Companhia Energética de Minas Gerais - CEMIG (CMIG4) Earnings Call Transcript & Summary

[Audio Gap] our 25th Annual Meeting of Cemig with Capital Markets. This is first 100% online version. In the prior years, we also held these events, and we had over 100 people with us. But we needed to adjust to the current situation. And we expect to see you here with us in Minas Gerais in the next few years. We are very happy to have you with us in this online event. And I would like to introduce to you our panel. Today with us, we have our Chairman of Board, Márcio Utsch; also our CEO, Reynaldo Passanezi; our CFO and IR Officer, Leonardo Magalhaes; our Chief Generation and Transmission Officer, Paulo Mota; our Distribution Officer, Ronaldo Gomes; Dimas Costa, Commercial Officer; Rafael Noda, our Chief Participation Officer. And also, we would like to inform you that you can follow this transmission via the phones and the links that are available in our RI website, ri.cemig.com.br. I turn the floor to our Chairman of the Board, Márcio Utsch, for his initial remarks. Márcio, please?

Good morning, everyone. This is the first time that we have this audience with no one in it. We have capacity for 100 people in front of us, but this is the first time that we don't have anyone in front of us. And this is the first online conference. Probably we'll have some improv because we might not be able to manage everything. But what is important is that you can better understand Cemig and better value us, our company. I will have a brief participation here. Just to tell you that what we have ahead of us, it's a basic guidance or a basic direction from our controlling shareholders, the state of Minas Gerais. And this administration was elected to privatize companies. And he's asking us to do exactly what took him to office, which is to privatize the company. We know that to get to that, several steps must be taken, and there is a whole series of steps and approvals and shareholders' meetings and other meetings, and we'll go through all of them so that we can meet the expected targets and also using all our negotiation abilities so that everything happens. I also would like to tell you that we are trying and just live in a very special progress in Cemig. We have a great governance improvement in the company. And everyone that works here in the technical areas and our officers, they have always been chosen by technical criteria, and they are very capable. And we are very happy about our team, just as the same our Board of Directors. Also, the Board members have been appointed by the majority shareholders and everyone else. Everyone knows the electric sector or they will know finance and management. Each one of them come from a different school, but we have a good heterogeneous Board, and they have knowledge in different areas. And this is very good. And more recently, in the preparation for post COVID, people ask us how is going to be this new normal, and I don't like this question. I think this is a boring question. And so you only can tell that there is going to be a new normal if you were normal before, but no one was normal, so we don't have a normal, nor a new normal. So things are the way they should be. So at this time, we took this -- we see the opportunity to change things. We have a new layout. We are turning the operations faster, quicker. We have a building that's going to be empty by our building here, so we'll be able to optimize our personnel. We will optimize room spaces. So there are several improvements being made, and it has to do with the governance of the company and the improvement that we want to provide to the results of the company. We want the good governance -- or better governance to allow us to reach better results and that we can raise the bar, therefore, have better results, more results, people feel happier working here, and people that pay the electric bills are happier as well because they have a good distribution, a good service. And if we have problems, and we will, that they can be addressed very quickly. So many things need to be done. You will see the figures very soon on the presentation, so you'll see that there's a lot of consistency on what I'm telling you. And I just wanted to bring to you this encouragement words because if things have not been going as fast as we thought, I can tell you that things are moving well. So it's like we have a dam, and when we lift the dams bars, things are going to move very fast. And I'm sure that we'll be reaching this new level and turn this company even more efficient. So I will bring Reynaldo to the floor for his presentation. Thank you very much for being with us. And I know it's a little bit harder to be in front of the computer following the presentation, so please be patient, bear with us, and I am sure that you will enjoy what you are about to see. Thank you.

