Societatea Energetica Electrica S.A. (EL) Earnings Call Transcript & Summary

Hello. I'm Alexandra Titan, Head of Investor Relations Department. And together with the entire management team, I would like to welcome you to the presentation of Electrica's results for the first quarter of 2020. Those of you who are connected only by phone, please download the presentation in PDF format following the link available on our website under Investor News section. [Operator Instructions] Kindly note that the entire conference is being recorded. [Operator Instructions] We will start by presenting the financial results for the first 3 months of 2020, and we will continue with the main corporate events that took place since our previous web conference. Here, we will include also some aspects regarding COVID-19 effect -- impact on Electrica's activity and also some hypothesis for the entire year 2020. Afterwards, we will have a Q&A session. I will now leave the floor to Ms. Corina Popescu, Electrica's CEO. Thank you.

Hello, everybody. Welcome to this today's meeting. So we are very glad to be today in this format. And we would like to start the presentation of the financial results for Q1 2020. So I will say only some few words. We just passed a very difficult period of time. But as you know, we are a strong team, and we succeeded to prepare the group, company in order to make face to all the challenges there are. We take care of everybody starting from employees to our customer and, of course, our shareholders. And we are very open, and these are the reason that, together with my team, we prepared a short presentation regarding the COVID-19 impact in the financials. So let's start the presentation. We'll start the presentation with the financial results. Madalina will take the floor and start everything.

Hello. Hello, everybody. I'm Madalina Rusu, Head of Budgets and Controlling, and I will start first presenting the group's financial information. At consolidated level, in the first quarter of 2020, we had a 4.7% increase in revenues, mainly from the energy revenues, coming both from the supply and the distribution segment. At the same time, EBITDA has recorded a roughly 200% increase as compared to the last year. In terms of EBITDA margin, this also tripled between the 2 comparative periods. The net consolidated profit for the 3-month period followed the EBITDA trend had reached RON 80 million, increasing by RON 121 million from the RON 41 million loss in the comparative period when we incurred significant electricity purchase losses on the supply subsidiary made on the regulated segment. Regarding the financial position, it's worth mentioning that the group is the first time on a net debt position after the IPO from 2014. This is driven by the distribution segment as a result of using the financial resources for the network investment's finance. And on top of this, we have recorded increase in the financing for working capital due to timing differences between our actual cost and those approved by the regulator. Moving forward, we will further explain the EBITDA evolution year-on-year. So EBITDA increased by RON 150 million compared to the first quarter of 2019. The main driver being the energy margin, which had a significantly positive variation of around RON 178. Main part of the impact comes from the supply energy margin generated by the reduction of electricity cost, especially on the regulated segment, reflecting the recovery of purchase losses from the previous year when the tariffs approved by RE were below the actual electricity purchase price. The distribution segment margin also improved due to higher tariff, where the positive effect being slightly allocated by the increase in electricity costs needed to cover network losses. These positive aspects were slightly affected by the increase in other OpEx, mostly employee benefits. This being the effect of the changes in the structure of the benefits granted to the group employees in order to keep our workforce motivated and align with the market evolution. Going further to the main segment's performance. On the distribution side, the estimated regulated asset base at the end of Q1 2020 was around RON 5.6 billion or around EUR 1.15 billion. The revenue from the distribution segment increased by 3.2% compared to Q1 2019. The contribution to the electricity -- the contribution of the electricity distribution segment to the group's consolidated revenues being 20%. The increase is due to the following factors: On one hand is a favorable impact of approximately RON 30.7 million from the average increase in distribution tariffs that offset the negative effect from the drop of distributed volumes by 1% year-on-year. And on the other hand, it's a negative impact of RON 10 million from the decrease of revenues recognized in relation to the investment into the distribution network compared to the same period last year. But this have no impact, though, on the bottom line. The cost of the electricity purchase for covering network losses increased by 4.3% or around RON 10 million. The evolution being generated by the increase in the electricity purchase price, but also by the slight increase in to electricity needed to cover the network losses. The expense for salaries and employee benefits increased by 70.3% compared to the same period of last year. So overall, EBITDA increased slightly, while the net results remain almost at the same level as last year on the comparative period. Net debt of the segment has significantly increased, and in fact, this is the main driver behind the evolution of the financial position at group level because we have to finance the CapEx plan and also the working capital deficit. In the next slide, information for each distribution companies presented, referring to financial aspects as well as CapEx plan network losses and volume distributed. So except for Muntenia Nord, which recorded an increase, the CapEx value is below the level of last year in accordance with the approved investment plan for 2020. This one is considerably lower by around 20% compared to the previous year plan. The cost with the network losses had a mixed evolution for the three DSOs, namely increase for Muntenia Nord and Transilvania Nord, while decreased for Transilvania Sud. When we are talking about quantities, these ones increased only for Transilvania Nord. No significant changes were recorded to volumes distributed except for Muntenia Nord, which recorded a 3.3% every decrease, mainly on high and medium low and medium-voltage levels. Regarding the targets for the network losses, these are set by RE for the entire year and are not relevant now, but only at the end of the year due to some technical aspects. These are incurred changes during the period. Moving on. Regarding Electrica Serv subsidiary, EBITDA decreased mainly as a result of revenue decreased by around RON 7 million after eliminating the impact of the sale of assets to the group distribution company. The reason behind this reduction is the lower level of auto services for the DSOs companies as a result of starting the establishment of their own fleet. A reduction of the related expenses to be seen in the following months. This impact is partially offset by the maintenance and repair expenses reduction by approximately around RON 1.9 million. It should also be mentioned that on the 27 March, 2020, Electrica's BoD approved in principle, the merger through absorption between Electrica Serv and Servicii Energetice Muntenia with Electrica Serv as absorbing company. However, the dissolution of SEM in view of this foreseen merger is subject to Electrica's EGMS approvals. Moving to the supply segment. It's worth mention that in line with the last year, according to the latest available RE report as of February 2020, Electrica Furnizare is the market leader with a total market share of 20.03%, the market share on the regulated side being 53.29%. While on the competitive market, its share is 11.90%. By comparison, as of December of last year, EFSA had a market share of 51.70% on the regulated. While on the competitive, had 10.94%. In Q1 2020, the group supplied 2.5 terawatt hours of electricity, representing the 2% increase year-on-year to a number of 3.6 million final consumers, both in last resource regime and on the competitive market. In the first quarter of 2020, the revenue from the electricity supply segment increased by 5.4%, both as a result of the 4% increase in the retail sale price and larger volume supply on the retail market, representing an increase of 2%. The contribution of the electricity supply segment to the group's consolidated revenue is around 79%. The cost of the electricity purchased for supply decreased by 15.4% in Q1 2020 compared to the same period of 2019 being mainly the impact of the reduction in the electricity purchase price on the regulated segment following the recovery in 2020 in the form of positive correction of the purchase losses from the previous year. Going into detail, RON 66 million were already recovered from the total budgeted amount of RON 170 million for the entire year 2020. As a result, EBITDA and net profit increased accordingly. Regarding the financial position, the net cash decreased compared to December 2019 as the cash and cash equivalent position is lower by 30% at the end of Q1 2020 and this is due to the slight decrease of collections following the change of payment channels at the beginning of the pandemic period. However, the liquidity monitored daily registered levels similar to a normal period of activity prior to this crisis. Moving on, the volumes on the retail market increased on the competitive segment, which represents 47% of the total volume, the same level as of December 2019. So thank you, and I will leave the floor to Alexandra to go on with the presentation.

