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

Good afternoon, and welcome to our webinar where we'll be talking about the fourth quarter results for Light. My name is Rodrigo Vilela. I am an IR professional and I will host this event. This event will be held in Portuguese and simultaneously translated into English. If you'd like to listen to the translation, you can click on the interpretation button on the lower part of your screen. The presentation and comments will be made by our financial directors and our Investor Relations Director, Gisomar Marinho. We also have with us today our CEO, Nonato Castro. This presentation is available for download on our IR website, but you can also watch it on Zoom. [Operator Instructions] This webinar is being recorded, and this audio will be available on our Investor Relations website. And as per usual, this is our disclaimer. We'd like to clarify that any statements made during this conference call about the company's business perspective, operational and financial projections and goals are simply beliefs and assumptions from the company's managers based on currently available information. Remarks about the future are not a guarantee of performance as they involve risks, uncertainties and assumptions. They refer to future events and, therefore, depend on circumstances that may or may not come to pass. Investors should understand that the general economic conditions, industry conditions and other operational factors may affect the company's future results and may lead to results that differ materially from the ones expressed in these forward-looking statements. Before we continue our presentation with our results and considering the latest communication yesterday about changing the Chairman of our Board, we'd like to invite our Board members, Firmino Sampaio and Wilson Poit, to join us here. Firmino, over to you.

Good afternoon, everyone. It's a great pleasure to be here with all of you to give some clarifications about my leaving the council. I joined the Board 8 months ago. We've been working tirelessly to make the company better, but time passes, and I'm now close to 76. I've worked for over 60 years, and it's my time to stop. It doesn't mean that I will be completely removed from the company. I'll be here, along with our Board and the new Chairman, my dear friend, Wilson Poit , to help and support the company in -- however I can. So thank you for your performance. Thank you for your help in performing this function. I'd really like to thank the regulators, the Ministry of Mines and Energy and all of the company employees. I'm sure that we are making our team much stronger. Wilson Poit is a known professional. He's a longtime friend, and I am happy and honored to give him the responsibility of supporting the company's management for the next years. Thank you. Thank you for your trust. And I'll now pass it on to my dear friend, Wilson Poit.

Thank you, Mr. Firmino. Good afternoon, everyone. It's a great pleasure to be here with you. I'd like to thank Firmino Sampaio, who I've known for over 20 years. He brought in a lot of expertise. He's been a board member in my company. We've had other battles together. And I'm very happy to continue along this path with him, counting on his support. I've been at Light for over a year as a Board member. And now I'm much more excited about this great opportunity. So I'd like to thank shareholders and other Board members and this strong team from Light who will be able to recover the company as we need. I've been preparing a plan for some time with Firmino and other Board members so that we can not only solve the present challenges we have, especially the ones connected to combating losses, but also to guide Light towards the future, toward new sources of revenue, new businesses and everything related to that. So thank you to our Board members. I promise to pursue these results with our directors, Board members and everyone at Light. So thank you very much. Thank you, Firmino. And I'm very happy to be here in this position, especially since I can continue to count on your experience, your experience in regulatory affairs, and I'll continue to be here with all other Board members. So thank you, and I'll pass it back to Rodrigo Vilela again.

Thank you, Poit. So I'll pass it on to Nonato Castro.