Good morning, everyone. I'm also here, Márcio, trying to see over 200 people in this room. How many people do we have now virtually? We have 280. Yes, the room would be more than filled out. Well thank you very much for being with us virtually in this event. For us, it's really an honor. It's very nice to be able to bring to you what we are doing, what is the company's strategy, where we want to take the company to. And specifically, we worked on this presentation in order to address the main concerns of investors. So in these past few weeks, our IR team has talked to analysts, with investors. And this presentation will address what we understand these concerns are, the questions that you might have, and we'll try to tackle them throughout the presentation. I think that we would like to start, and I think this is what we can tell, it's respect for life. This is a nonnegotiable principle that we have. And that's why we are holding our Cemig Day virtually today. We have an empty room physically here, but it also exists because we wanted to tell you this is an actual room, and we want to bring together the 2 realities. And we, of course, want to ensure the health and safety of our employees, the health and safety of maximum quality service that is provided to society and also the customer satisfaction, okay, about our employees. Of course, that most of people in our administrative functions are in home office. We have 22,000 employees, our own and outsourced. So we have a lot of people out in the field, so I would like to thank everyone that is out in the field working and honoring Cemig's name, making sure that society has quality public service and it's not interrupted. And of course, we still have this building. It's basically empty. We have 3,000 people that would be working here, and now they are mostly in home office. Right now, we only have the officers, superintendents and managers here. We have used all types of protections in terms of equipment adaptation for teams, protocol adjustments, training sessions, PPEs, hygiene materials, testings and also preventive testing of our asymptomatic employees. And we are very proud to say that we have around 150 people only out of the total of 22,000 employees that had confirmed cases of COVID-19. Unfortunately, 4 of them were fatal. And I think that shows that all our safety protocols have been satisfactory. Just as the same, we developed a lot of protection protocols to ensure operations, the operation center, several redundant sites. We also placed protection protocols for hospitals, emergency. And Dr. Ronaldo is going to talk about it as well. We have a DEC, our outage index, which is 1 hour below than the past. And we also made donations. There was an important donation campaign, ventilators campaign and ventilators donation. It's very important here because we put together donations and innovations. And also, as far as clients are concerned, we also provided virtual service. This is here to stay. That's very important for us. And our flexibilization of negotiations with customers, I think that's very important as well. We respect life. We guarantee safety and health. And we work also to serve the society with a quality public service, understanding the situation, the customers' situation, flexibilizing negotiations and also allowing for digital negotiations so that everyone can access safely our services. So now I start addressing what is one of the questions that people always ask us. What is your view? What is your perception? What have you been seeing since you arrived? And how are we going to face it? And which are the priorities of this management? So the first thing that I would like to highlight, and it's always surprising when you come in, is the size, the complexity and the opportunities that Cemig poses. And we have it here. Cemig is the largest integrated electricity group in the country. And here, we have a figure that is a little different from the accounting figure. We have here the different participations, and we added them up to the EBITDA because, usually, they are not in the consolidation, they are in the equity method. And then we see the real size of the group because in this group, we have distribution that is the largest distribution company -- individual distribution company in the country, the sixth largest generation group, the second largest transmission group, the largest commercializing company in the country. And we have shares in many businesses, Taesa, Belo Monte, Aliança, Light, Santo Antônio. That is -- this is a group that really has a size and the complexity that is important. And I always look at it as a landmark for opportunities because we can do a lot of things in each one of these areas. So we are talking about an EBITDA in the last 6 months of BRL 3.5 billion. If we annualize that, it would be BRL 7 billion. Anyone that you want to do a sum of the parts valuation know what it means to start out of an annualized EBITDA of BRL 7 billion because those shares are more or less 1/3 of the EBITDA, the BRL 836 million. So for me, well this was the first thing that I realized: the company has many opportunities. And in addition to Cemig, there is another world, which is the world of the nonconsolidated investees. That in terms of management, it does take up our time, and that represents a lot of opportunities. And Rafael later on will comment on that in further detail. So this is the first message. Think about Cemig. We can go beyond the accounting figure, the reported figure. Cemig is much larger than that. We are talking about an annualized EBITDA maybe close to BRL 7 billion, so very well balanced out among the different areas in the company. Something else that really surprised me were the sustainability practices held by Cemig. Cemig has wonderful sustainability practices, and we cannot forget that. 100% of the energy generation of Cemig is renewable. Very few are the companies that can say that. Cemig is the largest supporter of culture in the state of Minas Gerais. Cemig has invested almost BRL 100 million in energy efficiency. When we look at our social figures of supporting hospitals, supporting social projects, these are amazing figures. We have 55 kilometers of area protection for land, for forest. I visited Très Marias, and it's very nice to see all the protection and environmental protection in their area and the water life and make sure that the generation plants' surroundings are protected, both plants as well as animals. So I see here that we are very proud about our sustainability practices. And that allows us to be greatly acknowledged. We are in the Dow Jones Sustainability Index since we started. We were also awarded the transparency prize in financial statements. It's here to the side, the transparency award for governance, the best financial statements. And you can see that in the presentation, we have a series of awards we received. So the size of Cemig is generating many opportunities and also the sustainability focus, and these 2 things are surprising and are very good and how can we lead such a large company and with such complexity. And then I turn to a third topic, which, for me, is also a reason to be very happy, and I see it as a great potential for transformation of this company. People here at Cemig do love the company. We have a trained team. Our technical team is highly qualified. Everyone is committed, proud of the company, and everyone loves the company. So I believe that with that, we can do a lot. And I see that every day, I see the passion in people's eyes for being here. And what are we doing with that base, with that substract, we have 2 major movements. One of them is to work on the cultural transformation, and we have consulting services specialized and working on the cultural transformation. And we also have another movement, which is to review the strategic plan of the company also with specialized consulting services. And so with that base of the technical capacity of the company and the pride that everyone has a love for the company, if we work on the cultural transformation and if we work on the strategy, I know that the results will be wonderful. And what do we want to work in terms of the cultural transformation? And here, I can tell you what I call our mission, which are the strategic objectives. We have an objective to change the rationale for decision-making. And of course, we have the objective metrics in terms of performance targets. So on talking about cultural transformation, the first topic is a private rationale for decision making. What is that? This is a business-oriented rationale with no political interferences. And we are going to look for a decision within a company's rationale, not with public power rationale. I think this is transformation. And we are growing on that, we'll be more agile, we will be faster, and we'll be simpler. And when you look at that, I want the private rationale, we are going to be working to be simpler, more agile, we are going to target results, not necessarily a public or bureaucratic rationale. So this is the first topic, the private rationale in decision-making process with no political interferences. Here, we only take technical -- we only make technical decisions, and we focus on results. And focusing on results is also an important transformation because we are not only looking at the process, we are looking at the results. We are not working in silos, but we are working towards the company's results. This is a customer -- also, we have a client's point of view. So not only the rationale of the product that we are offering, but also, we have the clients and the customers at the core of our concerns. We work for them. So it is the customer, the client, not the product. This also has important implications in terms of how the company works, integration. And Márcio mentioned it. For instance, all of the officers today, we are in an open space. We are in the same room. I think that integration and not working in silos is important. These are crucial topics for the transformation that will generate results. And obviously, also integrity, compliance, ethics, I think that's also at the very core, at the very base. And that transformation is going to allow us to focus more on results, to be more business-oriented, to have that private business rationale. And this is a preparation so that the company is ready for privatization if that comes to happen and, of course, also respecting following all the legislation steps. So we have cultural transformation as a substrate for the company's transformation and the review of the strategic planning. And here, talking about strategic planning, we have something that is more concrete. And these are cross-functional topics that can be applied in all the areas. First, operating efficiency. We have to be efficient. We have a lot of optimization opportunities. And this is one of our mantras, to do more with less. Never -- we will never let go the quality of service, but we will try to do the same service with less resources, more efficient, in a simpler fashion, less bureaucratic, more digital. And second is digital transformation. This company obviously has a digital challenge that is huge. And in the strategic planning review, we hired a specialized company in the strategic planning along with the digital transformation plan. That's why we want to -- if we want to be in the 21st century, the main driver for transformation and efficiency is digital transformation. Two topics that have similar names, asset management and liability management. For asset management, we want to work well the regulatory asset base, but we want to optimize the life cycle of each one of the assets, to know when to hold maintenances, when we have replacements, when we have to understand regulations. And we have a variable plan in terms of distribution to have a base of regulatory asset base of BRL 3 million in the next tariff review. These are BRL 6 billion in investments, understanding regulations, generating 0 disallowances and, at the same time, optimizing the use of the life cycle of that asset. We have a lot of opportunities here in generation and distribution and, of course, in generation. Liability management, the company has to face its liabilities. And these are critical topics to ensure the long-term sustainability of the company not only in terms of the financial management, and Leonardo will talk about the debt management, but also obligations that we have such as the post-retirement, that they have to be faced. And if we want to be efficient, we will only be efficient if we are able to do more with less and address structural issues that we have. And obviously, we need to go back to growing with innovation. Here, we are bringing to you, and this is something that is a direction, and I would say that we are adapting to that. We need to seize the growth opportunities that exist today in generation considering that we have the largest commercialization company in the country. We have access to clients. We have technical engineering that is skilled. And we have to seize and use this capacity and these engineers and the ability then because we have the largest commercializing company in the country and invest there. So we are talking here about the regulatory asset-based growth and distribution and transmission. But also, we are talking about growth in terms of renewable energies, distributed generation and also seize the opportunity of -- and take advantage of our single access to customers. And finally, innovation. Here, we have to take all opportunities and modernizations of the electric sector. And that will allow us in terms of energy, storing, electrical vehicles and also in terms of opportunities, for instance, separation of energy and the base because our matrix favors us to all of these situations. So this is our mission, I would say, in a transversal point of view, to work on the culture with focusing on results, also the private decision-making rationale, operating efficiency, digital transformation, regulatory asset base, management of liabilities, focus on post-retirement and innovation. And this is an initial comment, and we are going to try to go into each one of these topics in the different areas. First, highlighting the area, the focus -- the strategic focus and then allowing each one of the officers to tell us how we are going to reach and fulfill that strategy. So Cemig distribution. Here, we are talking about 8.6 million clients in 774 towns, this is the largest concession of distribution in the country. We serve 20 million people. And this is the third main GDP of the country, Minas Gerais. This is a number that surprises me when I look at the size. We are talking about 540 (sic) [ 540,000 ] kilometers of lines in the grid. These are 40,000 kilometers that is 13 times around the earth, 13 times around the earth, 13 rounds around the earth, and to give you an idea of the complexity and of the size of the effort to manage the grid. And we've been very clear about this message. Our message is that we have a strategy to turn around the company distribution. The company is in the results plan of ANEEL. There are some challenges from the standpoint of efficiency, quality and technical losses. And our goal to turn around the company is successful. And I mean Cemig Distribution. And our team is very focused and want to deliver those results. And I'm going to invite Ronaldo, but our strategy is this. In order to surpass the regulatory EBITDA, which means delivering the regulatory OpEx, delivering all of the metrics regarding losses, commercial losses, improving quite a lot our customer service with more and more digital service. And finally, work [ relentlessly with the ] investment program. I talked about [ regulatory ] of BRL 13 billion. And including in this program is strong plan for digital transformation. And this is our strategy -- our turnaround strategy. I'd like to invite Ronaldo to explain to us how we are going to deliver all of these challenges.

