Comp En De Mn Cemig ADS American Depositary Shares

If it goes away, if we lose market, this will be a defeat for us, just as all of our victories will show when people say, we want to stay with you. This is the work that our team has to do. So there is an old saying that says, if you only know who are your friends, if you eat a bag of salt with the other people. my dad used to say that it takes a long time to eat a bag of salt. So we have a long time to develop this relationship. And I think this relationship that we are going through of process improvement to have at the end that yes, from our, consumers, our clients to work with us. I think that is our job and we are doing, we are working on it. In addition to governance, team, technology and service, another topic that is really important is samega privatization. All of you know that Zema, when he was elected and then reelected, he said that he wanted to privatize the samega. This is no secret. It was openly said in his election campaign and this is a task that has part of it to be executed by the administration and another part by the state administration. And because that has to be approved, by the administration of the state. And so we have to convince the congressman that this is good for the state, good for the population. And they have to say yes to this project. And once they say yes, we have to work for that. And if they say no, we will continue being a state company and improving always. If you compare CEMEX results in the last two or three years, you see that we are in an upward trend. you know one or another indicator of non-recurring events and sometimes are not that good but you will see a history of improvements in our results in the past few years being a state-owned company so if it's not approved by results that's okay we continue working and dedicating ourselves because we know that working on a state-owned company is not dancing with my sister on the ball is to dance with the most beautiful lady of the ball but if we cannot be privatized we will be a state-owned company that is a very strong one but I do believe that we should convince them because we have arguments we have data not only objective data but the subjective argument as well why is it better so the objective data is that of course the company will have a greater value so there's your different mechanisms here we are we have companies that have been sold we have companies that we so just a part of that stock is so the market value for the state now it's around 17% and if that becomes privatized or if we increase capital it will be worth more and if the amount is will be X plus 30% or some more percent. So that is what this part that the state has will be even more valuable because it is going to be even more valuable. So we're not removing value, we're adding value to people. And on the other hand, people, the state is also part of this, people, when I say it. And also we will have agility and management. They've been a state on companies. There are several ties that a private company doesn't have because there's a lot of bureaucracy. There are a number of committees to manage state-owned companies. So I'm not criticizing it and I'm not praising it either. These are things that are there. They exist. And sometimes that takes too long. There are a lot of rules that end up taking to postponed actions, reactions that could be faster. So that's a fact. This is not only speech, you just have to look at it and you will see it. This is a subjective approach, but the objective one is that it's going to value more. The subjective arguments are there is going to be improvement in management, in agility, and the administration. We have to take that into consideration because that is important. And finally, I would like to talk about results. CEMEX results have been very good, as we have seen it. Of course, you as investors have to approve that. We're not. And so far, you have approved it because we are growing market value in a very relevant, very... Well, when... Amiga reached 31, 32 billion not long ago, and then it came down a little bit. But it came down because of the stock market, because it was 110,000 points. It's now 198,000. So that's not an excuse, yes, because have stayed, remained on the top, but we did suffer a little bit with the drop of the stock exchange. So we took 50 steps forward, two back, but that's okay. Part of us have to do with our work and also part of that has to do with the market. So our consistent, our results are consistent. More than that, they are repeatable. These are not one time off results and because they are repeatable uh that shows that the company is on the right track so uh the indexes that we have with our regulating agents are all met what was supposed to come down came down what was supposed to go up went up so we are meeting all the indicators defined by our regulating agents and there are other indicators also such as management and the companies use it and we are also doing very well in these other indicators any company in brazil with a capital cost of 15 to any percent and most of the companies are there uh in that range the level of leverage that companies have a 15 to 20 to run a project the project has to provide you 25 of return how are you going to allocate uh 15 to 20 percent of capital to have a return of 21 you should you would be crazy to do that so we need to understand that we need in fact to have that capital allocation done right in a very specific way and especially in moments of high capital costs such as now of 15 to 20% of capital costs. Right now, it's not easy to have a project that will pay off. If you take a debt to pay at this rate and to have a return that is lower than that, it wouldn't make any sense. But we have to be careful. Unless it's something needed, or the ceiling is falling and we have to fix the ceiling. So we will need to do that. But if it's not that, really, we have to choose very well where we are going to allocate the capital. make sure that the company does well in the wrong capital allocations just like cancer if if you have that I'm not a physician but anyways well we don't need to be a doctor to know that but if you have a cancer it will eat you up and when you find that out and you were dying because you would not find it out because of the swelling symptoms and this is capital allocation if allocated now In the return term of the project, if it is four years from now, in the midterm, you already know if you have done something wrong or not. So if you're not doing well, you know that you're not doing well, and you can prepare yourself. So capital allocation is a relevant art, and that's part of this final... part of this presentation of mine and to conclude here my remarks i think that this makes challenges today and this is really something from a huge challenge is to be in school people But when you take people away from a position where they are for a long time in a very comfortable way, and when you think that the person has to be reinstalled in a better place, that's an argument because you want to take people away from that place. People have to leave the place where they are comfortable installed so that they can be transferred and reinstall themselves somewhere else. But can you make someone to do that? Of course not. But we can provide a plate full of food, but we cannot make the person eat. the company really can move to where we want it to be a competitive company a company that does a great job

Well, thank you all very much. You have a nice day and a nice event. Yeah, I'm done a few minutes before the time I had on the video.

Thank you very much for your participation. