Transmissora Aliança de Energia Elétrica S.A. (TAEE11) Earnings Call Transcript & Summary

[Interpreted] It's a great pleasure to have you all here. I'm Cristiano Grangeiro. I'm the Executive Director of investor relationship at Taesa. I know you are busy, and we are very careful to have you all here. And I think on behalf of the company, we are live, of course, from Sao Paulo, there is a broadcast happening. We have more than 300 people watching. We know that, that happens. And before anything, we would like to remind you that security is something that we cannot -- security is something that we cannot jeopardize. So we have here the guy from the hotel is going to briefly explain all the securities of the company. So Evandro, please.

[Interpreted] Good morning, everyone. I came here to share with you that [indiscernible] is concerned about security. We have fire brigade available. The place where you are has smoke detectors, sprinklers and extinguishers. They are all tested within their shelf life, there is also a route to escape, emergency light and everything in the room is noninflammable, and the emergency as it is behind all of you and the emergency as it is also indicated at the door. So you just have to go through the door because it is a fire resistant door. In case of emergency, please stay calm, you will be able to carefully walk to fire extinguishers in order to use them. And in order to use it, you just open it, remove the pin and you just press the lever. And we also have a wheelchair and all the necessary equipment. I wish you a great event.

[Interpreted] So resuming just to warm up our event, we have a video, a video that is about the company. I really enjoy this video. It will warm up our event. So here it is for you to understand what is this major company we are part of. [Presentation]

[Interpreted] Well, the Investor Day is a different day for us, it's the opportunity we have to bring people besides the [ RI ]. So you can have a closer conversation, understand the business in a closer way. So we would like to introduce the representatives of the company that will be here with us. So you are going to see that there will be moments and dynamics that are different with all of them. So when you -- please stand up when I say your name, Mr. Moreira, our CEO; Mr. Pecchio, our RI, Fabio Fernandes, our Manager of Participation, Marco Faria, Technical Director; and Luis Alves, our Implementation Director. Of course, we have a special guest, but I will only tell you about that later. So that I -- Well, I would like to remind you before we talk about our agenda is that we are going to have some service during the event. I would like you to take part -- it's a quick question, one single question. Direct answer after some blocks we are going to answer it, not only to those who are available here, who are present but also online. Please send your answer, so we will understand if we are delivering according to your expectations. This is going to be amazing. And besides that, there will be some raffles of gifts for those who take part. So we said at the end, you want to take part of the raffle. Just add your e-mail. And we are going to have that, there will be a process of our auditing area that will follow the raffle, so confidentiality will be assured. Talking about our agenda quickly so we can start. Now we are going to start that there was an opening, there will be a first presentation from Andre Moreira, our CEO, the challenges of the electrical sector and different strategies of Taesa, that is a round table with our guest Mansueto de Almeida. Then a quick interval [ bio ] break, if you need to answer the call, then we come back for a presentation of Pecchio, our Financial Officer, and we close the event with a dynamic in which all of you, even those who are remote will be able to ask questions to each of the directors. So at the end, we closed and that's our agenda, pretty dynamic and with a lot of interesting points. So in order to start I'm going to call Andre, our CEO, he is going to talk about the challenges of the electrical sector, the power sector, the floor is yours Andre.

[Interpreted] Thank you, Cristiano. Good morning, everyone. Thank you, thank you. For those who are online and in person. So our Investors Day is pretty important. So we will show a little bit about our company, Taesa and explain a couple of things. I'm going to talk about the challenges of the energy sector, it's very important for you to follow that. And I would like to start sharing with you our situation and this mistify some of the mix we have. What is the electrical sector here in Brazil. We are one of the largest in the world. The electric sector in Brazil is pretty important. Our matrix is around 88% clean renewable energy, and it should be from -- well, among the other countries, it is the greatest one and I'm talking about that as a whole, the entire oil and gas is around 48%, but electric, 88%. So we are a different country in that sense. So as a reference, the last 10 years, we have grown 63%. Today, we have 210 gigawatts available as a reference for you to understand in the last month, 13th of November, we had a peak of demand due to the heat wave that was generated by the weather change. 100 gigawatts. So we have the double, the double of our need in our historical peak available to our use. I'm going to mention a little bit about that also. We also have a sector that fosters the development of renewable energy, and we have discussed that recently. And what is pretty important to the sector and to us is to have a safe regulatory sector also mature, and that assures us a great moment for investors believing in our country, believing in the infrastructure of the electric -- the power sector. Just to clarify where we are in our value chain of the sector, we are the transition between the generation and the distribution, just to remind you we are a transmission company located in Brazil. Here, a little bit of how we correlate this national interconnected system that is called SIN and Taesa the national interconnected system is one. Some people say it's the largest in the world, but we are one of the largest in the world, 184,000 kilometers of transmission, and we have grown together, together with the National Interconnected System. In the last 10 years in relation to revenue, we almost doubled. We went from BRL 1.8 billion, 10 year ago, to BRL 4.1 billion this year. We also grew -- we tripled our size. Today, we have 15,000 kilometers of extension, 43 concessions, and we are present in 19 states plus the Federal District. So this is our major correlation of the National Interconnected System and Taesa. That's where we stand. But it's pretty important thing here, our framework. Where are we in relation to energy transition. We have talked about that a lot. We enjoy this definition that we had at Taesa. What is energy transition and how that relates to our business. Well, it's a change in the system but based on renewable that is the case of Brazil, renewable sources and also reliable sources. It's an important point for you to know we talk about fossil fuel. But today, they are sure this buffer for energy that we have in our countries. So still based on the fossil fuel. We have gas and some other sources that really concern us and they are pretty necessary for our energy matrix. We are discussing, and it's happening at this moment this week and the next 2 weeks, we have COP 2028 in Dubai. One of the points that yesterday were discussed the United Nations' National Director, Mr. Guterres has said that we are in the middle of a climate collapse. And we really believe all that. And if you realize one of the major drivers we have for this energy transition, it is -- the driver is the climate change, the carbonization of the atmosphere and what that has brought to us. It's important to clarify that at COP16 in Paris. We had an agreement among countries that we would keep global warming around 1.5 degree Celsius up to 2040. However, if nothing is done, this will double or triple, and we are suffering the consequences yet. We are talking about important changes and things that we have never ever tried before, mainly here in Brazil. Floods and other things, this extreme hot weather, the intensification of El Nino, La Nina, everything changes the environment, the infrastructure, we need a more robust infrastructure. We need more people worried about that. Well, and what us as a company can do and what can the society do? And what can the governments do? So together, we have to solve this problem. Another important driver for us, and we talk about that is the electrification of the society. This moment in the entire world, the society is being electrified. We see electric cars. They are no longer using fuel. They have hybrids or electric cars, the intense use of technologies that requires a lot of energy and a reliable energy. The development of new technologies. We can talk about that storage systems, batteries, green hydrogen, we were mentioning before the event started about the development of this energy. And Brazil can be a great supplier, and we should be a great world supplier of green hydrogen. Two weeks ago, there was a seminar that I had the chance to attend the two greatest companies in the world are betting on that Vale and Petrobras they are developing research and development in green hydrogen, and they are the greatest consumption to consumers, and we need to provide energy to these sectors. And sectors that have difficulties to capture that mainly when manufacturing steel, fertilizers and so on. We also have an important driver that is the high cost of energy in Brazil. It is a cheap production, but at the end, it's pretty expensive. So that's also a concern, a concern to the society. We need to help them, and we need to decide how do we position that. This week on the 28th of November, there was -- there were 15 authorities in the electric sector together with the Ministry of Mines and Energy. And among them, one of our board members, Dr. Hermes Chipp, and he talked about the concern about the tariffs to subside other sectors and other investments. So this is something that really is a driver for energy transition, and it needs to be taken care of. Another important point is the digital transformation. As everything technology is amazing, it helps everything, but also has some side effects. We are talking about concerns of Taesa and we have a cyber attack. And this is also a result of the digital transformation. It's a side effect that cannot be left aside. And what about the trends? We have some clear trends, the matrix, the decarbonization of the sector. We are creating in the world and in Brazil, the CO2 market of companies that really need to clean the energy matrix so they can have access to the market and eventually buy carbon credit. And what we can do with that, this is pretty important, and it will bring from now on, a great momentum for us. And obviously, the responsibility with the environmental, social and governance aspects. So we always have to pay attention to that. Well, and we try to reach our challenges in the energy sector and for us in transmission. We know that this diversification of energy sources has created reliability in the system. We have studies indicating that in 10 years, they will still have around BRL 90 billion of investments in transmission in Brazil. Opportunities, I mean, we can grow, and it will depend on the increment and new sources and there is a need to connect sources so that it will be close to the centers? Another important thing is the fact that the infrastructure is becoming more modern in terms of distribution. Two other things are updates in regulation recently, if I'm not mistaken, it was yesterday, there was a new regulation on the production of offshore renewable energy which is something that we are also studying. It could bring opportunities in transmission. Of course, we need to transmit from generation to a different location, and that is a business opportunity and ensure we have the right incentives for investing. Of course, this all sounds great, but if we don't have credit, if we don't have the funding, it's not going to go anywhere. So we need to count on that as well. So what our strategic differentiators that can ensure our level of excellence? We have being the benchmark when it comes to asset management, we are considered the benchmark. We have the confidence of our shareholders. We are currently about to approve our reviewed strategic plan, our 10-year strategic plan that focus on growth, efficiency, sustainability and regulatory concerns. We can renew concessions, we are present. We are trying to have an influence, so we can get the best possible design when it comes to government policies. Recently, we opened our new operations center, very modern located in Rio de Janeiro, and we are pretty much moving everything there. We transferred already from Brazil to real. We have a backup system. We have system with accessory information, which is -- they're extremely important for us and makes us comfortable because not only this is a very modern operation center, we have a very interesting expansion ability. So we are ready to grow. Quality of our management, recently actually 2 weeks ago, we received a recommendation by the accreditation authority to be certified by different ISO standards 9001. Another one on environment and 45001 on health and safety and another one on Asset Management. So we are about to receive the certifications for these new ISO standards that we call the Taesa Integrated Management System. That will bring -- make our management more robust, and it is an important information for those who want to invest in our company. You can trust us because we are doing what we say we do. We are walking the talk. Taesa is present in 19 states plus the Federal District, which gives us a great capillarity and the possibility to generate interesting synergies to our business. So expanding inside the Brazilian market makes sense. And of course, we use that ability to our businesses. And last but not least, we have had access to credit from the capital market. Not forgetting our famous financial discipline and our ability to generate value with the payment of robust dividends for our shareholders. It's important to remember that we have a shareholder base that is beyond 700,000 individuals at B3. So we do have a great responsibility to our shareholders. So in conclusion, I just would like to leave you with a quote that we use. So as some food for thought, both for you and as well as to ourselves. We understand that without transmission, there is no transition. So no transmission, no transition. This is our final takeaway message. Make sure you enjoy the most of this event. Thank you again for coming. And now I'll hand the floor to the next speaker.