Good morning, everyone. The first challenge that we have, as Dr. Reynaldo mentioned, to have the company complying OpEx and regulatory EBITDA requirement, this is an obsession for the company. It's our mantra, to do more with less. And we show those. So looking at the top chart, we see regulatory OpEx of about BRL 1.303 billion (sic) [ BRL 1.323 billion ] in the first half of 2020. And PMSO, these are the funds that we apply directly to our operation, contributing BRL 228 million to have the company complying. And this is the differential that we have here. Both the Board and the Executive Committee are following cost-cutting topics, retirees benefits, the voluntary severance program, fines and compensations, provisions and also our ADA, allowance for doubtful accounts. So we have a default provision of BRL 152 million. We also have the short-term investment of the company that consolidates future results with the voluntary redundancy program. We have a positions and remunerations plan which is very well structured and aligned with market practices. Fines and compensations, even our investments are a priority, also for preventive maintenance. And we will have a much lower result than last year. And these provisions, already BRL 44 million, very much linked to labor and civil claims, but this is very well addressed by our legal department and supported by our Board and Executive Committee. And the default provision, well this year, we have the COVID impact. I will detail that more in the future. And we have a real actual OpEx of BRL 1.519 billion. And I'm from the operational area, and I'd just say that we have a potential to comply with all of the targets. In regard -- I was talking about OpEx at the top, and EBITDA is on the bottom chart. We have BRL 1.323 billion. And it's a coincident number. It's a coincidence in the first half, we had an OpEx of BRL 1.323 billion, and the regulatory EBITDA is 1.323 billion. It's a coincidence. And the EBITDA that we had so far, considering the contribution of other revenues, the part that stays with the distribution company, the product services to clients. In OpEx, we have a negative contribution of BRL 196 million. And with the nontechnical power losses, that is related to fraud. And we have a robust plan to fight that. I will give you more on that in a minute. So we have a huge potential of reversing the result even in 2020 regarding both the OpEx and -- regulatory OpEx and EBITDA to achieve the required coverage. Regarding losses -- technical losses, which account for 65%. Technical losses account for 65% of the coverage of total losses, and commercial losses account for 35%. In the process of tariff review, we were able to have integral coverage of technical losses, but still, we have an investment of over BRL 6 billion. And in this investment program, we are reconfiguring the mid-voltage system redistributing loads. And through these actions that cascade down into several other actions, we are compliant in this item, but we intend to achieve a lower value of technical losses, lower than the coverage. This happen over the years. Regarding commercial losses, about 2%. By the end of 2019, we approved a robust plan to fight commercial losses. And because of this program, in 2020, we intend to have a result which is 20% better than last year's result. But in 2021, the goal is that we'll be compliant. These are the actions. 1.6 million inspections. Well there's the COVID-19 impact. We have to train the teams. But again, we want to have many inspections. We'll have about 270 teams carrying out inspections in the state of Minas Gerais and already mapped regions where we have the highest fraud incidents in metropolitan area of Belo Horizonte and in the area of Monte Claros. We'd have to regularize 120,000 unauthorized connections, in other words, families using power without paying for it. Public lighting has to be inspected, 2.2 million public lighting points. We have to identify the light bulbs that are there compared to our records. And we have remote and automated metering or reading. We will be installing 345,000 points with an advanced and smart metering infrastructure. So we'll be able to measure the profile of consumption remotely, and we'll be able to act with distant disconnections and reconnections. Well there are 7 action groups, with these 4 account for 94% of the deliveries of the plan to -- so that commercial losses will be compliant by 2021. And we have here default. We also have a robust plan being executed. It's in motion. It started being executed in 2019, and it was achieving some results. And we had the COVID-19 impact from the end of March until the end of July. We were not allowed to make disconnections, as all distribution companies in the country. But now this has been resumed. We expect to be disconnecting some families. But even without the disconnections, we had an intensification of our collection channels, and that is important. In 2019, we don't have it here, our billing -- our collection was low in January. We were able to get 98.2% of recovery. In other words, what we bill and what we collect, billing collection -- or actual revenue overbilling. And now in August, we achieved 101%. Considering the bills maturing in this month of August, we are also collecting bills that were in default. So in July (sic) [ June ], 94.4%; in July, 98.5%; and in August, 101.4%. In September, do you love this, we had 108%, but that's not in the chart. So we are in this process of collecting default clients. And we are charging double through virtual channels. We are protesting that. We are sending collection letters delivered at the time of meter reading, bringing this to the customers. We are collecting via specialized collection companies. There are 2 collection companies working for us. This is new. We didn't have it in the past. We also are using WhatsApp to try and collect it and payment at the time of disconnection. So we go to the customer's household. Instead of disconnecting, we have them use their debit or credit card to pay their debt. We are accrediting collection agents including fintechs, digital banks. There are 3 agreements underway or being negotiated with these collection agents. We are also negotiating with the state of Minas Gerais. There's a [ BCLD ] reversion to happen in the month of July. We have agreement with the biggest default customers -- retail customers, I mean, ensuring BRL 140 million in settlements. We have a negotiation campaign via WhatsApp. We allowed them to pay their debt in installments, in up to 12 installments. Then so we will achieve [ BCLD ] or ADA, right, for this year will be delivered. We also have late charges on past-due bills that will ensure a lot of funds inflow into the company, about BRL 300 million; and until June, BRL 172 million. We also have a new model of service. Well COVID-19 is an exceptional period. But we have some customer service channels. And we identified a gigantic opportunity for improvement, to redesign our processes and to make the digital channel extremely friendly -- user-friendly. We don't have this yet, but we are working full-time as a team that can give us an annual gain of about BRL 14 million to BRL 28 million. And this process alone, we are redesigning our processes internally, and we can ensure additional resources in other areas executing services to customers. That accounts for 30% of this BRL 28 million. If we achieve BRL 28 million, it will be a 30% cost reduction in this new client service model. We also have our investment plan. We were very successful in our tariff review, ensuring 0 disallowances, inclusion of 100% of investments in the remuneration base. So we have the potential to include BRL 6 billion in the regulatory rule and achieve a net remuneration base, a BRR of BRL 13 billion by 2023 and to ensure 0 disallowances. This will ensure growth of 1.14 million clients; and almost 3,000 kilometers in high-voltage lines, plus 17%; 80 new substations, plus 19%; and 2,150 MVA of transformation capacity. So this is very important. It is important to invest. The distribution company has to be in this virtuous cycle of investment. DEC in a mobile average, we are at 9.48. This is the results compared to 2019 and previous years. And we have the possibility of ensuring and we will be doing this by 2020, we'll be looking through the vast DEC of the company. The whole company's mobilized to achieve these goals. And this is determining first to maintain our contract for another 28 years. DEC is the average outage duration for a customer. I will now turn the floor to Dr. Reynaldo to comment on -- and to continue the presentation. Thank you.

Thank you, Ronaldo. I think that Ronaldo's presentation was clear in terms of helping us understand that, yes, we do have a turnaround challenge. And that's the first part. Once we get that, we have to face it and deliver the results. And this is exactly what we are working on. We want to comply with regulatory OpEx, be compliant with commercial losses, have our investment plan to ensure an adequate remuneration base and on high life things which are opportunities for us. Because in the collection of past-due bills, we have millions of reais, this is hard to recover. But when we make a huge effort to recover, we also recover or revisit themes of the past that were forgotten and like they can generate [ relief ] for the company. I will now make some comments -- I'm always going to make some more comments in terms of our transmission strategy as wells as transmission for generation. And then I'll turn the floor to Paulo, and Paulo will be commenting and explaining how we're going to achieve all that. But in transmission, I see that transmission needs to get more attention. In terms of how investors see the company, Cemig has a big transmission company. We're talking about BRL 800 million, 5 million kilometers of transmission lines and 44 substations. With a very large investment program, you're going to see an investment program for the next 5 years of BRL 1.2 billion. Yet this is not auction. We're talking about grid. We're talking about lines. So we are always going to have opportunities to improve with organic growth. We're very proud to have Cemig T as benchmark in operating efficiency. And our growth strategy is one focused on having updating and improvements because we have the center of the load. And we should look at auctions when there is a potential for synergies for the company. I would like to comment a little on generation, and then Paulo will comment on transmission and generation. Also in generation, and this is a very big company in terms of generation, we lost some concessions in the past. But the company has a strong engineering team, renowned technical capability, if you were in the industry. We find Cemig people or former Cemig people everywhere, and we are working to renew our concessions and to work recoverability to develop projects focused on renewables and integration with Trading. In other words, we have the customer. And we are buying power from third parties in order to develop our own power. So generally speaking, in Transmission, we have the goal to invest in updating and improvements, in other words, asset management, optimizing the life cycle of the assets, enjoying the opportunities, understanding that this is very profitable and a very important and strategic area for Cemig; and in Generation, to develop a pipeline of projects and take advantage of the fact that we do have the customers and we want to develop projects to serve our end customers. Paulo, we'd like to hear your opinion on how we are going to achieve these goals.

In the case of Transmission, I'd like to stress what Reynaldo has just stated. To stress Reynaldo's words, it is very important to be the benchmark in operating efficiency. This is established by the regulatory agency, ANEEL. Cemig is at the top alongside companies that achieved this kind of operating efficiency. And our challenge and our goal is not only to continue as a benchmark but to evolve so that we can be more and more competitive. It is important to mention one case here of growth with synergy. Recently, Cemig acquired Centro-Oeste, the working stake of Eletrobras, and that brought us synergies and results for the company. So it's a clear example of how we can increase our operating efficiency even more. Another important point in Cemig Transmission, well it is important, and the [ concessions ] part of that group was extendable. If you're in the electric sector and category 1, concessions mature in 2042. And that modality, this kind of return to the company's portfolio, 94% of RAP are in this portfolio. And because these are extendable, we are focused on updating and improvement. And if there are opportunities of auctions and loans, we'll be able to respond. In that BRL 1.2 billion investment from 2020 to 2024, last -- or next year, we'll do more than that, about BRL 240 million invested. And the company has been making an effort to execute these investments, to execute them with efficiency. So in addition to results brought to the company, this kind of investment improves the quality of service, improves safety for the national interconnected system. So it is strongly beneficial. When we operate our facilities and we maintain the quality of service, as referenced, we have a regulatory WACC of 6.98%. So that requires a specialized technical team. Both for updates and improvements, we work with connected facilities. And it is really important to let the company be qualified and that the company can work to improve the national interconnected service. We require extremely skilled teams for that. In Generation, we have a large park of hydroelectric power plants, 39 small hydro plants, 11 hydroelectric plants. And this is the Cemig generation matrix, which is 100% renewable, 100% clean, so hydroelectric power plants, wind plants and one photovoltaic plant. This is a very important point mentioned by Reynaldo. We also have an engineering team which is highly skilled. In the past, it was specialized in hydroelectric power plants. Now we're trying to be as specialized as with other renewable sources. This is the challenge, and our goal is to grow in this market. Well it's not a future market. It is an existing market with opportunities in terms of operating efficiency with very high availability, normally above the average of the market. And a very important point is our integration with Cemig Trading. We are very integrated with them, so this is a huge competitive edge. So we have a growth strategy to enjoy integration with Cemig Trading, renewal of concessions and development of projects focused on renewables. So we have some concessions that are about to end with very 2 important plants, Emborcação and Nova Ponte and Sá Carvalho. And Cemig is looking for ways to maintain the assets. Because the law allows, so we are sparing no efforts. We are looking at this possibility for Sá Carvalho, Nova Ponte and Emborcação. And here we have the drivers that we are [ using ]. For hydroelectric power plants, looking at our existing park, we're trying to expand their capacity. A small example, which is underway, is the Poço Fundo expansion. And we can see here we are tripling the capacity of this power plant. We expect to have at least 50 megawatts of growth. And we have photovoltaic plants in our portfolio. We have about 1,400 megawatts peak, and we are trying to have synergies with Cemig Trading. We also have the possibility of floating photovoltaic plants. And Três Marias is very interesting and a very good area. And we have projects to develop this kind of floating photovoltaic plants in the future and particularly in the Southeast. And wind plants. In the next 10 days, we will be having a public tender for development and acquisition of good wind projects. So this is new. This is a very competitive renewable power. And when you're bringing in these good projects to our portfolio, it builds this opportunity. And finally, thermal generation. With the new gas law, there are some opportunities being open, and federal government is helping. So we see an opportunity to explore thermal -- the building of thermal power plants. So that would bring us about 500 megawatts. So in a nutshell, in a very summarized way, these would be the guidelines, and these would be some of the challenges in terms of generation and transmission for Cemig. Thank you. I turn the floor back to Reynaldo.

