Light S.A. (LIGT3) Earnings Call Transcript & Summary

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Good afternoon, everyone. My name is Nonato Castro, I'm the current CEO for Light. And we started here, I was in Rio from October, but I had COVID. I spent about 15 days in the hospital. And in December only, were we able to take office. I'm an electric engineer. I started working in energy in Coelba in 1986. We spent 10 years there. And I was also a Professor at IFET, which is a federal institute in the city of Petrolina, and I did this along with my work at Coelba. Then I joined Equatorial. And at Equatorial, I was able to work in Sao Luis in Cemar, which is now Equatorial Maranhao. And then I worked in the state of Pará in Northern Brazil for 2 years. And finally, in the state of Piaui in what used to be called Cepisa. And I spent 2 years there. In Pará, I spent 6 years. And in Maranhao, I also spent about 6 years. In Piaui, I spent 2 years working there. So we have experience in power, but of course, all results and all of the management achievements we've had in the power company is always related to the team, to people around you. So we have the opportunity of bringing in professionals, especially one of the biggest issues that the company faced was losses. So we got professionals who had a lot of experience in fighting energy theft. And we're training people so that they can do this in the best way possible so that they can get learned from the experience that we had over many years. So we have field staff who are going through training sessions to change the methodologies they use to fight delinquency, which is something specific in our industry that requires knowhow and requires a different sort of training. This is what we are implementing here. When I joined Light, of course, I also found professionals and people who are very well trained, who are committed and who are totally in the new projects that we're starting now. Right now, we're training [indiscernible] Foundation is here with us, the management model, we're setting goals, training subsidies to generate action plans, the structure of our management and the company is being recognized internationally. So what we've seen from our experience is that there is a possibility to have great changes in how we work in Rio de Janeiro, and this is based on our experience and the lessons we've learned. We understand that it's a different sort of complexity. The population knows about this, of course, but we understand that with the professionals we found, with the drive and the willingness that we have, with training and capacitation for professionals who already know this area, which was one of the areas that most affects our bottom line losses. We need to build a new moment so that we can recover from that side. Of course, we're going to be working together with all of the complex areas involved in this process. So this is our aim, and for that, we are very close to all of the agencies that are important in this process. Rio de Janeiro is a very important state. So we have had contacts with the Prosecutor's office, with the Governor, with the Mayor, Eduardo Paes. We've met with all of them, and we're going to have a project with many institutions who are very important in that state. So that's how we believe we will move forward. This is a project that will transform and support communities that really don't see -- don't have any connection to the government. So the effort we're making, structuring and training, obviously, with the pandemic, we've all been affected. The entire country has had to change. Companies have changed the way they work. We're working with video conferences now, and this is also a challenge. We are far away from other people, but technology also allows us to overcome these challenges that we face so that things will move forward in this new management model. And we hope that it can do so as quickly as possible. We believe that our construction has a lot of potential. There are possibilities to do a lot, and we believe in them. If not, we would not be here. We would not take this challenge. This is very important, and especially, we have to remember that we've already learned that everywhere in all companies, from the north to the northeast to any state of Brazil, in any company, you're going to see good professionals and people who are committed. I believe in people. I believe even more in training people, in people's ability to transform, in people's ability to build. I believe in people, and that's why I believe this project. We know how difficult it is. We know the challenge we face, but having the professionals, having the experience, being together with a team from the company that also is anxious to transform and grow professionally means that our goals will be reached at the right time when learning, technology, training is provided in our work and activities we perform so that we can reach the goals we wish. So we believe in this project because of the team that's behind us, because of the people we have with us. It's people who transform. That is the truth in any situation in life. So now I'd like to invite Roberto Barroso, our IRO and CFO. Over to you, Barroso.

