Companhia Energética de Minas Gerais

Ladies and gentlemen, thank you for holding, and welcome to CEMIC's second quarter 2020 conference call. We inform that all participants will be in listen-only mode during the company's presentation. After that, there will be a Q&A section when further instructions will be given. Should any participant need assistance during this call, please Press star zero to reach the operator. Now, I would like to turn the floor over to Mr. Antonio Velez, who will start the presentation. Please, Mr. Velez. Good afternoon. My name is Antonio Velez, CEMIG's Investor Relations Superintendent. We now start CEMIG's second quarter 2020 earnings conference call with the following executives. CEO, Mr. Reynaldo Passanetti Filho, CFO and IR Officer, Leonardo Georges de Magalhães. Chief Generation and Transmission Officer, Paulo Motenriquez. Chief Distribution Officer, Ronaldo Torres de Abreu. Chief Legal and Regulatory Officer, Eduardo Soares. And also, Mr. Rafael, Chief Participation Officer. You can also follow this broadcast by the following phone numbers, 5511-312-74971, and in the U.S., 1-929-378-3440, as well as by our links at our website, ri.samid.com.br. For the initial remarks, I will turn the floor to our CEO, Renato Bassanese. Good afternoon, everyone. welcome to not anymore a teleconference of results, but this is a results webcast for the second quarter of 2020. We are starting a new webcast format and also we are opening it with all our executive board. I ask everyone to be here to show you that we are here together and if you have any questions, All of us will be here, and it's very important to provide transparency and accountability to our investors. So, Ronaldo from Distribution is here, Paulo Mata from Generation, Demas from Commercialization is on vacation, but Paulo and Ronaldo can take questions about that, or Rafael from Corporate Participations, and also, Leonardo, And we have the whole team here. Well, I think we can turn to slide number three, please. I would like to highlight the main messages that we have. And I think that maybe the main one is the resilience of the company in the fight of the pandemic. We see an EBITDA that is recurring of 2.3 billion rounds in the first half of 2020. up to 12% in our results, and for me that is a clear demonstration of the company's resilience in the spite of the situation we are going through. And this is a result that happens throughout all segments and distribution, generation, transmission, commercialization, and the holding. This is really a result that can be applied to all segments, of course, with a few differences, but all of them show resilience. And we're very proud to say that a significant share of this performance, of this increased EBITDA, is related to our efforts in order to improve operating efficiency of the company. Almost a half of this growth In this period, it has to do with our optimization efforts and increase of operating efficiency. I think this is the subject that we will be following with a lot of hard work. And we'll be aiming operating efficiency, permanent optimizations. And I will give you a few examples. also some signs where we are going to, our directions. We are concentrating some activities in our main building, and we are going to leave the building by the end of November. We are bringing in to our headquarters. Also, is coming to this headquarters. I have now an open office for our top management. In order to have integration and efficiency, we have put for sale the airplane that we still have. So I think these are examples and these are signs that show that we are working on a better efficiency and we have a bold target to reduce $150 million this year in PMS sold. So I believe this is our initial message. A lot of resilience in the company's results. A growth of our EBITDA, recurring EBITDA, and this has to do with our optimization efforts. The second message here, which is also important, is a drop in our load. And that is because of the pandemic. But what we see that This is increasing. It was 6% in the second quarter. Now, in the first half of the year, the accumulated amount was 4%. And it's important to say that in July, it's slightly above what we had in 2019. We see that, obviously, for the integrated national system, you know that the national system... This closes these figures, and we're seeing the behavior here in Minas Gerais and San Miguel areas, basically the whole state of Minas Gerais. It's very similar, and we see a clear recovery of the load. We still have a year on year, but this recovery is very important for the second half of the year, and important also to show that we are going to go through the pandemic and this difficult period with a lot of resilience. So, first, this low drop is decreasing. So, in July alone, we already have a figure that is higher than the same period in 2019, and we also see that in our delinquency rate. Our delinquency in April reached significant amounts, and today we have a figure that we use a lot, which is the ratio between collection and billing, and it is already very close to what was the target for the year. We are just 1% below that target, and it also shows that payments are improving, and thanks to the public policies and other conditions that do allow for that recovery. And obviously, we have very positive expectations in terms of provisions. And also, because we are bringing back our disconnections policies and agreements with granting power and also agreements with our debtors. And we do have a very positive expectation that we have a better result of our ADA over the year, whether because we are already back with our disconnection policies. We did return to it now in August. And also because of other agreements in which we are working on commercial debtors and also with the renting powers. And I believe we are going to have good results stemming from all these initiatives. And that also has to do with the flexibilization of an health resolution that allows, once again, the disconnection. And one thing that I would like to highlight, and it's in the next slide, I believe, is the potential that we are going to have both in terms of efficiency as well as improvement in service providing with digitization. So digitization... effectively will allow us, for instance, payments, due