Okay, Paulo. We turn now to Cemig Trading. This is another frequently asked question by investors. What is the strategy of Cemig Trading? What are the characteristics of trading? So we prepared the presentation, an even more detailed presentation about Cemig Trading. And just like I mentioned in transmission, I don't think that transmission gets enough visibility as it deserves. I believe that Cemig Trading does not get the visibility that it deserves. We're talking about the biggest trading company in the market. It has 18% market share. It is an expertise trading company with the ability to anticipate market movements in terms of hydrological conditions and understanding the customer. So our strategy here is to keep our market-leading positioning to [ guide ] the opportunities that will arise with the deregulation of the market. Of course, there is a gigantic growth expected for the retail market, and we are very well positioned to enjoy it. And we'll be able to integrate with Generation, our customer capacity with our capacity to develop projects. So this is the strategy of Cemig Trading. I'll invite Dimas. Because, again, we are addressing a clear concern of many of you, we'd like to speak -- you want us to speak more about Cemig Trading, so we will do this. Now we'll bring our officer, Dimas.

Thank you, [ Reynaldo ]. Good morning, everyone. It's a pleasure to be here with you again. Reynaldo already talked about our commercialization or our trading strategy, but I would like to talk more about this and what it means for Cemig. Today, we have 18% of our market and a free market. And I would like to stress that this based on 2 main pillars. First, well how can it be Cemig, as a state-owned company, is so agile to be a leading company as well as to keep that leading position? But that is thanks to 2 pillars. One of them, as Paulo mentioned, is our synergy with the generating company. The synergy allowed us to use the structure of the generating company. But the starting of trading company actually was to sell the generating company's energy. And then we were also -- we also needed to buy a huge amount of energy to be able to step up to our market. And the second one has to do with the tasks that the Executive Board and the Board of Directors tell us to do or assign us. And we have to be very agile. If we were to follow all the bureaucracy from a state-owned company, we were not able to keep up to the speed of the market. Where is the control here, the remote? Well let's talk about the competitive advantages here. So first, when we had -- well we are pioneers in a series of activities in terms of trading. We first want to migrate the clients to the free market when all generating companies were concentrated in the captive market. At the time, we had almost 40% of the market, and that was a movement of Cemig migrating all its clients to the free market after that generating company, to start it also to migrate because this is a more profitable area. It's not regulated. Another topic is the perennial contracts that we have. While the captive market has contracts of 1 or 2 years, we have contracts that are over 5 years. Well today, almost 60% of our contacts are above 4 years. This ensures a perennial contract and a constant relationship with our customers. The trading margin, it's above the market. So first, because we buy efficiently, we also have our generating company, and we have created several flexible instruments, and that have been mimicked by the competitors. And it has proven to be good and to be right. And in this crisis that we are going through and of, course, that we have lost some of the revenue because if I am too flexible, the customers will reduce consumption because of the crisis and low production. And then we are able to have a small reduction in our profit of around 7% by the end of the year. Considering such a crisis that we have been going through, that's very important, and it proves that our strategy was the right one. About the sickness, I already mentioned. And I would like to talk about focus and objective. When we lost our power plants, we then started to buy energy of third parties. We bought greenfields, and we bought around 1,200, 1,300 megawatts of energy of third parties to cater to our market. We -- since we had and still have today huge availability of energy for a low demand of the government for the regulated market, this was the right strategy. And then we have seen that other companies are doing the same, such as Copel and [ GNL ]. And that strategy is a right one, buying third-party energy. But now we are changing our strategy once again. Like Paulo mentioned, now in September, we'll have an auction of pipelines for wind energy. And instead of buying, it's not that we are not going to buy anymore, but we're going to suspend that temporarily. And we will now be working on these auctions, and Cemig itself is going to work with these wind farms. So we should have an auction for pipelines. And then we should change the line of market service. Another important topic that I would like to mention, and we started this purchase in 2018, and you can see the speed in our penetration in the market. We had, in the last 3 years, over 1 giga of -- almost 1 giga of incentive-based energy, and that energy, that was available. Let me drink some water. As I said, the auction was a good strategy for purchasing energy. And as I said, we are now migrating for a pipeline auction. And with the market change, we are already planning for new times. What are the new times? Today, the free market is not growing. It's going to grow now in the average voltage as it has been growing. And now with the deregulation of the market, that is being discussed to '24, but maybe starting '23, we will have a deregulation. And it will only happen by the retailer trading company or -- which are the clients that have a demand lower than 500 kilowatts, and they will be catered by a retailer trading company. And Cemig, already anticipating this movement, has created 2 companies: one at Cemig GT; and one under Cemig Trading. And this is where we are going to have the retailer trading company. And the challenge for the future market is the need of digitization, and that's something for all Cemig but especially in the commercial area. We have 2,000 clients. We already have an automated system, we have SAP, CRM, Salesforce, but we are talking about 8,000, 10,000 retailers as clients. So today, with the tools that we have, we cannot cater to this market, so it's only inevitable that we implement a robust digital system so that we can support all this market that we intend to have and that we will have. Now I would like to mention some of the highlights. As I said, we manage the whole energy portfolio for Cemig. And then the spirit of timing, you will see that we have a fair balance sheet. And we don't -- and it is very tight. We do not have any surpluses, and we do not have any deficits either in the next 4, 5 years. I mentioned the 3-year contracts, and that is because of our market penetration. Today, Cemig is trading 3,500 megawatts in the free market. And more than half of that today is out of Minas Gerais. So we started in Minas, but most of -- half of that amount is throughout Brazil. And that footprint ensures us our business, whether because of purchases or the pipeline auction that we'll be holding, we have a very good margin 10% in trading. That's very good. The market is at 4%, 5% margin. And why do we have that margin? First, because of the efficiency of our generation area, there's more affordable energy, we buy energy in the right moment, and we have also flexibilities that allows us to buy a little bit more. So the margin is safe. For the next 5 years, I would see an average margin of around 10%. And the prices that you see here are the average sales prices for 2020 to 2023. I told you that our balance sheet is already closed, and this is more or less of an APR, annual permitted revenue, of 4, 5 years. That revenue is going to be at these average prices. I'll bring to you the balance of supply and demand, which you already know. And for those of you that do not know it, this green line that we have in the back is what we call the botox, the energy that we sell to the captive market, a small amount of it. And then we have the orange line, which are the plants that we acquired in the auction. They are Lot D, Tres Marias, Tres Marias and other plants. So this is a quotum. We have the green column, which is conventional energy that we have been selling; and the lighter green, the incentive-based energy. So the black line that you see is our generation capacity. That is our own resources. In 2024, there is a drop, as you can see, and then it goes up. 2026, there's a downward trend. So it's a possible loss of Sá Carvalho and Emborcação plants. So the concession is due for those plants here. We are not considering a renewal, neither the extension because now with the new GSF law that was just approved, we are allowed to apply for an extension. So that could happen in 1 or 2 years. It's not contemplated here as we have not contemplated the renewal of these concessions. So the line that we have here, this red line on the top around the charts -- or around the columns is our planning. It is the current market with a growth of 3% a year. The gray area represents available energy to be sold. And above this gray line, the white portion of the chart are the contracts for potential renewal so that we can cater to new markets. You can see that this is a balance up to 2023, that we are fully sold, very well balanced out. And starting in 2024, you know that we have 5-year contracts, and then we'll continue with our efforts to sell that energy that we have available and this need. When we talk about the pipeline auction, this white area is the market, the possible market, whether by own generation or third party. So we have a huge potential to grow. I think that's what I had. I will turn the floor to Reynaldo so that he can conclude this section, and then we'll be open for Q&A.