Good afternoon, everyone. It's a pleasure to see you again. I'd like to highlight that 2021 was a striking year for Light because we started building the pillars of a new company, implementing a new business model and starting a deep transformation in the company. We've put together a highly experienced team who really know how to turn around a company. This is a team that is driven by challenges, and they have been working tirelessly on this process. And it includes not only operational processes but also our organizational culture. Since we took on this challenge of managing the company, along with all of the professionals in this room, we knew that the path towards transformation would be long, and there would be no shortcuts. It would need to be done well, and it would need a firm basis. We're still beginning that journey, and we understand that there's still a lot to be done. Nonetheless, we can say that in 2021, we took some important steps, showing that we have been evolving in the right direction. We invested over 460 million in fighting energy theft and improving collection. And that figure has gone up 60% versus 2020. Investments will continue at a quick pace in 2022 because they're essential to advance our strategy, which includes modernizing equipment, protecting the grid and training field teams. We also advanced in replacing obsolete gauges and meters. We've replaced over 63,000 pieces of equipment. Our grid protection strategy has also advanced and has reached over 40,000 normalizations and regularizations, 6,000 of which were in the last quarter of 2021. During the fourth quarter, we also recorded a reduction of 209 gigawatt hours in total losses for the last 12 months. So the total loss indicator has been constant since early 2021 despite all the challenges in our concession area and training teams and new measures that we took. Even with all of that complexity and the economic challenges that we faced in the concession area, our collection has not been blocked from growing. We've advanced 1.4 percentage points in 2021, and we finished the year at 96.4%. Considering power supply quality, DEC and FEC indicators reached their best marks in 20 years. These were indexes comparable to the best concessions in Brazil, placing Light among the top 5 power distributors in Brazil with over 1 million clients. According to ANEEL, Light has been the distributor that most advanced in 2021 in power supply continuity ranking, going up 10 positions. So these are advances that need to be celebrated. I'd also like to say that we've been very successful in our Light at the communities program, which is ongoing in 8 locations and has as its goal bringing Light back to those areas and rebuilding the company's relationship with these communities on a different level. So in order to do so, we count on the local support of neighborhood associations, community leaders who are boosting social transformation in each area. Relationship management with our communities is already actively working in these areas, supporting the company's technical team in seeking balance between loss combat goals and collection and also perfecting how we service this target audience, using several relationship channels. In Generation, Light has shown great efficiency and significant results in protecting our results from the risks we have in the market. We worked preventively, and we managed to advance the events that impacted the market, like the water crisis that started at the end of the first half of the year, making prices very volatile and reducing GSF to historically low numbers. Risk management ensures that the company's results were protected in 2021, preventing against any potential losses related to the water crisis. Financially, we successfully concluded several operations in 2021. Our follow-on in January 2021 was well received by the market. And it reaffirms how much our operational improvement plan is trusted and how much we can generate results. At the time, we captured BRL 1.34 billion in new resources. In liability management, we issued debt to the local and international markets, an amount above BRL 5.5 billion. That contributes to improving costs and reducing our debt terms. We finished the year with a robust cash position to meet our obligations in 2022. In 2021, we also reaffirmed our focus on transparency, accountability, equality and in constantly communicating with our stakeholders. We are in the Business Sustainability Index at B3 and also in the Carbon Efficiency Index (sic) [ Carbon Efficient Index ] in B3. Finally, we have to make a comment on the periodic tariff review process that the distributor concluded last week. Our Board was a participant, especially Firmino Sampaio, who practically moved to Brasília to do it. It's important to highlight how relevant this process is for Light. Once it's captured, the benefits of a new regulatory model that addresses the challenges that complex concessions face. As a result of this review, adding Part B from irrecoverable revenues and losses will provide positive impacts to our EBITDA and to the distributor's cash, representing approximately BRL 770 million, out of which BRL 542 million will be in 2022 alone. Our total gain for this year -- excuse me, for this new cycle of 5 years will have a net present value of BRL 2.8 billion. The positive results from this tariff review will provide Light with the needed safety to continue our work. We will advance in implementing our management model, focusing on seeking a sustainable result in the Distribution segment, allowing us and making sure that we have balance in consolidating our business. I'd like to wrap up by saying that we continue to be strong and confident that we are in the right path. And we're sure that with the operational improvement plan, we will have a transformation in Light. Throughout this process, we're becoming a more efficient, dynamic, agile and modern company. I would now like to pass it over to Mr. Gisomar Marinho, our CFO, and thank you all for being here. Gisomar is going to tell you about the results for this quarter in further detail. Have a great afternoon, once again.

Thank you, Nonato. First, I'd like to greet all of you who are watching. And I'd like to apologize because I'm a little bit hoarse, so you might be annoyed by how my voice is, but I hope you understand. So starting with Slide 5, we're going to be talking about the results from our periodic tariff review, which finished on March 15. Last week, we published the main indicators of this review presented here on this slide. Among the main points, I'd just like to highlight this. Technical losses are now 6.86%, while nontechnical losses on low voltage and the subterranean system, which is now also included in the calculation, had its tariff established at 40.93% for the first year of the cycle. In 2022, we're going to have increased passes, considering the losses we had in our tariff. And it will represent BRL 240 million. So concerning total losses, that will be an increase of 2.4 percentage points from 19.3% to around 21.7%. We have to highlight that with every percentage point in losses, we lose BRL 95 million. Our operational costs are now BRL 1.06 billion a year, and it's growing throughout the tariff cycle for the next 5 years. The regulatory compensation base, which includes all of our assets in our concession area, had its gross value fixed at BRL 21.2 billion and its net value at BRL 10.1 billion. our RRQ, the regulatory reintegration quota, which is a compensation received by the distributor for the depreciation of its equipment, will be BRL 855 million a year during the cycle. Regulatory EBITDA, including the yearly cost of real estate facilities and movable facilities, or CAIMI, will now be BRL 2.2 billion. The Xq factor, an incentive to improving quality, will correspond to BRL 34 million over the cycle. Continuing on Slide 6. Here, we see a comparison between the parameters of the periodic tariff review in 2017 corrected by the tariff readjustment in March 2021, which were standing until February 2022. And it compares it to the new cycle beginning in March 2022 with the recently concluded tariff review. Values are listed on a yearly basis, as you see on this table. In this context, the results from this review, that is adding Part B from impaired revenues and losses, will have a positive impact of about BRL 770 million a year to our EBITDA and to the distributor's cash, out of which BRL 542 million will be paid in 2022 alone due to the pro rata period from March to December 2022. Gains from the tariff review during the 5-year cycle is equivalent to a current net value of BRL 2.8 billion. Continuing on Slide 7. Here, we see the evolution of nontechnical regulatory loss recognition versus the low-voltage market during the new tariff cycle, which will begin in March 2022 and will finish in February 2027. During the new cycle, ANEEL started considering the subterranean system or the underground system with the low-voltage market in its formula to calculate this index. We finished the last review in February of 2022, and there was a recognition of a 36.06% nontechnical losses in the low-voltage market in this tariff. The graph shows the curves for the public consultation and the adjusted output. As you can see, we were able to move forward in our dealings with ANEEL, and we had gains of between 2% and 0.5% in passing on losses throughout the new tariff cycle. This is shown on the graph. Continuing on to the next slide. Here, we have some information about the Billed market at Light. Our total energy market in the fourth quarter of 2021 was 6,131 gigawatt hours, so 523 gigawatt hours below what we had in the fourth quarter of 2020. Captive consumption reached 3,166 gigawatt hours, a reduction of 14.7%. Consumption from free clients was 2,369 gigawatt hours, representing an increase of 5.4%. This was the result of a migration of clients who are big- and medium-sized. Looking at the main revenue classes or billing classes, we see that residential, which is the biggest one in the company, posted a reduction of 13.9% in volumes versus the same quarter in 2020. This reduction is due especially to the lower temperature resulting, on an average, 23.7 degrees in the fourth quarter of 2021, down 1.7 degrees versus the fourth quarter of 2020. That's below the average we saw in the last 4 years, which was 24.5 degrees. The commercial class, which includes captive and free clients, went down 6.2% versus the fourth quarter of 2020. This was mainly due to a slow recovery in the economy in our concession area, and that still affects how our clients are consuming power. Industries like telecom, transportation and retail were the ones that recovered the least during this time. Now the industrial market in the fourth quarter of 2021 remained flat versus the fourth quarter -- excuse me, the fourth quarter of 2021 was flat versus the fourth quarter of 2020. And that follows our good performance seen in the last quarters, boosted by a higher growth of the steel work industry. The industrial segment in our concession area posted the best recovery when restrictions were lifted. In the fourth quarter of 2021, utilities went down 39.8% year-on-year. This is due to structural changes we see in how utilities have their supplies arranged because of how they changed their connections from the Light system to the basic grid or because they connected to thermoelectric plants in these utilities. So to conclude, our total consumption was 61.4% in the captive market and 38.6% in the free market. The next slide, Slide 9, discusses how losses in gigawatt hours developed in the last months. This is the third quarter in a row in which we posted a reduction in total losses in 12 months, which was 209 gigawatt hours. The indicator representing total losses over grid load was at 26.63%, a reduction of 0.04 percentage points versus the third quarter of 2021, as we can see on this slide. The loss reduction plan reduced 92 gigawatt hours in losses due to a higher recovery of energy compared to the third quarter of 2021. A lower average temperature also contributed to reducing losses considering its correlation to consumption. The company is now 7.33 percentage points above the regulatory percentage of passing on in tariffs, which had been ongoing until February 2022, which was 19.3%. That would be the dotted line you see on the graph on Slide 9. This is a regulatory threshold. So activities in the loss reduction plan has been reviewed and adjusted in early 2021, and they continue to provide greater efficiency in recurring energy recovery activities. Versus the previous quarter of 2021, we had more replacement of obsolete meters, representing 6,200 units