Companhia Energética de Minas Gerais

Ladies and gentlemen, thank you for waiting. Welcome to CEMIG's fourth quarter 2020 earnings 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 session when further instructions will be given. Should any participant need assistance during this call, please press star zero to reach the operator. And I would like to turn the floor to the Superintendent of Investor Relations, Mr. Antonio Vallis. Please, Mr. Vallis, you may proceed. Good afternoon, everyone. We now start CEMIG's fourth quarter 2020 earnings call and webcast. And we have with us the CEO, Reynaldo Papanesi Filho, the CFO and IR officer, Leonardo Giorgi de Magalhães, Chief Generation and Transmission Officer, Paulo Motenriquez, Chief Distribution Officer, Marnay Tadeu Antunes, Chief Legal and Regulatory Officer, Eduardo Soares, Chief Commercial Officer, Dimas Costa, Chief Semectar after Mauricio Dallin. This broadcast can also be followed by the following phone numbers 5511-3127-4971 for Brazil or for the U.S. 1-516-300-1066 as well as on our website at ri.temig.com.br. To start the presentation, I would like to turn the floor to our investor relations and my officer, Leonardo de Magaliz. Good afternoon, everyone. Thank you very much for being with us in this conference call for the results of 2020 specifically and also the fourth quarter of 2020. we are still in a very challenging environment. And in this environment, we understand that it's a mixed characteristics of an integrated company with relevant participation and generation, distribution, and transmission of electric energy brings us a strategic advantage. And we understand that that's very important and proves that the resilience of the company, even in this difficult time, environment in 2020, and we do have sound results, and we'll talk about them during this presentation. On slide number three, we have a few highlights. Our EBITDA was almost 30% higher than 2019, almost $5.7 billion, and even the adjusted EBITDA with non-recurring events, it had a growth of 7.1%, just as the same our net profits which was down vis-a-vis 2019, and 2019 was the year when we have pathos and caffeine pathos with a huge effect on our results. So because of these events of 2020 and 2019, Omega has a growth of 14%, which is very significant when compared to the prior year. And just as the same, this improvement in the financial results was significant thanks to operating indicators improvement. It was the best decade, the best DEC was in 2020 of 9.57 hours It was the fifth year of our concession after the contract renewal. It was a very important year of the company to meet the regulatory GEC, and we are celebrating not only this result but also the improvement in the service to our clients in the distribution segment. Also, we have reduced the leverage lower than 1.5 to 1.28 times. at the end of 2020 and it's very comfortable to face our financial debt and in 2021 with a high risk perception and an uncertain scenario we understand that this transitory but our cash right now allows us to feel confident to go over this moment at this difficult moment and the last event that we highlight here is the sale of light And despite happening now in January, we should bring it to this call because it was this management commitment with stakeholders and shareholders. We were talking about selling our shares in light and we already disposed of those stakes in january and that generated a significant cash for the company of 1 billion 372. on slide number four we can see that all this improvement in the financial life of the company also has seen us a better risk perception and that resulted in our credit ratings all of them improved upgraded our ratings in 2020. And this was a year where almost no companies had rating improvements, and some did. And the three agencies, both in the domestic scale as well as in the global scale. And we understand that we are still optimistic for 2021 because we believe that this movement will keep on going, considering the current financial liquidity company of the results that we have as well. On the next slide, number five, we are going to go into details in terms of our quality indicators. The main ones are the DEC and FEC. On the top, you see the regulatory limit for 2020 was 10.44. We were at 9.57, almost one hour less than what NL demands in terms of interruptions. for our clients, and as I said, this was a reason for celebration here in the company, and about the frequency of interruptions, the FEC, the one that the regulatory agency established as 6.67, and we were almost 30% lower than the regulating agency's limit, and so it shows that we were successful, both in the structural and financial ...in the continuous improvement since 2020 in solving our clients. Now turning to slide number six. This is another important event. This is the GSF agreement and we understand that before electrical sector, it was a major achievement because now we will be able to have operations done in CCE, and to me, because of this agreement, we extended some important concessions for us, and here, Embarcacion and Lava Ponte, which were due in 2025, and now with this GSF agreement, they will be renewed or extend for two more years, so this 2027, ensuring, therefore, a more... better cash flow, the certainty that we will have cash flow for the next few years and therefore that