Okay. Moving forward. We talked about distribution, transmission, generation, trading. And I think the question that people ask the most is what are we going to do with CemigPar. So Rafael, I think this is the question people are longing for. I would like to say that this is an integrated company, and we have as a core business commercialization, distribution and generation. I think there are no questions about it. I think everyone knows how important these businesses are for the portfolio and for the growth of the company. But obviously, the participation is something the other companies -- also those are reason for questions. And so we have Rafael that is an expert in finance, and he is going to take the floor to talk about the subject.

Okay. Thank you very much, Reynaldo. First, we would like to say what you said in the beginning, which is the relevance of CemigPar. Here, we have several emblematic companies such as Light, Belo Monte, Santo Antônio. And we also have participation in generation, distribution and services. And I would like to highlight the main indicators here: BRL 1.8 billion of EBITDA in 2019, that's very relevant; and over BRL 8 billion in revenue. But what is most relevant is to talk about the strategy here, I believe. The main message here is that the strategy is to maximize value for Cemig. And we have 3 main pillars for that. The first pillar that everyone asks about is divestments. Within divestments, I should highlight 2 major categories. The first one have to do with the nonstrategic participations or the ones that have limited synergy with Cemig. For instance, Santo Antônio, Belo Monte, Light, Gasmig, these are assets that we aim to divest, each one with a specific strategy. And we also should mention possible divestments that we called opportunity divestments. Sometimes they are -- these assets are considered the joint of -- the jewel of the crown, but they do have other people interested in them. And so in our strategy to maximize value, we're not going to burn money. But if we have a very good proposal for these assets, we will not deny those. The second pillar has to do with growth. So first, we have the ones with great growth potential, and here we have Gasmig and Taesa. And I'll talk more about Gasmig shortly. Taesa has a billionaire portfolio of investments. And the other ones are following the same path. And then we have new businesses, Cemig SIM, and I will talk more about that shortly, but this is a focus in distributing and generation. And the renewal of generation concessions, Paulo Mota already talked about that. It represents over BRL 1 billion in EBITDA. And that is a very relevant project for the company. The third pillar is management to generate value to these companies while we are shareholders. One of the lines of action here is to seize the synergies. And Dimas well talked about it, the synergy between trading and generation. And also in operation, several of our minority stakes are operated by Cemig GT. And here, we also have relevant synergies. Another line of action is more on the financial side. And here, we consider the optimization of capital structure and distribution policy. And I would like to highlight here Renova. Maybe this is the main challenge for the company. This is a company that is in bankruptcy protection. And our efforts are to approve a good plan for bankruptcy protection and also to include Alto Sertão III, which is a very important project for Renova. But also, that's a very important investment for the country. These are billions in investments that are not producing anything and, with a little bit more of investment, can generate a lot of value to the country. And third, a transversal initiative, which is to improve governance and that can be applied to all these states. As I mentioned, Gasmig, this is a company that has a growth potential that is huge. Gasmig has a very well-consolidated position in the industrial segment and a lot of potential in the residential business especially with the legislative changes and potentially the regulatory changes as well. There is a perspective of growth that is exponential in the residential segment. Another important message for Gasmig is that we believe this is a company that has a lot of potential to be a listed company [Audio Gap] effectively with shares that are negotiated. And today, we have to define what is the best structure so that Gasmig can be a listed company. And the main challenge is how to do that pricing the asset in the right way. So we want to do that without leaving money on the table so that the market can recognize the huge growth potential that the company has. And finally, Cemig SIM, which is another crown of the jewel -- jewel of the crown. And today, Cemig SIM already has 2 operating plants. And the idea here is to continue growing and distributed generation. One of the path are purchase options that the company already has in the pipeline of over 22 megawatts. But there are several other partnerships that are being discussed and that can -- to improve the growth potential in hundreds of megawatts and investments of hundreds of millions, maybe even billion reais. This is the size of potential Cemig SIM that we want to carry out. And then I will now turn the floor back to Reynaldo.

Thank you very much, Rafael. Continuing, and I think that we have gone through all the operating areas already, and now we are going to go into the financial area, which is something that I also learned in my life that we generate a lot of value in operation, and we generate a lot of value in the right financial management. And effectively, we are then able to face challenges, that we clearly have many of them. We have the challenge of the post employment and also our debt management. We have Eurobond. This is always a frequent question. So without much further ado, I would like to turn the floor now to Leonardo. Leonardo, please, which are our financial challenges?