replaced, up 33%. Over the year, we replaced over 63,000 meters. And besides that, the grid protection strategy continues to grow. It's increased 5,800 normalizations or regularizations or 59% more than what we did at the end of the third quarter of 2021. When we compare how much we advanced versus the fourth quarter of 2020, other levers are showing -- are standing out, such as regularizations in the inspection program, which went up 177%, and action in illegal connections, where we regularized a volume of new installations that was 60% higher. Besides that, the grid protection strategy continues to expand. And we've had a growth of 59% in regularizations. Power recovery or REN had a reduction of 6.1% this quarter versus the third quarter of 2021, reaching 250 gigawatt hours. This reduction was mainly due to the reduction in the average amount of energy for regular clients, which in the fourth quarter of 2021 was at 1,957 kilowatt hours per invoice, 4% below what we calculated in the third quarter of 2021. Since April 2021, we adopted a new guideline in billing REN to increase our collection and to make our process more sustainable. Losses grew in the conventional area, and that was due to the following factors, as we can see in the pie charts on the lower part of the slide. During the first quarter -- these are the reasons, okay? So the first quarter of 2021, we migrated some regions, which were considered a special area, to the conventional area due to having a closer connection to our clients. These regions, however, have higher losses. Non-billed energy in the fourth quarter of 2021 and changes in the billing calendar in group A in the fourth quarter of 2020 also contributed towards this effect, that is, the higher losses in the conventional area. Besides that, all REN processes were canceled because a new guideline was adopted to bill REN, as I mentioned before, aimed at increasing our collection and create more robustness for the entire process, and that also impacted our growth. Continuing on the next slide, Slide 10, we'll be talking about collection and ADA. The total collection rate for 12 months in 2021 was 96.4%, 0.2 percentage points above September 2021, which was 96.2%, 1.4 percentage points higher versus December 2020, which was 95%. For the fourth quarter of 2021, even with a water scarcity fee, the company was successful in collection and finished the quarter above the third quarter of 2021. These good results in the fourth quarter of 2021 were due to better indicators for retail and for government due to a more charge activities and proactive contact through cognitive URA (sic) [ ARU ], text messaging and WhatsApp. Expanding payment methods also helped to contribute to a better performance in collection. We started using credit cards, PIX transfers, PicPay and Ame. All of it contributed positively to the segment. We also started having better negotiations with the government over 2021, especially in the fourth quarter. In October 2021, we started a very successful campaign to renegotiate debts, a number of clients in residential, who had at least 1 bill due in the last 12 months and then regularized again. This campaign led to an average discount of 52%. The PCLD indicator over the net operating losses, as shown on the graph, in December 2021 was 3.3% or 2.2% lower than the third quarter of 2021. ADA was about BRL 79 million, 20.2% below what was posted in the same quarter of 2020, which was around BRL 99.2 million. So it remained flat at BRL 597.4 million in 2021 versus BRL 618.7 million in 2020. Moving on to Slide 11. We're presenting the actions for discipline and expanding our market share. One of the biggest -- or winning back the lost market, excuse me. One of our strategies is combating energy theft. Our strategy is based on actions for discipline and market. During this quarter, we are presenting again the operational default combat levers. The improvements we presented over the quarter aimed at perfecting the collection and billing process. We can see how it advanced on these graphs. We had improvements of 160% in normalization, 1 percentage in normalization productivity by crew and also higher percentage detection per inspection. And we also saw a reduction in non-inspected visits or non-inspected clients. And average REN per customer also reduced, as we mentioned before, due to a change in criteria and also an average IEN per customer in kilowatt hours. All of these initiatives led to a higher volume of normalization and listing of clients. We replaced obsolete meters, we implemented new technologies and we have trained our field teams at Light. From the beginning of 2021, we've invested over BRL 460 million in fighting losses and in improving collection. That is an increase of 60% versus what we invested in 2020. Continuing with the next slide. Here, we're going to be talking a bit about our energy theft combat strategy with a true case that's very interesting and shows in practice the effect of our field activities. This case was a condominium in the Greater Rio area in the city of São João do Meriti. It's a condominium that had about 1,000 units and it's a part of a housing program called Minha Casa Minha Vida. This example really illustrates what we regularly see in similar regions, which are part of our concession area. Several attempts to steal energy were made so that the unit was illegally connected and service the units without any charges through the meters. These attempts were prevented against because we have new protection equipment used in locations with high levels of energy theft. The inhabitants there were without power for 19 days before they contacted Light so that it was reconnected correctly. The next slide, Slide 13, shows the loss-proofing equipment that is being used by Light. In these images, you can see that we have ballistic, antitheft, loss-proofing boxes that are open remotely, and it's restricted to Light operators who know how to use it. These boxes can contain 144 connections for consuming units according to their size. They can be installed on posts or, in this case, on a concrete structure. The next slide, Slide 14, shows operational quality indicators, EODi and EOFi. Well, starting with EODi, it was 6.34 hours, a reduction of 4.8% or 0.32 hours versus September 2021. The equivalent internally caused outage frequency per consumer unit indicator, or EOFi, for the fourth quarter of 2021 was 3.44x or 9% lower versus September 2021. These indicators performed below the limits established by ANEEL in Light's concession contract. EOFi and EODi had the