Thank you, Andre. That was excellent. Thank you again for the presentation. You can stay on stage. Make sure you take a seat because now we are going to have another part of this presentation. You can sit on this chair, please. Now we are going to have a discussion, including the discussion on some of the topics that you highlighted that are very strategic and important not just to Taesa, but to the country. So besides Andre, who will participate on this next panel discussion, we have two other guests. Actually, three other guests. One external guests and two 2 of our executives, I would like to call Mr. Almeida, who is the Chief Economist from BTG Pactual Bank; Mr. Rinaldo Pecchio, our financial executive and -- for relationship with investors; and our Technical Director, Mr. Marco Faria, and I will be mediating the discussion. Just a minute. And while I gather my notes. Before we start discussion, our idea is just to have a very proper conversation. You're all going to participate, even those who are watching us online. And of course, I have to start by thanking the -- thanking our external guests for coming. We are very happy to hear that you have accepted our invitation to be here. Mansueto, again, needs no introduction. He has served a very important position in Brazilian. You have a vast CV, so I'm going to try to summarize it. Mansueto was a general coordinator of economic policies at the Ministry of Finance and the Secretary of competition also in the Ministry of Finance. More recently and his last government position was the Secretary of the National Treasury. So once again, thank you for being here. And before, Mansueto -- because, again, our idea is to ask him questions because the executives later will be talking to you at a different session. So our focus is to have a discussion with Mr. Mansueto. So before we start, perhaps you could give us an overview a little bit about your opinion on Brazil, on the macroeconomic scenario of the country. And obviously, the impact that these discussions on the energy sector. So perhaps if you could give us some color on that.

Thank you very much. Thank you for the invitation. Congratulations to Taesa. Almost 15,000 kilometers of energy transmission lines ready to build more you've been helping develop not only the industry but the country as a whole. Looking at that and looking at the history of the company, we are in a much better position than we were a few years ago. I think it was in the year 2000 -- beginning of the year 2000 when Taesa started to invest in transmission lines. Because if we go back 20 years in Brazil, used to have a debt in dollar. Our external debt was $130 billion. Our level of reserves are $30 billion, 40% of our local debt was indexed to the exchange rate. So when the dollar became expensive, more expensive. We had a very serious fiscal problem immediately. And our debt level was above 80% of the GDP. Even though the government at the time was able to get very positive primary surplus. But for the past 20 years, Brazil has changed a lot. And the main change that differentiates from other emerging countries in Latin America is that Brazil -- our external debt in Brazil is the same one that we had 20 years ago, $120 billion, $130 billion. But 20 years ago, our reserve levels were $30 billion and today it is $340 billion. So we have that different scenario, something that my generation ever expected. 20 years ago, like I told you, 40% of the local debt was indexed to the exchange rate. And today, the percentage of the debt that is indexed to the exchange rate is only 20%. Different from other emerging countries, 90% of our debt is held by residents. Italy in emerging countries, 20% to 40% of the debt is in the hands of nonresidents and Brazil is the opposite. The percentage of the debt that is funded by nonresident is below 10%. So again, we have this different scenario. We have a high debt. You have to still face a fiscal problem, but a lot of the debt is funded locally. And a country that for the past few years, has done important reforms. If we go back 10 years ago, not 20, but 10 years ago now, 2013, I'm sure you remember what was happening in the energy sector. We had huge problems even for the auctions on the mission that are very competitive. We had an issue taking place the subsidiary from Eletrobras would come to these auctions. They would buy credit from public banks without telling the holding. And that was a huge problem that we needed to solve in 2016, 2017. And that changed. As of 2016, we have been improving the regulation of the energy sector. The auctions for transition lines are once again competitive and Brazil, different from other countries in the world. When we look to the future, we are going to have a very strong growth and investments in renewables or energy, but we are also going to have a strong growth on our oil production for old energy sources because we have already made the investments. In Brazil, we have 2.9 million barrels being produced in the past. And we estimate that we're going to get to the end of the decade with 5 million of oil barrels every day with Brazil among top exporter oil countries in the world. And when we look at everything that we export of oil and import of diesel and gasoline, we have a positive balance by 2015 -- until 2015, this balance was always negative, historically speaking. But now Brazil has a surplus, we can export oil. And this number is only going to grow. So when we look at the future, we have a country that we're going to have a higher offer of renewable energy and also fossil fuel-based and it is because of the investments that have already been done in the press hold. Our trade balance is increasing because of oil and our agricultural production that is significant and will only continue to grow. This year, we're going to produce 317 million tonnes, a historical record. Next year, their agricultural production will go down because of El Nino, when you go down to 300 million tonnes will be the second largest harvest in the history of Brazil. This year, we are going to have a record in our trade -- something that we didn't expect. Before the pandemic in 2021, Brazil had a historical record of $6 billion. In 2022, our new historical record, $62 billion. 2023 in the beginning of the year, if you were really optimistic but really, really optimistic, you could expect a balance that was around $75 billion, $78 billion. We're going to end the year with this balance between $95 billion and $100 billion. So a growth of more than 50% in comparison to the previous year, which is a historical level. Next year, the status is probably going to go down to $80 million, $85 billion, which will be the second best year in the history of Brazil, again, only losing to 2023. So all that combined, we have enough conditions to be optimistic. The problem that we have is that we started the year with a very high interest rate, the highest one in the world, a nominal rate of 375 is expected inflation of 6%. Last year, the inflation rate was 5.8% because we reduced tax on energy on telecommunication, on fuels, and we didn't have a federal tax on fuels, which brought the inflation rates to 5.8% last year. Without this tax reduction, the inflation would be close to 8% because again, the service inflation last year was very high. It was around 8% or 9% a year. The expectation that the economists had for this year was this. If unemployment doesn't go up, it will be difficult to control the service inflation, and we're going to have an inflation year in 2023, a year with high inflation between 6% or 7%. What happened unemployment went down. Yesterday, we saw the data, the unemployment rate in Brazil is 7.6%, the lowest unemployment rate since 2014. And what happened is that the service inflation really dropped. Today, monthly average is around 3% a year. No one can explain why. How we were able to see such a drop on the service inflation with unemployment going down. So the expected inflation rate in the beginning of the year was 6% and 7%. Today, it's close to 4%. Next year, the market also expects to have inflation rate of 4% or even below that. So again, if the market is correct, if the inflation this year is between 4.4% next year, around 4% in 2025, 3.5%, 2026, 3.5%, if that market expectation becomes true, in this administration, we're going to have the lowest inflation rate in 4 years since 1994. So since 1994, in this 4-year period that we had the lowest inflation rate was the second low administration, which was 4.5%. If we end this government, we think a little bit below 4%, we will have the lowest average inflation rate in 4 years since 1994. This year, we have another surprise, which is growth. We started the year with a very high interest rate. High interest rate really affects retail in the industry, and that's what happened. But we're going to end the year. With the transformation industry with a drop of 1% when we look at the industrial sector as a whole, transformation extraction, and we add sanitation and energy, we have a positive number. But because of investments in sanitation and energy on the extractive industry. When we look at the transformation industry, we have a 1% drop, but the growth in agriculture is so intense with the impact on agriculture-related services that we're going to grow close to 3%, 2.7% and 2.8%, and that improves our fiscal indicators. So we're ending the year much better than we started. We started the year with the dollar at BRL 5.20. Where ended the year, it's between BRL 4.80, BRL 4,90. Again, we have a much higher commercial trade balance much higher than we expected. And because -- and that's why the federal bank can be more aggressive in terms of interest rate reductions. We're going to have a meeting next weak interest rates will go down again, but these reductions are happening 0.5% per meeting. Again, we started at 13.75% with an expected inflation of 6%. We are going to end 2024 with an interest rate of 11.75%, but with expected inflation of 4%. So the real interest rate is pretty much the same because the nominal rate went down 2% and inflation as well. And that will continue? Are we going to keep on this high rates? No. But since the inflation is improving so fast, much faster than we are the Central Bank expected. Possibly next year, we're going to hear from the Central Bank a different discussion. Perhaps an acceleration on the drop of the interest rate or perhaps we can end next year with an interest rate around 9%, perhaps even a little bit below that. The market estimates that in the end of next year, our nominal interest rate will be 9.25%. If that happens, this is not a bad scenario. Because this year, we're going to grow 2.7% considering everything that happened, everything that happened in the first quarter of the year when we have our first harvest. In the third quarter for this year and the final quarter of the year, the Brazilian GDP went down. But the growth of the year was determined by what happened in the first quarter. Next year, we have a different dynamics in a cycle where you see a drop of interest rate every quarter is a little bit better than the previous one. So next year, the economy is going to improve at every quarter, and we're going to get to the second half of the year with the economy turning faster than the average growth of the year. I think next year, we're going to have a GDP growth of around 1.5% to 2%. That will be 1.5% or 2%. It depends on the rate that the interest rate goes down. But even if it's 1.5%, it's not a bad year because if it's 1.5%, we're going to get to the second half of the year, with the economy growing faster above 2% a year, it's not going to be a bad year, but the interest rates need to go down. And in order for that to have there is one important thing. It's not about the government delivering 0 primary deficit because nobody believes that it can be done. I hope it can't actually because it can be quite hasty increasing revenue, which is not good for everyone. So I hope -- if it cannot do that, if that's the methodology, but we should deliver a number that is much better than this year. This year, the primary deficit, so revenue minus expenses without paying interest rates. This year, this fiscal call will be around [ $150 billion ]. And since the government is going to pay delayed late debt, [ $90 billion ]. This deficit will go beyond [ $200 billion ]. But because we have this pass to deal with. If next year, we can deliver [ $60 billion ] of deficit that will be excellent. The market will improve a lot. It will really help us in this cut of interest rates. So it's not that difficult. This crazy world two worst political conflicts. International trade is not bad for Brazil now. In the past 10 years, Brazil has approved important changes in the regulation of energy and sanitation and many other measurements that have helped us recover investments. We forget but the investment rate in Brazil in 2017 was 15% of the GDP. It went down 4 years in a row, '14, '15, '16, '17, a 30% drop as of 2017 with the reforms that took place, we saw a very strong recovery in the investment rate, and we ended last year we're at 19% of the GDP in a moment, where public investments were going down. So what really drove the economy was the private investment and the private sectors. And to add one important point. We are talking about a country that 10, 20 years ago, many of the infrastructure products depended on public banks. Public banks are important. Of course, but that's got to what I mentioned that was unsustainable. What is the good news? Once we start to reduce subsidies in 2016, and some reforms that we did in the Temer administration, we saw a huge growth in the capital market. If you look at the data in 2015, 2016, companies in Brazil would raise in the capital market, BRL 100 billion a year. 2021 was last year was BRL 540 billion. This year, any company when they need to raise capital. They either do an IPO if they cannot do an IPO. They do a follow-on. If they don't want to do a follow-on because the price is too low, they issue private debt. Incentivize the better CACI a structured funding operations. So today, the capital market can raise new capital more than BRL 500 million. And 6, 7 years ago, it was 100 million a year. So when you look at all that and you look like the evolved and investors from abroad, realize that emerging countries, they did not compare Brazil with the U.S. or Germany. They compare with Russia, Turkey, Chile, Colombia. And when you compare all that, Brazil is pretty good. Brazil and Mexico, they are ahead as two countries that interest in international investors. Of course, they are not pretty strong due to the turbulence we had abroad even with the American interest rates going up, but they look at Brazil and Mexico very carefully. So if we do our homework, the scenario is not that. It's better than what we perceive watching the news.