payments. Today, electronics are growing a lot and decreasing the dependency of more expensive channels, such as bank branches. So I think that we can clearly say that the company is showing its resilience. We believe that the worst of the pandemic is over. And we come out of it strengthened. I also would like to mention that we had excellent results in terms of territory review. This is a very important subject for us. I'm sorry. Are we back yet? on the tariff review for transmission. We have very positive results. In our balance sheet, we have $430 million. For us, it's very good to be able to say that transmission is benchmark in this sector. And with that, we have a positive result, both because The O&M revenue has improved, and this is valid since 2018, since we are benchmarked. Also, because of the KD review and the WAC review and efforts and improvements. So, transmission is bringing positive results, and I should say transmission is a very important segment within CME, and it needs to be duly appreciated. under different multiples. Because for us, it's just differently from other companies with a component of improvement and organic growth that's very important and positive in terms of value generation for the company. After that, the enrollment under the COVID account, we have received and we have the figures 1.1 or 1.2 billion we have received back and it's going to reach 1.4 billion by the end of the year. And depending on the situation, the low situation and over contracting, but we have already received 1.2 billion in our cash in So 630 was 37 billion reals. So with COVID accounts, it's already 5 billion in cash and a net debt of two times the EBITDA. And you can compare that with 3.2 in 2018. So higher amount in the past. So a lot of financial soundness and also cash liquidity, which is enough to face our obligations and our investment plans. I think we can turn to slide number four now, here on slide number four. The first thing that I would like to mention is that we are ensuring the quality of service continuity. Of course, this is a crucial topic for us, and we are very happy to be able to say that we have a great perspective of having ADC this year below the 10, which is a record figure for the number, the best result for the company. When you look, the year-to-date up to June is 4.97. So in these first six months, it is already two digits. July also, the figure is positive. So we have... positive perspectives, and here for all employees of the company that are working hard to improve our DEC, average audit duration per customer, I would like to thank everyone in the team, all employees. This is a guarantee of a service, a public service of high quality, and to reach this DEC under two digits is the reason that makes us very proud employees. Employees' health and safety also is a crucial topic for us when we consider our own employees and outsourced ones. We have 22,000 of them, and we have 130 confirmed cases. Unfortunately, three of them were fatal. And that shows, I believe, all the efforts we have made so that the measures have been working almost perfectly. Everyone, of course, on the operating front is out in the field, so the percentage of contamination is very low, ensuring the quality and health and safety of our employees and our support people are owned and outsourced, as I said. And now we are slowly going back to activities here in Minas Gerais, starting next week, actually. In terms of relationship with our clients, we have our digital solutions. I think here we have a great potential. I mentioned that in the past, that digitalization is something that is very positive. To improve the performance of the company, electronic channels have increased almost 40%. From 28% to almost 40%. That is a significant increase. so that we don't have that dependency on bank branches. And also, of course, we have a better operating efficiency. And finally, social responsibility. Once again, we come from the donation of $5 million in equipment to hospitals in the state of Minas Gerais. The donation has been already formalized. Financial sustainability, I just mentioned it. we do have a comfortable cash position and net debt over EBITDA ratio in two times. I think we can turn to slide number five to conclude my initial remarks. We are working hard to optimize and to have operating efficiency. And in summary, that shows the resilience of a recurring EBITDA that is valid So all the set of areas that the company works on, very much focused on a better management of expenses and maintaining the investment program. This investment program is still very bold of $1.7 billion this year. This reduction is not compromising investments in that cycle. Not at all. It's compromising. It is just... an adjustment during the year. And sometimes even because of an execution problem, due to the moment we are going through, we know that sometimes it's more difficult to talk to city administration, so there are delays. But in general, this investment program is preserved. And that shows the mission that I have, and that I have always highlighted, generating service, providing offer, maximum quality. I just mentioned DEC and we are going to be able to be below two digits. Competitive prices, of course, we are working on optimization so that we can have competitive prices and with a private rationale in terms of decision making. And that private rationale is reflected in these efforts to increase efficiency as well as work on investments that will generate value to the company and will add quality in service providing and also will add to the regulatory base and the asset base of the company in a transformation project, a cultural transformation project. Here we call it novus initius or new energies. And the objective is to bring results to a winning team that is effectively recovering that cloud of being in this company and of providing maximum quality service to our people in the state. These were my initial remarks. And now I'll turn the floor to Lel. And we will be available to take your questions. in the Q&A. Okay, thank you. Thank you very much, Reynaldo. Good afternoon, everyone. Thank you for your participation in this video call for the results of the second quarter. I will mention some highlights, and then I'll turn the floor to Alice, who will go into the figures, who will compare quarter on quarter. And I would like to start on slide number six. about our voluntary redundancy program. Mr. Rinaldo mentioned our operating efficiency process, which is continuous. And the company understands that the cost reduction process already has had positive results in the second quarter, and our costs are dropping continuously. And we understand that the process is going to start or is coming and is going to have effects throughout 2021. And among one of these factors of cost reduction, we understand that the volunteer redundancy program has an important role. We implemented this program now, and we had the enrollment of almost 400 employees. And for 2021, that is going to represent a reduction in our cost of $95 million. And that already, considering... And of course, there is an outsourcing effect here, but that is not a high if we compare with the gains that we are going to have with the P gain. So, we understand that this 95 million recovery is very significant. In basically eight months, we are going to recover that. And we understand that when we invest in efficiency, we can have this as a permanent gain in our results. On the next slide, and Dr. Reynold already mentioned, the COVID enrollment and the funds have already been received. This 1.4 billion were approved and the first financial was 1.18 billion, reinforcing our cash and equity contributing to reduce our leverage. And that allows us to have a comfortable position And now we start the second half of the year with a cash position that allows us to pay for our debts without having to have new finances or rolling over. And so, as I said, this is very comfortable. The company can deal well with the pandemic moment. Another topic on slide number eight, and we did have a material fact that's close to the market, Our tariff adjustment allowed by ANA was 4.27%. It's backdated to May 28th. We had administrative appeals with ANA questioning this adjustment because the company had already received a judicial deposit amount regarding the recovery of PISPA tax credits over ICMS. And then we received cash to the distributing companies. So we understood that... In order to provide a contribution to society right now in the pandemic, and this is also something that can reduce delinquency with this action, we sent an O2 to NL and we proposed that 714 million of this 1.2 billion that we have already received of judicial department regarding that tax credit over ICMS lawsuit. And this issue is going to be discussed by NL. to all distributing companies in the segment in the future, in the next few months. But in an unanticipated fashion, we already agreed that $714 million of this amount can be reimbursed to our consumers. It's important to highlight here that the $714 million are within that 10-year period that we understand that should be reimbursed to consumers. and the success of this lawsuit of Semi-D was $6 billion. We understand that $2 billion is from a period prior to 10 years. $4 million is an amount within the $10 million that should be reimbursed to consumers, and this $714 million are within this $4 billion. So we believe this has positive effect for the company, for our consumers, and we understand that This should be a balanced situation because we are recognizing the efforts of the company of having filed that lawsuit in 2008 advocating for the rights of consumers, and we understand the company also deserves to receive a share of this amount because of its deficiency when dealing with this tax issue. This is going to be defined by ANEL's executive board, but this was the company's proposal. On slide number nine, we have delinquency and losses. Our losses today are at 2% higher than what is recognized by ANEL, to 3.66, and recognized by ANEL is 11.45, and we are implementing a whole series of measures to reduce those losses. Telemetering for major clients, a higher number of inspections, and we expect that by 2021, we are able to bring to zero that gap of 2% that we have today, piece of what is covered by the tariffs. Our losses add up to 13.66%. We are working a lot internally. We have taken several measures to reduce losses that involve several actions of the company. It's not a single action. We have inspection, cell and metering, technology, effective actions, intelligence in the process. And we expected that by the end of 2021, we are able to reduce close to zero these losses. The fault also, we imagined that this would happen in the second quarter because of the pandemic. And it had to do with the economic situation of families. And the ADA was $199 million in this half of year. This would be $108 million for past year. And also, we have to say that these connections were suspended. We did not have any connections in the second quarter. The connections are coming back now. We know that these connections are very sensitive in terms of dealing with with delinquencies. So, these connections are happening again now in August, and we have held several campaigns to renegotiate deaths involving low-income customers, hospitals, and small companies to reduce delinquency rates. Also, we should say that now, in July, we enrolled to a state law that would allow us to offset all deaths with electric energy up to June of 2019, and these deaths should be received with ICMS and we can discount the ICMS that we pay the state on a monthly basis up to the end of 2022. So the debt that we have in the receivables around 220, 240 million is going to be received up to the end of 2022 and that will allow us, considering this is a real guarantee, to reverse the provision that we have for ADA and that refers to this share of the debt of the state of Minas. So in spite of our provision being of $199 million up to June, we expect that by the end of the year it reaches $170 million at the most, exactly because now in the second quarter we'll have a reversal in the provision in this amount that we mentioned, $220 million, $240 million, because of this agreement. signed with the state administration. We think this is good news, and that shows the efforts of the company in this process of the renegotiation of debts with customers, and in the case, the state had a higher debt. And it's also important because we didn't have that regulation by the state. Because this was a past due debt, talking about