brings down the risk perception of the company. Here we have this effect, the monetary financial effect for the concession extensions and the lot D concessions which are in the last line, they still depend on NL's regulations but they should be extended for seven more years and The total here is $1.3 billion. We know that these are still transition amounts, but some companies already had approval in 2020, and the company will then wait to have those announced regulations for 2021 to then have the approval in its governance bodies, and that will represent approximately, considering the current figures, and we understand once again these are temporary, it should be close to 1.3 billion. We think this was an important achievement for the industry, for the sector, and for Semigi. We believe this is great news for the company. When we think about the value creation of the company for the next years, and here specifically, in energy generation. Now on slide number seven, we have our investment program. We invested in 2020 almost a two billion reals And I should highlight here distribution with almost $1.4 billion. But we should talk about 2021 as well. We understand that we have an opportunity to make relevant investments in our distributing company, improving our capacity to cater to clients and also to develop the state by offering energy, to have energy available to the industrial sector. in our state and we are projecting investments close to 3 billion in 2021 and this cash comfort allows us to have such a relevant program and then remember that next year in 2022 the 22 is an important year for us in 2023 we are going to have another tariff review for systemic distribution so We believe that for next year we'll have $2.3 billion in our distributing company, but also with relevant investments in transmission generation and also cash injections in here, GT, I would say, because we want to grow in that sector as well. Now on the next slide. And then here, fighting delinquency. we ended the year. We were very much concerned about delinquency in 2020. Here in the study, you see how our collection was last year. And you see that in April, our collection had a hard time. We just collected 89% of our revenue. But after that, we started having improvements in our collection. and we ended the year close to 97 percent of collection this year revenue and this is very close to our historic rate and we understand that the final result uh stemmed from several actions from the company in 2020 we had to do less disconnections because of the pandemic and the economic effect of the pandemic on the brazilian families we had 668,000 disconnections, but for 2021 we expect to have 1.7 million disconnections. We believe this is a very important figure. It will help us bring down delinquency, but we always have to consider that we will be analyzing the pandemic effects on the economic activity this year. We understand that in this situation, second quarter of this year will still have major effects. But after that, we understand that it will be important to have that negotiation process with our consumers and disconnections. Also, we'll aim to reduce delinquency in 2020 We had taken several actions to have payment installments, cash payments, and we developed several mechanisms to help us reduce delinquency. And these new means of payment were very successful in 2020. We ended with ADA of $135 million, very good result piece of 2018. practically half of the prior year, even in a challenging year. And here we have some highlights of relevant amounts, close to $230 million that we were able to negotiate with Minas Gerais state government that we are going to offset with ICMS in 2021-22. So this is a real guarantee to offset the late credits. And this is going to generate additional cash flows in 2021 and 22. Slide number nine. We talked about the transmission company. It did have a huge impact on our results in 2020, a little bit because of the tariff review with the new regulatory asset base, and also with the result of $338 million in 2020, it was $127 million, $111 million worth on shareholders' assets. practices in the transmission sector. CEMIG was the only distributing company with other assets that had tariff review. Even other companies in the sector, not distributing companies, the other companies in the sector that mentioned business with old assets of older concessions, they did not have tariff review. And CEMIG was the only one with tariff review. And starting this year, 2020, we had the results of tariff reviews for all transmission companies with tariff reviews, and we had to standardize those accounting practices. And because of that, the accounting practice that CEMIG is adopting now in 2020 is very close to the transmission companies with new concessions where you record the revenue as you build the asset. along with the construction margin of these assets, just as the other transmission companies with new concessions on a quarterly basis, the regulatory results and the results in compliance with IRFIS, we are going to do the same. Here we'll publish a specific note. with the results under this new practice and without that practice so that everyone can follow up and analyze the process and see how our financial statements are. So basically we had an important effect here of $338 million and in practice with this new methodology, We will