[Interpreted] Thank you. Thank you for this brief introduction and complete introduction. So CEOs and officers. Well, I was quite excited with your message. We are going to take that to our Board because they will be pretty happy with the following years. Well, question with what we've seen -- what you've mentioned, we know climate change affects our business. Do you believe or what type of investment or incentives the government could generate to the electric sector for this energy transition in order to overcome this moment.

[Interpreted] Well, one of the important points is not incentive. It's about regulation. The sector to invest despite the sector the electric, the energy sector, we are talking about a long-term investment. When we discuss changes for tax rules of regional incentives that harms the factor. Once I asked an international investor, which were the difficulties, the quality of labor, infrastructure, the high tax rate? Well, nothing affect because I can add to my price. So if you have labor that is not very productive. If you have infrastructure problem, of course, the product price will be more expensive than in the U.S. However, there's something that I cannot plan, when you change rules when there is some tax changes because then my planning is gone. So first of all, the government has to have an open dialogue with different sectors, especially the energy sector in order to clarify everything, which are the rules of the game. Because you were going to make decisions not looking to what is going to happen in 4 or 5 years or what may happen to Brazil in 20 years. So it's pretty important that at once we will finish the tax reform that was proposed and if there is any change in relation to the income tax that the government will try to do in the next year. It has to be with a dialogue with companies and as fast as possible in order not to jeopardize investments. And 1 point that the government acknowledges is that a real profit company like Taesa and many other companies, the tax load is pretty high when you have all the taxes, more than 40%. And it's not the tax because of the tax load is pretty high. But we have some special options in relation to individuals and not companies the government acknowledges that and it's pretty important that any tax reform, it won't increase the taxes for companies because in any comparison, this is pretty high already. Some incentives may be granted. Energy transition, let's be quite clear. Everywhere in the world, there will be some subsidies in order to have this. Brazil won't be different. So most of the time, technology is pretty expensive. It's not the case because we had done and wind, there was a reduction in price. But anyways, what is more important is to have incentives for innovation, clear rules that bring trust to investors from here and abroad to invest on the long term, and investors are always on the long term. This is pretty important to have stability. So it's quite essential to -- in the next months, to have this clearness. And unfortunately, this country, the investment rate was down because the interest rate was high, and that harms the investments we had 17 -- 19% of the GDP. Now it's around 17.5%, 18% of the GDP. But the next year is to recover investments because the interest rate is going down. If the interest rate going down is followed by a certainty that there is no drastic change in relation to regulation and better incentives for energy transition, it's going to be a bright horizon to the sector.

[Interpreted] Thank you. Well, a question about the scenario you've showed that is quite positive. In relation to some stress scenario that we could think about in relation to public accounts and the transfers for low to inflation or the low inflation is already considering that. So how would that be?

[Interpreted] Well, the stress scenario would be the following. As I've mentioned, in the third quarter, we are going to have a small drop in the GDP, 0.2% third quarter, a small drop on the GDP. We started the first quarter with the economy in a slow motion. The government may be anxious because they don't see the growth they expected. And then they take measures to stimulate and they don't have resources available for funding. And that can generate a huge debt to the market if that is higher than projected by the market and investors start to have that in the expectation of a higher investment. Well, they can reflect that by the government a boarding and that may jeopardize investment and there will be less growth. The government may be fostered to have more simulation packages. Not clear where the cash is coming from. And then we may mass with the economy pathway. I see the world growing less next year, of course, but it's not an exception. The U.S. will grow 1.5% and European countries, 0.6%, 7.8%. And with this low growth, but with the numbers of inflation in the U.S. and Europe, there may be an anticipation of interest that will favor the same thing here in Brazil. The major risk is the government. The government thinking that, well, things are slow. I'm going to coordinate everything. I'm going to stimulate the growth that I expect it to have. And does it work? Yes, if the government starts to think about expanding more in a large-short period of time, it will increase, but it's not sustainable. The central bank will have to increase the interest and there will be an on balance of everything. So that's why it's important to have companies talking to the government to understand and show, look, don't do that. We don't need that now. Things are moving forward. The Ministry of Economy today mentions that we have to create conditions for the Central Bank to reduce interest then private investments will come back in a strong fashion. Today, we are in a country that is different from 10 years ago. And a lot of what we call the public investment in the past, it's no longer public investments, it's private investment. 10 years ago, Elektrobras branch investments was a public investments. It's no longer. Today, it's [indiscernible]. If you got a flight at Pongola's Airport went to Porta Alegre or Fortaleza I left an airport that was public, a state company and went to another one. Today, I get the play here. for a private concession and I go to Fortaleza or Porta Alegre, they are all in private concession operated by the best operators in the world. So [indiscernible] and [indiscernible] is tranport to the same one as Frankfurt. Ten years ago, investments in airport was a public investment. Today is a private investment. So Brazil has changed a lot. And if we have the macroeconomic conditions that are adequate, the country will work payment government entered in May 2016, I was with a new tire group, the interest rate was 14.6%. We finished 2.5 years later with an interest rate, 6.5%. 2019, Bolsonaro government approving the private pension reform, 4.5% interest rates. Before the pandemic, it was 4.5%. And we spent 4 years with a strong recovery of all the local assets and the stock exchange up to 2019. And the debts were pretty high. 2016, when we approved the expenditure sailing the expenses, the fiscal hole was 2.5 of the GDP, BRL 250 million. Today, primarily that is around BRL 190 million. At the end of same government, the primary debt was 1.5% of debt, BRL 150 million. And we had all these numbers because the interest rate went for 14, 25 to 6.5%. If we show the pathway that is responsible for all that and wants to deliver the public accounts, even not making it we have a room for the economy to benefit. And you have to show that the government is committed to improve the fiscal accounts.

[Interpreted] A lot of information at the same time, right? I would like to talk to Andre and it relates to your talk, considering the geopolitics of the energy matrix concentration of gas in Russia, oil in the Middle East, the Paris agreement that proposed the green gas effect in gas emission.

Well, COP 2028 being held in Dubai and we have oil manager as the leader, what we expect from COP. And can that affect energy transition in Brazil. I believe the energy transition agenda for us, it's easier than abroad. As Andre showed, the energy matrix in Brazil not including oil, just electric, 25% of the matrix is renewable is renewable or hydroelectric. So our matrix is relatively clear. So in Brazil for you to evolve in this agenda, to fight against CO2 emission., we have to go faster in fighting against fires because our matrix is clean in relation to oil. What we see in the world last year, we had an increase in oil due to the Ukraine war. What we [indiscernible] every country in the world with a strong subside and the gas price, the gasoline also and energy transition will happen. It's a quintessential that the government has to have specific policies with subsides. But we have to acknowledge that by some reasons, the oil consumption will be high. There will be some drop of fortifier in the next 10 years. What's happening in the world is that oil companies in Europe, they have reduced their [ CAPACS ] due to demands from the shareholders. They don't want them to invest more in oil and the oil companies in the U.S., not so far. But in Brazil, we have a problem that I may say that it's a bonanza because we have invested already. So this growth of oil reduction for Brazil is not due to new investment, but it's due to investments that were already done. Of course, the Petrobras has to finish all the platforms in presell to extract that amount of oil. But well, this transition moment for new energy, those things are all compatible. Europe has a plan that in 2035, they will no longer allow selling combustion car in Europe. Some car companies in Europe have mentioned to European Union saying that if we solve the schedule, it's pretty good, but we will be able to compete with cars that cost $35,000. And then with $100,000, we will be able to compete but cheap cars, we won't be able to compete with China. And in that line of products, we are going to close our production and Chinese will come to Europe. And Europe now is discussing -- strongly discussing this schedule for bidding combustion car sales for 2030, they will extend that deadline. There will be some difficult decisions to be made in Brazil, we can evolve in energy transition. As I mentioned and Andre explained, the energy matrix is already clean and we have a lot to evolve, especially the regulation of carbon markets, something that would be beneficial to Brazil. We fight against fires and that will help us to reduce global warmest and the energy transition. But here, the situation is way more comfortable than any other countries. Because here, as I've mentioned and as Andre explained, the energy transition is happening because the matrix price. 2027 COP, we had some agreements, so I'm pretty optimistic for 2028. And there will be transition here from cars to electric cars? Yes, we will. That will happen because this is going to be a coordinated movement. The company will coordinate this change. They will increased electric cars production. And it's pretty practical when the oil goes up, the government subsides. The rest of Europe wealth we learned last year, which the countries we admire in relation to planning competitiveness, brought some problems in relation to offer of energy, and we didn't expect that. Just like Germany, from the sector, it was surprising to know that when we had that problem, the supply of gas from Russia to Germany, well, they had to build one. They had to port case through Spain and through Portugal. Well, there's a world of in transition. And the good news is we are all today discussing the energy transition. So we can have some points to admiring COP 2028. Brazil will be in an important position in relation to bad lines. and how fast the transitions will be made. We have to discuss because we will need some investments. The international monetary funds have made some analysis. And we, in the Paris agreement, we had an increase of the debt in 10% of the GDP. Well, we have to get that together, carbon regulation, some incentives of energy, cleaner energy with some investments to regulate all that. We will find out the mixture in the next month.

[Interpreted] Do we have any further questions, Andre. Here, the microphone, you have to hold upper because if you hold down the antenna is there.

[Interpreted] Well, we have a curiosity. You were in the government and you follow the evolution. We would like to know, for instance, if BNDS can become a competitive bank to sponsor infrastructure and what is the challenge in your opinion?

Well, it is competitive, but not BNDS as it was in 2019, 2014. Because the BNDS lended per year, 3% to 4% of the GDP, and that is BRL 300 billion in the year. And in order to do that, they send cash to BNDS to land with some subside. And in some cases, there was a reason for that. Others not. That won't happen because the government can increase in 500 billion to send to BNDS to have an aggressive project. And it's good not to happen because they don't need in some areas. In some cases, it's justifiable, but others not. But BNDS is restructuring itself and the expenditures is around 0.7%, 1% of the GDP. We are talking about 70 million, 100 billion per year. The present BNDS that I want to reach the end of the year with BNDS lending 2% of the GDP, BRL 200 billion, that's not normal because if you get the average from 1995 up to 2008, the average from those 2 dates in the first and second government of Lula, 1.9% of the BRL 190 billion per year. So BNDES is more competitive, and it acts together with the private sector, and this is going to happen. We've seen BNDES by debentures that were received incentives, some sanitation companies Well, some lendings will happen. BNDES will be there. So we should expect that. But that BNDES lending of BRL 400 million, BRL 500 billion per year to the government with an interest rate that is below the inflation, and that brought a lot of losses in the investment of those water plants. Well, that's not sustainable. If someone offers 30 years of credit and you are going to pay less than the inflation that is not sustainable. This will not happen.

Perhaps one final question before we open to questions from the audience. Just one quick question related to the reform. We have seen the government working hard on managing the public accounts. What about the reforms, what can we expect? Are they going to continue? What about timing? Do we still need to wait until we have this consolidated? What is your take on this topic?