efficiency on slide 10, we talk about our quality indicators. We believe this is another good news. The company is more efficient operationally. We are reducing cost without damaging, without hurting quality. Our average frequency duration per consumer has always been much lower than what is established by the regulating agency and it's still very good. Our indexes are good. We did have a 2.28 and the regulating agency The agency establishes 3.24. And DEC, it was expected that this is the last year in the cycle after the beginning of the concessions. So it's very important for us in terms of the DEC. We believe we are going to meet the figure. And here we have the average of the last 12 months. And compared to the prior year, we are one hour behind. with a better quality in service to our consumers, we understand this is also good news. This is the first time that a company has a GEC that is lower than 10 hours a year because these are annualized results. So we understand it shows our commitment with customers in terms of assets-based modernization. having investments that have consequences that improve our quality indicators. On slide 11, we have our distribution load. Semegi in the second quarter had a load reduction close to 6%. It was one of the lowest distribution loads here in Brazil. We were able to see that very clearly, that even with the pandemic effect, and Valis is going to show you that, our distributing company had resilience in the results And here we see the figures up to June and July and August. This is preliminary. We had a drop here, a reduction in the load in April specifically, and then the load picked up back in May and June. And now July and August, it is even higher than what we saw in 2019. That is a market recovery in the state of Minas Gerais. It really is. is high. Our own load is still with a reduction. It's massive to 2019, but came down a little bit. But for free clients, it's much higher. So our expectation for the second half of the year, and of course we have to wait a little bit, but the chart trend shows a recovery of the load of semi-distribution fees of the second quarter. And even the year of 2019, on slide 12, We have the tariff review of transmission, and Dr. Rinaldo mentioned, but we should highlight it. Semi-GT is a benchmark in the sector with CTE. So we have discipline in our transmission costs. And it's important to say that in our tariff review, because it had happened already, a tariff review in the distributing company. This is important to show the regulatory compliance of the company and how the company is making very prudent investments, and that's important when you think about the expectation of revenue for CMEG-ND. And here we have an increase of 9.13% in our APR, and it's $100 million higher than the prior RAP of $640 million, close down to $700 million. 80 million adjusted for June 2020. And because of this APR, this new pricing of assets of Transmission by NL and the regulatory base, that is an accounting difference there. And this new base approved by NL has generated a creditory effect of 430 million. And this effect, of course, This $430 million effect at this moment is non-recurring. It does not mean that it's going into our cash position right now, but in the future, this impact of $430 million will revert into the company in a significant revenue in our transmission business. Now, talking about GT, just as the same, we had a major recovery in GT revenue here in August. We reached 1,954 megawatts. or gigawatts, average gigawatts, higher than what we had in March of last year. And when we break it down, we see the incentive base once with the lowest to lower. Here in the incentive space, we have shopping malls and other areas that have been impacted by the pandemic. But in the conventional clients, we see a significant recovery. We believe that is very relevant and even at higher levels than what we had seen in March. And continuing, we see that this creates an expectation for the next half of year. We know that Senegal GT's results in this quarter suffered a little bit because there was a drop in the demand and the load of our free supplies. clients, but we have a favorable expectation for the third and fourth quarter for 2020. Of course, we are going to have to wait a little bit more and to see how the market is going to behave with the pandemic and the Brazilian society as well. And on slide 14, we had a major concern with our free clients so that delivery, we did not have a huge delinquency in the generation sector, and then we had the opportunity to... And we have taken several actions to have the deferrals of the difference between the take and what effectively was consumed by our clients in a period of up to 36 months. And we believe we have been well-succeeded, because although we postponed the cash, we were able to have... GT's effective delinquency to be very low. In April, of course, we showed the results of the quarter, but in April, we did have a higher provision, but that was reverted in the following months because we were successful in negotiating these overdue bills with our customers and clients. We believe this is also good news. So, for Semeca G&T, we understand once again that results... has been affected in this quarter, but we do have reasons to be optimistic about the second half of 2020. Now I'll turn the floor to Felix so that he can analyze the results into details for the second quarter of 2020 and also in the first half of 2020 when compared to the first half of 2019.

Thank you, Lyle.