Well, good afternoon, everyone. We're going to share a presentation with you so that we can see the results for the fourth quarter of 2020. Thank you, Nonato, for this introduction. This is the first opportunity we're having to talk to the market. So continuing with Slide 2, you'll see a summary of our directors. So this was the team put together by Nonato to continuing -- facing this challenge. I am CFO and IRO. We have Deborah, who is still leading the Legal and Institutional Relations department. Alessandra Amaral is in charge of Regulation, Energy and Trading. And Nonato has brought, from December to February, 4 new executives for the company's executive directors. We have Carla Medrado from November, leading People and Corporate Management. Daniel Negreiros was already in the company in the last 4 years, and now he is in charge of Distribution. We have Thiago Guth, who is our commercial leader. And recently, in February, Gisomar Marinho joined our team as Head of Administrative and Controlling. Slide 3 will show the new shareholding structure for the company before the offer and after the offer in January 2021. In this year, we opened the Brazilian capital markets, and we managed -- excuse me, we're having an audio issue. Excuse me for that technical issue, but continuing with the presentation, you'll see how we managed to divest CEMIG from the company and attracted new investors. And we would like to thank them for their trust. These are the company's greatest shareholders, and they took their preferred -- their preferential options and also the new shareholders who believe in the company's management. Our new structure is led by Samambaia, who has a 20% share. It's led by [indiscernible]. The second biggest shareholder is Santander PB FIA 1. This was the investment where -- when [indiscernible] joined the company. Atmos Capital with 6.26%, and other shareholders have a share of 63.57%, which consolidates the company as a true corporation. The next slide shows a summary of the tariff readjustment approved by ANEEL for Light. It was approved on March 9. If you look at the first column, you'll see that we were impacted by financial items that appeared over 2020, and we received a COVID account to offset the financial impact that we had over the year. Right now, we are returning that COVID account completely. So that's a reduction and 12.4% tariff adjustment, but we did pass the increase in the cost of energy, especially the Itaipu costs, which are listed in dollar and also Norte Fluminense. And there was an increase in cost that was passed on to the transmission grids, RBSC, which led to about 4% in readjustments. And the CDE related to the COVID account had an impact of 4.2%. So what remains for the company is 1.7%, of which BRL 171 million are -- and we also had BRL 18 million in recoverables. And this adjustment, understanding the moment we're in with the pandemic, we have proposed to ANEEL to pass on 3.5% of the tax credits related to the PIS and COFINS taxes, which have already been provisioned for the last 10 years. And this is referring to the part that we were able to offset between April 2020 to January 2021. BRL 374 million passed on to the consumers in the next 12 months. This entire composition impacted the average consumer perception by 6.75%. Slide 5 shows some of our financial highlights during the first -- fourth quarter of 2020. Total losses were reduced by 95 gigawatt hours this quarter. Versus 2020, that reduction was 744 gigawatts hours, of which we had focused so far on the conventional treatment area. And there, we had a reduction of 1,260 gigawatts. We also had a reduction in legal contingencies, a reduction of BRL 41 million, which is a total of nearly BRL 200 for the entire year. We continue cutting costs and our costs with materials, personnel and services was BRL 12 million lower that quarter. Our recurring consolidated EBITDA was BRL 974 million, and this was a positive impact from GSF recognition on Light Energia. And we also had some positive impacts in the distributor, as I mentioned before. We had that PMSO cost, the contingency cost and also VNR had a higher value because of inflation being higher this quarter. The net debt-to-EBITDA rate was 1.73x, well below the debt covenants in most of our contracts, which was 3.75x. We finished 2020 with a robust cash position of BRL 3 billion. And now in January, we also had some follow-on proceeds and also the liability management sequence, which I'll delve into in the next slides. The fourth quarter of 2020 had a recurring net income of BRL 235 million versus a recurring loss of BRL 48 million in the fourth quarter of 2019. This year, the reported net income was BRL 742 million. Slide #6 shows how our grid load evolved. There was a reduction of 2.9% in the first -- fourth quarter of 2020 versus the fourth quarter 2019 and a reduction of 2.6% for the billed market. This reduction was mainly caused by reduction in the concessionaires' market. That lower consumption represented 240 gigawatts this quarter. When we look at the right-hand side graph, we have some very different behaviors according to the segment. The residential market recovered with an increase of 6.8% versus the same time in 2019, and this was impacted by the higher temperature in the fourth quarter of 2020. It was about 1 degree Celsius above the average for the previous quarter. The industrial market also had a raise of 5.6% because of the recovery of steel working in Brazil. It evolved significantly in 2020, especially due to how this commodity had higher prices in 2020. However, the commercial segment is the part of the company that has been slower to recover. We actually had a reduction of over 20% in the second quarter of 2020. And in the fourth quarter, that reduction was about 5.8%. Slide #7 shows how our losses have evolved. We were able to reduce 95 gigawatts this quarter, especially due to the implementation of 863 Act or Resolution, where we measured all of our clients -- industrial and commercial client plants where relevant in group A until the end of the month, on December 30, 2020. This had an impact on how much energy was billed, and how much was not. When we look at the percentage, there was a reduction of 0.7 percentage points during this quarter versus the previous one. And this was still impacted by a reduction in the market because of the COVID pandemic. When we look at the billed market around 2020, we had a reduction of 7% over the year. Slide #8 shows how we are evolving in combating losses in the conventional treatment area. This was the area that the company focused in, in 2020, and we were able to reduce 1,260 gigawatts in 1 year. This year had temperatures below average, but we were still able to move forward with our initiatives, both to incorporate and recover energy throughout the year. Looking at percentage points, we had a reduction of 2.4 percentage points in one year. Looking specifically on nontechnical losses, there was a reduction that was a bit higher than 70 gigawatts in the last quarter. When we look at the 12-month period, that finished in the third quarter of 2020. The percentage reduction was a bit better during this time, especially because of the residential market, which