Well, the government is pretty much doing what it promised it would do. I promise that I will do a tax reform based on the Evotec and focused on that. In March, our fiscal plan was presented, and this plan is not going to solve the Brazilian fiscal problem. In 3 years' time, in the next presidential election, we'll be discussing the new fiscal adjustment. But the government plan, at least was able to read a deal with that -- what we call the tail risk. This explosive growth of death. Having said that, some reforms on the energy sector, some investment rules for infrastructure. These are still open discussions. For example, there is a reform that the government is not really discussing because of the topic, which is the administrative reform. We, from the private sector, every day, we do take some type of managing measure in our company to reduce costs. The government should do the same. And every time we talk about administrative reform, it will be much more related in identifying possibilities to lower cost and deliver a better service. But many people think associate that with firing people and cutting salaries, but it's not that. So I think that eventually, these topics will be discussed by the government. But what's very clear that -- this government has the tax reform as part of the agenda that was approved by the senate. Now it's in the second -- the lower chamber. And now they want to change some special tax regimes and what we are going to do in other industries, commercial agreement with the European Union. If we were able to do that also with Mercosur that will be incredible and incentives innovation. What is the new policy to incentivize innovation. The government will do a reform fiscal adjustment, that depends a lot on the growth in revenue. But there are different government expenses that are binded to the revenue. So when the revenue goes up, expenses also need to go up. And the government said that, that should be reviewed. So again, there are a number of things that the government need to discuss. And again, the government -- when I was in the government, in the Bolsonaro government, a new minister called me and said, "I have a lot of headaches because I'm here to make a difference. And 70% of the time, I'm solving problems from the past. And I told him, welcome to the government. So 70% of your time when you're working in the government is dealing with problems from the past. So we still have a lot to do. But if we keep on the right track, even if we cannot generate a positive fiscal result to have this trajectory of drop in interest rates by -- until 2026. The economy can improve a lot. As long as you signaled that the country is improving and doing this fiscal adjustments little by little. I was wonderful. We would love to continue this discussion now with the participation of our audience here with us and also those were with us online.

So if you have a question, just raise your hand, we'll make sure to get a mic to you. Please introduce yourself. So we can make the most of our special guests. I think Victor has a question. Good morning, Victor so from General Investments.

Your revenue are indexed to IGP-M. So I understand that IGP-M has a very significant exchange rate component. 2021, there was a boom of IGP-M it was above 20%, and APC was around 10%. So it's almost like IGP-M brings some sort of leverage to the company as in revenues as that are indexed to the IPCA inflation rate. I would like to understand your estimate for 2024 when it comes to these 2 indicators, IGP-M and IPCA. And what could happen. So we have this decoupling. I imagine this is not a base scenario, but perhaps we could start preparing for what could happen in these 2 indicators, so they are decoupled from each other. Usually, I know this data by heart, but I have to confess that I don't remember them for next year. But this strong decoupling that existed is not supposed to happen anymore because during the pandemic, in Brazil, we had a very strong devaluation of rail in different currencies in emerging countries, especially from Latin America. And in 2020, inflation was relatively low. But with this lower in the exchange rate and the price increase in products that are part of the national basket the cost of transportation increased a lot. So there was decoupling. But now we have a scenario that no one in Sao Paulo or no one in the financial sector expects that the real will go through another strong devaluation cycle. I think we can end this year, with an exchange rate between 480, 490 and the expectation for the next years is to have a stable exchange rate or following inflation pretty close which -- because in our perspective, IGP-M and IPCA should be really close together. IPCA for next year is 4%. IPCA for 2025, '26 . For now we are aligned with the market 3.5%, but we still have a lot to happen. We don't have a good model to look at the IPCA for 2025 because I don't many things can happen until then. But next year is 4% in our expectation, it could be a little bit above that, 4.1%, 4.2%, but also a little bit below because the inflation for the next -- for the past two months has really been surprisingly low. The level of deflation we saw this year was not expected by anyone in the market and not even by the Central Bank. So, because to have this drop in inflation this year back in 2016 and 2017, we had to have 1% growth in the economy. 2016, the Brazilian GDP went down 2.7%. In 2017, Brazil resumed growth, but only 1.2%. So we had a very low growth in a year with a drop in the GDP in order to break the backbone of inflation. But this year, we were able to do that. And when I say we, I'm talking about the Brazilian economy. The Brazilian economy will deliver an inflation rate that is much lower much better than anyone expected with a drop in the unemployment rate. It's really unusual. No one can really explain what's happening. But the inflation scenario for the next few years is really under control. We are at 4%. Some colleagues expect 3.8% and with the service inflation at the same level, 3%, 4%, so a positive scenario. In this scenario, since we don't expect the devaluation in the exchange rate, we expect IGP-M to be quite close to IPC level. I'm pretty sure that's the dynamic, but I can double check that. Any other questions?

Good morning, and thank you for allowing this question. I'm Rob Simon from [ Valor Economico ] newspaper. You mentioned that subsidies will be necessary for the energy transition processes. Sutaris in Brazil is a tricky word, especially when comes through the energy sector.

Recently, we saw the lower house talking about subsidies for renewable energy, even in coal was part of this list. We have subsidies for distributed generation, and we have cross subsidies that affect the power bill that consumers pay. Talking about subsidies in Europe and United States, it's quite easy. But how do you see that for Brazil? But it depends on the type of subsidy. If I'm providing a subsidy for some segments that will have an impact on the captive market because it's exactly what we are talking about. We are renewing a number of subsidies and the subsidies that will have an impact on the energy bill and the segments of the market, which is the captive market. and the cost of energy will be high because we're giving subsidies, but many subsidies are necessary. Many of the subsidies that we used to give for investments in renewable energy are no longer needed because the cost of investment in renewable energy has dropped a lot. Investing in renewable energy today is very different from what it was 10 years ago. Renewing subsidies for coal thermal plants. It has nothing to do with energy transition. It's the opposite of energy transition. So I also don't understand why we are incentivizing all thermo plants. I have no idea how that got approved. A lot of operations are subsidized, and they don't need to get those subsidies renewed. When we talk about subsidies for energy transition, for example, energy from commission-based cars to electric cars. A lot of the research or development of this technology is subsidized in many parts of the world. Can Brazil do the transition without subsidies? Hardly. But when we talk about subsidies for energy transition, it doesn't mean renewing the existing subsidies that many times are not necessary, like you mentioned, they only add the cost of energy for most of the consumers. So we need to provide subsidies, yes, for distribution in January, no, actually. That also is increasing the cost of distributors, and that, of course, affects the energy bill. If I'm not mistaking the Federal Court of Accounts, did patent work on the subsidies that generate a very high energy bill in Brazil, and there was this recommendation for the discussion to be more thorough. So we do have that challenge. We need to be careful when we talk about subsidies for energy transition. Many subsidies, again, that are given today that are no longer needed, in my opinion. And these guys, they know this better than I do. But today, we have a problem to see the energy cost in the free market is so low that investing in renewable energy when I talk to some companies in the sector, they say they are reducing investments. They are reducing investment not because they have a cost issue. It's because the energy in the free market is very cheap. So temporarily, they are reducing investments in renewable energy sources. So there is no way the government can increase subsidies to force companies to make an investment because the market has this excess of supply of energy. So we need to be very careful and it's up to us to make that distinction, providing subsidies for things that are no longer justifiable. Subsidize energies in wind power, solar power 10, 15 years ago, is a very different thing than doing that today. Subsidies levels need to go down because today is much cheaper to invest in solar and wind power than in the past. The price of components have really dropped. So we need to be careful. When we talk about the need of providing some subsidies for energy transition, we are not just talking about power. We're not talking about I'm talking about a macro perspective here.

Thank you. Still on that topic before we open for another question of the audits. We have received an online question from Fabiana, it was a little bit of the topic you just mentioned. She wanted to know your take on the free market of energy, especially for residential consumers or -- so you can choose your energy supplier and choose the generation process according to the bill that's being discussed in Congress. So what's your take on that? How can -- what do you see this energy market being open that allows people to choose wear to consume?

I think the movement that was done in the past few years was very positive in that sense. I don't understand the details of the energy sector, the power sector, but it's a very positive sector -- improvement, sorry. But we need to be careful with what was mentioned before. So we don't have a dual market. Especially companies, they have access to cheaper energy and consumers are stuck in a contract with a high energy cost. On the other hand, we need to be very careful when looking at that because we have contracts with distributors that they need to be they need to earn. And these costs are not due to their business or the core business but due to regulation. So this transition to the free market is a good thing, in my opinion, it is beneficial but we need to understand the pace of transition and how we can incentivize smaller consumers to do that. It's not clear for me. But yes, I'm in favor of benefiting the free market. Any other questions here?

Hello, good morning Hello. Good morning. My name is Loren. I'm from Oregon. And I have a question on the fiscal topic. You talked about your expectations on the deficit for next year. I said that if the government delivered BRL 60 billion that excellent, my expectation is modest is BRL 120 billion, even worse, above the lower limit of the fiscal framework. And we already have president saying that we'll not stop investments. We have the report from March that potentially is a window that the market is discussing to change that target. So how can the market be a possible change, so in 2025, we don't have the implementation of the penalties to decrease this ratio or the relative growth of expenses over revenue. I believe that the President will -- the government won't not be able to do that, but to decrease this potential of increasing expenses in 2025. So how can the government balance -- the expectation that the market has on the fiscal area and the data that we're going to get next year.

If the government delivers a deficit -- the market today estimates around BRL 90 million of deficit. Without changing the rules, I think the market was not going to react poorly because it's pretty much what's already expected by the market. And then there's the effect that you mentioned in March, we saw the first report being published estimating expenses and revenue, and the government was supposed to block BRL 52 billion, BRL 53 billion from the budget. And the government is going to have a lower increase in expenses in 2025 and 2026. So if the government doesn't change the target, even if it doesn't deliver what it was promised, but observe and follow all the rules that they established 3, 4 months ago, I think the market will react quite well. What the market wants is to have the certainty that things will improve year-over-year. What happens if the government changes the rules? It's still an open discussion that happened at the end of October. And then in November, throughout November, actually, we were surprised to see that there won't be a change in the target. There won't be an amendment in the bill that is going to be voted next year to change the target for the primary deficit. But there could be a change in interpretation here. So the government established that they can block from the budget up to BRL 52 billion, BRL 53 billion. Now there's a discussion to give a new interpretation that will limit that number to BRL 22 billion stops. I don't know how the market will react to that. The market might think that was very bad, and that can affect expectations or the market get accepted. If the government blocks only BRL 22 billion, but can approve measurements that are still being discussed, such as bill that will increase federal taxes on companies that have received some type of state tax benefit. If the government estimates BRL 35 billion, but it's very difficult for this bill to be approved as it is today. But if the government gets BRL 15 billion more or BRL 20 billion more instead of BRL 35 billion that already improves this equation. I don't know how the market will react because the market will focus a lot on the final results of the primary deficit. If the government doesn't change the target, even if we have a new interpretation for the fiscal rule that the government created and increased this level that is being blocked, but does that at the same time, and we believe deficit will be at around BRL 60 billion or BRL 70 billion. The market could react positively. But it's difficult to know exactly what's going to happen because, again, it will depend on the way the government communicates these changes and how transparent they are. So the government has been taking measurements, not only on collection but as well as expenses to try to deliver a better result because zero deficit is not going to happen. But the government is willing to do that. and the government be transparent, can the government at the same time show that we're going to have a better fiscal result without creating other problems at many times like everyone wants to open an exception for the CAP. So we need to look at the whole picture. Like I said, in the Temer administration Temer, the deficits were quite high. but we told the market, the rules of the game and where we wanted to get, and we cut a lot of public expenses. From 2016 to 2018, public expenses cut has happened, right after that as well. So there's a way, but the government needs to be very transparent. The government needs to make an effort on the expense side as well because if we make all the necessary adjustments to get to the government numbers in the next 3 years, we need to increase tax burden in 2.5% of the GDP. We're talking more BRL 250 billion. Nobody wants that.

