AXIA Energia S.A. (AXIA) Q4 2019 Earnings Report, Transcript and Summary

Ladies and gentlemen, good afternoon to you all, and thank you for waiting. Welcome to the teleconference of Eletrobras to talk about the results regarding the Fourth Quarter of 2019. [Operator Instructions] I remind you that this presentation you can find the PowerPoint with the RI website -- the Investor Relations website of Eletrobras. [Operator Instructions].Before we start, we would like to clarify that anything that might be said during this teleconference regarding to the prospects -- to the business perspectives of the business -- of the company, operational and financial, these are newly believed of Eletrobras as well as based on information that is currently available to the company. Future considerations are not a guarantee because they involve risks and uncertainties, and therefore, we recommend they depend on circumstances beyond our control. Investors should understand that any other factors might influence the results in the future.Now, I would like to give the word to Mr. Wilson Ferreira Junior and the Financial Director, Ms. Elvira Presta. Mr. Wilson? Thank you for the opportunity, please, the floor is yours.

Good afternoon, everyone. Good afternoon, Elvira. Thank you, analysts. It's a pleasure to be here today sharing our results for 2019.Now, I'm going to explain Page 4 and the company highlights. This is very important because it shows the last transactions that we've done, many of them from the last quarter. We have here the operation of incorporation of Eletrosul and CGTEE, the incorporation of both companies. This is a single operation and thereafter in January of 2020, we also had the transference of Amazonas GT to Eletronorte and now it acts as a subsidiary of Eletronorte. These are the two main things that have taken place in the last quarter.We also report our workforce. We have, as all of you know, an extensive program. We also started the second event in the beginning of the year. Well, 1,845 people are adhering to the PDC 2019, and the economy is estimated is R$746 million per year. And this is added to -- well, we had a big team of subcontracted parties at Furnas with over 1,000 employees, and just as we subcontracted that we're adhered to the voluntary leave program, we had an economy estimated for this year of R$280 million. These are two important actions, and we can reduce, therefore, our cost with personnel of around R$1 billion from 2021. We also will comment the transaction for the increase of capital that we did in December. This increase in capital -- well, we have an increase of the total capital of the company of R$7.7 billion, with that we had an adherent well -- differentiated investors in this process.Through this transaction, we had the liabilities here. The reclassification of the noncirculating liabilities of -- in the order of R$4.1 billion regarding the AFACs to the union and also the reinforcement and the cash flow in December -- up until December of 2020 of R$3.6 billion. So in the results, we still leverage the company. We started the quarter. The net debt was adjusted to 1.6x, if you consider the 2.2x without the RBSE. And now we have a very adequate level for the company in the electric sector. We had at the beginning of the year the rollout of the bonds and they will be due in 2021. The result is R$1.1 billion. We started the rollout in January 2020. And we had last year, two operations that are very relevant in terms of financing and leveraging. And the issuance of the debentures of R$5 billion in July of 2019 and also the debentures that we had for Furnas in November of '19 and February of 2020, it added cash flow of R$1.2 billion for the payment of the finances of Eletrobras. Because of this wonderful work that we've done, we were recognized at the beginning -- at the end of the year with the Finance & Law Summit and Awards 2020. We were awarded with the best Financial -- well, best internal financial department in infrastructure and energy. Here is the consolidation of our team that was very well led by Elvira Presta.Now Slide 5; we can see the impact and some transactions. Restructuring of the partnership here, and we can see here the partnership structure that was very simple. Now that was very complex and now it's ever simpler. We have four companies for generation and transmission, Eletronorte, Chesf, Furnas and Eletrosul. And in the case of Eletronorte, it has a subsidiary in Eletrobras Amazonas GT. It's important to show to you that in regards to -- here, we started the presentation with 172 SPEs. Now we have 136. 41 are in the process of selling, 25 in the process of extinction and 14 in the incorporation. Therefore, we estimate that by the end of the year, we are still evaluating the impact of coronavirus, the pandemic and this process but towards the end of the year with the complete restructuring of SPEs, we should end with 62. We started with 178 [ph], once again. These are companies that have -- well, we have the hydroelectric power plant. We have the assets and other SPEs. On the right, we see the shareholder composition. It's -- here we can see the capital operation. We have here an increase of 1.5% of the free float.And on Page 6; I can show you some operational highlights in terms of generation and transmission. We are going to get into the details. Generation, we got to 51,143 megawatts of installed capacity, an increase of -- well, we had an increase in revenue of R$3.2 billion. Transmission, also with the demobilization of SPEs, we have the same number in the fourth quarter in regards to the fourth quarter of last year, 30 kilometers, with the sales of the SPEs. But the operational availability in regards to the fourth quarter of '18, we can keep the operational standard of high-level and a reduction of 7%, and the system problems -- the problems of the system. And here, we have the RAP, the allowed annual revenue aggregated up R$122.6 million. Well, three weeks ago, we have the new regulatory framework. And because of this new definition for generation and transmission, we have an additional revenue in the generation of R$50 million per year in the RAG and transmission R$129 million in RAP, well, this is provisional. And with the new definition of WACC regulatory framework, we can see that it's over R$100 million retroactive for the cycles of 2018-2019, 2019 and 2020, in generation and transmission R$258 million in these cycles to be paid in three years from July 2020. We had recently the recognition of credit of R$2.1 billion, given -- recognized by Abeel, given by Ceron and Eletroacre and also R$1.4 billion of credits approved also by Aneel from the 12,999 [ph] that will be paid and are included in the law project towards the capitalization of Eletrobras. We have here a total of R$5.8 billion in credit that were accounted up until December of 2019. All of this will be considered up ahead.Page 7; the main indicators, we will detail up ahead. I just want to show you the main results. The reported values of real for '18 and '19 and also the impacts of -- for the fourth quarter of '18 and '19. Well, here, we can see the quarterly and yearly numbers. The reported numbers, we can see that the main loss is for the accounting of [indiscernible]. We have to talk about the recurring EBITDA that grew 5% in regards to last year. We got to R$13.210 billion. And in the quarterly part, it grew 11%, getting to R$3.2 billion. The margin of the EBITDA reported, there was a drop of 37% -- 37 points. The net revenue also dropped 20%. That's the red line that was reported by the papers. But the -- this is an important number for the company, even though this is the net revenue that was reported. These are the biggest drops. We are getting to the recurrent of R$7.7 billion, an increase of 3.8%. And the recurring net revenue, there was a drop in comparison to the quarter of '18 of 55%. This is due to RBSE that had a differentiated treatment regarding the volatility that we have. We did this treatment based on NPEs. And now we had an agreement, and this was proposed by the regulatory body that guides the concessions. Also, quarterly, we are going to show the numbers overheads. It's important to highlight our investments are less than as predicted, 28% less. Here, this is the problems that we're having by the company, we cannot advance with the work, for example, in Angra and other power plants.But here in the end, we got to 13,089 employees. But as we can see here, there was a reduction of 394, 123 where we from May up -- we have left until May, and we should end the year with less employees. This is part of the agreement that we had with the labor court. The results in our opinion are very positive. So let's talk about the evolution in each of the businesses.Page 9; Here we have an x-ray of generation. For 2019, that was an aggregation here of 51,143 megawatts. The conclusion of the Sinop, power plant, we had a part here, 100 -- well, another 1,343 megawatts, an increase of 3%. We have at this time 30% of the installed capacity is clean energy. And we are losing the participation in this market as we add less than 38.1%. In this last year, Brazil added 7,336 megawatts and Eletrobras added 1,343, 18%. That's why we are losing considerably market share. We have 125 power plants, 58 are corporate and 67 SPEs in partnership with investors. The data that is very relevant, is that this is the company today that 96% of the company, once again is clean energy, 90% is hydraulic, 4% nuclear, 2% wind and solar and 4% is thermal. Here, we can also see an improvement and the quality of the matrix -- energy matrix.Page 10; now we're going to talk about the performance in the generation. This is also important here, the financial area. We can give you transparency in our numbers, here, the regulated market and the free market, ACR regulated, ACL free market. We can see an evolution of 36% improvement in the regulated market because of the interest of Amazonas GT. The company had increased because we started to buy oil to service well, natural gas, to service Amazonas GT and that was R$3 billion in the revenue of the company. We have also the performance of Angra 1 and 2, R$865 million. And we had a drop of R$370 million the closing of the contract of Eletronorte. In the last 12 -- well, the quotas, we had an increase of 31%, and this is due to the recognition of the improvement guideline throughout 2019, and the adjustment of the revenue that was given by the Law 12,183. Here, the bilateral contracts in the Chamber of Energy, we can give special highlights. We can observe down here that shares, the difference between the practice of ACL and ACR, we kept -- we had a drop here, and there was a reduction that was very expressive here.The total revenue for generation goes from R$20.139 million, to R$23.374 million. I think that there is still -- the bottom line of the profit, the revenues from generation, an increase of 16.1%, basically half of the operation of the company in regulated market and 50% of O&M from the quarter getting to R$3.5 billion. So of R$23 billion, practically R$15 billion is given because of regulated operations.Here on the next page, just to show a little bit of the future. Looking at the energy balance here. We can see our own resources. We can observe that the company has table in 2024. It dropped because of the transformation at this time of the power plant and quotas too. Here, we can see the sales portfolio R$5.991 billion, and here in the sales that are distributed in bilateral contracts, ACR except quotas, down here, the average price per reals and megawatt, you can verify. This is the overview of the company and the set of the contracted energy, which includes the hedge. And down here, we have the system of quotas. And we can see an increase of our quotas position from 2024 on, and the company starts to work with quotas instead of regulated contracts. And we have -- beyond those quotas, we have of hydroelectric energy, we have the quotas for nuclear energy. This is the big -- this is the first effort of the area in terms of transparency. So we can use our assets for the regulated market and the free market and the quotas.The next slide, just a report of what we are building, starting with Page 12, where we are showing the 190 megawatts that are built here for the wind mills. Here, the four plants are in operations. Five plant -- five generation -- five wind power plants, 123 megawatts are going to start operations in April 2020. And we have Casa Nova IA, 27 megawatts, that will start to commercially operate in October of 2020. That will add another R$105 million in the -- to our subsidiaries.Page 13, just a report on the construction of UTE Santa Cruz. Actually, the closing of the combined cycle, we're going to add the capacity here of 150 megawatts and a total investment of R$767 million, and the closing of this cycle will be predicted by April 2021.Finally, we have the most important investment in terms of cost, Page 14, which is the restart of the building of Angra 3, which is 100% participation of Eletrobras. The costs here, we have partners that are from the private sector, and we have an investment of almost R$15 billion. Another comment, we are recognizing the lay and the work and the prediction for the beginning of the operation of Angra will be by November of 2026. The works are ongoing.Page 15, just a synthesis of this evolution of the full capacity, 190 megawatts until of December -- October of this year, actually 2020, 150 megawatts until April of next year, and then we are going to have from then on investments focused in the portfolio with 1,405 megawatts of Angra, totaling over 1,745 megawatts predicted by the end of 2026.Page 16, we have an x-ray of transmission. We are still the biggest transmitter here in Brazil, 71,154 kilometers. This is the size of our network. And we have on the right, what happened in 2019. We had a de-aggregation of 195 kilometers, which includes -- well, what we concluded was the aggregation of 422 kilometers plus the SPEs 617 kilometers, and these were made available through the partnership throughout 2019. We had, throughout last year, the incorporation of R$728 million from RAP and with the highlight to Chesf with R$290 million. And here, the values are given to the R$564 million of O&M, the renewal of the Law 12.783/13 and R$164 million because of new corporate enterprises that were concluded.Here, with our database, we have 78 corporate works, big works, with the potential of adding revenue of R$300 million, among the companies of the Eletrobras group. Here, we can show throughout the last month that it's important to show our expectation for the aggregation of these revenues throughout these next five years. You can observe, we have basically two types of aggregation. The RAP, the review of the WACC -- and the WACC retroactive. So every year, we have to do the combination. And as you know, ladies and gentlemen, we also have assets for transmission that were bidded in the beginning, and these are the ones that had the step-way profile, 50%, where we had a reduction of 50% of our revenue. Here, we are predicting all the effect of this, R$54 million in 2020, R$11 million in the contracts in '21, plus R$13 million reduction in '22 and $71 million in 2023. Now to counterbalance this, we see that every year we have growth. We have here projects for the increase of amortization of RAP, adding 383 just in 2020. The net of that will be R$330 million. In 2021, we can add another R$286 million, which will give you a net of R$225 million if you count out the Eletrosul. 