see that the results of the transmission companies, as we have investments, we will be posting revenue every month or every quarter, and that will have a positive impact in the shareholders' equity of CEMIGA's transmission. Turning to slide 10, here we have a proposal for allocation of almost $2.9 billion, and So, we will propose dividends of $1,482 million of dividends. $553 million will be in interest on equity and $929 million in complementary dividends, adding up to almost $1.5 billion and an important yield here, which is close to 8%. We understand that this is very relevant and we'll be paying our shareholders in an adequate way. Also, we will request the shareholders meeting a stock bonus of almost 11.5% because of our profit reserves going over the capital stock and we'll have to propose that. So at the same time, we'll bring in, we'll submit this proposal of a stock bonus of 11.5%. And moving on, and this is my last slide before i turn the floor to valley who's going to go into the details of 2020's results and comparing those with the prior year but let's talk about sustainability now that's very important for samig the esg practices are in the company's dna and samig isn't about john sustainability index since the beginning it is the only company uh in the world that is not in europe that is in the the Dow Jones Sustainability Index. And there are very few companies of Brazil in this index, and one of them is Semig. And we are also in another index of sustainability that are important. And here are some of our ESG initiatives that are relevant. And we should highlight one of them that we believe is very important, that starting in 2020, and winded our activities of Igarapé, which was oil-powered. With that, 100% of our electric matrix is renewable. This is very important for the company. In addition to other initiatives of energy efficiency, also volunteering programs and our commitment with the society, and we are always involving all the communities and the areas. We surely want to be a responsible company. So we conclude now the initial highlights for 2020. Now turn the floor to Valis to go into the results of 2020 when compared to 2019 and also the fourth quarter. Thank you very much, Valis. So let's just start with the analysis of the results. I would like to start on slide number 13, mentioning the main effects that we had in the results in 2020 and some of them in the fourth quarter. For San Diego holding, the consolidated result shows a significant increase in the equity method, almost 185% higher, which was $356 million in 2020, fee-to-fee $125 million in 2019. For the negative distribution, we had a drop in the electricity distributed volume of 1.1%. In the captive market, there was a reduction of 5.3%. transmission for free clients had a growth of 4.4%. Here we have some effects of migration of free clients and also effects of distributed generation and we'll explain that in a while. Also, we need to remember that in the third quarter we had a reversal of a ADA $231 million. And I think we should make an important highlight here for CEMIC distribution. OPEX for CEMIC was within the regulatory target. That is, the expenses, the operating expenses for CEMIC distribution was lower than the regulatory expenses that are covered on the tariff. This was also the first time that CEMIC distribution reached this efficiency level. For SMEG GT, the main effect in here was because of the Euro bond and its marking to market and our foreign currency denominated debt. We had a positive effect in 2019 and in 2020 this was almost zero effect. So that also affects the comparison in the year. Leonardo mentioned we also had the periodic tariff review for transmission that with the standardization of the accounting practices has generated a positive effect in the results of 621 million RELs. On slide 14, a chart with a breakdown of the mark-to-market of our ear bond debt. In order to make the best analysis here, we have to take into consideration the market-to-market of the hedge instruments, which are two, the swap that is protecting us in the FX variation of interest, and the cost spread that is protecting us in the FX variation in the principal. Together, these instruments had an appreciation in 2020 of one one billion 258 million rounds in addition to that big because of the payment of interest in 2020 we have received 495 million rounds from settlements because of the swap in a way that the hedge effect was only four million higher than the total principal amount of the stat, which was 4 million rounds again. On the slide 15, we have a comparison of EBITDA and iProfit, both IFRS, as well as the adjusted. We bring these adjustments so that the comparison is easy to understand. And here you have the chart with the main effects. In 2019, we had relevant effects such as this COFINS approval. We did have a very positive effect of the credits of peace, PASAP and COFINS, tax and ICMS, and also we have tax provisions. And with that, adjusted EBITDA, you can see here, that was in 2020 for the adjusted for 0.25 have reversal of the provisions in semi-distribution. So the EBITDA in adjusted for 2020 was forbidden 875 made in row. 5,694,000,000. So the adjusted increase was 7.1%. And in the same adjustments in the net profit, we can see a growth of net profit of 14%. That is in recurring terms, that's very strong results in 2020.

