Neoenergia S.A. (NEOE3) Earnings Call Transcript & Summary

Good morning, and welcome to the conference call on Neoenergia's First Quarter of 2023 earnings. This conference will be held by Mr. Eduardo Capelastegui, CEO of the company; and Leonardo Gadelha, CFO of the company. This conference call is being broadcast simultaneously over the Internet via webcast and can be accessed at ri.neoenergia.com, where the presentation slides are also available. [Operator Instructions] In addition, this event is being recorded and will be available later on Neoenergia's Investor Relations website. I'd like to mention that forward-looking statements that may be made during this call regarding Neoenergia's business prospects as well as projections, operating and financial targets are based on the management's expectations and assumptions about the future of the company as well as information that is currently available to Neoenergia. Future considerations are not an assurance of performance and they involve risks, uncertainties and assumptions as they refer to future events, and therefore, dependent on circumstances that may or may not occur. Investors must be in mind that general conditions, industry conditions and other operating factors may affect the company's future results and may lead to results that differ materially from those expressed in such forward-looking conditions. Now I yield the floor to Mr. Eduardo Capelastegui stage. Please, Mr. Capelastegui. Please Mr. Capelastegui, you can proceed.

Good morning, everyone. Thank you very much, operator. I'm Eduardo Capelastegui, CEO of Neoenergia. I would like to thank everyone for being connected today in this conference call, at which we will start the presentation of our results for the first quarter of 2023. And then, we will talk about the transaction announced last night to the market regarding our transmission business. Here with me are Solange Ribeiro, Deputy CEO; Leonardo Gadelha, CFO of Neoenergia, Giancarlo Souza, Executive Director of Operations; Carlos Choqueta, Executive Director of Corporate Development; Juliano Pansanato, Executive Director of Asset Control and Planning, Solange Ribeiro, CEO of Neoenergia of Pernambuco; and Renato Rocha, Director of IR. As usual, I will make a brief presentation going through the main highlights of the results for the period. Then Leonardo will present the results in more detail. And then we will move on to the presentation of the transaction announced. And finally, we will go to the questions and answers and final remarks. Let's go to Slide 4 for the highlights for the first quarter of the year. EBITDA in this first quarter was BRL 3.6 billion, more than 14% when compared to the same period in 2022, reflecting tariff adjustments, cost discipline and new renewable transmission and generation projects already in operation. With great satisfaction, we delivered Luzia, our first solar complex, which has a peak of 149 megawatt and we added around BRL 90 million wrap and transmission projects with the deliveries of the [ Rio Formosa lot ], some sections of the [indiscernible] and the REA in affluent Neoenergia. As a result of our differentiated execution capacity and as a result of the progress of our growth projects and transmission and distribution, we executed a CapEx of approximately BRL 2.1 billion in the quarter. We've had very positive results with tariff review processes for Coelba and Cosern. We had a growth of 2.5% in Portion B at Coelba, reaching BRL 5.5 billion and the growth of 25% for Cosern reaching BRL 1.2 billion. We had full recognition of all investments made in the last 5 years with a regulatory remuneration base of $15.3 million for Coelba and $3.4 billion for Cosern. Additionally, the revisions contemplated the adjustments of the impact of distributed generation in our markets in addition to the improvement in loss rates, which allowed the classification of regulatory losses also in Neoenergia Coelba. Finally, we continue to successfully execute our asset rotation plan. Having announced yesterday the completion of the sale of 50% of the capital of our operating transmission companies. All these points confirm the strength and robustness of the deliveries we have this quarter. Moving on to Slide 5. We can see an evolution of our projects under construction and renewables, we concluded the works of our first Luzia photovoltaic project with [ 149 ] peak aimed exclusively at the free market, which was born with 100% of energy already sold in the ACL by 2026 and 20% by the end of its life cycle. Luzia has the right to associate with our TFAs wind complex, which increases the projects returned by more than 100 points as it generates considerable reduction in the TUST does exceeding the expected return in its business plan. Our OATs [indiscernible] Complex reached the end of the first quarter of 2023 with 445.5 megawatts in operation. And in the coming months, we will reach 100%. [indiscernible] has 96% of its energy on the free market already sold at prices that ensure the project's profitability and exceed our business plan. In transmission, we continue advancing in the December 2018 loss with 45% completion of the [indiscernible]. We plan to deliver other parts of the lots in this auction for this year. Tomorrow [indiscernible] from December 2020 bidding already has an installation license for its entire length and the works continue to advance split. The Lot that we won in the December 2021, bidding was granted the waiver for environmental licensing, which reinforces the very low risk in this execution of this project. And regarding the Lots won in June 2022 being, especially Lot 2, which is the biggest one. We've already hired 92% of CapEx. And in Lot 11, we have 97% hired, which greatly reduces the risk of frustration in relation to CapEx savings that we signaled. Additionally, the process of obtaining the licenses is making progress as planned. I will now turn the call over to our CFO, Leonardo Gadelha, who will provide more details on the results for the first quarter, and then I will come back to explain the transaction announced last night regarding our transmission business. Leonardo, you have the floor.

