the vinyls business since we decided to shut down the chlor-alkali in 2019. We decided to import caustic soda and EDC to be able to feed the market or to sell to the market and keep the market well supplied. We sell caustic directly to the clients, and we use the EDC in our PVC assets to keep PVC running normally to supply the market. And we are in the process of moving to the new integrated business model after the start-up of the chlor-alkali plant back in operation this quarter. We will be able to make our own caustic soda again and serve the market. And as the same we will be doing with the EDC, and we have the [indiscernible] EDC to feed our PVC plant. And instead of importing the chlorine -- the caustic or the EDC, we will be bringing the salt from external sources. And of course, in the meantime, we did an investment to be able to handle process in receiving the salt and using our plant. The investment is about BRL 60 million and was completely up and running. Then I will pass to Pedro that will continue the explanation regarding the financial aspects.

Thank you, Almir, and good afternoon, everyone. It's a pleasure to talk to all of you. I'll try to sum up everything that we have discussed in the past hour or so and try to kind of put it together financially. First of all, on Slide 38, we can see that we had a very significant advance in all the fronts that Marcelo Cerqueira outlined in the beginning. In the legal front, the 3 main public interest civil actions were terminated. And the total request in those actions of almost BRL 40 billion ended up being settled for around BRL 10 billion. It's still a high number, but you can see that reduction in uncertainty is very relevant for the company. We still have the class action ongoing, as Filipe highlighted, but I mean, the 3 largest ones are in the past now. It's -- the challenge now in the technical front and the implementation front to complete all the actions that were agreed upon on those actions. On the technical front, we have completed many studies to improve our understanding of the phenomenon. We are advancing in other studies. And I think most importantly, we have started to actually close and backfill the wells that are in the plan to be backfilled. So that was, I would say, a very significant achievement. It's a type of operation that the company has never done before. And that, I mean, is not very common anywhere in the world. So we are happy to see that it's working in terms of advancing the closure of the mine. In the implementation front of the relocation program, as Thiago highlighted, I mean, we have already made around 4,000 proposals to people around a definitive settlement. And we continue moving on the relocation with the additional areas that were added to the map in December. And finally, on the operational front, as Almir just highlighted, we are coming back to an integrated business model with imported salt. So that would -- will also, we expect, add back to the company's results in the -- through this year and the coming years. Moving to the next slide, we can see the total provisions today. I mean, this is an expected value for the end of 2020. We are still in the process of closing the numbers and having them audited, but the total provision in the balance sheet is expected to be around BRL 8.8 billion. For a total amount, I mean, if you were able to keep track through the presentation, the total amount of the provisions was around BRL 10 billion. We have already consumed around BRL 1.2 billion. That is why the remaining provision is at BRL 8.8 billion. I think it's important to mention here, I mean, you can see the different numbers that were already mentioned through the presentation, but we have also highlighted some expected future developments such as the study, which is not here because we don't have any indication around that at this moment in time. So this is the total number that we have at this point, BRL 8.8 billion. And then moving to the next slide, you can see how the company intends to fund that amount, okay? So we have already set aside BRL 1.5 billion in a specific account that is supporting the relocation program. We have another BRL 3.6 billion in nonoperating cash flows coming from the PIS/COFINS credits that the company either has already recognized or that the company expects to recognize over the coming years. We have insurance, general responsibility insurance of $300 million, which is around BRL 1.7 billion at current exchange rates. We are still discussing that with insurance companies, but I mean, we do expect a favorable result on that. And then the company will be able to count on that, again, depending on the result of those discussions. So you can see here that, that adds up to close to BRL 7 billion. The BRL 2 billion identified here, I mean, first, we have 5 years over the kind of the cash flow of this BRL 8.8 billion. Second point, the company today is carrying an excess cash of BRL 8.5 billion. So the BRL 2 billion that are not mapped out here will likely come either from existing cash or from future operating cash flow, but you can see it's not a big burden for the company going forward. So from a nonoperational perspective, I mean, the sources of cash and the uses of cash seem to be well balanced, and we then can count on the operating cash flow for the other users of the company. And the next slide, my last slide is just the outlook for 2021. Of the BRL 8.8 billion, BRL 4.1 billion will be disbursed this year. And then this year, you can see there, I mean, again, BRL 1.5 billion from the -- already set aside to the relocation program. BRL 1 billion that we expect to monetize in PIS/COFINS credits this year. And then the insurance with all the kind of the comments that are already made on that. So for this year, we believe that, I mean, all the sources and users are already in balance. And I'll pass on now to Marcelo Cerqueira for the final comments before we open up to questions. Thank you.