Thank you, Madalina. Okay. Now moving further, information referring to dividend is presented. The gross dividend of RON 0.7248 per share was approved by the shareholders in April with a dividend yield of 7.1% if computed at the closing share price from 8th of May. The distributed gross dividend and the gross dividend per share continued to be at a similar level to the ones registered, recorded in the previous years. In this way, Electrica continues to ensure a stable dividend yield. On the main events that took place since our previous web conference, the annual OGMS took place and the shareholders approved the financials for 2019 and the budget for 2020, both at individual and consolidated levels. Mr. Iulian Cristian Bosoanca is the new member of the Board of Directors elected by the shareholders for filling in the back end position following the denunciations to the mandate by Mr. Niculae Havrilet. His mandate is until 27th of April 2022. As you know, in September last year, Fitch granted a BBB rating to Electrica Group. In April this year, the rating agency affirmed the corporate rating, but revised its outlook from stable to negative. This action followed the revision of Romania's rating outlook in the national contracts generated by COVID-19 pandemic. Regarding the RRR. On 6th May this year, ANRE approved the new level of RRR at 6.39% valid until the end of the fourth regulatory period. We remind you that the previous level of the RRR was 6.9% according to the government emergency ordinance 19 from 2019, valid until 29 of April this year. Afterwards, the RRR was 5.66% for just 40 days until 13th of May. A 1% incentive is granted for investment in the network put into operation during the period and will be granted at the end of the regulatory period. Taking into account these changes in the investment analysis for 2020, we consider an estimated compounded RRR of around 6.69%, taking into account the 4-month period with the previous RRR of 6.9% and the 6.39% for the rest of the year, applicable to existing RAB and, of course, the 1% incentive that will be granted at the end of the period. The weighted average was used on the hypothesis of realization and full recognition of the investments according to the assumed plan. Okay. Moving further, we will start to discuss about COVID-19 impact on group's activities. As a review of the main legislative measures, we remind you that there was a state of emergency in Romania between 16th of March and 14th of May, and several measures were ordered, some of them with impact on the supply activity. For example, the prices of electricity, and natural oil and gas are kept at the level that was practiced on 29th of March this year, with the possibility of reducing them, depending on demand and supply. The government, through the emergency ordinance number 29, granted SMEs affected by the decisions issued by the authorities in this period based on an emergency certificate, the possibility to defer the payments for utility services. This also affects our group's activity. The law approving this ordinance defined a 3-month staggering period and grant the providers of utility services that are affected by these decisions the possibility of postponing their payment of taxes to the state budget within the limit of uncollected amounts. Following the outbreak of COVID-19 pandemic, Electrica Group implemented a plan of organizational measures specific to this context, and this will be discussed next. But because of these measures, unforeseen expenses appeared, additional to those included in the budget for 2020. In this case, until the end of March, we are discussing about RON 0.6 million additional costs recorded by the distribution subsidiaries. These companies also approaching ANRE for the recognition in the category of noncontrollable expenses in addition to the values already approved by ANRE. On the supply side, the loss -- the cost -- additional cost recorded were of RON 0.2 million. All these costs, of course, are related to protective equipment, materials, sanitation services and other specific equipment. As I said, we will present the main measures adopted by Electrica Group in COVID-19 context. And we had a resilience plan enforced at the group level, which has been updated promptly in order to ensure the business continuity, welfare of our customers and employee safety. We also encouraged our customers to use methods of indirect interaction through Internet or by phone to solve various requests as well as to use the online payment method. Also, we recommended to our shareholders to cast their votes by correspondence during our general meetings of shareholders. The supply distribution and energy service company has donated EUR 150,000 to hospitals in, Bucharest, Ploiesti, Brasov and Cluj. And additionally, Electrica Furnizare donated around EUR 100,000 to Crucea Rosie for the purchase of sanitary masks. During this entire period, and moving forward, the management team is monitoring the financial performance and liquidity of group companies in order to ensure the availability of the necessary funds for carrying out the activity. Now that we are out of the state of emergency, and we are in a state of alert. The companies with an Electrica Group has plans of users to gradually resume