grew over 6% during this period, but we know the challenges that we have ahead of us in special treatment. This was an area that grew in gigawatt hours by over 400 gigawatts over the last quarters. And because of that, we're putting together a special plan so that we can advance in reducing losses also in special treatment areas and not only in the conventional treatment area. Looking at our loss plan in 2020. Our highlights are here. We can see that energy incorporation volumes, especially during this project called The Legal Client, formalized a number of clients who had had cuts in 2019. So we worked on this over 2020, and we also moved forward in inspecting clients throughout the year, especially during those moments in which we were unable to perform power cuts. The lower graph shows our bad debt to gross revenue ratio. So this is basically in line with the company's expectations. We finished the year with 3.9%, which is 0.1% higher than the third quarter of 2020. And now we're reinforcing our provision to 3.9% in December 2020. We're also going to focus in 2021 to improve our collection even more so that we can reduce our bad debt to gross revenue ratio throughout 2021. We have a client base that is in banking. So we had an increase of 10 percentage points in the number of clients or retail clients who pay their power bills through electronic methods. We finished the year with 87% of the collected value in the last months of 2020 collected through internet banking, ATMs or automatic payments. Slide 11 shows how our quality indicators have evolved. Here, we see the duration of interruptions and the frequency of interruptions. Regarding duration, we are fourth in the ranking of the best companies for this indicator in Brazil. We finished at 7.04 hours. It was a 20% improvement in comparison to 2019. We adjusted the calculation methodology, and it was defined by ANEEL. So we have adjusted and reprocessed the previous years as you can see on this presentation. Regarding frequency, we were also able to evolve significantly on this over the year, and we finished at 14% below the limit in our concession contract. Slide 12 shows the evolution of the company's EBITDA. You can see that there was a -- if you look at our recurring EBITDA, there was an increase of about 10% in the fourth quarter versus the fourth quarter of 2019. The highlight here, as I mentioned, is GSF and intangible assets of BRL 464 million and also a better performance in the distributor during this period. This was led by contingency provisions, which is one of our main points and also controlling manageable costs in the company. We were very successful in the Furnas agreement, which gave us nonrecurring cash that we received on December 28. Received BRL 394 million as the first installment in this agreement, and there is still an outstanding BRL 40 million and BRL 120 million due in power assets. It's also important to highlight that the fourth quarter of 2020 was still impacted by the pandemic. We estimate this impact in -- by BRL 63 million; BRL 15 million due to the reduction in the billed market, 2.6%; and BRL 48 million due to the increase in our bad debt due dates. On Slide 13, we see this evolution of BRL 510 million in our EBITDA per segment. As you can see, this was mainly due to the generator as GSF recognized BRL 394 million and an improvement of about additional BRL 50 million in our EBITDA, and that includes Light Energia and Lightcom together. In the distributor, we had BRL 30 million returns. Slide 14 shows how we reduced our legal contingencies during this time, a reduction of BRL 40 million. And over the year, we were able to reduce it by about 50%. This goes for civil and special civil courts. So looking specifically at special civil courts, we can see the green bars showing how 8,000 new lawsuits were received during this time, 8,900 that is. This is the lowest level we've had when we compare the first quarter -- with the first quarter of 2020 and the fourth quarter of 2019. Our indicators are well under control, and this reflects not only how we improved our operations, but also it shows a positive impact because the judiciary was closed for some time. But we're convinced that we took a number of measures that were very correct, for example, continuing to take readings from clients gauges during the pandemic. In 2020, the real reading rate was higher than the one that we had in 2019. Looking at Slide 15, we see how the company's net income also evolved. We reported a loss of BRL 48 million in our recurring results in the fourth quarter of 2019. Our EBITDA improved very much in the first -- excuse me, in the fourth quarter of 2020, and we had a slight negative impact related to financial results from the GSF update, which is based on IGP-M, an indicator. And it was above 28% in 2020. We also had an equivalence in our real estate investments when we look at our financial operations. When we look at Slide 16, we see the same graph we saw in the second and the third quarter results. Here, we see the impact on the company's operational improvements in the distribution company, and it goes for reduction of losses, reduction of personnel, materials and services and also a reduction in contingencies. And over this year, we had an advance of BRL 264 million. However, the impact from the pandemic still weighed down our results for the distribution company. BRL 168 million versus the estimated impact and BRL 163 million, which was the estimated impact for Installment B and the nontechnical losses related to the market during this time. And it comes to a total of BRL 331 million. This is still being heard by ANEEL. It's at the third stage of public hearing, and we hope that we can move forward on this in the next months. Slide 17 shows the company's cash position on December 2020, BRL 3.9 billion and also the company's cash position for the next years -- excuse me, our debt position for the next years. The amortization expected for 2021 is BRL 2.3 billion. The cost of the debt has gone down year by year. We finished 2020 with a nominal cost of 6.87% and an actual cost of 2.45%. We were able to reduce the company's leverage from 2.9x in December 2019 to 1.73x in December 2020. So from the debt profile point of view, about 60% is CDI indexed and 40% is IPCA indexed. We continue our liability management effort. We captured BRL 360 million from the 21st debenture issue now in December. It had a 4-year term, and we hope to amortize debt that had a cost of IPCA plus 5.74%. After the follow-on resources, we also amortized in advanced all of the debt with Light SESA, with the distribution company. And it came at an average cost of IPCA plus 5.11% a year. So just to wrap up my presentation for the fourth quarter results, we'd like to highlight a couple of messages. Our management is still committed to generating results for the company. We are making a big effort to review processes and leverage operating improvements and now will be even more consumer-centric across all business lines. That's how we're going to build the Light of the future. I'd like to thank all of you for joining us, and now I'll pass it on to Rodrigo so that we can open the questions-and-answer session. Thank you.