Okay. Thank you, Pedro. So as you saw in the previous slide, we made a significant progress in all fronts, especially in the Slide 38, where we show where we were in January 2020, where we are in 2021. So a significant progress. So -- but we need to keep the pace. And for 2021, the priorities are to ensure the safety of the people in the region. So we will continue to make actions to protect the people in that area. We will continue to advance in the financial compensation program and support of the relocation program for the people. We implement the action defined in the agreement related to the socio-environmental process. And we will continue to advance in our plan to closure the mine and interact with the mining agents. We will conclude the commissioning phase of the chlor-alkali plant. As I said, we expect to start up within a few days. And we continue to monitoring the region following the dynamics of the geological phenomenon. So this is what we have. So I think we can now open for Q&A. Thank you very much.

[Operator Instructions] Our first question comes from Guilherme Levy, Morgan Stanley.

I have just one question, actually. I understand that the environmental [ trend ] is the only one missing now, and that this [ trend ] is included in the social-environmental direction of Slide 32. So I just wanted to understand, how is this going to work? After the company concludes the studies in the second half of the year, what are the mechanics to -- I don't know if this is correct, sir, but to amend these social-environmental agreements and add these values, so we don't have this, like, open clause anymore? And also, if the company, by any chance, has at least an order of magnitude for this additional environmental liability, that would be great.

Guilherme, thank you for your question. This is Filipe again from legal. With regards to the results of the environmental assessment that's going to be conducted by this independent technical consulting company, which was hired in agreement with the federal prosecutor's office, once this study is concluded, and it's expected to be concluded in the second semester, and the company presents the results of the potential impacts that may appear from this assessment, the settlement already provides for the governance of the interactions between Braskem and the federal prosecutor's office to define what measures must be taken. Together with the assessment of the impacts, the independent consulting company must also present its proposal for measures that need to be taken to repair, mitigate or compensate such environmental impacts. In case the parties, Braskem and MPF, do not agree on the plan presented by the consulting company, the settlement provide for a second opinion from another independent consulting firm, which is also to be hired by Braskem to support the discussions among both parties. The plan for -- the execution plan for what needs to be taken regarding each of the impacts that may be identified are to be determined by both parties, by Braskem and MPF. And once they are agreed upon, they will have their own schedule and provisions of estimated amount to be incurred. So there's no necessity to amend the agreement, the settlement that was reached in December, given that it already provides for the governance of this process, which we expect to start in the second semester once we receive the result of this independent study.

Just to complement, Guilherme, I was under the impression when you started your question that you -- I mean, environmental aspect that Filipe talked about was the only aspect missing. In fact, we could say that we have a few aspects missing that were mentioned through the presentation, and I will just highlight them because I think it's important that you have clarity around that. So we highlighted that we still have one area of priority in terms of negotiations for 2021, which is around the public concessionaries and individual lawsuits that is highlighted in Slide 16. So that's one area that we are also going to focus on in 2021. It's important to mention that in Brazil, I mean, individual rights cannot be eliminated by a settlement like the one that we did. So people and companies and other entities still have a right to come after the company. What we have established in the settlement is that if they want to join the settlement and be a part of the relocation program, for example, then they need to give up their personal claims. But that's one area still that is going to be a focus for this year. The second one is the environmental claims that -- the environmental study, sorry, not claim, but environmental study that Filipe mentioned. The third one is highlighted in Slide 21. We still can have other interested parties joining the agreement over the next few months. So that's also going to be negotiated on the socio-urbanistic measures front. And finally, again, as highlighted on Slide 19, I mean, we have a legal obligation around the closing of the salt wells and the stability of the mine. And that is supervised by the Brazilian mining regulator, ANM. So we still have that conclusion of discussions with the mining regulator around the implementation of measures. So I wanted to highlight those. They are all through the presentation. But putting it all together, we still have these areas of priority for 2021. I just wanted to emphasize that, I mean, close to the uncertainty that we had over the past year and the reduction in uncertainty, these matters that are remaining, they [indiscernible] us to be much less relevant. So I think the -- we should not let, I mean, these lingering areas of priority be in front of the huge advance that we had last year in terms of reducing the uncertainties and the risks around the case for the company.