2022, we have a net that is basically R$226 million.If you add the new aggregation of RAP, the review of WACC and the WACC retroactive business, well, then we're going to have a drop in -- well, we have the aggregation of R$35 million, the aggression of RAP and then the new review of tariffs in 2023, the cycle '23, '24. We can see the perspective in the graph in aggregation of RAP in the medium-term of five years of almost R$800 million, with 7% -- all of the previews in tariffs in the past stepwise or non-stepwise, we will see the review of RAP. This is a very important theme because the segment is very relevant, and we start to have a very big stability with a revenue of R$12.5 billion, now almost R$12.2 billion.Let me see here, the Page 19, the financial performance 2019. We can see the big table. To the left, we can see the main effect of the reported values we have for the quarter. These will be very similar. We will see always is a growth in our gross revenue for generation, and mainly the entrance of Amazonas GT. We see the effect in growth of revenue and we can also see in the costs and the expenses -- operational expenses, we can see way it, by the way, a growth of R$1.6 billion, which is the fuel and energy and natural gas to service the Amazonas GT. The margin -- gross margin is R$1 billion. In transmission, we had a drop, gross revenue, 3% because of the amortization of RBSE, R$389 million. In the other revenues, we had a drop, 12%, and here is a set of effects, mainly actuarial revenue, the decrease in contracts. And the percentage value is 12%, in real values, we're talking about R$769 million.Now PMSO; we have a growth in the reported value. In the recurrent value, we have a drop of 3% in the reported growth of 8%. These are effects with the expenses of PDC. If you compare both years, it is the main effect, and we have a reduction in costs that is happening in 2020. It's important to show, and we are going to see this up ahead that we have a procedure to provision the PLR, what we do a positive reversion -- by projecting a positive reversion that is bigger in 2019 than '18. The second thing that we need to observe is the fact that in Angra 3, we have our investment. We have to increase it to keep the perspective. And at this time, we cannot do this. Obviously, the people that would be taken to the investment, we can see it and the cost of personnel. But once we start the works again, we will have a reduction here.Operational provisions; a big event here, last year, we had the activation. We had to reverse some -- the impairment of Angra 3, R$462 million because of the difference in deadlines, and the delay in 11 million -- the delay of 11 months. You can see the reversal R$7.4 billion that was done in 2018. In 2019, we had to do the PCLD for the distributing the privatized, the financing, that's why it's negative.In the recurring base, we had a drop of about 8%, R$544 million to R$501 million. You can see here the partnership participation. And here, I highlight you the drop. We didn't have a good -- we have the SPE Madeira, which is our transmission line in Madeira, we could not remove the reduction of 10%, because in -- from last year, we had a productive mission that allowed it to have its full revenue. And that's a result of R$341 million. With that, our EBITDA that is reported this year would drop to R$10.257 billion, a drop of 46%, but R$7.5 billion is just exclusively the scene of Angra 3. When we see the recurrent, we are talking about a growth of 5%, R$13.210 billion. Once again, we had that very relevant result.Depreciation and amortization, higher. This is due to the investment and the growth of 6%, the financial result. It has here what we have to mention that last year, we had the agreement with Eletropaulo with R$1 billion. And we also had from these operations, the debentures of the holding and the capitalization of the interest rates of UTN, the nuclear power plant of Angra 3, because we didn't restart the work. Just from these two events, we had another R$567 million in 2019. We had a growth here that is negative of 21% in recurrent basis. Here, we have the issue of IR and social contribution. Here is the activation of the fiscal credit of Chesf and Furnas, and we had here -- this year, in recurrent base, the results of the discontinued operation. We got to the last slide, the annual revenue. Even with all the transformation of last year, we had a growth of 4%, getting to R$7.058 billion. This is the best result thus far, in a recurrent way for Eletrobras.When we see the next page, the fourth quarter. Let me just get the most -- well, the highlights. The gross revenue for generation, we see the effect of Amazonas GT. Once again, in transmission, we had the revenues of RBSE. We can see here the cooperations with the private. We have the fullness actuarial. We also had a participation of Santo Antonio to 43%. These are the two things that reflect here the other revenues.In PMSO, we had a drop in 2% in the recurring basis. These are the values of PDC and the reversal of PLR. The positive one of R$158 million, extra in 2019. It gives us the fall compression that it was higher in 2019, but this is given through these interventions. The EBITDA here in the semester is R$2.900 billion to R$3.2 billion, and here also the impairment of Angra 3 in 2018. When we look at the fourth quarter, the operations happened at the end of the year. And in the financial results, I will have that accounting adjustment of R$1.258 billion, with the expenses of RBSE in the fourth quarter of '19. The revenue that was accounted in the past, R$1.143 billion, and then we will have 2.5 -- R$2.4 billion, we are not considering this. This is the concept, which is the accounting adjustments if we consider the WACC regulatory framework, NTN-B. If we eliminate this effect, we would have had a revenue that is 42% higher. We can see this very clearly up ahead in the slide that shows the net revenue of the fourth quarter. We see R$2.400 billion. We can see on the graph, and the difference of -- bringing the difference of NTN-B of 4.6%, bringing into the next WACC of 6.4%. These two values, if we work way down there, the value of the recurrent revenue, it dropped to -- well, we had a drop of 55% from R$2.9 billion to R$1.3 billion. Without these effects, I will start with revenue one. Well, I would get to a revenue of R$2.586 billion, and it will give me also the variation. If I see the adjustments considered for 2019, this is for the effect that is nonrecurrent.Now, let's talk very quickly. Just to report this, the increase in the gross revenue on Page 22. R$33.600 billion, we have an increase from R$30 billion to R$33 billion. We have generation SPEs. The growth is practically the same, and it's given to the revenues. It's the R$3.2 billion in Amazonas. And here, the GAG improvements, and we also have the RAG readjustments for R$124 million.In transmission, we have basically the amortization of RBSE, R$389 million, and the construction at Chesf of R$157 million. And the other revenues, we can see a drop as we've seen, that is the actuarial gains, the multimedia revenue and the last participation in the partnership of Furnas. We can see here R$33.687 billion in the gross revenue. We also had the operational cost that grew 22%, and the recurrent, it grew 25%, R$5.4 billion to R$6.7 billion. And here, we have the operational cost of R$1.7 billion, in red, and that will be R$1.7 billion. R$1.6 billion is due to the fuel for Amazonas GT, the power plant of Mauá 3 in corporation of the PIES contracts in 2019 and the gas. In transmission, we had a growth of R$410 million, and we can see an effect that is indirect that we do less investment than last year. Then we have a capitalization and