I think it froze.

Well, now turning to slide 16, we have the results for the fourth quarter. These are consolidated results as well. The adjusted EBITDA was up 23.7%. And that profit, the adjusted one in the fourth quarter, had an increase of 18.6%. Epida and that profit for Semiga GT, based on the adjustments we have mentioned, Semiga GT had a growth, a relevant growth in the Epida, but with the This can be explained basically by the weaker result that CIMIG-GT had in the quarter. And you remember that in the second quarter, CIMIG-GT had to negotiate with clients, particularly the free clients. They were redistributed with time after that, but we did have an impact in the second quarter. And you can see that because if you look at the fourth quarter, CIMIC-GT results, both the counting results and adjustable results also were very good. If you compare CIMIC-GT with the fourth quarter of 2019, EBITDA had a growth of 46%, and that profit had a growth of over... 83%, so you already see that there are better conditions for Samiga GT in the fourth quarter. For Samiga distribution in the full year, in the adjusted result, we had a slight drop in the EBITDA of less than 1%. We ended in the adjusted of R$22,113,000,000. That's very relevant for CIMIC distribution, specifically in a pandemic year, and that profit in the adjusted had a growth of 10%, which is a robust result as well. On the other hand, in the fourth quarter of CIMIC distribution, on slide number 20, we see that there was a drop both in the EBITDA as well as in the net profit. In the fourth quarter, we did not have any relevant effect, and neither in 1990. But what happened is that the provision for ADA in the fourth quarter

up in the results of CIMIG distribution in the fourth quarter.