So I will turn now to the results of the second quarter, and then I will talk a little bit about the trend of the first half of the year. On slide 16, we have here some comments that are important to be taken into consideration because they also explain our results. For the holding, we have the Restatement at market value of light with a positive impact of $475 million. Remember that light is in our asset, in our balance sheet as an asset available for sale, and because this is a listed company, at every quarter we have to the market to market and the amount of our shares. So here we did have a positive impact of $475 million, and that is in our results as well. At the media distribution here, we have a lower volume as well as mission than our COO, so we had a drop in energy, sort of 6% in our captive clients. This drop was of 8%, and transmission was down 3.5%. Also, in the voluntary redundancy program, the expenses allocated, and here we have a More people involved, as you know, but the expenses allocated for that was $46 million. For Sonequa GT, the main effect in the results here for Sonequa GT was the sale of energy at the lower limit of flexibility contractor range. This was the main effect. We also had the tariff review for transmission already mentioned. which allowed us to have a positive effect on the amount of the concession. Therefore, that also ran through our EBITDA in the amount of R430 million. The volunteer redundancy program, the expenses allocated for it, he was of R11 million. We also had the marketing to market of the error bonds, which had a positive effect in 2020, second Q20, at R71 million. And we compared that to the second Q19. Also there, we had a positive effect of R558 million. So here on slide number 17, we have the explanation of that variation of mark-to-market of AeroBunk and also the hedge instruments. And in this case, we have the hedge instruments that have a positive variation of $487 million, while the debt amount... When we consider the depreciation overall, we did have a negative variation of $416 million. So the impact in our financial results is of $71 million positive. So this is our hedge working to protect our debt. Turning to slide 18. And here we have an energy market for community distribution in the second quarter of 2020. We had a reduction in the loads of CEMIG-D of 6%, and the transported energy from CEMIG-D distribution had a drop of 3.5%, and the captive market had a drop of 8%. If we analyze that into the details and we break it down, the consumption classes, we have, as expected... We did have a drop in all the segments exception made to residential consumers. As we know, everyone was at home, so it's no surprise that the residential consumption was higher during this period. Now, turning to slide 19, we have here our EBITDA and consolidated profit, and we have here an analysis. Because of these effects and non-recurring effects on our daily operations or that are not referenced to the long term. So we made a few adjustments. When we, well, let me comment. The EBITDA and the adjusted net profit is in the chart here and also in our release if you want to understand it better. But these are all the facts that we already know and that have already been discussed. Here is the presentation. Our EBITDA, our adjusted EBITDA, and I would say that it had a drop of 6.8%, which I consider the smallest part in 1,007,000,000 to 939,000,000 in the second quarter of 2020. Net profit... had an increase of almost 5%, starting at 415 to Q19, to 435 million rounds, and to Q20. Now, turning to slide 20, we have an EDT with EBITDA and nonprofits. As we have mentioned, when we not consider the tariff review, we have the EBITDA in the second quarter of 2020 of 341 million, a drop of 33% compared to the same period of last year. And this drop is because of the seasonization and mainly what I have mentioned. Our free clients had a reduction in consumption and therefore they were billed in the lower limit of the contract flexibility. They have been billed on the take. So that generated a drop in our revenue and the energy available was sold at the spot price at an amount of price that was lower in the conference. And you all know that this is a low period. And the net profit in the second quarter of 2020 for CMEGT had a drop of 63% from $88 million in 2019 to $70 million in Q20. CMEGT distribution, on the other hand, had a very good result also considering the scenario, of course, that we expected better than last year, but this was higher than last year from $407 million last year if we do not consider fiscal fee and tax credits and to $535 million this year, a growth of 31.4%. And this is also because, and it's important to remind everyone, that is thanks to our operating efficiency efforts. And I will go into the details in the next slide. Same thing for net profit. Here, recurring terms, it went from 152 million in Q19 to 185 million relative to Q20, equals over 87%. In terms of operating costs and expenses for the company. When we basically look at what would be the PMSO, the expenses that are manageable here, I'm also not considering provisions because last year we had a huge provision that would impact the analysis. It was the provision for renewable credits of almost $700 million. So when we look at PMSO here, we have a reduction of... over 8% in the second quarter of 19 to the second quarter of 2020. That is significant if we consider also expenses of the voluntary redundancy program. So that's a reduction of over 70 million rials. It's important to stress also here on slide 22 that Out of the budget that we had originally for 2020, we still had a reduction for this year of $150 million in materials and services. And this is already being seen after the second quarter. On slide 23, and I'm mentioning the numbers, but these are the same effects, but now with the specific figures. that we had in the first half of 2020, and now we are going to compare to the first half of 2019. So, in the first half, for light, we had a reduction of 134 million rounds in the first half of 2020. Also, we have a restatement of fair value for centralized, again, of 52 million. For scenic distribution, there was a drop in the energy distributed 4 percent, the captive market was down 6 percent, and transmission was down 1.3 percent. Once again, 46 million expenses with the voluntary redundancy program and an increase of ADA of 91 million. Allowance for that full account, those four accounts. At Sunigi GT, as I mentioned, we had a profit affected by sale of energy at lower limit of flexibility contract range. We also had the carriage refuel, the voluntary redundancy program, and the marketing to market of AeroBoundary had a positive effect of $677 million in the first half of 2019, against a negative effect of $367 million in the first half of 2020. And with light of 2024, the energy market for semi-distribution in the first half of the year had a reduction of 4%, the build market and transmission, and the free market was down 1-3%, and the captive market was down 6%. Once again, when we look at the consumption segment, the only one that