best performance in the last 10 years -- 20 years, excuse me. Light continues to have excellent operational results, and it's the third best distribution company in Brazil, according to these indicators. And it's the fourth best in EODi, according to ANEEL, in distributors with over 1 million clients in their concession areas. The next slide shows the effects of the water crisis in the company's results. So it became weaker during the fourth quarter, especially in the second half of October when natural energy started becoming more consistent with the average -- averages expected in most river basins in Brazil. That relieved the pressure on energy cost. Although we saw better rainfall on the short term, reservoir levels are still critical. And to recover them, ONS maintained its strategy to keep thermal electric generation going at expressive volumes, prioritizing the system's energy safety. This measure took our GSF to lower levels. It was between 54% and 66% between October and November. But a reduction in VLD (sic) [ PLD ] at the end of the year generated a lower value due to the energy acquisition that was made for the fourth quarter of 2021 when it was expected that water restrictions would continue. Light energy was affected by this entire situation, and the fourth quarter of 2021 received allocated energy after GSF adjustments of only 380 average megawatts versus the 474 average megawatts of energy sale contracts. As part of the Generation Company strategy, we left a relevant share of its physical guarantees uncontracted. In 2021, 17% of the total energy was allocated for that end. This part of the energy that was not traded was used to mitigate the seasonal effects and the GSF variations over the year. Due to having more seasonal contracts, it was possible to reduce energy sale allocations in the fourth quarter of 2021 by 474 megawatt-month or 8.8 below the volumes in the fourth quarter of 2020. During that purchase, we saw a reduction of 22% or 32 megawatt. The next slide, Slide 16, shows the company's consolidated adjusted EBITDA. Our consolidated adjusted EBITDA was BRL 690.2 million this quarter, so 46.8% below the fourth quarter of 2020, which was about BRL 1.297 billion. Disregarding nonrecurring items in these 2 times, our adjusted EBITDA would have been BRL 641 million in the fourth quarter of 2021 versus BRL 973 million in the fourth quarter of 2020. The distributor's adjusted EBITDA in the fourth quarter of 2021 was BRL 536 million, a reduction of 20.9% versus the fourth quarter of 2020. Considering nonrecurring items in the 2x, the company's adjusted -- or excuse me, the distribution company's adjusted EBITDA would have been BRL 487 million versus BRL 354 million in the fourth quarter of 2020. And that is especially due to higher revenues from captive and free clients and tariff-free adjustments in March 2021 despite a reduction in the billed market in the fourth quarter of 2021. In the Generation Company, the adjusted EBITDA was BRL 120.8 million in the fourth quarter, a reduction of BRL 486 million versus what was posted in the fourth quarter of 2020. Most of the variation is due to recognizing an intangible asset in GSF due to ANEEL -- in ANEEL regulation in the fourth quarter of 2021 of BRL 433.8 million. In the fourth quarter of 2021, there was also lower energy sales due to contract seasonality. Trading posted an adjusted EBITDA of BRL 39.8 million in the fourth quarter of 2021 versus BRL 14 million in the fourth quarter of 2020 due to a higher result in energy purchase and sale operations and also because average prices were about 13% higher what we did in the fourth quarter of 2020. A higher PLD also strengthened our EBITDA in the trading company during this quarter. The next slide, Slide 17, shows the company's net profit and its breakdown -- excuse me, net income and its breakdown. The company posted a net income of about BRL 73 million in the fourth quarter of 2021 versus an income of BRL 433 million in the fourth quarter of 2020 due to the results from Distribution and Generation, which had an income of BRL 46 million and BRL 38 million, respectively, in the last quarter of 2021 versus an income of BRL 239 million and BRL 202 million in the fourth quarter of 2021. If we were to exclude one-off or nonrecurring events, the results would have been about BRL 41 million in the fourth quarter of 2021. Continuing with the next slide. Here, we see the company's cash position. The company has a robust cash position and an improved debt profile. Our consolidated net debt at the end of the fourth quarter was about BRL 7.4 billion, 3.6% above what we posted in the third quarter of 2021, which was BRL 7.1 billion. This quarter, we have to highlight that the company made its 23rd debenture issuance in 2 series at a total value of BRL 532 million. The first series was BRL 263 million with a term of 5 years and paid at CDI plus 1.63% (sic) [ 1.65% ] a year. The second series was BRL 268.5 million with a term of 7 years and a payment of CDI plus 1.95% a year. The actual cost of debt was at minus 0.1% with an average term of 3.7 years. The covenant net debt to EBITDA indicator finished the quarter at 3.48x, higher than what we posted in the third quarter of 2021, which was 2.44x. However, it was still below the limit established for most contracts, which is 3.75x. So to conclude, we're going to go to Slide 19, where we show the progress we've made on our ESG plan. We were selected for the 15th year in a row to be in the Business Sustainability Index list at B3, also called ISE B3. For the second year, we're also in the Carbon Efficiency Index both for 2022. As a consequence of our commitment to diversity, equality and inclusion, we increased the number of women in our total employee list, especially at leadership positions and top-level management. Now we have 1,021 women, which represent 19.5% of the total number of employees. This is above what we see in this industry -- above the average of the industry. We also updated our Materiality Matrix, selecting priority topics for the company and for our stakeholders, what we call double materiality. This process was run by the ESG+ Committee connected to the Board. So based on the new matrix, we selected 10 priority topics to continue our ESG strategy for 2022, as shown on the list on the right side of the slide. Here, you see a list of the 10 items. And this is going to direct our accountability. And now to conclude, we're going to continue with a questions-and-answer session. Rodrigo Vilela will continue so that we can begin this part of our call.