Now, turning to slide number 21 and talking about the market, as I mentioned, energy for CIMIG distribution dropped to 1.1%, being that the Transported energy was up 4.4%, and the sale for final consumers was down 5.3%. If we analyze the total energy consumed in the concession area for semi-distribution, we will see that residential consumption had a positive effect, growing more than 4%. And industrial consumption also was strong because it was up 1.4%. Other parts of relevant consumption, which is a commercial one, it had a drop of 13%, and that was because of the pandemic. You know that all the stores were closed for a long time. It opened and it closed, and we know which are the effects of the pandemics and the stores. But it's interesting here because we ran an analysis to see what was the migration rate our free clients and how that affected the variation both for transport and final consumers in CIMIC distribution. So we did have a migration of free clients in CIMIC distribution that in terms of consumption was of 376 gigawatts hour in 2020. So the transported energy would have grown 2.5% instead of 4.4. And tumors would have of captive clients to distributed generation, and they don't show, neither in the transported energy nor in the consumed energy, and that's very relevant. In 2020, we had 626 gigawatt-hour that were not billed in consumption and transport because of distributed generation. If we adjust that, total distributed energy and transport, that would have have a growth of 0.3% instead of the reduction of 1.1%. And the volume of final consumers would have had a reduction of 2.9% instead of a reduction of 5.3%. As we know, distributed generation has significant impact for the distribution business and for systemic distribution tariffs. So in our opinion, it's important to discuss the subsidies that today are measured by distributed generation by the means of a national tariff policy. And here we have the energy market for semi-distribution only in the fourth quarter. You can see the recovery of energy consumption in the fourth quarter of 20 when you compare that to 4Q19, an increase of total distributed energy of 2.3% and transported energy was up 12.8% and the energy for Final consumers was down 5.5%, and we already knew that the residential consumers were consuming more because people were spending more time at home, but we also see here the recovery of the industrial client going up 9.6% in terms of consumption compared to the fourth quarter of 2019. Talking about operating costs and expenses, we see that the PMSO, in addition to non-manageable expenses, had a drop of 4.6%. And PMSO, which is basically everything that is manageable, and here we highlight a drop of 7.2%. Most of that is related to the new participation of the profits of the company, in the profits of the company, the profit-sharing program that has reduced that profit-sharing program in 121 million rounds. And also, in 2019, specifically in the fourth quarter, we had costs related to the decommissioning of IGAAP TPP and the impairment. along the river and together they pressured expenses in 2019 specifically in the fourth quarter and I will talk more about that shortly in a way that in the comparison we have that reduction of 7.2 percent now comparing the fourth quarter of 2020 to the fourth quarter of 2019 PMSO had a reduction of almost 20%. As I said, we had a reduction of the profit-sharing program that was provisioned mostly in the fourth quarter, but we also had the decommissioning of Igarapé and the impairment of Volta do Rio that were concentrated in the fourth quarter of 19. Therefore, the PMSO reduction was very significant. It's very important to us because it shows the performance of our distributing company comparing to the regulatory indicators. In 2020, Semiga Distribution had the regulatory coverage of expenses of 2,941,000,000 RAUs, and the realized amount was 2,927,000,000 RAUs. We were 14 million better than the regulatory target. So we believe that we have room for improvement. But, of course, this is the first time that we meet the regulatory target, and that's very important. And we finally met that goal. And to reach the regulatory EBITDA, we are below the regulatory EBITDA in 105 million rounds. and that is mainly explained by losses. Although it has improved, we are still over the regulatory level, and they cost the company 125 million real estate losses. So we expect to keep improving the losses in a way that we can still this year meet the regulatory level requirements. or regulatory target for EBITDA as well. And in terms of that profile, you follow the company and you see how that profile has improved a lot in the past few years. And this year, really, 2020, that profile ended at a very comfortable level. We have cash and cash equivalent of 5.8 billion RALs, and we have maturities of a little bit over $2 billion in 2021, and $1.2 billion in 2022. 2023, we almost have nothing, only $80 million. And we have the maturity of our Euro bond by the end of 2024. That is December of 2024. And today, at the FX rate of 2020, that is equivalent to... $8.4 billion. This is a relevant amount, and today this is the main subject of our analysis so that we can bring down that maturity in 2024 and to extend it even more, our debt profile. Because of that debt, the dollar today represents our main indexer. 52% of our debt is in dollars, 32% is in APCA, and 50% is related to CDI. In terms of cost of that, our nominal cost by the end of 2020 was in 5.3%, which is very good, very competitive. And in real terms, it was at 1.8% a year. But an indicator that really improved a lot without a shadow of a doubt, is our leverage. As Lau mentioned, we are in a very comfortable situation with a net debt over just an EBITDA ratio of 1.28 times, which is a very comfortable leverage position and total net debt over equity plus net debt of 26.3%. very well and to end the analysis of the results before turning the floor to our ceo we have our cash flow and it also shows a very strong cash generation over the year of 5.8 billion rails in addition to that we received the amount from the coveted account of 1.4 billion and also the court escrow deposit of PZEPs and COFINS. I should highlight that in this cash, in addition to the court escrow deposit, we also have the compensation of federal taxes that started in May because of the credit that we have due to the final ruling of PISCOFINS on ICMS matter. We also pay debts. in 2.4 billion rounds and we also had investments of 1.7 billion i already mentioned in a way that the company's cash ended 2019 a little bit lower than 1.3 billion and it ended 2020 with 5.8 billion now To talk about the company's priorities and what to expect in the next few months, I would like to turn the floor now to our CEO, and he will take over. Good afternoon. Good afternoon, everyone. I