So is there room to block these amounts in the budget, that doesn't include the PAC project that's very important for the President next year because, again, we have municipal elections. So there's something beyond that can be done to signal to the market.

Well, there are two things about this. First, most of this project comes from private investments. So when the government designed this project and said it's going to be more than BRL 1 trillion on the next few years. But 70% of the numbers come from private investments. Second, the public investments that in next year's budgets are around BRL 80 billion, not different from this year. Well, everything is in the PAC. Contingency and we have the double investments. You can cut BRL 10 billion of cost in contingency. Part of what we have that we call payment are malatory expenditures. So when you have contingency -- well, since 1999, when we had the targets and performed this contingency, you lose a little bit of public investments. But 10 years ago, a lot what we did call public investment is private investment now. And to recover in the next 3, 4 years, it's way more private than public. So in the best scenario, when we have the federal government, public investment is around 2.5% of the GDP. 15% is private investment. So it's important for the government to create conditions for the interest rates to be reduced or the GDP go to 18, then to have a risky way to grow those 2.5% change in rules. The contingency will get part of PAC because it gets investments and public investments, everything is called PAC. So it's going to get a little bit, but for real. If the interest rate goes for a digit next year. And for that, we have to trust the government that the government will follow with the fiscal reform or the fiscal adjustment, it's way more important than the PAC being BRL 15 billion more or less.

We have two questions. I will ask you to be brief. We are almost done. Two final questions for us to finish this panel. So is your microphone on? Just ask, please?

My question is from Asit and it connects to Taesa. This updated that the public expenditures grew 10% in relation to the previous year. and revenue not much. And one of the measures for collection that the government is thinking, it's the interest of their own capital, proprietary capital. And what is the sustainability of this growth of expenses and if the use of the proprietary capital can jeopardize any investments from the company that because you are paying more interest and then the companies won't invest more because of the taxes.

Well, the growth for the budget this year is 7.5% real. So the expenditures of government will grow more than GDP. Having said that, for the next years, they are going to grow like that No. Now even with the interpretation changes, we were talking about that, the government's mentioned. From now on, the growth will be 0.6% to 2.5% per year. And then 2.5%, the collection has to go way beyond because the limit is related to 70% of the collection. If it doesn't grow or goes down, it's 0.6% up. That's the fiscal rule. The budget that the government sent to the Congress, the real growth is 1.7%. So there will be no cash to do that. So even if they change the interpretation of the room, and that's what we are discussing, the government wants to change that to have a good growth of 0.6%. If the expenditures goes to 0.6%, it's smaller than what we projected for the economy. And that means that the GDP expansion won't go down. One of the reasons for the market to improve. Well, that's exactly that. The expenditures won't grow as at 1.7%. Otherwise, we would go to a debt that would be 90% of the GDP at the end of the government. That's why the market is improving because there is a cap there. The second point that you've mentioned, I forgot how JCP. JCP, it's quite controversial but that is going to be a measure for the following year. The government, when I talked to some government technicians, it wasn't finish with JCP. The idea was to have a reduction of what they call dividends of distribution. This guide dividend distribution, They mentioned some alternative mechanism. They made an example based on Chile. Well, just like JCP and I believe it's pretty difficult for them to approve up to the end of the year because everybody is complaining, everybody wants to understand better what you have mentioned. What is the change that we may have in JCP to be more transparent because that's a mechanism that is legitimate and it won't jeopardize the sector. So I believe this is going to be left for the full year.

Great. Last question on Daniel.

Thank you for your presence, Daniel [ Tavis ] from Safra Bank. Where we would like to take advantage from your experience to try to understand a little bit about the Minas Gerais state debt, BRL 160 billion in debt with the federal government. And more than that, we have this proposal of making some state companies, federal companies. So I would like to hear from you what is the possibility? Is that -- well, this is a possibility? Or if not, what is the negotiation margin we have in order to solve this problem? Or is this proposal feasible or not?

Well, first of all, until today, the state of Minas Gerais is not a part of the Cisco recovery regimen because there was no approval at the house of city representatives. In 2017, that was the regimen that Janeiro adopted the privatization of company's ability, it was in the energy sector or financial sector. It was a pre-requirement. It was mandatory. But it's not that case of the new fiscal recovery program that we changed in 2019 to 2020, I spend. So there's no requirement for the company to become a private well, the states make it private. But the state has to present a plan that in 10 years, they can pay the entire debt. So when they are in a fiscal recovery program, it doesn't mean that they will immediately start paying the debt. There is a year and then just an installment 10%. That is like a letter, it takes 9 years. In relation to Minas Gerais, the major problem was that the government didn't get any support from the house of representatives. So there was like a junction not to pay the debt, and they try to negotiate to enter the program of fiscal recovery. If you manage to have that plan, that at a certain moment, there will be an extra revenue to pay the debt, it's easier. The National Treasure will analyze and say, "Oh, it's persistent, let's approve." But to make state companies, federal companies, it's not easy. The experience of the federal government with this action is not very good. There's always problems. Just like there are always problems when the federal government gives the credits that is assured that the counterpart, the guarantee is a state company. A recent case that happens to Sadai when Rio gave to the program in 2017. The government authorized a few Janeiro to get a loan of BRL 5 billion with a private bank assured by the treasury, it would be due in 2019, 2020 and the government of go Janeiro, if they didn't pay the treasurer would pay, and it would be the owner of Sadai and what happened, the state didn't pay along the government's paying to private basis. Look, Sedai is mine, the government said no, because I will have a concession. And then we got BRL 22 billion and the federal government said, oh, I do have BRL 22 billion paid the debt of BRL 5 billion, and there will be more than BRL 15 billion for you and case of then the government said, "No, no, I'm not going to do that. I need the entire cash amount and I will renegotiate my debt." The recent experientions of federalization were not good for the federal government. Is it possible? Yes, it is. politically speaking, you can approve a long, an opinion that allows that, but it's not that simple. It's not that easy. It's not a plan well, when we discuss Eletrobras privatization, we started discussing that. If I'm not wrong, in the beginning of 2018. And it took 5 years for us to have the privatization of that with the design that was defined in the beginning of 2018. So it was up 2022. We have many of pens signed by me and things that were not possible and they said, "no, no, this is not because the risk for the federal government was too high." So I don't know if we can structure a project, first, it's not certain if it's going to happen or not. Second, it's not easy to model it, to have a model because if you have this private concession, there would be a bit. And then the owners of the company, they would get some benefits. And then they would have access to the debt. And let me say something. With the access to this cash, I will pay parts of my debt in 4 years. I don't know the discussions about federalization, but it's not that comment. In relation to this negotiation, it's possible it is. But in relation to federalization in which I state company was a guarantee. It's pretty problematic. Great. Great, amazing. First of all, I would like to thank to our gas, so our directors Gentlemen, it was a pretty reach discussion. We are going to continue soon. And now, well, I would like to thank you all and congratulate Taesa a very important company, a company that we are very close and we admire, Congratulations, and thank you for the opportunity.

There will be a break, but before, I would like to share something with you. We will have here survey question. What have you thought about the first part of our event. If you are at home, please answer the question. You have QR codes just we did, so we can have a quick assessment of this first part. And then remember to add your e-mail at the end, there will be a raffle, and it's pretty important for you to get a pretty nice gift rate. 5 minutes, just a bio break, you can make a call, we'll have some order and we'll be right back. There will be a pretty nice debate on the second part of our event. Thank you very much. [Break]

We are ready to start again. I'd like to remind you that we also have people watching us online. So we cannot be late. So I would like to kindly ask you to please take your seats. So we can go to the next session and have our last panel discussion where when we will hear from our executives. So once again, I would like to kindly ask you to take a seat, so we can continue with our agenda of the day. And again, if you are watching us online and still haven't had the opportunity to answer our satisfaction survey. The link to the survey is on the YouTube link. And now I would like to invite Rinaldo Pecchio, our CFO, who will talk about why investing why you should invest time. We apologize cannot hear Mr. Rinaldo Pecchio. We apologize. We are facing some technical difficulties. The audio for Mr. Rinaldo Pecchio is not being transmitted to the translating platform. We are having a small technical issue, and we are trying to solve it right now. Thank you for your patience. Once again, we apologize. We are facing some technical difficulties. And the audio from the speaker is not being broadcasted. Thank you for your patience.