the activities. These plans, of course, will be updated depending on the evolution of the situation and the decision issued by the authorities. The main aspects of the plans refer to prevention and protective measures in all areas where the group's employees are activating. These include introducing and imposing specific hygiene measures, ensuring physical distancing and protection of employees during interaction with colleagues and third parties and monitoring the health status of the staff. Regarding the electricity and natural gas supply segment, here are some important changes. The cash collection activities through own cashiers, the activities of the customer relation centers and the field activities for business-to-business clients have been -- will be resumed starting on Monday. All services offered prior to the initiation of the state of emergency are provided. But in a safe manner, of course, with a limited number of employees in front office for a period of 3 months. On the distribution side, the investments and maintenance works, including those requiring customers' interaction, will be accelerated. But for the next 2 weeks, the decision to postpone meters replacement will be maintained, in case it is necessary to enter household's houses. Discussing also about the energy services company, specific working procedures are implemented, in order to ensure employees' health and safety in the new context. Now we are moving to the financial part of COVID impact on group's activities. And we will discuss about the distribution side as well as about the supply one. On the distribution side, even though the cost of electricity needed to cover losses -- network losses was higher by RON 10 million year-on-year compared to the previous year, evolution had a positive effect compared to the budget level. As a result, we have a positive effect of RON 7.6 million as electricity purchase price decreased compared to the estimated one. In this context, for the period April-December of this year, a downward trend in the electricity purchase price is estimated, especially on the spot market. Thus, a potential reduction of the cost of electricity for covering network losses around -- is estimated around RON 18.6 million, of course, due to the price effect. Here, we are taking into account the quantities achieved in the first quarter of 2020 and those budgeted for the next month as well as applying an average purchase price reduced by an average of 3%. Continuing on the distribution side. In the first quarter of 2020, the amount of electricity distributed was 4.5 terawatt hour, lower by 1% compared to the same period of 2019 and by 3.6% lower than the budgeted level for this period. As only 2 weeks of this quarter has been affected by the state of emergency, the potential impact for the entire year cannot be accurately quantified, but some estimates are provided in this slide. We estimate that due to the decrease in quantities, there will be an impact between RON 56 million and RON 130 million, depending the decrease, namely decrease of quantities between 3% and 7%. Of course, any decrease in quantities during this year will be followed by positive corrections in the following period. Additionally, the decrease in the RRR was considered. Thus, taking into account the quantities of energy distributed in January-March 2020 and the impact of RRR, which was decreased to 6.39%. We estimated two scenarios: The first one, in case the budgeted quantities are maintained. And in this case, the impact on electricity distribution revenues would record a decrease of around RON 33.8 million. And the second scenario is based on the hypothesis of quantities reduction by 5% during April-December. The estimated cumulative effect being a decrease in revenues of around RON 95.7 million. Going further to the supply company. We consider here also a decrease in the consumption compared to the values included in the budget, but it is not possible to have a clear estimate at this moment on the impact -- on the amount of electricity supplied during this year. The estimated evolution of the quantity is a mixed effect of the estimated increase in the household customer segment and the estimated decrease in the other customer segment. Thus, as a result of the reestimation of the supply volumes correlated with the consumption reduction and the prices for purchase and sale, it is possible that at the end of the year, there will be an impact on the gross supply margin on the competitive segment. As you remember, we have also to say that we have to recover some purchase losses recorded in previous years in amount of RON 170 million during 2020. From this month until the end of March, 39% was recovered, and it is estimated another 20% recovery in the second quarter, 80% recovery in the third quarter and 23% in the last quarter, so -- until we reach full recovery. Also, the presentation for final year 2019, we said and we remind that the second -- for the second semester, we maintain the hypothesis of 60% coverage to electricity purchase agreements allocated by ANRE for the regulated household clients. As a result, the downward evolution of purchase prices, especially on the spot market, here, there was a decrease of around 29% in January and April year-on-year. So the downward evolution is estimated to generate a favorable effect on the gross margins on the supply segment. Discussing further regarding the postponement of the payment of electricity and natural gas bills. As we said previously, the emergency ordinance number 29 for SMEs remains applicable. The balance value of EFSA's receivables from clients with valid state of emergency certificate is around RON 27.5 million, out of which RON 3 million are provisioned at the end of April. Also, until the end of April, only 557 clients with certificate requesting deferral of payment in amount of RON 50 million, which, of course, is an amount insignificant compared to EFSA's portfolio. This slide also presents the evolution of the aging intervals in election of receivables. As you can see, there is no significant impact with very small variation compared to the same period of 2019. So there is no -- there is not expected any significant impact on our liquidity. Moving further, we will discuss about the group liquidity. At the group level, the total liquidity in the form of cash and overdraft limits available at the end of March 2020 was RON 1.1 billion, which includes also the overdraft line of RON 210 million related to the master account of the cash pooling facility. Without this amount, the total available liquidity was around RON 964 million, similar to the one at the end of 2019. Also, the level of actual cash is similar in the two periods. The level of received payments and liquidity is monitored daily by each company in the group and consolidated in order to detect any deviation in time. Also by implementing the cash pooling structures, the group is able to optimize the use of liquidity between companies and to quickly cover any unforeseen liquidity needs. Okay. Now moving further, you can see more -- you can find more information on the appendices. Here, you can find regulation on the supply and distribution side, information about share price evolution, about shareholding and so on. As we reach the end of our presentation, we invite you to ask questions in the Q&A section on the platform. And in case you attend an audio call only, please send your e-mail -- your questions by e-mail at [email protected] We propose to have a 10-minute break, and we will come back with the answers. Thank you. [Break]

We came back, and I will leave the floor to Mr. Mihai Darie, CFO of Electrica. Thank you.

Okay. Hello, everyone. So we have received a few questions. Okay. Okay. So just slight interruption. So I will try to compress some -- combine some of the questions. In fact, we received three questions with the same subject related to the recovery as a result of VAT adjustments for Oltchim, which is mentioned into our budget proposal, which was approved last month. In fact, here, we have the plan, and we are currently assessing with the support of a tax adviser, the opportunity to set up a VAT group for Electrica. Most probably, we will do so to constitute VAT group. We need -- just need to define who will be the VAT group leader and also the technicalities. We also more slightly impacted by the emergency status in our initial planning because some of the [indiscernible] were delayed as a result of the situation. So after we would set the VAT group, we also take into account some NIM impact regarding the timing when we will have the adjustment. So the question is whether this assumption in the budget will be preserved and when will we see exactly the impact? I would say that the earliest possible would be third quarter if we take our internal planning. And the latest, obviously, the fourth quarter. But definitely, we maintain the budget assumption, and the effect will be seen in 2020. We have no indication that we need to revise this assumption. So third quarter is one scenario, latest is the fourth quarter. Then another question is related, as a change in regulated rate of return with an additional 1% for new CapEx will make us reconsider the investment plans ahead. Actually, we cannot change the investment plans ahead because the investment plans for the fourth -- the whole fourth regulatory period and was established and the inception of the fourth regulatory period. We are now in the second year of the fourth regulatory period. So the CapEx plan is already assumed. It's regulatory-based and it's mandatory. So we have no ways to adjust the investment plan. And in fact, we have no motivation to adjust the investment plan since we do consider that we can achieve the investment plan. We can finance the investment plan. And obviously, the CapEx is one way to devise returns by [ additioning ] into the regulated asset base. There is another question related to the grid losses for Transilvania Nord, the reason for increasing volume for grid losses? Actually, as it was mentioned during the presentation, and if you have a comparison between the percentage network losses for this quarter as compared to the similar period of last year, you can notice that once you compare the percentage network losses with the regulated annual targets, actually, there is quite a gap. I think it is normal for the first quarter with winter month. And the only relevant comparison is with the values that will be achieved at the end of the year. So this is not a situation to worry of. Sometimes there are temporary differences, sometime technical explanations, so not be very preoccupied at the moment. Another -- actually, there are several questions related to whether we consider that all losses from regulated supply activity will be recovered by the end of 2020. And what would be the alternative -- what will be the solution, in our view? As it was mentioned in the presentation, at least for the first quarter of this year, we were in advance with our estimated level of recovery in the first quarter. We recovered RON 66 million. And then the planning for the second quarter, which should be rather accurate, is that we will be in the process to recover furthermore. So therefore the first half of the year, some 60% of this RON 170 million are to be recovered, in our opinion. And only 41% needs to be still recover in the second half of 2020. There will be a framework for regulatory prices in the second half. We just need to see exactly what would be the final regulated tariff, in order to see what would be the allowed adjustment component of the tariff. So that for the -- based on the estimated volumes in the second half and based on what is remaining to be recovered, Electrica Furnizare to be in the position to recover in full dose amounts. Obviously, something remains unrecovered by the end of the year. The only alternative solution will be to pass those unrecovered amount into our gross margins for the next period. But the base case scenario, in our opinion, and based on the existing framework, we are still confident that we will be in the position to maintain the budget assumptions. Okay. This was related to the previous one. Another question was related, what tariff settlements should be revised, regulatory rate of return volumes and whether we expect a revision this year, including all changes or expect correlation to be included in 2021 tariff? In fact, the distribution methodology is now subject to revision. There is no provision stating that the tariff should be revised starting 1st of July, like another sector. So -- but ANRE, obviously, could propose or endorse different methodologies. So we could be in a scenario in which we will have revised tariffs to take into account the new regulated rate of return for this year or the tariff will not be adjusted by the end of the day. So these two scenarios are possible, but are not dependent on our will. Regarding the volume corrections, this in accordance with the methodology, we have an effect in the plus 2 years. So currently plus 2. So it will be positive correction, but in the future periods. Again, also in this regard, if ANRE wants to have some revision of the methodology, but this would probably imply the increase of the tariffs. Okay. This one is related still to the CapEx. We responded to the question regarding the capital revision and whether we experienced delays in CapEx implementation because of the crisis. We addressed this in the presentation. We did not identify until now major inconveniences or delays into our CapEx implementation program for this year. And if the situation will remain for the rest of the year into normal parameters, I mean normal considering what was in the last period, there is -- there are no significant elements to let us consider that we will not be in the position to implement in full the CapEx for this year. But we are currently monitoring this. And it also is depending on the technical, operational and financial capacity of our suppliers to still be active on the market, to be operational. And also based on authorities' decisions, to allow us free movement of equipment, machinery and staff to perform those activities. Let me see. As noted, the variation of the supply segment revenue was mainly driven by the 4% retail share price increase and prediction about the retail sale price during the upcoming quarters. So definitely, if we leave aside regulated segment of the business -- for the competitive segment of the business, it is always the combination between the acquisition cost of electricity. So if the business will be supported by lower prices for acquisition of electricity both going forward as well on the spot market, at least on the spot market, we have commented that we saw quite a positive effect of the spot market prices this -- in this period, which was benefit for our business. So if the trend will continue in the next quarter, I think this will be supported also for the business case in which we could adjust downward the prices to our consumers. But obviously, we need to pay attention to the margin -- the gross margin because it's always a combination between the two of them. So it is probably still too early to make comments on the estimated impact on the margins because it also relates to the -- how much the supply volumes will decrease by the end of the year. Another question was related really also to the tariff revision. By the way, the weighted rate of return -- regulated weight of return is presented -- is included in the presentation for presentation purposes. So it is -- new rate of return is 6.39%. In fact, for 13 days, between 1st and 13 May, the valid regulated rate of return is 5.66%. Because the new 6.39% entering the [indiscernible] only on the 13th of May. So by combining the 6.39% and