Good morning, everyone. Thank you very much for your participation. We have over 400 people in this event today. And so if we had everyone and how's -- most of you would be standing up. So Reynaldo talked about our financial strategy, we have 4 topics that are very important. And we maintain our liquidity in the long term. Our debt profile for -- debt profile, we also believe it's important to reduce our capital costs, having the optimized capital structure. Also, we focus on our operating efficiency. This should happen in a sustainable fashion. It's not only a cost reduction forward on that would generate additional costs because of wrong understanding on where we can cut costs or not. And we were able to reduce our costs in a budget review of over BRL 150 million. And at the same time, we will have the best DEC, the outage index, in history. This is a good combination showing our objective. And when we talk about sustainable operating efficiency and also our zero-based budget, ZBB, for 2021, we are going to try to identify all opportunities for cost reduction with efficiency, making sure we have the best delivery possible in terms of the quality indicators of the company. About investments, investments with the right return. The next 5 years, organic investments in Distribution, Transmission, we will have around BRL 10 billion in investments. And we have all the governance, internal governance, so that these investments are compliant with the regulations, avoiding any risks of disallowances for the company. In the 2 last tariff reviews for the distributing and transmission companies, we were successful, making sure these investments were recognized by the regulating agency. And we understand that investments for the next 5 years will continue changing the level of our Transmission and Distribution businesses in terms of revenue generation and also competitive rates. We understand that with the right capital structure, we reduce our capital structure, and we are then able to get third-party funds with better rates. And we do have a favorable expectation about our ratings. We understand this is a virtuous cycle that can generate a lot of value to the shareholders and, just as the same, positive investments, not forgetting a right remuneration by our dividends. And then talking about operating efficiency, going back to the slides, we talked about the budget review that we held in 2020. We also have a voluntary redundancy program, and people are leaving the company, especially in this third quarter. So for the next year, 2021, we are going to have savings would be in around -- of around BRL 90 million. That is going to be fully captured by the company. We do not have an expectation to increase expenses, hire new employees, so this is going to be internalized. And we understand that this is a significant reduction in our costs. And also something else that Reynaldo mentioned, and I think it's important because of the relevance of amounts, which is the post-retirement liability management. Here, we have how much we have in terms of obligations, BRL 6.8 billion, almost BRL 7 billion in post-retirement obligations, especially related to pension funds and health care plans. And to the right, we see how much these expenses represent in each year up to June. These expenses were BRL 224 million. And so annualized, we're talking about an amount of close to BRL 450 million. In 2017, this was negative because there was a restructuring that happened at that year. We had our life insurance, and then we had a gain of BRL 620 million. So we need to carry out the restructuring in our health care plan and our pension fund with 2 objectives. First, to reduce the actuarial risk and also interest rates because it's very difficult for the pension fund to invest at the same rates that we had in the past and then ensure the actuarial stability. And we understand that these are subjects that are difficult to tackle, these are challenges, but we are focusing on these topics. And for the second half of this year, we will start the process of restructuring these plans. We are working with consulting services to address this topic. And the message on the topic is that these are relevant issues. These are relevant amounts in our financial statements. And we understand that if we are able to restructure these topics that involve health care plans and also pension funds, we believe that we are going to change the level of our company. And now talking about our debt management in this first slide. Here, we are going to talk about the cost of the debt and more of the profile. If you look at Cemig's profile for debt is adequate. We have uniform maturities over the next years. And if we think about the cash generation of the company, this is a company that has an EBITDA over BRL 2 billion. And we are very comfortable in thinking about the company's liquidity today up to 2021. We understand that we would not need no -- we would not need debt refinancing. But here, in 2024, we have Eurobond maturities, BRL 8 billion, and that is because now we are considering the dollar rate of June 30. It's important to talk about the subject, this debt of 2024. Regarding interest rates, we are fully hedged. We have changed -- swapped the dollar-denominated debt by a CDI, which is 142% of the CDI. So today, that vis-à-vis the interest rate is very low; but vis-à-vis the principal, we have a hedge up to BRL 5. So at the bond of BRL 3.45 up to BRL 5, we are going to pay BRL 3.45. And above BRL 5, if that in 2024 is at the level of over BRL 5 for the dollar, it has to be paid by the company. But we are not going to wait to 2024 to have this FX risk. Of course, we could have the dollar at a higher rate at the time because of market stress. So our expectations and what we believe that we should do in terms of debt management is that as soon in 2021 we have a less risky scenario, out of the pandemics, the company will look for alternatives to address the Eurobond debt for 2024. We have several possibilities. We can increase the hedge coverage. We can swap of the foreign currency by local currency. We can have an exchange offer for the bonds. So we have several possibilities here to address the topic. And the message here also is we are paying attention to the topic, and we understand that we are going to address it the right way as soon as we have a scenario with lower market risk to seize opportunities to deal with the subject. Of course, that in the pandemics, costs are higher, the cost of the debt is higher. And we can wait a little bit to have the best alternatives to manage Eurobond. Regarding leverage, Cemig has been reducing its leverage in a marked way. Our leverage is close to 2x debt over EBITDA. And the cost of debt has been reducing a lot given the CDI reduction and since all of our bonds are hedged. And with 142% of CDI, this debt has a very low cost for us. So regarding leverage, we believe that between 2 and 2.5x over EBITDA would be adequate. When we talked about the renewal of concessions, we said that it would be necessary to have additional funding for Emborcação, Nova Ponte and Sá Carvalho concession renewals. So if we have 2x the EBITDA ratio, we would be in the right condition to renew these concessions with no concern, no pressures from the market regarding funding. So we'll continue to monitor this, but we believe that debt over EBITDA ratio of 2x is adequate at this time. And because of that, we understand that our rating by agencies is, a, we understand that we have a positive trend, considering the solid financial structure of the company, adequate debt profile and so on and so forth. We understand that we could have a favorable prospect regarding our ratings. And now to dividend payout policy. Regarding the 2019 income that we will be distributing in 2020, we were very conservative in our dividend policy because we thought that this would be appropriate. What we decided in the shareholders' meeting is convergent with the interest of our shareholders. With the pandemic, ensuring liquidity was essential for the company to be able to cope with those moments. But we paid close to 25% of dividends. That represented 4.6% dividend yield. If we had paid 50% payout, it would be greater than 9% of dividend yield. But for the coming years, we'll maintain our dividend payout policy of 50%. With 50% payout, that is adequate remuneration for our shareholders. And it also gives the company the ability to continue to invest with profitability. And down here on the bottom, we see the median for the last 5 years of dividend payout. We paid 6% dividend yield. In other words, the company is a good payer of dividends. And we intend to maintain this policy because we understand we remunerate our shareholders adequately. So basically, this is what I had in a nutshell. And regarding the company's financial policy, I turn the floor back to Reynaldo to continue the presentation. Thank you.