Thank you, Eduardo. Good morning, everybody. As Eduardo said, we had a very consistent first quarter with very good performance in all our segments. Starting with the consolidated results on Slide 7, we can see the evolution of the [ Bruno margin ], which grew 14% in the quarter, reaching 760 million, driven mainly by the effect of the portion of readjustments, greater customer base, higher VNR and better results in renewables with [indiscernible] and Luzia complexes. And this quarter, we continued to show good cost discipline with 8% growth in operating expenses again in the first quarter of 2022, therefore, in line with average inflation in the period. Consolidated EBITDA grew by 14%, as Eduardo mentioned, and cash EBITDA, excluding noncash items such as B&R and IFRS 15 increased 7% compared to last year, reaching $2.609 million driven mainly by readjustments in the B portion and entry of projects. In the quarter, we posted net income of BRL 1.25 billion in line with first quarter of 2022, explained by the increase in the debt volume of around BRL 5 million in the quarter, and naturally, the increase in interest rates. In the next slide, Slide 8, for context, we have more detailed information. Eduardo already mentioned that we've reached BRL 2.1 billion, whereas BRL 1.2 billion are in distribution, BRL 737 million and the progress of transmission work and $138 million in renewables with the final phase of the OETs and Luzia projects that are already at operation. It's important to highlight that for the coming quarters, this will become the new profile of our CapEx that is-- it will be concentrated in the grid and distribution and transmission work. Moving on to results analysis in Slide 10. We're now getting into the performance of our Network segment, and on Slide 10, we see the change in energy and directed to our distributors, which has previously announced show growth in [indiscernible] Brazilia. However, there was a decline in the other 3 distributors. In the quarter, we were impacted by lower temperatures rains, especially at Electro and also customers migrating to GD. It's also worth mentioning, as Eduardo has mentioned that we had the [indiscernible] tariff revisions last week, which was very positive in [indiscernible] also in terms of defining the new market. Slide 11, we're talking about distributed energy. We present the evolution of energy distributed in our 5 distributors as anticipated by the market. And in the first quarter, distributors presented a reduction of 0.6%. Total number of consumers reached $16.1 million, therefore, an increase of 307,000 customers in 12 months and more than 1.5 million in 5 years, therefore, equivalent to a new distributor for each cycle. Moving on to Slide 12 on losses, again, we had a quarter of good performance with loss rates that are well controlled across all distributors. We continue with the 3 distributors within the regulatory limit. And the good news is that considering the new regulatory limit for RGP Paraiba, it is already included with a limit that's highlighted in green on the slide. So we will have 4 of our 5 distributors classified within the regulatory limit for losses. Moving to Slide 13. Speaking of [ depo ] and elektro, this quarter, we maintained a good level of collection at our distributors as we can see at the top of the slide. PECLD remained in line with previous quarters, except in Pernambuco, reflecting pressure on retail that we observed and also a one-off effect from the government of around $20 million in the quarter. For the coming quarters, we will