the cost of personnel that is less, and you activate the expenses with personnel. So here, we have a growth of 25% that is predictable with an incorporated revenue of R$1 billion.Page 24, we have the report of PMSO 2019, also growth in the reported -- we can see the effects here in the contracts or subcontracted. We have in the recurrent base, a drop of 3%, and it's due to the R$141 million that we can see in growth of personnel, but this growth is the difference in provisions, PLR. And just in this case, the R$29 million that the non -- the privatization at Angra 3 does not capitalize the personnel here involved in this operation. If we just discount that, we would have a drop of 1% in our personnel cost.In material, we had a growth of R$18 million and just R$22 million is just the increase of the consumption of materials for CGTEE, and it start to operate at the maximum capacity. And besides coal, we have other components that are the base of the fuels for the generation of the carbon-based turbines. While, the services are dropping R$39 million, a highlight to the first company that had the OBZ power plant, which is Furmas, and then we have R$10 million from Eletrosul. And here, we have a drop in the others, R$121 million from Electronorte, R$30 million from CGTEE and R$60 million from the tax credit from the hold in 2018. These two -- these three cases, we have a reduction from R$8.6 billion to R$8.3 billion.The operational provisions; we even changed the graph here in the demonstration to show what we had in '18, and this is very different. You can see here the main components, the provision. The contingencies for 2019, R$982 million. The update in the compulsory loan, R$775 million. PCLD of the distributor, the receivables that we still have here of loans given to the distributors, we have R$624 million. And a provision for Angra 3 of R$301 million. We had an effect here of changes in rates and 11 months of delay.We didn't have the TFRH rate that was last year a reduction of 1.8 -- R$1.187 billion, and other provisions are R$75 million. So we provisioned for 2019, R$2.006 billion. Last Year, you can clearly, see demonstrated in this graph, the components are very similar for the reversal of the provisions. Though we have an impairment for the reversal of Angra, we had an impact of R$7.2 billion, that was positive here with the rate of the hydraulic resources that was a rate for Tucuruí and we go to next year. And the evaluation from one year to the other, we have a reversal here or provision. So we have a difference just with provisions of over R$8 billion. Of course, 2018, this is a nonrecurring event.Page 26, EBITDA grows 5.3% in recurrent base, but we removed those effects of contingencies and the contract beyond the PDC. This evolved from 15 -- well, R$12.5 billion to R$13.2 billion. We have the operations, specifically Amazonas GT. This is clear. The partnership participation had a lower performance of R$43 million. Basically, now the account of gas for the power plants, and we have less cost, and this gives us a growth in the EBITDA of the company of 5.3% or R$670 million. And here, the net revenue, nonrecurrent, we grew from R$6.8 billion to R$7.058 billion because of the decrease of the financial result, recurrent one, and because of the less investment basically with the taxes. And here, we have the recurrent growth of 3.8%.We can see financial discipline here. We are getting to 1.6 with RBSE, the net revenue over the EBITDA. It's good to see that we -- in 2016, we had an EBITDA of 6.1 to over 3.6. And now we doubled in two years, and this made us come from 6.1 to 2.2x, or from 3.6 to 1.6, when we include the RBSE. The company has the net debt with R$21 billion, and 47 gross debt -- R$47 billion of gross debt and recurrent debt R$46 billion, and we have a net debt of R$21 billion. It's important to take a look in the next Page, 29, an evaluation of the debt and the receivables, and the indexation with the foreign exchange. The -- here, we are approaching the rollout of the bonds from January 2020 that we did R$47 billion. Before the rollout, we had R$12.9 billion. So our debt is not long, and we can see the evolution after 2025, when we started in 2020, R$4.13 billion, and we are expecting to get to R$0.75 billion after 2025. We can see here with this profile from '20 to '25, the receivables that are important in 2021. And when we look at the indebtedness, we can see the composition here. In Real, we can see 18% and the -- 82% in real and in foreign exchange 18%, the debt. And here, we can see the CDI that's fairly in prefixed, the composition of the receivables we have in foreign exchange. We have 44%. And also looking at the indexation of the national currency, the receivables are indexed, 90% are to CDI and Selic. This is also very good in regards to the debt.Page 30; we have an evaluation of the investments. We did well last year. We realized R$3 billion. Out of these R$5 billion, we had budgeted the main investments. We had, in generation Angra 3, Santa Cruz, the system for the Northeast, Itaparica, Candiota and Sinop. And this is generation and also for transmission. But even though we had all this effort is 58.3%, the total variation. Some of the investments that we could not do. The work at Angra depends on the work. We had the investment of R$650 million. The transmission by Manaus Batista, depends on the license that we are expecting in May, April, R$329 million where they're budgeted. If we didn't have the problems, we would also have invested more and we would get to R$4.136 billion. And that would be R$1.5 billion the result. This is not a good result for the investment but we couldn't do all the investments that we wanted to do.Page 32; the results we are closing the profit of the company in R$10 billion. The distribution, the mandatory dividend of R$2.540 billion, the net revenue adjusted is R$10.62 billion. The mandatory dividend is R$2.540 billion, it will be distributed with the preferential shares and the ordinary shares. Here, we have the different classes of the shares, but we will get into ordinary 1.59 and the preferential we'll get 1.74 to 2.24. We have the two types, A and B. Here, we are removing the adjust -- here we are adjusting for [indiscernible] and controlled, 1.7 -- R$157 million we can get to the statutory reserve for the investment R$5.348 billion. The statutory reserve for studies and projects, R$106 million and for the capital budget, Article 196 R$2.0 billion. This is the results here.Page 34; just to talk about the moment for the pandemic. What are the actions that we are taking to face this coronavirus and the prevention of these operations? We did several things. We started the crisis committee that was done by the directorship of Eletrobras. Along with all the presidents of the companies, the sub controlled companies. We have daily meetings, including the weekends. We have several protocols for our operation in this new environment. And to focus here, the economical focus that we have, our operation and the maintenance of the system, that is intact, more robust, more sophisticated with more redundancy. We are working strongly towards it. And also the hygiene and prevention that we want -- we have over 1,800 workers here that we want to instill that care for their own health. We have a protocol that for everybody that throughout the last three weeks that had had interactions, that had worked. We had the quarantine around [ph], and we did a great work in the telework, in the remote working.We have 74% of the employees working remotely, preserving all the essential activities in terms of feasibility and trustworthiness in our generation and transmission. Of course, the coronavirus imposes costs through all the sectors of the economy. The energy sector is