Our next question comes from Gabriel Barra, UBS.

I just want to hear related to the operations in [indiscernible]. Is this in relation to a -- of the provision process operating model? How should we think about margins compared to the company had today with the salt mine operation? And what impact does it have in salt mine if you start to reduce supply by third party? That's my question.

Gabriel, your sound -- I mean, your sound was a little bit low, so -- and blurred. So I got that you would like to understand how the new operating mode will affect margins for the company now [indiscernible] production with imported salt. So I'll give you kind of a high-level overview, and then I'll ask Almir if there is any additional information for Almir to complement. When we stopped the operation back almost 2 years ago, we announced that, that would impact the EBITDA of the company negatively for an amount of $20 million to $30 million per quarter. So let's say, around $100 million to $120 million per year of lower EBITDA with the plant stopped. Looking at the operational model with imported salt doesn't give us back the same type of returns and results that we had in the past because of the higher logistics costs that we'll have. So what we see now is that we will have roughly a recovery of roughly half of that amount of about $100 million, $120 million. So that would be $50 million, $60 million of EBITDA recovery in the vinyls business, plus an additional benefit in the Bahia cracker because that cracker, I mean, with the chlor-alkali plant shutdown or not operating the cracker was operating at roughly 2 percentage points below the historical average. So that -- those 2 percentage points, I mean, that's only marginal returns. All the fixed cost is already paid for. All the CapEx is already paid for. So it's a valuable 2% that we're getting back in terms of operating rates in Bahia. And also, I mean, looking at spreads and spreads that we have for the vinyls business in the past year or so compared to what we are seeing now, the spreads now seem to be almost $200 per ton better for this year. So actually, the $50 million, $60 million that I mentioned in terms of return to recovery in operations could have an upside to that if this, I would say, higher spread materializes over the course of the year. Almir, if you have any other points to complement, go ahead.

Exactly, Pedro. I believe it's -- we will be able to capture back certain amount of the -- half or a little bit higher than that what we had before, but create us conditions to improve our operation, stability and also to generate some kind of benefit in the integration that we have with the assets in Bahia. I believe it's successfully that. And the market is -- the moment in the market is very good for vinyl. So we can have that in a moment that the market is in -- having a higher spread is even better.

Our next question comes from Christian Audi, Santander.

The level of detail here is really amazing. I know it's been a tremendous amount of work on the part of the company. So I know it's not yet done, but a phenomenal job on a very complicated situation. I had 2 questions. The first one, Pedro, on -- and again, thanks for the level of the breakdown and the detail. On Slide 40, you break down the provisions and where the money will come from. But the basic message here is -- I just want to make sure I understand because it's a lot of information, is that the provisioning should not impact, in any significant way, the operating or the cash flow being generated by operations. So when you combine the cash and all the other items that you showed, that the impact on your operating cash flow generation should not be significant. Just to clarify that I understood it correctly. And then secondly, when we also look at that slide, you had that breakdown of the PIS/COFINS credits. If you could just elaborate a little bit on the timing of when the rest of the PIS/COFINS credits would be booked, that would be very helpful.