think we are bringing you results that are spectacular for 2020. As Léo said, the year shows the resiliency. and the results of a management that is always looking for optimizing the results. We have grown our EBITDA almost 30%, 7% in the adjusted. So these are huge figures, 5.5 billion in EBITDA. That is fantastic in a pandemic year, 14% in the net profit. that is close to $3 billion. I think that shows the capacity that we have, the ability that we have to be resilient and to improve the company. And for the first time in history, we have a few things here that, you know, makes us very proud. And so I congratulate all our employees here and also the third party employees, they helped the results and these are all time best results. The first one, the DEC lower than 10 hours that allowed us to fulfill the contract The concession contract and its indicators, it allows us to have 25 more years of concession. That is a fantastic number. Congratulations, everyone, everyone that participated and helped us to get there. Delayed construction works, we had many, and everything now is on time. We are meeting our investment programs. And this is another achievement. We have not been affected by the pandemic in our investment program, and we are working on it. We are improving it for 2021. Also, for the first time in this company's history, we had a PMSO lower than the regulatory one. This is a major achievement. As you have seen over the year, we made huge efforts to control PMSO, and we were able to fulfill the regulatory one, which is the distribution, well, the PMSO lower than the regulatory, and we almost met the regulatory EBITDA. So if you look at the trend, in fact, two years ago, we were at 78% of the regulatory EBITDA. Now in 2020, we were able to meet 98% of this EBITDA. So these are amazing numbers. Congratulations to everyone from Temiga that has helped us in this objective. Also, in terms of the consumers, we did not have a tariff increase. So all of that we're able to do without increasing tariffs in 2020, which was a difficult year, the pandemic year. We were able to use part of the TIS and COFINS credits to settle, to pay for part of the need of tariff reviews. Our debt leverage is at 1.28. that allows us to improve also in the standard and of course we are just, we are very close to be a triple A there. And these are amazing numbers for me. And now in the beginning of the year, we fulfilled our commitment of divesting light from the company. So light, when we look at the last 18 months, effectively, the total amount of the divestment is over $4 billion. If I wanted to maintain the 49% we had in light, we would have to be part of two capital expansions. So not only we avoided the capital expansion for these last 12 months, but also we sold the shares and that adds $4 billion. Just to give you one idea of the cost of maintaining an investment when we compare that to the investment program of the distributing company. Obviously, our focus is in the state of Mena Gerais and to keep on improving the quality of the public service that we provide to consumers in the state. So, for Bill and Rouse, we allow us to have almost three years of investments in distribution. And that's it. I think that's our priorities here. So, to have our OPEX within the regulatory limit, and that has been achieved. It's a huge effort to be able to maintain ourselves within the regulatory limit, but that is our objective, and also to gain margin on the regulatory OPEX. Also, to strengthen the investment program for SEMEGA distribution. As we said, we maintained the investment program in 2020. In 2021, we have over 1 billion rails in the investment program for distribution. We know that there is a pent-up demand, and our objective is to address this pent-up demand totally so that Semegi can be a driver for the economic development in the state of Minas Gerais and never a hindrance. Our DEC is within the regulatory limit. For the first time in the company, it is below 10 hours. We also have an optimization of capital allocation. We just mentioned lights at disposal. We announced Friday that we are holding studies to divest Taesa, which is another divestment, huge divestment. It's a very important topic and also is the final solution for Renova. We are addressing it as partially achieved because we approved a plan for Renova. This is a huge achievement, just approving the plan for Renova. I think this is a major achievement. It was just by the end of the year, and it allows us to conclude the investments in out-of-circumstances and eliminate a residual risk that existed for a possible bankruptcy of Renova. And I think that's a positive topic here. It had our full support. Renova has our support so that we can fulfill successfully that investment plan and conclude certain three. And here we have other topics that we have been announcing, the renewal of the concessions. Of course, this is crucial. And now we have an additional period of time because the concessions were extended thanks to the GSF agreement. But I just would like to, Eduardo, I think, Eduardo, your video is on. So the renewal of concessions with the GSF agreement, we gained more time, but this is still a priority. Today we're talking the ministry, implementing renewable generation sources, wind and solar. This is a change, a strategic change for the company to have our own investments, not only in HVPs, but also wind and solar. We have had a public tender, and we have several projects there. Also, non-technical losses, as Val has mentioned, we already had some results in 2020, and we have strong objectives to be in compliance with the non-technical losses. And we have been able to have amazing results already in some of the programs. And I think that we'll be able to get into the non-technical offices and to be compliant with the regulatory levels. Also, we are working to restructure retirement benefit plans so that we can have a sustainable PMSO below the regulatory ones. This is a huge challenge, a major challenge, and we need to have positive results in the post-retirement plans in 2021. We also have the liability management for the Eurobonds. As mentioned, we have Eurobonds with It is locked at five rails and we have a huge challenge to bring down our vulnerability. So we have a digital transformation plan which will encompass the whole company. It is starting here with a major change in customer service and we were going to have a new model to work to cater to clients it's an integrated channel we call it omni channel all channels are integrated and everything is coordinated by a single supplier and in fact we have worked and and there's a strategic plan review with the digital transformation of the company and now some uh we have the growth in retail electricity sales we're preparing ourselves for the changes in the electric market in the market.