a sector that has -- in the base of its growth, the foundation of the GDP, we just had today the report from Focus. We had weekly reductions in the GDP, and we had worked last year with an increase of 2% in the GDP, now dropping to -- well, today, we have a growth that is negative 0.8%. This generates a drop in demand, and we have a structural problem. We have the distributors that are -- the cash flow, the speed of the chain of transmission and generation, the exchange of transmission, the taxes in the value chain of the electric sector.It's difficult to have a new prognosis. It's probable that we will have -- the consumer will -- those that have an automatic payment, they cannot do the payment in person, of course, and this is the initial challenge. Besides that, we have the free market and looking at the breakdown of generation here in the graph here in the middle, we have 37% from our operations, almost R$8 billion that are in the free market. And we see movement that many customers will -- might lose their contracts. These are bilateral contracts with guarantees, but this is a movement that has been declared. The request exists, but we haven't renegotiated any contracts beyond the guarantees that were instilled. Here, we have an impact in the economy. There might be a delay in the works. We also had difficulties of moving. These are some of the risks that we are pointing, and it's important to show that 63% of our contracts are regulated. With distributors that have obligations, the A parcel includes the costs that are non-manageable. So a distributor has to be regular and paying with what we call the A parcel in the cost of generation and transmission. We have lesser part of our contracts, which is ACL, 37%. And we do not have any distribution operation, and we have a robust cash flow. And we have a holding with a cash of R$6.8 billion and in a consolidated way, getting all of the cash flow of all our -- all of our control companies will get you R$10.8 billion. And this is important for the first page here.In the next page, we have just -- well, talking about the transmission. It is well-known that it's a subsegment that is low risk. We also have the availability for the transmission. So we understand that this process in the last 12 months was less than 0.5%. The segment that had problems with payment, we have backup systems. And of course, there will be challenge to restart some of the works that I just mentioned. While the foreign exchange, we had the receivables liability of $2.2 billion, which is 94% of the foreign exchange liabilities. And when we can see the configuration of our liabilities, the assets and liabilities, we can see that 2020, 2021 and 2022, our -- we are very -- we are active. We still have to receive the dollars. We are not owing. We are sure that the foreign exchange stabilization will occur before that. But if it occurs, the stabilization is positive for the company.Here, the presentation of today is longer because we had a Board meeting in regards to the PDNG 2020-2024. I just wanted to go through four slides and go through the main points of the PDNG. First thing is that we reviewed the corporate identity. We updated the best practices. We had here a review of what would be our mission. Our purpose that we mobilize people is described. We place all of our energy for the development, a sustainable society, clean energy, once again, to help the sustainable development of our society. This is our purpose.The vision of the future. We have to be an innovative company in clean energy that is recognized by excellency and sustainability. And the values. We are guided by the respect to people and life, ethics, transparency, excellence in our operations by our innovation and collaboration and recognition. We understand that these are the strategies that are aligned with the new time that we're living. We have here four main indicators for evaluation, four pillars. Now our net debt over EBITDA is less than 2.5. This is a goal for our operations. The PMSO real over the regulatory is less than 1. We are seeking that. We're getting close to that. In personnel, something that is fundamental. We are doing a strong work for -- in the international the -- we are looking at that rate of subcontracted and own employees to be less than 2.48. When we have accidents with people that cannot work and governance, the number of material weakness is to 0. These are the investments that have been approved, R$32.4 billion, subdivided as you can see in this graph that we have here, R$13.9 billion is the work of Angra 3, seeking a private partner to finish that work. We have another R$9.4 billion in the transmission. I already mentioned this, generation R$7.3 billion. And in infrastructure and environmental, R$1.8 billion, a very strong focus in leading the company to the digitalization that is more intense. This gets us, our investment, in five years. We can see the investment in Angra of R$2 billion per year throughout this period. And as I reported, we have an investment that goes beyond 2024, '25, '26. So we can conclude, we have R$15 billion still under work.I have here the directive and strategic initiatives. To close this theme, which is the main one, 7 main ones, value and investment, where we have the objective of value proposition for the market. And for that, we need to have the capitalization of the company, as is expected, and bill 5.877 '19. Culture and people. We are recognizing the change in the culture of high performance and the intensive health care program and job safety program.Governance; the improvement in the internal control environment. And in management, the implementation of OBZ, the 0 based budget. Here, we have the economies expected for this year and R$181 million expected for 2021. And we're getting to R$450 million and another R$31 million, getting to R$0.5 billion a year. This is what OBZ should bring to the company for the implementation process. The innovation and digital transformation. We have Eletrobras Digital, the program, and Inova Eletrobras. Efficiency and transmission and generation. Here, we have regulatory strategies that we are going to prioritize the receivables CCC, over R$5.4 billion. The Ke of RBSE, over R$10 billion; and also the designation period of our distributors, with over R$3.7 billion.As I mentioned, we have the incorporation of Amazonas GT. This is the partnership participation, Amazonas GT, incorporated by Eletronorte by 2022. And modernization of assets, transmission and generation so we can have more automation, monitoring, et cetera. Finally, in terms of expansion in this time, the focus in the project of Angra 3.And I finish with Slide 40, future perspective. You can see the receivable of Ke from RBSE, an expectation that what is negotiated by July 2021. We still have a due balance of R$40.7 billion, estimated of the Ke is R$10 billion. Capitalization of Eletrobras, we have the approval of bill 5.877-2019. We have a potential -- well, a natural delay due to the COVID-19. At this moment, it's solid, but now we will continue focus in the simplification of our shareholding of our company, the SPEs. We had started this quarter with 134, and we will get throughout the year until the end of the year with -- ending with 62 companies, 62 SPEs. We talked about the entry of the generation of the commercial operation, generation, 190 million megawatts. And still on the themes of Angra 3 and PDNG 2020-2024, increasing the capacity of the company, reduction of costs, transformation of the culture and aligning with the automation and digital transformation.I apologize, it was a very long time, but it was necessary for us to do this disclaimer. We have the PDNG and we still have the issue of COVID-19. These are the explanations. And I am available for Q&A.