Thank you, Barroso. So now we're going to begin the questions-and-answer session. [Operator Instructions] Henrique, you can continue.

This is Henrique from [indiscernible]. Thank you, Barroso, for your presentation, and I have a question here. During your Investor Day in late 2019, you mentioned some initiatives that you had. You split Rio into a couple of areas to attack on losses. So I'd just like to hear from you, how you're dealing with this, if the strategy has changed at all, if it will remain the same? How are grids being protected? I know that you're replacing some of your labor force, right? You're outsourcing labor less. So I'd just like to hear from you if your plan has changed. My second question is, do you believe that there is a lot of fat to burn in these possible areas? How much is there? Is there still a lot that you can do in that area? So that's my question.

Thank you for your question, Henrique. So during the 2019 Investors Day, we presented a Light split into 5 regions. At the time, we mentioned that the company's focus in 2020 would be to move forward in conventional treatment areas, which we call likely or possible areas. And this was exactly what we did. This was done through 2020. We prioritized clients who had had power cuts, and we brought them to our base through 2020. We also focused on some areas in certain regions. We had a pilot protection program, and we also had a program to replace old gauges, and we're trying to be assertive in reaching bigger clients to inspect them against fraud or any sort of irregularity. So this is what we did over 2020, and that's how we managed to reduce by that amount you saw in conventional areas. But over 2020, we also noticed an increase of about 500 gigawatts in areas that we called risk areas, and now they're called special treatment areas. So because of this entire context and with Nonato joining us as well as Thiago, we're revisiting our way of working. We're reviewing it, and now we're going to work with leaders in certain communities. So we're going to work with the population in certain communities and also with the government so that we can try to move forward even more in these areas so that we can reduce losses that are happening there. Nontechnical losses, about 1/3 of them are in conventional areas and 2/3 in special areas. We believe that there is still some fat that we can cut in conventional areas. The new team that just came in has found some still relevant fraud over the last -- excuse me, over the first quarter. So we do believe that there is an area and over 2021, we're going to continue moving forward on both fronts.