So I think here we have moved on. Focusing on, we may turn to the next page, please.

This is what we are going to focus on. Our strategic planning is here. We hired a review of our strategic planning with consulting services. We have a lot of plans in action. I would like to invite you all for the CENEG Day. That's when we will be able to discuss, to talk to you. You can go back now. That's going to be on April 28. We will be discussing strategic planning.

We will give you more details.

But here is a hint, a spoiler of what we are going to be talking then. And I like this sentence, focus to win. We want to leave diversification and to prioritize what we know how to do, generation, transmission, and trading, commercialization of energy in the state of Minas Gerais, in our concession area, aiming to be leaders in efficiency and customer satisfaction. This is an element that will be always here with diversity Operating efficiency, an important focus, of course, this year in the post-retirement. Also recovery of CAPEX and businesses and concessions that we have. I think this is our competitive advantage. So a recovery in distribution facing the pent-up demand that we have and also recovery in G&T with wind and solar and also take some risks to have energy available so that we can sell it in the retail as well, and to move forward with the divestment process. We had light on Friday. We announced studies so that we can analyze ties of divestment And this is a strategic planning, focused to win, to leave businesses, leave prior diversifications and to concentrate on businesses of Semigi, where Semigi has history and has amazing history in business. spectacular results for the country and for the state so this is a strategic planning and we also have here an organizational culture project along with it so that our decisions are guided by private rationale in terms of decision making and also the values that we are a company and always with private criteria for decision making. Also to move on in the debt management and capital allocation. I already mentioned the divestment. And we are going to have many synergies in all capital allocations in areas that we know very well, and they will give us good results, good returns, and to work a lot on digitization, and I think this is where we are going to go up two steps on the ladder. We are going to leave a situation where we are vulnerable in digitization, and we are going to turn into market systems, which are modern, proven, and that will help us a lot to better serve clients and to reduce our OPEX as well. That's what I had to bring to you about 21 as well. And I would highlight some very specific topics. And obviously, we have to highlight them because look, we have the GSF agreement for 2021 as Leonardo mentioned. We are just waiting for NL's final word, but we know that this is going to happen in 2021. And here we are talking about $1.3 billion. And also we have the new methodology for transmission includes the margin of construction. So when we have a policy to distribute 50% of our net profit and when we have these non-recurring events such as GSF and this new methodology of transmission has become recurring but that's not cash, we see that effectively on cash this distribution is much higher. Because the perspective of results for 2021, when you add construction margin and also the posting of GSF and more divestments with capital gain, that becomes very, very positive. And it follows the same rule that we have, which is the statutory rule of the 50% of the equity, the profit. That's what I wanted to talk about. And now we have our final slide, which is, again, to invite you all for the CIMIGI Day. That's going to happen on April 28, a month from now. And we'll be able to bring you a breakdown on our strategic planning. and also very clear direction of where we want to go to. And obviously, this is going to be a commitment with other markets so that we fulfill all our goals. And once again, to everyone at CEMIGI, thank you very much and congratulations on the spectacular results for 2020. Thank you very much, Reynaldo. So now let's turn to our Q&A session.

We will now start the Q&A session.

To ask a question, please press star one. To remove your question from the queue, please press star two. Our first question is from Liliana Young from HSBC. Liliana, the floor is yours. Hello, thank you very much for the opportunity and congratulations on the results. I would like to know that by strategic positioning and considering also your cash position, if it still makes sense to sell transmission assets such as Taesa. Do you think it makes sense to sell one of your assets such as Taesa? I'm sorry, I was muted. I apologize, I was not able to understand the end of your question. You were asking about Taeza's divestment, but I did not understand why. Yes, divestments such as Taeza, considering your cash position is high, you have low debt or low leverage, And it looks like the market is buying transmission assets in Brazil. I think we have two topics here. Our decision to divest is something that we are announcing, obviously. So it is possible, it's probable that this is going to happen. But obviously it will depend on other factors. things, but we are starting analyzing the possibility, but it is within the strategic planning, and this is a strategic planning very important for CEMIGI to focus in the businesses it knows very well. Yes, I know TAESA is a very well-succeeded investment, but in other situations it has not been. So, in fact, we have as an objective not We want to have control. So if we are to do anything, we'll do it to be a controlling party. And if we want to be partners, we want to be minority shareholders. In fact, you know, this model has damaged value in the past 10 years. And despite of having cases where we had positive results. But this is the rationale so that we look at it and say, you know, this model somehow, and we work better. We want to go back to the basis, but we'll discuss that still on the 28th. And we know how to work very well with the concessions that we have. Perfect. Thank you very much.

That's what I was asking. Thank you. Next question from Marcelo San from Banco Itaú.