[Operator Instructions] The first question will be from Andre Sampaio from Banco Santander.

I'd like to ask a question -- two questions. First, the expectation that you have -- well, in regards to the pandemic. And the second question, the discussion of the designation price, which is being discussed with the government.

In terms of GCP, the Senate is what is holding today, now using teleconference. In the case of the Senate with 80 senators, it's more factual than with the Congress. But I had the opportunity of seeing some of the Senate discussions. This is where it is going. The Minister should come back this week. And I think that we are going to work with assistance. He -- once he finishes the week of quarantine, he should come back tomorrow, and this is a subject that is prioritized. It was matured throughout the Senate and can occur over the last few days.I'm sorry, I forgot about the company -- about the question. The designation period. We had a report that we prepared and always going to use and we're going to discuss it with the government. There was a commitment towards the end of the year. We need to keep the deliberations of ANEEL and all the things that are priorities to ensure the CCC. We have had a big investment. We are awaiting a few deliberations. And from then on, we are waiting for the last deliberations. So we can basically get the three types of credits, the CCC, inefficiencies and losses during the designation period. Once we close the deliberations of ANEEL, then we can make our pledge.

Next question will be from Marcelo Sa from Banco Itaú.

Two questions. First is the -- you talked about the energy. You had a very high volume that has been procured and I wanted to understand what is the strategy for procurement over the next years now that we got to the minimum price. And the next question will be the fusion of SNTT [ph]. Are you, in fact, discussing the proposition? And do you have any idea about that?