Thank you, Gisomar. [Operator Instructions] Marcelo, we've got a question -- we've got a question from Marcelo from Itaú BBA.

I have a question about a change to the Board with Firmino stepping out but still being on the Board. I'd just like to understand what were the reasons behind the change? What Wilson is going to add to the company? And I'd just like to understand what the rationale was? Because Firmino had a very important contribution in the company's revision process. He is very knowledgeable about regulations, and he's very experienced in the industry.

Okay. I'm going to answer and feel free to ask again if I don't answer your question. So Firmino really made big contributions in the tariff reviews. He practically moved to Brasília, more so than anyone else. We were also in Brasília for a long time. As Mr. Firmino said, it's been 76 years, and it's starting to -- he's 76 years old and that starts to weigh down on you, traveling, being away from your family. He was sick. He had COVID twice. He had a difficult situation. His wife also got sick. He is moving to Salvador. So he really spent a long time with us, but he'll continue to give his contributions. He's very important in the industry. He's well-known. He knows it very well. And we're going to continue to count on him. But this is based on his decision to have a more relaxed life and be closer to his family.

Thank you, Marcelo. We're now going to hear a question from Andre Sampaio from Santander.

I have a question about the reclassification of the risk areas. We've seen a movement in which risk areas seem to be constantly changing. And I'd just like to understand what's happening. How much time will it take to conclude the process? And after it concludes, would it be feasible to invest in loss-proofing these risk areas? So my question is, as soon as we finish splitting risk areas from non-risk areas, if in the risk areas it would be feasible to invest in loss-proofing the area or if traffic and militia are going to prevent us from doing so.