Now yes, 700,000 individual shareholders, which, of course, brings a major responsibility to a company. The dividend distribution more than BRL 5 billion in 5 years, almost BRL 13 billion since 2016. So all those numbers tell you that this company is working well. Our execution is extremely good, and we can give returns to all our stakeholders and obviously, to our shareholders who are an important group of our stakeholders. When we go to events, myself and my RI team who does -- that is a brilliant work in prospecting funds and fostering discussions that we can have in order to identify investment opportunities in the future. It's very clear to see how much people are interested in Taesa, both locally and internationally. Not long ago, we were in an international conference abroad, and it was clear to see the interest from those who follow our work and sometimes that is not translated into investments at the moment because of the macroeconomic scenario. But we understand that with this scenario that was just described, we are about to enter a very good investment cycle for Brazil as a whole. And we are certain that Taesa because it is such a solid company, we'll be able to get a very expressive participation in this new scenario. Here, I would like to discuss a little bit about our history at Taesa. Andre already mentioned some of these topics, but it's important to remember that this company was founded with 3,800 kilometers of transmission line. Today, we have almost 15,000. And of course, that is translated in growth in our revenue. We see our footprint in the national system, the integrated national system or SIM. Today, we are present at 19 states and the Federal District. And every time we think about the future, and I'm going to talk a little bit about that later, it allows us to know that we have very important synergy potential that could be translated as returns on the investments that we might do. So this is a very important position to highlight. And we also show here the different efficiencies that this company has been presenting. When we look at our EBITDA margin has been 87% on average is quite representative. But more important than that, perhaps is showing that new projects or new investments that are already operating gives us a 90% EBITDA margin. So this is an obsession that the company has. We are obsessed about delivering returns and results. And here, we see some examples of what the company has been doing and that highlight this history of success that I showed you previously. Now we talk about the numbers, we talk about the strategy, but there are some values that we wanted to highlight. We have a history of availability. That is excellent. We are close to 100% in our availability index. And that, of course, means that there's a lot of work in the background, a lot of investments and a lot of culture behind all the numbers that we present. And the discount that we have over the RAP is 0.9%. So these are numbers that helps us give the results that the company has been demonstrating. But once again, numbers are one thing but we also have our mission, our vision, our value. I'm not going to read them to you. But the company is very careful in not only executing but we obsessed about them. So every meeting that we start in Sedai, we start talking about our mission or vision and our values. Anyone who presents anything talks about these 3 elements just to show how solid these concepts are inside our company. Thinking about values more specifically and talking about the 6 golden rules of operation, and again, I will be able to cover the specific details later. Marco will be part of one discussion tables that we could further go deeper than that. But we talk about the care of people and the care that people need to have and the procedures that need to be followed we are very strict when it comes to that. And again, all those actions are in place. So the lives of the people who work for us is preserved. So this is a negotiable value and something that we take a lot of pride in saying that exists inside our company. Finally, still on this slide, we talk about our integrated management system that Andre mentioned. But I think the way we can explain this to the market is by telling you that we look at processes, we look at best practices, and we have better management instruments in place. So we do all that, not because we want to have to be a company that has DCO or other certifications but this is a way for us to establish the appropriate environment, safety and asset management practices, like I mentioned before, so again, this can be translated into consistent results inside the company and something that we have achieved and something that will grow a lot with the new certifications that are on the way. Speaking a little bit about sustainable returns, though. I often show these numbers, and these are just two examples of deaths we have raised. And that, of course, is a testimony of the trust in our company. When we raise a new debt, of course, we are very happy. Recently, we have done a very successful mission process, but that is the result of the work done by the entire company. So when we look at these rates that we are being able to achieve, this means that the market has a lot of confidence predictability and beliefs on the results that we are delivering. So the rest are really well mapped and in the perspective of the market under control. which translates, of course, on this very attractive interest rates, many times below market average, and we are very proud of that as well. Another issue to be highlighted has to do with our green debenture emissions. The company is already meeting these instruments for quite some time. We had BRL 3.7 billion in 7 emissions that what has to do with our ESG agenda. So again, there's a lot of hard work behind us, and we take, again, a lot of it in having this in our emission portfolio. Of course, we cannot do everything with a green seal, but we try to maximize these possibilities as much as possible. And another important thing here in terms of sustainable returns, returns are related to the taxation process. The company has an optimized tax regime. We consider what is the best tax regime to the company using real profit when that is the most appropriate regime and using, of course, the tax benefits from Sudan and Sudani that allows us to optimize our tax burden almost BRL 700 million. So that requires a lot of plan, which translates in this real tax rate that is around 14.2%. That is only, again, a testimony of the quality of the management and the instruments that we use in order to generate value. Speaking of return to shareholders, these are some average payout numbers and yield be consulted, I'm not going to just read the numbers to you, but I do want to highlight that we are very proud to say that this is -- we are one of the companies in the market with more liquidity with participation of 66% of minority shareholders in our shareholder base, which reinforces this commitment that we take very seriously when it comes to the sharing of information and governance levels that we have. So again, these are elements that we focus on and our perspective for the future is extremely positive to continue to present an extremely favorable returns when it comes to the return to our shareholders. Well, what do we expect from Taesa in the coming years? This is something that drives us forward on a daily basis. What are we going to do? We are discussing our strategic plan, we are about to conclude the budget process. And this is an important part of the process. And again, we do spend most of the time thinking about what we are going to do and who we want to be. And just to highlight some of the topics trying to separate a little bit about our strategy. We could talk about capturing value through financial management and operational efficiency. And again, here, we are obsessed with more efficiency. We have very serious discussions inside the company because we are already pretty efficient, but we want to be more. This is a constant search for us. We hope to soon present to the market some numbers that in our understanding will show you increases in our efficiency level. This is a challenge. We are discussing this intensively, and we want to present them not only on the operational level, but on the financial level as for. So how we fund the project, how we can optimize that using our cash flow, we are starting to thinking about more modulated emissions. So we can have this submission happening quite close to the moment where we are paying, so we don't have this negative carryover. So these are all elements that we consider. And in our understanding, allows us to generate more value. And of course, we will keep you updated. And I think 2024 will be a very promising year in that sense. In terms of sustainable growth, I believe we're going to discuss that later today. But the idea here is to talk about our growth opportunities so we can continue to have a very positive profile in terms of return to our shareholders and you're using -- looking at our balance sheet. So the company has been using our leverage ability in order to face these investments and now we have reached the level. And now we have a strategic plan and some discussions on the next steps and I'm certain that according to our discussion is going to be a growth path. And this growth is going to have in horizons that are not necessarily focusing on the extremely short term, but we do have a lot of things on the pipeline. We have BRL 3.5 billion of CapEx to execute and some significant RFP to add to our portfolio. And finally, I just wanted to talk a little bit about our capital structure. Well, here, we have some matters about being this company acknowledged by the market, but we have a profile that the growth is part of it. As I've mentioned in the horizon we have discussed, we have analyzed a strategic planning with the Board. So the next chapter is written now. And once again, that's what we summarized. We are available for the questions you have to tell me. I'm going to hand the floor to Cristiano.

Thank you. It was an overview. An overview as we've mentioned, the dynamics are amazing and a little bit from our officers, they are part of a major company, a lot of people who work hard to make everything happen and generate value to everyone. This is the final moment for a nice dynamics. Our purpose here is for you to leave the PowerPoint, the numbers that you always talk with us, and we are going to talk about the 5 options were here. So please do not stand up. You are going to stay seated. Every director will go to a table. There will be one director in each table. And then you are going to spend 10 minutes. It's going to be pretty dynamic. Those who are at home will be will be seeing one of the tables, and you are going to take part of that. So we have the numbers here. So we are going to start with Andre there and all other officers will be around close to 10 minutes, you are going to hear a sound alarm. Just for you to pay attention that time is about to expire because this is pretty important. We know that it's an innovation. We enjoy innovating and it's going to be pretty interesting, and ask questions, there will be a brief introduction from the officers and it's going to be guided. Questions will be guided to them. So every officer will sit down in their respective table. I will leave the stage, and I will follow with you. Okay. [Break]

Oh, just for the broadcasting. Great. So I'm available to all of you. I'm Andre Moreira. Recently, I celebrated 3 years at the company. And we are in many -- we are doing many things at the company, the meetings, and we are pretty available to answer any questions. If you have any suggestion, please welcome, we don't know all, but we are here to learn together and now available.

If I can start I have a structural question in relation to the base of shareholders. You have a strong presence with investors like individuals that for sure help you a lot but I would like to understand what is the planning? The planning to try to bring is the local institutions to the table. We're trying to share room with investors from abroad, and other investors.

Well, we are pretty comfortable with our portfolio of shareholders in practice that challenges us more. There is no deal roadshows, including abroad, with potential shareholders to try to attract and show Taesa as we are talking to you today. So this is something that is believable. And we have had some positive feedback from investors. And this market is a little bit far away due to the pandemic, the inflation, the interest rate increase mainly in the U.S. economy. But we believe that in a close future, we are going to be able to do that. And even in the discussion we just watched in relation to the Brazilian economy, things will be better. So we will have more investors. But today, we are pretty comfortable with our portfolio of shareholders, and that doesn't concern us. That's not a concern from the company. Well, but once again, we have worked hard with the investors and potential investors.

Daniel from Safra Bank. I would like you to mention about the capital structure, how you see that evolving throughout time, considering the plan that was mentioned during the presentation for the growth for the following years, the auctions. So how do you believe this optimal capital structure will move forward of the following years, considering that in 2030, if I'm not wrong and correct if I'm wrong, there will be some important discussions just to understand how things are?

Thank you, Daniel. I'll go backwards, okay? So today, it's a very rich subject. It's part of our discussion. And expiration of the concessions. And from 2030, Taesa will be affected by that. We have been working with that. There is a recomposition of our revenue through our time in the last auctions in the last 4 lots, there is a future revenue of at least BRL 400 million, BRL 500 million, and the lots and some reinforcement, important reinforcements we are adding to the company. So it's a recomposition of at least BRL 500 million that we have already hired. Anyway, the capital structure is an instrument that we studied, not weekly, but every month, we discuss that with the Board, we have -- well, to be approved our review. And one of the subjects are one of those, how do we balance all that to assure our tripod, to keep a high level of investment, a high level of dividend payment and the leverage. So we have to work together, and we have different ways to do that. So we have studied and I'm not authorized to comment on that because it was not even approved by the Board, but as soon as it is approved, we can prepare something more feasible and present to you. But to start with, there is no short-term plan to change the capital structure. However, we study and the first opportunity we have, we are going to do that. We have studied many formats, different setups that the market uses. And follow-on and so on. So this is part of our everyday life.

If I can ask another question in relation to assets. Have you managed to advance with [indiscernible], ISA CTEEP, in relation to this crossover of assets.

This is an important subject to us we have moved forward with discussions, both partners, [indiscernible], ISA CTEEP, and this is part -- well, for them, it makes sense for us, it makes sense. We have some discussions, some more evolved, other not. But we believe and we are positive based on facts and data that we may have better efficiency if we manage our assets completely and not separately. So we do have that. I don't like to -- well, we are discussing with our partners. Yes, we don't have a date. But anyways, it's under our radar, and we are discussing this. It makes total sense and it's part of our short term and long term. Well, if operational assets, right? Well, we don't have nonoperational assets anyways. So 3 with CTEEP, they are all operational, 2 being operated by Taesa and the other 1 by CTEEP.

If I can ask another question in relation to the last slides you shared about taxation the government searching for the increase of -- you are paying 14% of tax. I agree with you, great management you managed to manage that pretty well the entire legal framework. So I would like to hear from you, how is the challenge with these potential changes from taxation in order to have a lower number?

Well, you've mentioned it is a challenge to keeping BRL 14.2 million in Brazil, if you don't do anything, it's what it's mentioned. And we just have that and we follow on. We use what we are able to use when it's possible, SUDAM, SUDANE, they were renewed recently, the incentives, we will always use it. Is there any concern about the future? Well, we are monitoring closely to see if there is an impact in our business. We believe there will be none on the short term, but any change, we need to sit down and reevaluate some rules, if they change, they may require some other aspects. So it's complex. Brazil is not for amateurs. And most of the time, the past is uncertain. Sometimes here in Brazil, the past is uncertain. So it's not a major concern here, and that's not what is taking our sleep at night.

If I can ask another question here about the auctions for broadcasting. We have 2 underway on this year, just a second. We are almost finishing participation and how do you see the competitive aspect?

Actions will be competitive. We are in the sector, and we understand that this action, we want to be part. It's focused on age of BBC major lots and it's not the size of Taesa. So we are studying what we can generate and everything. So thank you. I'll be here later if you want anything, just let me know.

I'm Marco Faria. I'm responsible for operations and the management of the assets and to ensure the availability of our assets to operate. So if there is a lack of availability, there is an impact on revenue. So my responsibility is to ensure the availability and in the end, ensure the revenue stream for this -- for the company. I've been in the company since the beginning, since 2009, and I have followed the process since the beginning.

Could you comment a little bit on how new technology influence operation and maintenance, drones? What are the opportunities that you have identified to reduce costs when it comes to new technology?

Well, when you talk about new technology, this is a very big topic for operation and maintenance, technology is essential. Even to optimize our cost. And our operations center is one example of a new technology that has been implemented to improve our efficiency and reduce the level of discount because of our service level. Speaking of the energy transition, we talk a lot about storage. What is the importance of storage? Well, it's important to minimize the impact of the intermittence that exist in wind and solar generation. So when you have wind and solar, it's important to have the technology because it can migrate the generation center and it perhaps -- there is a need of a new technology that could be battery, green hydrogen and other technology. And this is an opportunity for transmission because, again, it's a new business. So yes, we are studying this technology of storage. And again, that brings an opportunity for developing new lines, especially with this new generation center created in the Northeast. So you have a concentration of generation in the Northeast with a necessary to distribute this energy that is produced by wind farms and solar plants.