has increased, that had a positive variation, was the residential consumers. When we compare the first half of 19 and the first half of 20, residential consumers were up in 2.8%. On slide 25, consolidated EBITDA and profit, we see an increase in adjusted EBITDA of over 12%, as our CEO mentioned. In the beginning, from 2,034,000,000 in the first half of 2019 to 2,284,000,000 in the first half of 2020. And profit in recurring terms had an increase of 20%, reaching 1,022,000,000 in this quarter. On slide 26, EBITDA and a profit for CMTGT. Here, the EBITDA had an increase of 2%, if we just consider a non-recurring effect, up to 1.1 billion 26 million RELs, and that profit had a reduction of 15.8%, especially because of the patch effect, which was not offset by other effects. Now, EBITDA net profit for semi-distribution for the first half of 2020, slide number 27, still we see growth of almost 13% for the EBITDA in the first half of 2020, R1 billion and R29 billion. Same thing for net profit, a growth of over 41% from R340 million in the first half of 2019 to R481 million in the first half of 2020. On slide 28, we also see the same trend of expenses reduction, PMSO reduction, in the first half of the year that we had seen in the quarters. Our operating expenses have dropped 8.2% when compared to the first half of last year. On slide 29, we have the comparison of the negative distribution in terms of the regulatory and what was realized. For OPEX, we understand that we had a regulatory cover of operating expenses of $1,323,000,000 and realized was $196,000,000 higher than the coverage that we have, as you can see here, the real OPEX. This is because our retirement and post-job expenses and post-retirement expenses, 162, and also our default provision. And turning to the EBITDA, the regulatory EBITDA and the real EBITDA, we then had the regulatory EBITDA in here. 1,323,000. And here, we have OPEX 196 million rails. And now, so, other losses here, non-technical losses, as it already was mentioned, that had a negative effect of 108 million rails. So, the real EBITDA was 1,025,000,000. So, in this quarter, our EBITDA was 300 million below the regulatory epidemic. As our CEO mentioned and our CFO also mentioned, we are working hard so that the shipping company overcomes and is able to meet the regulatory targets that we have. As cash flow generation, we have here... Short summary on slide 30 of our cash flow generation in December of 19 was $1.3 billion. We had a cash generation in the first half of 2020 of $4.2 billion. And the period also, we paid some debts of over $1 billion. And we have rate investments of $700 million. So our cash in June, as it already has been mentioned, it was very robust, consolidated cash of 3.7 billion rials. Not considering the amount that has already been received in the COVID account of 1.2 billion at the end of July. Turning to the next slide, 31, we have our debt profile. And here is the consolidated results. This is that it's very comfortable. So when we look at the maturities timetable, we have an average standard here of 3.8 years. Of course, that would like to extend it a little bit more. But in the short term, between 2020 and 2023, we have very comfortable maturities. And within our cash generation, we don't have major problems, not only cash generation, but also cash position. We have a tower. Well, in 2024, which is here, the Euro bond that is due in 2024 in terms of net debt, we have a net debt of 12.2 million rials. And when you consider the present value of cash, because this is the amount that we would be receiving right now if we were to pay the debt today, and we have to take that into consideration. So it is like we have a net debt of 8.9 million rials. So our main indexers here, you can see most of our debt is dollar-denominated debt, and the remainder is distributed just as the same between BCA, 24% of the debt, and CDI, 23%. Remember that our dollar-denominated debt is protected, as I mentioned, by Hatch Instruments. that are transformed into CDI. Our cost of debt also has a strong reduction since 2018. The nominal cost of our debt at the end of 2018 was 9.67%, and now in June of 2020, the cost of debt is 4.3%, and that also has to do with the reduction of the CDI, but the dollar-denominated debt, the bond that was hedged 142% of the CBI, now this is a relatively affordable debt if we consider any debts that we might contract from now on. And as our CO mentioned, when we see, when we analyze the leverage indicators, total net debt over adjusted EBITDA is up two times already in June, turning from, you can see here, almost three to two in June. This was a very quick recovery of our financial soundness. And also capital structure, which is measured total net debt over equity plus total net debt of 34.5%. Also a very robust structure. Turning now to slide number 32. almost at the end of our presentation, we have here the Eurobond covenants. Maybe these are the most restrictive ones. And here we show and we focus the covenants in June. So, net debt over EBITDA, for example, it was in June. 2.85 times, and the limit for the covenant is of 4.5, and here you can see the breakdown of the calculations. It's very transparent on how the calculation is done, and for the holding, just as the same, the indicator of that over every covenant is 2.12 times, and The limit here for this covenant is 3.5, so this is a very comfortable position as well. And now, turning to the end of our presentation, slide 33, I would like you to save the date. It's September 15th, a month from now, basically, so that you can be with us in this 25th Annual Summit Meeting with the Capital Markets. We hope that every year, this is already our 25th edition. Normally, this is done in May. Unfortunately, this was not possible this year because of the pandemic. But we really wanted to do it, and we are preparing this event. It's going to be fully digital this year, and we hope to have you with us. So please save the date, September 15th. We do expect you to be with us. That's what we had to explain our results of the second quarter, and now we are going to open the floor for the Q&A session. We will now start the Q&A session. To ask a question, please press star 1. To remove your question from the queue, please press star 2. Please wait while we post the questions. To