Thank you, Leo. Well I think that this is the last slide. And our take-home messages in terms of what we're thinking as a strategy for the company, this would be the slide to remember. This slide tries to summarize the focus that we currently have. At the very core, our goal is to transform the company with a private sector decision-making logic. We want to make decisions absolutely centered around technical decisions, business decisions, no political influence. And we just want to focus on defending the interest and the best interest for the company. That means an absolute focus on results in a customer-oriented approach. So this is the substrate of everything we'll be pursuing in any area of the company: a private sector decision-making logic; a business-oriented logic; a focus on results; and always from the standpoint of the client; and as a cross-cutting principle, we want to optimize operating efficiency, operating efficiency in OpEx, CapEx and a large transformation -- digital transformation project; always ensuring sustainability from the environmental standpoint, social standpoint and the best governance rules, so ESG. And you can be sure that this is the mantra that we are following: private sector decision-making logic; focus on results; a customer-oriented approach with a digital transformation; and a broader view of the stakeholders of the company. So by area. In generation, we spoke about our goal to renew our concessions and to develop new projects, building on the integration with the trading company. So we have the ability to get close to our customers. And with the current engineering team that we have, we can develop our greenfield projects. So in trading, again, integration with generation and use this ability to develop our own projects. And given our leadership position, we have to enjoy the deregulation which is coming up. And we need to grow in retail market. Financial. Leonardo has just mentioned, we want to have an appropriate capital structure. We have to reduce the cost of capital and face difficult liability management themes such as the Eurobond or the retirees' benefits, always ensuring adequate remuneration and return to our shareholders. In equity holdings, Rafael mentioned maximizing the value of our shareholdings. There are some assets which are clearly not strategic. And for those, we'll continue with our divestment program. And we have the crown jewels assets where we want to get positive results, and we'll be open to recycle our financial portfolio. In transmission, we want to continue growing through updating and in improvements. We will continue to invest in updating and improvements. That's a big potential that we have given the state where we are and distributed generation, which will entail a lot of investments in transmission lines. So we have to enjoy growth opportunities in auctions if these will bring synergies. And finally, in distribution, the focus -- have a big focus on distribution, understanding that we do have challenges but that these challenges are perfectly overcomable. We want to exceed regulatory EBITDA. This increases efficiency. This will imply improving commercial losses. And this will also mean that we have to increase our customer service ratings. And that also means talking about the regulatory remuneration base and default. Like I said, this is our mantra. I see that we have 400 people in this virtual room, so we are now ready to move to the Q&A. But before anything, I would like to thank all of you for your participation, for your attention. For us, it is a pleasure to be in contact with you, albeit virtually, looking at a camera. But we are all here very much focused on making you understand how proud we are of our company and how focused we are to grow it and to take it back to its leading position as the best generation company in Brazil. Thank you.

Well Mr. Chairman, we have almost 420 people. We used to -- well we had 420, now we're down to 415. It's a very relevant audience. I already have some questions which I will be reading, and then we'll see who will be the best person to answer. So we have one question related to our growth plan in generation. [ Diego Poderoso ] asks, could you give us more detail on the development of projects regarding renewables? Which ones are interesting? And is the goal to sell everything in the free market? And will Cemig have a minority stakeholder or will Cemig be holding 100% stake of the project?

Diego, thank you very much for the question. In our portfolio, I can give you a little more detail. In the case of photovoltaic energy, we have some more mature projects. We are taking opportunities that we have in some of these projects, in which Cemig has the sight, okay? So that is an advantage. So of course, we're looking for synergies always. In the case of wind plants, even yesterday, there was a communication about how competitive this source of energy is. And our goal is to have a public call, a public invite to have entrepreneurs with us and so that we can sell this energy through our trading company. In principle, we would have to develop the projects. And the projects can have many formats. In principle, the company would acquire the project, develop the project, but we will also open to other modalities in this public calling. And what about -- the point is the synergy with the trading.

Thank you for the answer. By Maria Carolina Carneiro, the question is, in terms of maintenance of generation concessions, could you give us an update of how you intend to do that? What kind of mechanism would you use? Would you have the majority shareholding?

Well we have one -- more than one way to extend the concessions. You mentioned one based on the presidential decree that allows us to extend in case of privatization, and this is the main scenario that is being considered. So we are advancing in that possibility. We are calculating what we call the VNR, the new replenishment of value, and then the calculation of the concession price or value. But that's not the only alternative possible. A few months ago, we disclosed a notice to the market saying that depending on PLS 232, other alternatives might arise to extend concession other than the quota regime. And this is an upside potential, but it's not the base scenario.

Excellent. Thank you. I think it's a question for you, Rafael, by Gabriel Fonseca with XP. I'd like to understand why the company intends to list the company instead of looking for a strategic partner. And there's also -- we should also consider the liquidity of the asset.

Gabriel, thank you. Thank you for the question. This is an excellent question because this is a reflection that we do all the time. When we mentioned that the strategies that Gasmig will be a listed company, it doesn't mean that this will be the first step. One of the possible strategies, like I said, to maximize the value for Cemig is doing this in 2 steps. One, we would bring in a strategic partner, an investor that would help us in our growth plan and in governance. And then later, we would have an IPO, adding more adequate pricing. I am not saying that this is the strategy, but it is definitely one of the alternatives on the table. And again, we have a goal that we mentioned. We want to have the adequate structure to maximize value for Cemig.

Thank you, Rafael. There is a question maybe addressed to Ronaldo. How is Cemig considering in all proposals regarding adjustment in the regulation for financial and economic rebalancing of distribution concessions given the pandemic?

Well there is an ongoing discussion. There is an ongoing regarding this. ANEEL, well, has been interacting with us regarding the possibility of having an extraordinary tariff review. One condition for that would be the renewal of the concession contract for those that haven't done it. In the case of Cemig, we have renewed our concession distribution contract, and this is Cemig's differential. And what we have to discuss in this context involves all distribution companies of the country, but Cemig stands out. So we could have a way to deal with a default or delinquency. For 5 months, we would not use collection tools or disconnections due to lack of payment. And in voluntary exposure, which is happening along 2020, and there's a projection for future years as well, so this is a discussion that is going on. But Cemig has the differential that it has already renewed the concession contract.

Excellent. Thank you, Ronaldo. Well, I think we have another question for you. It has to do with the strategy to create photovoltaic plants in rural areas close to substations or large clients. Do we have this kind of strategy? Perhaps you could give us more detail about photovoltaic [ power ].