continue with cutting and collection actions. And therefore, we expect to return to the level of previous quarters. Now about DEC and FEC on Slide 14, we show the quality indicators and our distributors with good performance and a downward trend and practically all distributors over the quarter. Now getting into the network results, the great results on Slide 15, we've seen an evolution of 18% and gross margin and retained 4 billion and 238 million, driven by reinvestment for 2022 and also VNR and IFRS 15. Network OpEx in the quarter grew by 7% and 6% normalizing the new transmission lots, therefore, below the average inflation of the period, showing our disciplined costs that were EBITDA grew 20% in the first quarter of 2023, reaching 3.254 billion. And EBITDA cash, excluding the effects of VNR and IFRS 15 grew 14%, driven by readjustments and tariffs and also the start-up of transmission projects. Profit from the network business reached 235 million in the first quarter of '23, therefore, in line with '22, pressured by the higher volume and higher cost of debt. Now Slide 17, with renewables and liberalization, we show a summary here where on the left side, we see EBITDA from renewables reached BRL 273 million, therefore, a growth of 16% in comparison to the first quarter driven by EBITDA from wind farms, which grew 42% due to the entry of the [indiscernible] Luzia projects, as you can see at the bottom of the slide. While on the liberalized segment, we reached an EBITDA of BRL 153 million, therefore, a decrease compared to 22 million explained by the non-supply of CAS in that partner of last year, the first quarter of 2022. Still a strong result from T[indiscernible]. Furthermore, our trading company MC posted an EBITDA of $7 million compared to $1 million in the same quarter last year. Now moving to Slide 19, where we talk about capital structure. Regarding our capital structure, we see that we ended the first quarter with a net debt of BRL 36.8 billion. We should emphasize that this is already considering the accounting criteria, deconsolidating the debt of transmission operating assets in accordance to -- with the announced transaction yesterday, which will provide details later on. But these assets have been deemed available for sale, hence the deconsolidation and our net debt-to-EBITDA ratio decreased from 3.15 to 3.06 million already anticipating part of the positive effects of the operations. So we don't have the equity coming in, which will only happen at the closing of the operation, but we are anticipating part of this effect and the leveraging. Our debt structure continues to give us a lot of comfort as it is well distributed over the next few years. As you can see on the slide below, reaching an average term of 5.4 years, and we continue with a very diversified in terms of sources and in taxes as you can observe on the right side of the slide. It is important to highlight that in spite of volatility of the capital markets in the quarter, we've already disbursed more than $4 billion in new funding and are at a very competitive spread levels with international banks, and we have already addressed a large part of our funding needs for the coming months, relying on various sources of financing among the IFC, a second one with [indiscernible], and we're also advanced with ACO, which is the Spain development named. Having that, well, in spite of the volatility we've observed, we still count on very competitive spreads. Having said that, I will return the floor over to Eduardo, who will talk about the announced transaction.

Thank you, Leonardo. Now moving to Slide 21. We will present to you the details on the transaction that took place yesterday that was announced yesterday. And basically, the signing of the operation of your transmission business consists of a broad partnership with GIC, one of the main augmented wealth fund [indiscernible] from now on, will become a partner of Neoenergia in one of its name in segments. This operation represents the commitment we have with our shareholders regarding the advancement of our strategy of asset rotation and value creation. In December 2022, we announced the transaction with Eletrobras to exchange hydraulic acid, and now we're announcing our second transaction in the transmission business this time. This operation consists of a partnership on 3 main fronts. The first phase is the acquisition of MGIC of 50% and transmitters of Neoenergia that are country in operation. This operation will allow cash inflow from the sale and deconsolidation of existing debt on these assets. And we understand that it is a transaction at a very competitive price and it conveys to the market at an implicit valuation that is not currently priced to the year. The second phase is a right to first offer to DIC for the future acquisition of lots that are currently under construction. We're talking about 8 watts with more than 6,000 kilometers of mines and in addition, there is protein are too after closing the debentures in 2025 when then you'll be able to conduct the operation of sale of 50% of [indiscernible]. These lots represent 3x more rate than the operational lots sold now. And the negotiation will be based on the same methodology used free lots in the first phase. The third phase is the joint participation in the future bidding processes as long as it is in the interest of both parties. This participation may even take place before the closing of this operation. Therefore, already for the June 2023 bid process. We would like to highlight the strategic rationale for the operation. First of all, this is about a strategic partnership. Today, GIC is widely recognized in the market as a strategic allocator of capital in perennial and sustainable investments. This demonstrates the value that GICs all in Neoenergia’s transmission platform and its intention to continue with us thinking about the long term, not just a single transaction. This was the great differentiating factor of GIC trial in the process. It's robustness and its investments and its intention to stay in the long run. And secondly, the operation generates a lot of value for Neoenergia operation [indiscernible]. Thinking only about operational assets, the off year is for equity of 1.2 million 50% with a very competitive implicit multiple at 12.9x at a premium of more than $500 million on equity that was invested in these projects. These values only translate the performance that Neoenergia Group implemented its assets and the ability to generate value. Moving on to the third point. It allows Neoenergia to deleverage. In addition to the cash that Neoenergia will obtain with this transaction, the structure that was designed and is one of control in which Neoenergia GIC will have a 50% stake, enabling new energy to deconsolidate the debt of operation assets. The idea is that assets under construction today will also be contributed to this voting after the COD with the same co-control structure. Finally, new energy will be responsible for operating the asset. A very important point is that despite the control structure, Neoenergia will be the operational reference for the assets. This operational performance that brought GIC to the table. And so we will continue to implement and execute all our products with the best market practices. We have increasing levels of quality of the operation. Therefore, Neoenergia will continue to provide O&M and administrative services. One thing I would like to emphasize is that we are looking for a partner for this operation with interests aligned with those of Neoenergia. And we understand that GIC is the ideal partner for this line of business, and we are sure to be running once again an operation within operation, in which both partners will extract a lot of value from this partnership. Moving to Slide 22 now. I think the vast majority of you the market already have a deep understanding of who GIC is [indiscernible] remember sub report data this fund. GIC is a sovereign investment fund from Singapore and has a global president and several strategic segments. In Brazil, they have partnerships in other infrastructure shipments and also participate in bidding in the sanitation segment in which they also structured a successful partnership. And for us, the most important about GIC is that it is internationally recognized as a resource allocator that seeks out as consistency and above all results on the long run. For these and other reasons, I reiterate how Neoenergia believes that GIC is the ideal partner for this business segment. Regarding the investment agreement, I would like to highlight some points of Phases 2 and 3 of this partnership. Sticking on Phase 2 about the right first offer of assets under construction. The GIC will have the right of first offer on the assets that are under construction as soon as they reach the COD, each asset will be assessed individually. Once you're operating, I shouldn't sit. But the conditions of the offer must be similar to what was designed for the operational assets of the first phase. Until the start of operations, Neoenergia will have full control over the construction of assets. And whenever device is exercised, they will form part of the Neoenergia platform NDIC, which will be a holding company for operating assets. As for future bidding, Neoenergia and GIC will evaluate the interest jointly participating in the bidding process. And in Ks, we win any of the lots Neoenergia will have 60% share throughout the construction phase. And upon reaching operation or COD, this asset will be contributed to the operating holding company with a 50%-50% structure, reinforcing the growth platform. This regimen will start now from this point onwards, including the mining in June 2023. With this, it is clear that the operation reinforces Neoenergia’ s capital allocation discipline. Moving to Slide 23. I'm going to go through this slide quickly, as it