Yes, I'd like to answer by saying this. The case we used as an example, we were called in by the militia. But it's not only about normalizing and loss-proofing, we're doing a lot of work together. So for example, we're doing sports activities, leisure, a lower tariff initially for them to see how their consumption is doing, if they're being efficient or not. So we start with a base value of BRL 100 at most. So we're creating a relationship with the community. The association is a part of the decisions. So we're coming in, and we don't mean to step out. What we're seeing is that, for example, the community where you had 0 collections now has 76% collections. And it used to be 0. These are not only risk areas, but these are areas where we're giving them some special treatment. So there's a number of initiatives that we have been taking together. We have meetings with associations, with leaders, talking. And there's also the case in which we proved at ANEEL where we're going to use the first case -- where we're going to use an alternative source, a solar source, to a community that really cannot afford it so that they can stop having all of these defaulting. Communities are also facing a serious issue that we're trying to solve for them. When they have a power cut for 17 hours, they can only get reconnected the following day, but we changed that. So for example, at [ Rosina ], we have a team there available. So they connect it, and they connect people who are paying. If they have a transformer that broke, they have to normalize it. And this is done with permanent follow-up, meetings with community leaders, talking to the communities. So it's a broader effort. The state government is also helping us in some areas. They're supporting us. The government, little-by-little, is going back to the communities to see what we've been doing. So I want you to understand that it's not only about putting a loss-proof box there, because when you open it, it stops working. No one will solve it if you don't work for Light. You have to go there again to make the box work again and you remove the secondary access. They no longer have that. So there's no way of having illegal connections easily. I'm just insisting on that so you know that it's not only about loss-proofing. You have to have social action. You have to be there. You have to guide them. You have to use more efficient equipment. And the other thing is, the reason why ANEEL recognized us differently is because we have precise measurements in every area that is consuming power. We know how much is being lost, and ANEEL knows it. They know it. So this is certified. So there's no possibility of making a mistake. It's certified. So that's why ANEEL gave us some time to work a little bit easier and have the resources to invest in what it takes.

Andre, just to add to what Nonato said, every time a company identifies what is the conventional area and what is the special area, there's a very well defined governance model supported by a number of internal directives in the company. And it all goes through a qualification process for that area to be classified as special. So that goes through committees, it needs to be approved by the directors and so on. So of course, we monitor it from -- in real time. But about communicating to the market, that's something that is only adjusted once a year. So when we post results for the first quarter of each year, that's when we see what areas have been defined as special and conventional. And from then on, so that we can compare between quarters, we always look at the same areas during that reported year. As Nonato said as well, for some time, we've gone through a certification process to prove what is the load that is actually going through the conventional area and how much is going through the special area.

Great, Nonato and Rodrigo. And I'd just like to ask another question about that. In the nonconventional area, just to correct here, you -- if you can tell us a bit about the changes in the rule to -- for low income. Now we have automatic registries. So what percentage of the market in these regions were using low-income tariffs?

We've started recently and we're expanding our recognition. We're accelerating how we register simply. So we're facilitating that because we're able to reduce tariffs, and we're allowing people to come in. So we have been accrediting them. There is an effort that we're making in 5 communities on updating our registry. So we should finish that report in the first quarter. And at the end, we're going to have the right design on how we're advancing, but we've advanced significantly because it facilitated how low-income groups were recognized. Before, it was only through CRAS. Now it's easier. So we're making use of the tool to recognize and regularize these clients faster. And we also have to say that the company in the last years, especially the last 2 years, has made big efforts to expand our client base in the low-income bracket. We had a number of low-income clients at the end of 2019 that was around 180,000 clients. Now we're closer to 580,000 clients. And that's supported by the project implemented to speed up the right that they have to that in these communities.

Great, everyone. So just a follow-up question, but is there a percentage that you expect? How much of the nonconventional area will be in the low-income bracket when the process is finished?

As I said, we're finishing this quarter and then we're going to have that data. If I give you any information now, that may change later. But until the end of the third quarter, we're going to have that balance. It's being updated. Whenever we extend that action, we see that the number goes up, but I can't mention any figures without having the results of what we're doing.

Thank you, Andre. We got a question from [ Bruno Figueiredo ] in the Q&A tool. He says that we mentioned BRL 400 million investing -- invested in our reducing losses in 2021. If you can tell us about the return on investment and what you expect to invest in 2022 and beyond. Gisomar is going to answer.

Yes, Bruno, we did invest that much. Even considering -- and that -- our investment was about BRL 460 million in 2021. When it comes to assessing returns on that investment, all of the levers, so all of the projects have that measurement, and we only invest in the projects that we understand will have a positive return for the company and that will generate strength in our process. In about 2022, investments will be slightly higher than in 2021.

Thank you, Gisomar. [Operator Instructions] Okay, everyone. So thank you for being here. I'd just like to underscore that the team is available if you still have any questions. We wish you a good afternoon. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]