Still on new technology, these new auctions of extremely high tensions on HVDC technology. I'd like to hear your opinion on a possible trend for auctions in the future. So they become more of this type because you have a concentration of generators in a specific region, in Brazil specifically, the load is concentrated in a different region. So it seems to me that this type of technology tends to be more present in the future options. Do you agree with that opinion and how can Taesa use this in the future? Are you preparing for that? Do you have a different perspective on the topic?

We are preparing for that. We have a concession called Saíra, which is the first step in order to be prepared for HVDC. It was on next year's -- last year's auction. But HVDC is used mainly for long-distance energy transmission. When we have that opportunity, this new technology, which is not really so new. It might be not really well explored in Brazil yet. So it is an opportunity for us. So again, we are constantly studying these opportunities and when applicable, when they generate return to the company and to the shareholders, of course, we will take part of it. I don't know if I have answered your question, if I left something behind.

I just wanted to understand the process. How do you prepare for that? Because this is basically a Chinese technology, if I'm not mistaken. And I wanted to understand the process that you have of this. Today, you have a line that has a technology so you needed perhaps a planning and development project in order to be able to compete in an auction like the one that's going to take place in December. You're not going to participate on this one, but in the future, you could, so I'm asking more about the transition, I think.

Our partnership with the vendors and suppliers is really good. So even though this is mostly a Chinese technology, we do have partnerships with major Chinese vendors. So deciding to participate on an auction or not depends, of course, on the relationship that we have with our vendors. So being prepared to go to an auction is a process, a process that we have been developing for some time studying these possibilities. And then this technology can come from any supplier, not necessarily a Chinese one.

Would you consider a partnership with a Chinese player that already operates in Brazil to participate in one of these auctions?

This is a business question. So the new business department is constantly assessing these possibilities. We assess different partnerships, including with the Chinese. But again, it's a business question, business is business. If it's a good deal, if it's good business, certainly, we will study and possibly participate. I'd just like to say that besides planning. Andre, that comes from different companies has experience in working with this technology. So they know they have participated in the process before.

So going back to a more technical question. Perhaps if you could talk a little bit about the evolution for the past few years. You have gone through a major change on the way you operate from 10 years ago to the way it is today. Had that happened or was already massified in the past and there hasn't been a significant evolution?

Well, the evolution on the maintenance process is constant because technology evolves quite fast. So our maintenance processes follow the evolution the technology brings. So new tools new oversight system through cameras and talent maintenance, things that we didn't have in the past. So today, we already use this technology in our processes. And of course, that optimizes cost, time, brings better return, more guarantee, more reliability, more availability to our assets. So again, everything that we can prospect in the market in terms of new technology that can have an impact in our process and that bring a positive contribution to our maintenance process is constantly being assessed, doing benchmarks, he is going to seminars and conferences. For example, this week, we have SNPTM, an event in Brazilian, which is a large conference that discuss new technologies for operation and maintenance for all companies. And again, we are constantly participating in these discussions.

2 questions if I may. Do you identify any risk from the technical perspective for line operators considering the complexity of the operation of the system because of wind, solar and other sources? Do you see a risk of having -- worsen your availability because of the complexity generation has taken in Brazil?

Well, every time new plants are implemented. In this case, wind farms and solar plants, which are very intermittent. Operation needs to follow the evolution, so all the agencies are constantly studying the operation of the interconnected national system as to ensure the operation. And that for transmission, we follow the procedure that is defined by the national agency. So I believe that, yes. But for the company specifically, no, we need to follow it. But for the operation of the system as a whole, it's certainly a new challenge. So new technology brings new challenges. And we need to keep track of them and contribute to the discussion about the new solutions with the different agencies implementing protection system and new equipment as to ensure the operation. So again, we are contributing and participating in the discussions with the agencies in order to face the challenges that wind and solar power brings to us.

Perhaps going back to storage as a final question. You mentioned that you were studying new technologies. And the idea is to identify how that could help investing in storage.

I think both. We apologize. We are getting 2 audios at the same time, we cannot translate. Working with the system -- I think we can work on both sides. Thank you.

I'm the Financial Director for invest -- in relationship with investment in the company. So my responsibility beyond traditional areas in the financial area like controlling, investor relations, fiscal planning, taxation, I also work with supply and IT. And my focus has been connected to what I mentioned in the previous slide. We are trying to bring efficiency targets to the company. It's a very efficient company, but we also see opportunities, and we are going after them. I hope that soon I can present to the market what are the targets that we are going to chase. And on the IT side, we have a consulting company, so we can but continue to focus more on having IT projects that clearly are bringing returns in all of them. The company already did that, but we understand we can have a more structured approach. We invest a lot on IT, so we need to have really well-defined returns on the projects that we make, and that's what we are working with, not to mention supply. We are reviewing procedures as to become more agile, agile when we do contracts without forgetting about governance again. So the company becomes more agile as to have interesting indicators of profitability for everyone. Well, having said that, in a nutshell, I'm available if you have questions. So we can keep this conversation.

Going back to a topic that you don't talk much about the year probably, which are dividends. I'd like to hear from you about your strategy to defining dividends? So over the past years, there was a perception that with a drop on the IGP-M, that could be an issue that's not necessarily true. So what do you look at? Are you looking at an optimal leverage level? Are you looking at the payout, gains per share, what is the metric that you are using in order to define annual dividends?

That is a good question. So I'll answer I'll try to cover everything. I forget anything, let me know. So in 2023, we had 2 quarters of dividends being paid. In the future, we are going to be quite close to what happened in the 2 previous moments. The company had a payment pace, and we sort of changed that because we were focusing on how much we needed to commit to participate on auctions, if there was an issue with leverage. And again, speaking of leverage, we have 3.7, which in our understanding, is fully compatible with a company in our profile and growth profile. But in our understanding, we should keep the level of investments, something that the company is working towards. And with that, we understand that we should have a level of 4, 4.1, probably you are not going to see Taesa in a different position than that. So those are the levels that we expect. With that, we are discussing a strategic plan. And when we look at growth, and I'd just like to make a comment that even though growth is extremely important for us, and the company has been very constant on our growth agenda. There is always an issue. Well, is it a good thing or a bad thing to win a project in an auction? We hear both sides of the story. When we win, people are worried. When we don't win, people say, "Oh, you're not growing." So again, internally, this is -- it generates a lot of discussion on the approach we should have. So what do we do? We define a return rate with our shareholders, and we are very disciplined. We say we can go up to that level. So when we lose an auction because of the offer that was done, there's not no reason to be upset. But we don't know what are the conditions that are being discussed at other places. We understand that the technical side, which I mean, CapEx, possibility of anticipating the operation. These are things that the major traditional successful players, the good operator, they have been doing. So there will be very little variation, probably I'm going to get a contract with a vendor, you're going to get a different one. And at the end of the day, my discount might be this or that. But in our understanding, that is really well balanced. What we will never know are the returns that are being asked by shareholders from other companies. So when we don't win an action -- auction. Of course, somehow, yes, we are frustrated. But on the other side, we know that we didn't win that because we are following the parameters that, in our opinion, are acceptable in terms of value generation. The life goes on. So like I said, I think the history that Taesa is going to build is definitely going to be a history of growth. There will be moments when the growth will be a little bit smaller because of things related to concerns about the debt leverage level or perhaps we might understand that the returns are not appropriate but those things might happen. But I don't identify any possible scenario when we will not see growth at Taesa looking at the future, a growth that is in line with what the company has been developing over the years.

Considering the changes that are happening in the Ministry of Finance with JCP, the end, or now the 50% discussion. First, in case it ends, they decide to end JCP, could you be in your understanding, accommodated in a specific regime like a bank? That's the first question. And second, if it really ends that rate that you presented, the tax rate, what is the maximum impact that you should have?

That's a more complex question. I cannot give you a straight answer because that's a mix, not only on the use of JCP, but also on real profit and the other tax regime. So I think later, [ Juliana ], we can stop and think about this and try to perhaps include this information in the materials that we disclosed. So it's not something that I have ready in my mind. It's a little bit of the feeling that we have, we are supposed to have the lowest benefits in using JCP. We don't see something that's -- well, it's going to completely go away. Of course, it could be significant enough, but I don't see a negative consequence for transmission companies. So the good thing is, well, the impact is going to be pretty much the same for everyone. What can we do beforehand, we can use as much as we have, and we are doing that this year. we have already calculated using to its most. Some -- this is calculated over previous numbers, but in our understanding, we shouldn't do that. And then in the future, we can -- but I apologize, I don't have a straight answer for you. It's a good question for us to think internally and perhaps start the next discussion on the incentives we are getting from SUDAM, SUDANE and JCP. We're going to do that homework for the future.

I also have a question about the fiscal element, especially because of the commitment to reinvest in concessions. And we see dividends going up, getting new projects. So how do you allocate that cash if you can really reinvest or use for other purposes?

We can, we have a control that needs to be done and is done on the benefits that is obtained to the reduction in the tax rate and the investments. And of course, that includes maintenance, investments for keeping the operation and whatever -- whenever possible we incorporate -- okay. Later, there will be an open discussion, and we can go back to the topic. Thank you very much.

Good morning, and thank you for being here. My name is Luis Alessandro, I'm the Director of Implementation at Taesa. So what do I mean by that? I'm in charge of CapEx or pre-auciton. So all the analysis done before the auction, I participate on the auctioning process. And if we win, I'm responsible for building. So I have no one to complain to, though I did the work before I had just to deliver what I have planned. So if anything goes wrong, I can have only myself to blame. So I participate on studying the difference, what's being offered in the auction until the conclusion. And I'm also in charge of large reinforcement. So specific things that we need to do. So I'm available.

Thank you, Luis. I actually have a question on the CapEx that the company can execute after winning an auction. There has been an update on the Brazilian agency prices. Before that, we had a discount level that you could implement the CapEx. And after that, the discount level changed. So where are we in terms of discounts that can be implemented today? And what are the challenges and opportunities that you could use?

Thank you for your question. In the past, we talked about 30%, and although there was a reduction of the CapEx of MLs. This is more difficult today. The prices today are more updated, the price bank is more updated. So the average in the market stands to 15%. And how can we do that? Only with ML price? No, no. we have this study that we are talking about. How can we have a CapEx that is lower? It's not only price it's we go for a previous study before the auction. So when we have a price bank. It's not a very detailed, it's study, aligned, way for a substations. And then we have to analyze in relation to foundation. Can I have this because -- it's the civil construction is the most risky part, can I have like a foundation that is different? Can I have a more efficient design, then I can reduce the risk or even find more interesting alternatives contributing for a lower CapEx. So we have this variation that is based on the previous study that I performed also based on the negotiation. If you are a player that you have a contract, you have volume, a meaningful value, it contributes. And also you have some formation of a lower CapEx. And then another question, how can you assure that you are going to have this value. I have [ 2 hired ] company. In the auction, I have a pre-contract of the cables, the towers, the equipment and everything. And what that assures me, 2 important things. I will have the offer of what I considered in the deadline and the deadline I am considering also, and the price because I have a pre-agreement, and when I go to an auction, there's nothing open. And then when I have -- when I talk about the CapEx, it can be open, 5%, 6%. Well, those are relays and off-the-shelf solutions. You don't need to worry, but cable, cable is dollar based, and that cannot be exposed to the exchange rate. So there is a hedge on the auction day. I have an agreement with the manufacturing company towers for instance. It's pre-auction. There is a clause there for that. So I also have all close, so there is no problem to have a price problem because I have all the problems. Imagine a refurbishment at your house, all the problems. Imagine kilometers of a network, many states, you have to mitigate price problems because you are going to have others. So especially this speed, and then it's D+1, that's the name of the project. We don't wait for the contract. I start working on the day after we don't need the agreement. So we structured the entire strategy for CapEx. That's the attention point you've mentioned, right?