Well, I'm going to start by the last. And now SNTT [ph]; well, we have a small participation, 7%. We had also the news of this process. And we haven't submitted the proposal from the financial area so it can be discussed in the Board of Directors, and we will do this discussion briefly. Your first question in regards the volumes of energy that are decontracted. This is important when we look at the values in bilateral contracts, over 3,000 megawatts. What we will be affected in the short term, I think that everybody will be affected. In regards to the PLD, and here is just the operations for the generation of energy. And as you can observe, it's 1,300,000,000 last year. And we are talking theoretically in value average of 173 and liquidation then, it can drop 70% if we have PLD until the end of the year. I'm still optimistic that we will not have this situation, but this is the only one that we would have a high risk, even though we have here operations that are ongoing to -- well, they were ongoing to decrease the volume that we had because some of the things we operated, we wanted to mitigate the risks. We have the committee for commercialization. That is permanent, I wanted to mention that since we have the risk committee, we have the subcommittees for this and some things that are important for us, and this is one of them. We want to work to honor the bilateral contracts that we have. And obviously, we want to have a perspective of regrowth of the economy in such a way that we still have the bilateral operations. And we would reduce by half the risk that you mentioned today. To avoid the requisition of CCEE [ph], they're paying a spread of R$40, R$45-megawatt hour, which is the double of the baseline of CCEE [ph]. This risk is annual, and we're getting into April. The quarter is done, the value would be at risk. If we had an agreement of 6 months, it would be half of this volume. And just half of the half of the volume would be on the risk of differentiating -- of having different pricing of R$90.I just wanted to mention. Well, I was talking to the secretary. It's important that these things regarding to the risk, they are present in the sector with the -- a broad change in liquidity consumption use that has dropped. We have dropped last week 20%. And every week, we have a problem that we need to face. But it's important to highlight that the administration secretary of the energy ministry, I've talked to [indiscernible] all these issues. And we've been working for two weeks. And I imagine that we have briefly a plan to face these intersections that we -- the risks that we are foreseeing through last two weeks. I just want to make it clear that the ministry knows. It's been a subject of discussion with the main agency, main associations and the main representatives, secretary and the Ministry of Energy, and we need to solve this as quickly as we can.

You talked about the potential reduction in the free market. And my doubt is in regards to the regulated market. Is there any risk that the government will try to review the volumes to reduce the volumes of the subcontracting of the distributors?

This part of the regulated, you're not going to, let's just say, mess with it. With the regulated contract, it's a risk to the distributor. For that, they have a gain, and then if taken in the range of 5%. To use a number, 15, and reduction of volumes, let's just say that during the quarter, for example. You have an impact of 15% throughout the quarter. That's a quarter of a year. 15% in an annual basis will be okay for that and it will give you less than 4%. It would be within the range of 5% that they can deal with. So I have no doubt that this will be faced, but we cannot get a number that was verified one day of the week. I wanted to say that the effect over the weekend is not so brief as a problem that was a subcontracting that was enormous because we shouldn't differentiate between one month and two months in the range that we have, the entire effect.So a negotiation that needs to be established needs to assure liquidity and deadline for your commitment. But we are still -- the distributor will start to verify the effects from now on. We have COVID for two weeks taking place and actually the last that we got last week, there was no reduction because it's regarding the previous month. Now every invoice that they are working with, they have two days of COVID, one day of COVID, so that gives you a time. We have a good team trained in the ministry that knows these problems. And obviously, their eventual work with the publications to come up with a solution. Now see -- for you to change the liquidation of CP is always as a last resource. When you do a contract that is longer with a lower price, you are going to repeat the baseline over the next three months, three, four months, and this will reflect the real price. If the prices are higher, once you do a contract of two years, you tend to go to the marginal cost. If I do the contract two, three years, it will reflect the baseline for 12 months, and it will reflect 20 months of prices that are more normal. The recovery in the contracts that will be done, we are going to try to make them recognize the higher values. This will be a moment that because of the attraction to the lower prices.

Next question will be from Pedro Manfredini from Eletrobras.

This is from Goldman. Two questions. I just wanted to confirm one thing. What is the level of flexibility that you have in the market? You didn't comment if that concerns you. And we had a discussion, the contract with flexibility. You need to ponder if you're going to run the risk if you run the contract until the deadline. I just wanted to hear your comment on that. Second point, you expect that [indiscernible] are included in this discussion. Well, the potential problems that we might have, the cascade of events that starts by the distributor in the moment that you have a lengthening of COVID, you'll have some distributors with problems with collections, the increase in PDD, maybe their PDD will flow through the chain. If you can comment on what would be the solutions that the government can take at this time to protect the entire chain as to we don't have capital events that increases PDD.