just reflects the structure that you already know about Neoenergia’s transmission assets. A single point that I think is worth barring in line is that assets under construction, which currently are 8 represent 3x more in terms of rapid than operating assets. And this reinforces the discourse that we have been adopting since the beginning that this is a very robust transition platform. Now on Slide 24. I Here, we just want to illustrate the times and movement Phase 1, for example for operational assets, we created a holding company, which is called Neoenergia Transmission, in which these assets will be contributed and GIC will invest directly in this holding company. What we jointly sought here were -- was 2 things actually. One, the creation of a transmission platform for this reason we prefer to create a holding company instead of making the right sales. And then second place, the streamlining of the shareholding structure, which is something we always see and our structures to make the whole process much more agile and less complex. Moving to Slide 25. Here, we are talking about Phase I and II. In Phase 2, the assets that are currently under construction will be 100% owned by Neoenergia. And when operating the partners will discuss the interest in mining and selling 50% of the shares, remembering that this is not an obligation on either party to buy or sell. But yes, there is an intention for this to happen. These operations are not about selling a assets. It's about building a robust platform on the long run. Therefore, if this common interest between the parties, the assets will be contributed to the voting of operational assets, Neoenergia’s Transmission. Now in Phase III, our new bidding processes, we have already designed a very detailed dynamic of how the partners will participate in the bidding. In summary, we are under no obligation to attending processes. It will be an option for both parties. But yes, we have this mutual interest in thinking about a better capital structure for future lots, which will make our growth thesis even more robust, always respecting shareholder profitability. For the assets on the bidding, will initially be outside of the operating holding and Neoenergia will have a 60% [indiscernible] during construction phase. Neoenergia will be responsible for executing the construction of projects, considering our know-how and product delivery track record, as you could already see. Now moving to Slide 26. We're going to talk about asset valuation. And this is an operation with enormous value creation for shareholders with a multiple of 12.9x enterprise value EBITDA and 10x enterprise value wrap. Very competitive compared to previous market transactions and with comparable multiples on the exchange market. It is worth mentioning that most comparable transactions are 100% sales with a premium, quite different from our co-control operation. In addition, I'd like to emphasize the current scenario of interest rates, which are much more challenging today compared to previous transactions. And this demonstrates the excellent process we have conducted. Another point made [indiscernible] comparison as the equity that was allocated to these projects. The calculation represent areas to compare GIC's offer of BRL 1.2 million with all the equity that has already been invested adjusted for inflation and reduced by dividend paid which translates into an amount of BRL 682 million. In other words, we are creating a premium of $518 million with the offer which represents a 78% increase over the adjusted invested equity. The TAC offer is subject to certain conditions, but until the closing of the transaction. As I've mentioned before, the M&A process, but which do not in any way alter the conclusion on this slide that the offer is competitive and did it reflect the profitability that the projects bring to its shareholders. For this operation, we hope to crystallize value and seek to reflect the value of our assets in the share price. Now for Slide 27, I'd like to highlight the impact of the operation. And the group leverage, it implies a reduction of BRL 3 billion in consolidated net debt, approximately $1.8 billion of that deconsolidation now at [indiscernible]. So in the next quarter, this will be incorporated plus BRL 1.1 billion of cash inflow at closing and an improvement in the 2023 covenants by 0.16x. Furthermore, we reinforced that the operation has no fiscal impact. And as it is very close to the net asset value, even if we have the gain versus the equity contributed when compared to -- with the PL or with IFRS if the offer is very similar, reinforcing that Neoenergia enters and monetizes the IFRS out results recorded during the years of construction of the assets. As you know, for each quarter, we present EBITDA and cash EBITDA. And here, what we show is the monetization of the results obtained very [indiscernible]. Now on Slide 28, coming to the end of the presentation, I would like to conclude by emphasizing some key factors about the transaction. First of all, I'd like to say that this transaction reflects the commitment we have with our shareholders with the execution of our asset rotation strategy and with a continuous search for value attenuation. Secondly, the significant reduction in net debt now at BRL 3 billion, much more ahead with the project and the construction come into operation, further strengthening Neoenergia’s balance sheet. Thirdly, to indicate that after a long progress, we will establish this partnership with GIC to create a robust transmission on farm in the long term. And finally, I'd like to stress that in operational terms, Neoenergia will continue to be the partner of reference, meeting and upgrading the lot and will continue to deliver results with the quality and agility that this segment met. It has been very hard work, but the result is extremely rewarding. We built this partnership together with GIC so that makes sense for both sides. As you know, the way to do operations at Neoenergia is to look for something that is good for both parties, and we are certain that we will build together a history of many results and profitability. We continue with our purpose of creating increasingly stronger Neoenergia and with shareholders increasingly delighted with our deliveries. I would now like to open for questions and answers.