Barroso, just another quick question. Oh, excuse me, Nonato, I'm interrupting.

No, that's okay. I'd just like to add, you mentioned fat to burn, and we have found hotels, restaurants, houses that have some fraud in the house itself. This was not so common before. So as was just said, we believe that there is some more potential that we can explore besides what's going to be done in communities. And this is being structured very well with the community and leaders in the community participating.

Right. And to conclude, I'd just like to learn a bit more about your liability management project that you're carrying out. We recently saw some companies rolling bonds. So adding bonds to -- with some better rates, and we saw that there was a big demand for it. So my question is, if you have bonds expiring in 2023, is this bond the problem for you at all? Do you see an open market to try to reduce that liability?

Thank you for your question again, Henrique. So we are paying attention to that, not only the international market, but the local market. After the January follow-on, we have already hedged with BNDES now. In late February, we issued a debenture, and we are paying attention to it. It can be an opportunity, but we need to talk about it in the company first. And as it evolves, we'll communicate it to the market, but the company is still paying attention to all the opportunities that we have to reduce our debt cost. The company had a capital structure before that was not as balanced as our peers. After the 2019 follow-on, we hedged the most expensive debt in the company, but we still have an average cost that is above our peers. So we are paying attention to any opportunity that can reduce our average cost of debt and also extend our debt duration, which was also one of our goals.

Barroso, one of the questions we got here is about how your PIS/COFINS tax credits have been used or evolving in the last months. So can you tell us?

Rodrigo, thank you for sharing that question with me. We continue using these tax credits to offset all of the federal taxes. So this is BRL 6.2 billion in credit that we got in August 2019 after a positive favorable ruling, and we have been using this credit to offset income tax and other social contributions. Any kind of federal taxes can be offset by this credit. So far, we've used from our recurring taxes, BRL 650 million up until January. That's why we're proposing to pass this on after the tax adjustment, the BRL 374 million in tariffs. And as we use them month by month, we're going to control it. And our idea is to pass it on to our consumers as soon as the discussion with the regulators is concluded. This is a credit that we've already provisioned in the last 10 years. So we're continuing to offset these credits completely. And as we evolve with the regulation to pass on what has already been provisioned, we'll be able to advance some more.

Okay. Thank you, Barroso. Now Marcelo Sá from Itau will ask a question.

I have a couple of questions, still on the PIS and COFINS tax credits. I understand that the part that you included in the tariff refers to the last 10 years, and anything before these last 10 years is in the company's cash. Do you think that ANEEL is going to make a decision on how that should be passed on? From what I understood during the last meeting, I now had the idea that this benefit would be for the consumer. And ANEEL mentioned several times that you had an impact of BRL 50 billion in tariffs. So that would be the total amount, and not only the 10 years. Have these discussions gone forward? That's my question. And my other question is about delinquency. You showed a graph on delinquency, and it was about 3.5%. And I think we saw other companies having a reduction in delinquency after the COVID peak dropped down around the fourth quarter. But for you, it seemed to be at a new normal level. So I'm just wondering if you can give us some idea on what the delinquency trends will be for the future. Do you believe that it will go down for the next months? That's all.