ask a question, please press the Start 1. First question, from Marcelo San, from Itaú. Hello, everyone. Thank you very much for the call. I have two questions. First, I would like to understand which are the main goals that the company has now. Reynaldo is in the company for a shorter period of time, so which are the targets? What can you comment? And second question is about the sale of assets. This has always been a relevant topic for me in the past two years. So, what can you do this year? What about Life Share or Taizo Share? Can you comment on that? Thank you. Hello, Marcelo. Thank you very much for your question. Yes, it is true that, you know, I've been here. For a while, you know, with the pandemic, it's been six months already. And Semigi is a major, a huge company, and it always had its targets. And we follow the company's budget. And the main targets are all defined in the budget for 2020. So we are working on DEC, the average outage duration per consumer. This is the fifth year of the concession. So we do have to meet the DEC indicators. This is a mandatory clause for performance. When I mentioned that it is below 10 hours, it means that this is an all-time result for the company. This is a really historic moment. And I'm working a lot to bring to the company operating efficiency. investments that will add value to the company, and also private criteria to make decisions. I know we are in the pandemic, but I'm trying to go out and talk to people. We are working on these three topics to ensure quality in the service providing, and that has to do with the EC, and we do have great results, also stemming from digitization, virtual services. We are working a lot to improve customer service by the means of digital channels. We are working to improve belly measuring and also move forward in automation of our operating and dispatch centers. We have great opportunities there, so... The two main drivers that move the company are operating efficiency and digitization. And we are trying to guarantee and maintain the investment program for the company. This is a huge one for distribution, also an important one for generation. We are considering to hold... a public call now in a short period of time. So obviously, we intend to increase our own production, and that has a positive characteristic of having customers there. So if we are able to grow our own production, we have this advantage, which is to have our own customers. And we are working to effectively bring in criteria and the rationale of a private company in all the decision process. And when I talk about the private rationale, I'm talking about looking for results to generate value and to really be... paying attention to the company to generate value out of each decision and to create a culture which is a winning culture and not a culture that will allow us not to fulfill these targets. This is a culture that will generate results. Maybe we'll bring to San Diego. I don't know. We are thinking about it. about having a strategic review. That's always done. Probably we'll be working on it because we cannot only think about the present, but we do have a lot of topics on the future, modernization and others. We have 8.5 million clients that, you know, allows us to have a huge potential in distribution, and we have the strength of the brand. We are the largest commercializing company, so we do have great opportunities. We have many, many advantages that we are discussing here that can generate a lot of value, and we have to be prepared for the future, and we'll take this opportunity to make any strategic review. So in the short term, we are proving to have a lot of resilience. The numbers show it. And in the mid and the long term, we'll be working to be able to seize the most of this modernization project. And then we will be able to see... that we do have a strong electric matrix, everything is integrated, and the business is sound, and that we are serving consumers. Our investment plans, and I don't know if Paulo or Ronaldo want to comment, so our investment plan, or divestment plan, actually, is moving on. These are strategic topics. And in due time, we'll make the announcement. But nothing has changed vis-a-vis the past. We are moving forward with this program, important divestment program, to generate capacity to invest in the core areas, which are generation and transmission. I don't know if Paolo, Ronaldo, or Rafael want to comment. Marcelo, this is Paolo adding to Ronaldo's comments. Yes, we have developed and we are trying to develop projects that will add value. Senegi has an important tradition in generation in the HPPs. So now we're investing in new projects and also in different sources, such as wind and solar projects. Just to give you an idea, the asset of the company itself here, we have a small investment that happened in last year's auction, and Poço Fundo invested We were awarded the option. The project is moving well, and we are also working with other possibilities, and that will obviously depend on the development of the market, of the sector. For instance, TPPs, we are also considering that if the market moves on, and all of that in agreement with commercialization. This is a major differential. So we do have a strong commercialization company, and we do want to have support so that this commercialization becomes more effective and adds more value, and that our projects also can be developed and reach that level of performance. And on a daily basis, as the comments mentioned, efficiency itself in transmission being benchmarked and generation trying to optimize our processes using technology. So in summary, these are some daily projects that we are working on and everything very well balanced with all the different areas of the company. Thank you very much. Now if you allow me, I remember that in the past years when Semigi had a higher leverage The strategy for the company was to buy energy from players that were going to participate in the auction. So for me to purchase energy of companies that were developing solar and wind projects, maybe closer to the average megawatts that you wanted. And so now I understand that the company The company's idea is to invest in its own projects as a source of growth. Is this the strategic change of the company now to be able to meet the demands of clients