the 1% incentive on the new CapEx for the fourth regulatory period, which [indiscernible] leads us to the weighted regulated rate of return presented in the presentation, based on weighting the existing RAB and the new RAB, which will be accurate in the fourth regulatory period. Another question is whether there is a chance that volumes to be considered for a tariff revision by the end of the year? Only to the extent that the methodology will be changed, but revising tariff based on lower volumes will imply increase of the distribution tariff. So probably in this difficult year context, it would be slightly improbable that the higher distribution tariffs will be desirable, not for Electrica, of course, this year, but for the consumers. We reply to the question. Do you still have reserves at the individual companies levels to pay out special dividends to the mother company in order to maintain your dividend for the full year, this year? If I understood correctly the question, when we prepare the budget, the budget is prepared on the assumption that we will draw dividend income from our subsidiaries based on the reported statutory profits as of 2019, which are already known. So it's pretty certain. So these were included in the stand-alone budget proposal of Electrica. So this will be the basis for the main driver behind the estimated budget of Electrica individual level. And in return, it will be the basis for reported profit this year for the Electrica not on a consolidated, but on a stand-alone basis. Again, there is a question related to VAT adjustment. We replied. So we maintain assumption, most probably third quarter, but could be also fourth. It depends on the opportunity, creation of VAT, but there is nothing to lead us to a different assumption. I think on the recovery of the losses for the supply segment, we already answered. Tariff distribution adjustment starting 1st of July, we already tackled this subject. There is another question on how we can make Electrica Serv profitable to implement some pay service for the customers. In fact, on a stand-alone basis, if we -- unlike last year financials, Electrica Serv is highly profitable. I think it's roughly RON 27 million on a stand-alone basis. The budget for this year is based also on the business plan and on the profit. Unfortunately, some of the plans for this year was slightly delayed because Electrica Serv has in plan according to its business plan to launch some value-added services customers also in cooperation with Electrica Furnizare. Obviously, in this 2-month period where we had emergency stages, there was some delays in implementation due to the impossibility to approach and to reach to the customers. Another question is whether we could explain the 18% increase of employee benefits in the first quarter compared to last year and whether we make any operational cost-cutting that could be permanent and be seen in the coming years as well. So definitely, the evolution of the employee benefits, which is an explanation of the EBITDA -- the evolution beyond the evolution of the energy margin is a result of combined effect of the changes that took place in the collective labor agreement. Most of the collective labor agreements, at the group level, were renegotiated, and they were completing new collective labor agreements. Obviously, those requested some adjustments. And you can see the results in the evolution of the staff cost. It's both -- it's also part of the fact that we need to keep our workforce motivated and also in line with what is happening at the sector level in the energy sector. We're still behind the averages in the sector, but also to keep the pace with what is happening in the whole economy. So we need to keep the competitiveness of the cost. And moreover, it is also important to be mentioned that in the distribution business, the staff cost is a purely pass-through cost. So it takes the recognition into the tariff and any savings in the distribution business that will be -- could be achieved in the staff cost, it would be only currency effect. It will be taken back by -- to corrections in the next period. So it makes real sense to have optimization at least in the distribution area. We just need to pay attention to not exceed the cost level. Regarding the other operational cost cutting, yes, that's does mention also in our reports and presentations. We have quite an ambitious target to decrease the controllable OpEx in the distribution segment. We know that we have a program in this segment. And definitely, we have running projects aimed at optimization. It's a difficult task, but it's on our agenda. Whereas in the supply business segment this year, we will complete a transformation project with the support of external advisor, which has two components both to prepare the Electrica Furnizera to be able to be more active and more business-oriented on the market, but also has a pay component for cost optimization, both -- in all areas like staff, third-parties' cost and so on. So we hope that the results will be seen in the coming period. I think we exhausted all the questions received thus far. If you have further questions, please send them to our Investor Relations address. Thank you for supporting us for such an extended period. Have a nice day.