Marcelo, thank you for your 2 questions. So to talk about the PIS/COFINS tax, ANEEL approved a public hearing in -- for 2021. We're still open for contributions, not only for -- from all the distribution companies, but from all of society. We're going to send our contributions before then. We can't tell you exactly when ANEEL is going to make its decision, but we hope it will be balanced on that. The legal aspects are still not been analyzed yet as the technical note for the public hearing says. So we hope that it takes as long as it needs to for the agency to assess this very carefully, including all the aspects of this relevant topic. To talk a bit about collection, our collection has been practically flat in retail. The fourth quarter of 2020 versus the third quarter of 2020 had a stronger collection in residential clients, 6.8%, as I mentioned. And this was a time in which we -- the average temperature was about 1 degree higher than the previous year. But with major clients, we were able to have more collections by 2 percentage points. And with the government, we also advanced 0.7 percentage points. So if you're watching us, if you're close to us, you'll remember that in the fourth quarter of 2019, we had an additional bills of BRL 525 million. And we mentioned at the time that we would not have any other extraordinary provision. So we have been conservative in setting the provisions for what we're not expecting to collect. So that's why we continued our criteria here, and we were very careful in our recovery. We're focused on improving how people access for clients. We've created installment plans for payments. We're trying to be closer to our clients as much as we can so that we can improve our collection performance for the next quarters.

Can you give us an idea of how much of this increase was from the pandemic? What would be a more normalized figure? Do you know?

I know that ANEEL is still defining how companies are going to offset these things. So of course, we need to wait a little longer.

But can you have the separation? Do you know what the separation is? And also, this delinquency gap is very high. Can you tell us exactly what it is?

Right. Okay. Marcelo, so in figures, we finished at 3.9% in 2020. The tariff includes 1.38%. So we finished at 2.5 percentage points higher than what you see in the tariff. That represents over BRL 400 million in our gap, and we estimate about 1 percentage point of that is exclusively related to the pandemic. This is the figure we listed in our results presentation. It's about BRL 168 million. So this is the best estimate we have for the PDD volume related exclusively to the pandemic. We expected the company's bad debt provision to be a bit higher in 2020 than 2019 due to our loss strategy that we communicated in the Investors Day. We mentioned that we would bring in clients who had suffered power cuts. So we expected that our bad debt provision would go up in 2020. But with the pandemic, we did have BRL 168 million more according to our best estimate.

We have question here from the Q&A box, and they're asking about an update on how those conversations with ANEEL are going about a new calculation methodology for losses? And how -- what is your target for contingencies and manageable costs for 2021?

Okay, Rodrigo. So to answer the loss methodology, we're also at a time in which we're analyzing this with the agency. After contributions from Light have been sent about this methodology, we've had 2 meetings with them so that we could present more details on our contribution. So we've had good conversations with ANEEL, and ANEEL is analyzing this in the best way possible. They're looking into it, and this should be concluded over the next months. About continuing to reduce costs and contingencies, we're still firm in the company after the 2019 follow-on. We had overcome the expectation to advance by at least BRL 50 million in reducing these expenses over 2020. We were able to reduce costs in personnel, materials and services, and we expect to reduce even further in 2021. Similarly, about contingencies, we've tried to work in the best way possible to integrate the legal and operational areas, not only the commercial area, but the company's distribution area. And we're trying to reduce the number of processes that the company receives. So we are focused on cutting down this volume of contingencies for special civil court and also for the civil court.

I'll now pass it on to [ Gabriel Lima ] from [indiscernible].

So now after 2 months of -- after 2 full months of 2021, with some changes with how the pandemic is behaving, I'd just like to know from you -- I know that this has already been asked about losses, but I'd just like to know from you, what you have in mind for losses as a specific target here for 2021 and for 2022, what do you expect? And what should we expect as well?

Thank you for your question, Gabriel. Thiago's team is working with all of our new staff that just joined the company. They have a lot of experience in dealing with losses. And the team right now is designing all plans in detail so that we can have more visibility on what the new plan is. We're going to focus not only in the conventional area, but also the special area for the next months. As soon as we understand this better, we intend to have an Investors Day and go into details on this plan, just as we did in 2019. I'd just like to take this opportunity to say that as I said initially, we're training and working, right? So this is a sort of training that already puts people in practice. Losses today in Brazil are dealt by specialized professionals. So we have a number of people in our team that went through this process, saw the evolution of the loss sector for many years, and they're here to help us out in making these changes. And we're training. So we're working on this while we're training. So in order to get to the results, that will take some time. And this is shown by the history of all the companies we work with. It takes some time to start efficiently reducing losses. I note that everyone is anxious, but history is what it is. Some companies have been very successful on this, but this didn't happen overnight. You have to go through a training process, adaptation, you need to understand the region you're in, but we know that we are moving forward in that. We're finding things and losses that were not so common before, and we're seeing them already. So we believe that we're going to advance more and more with each day. We do need time though. We need time to train people, to make people aware and to cover this huge area in the state of Rio de Janeiro.