Could you comment on the projects, do you have more lines, substations, could you mention the major difference and challenges of a project that is mid of line or...

Well, when you have a substation project, we don't have an environmental concern because the authorization of a small area, it's pretty fast. And you don't have any problem with the land because you don't need a licensee or indemnity of any passage. So in a substation, you have a lower risk in relation to the land, environmental also. And when you have a good supply contract for equipment, increasing the volume and usually equipment is dollar related. You have to have a pretty good contract and EPC that has a good quality, then you have something that is more controlled. Transmission line construction is the major expense, cable and towers, more than 60% of the CapEx depending on the type of line. And you have to pay attention to that to have a good supplier for cable and towers and pay attention that you have an environmental license, you go through 2 states and then you need federal licensing with IBAMA. If it's one single state licensee. So you have to be prepared for all that. What type of license, is that a agriculture area, industrial area, all that change in relation to indemnity because in a transmission line, you are not proprietary. You just have some authorizations for passing that region. So the challenge is pretty different. The transmission line, environmental, land, careful with cable and also towers substantial. Well, it's a more controlled environment. So you have those 2 differences that are pretty important from a substation in a line.

I will get a link with what you've mentioned. I'm moderating online questions, and here it is, which would be the tools of the company to reduce projects inside the deadlines?

Well, Juliana, it's the previous study. So we dedicate ourselves 6 months before mapping everything, and even we can conclude that I won't be part of that. So I studied 6 lots and the risk is not something good. So I think part of 3. So 3 study and 3 agreements and allowing me not to have a lack of material and labor, that's a great advantage. At Taesa, we are always hired, so I don't have any projects without the labor hired, without material without the cable and network. There is no exposition and that brings some securities. And in order to assure the schedule we have an entire proprietary management. the inspection, it's our own. The management of the construction is done by us. And we adopt the PMI, PMBOK. I have an office project that performed the entire management, risk management rollout cost, plenty, financial planning, quality, all that. So it's summarized, you add a previous study, there is full of details, pretty detailed. You have partners, ideal partners, so you can start working on D+1 and have a strong management team to control and mitigate risks that may arise during the project.

Well, a question. Do you see any technical difficulty, is it technical wealth.

It's a strategic part of the company, we have many opportunities. And as you have capillarity in 18 states plus the federal district, it's pretty important to be more solid here, even to have this energy because when you go to another country, you have to build an entire base. And then we have a lot of opportunities here. Our focus is, well, we have a lot to explore here, okay?

Last round in order to finish with all the officers.

Good morning to everyone watching us online. It's a pleasure to have you with us. My name is Fabio Fernandes, I'm the Director for New Business and participation inside the company. Inside my office, you have new business development, both brownfield and greenfield, so coming from auctions and M&As, and also an area that is Executive Director, that's responsible for management the companies we invest on together with our partners. So we have 19 companies in that condition, and this management is done inside this executive direction that exists. So I'm here to talk with you, and I'm open if you have any questions or if you need any clarification that I might help you with.

Well, perhaps I can start. Actually, I just wanted to understand your take on the scenario for both greenfield and brownfield investments. Because in the past few years, we have seen some options and some lots being taken at very low return rates, very low rates according to the market. So these lots, I don't know if they were built or not because many players are not even listed. So do you see an opportunity for some lots coming to market with more brownfield opportunities?

Well, first, when it comes to discounts and auctions, I often say that at every event, I don't get tired of saying this because it's very important to have that as a clear message to the market. Every time we study participating on auction, we're very thorough on each lot being offered. So Luis from Implementation, he starts studying the characteristic of what's being offered 6 or 7 months in advance because we know, what are the lots that are coming and what we are going to do. So when it comes to participating in an auction, we are very aware, very aware of the risks that are involved in the mitigation that we need to do as to ensure the returns. And most of the time, with projects that are already prepared because we have done so many analysis that when the option is over, you are fully hired. So with BRL 4 billion of investments, BRL 3.5 billion or BRL 4 billion, investments to still make that we generate BRL 400 million in RAP that are fully hired. So we are not exposed, for example, to suppliers, to no type of hedge. We leave the auction without being exposed. So the way we work with auction makes us really comfortable that even with the discount that perhaps say, 30%, 40% could be a high rate we -- the company is really confident that even in those situations, we are bringing good projects for the company that are superior to our CapEx and that were identified for that risk level for that project. Operationally speaking, the other thing that we have that's very interesting that creates a differentiation from other players, it's our capillarity. As we saw before, we have 15,000 kilometers of transmission lines all over Brazil in very strategic areas. At the North, Northeast, Southeast, South corridor connecting the generation centers with 5 operation bases all over the country. So when we participate in an auction, depending on the characteristics and the geographic location of the lot being offered we can maximize our operational synergies because we already have an installed base that we can use. Our operations center, for example, that we recently built uses cutting-edge technology that allows us to add more to it. Today, we operate at 15,000 kilometers. We can add 10,000 kilometers at no additional cost or the marginal cost. So that differentiates us when it comes to operational margin or issues that are CapEx related. The work that we do before the auction, not only to work on the obvious tax benefits like SUDENE and incentivized areas, so SUDENE and SUDAM. But we can work where the line is going to be at the state and municipal level, so we can identified fiscal opportunities, whether to get a tax exemption or improvement in local taxes, we are very careful with that. So once we come to participate in an auction, we have some characteristics that allow us to be very aware of what we are doing. So we do have these leverages that perhaps the market and the research cannot really capture and they are not supposed to do that because you're looking at different things. You're looking at sanitation, energy, telco, so it's a crazy life capital structure. When we work in an auciton, the way we optimize our capital structure in the 30 years of the concession time generates a huge value because you have the hired RAP, you have -- that doesn't oscillate everything I [indiscernible] to the IGP-M. So there are planning ability, if you have an efficient capital structure, quite big. So that creates this ability to go to an auction that is going to bring you good returns. When it comes to M&A, there are other operators or other winners and auctions that are not long-term operators. Their business is to generate build and sell it. And again, we are aware of all those opportunities. Out of the 43 concessions that we have today in the company, a lot of it came through M&A. So looking at the secondary market, identifying good opportunities is always part of what we do. It is a growth pathway that we have. And yes, we are going to keep analyzing it to see if it makes sense from the strategic, financial and commercial side. So certainly, we will participate on the auctions that are compliant with all these principles, and we're going to be competitive and generate value.

Well, in the past auction we saw very aggressive competition and some great discounts happening. So I wanted to understand what the company expects from the next auction? Do you expect a major competition like you -- we had in the previous one, the level of discount is going to be as intense, perhaps understanding your thoughts on that.

Well, the December auction was not typical. The December auction -- again, we're talking about investments of around BRL 20 million, and there's an HVDC lot with BRL 18 billion. So it's a different auction. I believe that for this auction considering the characteristics of the business, we are not going to have a great level of competitiveness or better said, we are not going to have many players. It can be a competition there, but I don't think it will be as competitive. For the '24 auctions, especially the ones taking place in March, we already have 15 lot investments varying around BRL 18 billion, and there will be a little bit for everyone. We have 2 lots above BRL 3 billion, 7 lots between BRL 1.5 billion and BRL 2 billion, some with [ BRL 200 million ]. So there will be a basket a variety of lots that we'll be able to meet the needs from big pockets, smaller pockets, looking for an opportunity. So considering this variation on the quality of the lots, we are not going to see discounts around 30, 40, which was what we observed in the previous auction due to that situation, especially because the transmission sector is very defensive. So more and more, we see this sector becoming more solid as being defensive a factor that has a regulatory foundation that's very good. It brings reliability. So the investments -- long-term investments can be done without many raptures or variation. So I think considering the regulatory elements and the variety in the quality of the lots that will come in this auction, we are going to see a very competitive condition.

As a final question, I have one on storage. We heard from one of the directors about the possibility of studying this market, this reinforcement that you could bring to the grid. So how do you see this opportunity? Is it a mature discussion or not inside the company?

I'll say fast -- I'll be fast. in the short term, we see ourselves as a local transmission operator, national. However, these alternatives and the opportunities offshore -- we are following the market close. It needs to make sense I think we need regulation that makes us comfortable. It's very important. [ Marcelo ] mentioned this in the beginning of his presentation. One of the things that cautious investors away are changes in the rules of the game. So with that, doesn't happening, not in the short term. I think in the long term, we do see a lot of opportunities in the local transmission sector considering the necessary investments that will need to be made.

Thank you very much once again. Thank you for everyone watching us from home. And again, we are available not only to listen to you and to answer further questions. Thank you very much, and have a great day.

All right, everyone. Thank you very much I was following some of the discussions. It was a very enriching experience. As usual, Taesa has innovated again on the way we operate. And we would like to give you this final opportunity because, again, it was a final -- it was a fast discussion. And if you still have some painting question, this is the moment for you to answer them. So if you don't have a question, actually, if you have a question that hasn't been answered, this is the moment to ask before we close the event. And of course, thank you very much. Any final question? Any pending questions? Wonderful. That means that we have had a very productive discussion. So I just wanted to say a quick thank you. Thank you to the RI team. They're going to be here and available. Again, if you have any further questions or if you need more information, we can bring the executives to talk to you as well. Special thank you to all the executives who are here with us today. Thank you for trusting me to be here with you, hosting this event. It was a great work, but the result was excellent. Make sure you answer our second satisfaction survey. Please scan the QR code. This is a second service, especially, if you're watching us from home. You now go to the second link to answer your -- to give your opinion on the second segment of this event. Thank you again. And I'll hand the floor to Andre for his final remarks, and thank you again.

Thank you. Thank you. Perhaps this one is better. Well, everyone -- this is -- we're coming to the end of our event once again. Thank you. And I'd like to say a special thank you, and I would like to recognize the team work done by Communication and Investor Relations and everyone who worked hard in organizing this event. It was a big team, the IT team supply. I mean a lot of people involved in order to make this event as productive as it was. We're going through a sanity test asking the same questions to everyone. But again, this is an important event for us. Rest assured that we are taking a lot of the messages that you have presented to us and that will definitely be part on the discussions that we have to review our plans. Interesting questions, questions that perhaps we still haven't asked ourselves. So again, we are continuously trying to learn. So thank you to our partners for their support. It seems simple, but it's a long work. They're very, very detailed work, a lot of attention to details. And we are here representing a full company, we have more than 900 employees that today are being represented today. So on their behalf, I also would like to thank you all for being here. Thank you for everyone who is with us online. I'm certain that you are able to get to know a little bit more about Taesa, and we hope to see you in the near future to share more good news so we continue to develop our relationship. Thank you very much, have a great day. Since I still haven't had lunch, I'm still going to wish you a good day. After lunch, it becomes good afternoon, but this is a Brazilian thing. But we have brunch being served for you today, for those were here with us, of course. Thank you very much. Nice to meet some of you. Nice to see some of you again and have a great weekend with a lot of health and safety as we often say. Thank you.

Don't forget to answer the survey available in the QR code. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]