[Operator Instructions] The first question comes from Guilherme Lima from Santander.

With regard to the partnership with GIC, could it extend to investments in other segments or only transmission. And also about the next transmission [indiscernible] are you looking into conjoint lots with GIC? What's your perspective on this? And how could this impact the threshold for return? And another question is if you could comment on opening the public hearing amount distributors, how the discussions have been going? We've seen those about inmates with regard to replacing refrigerators and solar panels and household. So I wonder about your perspective on the resources for this initiative? And if there is any impact you anticipate?

To answer the first one about a partnership with GIC and other segments, we are -- this is not something we are looking into right now. We are focused exclusively on transmission for the time being, and we are not looking into other segments. Now about the June bidding process, as I've mentioned during the presentation, we will participate conjointly in the beginning, and we are rushing to do sell to the timing of a partnership -- as I mentioned in Phase II, we'll start operating as often. And now for the next 5 years, we're looking at to the bidding and launch in AEA and around other areas where we are building. So obviously, we will participate in those remaining processes, and we will remain as we are now. We trust that now with GIC, this will further boost our capital allocation discipline, yet another reason for the market to trust and how we participate in these bidding processes. And the results we obtained are almost doubling the invested amount -- and I think that speaks for itself. These are assets that had a lot of value that create a lot of value for Neoenergia and the construction for the construction will be similar. Now as to the shift in the market, I should mention what we're always bearing in mind. We continue to believe that the renewables model makes sense because this is in contract we have a regulatory model based on benchmarking and therefore, this model that we have designed we believe it will continue to yield results. And we're thinking about how to articulate, how to build along with social programs, but I'd like to emphasize that this is indeed very important to us.

Next question is from Rafael Nagano from Crédit Suisse.

I have a few questions on mind. One is, could you explain a bit more about the rationale and the 60%, 40% structure during construction and then I believe GIC is going to buy the 10% participation for 50-50. So what was the rationale in terms of leveraging. And the second question is actually, I'm wondering if there's been any progress in selling Pernambuco, Termopernambuco. Can you give us an update on this, please?

Well, the 60%, 40% main construction is actually what we're preparing for the meeting and building the lot. Because construction is what we do best and 60-40 during construction is actually establishing that control Neoenergia will have during the construction process. We need that kind of agility. It's our business plan so we need to make sure we're going to be able to build following the business plan. So that is why we have this bigger relevance in comparison. Now, once in operation, there is the -- there will be this tally of 10% because this is going to go to the Neoenergia [indiscernible] holding company. And that's why we're going to have 50% after a smart upgrading. Now our plan has been announced last year with 4 pillars transmission with yesterday, we have Belo Monte that has been announced, and we are confident that we will make progress still this year. And we also have the thermal power assets. And we are working on the assets rotation to complete the cycle according to the deadlines we have indicated last year.

The next question is from Marcelo Sá from Itau.

Still about the 60%-40%. I understand Neoenergia is going to have a more relevant role that they're building. But I'm thinking about the leveraging, otherwise, you'll end up consolidating this debt, right? So isn't this negative to the margins during the construction? I think that's the first question I have. And secondly, I'd like to understand the government for a bidding process. I understand you are going to do it out, but I'm thinking about the fourth slot where you enter together, then lends assume a scenario where you don't reach an agreement with price and Neoenergia had decided to do its own. Is that a possibility? Or would you necessarily have to reach an agreement to bid? And if you're by yourselves, I understand you can make your own bid. But -- and the lots you're working together. Can you -- do you necessarily have to reach an agreement on price or can Neoenergia proceed on its own?

Let me to clarify the 60% to 40% because this is something I have not mentioned actually. During the construction stage 60/40, -- is this clear? It's Neoenergia initiative but at first, we're not consolidating the assets with that. We're going to consolidate the debt run out structure. I just want to make that clear. And that also addresses the previous question. Now about the bidding process, I'm going to yield the floor to my colleagues that he could explain the different scenarios we're looking into...