Christian, it's a pleasure talking to you. So on Slide 40 and the breakdown, it's -- I would say this is a proxy that we created, that we are setting aside nonoperational funds available to the company, plus nonoperational future cash flows like the PIS/COFINS credit and the insurance against this nonoperational liability that the company has. So it's a way of trying to set aside these cash flows. And then when we look at the operational health of the company and, I mean, the operational prospects of the company, then we can look at operating cash flow and not be concerned about, okay, how are you going to pay for Alagoas? We are trying to set aside the nonoperating cash flows in kind of on a proxy basis, right? So this is not a formal allocation, but it's a way for us to show that the nonoperating cash flow available to the company, plus the nonoperational excess cash that the company has is enough to pay for the full amount of the liabilities. Of course, there's a timing aspect here. So for example, as I showed in Slide 41, for the BRL 4.1 billion for this year, that would be already covered under those assumptions. And then moving forward, I mean, the additional BRL 2 billion [indiscernible] be required from cash likely could be required only next year or even later than that. So that's part of kind of trying to separate those 2 worlds, right, the nonoperating with this liability and the operating cash flow. On the PIS/COFINS, there is a breakdown there, as you highlighted. The BRL 1.6 billion is already in our balance sheet booked because we have already had that case passed through the court. The BRL 2 billion, I mean, all the companies in Brazil have already won that case in the Supreme Court. But the case needs to pass through the lower courts. Every specific case needs to pass through the lower courts for that to be booked. And we do have a few cases that have not yet passed through the lower courts for a final kind of assignation, but it has already been won in the Supreme Court. So it's more of a procedural aspect that we expect to be concluded this year. We don't control that time line, but it would be reasonable to assume that, that would be booked over the course of this year.

[Operator Instructions]

So we have received a few questions by e-mail, and I'm going to read them. So the first one is, on Slide 13, what is the likelihood that the monitoring area will continue to expand? At what point will the growth of the monitoring area end? And I will ask Thiago to address that question.

Okay. Thank you. Can you hear me? Okay. So thank you, Pedro. So as I mentioned, so it's -- the first message I tried to give when presenting slides, that the risk evaluation map is already a comprehensive and, in our view, a conservative view. Again, it relates to all the areas that are considered risk areas for relocation areas. They are still defined as monitoring, already assumed as part of the scope in the last agreement that we made. And then also encompasses all the views of potential areas that might be impacted in the long term, scenarios of the long term given the studies of 3 different institutions, renowned institutions from Brazil and outside of Brazil. So it's -- again, it's not, I would say, likelihood or things like that. Our view is -- again, is already a very comprehensive map is, in terms of context, [indiscernible]. Now we have the monitoring areas, and we have these potential long-term scenarios. So we feel that it's much more solid understanding and much solid scope that we have to act, especially in comparison to -- as the developments happen throughout 2020 in the new technical developments, as I mentioned. And the final thing, as I also mentioned on the slide, let me see, sorry, Slide 16, is that due to the technical -- due to the agreement that we made at the end of the year, it was [indiscernible] technical group. And this group will be responsible for monitoring the event and also studying adjacent areas for a period of 5 years. Again, it's not anticipated, again, any aspects at this point in time. Seems also monitoring areas are already consolidated in part, but it will be also scope. And we don't anticipate at this point any developments. Anything different from that will certainly be shared with the market.

The second question is a question to me. When do you expect the BRL 1.7 billion in insurance to be confirmed and agreed to by the insurance companies? So it's a complex discussion with the insurance companies. I mean, all the process, right, all the situation is complex. It involves a lot of interactions and flow of information. There are technical studies being conducted also by the insurance companies based on technical documents that we are submitting. So although we do expect this to be resolved over the course of this year, we cannot give 100% guarantee that it will happen. So again, given the complexity, the depth of the studies is very great. And then, I mean, it will take some time for that to be resolved. Nevertheless, I mean, from a cash flow perspective, you saw in the chart that we could be counting on that for cash flow for this year. But if not, I mean, as I said, roughly BRL 2 billion are going to come from excess cash anyway. So if we need to use those funds this year and then count on insurance for the coming years, that would also be fine for the company.

[Operator Instructions] With no further questions, I'll turn it over to the company for closing remarks.

So thank you very much. This is Marcelo. It was a pleasure to participate in this call with you. Our objective is to clarify the information regarding to the Maceió case. And I would like to emphasize the huge progress that we made in all fronts in 2020. It was a huge work from the team, and we will keep the pace in 2021 in order to reduce the uncertainties. So this is our objective for 2021. So this is my final messages. Thank you very much, all of you.

Thank you. This concludes today's Braskem [indiscernible] conference call. You may disconnect your lines at this time. Thank you.