Marcella, the floor is yours. Good afternoon. I have two questions. First, about the results. You were showing an adjusted EBITDA, adjusted by non-recurring. In fact, you had a line showing the result of the RF review, and the effect is 1.91. But when I... look at page 37 in the release, you show an effect of tariff review of 502 million rounds in the fourth quarter of 2020. So I was confused when I saw that chart. I think this is not right because these effects probably happened in other quarters. I just would like to confirm if this is not right or what is really the factor that you had in the fourth quarter. This is my first question. Marcelo, thank you for your question. We are going to check the figure, but I understand that about the fourth quarter, the main effects of the transmission company happened in the third quarter when we posted the tariff review of the transmission company, and that affected the EBITDA hugely. The impacts in the fourth quarter were related. to the standardization of accounting practices and that effect on the results, then we understand it is the one that is on the chart. We are going to check it, okay? But most of the effects have been recorded against the shareholders' equity, but not the results of 2020. But thank you for your comment. We'll check it. And if there are adjustments to be made, We'll be making them and we'll communicate via our RI channels. Okay, good. And I looked at the other results from prior quarters. In the second quarter, you had the effect of the transmission. It was 400 million, more or less. So I would say that this is the total effect, maybe, that was not contemplated in the right quarter. But thank you very much. That was my first question. My second question is about Thais' sale. I understand that when we talked in the past that the idea was to sell Taeza in the same year of light so that you could offset taxes on capital gains. And when you look at everything that has to happen so that you still make the sale this year, I'm thinking that if you're going to have enough time, because if Semigi leaves Taeza, Alapau, for instance, could offer, could bid and the participation of PBL. And I would say this process takes a while up to its conclusion. So do you think this will be happening by the end of this year, considering that you have some steps to go? Thank you. Hello, Marcelo. We hope so, but obviously we cannot anticipate anything. But you know, Let's take it easy. And there are several events and several steps that need to be followed and respected, but that's not impossible, right? Not necessarily we need to have one thing before the other. Some things we can do later on after a possible leaving of Finnegan. We need to be careful, of course, just like any divestment process of a large stake where we have other partners, other companies under it. That has to be very well analyzed. But we do have good teams, financial and legal teams, working on it. They will analyze it, and I'm sure we'll be addressing everything that needs to be addressed. But we do expect, yes, we would rather to end that in 2021, yes.

Perfect, thank you.

Once again, I would like to remind you that to ask a question, please press star 1. And to remove your question from the queue, please press star 2.

Next question from Guilherme Lima, Santander.

Guilherme, that's all you have. Good afternoon, everyone. I have two quick questions. The first question is about Taiz's divestment. I want to make sure that this divestment will trigger a tag-along for the minority shareholders of Taiz. And another question about the distributing company. Can you talk more about the collection and volume, the first quarter of 2021, which is almost over? Thank you. Quick answer. I don't know for the first question, if we are hiring assistance, not necessarily, this is a topic of ours. That's the first answer about the tag along for the minority shareholders. And the second one, We haven't seen the effects of the pandemic yet for this quarter. We do have, we do have effect on the stores and the general commerce, but not general. Quick question and quick answer, right?

That's great. Next question from Marcella from Itaú.

Marcella, the floor is yours. Thank you. One last question about the growth strategy. You mentioned that you have a public call for wind and solar project. I would like to understand if you are looking for operating projects, green fuel projects, and if you are going to develop Are you going to sell that in the free market? And how is the demand of the PPA in your commercializing company? If you can talk more about that, please. Yes, Marcelo, we are going to focus on greenfield. It doesn't mean that we cannot look at M&As, but the focus of the standard notice is greenfield for the free market. the opportunity that we have the technical ability of all our engineering teams and also the commercialization ability. And we also have this last year, the subsidies and this year, as you know, right? So these are the three main elements. And we believe that, yes, it is possible to have profitable projects in despite of prices. in the state of the crisis today. Can you give us a price idea if you were to sign a 10-year contract for incentive-based energy, how much it would be to develop a greenfield project, a range at least, a price range in the free market for this type of energy? Well, Dimas, would you like to comment on the incentive-based market? Yes. Who asked the question? It was Marcelo. Hello, Marcelo. Out of these investments that we intend to make for Greenfield, part of that we expect to be directed for self-production. We have a huge demand. from a number of clients that are choosing that. And so part of that should be self-production. Others will ensure that we'll be guaranteeing a PPA. When you ask that, our target, we are looking for energy of what we have seen and we have had offers of energy that, you know, varies from wind of 115 up to solar of around 135. So I believe that would be more or less our target. Of course, that for self-production, I can charge a little bit more because I will split the gain of the benefit with the client. But our target, whether for green-fued or energy purchase, is around 115 and 135 is still as renewable energy.

Did I answer your question?

Yes. I did have a slight technical problem, but I was able to understand. Thank you. If there are no further questions, we turn the floor back to the company's management for their final remarks. Very well. Thank you all very much. I hope to see you on April 28th on Semiyugi Day. I hope you all be well.

Thank you very much. The conference call has ended.

Thank you very much for your participation and have a nice afternoon.