As Eduardo said earlier, we've defined an agreement with GIC that are sophisticated it one of a parotid for this agreement is to grant flexibility for new energy and also having partners along with us has been confined from teary beginning that Neoenergia has led liberty to analyze the lots and [indiscernible]. GIC doesn't want to, Neoenergia can do it if both are interested in a lot, the idea can participate in other in the pending. If during the analysis of the main process, the areas of [indiscernible] Neoenergia may proceed on it. Your final bid is Neoenergia [indiscernible]. So currently, our rules allow to in together, but Neoenergia has the possibility to do it on its own and the final bid is on -- is a Neoenergia call. So if we agree, we go in together. And if we disagree, we can leave the contract. So when we thought 60/40 the rationale is, you guarantee Neoenergia’ s initiative and if for any reason, the partners don't agree by the end of the construction, they may sell the 40% in Neoenergia where Neoenergia would have 100. We're not expecting this scenario. They're very well aligned. But in order to make sure that we continue to participate in the next future bids, we decided for this method. But the idea is to always participate with GIC. We are not talking about selling assets. We're talking about a long-term robust method. I'd just like to explore more at this point. Obviously, we're conducting the operation to build together with GIC, participate in the bids, process and leading other more way, but it's very important for Neoenergia to have that kind of flexibility. That's defined by contract. This is perfectly clear.

Now about the first question about consolidation debt. I'm wondering if there's going to be an agreement across shareholders for the control. So even though we have 60-40, it's a control structure, and that's why you're not consolidating the debt, right?

Yes, correct. 60-40 or 50-50 is not exactly the right to participate. It's actually the control model that we have established during the construction allows for that.

The next question is from Daniel Travitzky from Banco Safra.

I think Marcelo already asked a question about movements. And I'd like to further understand this alignment. In the case of minimum profitability, if you have entered an agreement on this? And also the continuous occurred mid -- with GIC's partnership, what's the mindset for these future bids? Are there any you're going to look into more carefully with DEC, for example, what's your perspective on this?

Evidently, we have not defined guide per agreement because it's a long-run partnership. But what's clear to me that is that now at Neoenergia, we work with inflation plus 2 digit return. And obviously, this extends to GIC and the goal is to do it jointly. We are participating in the first bid to trying to preserve the flexibility, which is great for Neoenergia and it's great for GIC as well, but we're always going to try building together and bidding together. Now about DEC, we are looking into this alternative, and we are analyzing each of the lots in June 2023, but DEC is not something where you're getting it right now. We consider there are excellent opportunities in the regular June bid. And we do not consider ourselves competitive in DEC so that's why we're going to look into that with more time.

[Operator Instructions] We are now closing the question-and-answer session. I would like to give the floor to Mr. Eduardo Capelastegui for his closing remarks.

Thank you once again, operator, I would like to leave a final message, a we're seeing our commitment to all of Neoenergia’ s stakeholders. First, -- we have repeatedly that Neoenergia, what moves us are our values, our focus on efficiency, value creation and capturing results. One of the best ways to represent this is the expressive growth of our EBITDA cash, which has grown more than 100% and our net profit as well over 100%, exceeding all expectations at the time. In second place, I'd like to emphasize this result is obviously the result of operational excellence, but also full vigilance of our financial health, ensuring an adequate capital structure. As you know, we have access to a wide range of funding sources, both domestic game international, which reassures us in terms of liquidity. Thirdly, the advancement of projects and deliveries aligned with our business plans also support these results we are demonstrating. And as we saw here today, we delivered our first Luzia, PV Park and are on our way to analyzing our OATs led complex. Furthermore, in 2023, we've already proven to be a year of important deliveries of the transmission. And lastly, I'd like to say that it is with great joy that we announced the celebration of our partnership in transmission with GIC, confirming our commitment to delivering our asset rotation plan, which is generating a lot of value and by adequately pricing our assets in addition to helping to strengthen our balance sheet. Lastly, to our shareholders who trust us, I would like to emphasize once again that we have the right team engaged and committed to deliver the desired results. And here, I would like to end, as usual, by thinking all Neoenergia employees who have fulfilled their role overcoming all challenges, delivering results and creating a lot of value. Thank you very much, and have a good day, everyone.

We are now closing the conference call. We appreciate everyone's participation. Have a good day, and thank you for using Chorus Call.