by that type of service, of product? Marcelo? For us. We want to seize the opportunity. The fact that we know clients, this is not a change in strategy. I can tell you that because I'm not here for a long time, but clearly I can tell you this was not in our plans either. But in any way, yes, we have to increase our all-generation capacity. There is a process of postponement of the plans. and the renewal of the plants as well, but we do have clients and customers and if we can have our own production, much better, right? It's very clear. And now, considering that you mentioned the postponement of the plants, what is your idea to try to privatize the plants so that you have the right to postpone that and then you would need a shareholders meeting? you have margin for any other possibility. Yes, we are working on the available ones. The main legal alternative is renewal of the plans either by SBE or by changes in the capital structure of our holding. in addition to PLS 232, but that has to be approved. But we have more time than other companies. So the main process for us right now is to follow up other companies that started with them, but in terms of definition of the methodology and the conditions, what is the granting amount, and the The payments and our focus now is to follow this methodology rather than making a short-term decision because our concessions are due, you know, further on in the future. That's great. Thank you very much. Our next question, from Philippe Hachet from Goldman Sachs. Good afternoon. Well, considering the pandemic scenario, how do you see the trajectory for the next few years? Can you comment on what you see for the future? About the PMSO, my second question. Do you see reductions in the next quarter? And if you do, where would you have those savings? Thank you. Philippi, I could not hear well your questions. I don't know if they did. Can you hear me back or no? I'll turn this over to Valise. I think Valise. was able to understand the questions. Hello, Felipe. Good afternoon. I had a hard time understanding your questions, but first question I thought it was about the price of energy. Is that correct? And then second question on our efforts for PMSO. I'll comment on that, and if there is anything else that you want to know, ask me. So energy, specifically in the short term, We already estimated for next year, but at the end of last year, we estimated for next year a price that was closer to the long term, closer to 150 rails. But now with the pandemic, that's not the case anymore. We expected that there's 150 rails. We got to that in 2022, 2023. That's why we are working on our negotiations. But that's the reference we have. But for now, it's just a reference because there are not that many contracts being signed. And in the short term, the price, 100 and 110 rounds for this year, going a little bit higher next year. Now, about the MSO, this is what we mentioned. We have that focus. Specifically this year, because of the pandemic, we have taken more initiatives, the ones that the pandemic has allowed us to take. So in addition to the reduction that we had forecast, we had initiatives specifically regarding materials and services that will allow us to have an additional reduction of R150 million, which starts to show in the second quarter of this year. We already have a little bit of that in our results for 2021. second Q20, and it will show more in the second half of the year. And we are still analyzing all opportunities, okay? Thank you. Now, going back, I think my phone was not very good. I hope that you can hear me better now. My first question actually was about commercial losses considering the pandemics. How do you see the trajectory of losses for the next years? I know you have inspections and other actions being taken, but are they enough to face these losses? I think I would have to address this answer. Ronaldo Balmes from San Diego Distribution about losses. We have concluded by the end of last year a huge structural diagnosis for losses, and this would be our last mile. We are working on investments, the acceptance of these investments in the TRF review. We are working in the DEC this year, from DEC January to July. We are meeting DEC. We also are working on delinquency that had reductions up to last year. We didn't have an impact of the pandemic, and this The structural diagnosis for commercial offices allow us to have here the amount broken down by reasons. So we have a plan that is being implemented. We know that we have a structural problem. We are starting to work on obsolete measuring devices. This action is in line to what was planned. So this year we have an increase in the number of inspections. Up to June, we had the same number of inspections that we had in 2019, the whole year of 2019, but we still have the potential of doing much more in the second half of the year. So these two actions, one is in line. the exchanging of the obsolete measures, measuring devices and inspections. We have to wait for the pandemic so that we can do more in the second half, more than the first half. We have a systemic structural action and connections that are faulty or that are illegal, both in Belo Horizonte as well as in the whole state. We have another project where we are going to have 350 330 tally measuring devices. We already installed some of them. And we also have a project to fight commercial losses with public lighting. We understand that this year we are going to have a positive result in the second half of the year. And in 2021, we are going to have the commercial losses under the regulatory coverage, removing those 2% that we were over in slide number 9 of the presentation. Okay, Pete. Yes, thank you very much. Very clear. And I'm sorry about my audio. No problem. Thank you. Once again, to ask a question, please press star 1. Please wait while we collect the questions. Thank you very much. If there are no further questions, we turn the floor back to the company's management for the final remarks. Well, I would like to thank you very much for being here with us in this call, and our investor relations area is available to take your questions and to talk to you if you need it. We expect to see you in our committee. Thank you very much. The teleconference of Samadhi has ended. Thank you very much for your participation.