Great. Let me just ask you something else. I know I'm a bit anxious, but I'd just like to understand, Nonato [indiscernible], the diagnosis you provided. When do you expect to -- I understand that the company is new for you, that it's complex, but do you believe that you'll have a diagnosis? Well, when will you have it ready?

Look, we already have a diagnosis, but as you expand your activities and as you get to know more about your area, it changes. It grows. So if you look at companies that had suffered major losses -- look at the history of the best companies, you have 4 years and 5 years. That's how long it takes. Although you start seeing the results in the first year, but in order to see a significant reduction that the market expects, you need more time. But you'll see the first signs of this every year, but a significant reduction, which is what we all want, right, a very significant reduction, leaving the company below the average, well, that takes time. You need 4, 5 years or more. And this is what we're trying to do, but this will happen every year. When you come in for the first year, you have to correct a number of things. And you bring into your base a number of things that might make you think that you're increasing your losses, but actually, you're absorbing a number of things that you didn't know that were there, but could be listed in a different category or were not analyzed as carefully using the right technique to make it a good result. So we need to be careful about that.

We got a question here about the liability management position. And what is the rationale to pay the BNDES debt? And they also ask if it would be better to pay a 7% spread debt instead of 5%?

Thank you for your question, Rodrigo. The reason for that was this. This debt has a cost of IPCA plus 7.45%, and it was going to be hedged in October 2022. It was an infrastructure debenture, 5 years, which was issued in 2017. So we cannot pay it right now. That's the reason why we selected the BNDES debt, which was the one that had the highest cost among the lowest prepayment fees, considering the company's other debts. So that was the decision we made. 70% of the BNDES debt had a cost of IPCA plus 6.09% a year. And that was the main debt that we hedged. It had monthly payments. It had receivables. So that removes your receivables limits. There is also a cost of connected accounts that were given as a guarantee for this debt and the other debenture was clean. It only has Light S.A. and no other additional costs. So it's going to be hedged when when it matures in October 2022.

Thank you, Barroso. We'll now pass it on to [ Mateo Suarez ] from Morgan.

Congratulations on your results. Thinking a bit about losses in special treatment areas. I know that you're still looking at this process, but I'd just like to understand if you're going to focus not only on reducing power cuts, but in energy efficiency to reduce consumption. And if you have any models to increase the company's consumption?

Thank you for your question. Without a doubt, this new project is going to involve not only the relationship that you have directly with communities and energy efficiency, but also areas with the support of partnerships that we have with [indiscernible], allowing people to be trained in computer skills, training people to work in electricity. In this project, we also have the perspective to generate employment. So you have to understand that we have challenges here that when people go out to take readings from these communities, they can't find addresses correctly. So the best thing is to train and prepare people from the community itself. They know how to do things there. So this is why, in our project, we are looking at all of the community leaders, and they're all being a part of this program. We're talking to them. So we need to know what their needs are and where they live. It's a project that involves many agencies that provide services to all of Brazil to Rio de Janeiro. So with -- this is a really different project, and it's going to work on all the aspects that you mentioned; efficiency but also job creation, training, allowing people to be more included in society, and we have the partnership with the government so that we can respect people in how they live. And of course, we can't charge everyone for all the power that they consume. That would not be feasible. We want to regularize them from now on. So that's why this is such a good project, and it's done together with many people. It has the community in it, and it also has agencies from the government who are going to be with us in this new way of working in communities.

So let me see if I understood you. Can I expect the process to have, for example, social tariffs, right? This is something that every distributor has with ANEEL so that could be used to help.

That's right. That's exactly right.

Okay. So once again, I'd like to thank you all for being here. We had many participants. This was a long call, and we will meet again in the next earnings call, and we're all available if you have any questions in the future. So thank you, and we'll talk during the next one. Take care. [Statements in English on this transcript were spoken by an interpreter present on the live call.]