Well, starting with the flexibility issue, the contract that Eletrobras has are long contracts. These are contracts that have flexibility and can be negotiated bilaterally. But what was -- the object of the activity of the contracted counterpart is because you have a long deadline with Eletrobras, and once again, can you do adjustment? Of course, you can. I doubted that people are interested of breaking a contract because of perspective that is short term, forgoing the advantage that these contracts have on the long run. Obviously, we have a very well-trained team in the area. And a part of our contracts are bilateral. There are guarantees in place. So I believe that there will be a balance between the parties in this negotiation.As to what you mentioned, everybody -- well, here in my 11th work of remote working, the world is remote working. I want to say that the minister, even though he's in quarantine, he is working. And I want to spare him, but he is very active. This is a personal opinion. I cannot share with you what they're exactly working with because they are negotiating and they're talking strongly with the distributors, which is where the problem can be clearly identified. This is where we have the effect of the limitation of the payment from the consumers because of mobility and social isolation. Here is the problem where we start to see the reduction in demand. It's not all the sectors that should receive these reports. The companies of machinery, you can see that some segments are growing very much and some segments had important reductions. But for the distributors, we have the effect -- the distributor invoices energy every day, 2021 quotas of readings. And in the invoicing process, we have the composition that, as we mentioned, 30 days without COVID, 29 without COVID. So you have lot by lot. And the very question of COVID is more intense until you get to one month. Oh, the entire month, we're going to have clearly each segment being detailed. The first problem, you have mobility. And you have a lot of people paying at a bank in person, you have problems with that. You have the impact of liquidity, remembering that the distributors in a map of R$100, they have the taxes, which is a relevant part and then generation transmission and cash flow. So for some that has R$100, if you have an impact of people not paying, and this is the wealth problem in the sense, but yes, you can have a problem and then you're going to have to deal with the issue of liquidity. Let's just remember the lifetime that you can create a regulatory framework on one side and the financing on the other. It's something along this way.And secondly, when you have clarity about the downline of when it's going to occur, then you have to externally -- you have to review the test, and you have the range and the values in terms of markets that are very low. You have to review. This is what comes to mind at that time, but I am sure that the distributors that are organized has a good association. They will be able to provide more clarity. And it depends on the data of the distributors to be -- or to identify word. In fact, it's happening. And what are the best alternatives to face this problem? And I think that we always have to have an important perspective. Regulatory speaking, we have the model in Brazil that is one of the best. We are modernizing, but we're talking about a factor that had a low -- well, all the bids that are presented to further the future demands are successful. We have a regulation that -- well, we have very low rates of nonpayment. Once we solve the problems of GSE -- and we have a segment that has a regulation that is improving. We are talking about a regulation that -- since the privatization of the companies we started 20 years ago. We have a very well-structured agency with people that are trained. So we need to preserve the pillars of the sector. And the pillars of the sector correspond to have generation and transmission that is regulated with bids, indexed, and all these assets were done with leverage and a tariff that was excluded. But we have the case that the tariff was higher than what was predicted. And of course, the effect of that is a decrease in the return of the investment to the investor. But this is -- everything that was bidded, 90% was delivered. Sometimes it was better but the regulation is good. The model needs to be presented. We had an extraordinary event. And we want to change the structure of the sector. The fundamentals of this -- we need to give an example to the world. And we need to present an extraordinary theme, which is clearly that we are living an exceptional time, and we need to -- as we've dealt in the past. We had issues in the past when we had the problems in the market. We could also deal with that. I am sure, and it's important that we have clarity that we are in a sector that is very well quantified or the bodies of regulation are very well qualified. We're paying attention to the system and everything is being analyzed.

Just to finish. I just wanted to understand all these legal discussions, statutory discussions. We have RBSE, the discussion of compulsory and the discussion of Angra. All of this at this time is on hold. Nothing is evolving in the regulatory framework. Is that correct or no?

At the exception of Angra, we have a team of CPPE [ph] working. But without a doubt, we have an emergency. It affects us. The emergency will affect us certainly, I hope that for a short term. But if you're not sure of what's going to happen, then this is not the time for you to use the reserves. We are leaving everything that we can in terms of investment of transmission, everything that we're doing, even maintenance of Angra. Everything is happening as we manage to do it. Last year, we had problems with mobility. There was an official publication I talked about the importance of the electric system so we can operate and keep the systems without any issues. We have to manage the priorities. The priority is to keep the system under the conditions of servicing Brazilians, and many of them are working. Well, we have a lot of commerce, but we have the industry. And we have the obligation since our service is essential.

Well, ladies and gentlemen, we close the Q&A session. Therefore, we return the floor to the President, Wilson Ferreira Junior, to give final thoughts.

First of all, I would like to thank you for your attention for this long presentation that we've done, well, me and my team, Elvira, and all the colleagues so we can clarify any doubts. We are here to serve you. The importance of this balance is that we already present the perspectives for the big transformation that Eletrobras had over this time. We had a reduction in the personnel cost. These are things that are allowing us to think about, dreaming about being one of the best companies in the world. We have SAP, and we have an evidence. We have remote working. We are working with everybody that is important. Our IT systems are good, and we are working in a way that we didn't imagine that was possible. This is a lesson learned for all of us, regardless of the segment that you work. But we are seeing the issues of the collaboration as being something very important. We are seeing the advantage, for example, for collective purchases, for protective equipment, for other things.The first page shows what we invested. More recently, we have the subcontracted parties and the reductions there, and this will bring more advantages for the company. I also want to highlight the simplification of our partnership the reduction in the company's reduction of FTEs, focus in generation and transmission that is efficient, we are working with that as well. Third, the issue focusing in the theme of our discussion of the COVID-19 pandemic and commercialization to leave everybody at ease, and we've been working with this for two weeks. I think that companies are mobilized in this issue are recognized of the importance of this moment for us to use this time to have a better future so we can think very well about this and we will face this obstacle with a lot of collaboration, also with the cash flow in this situation. In the past, we didn't have the robust position that we are at now. And we want to leave the pandemic in a very well, very good standing. In this crisis, we have to have the opportunity to think about new ways of working, and we have the opportunity of doing that. And I am sure that we can work with a sector that has a great infrastructure in Brazil because we have good people working here, the quality, the entities that participate in the ministry, ANEEL, or the organisms. We have an island of a lot of confidence. And with everything that we're working, we will be stronger.Thank you to all of you. And once again, I remain at your service, if you have any more questions. Thank you very much.

Well, at this time, the teleconference of Eletrobras is closed. Thank you very much for your participation, and have a wonderful weekend.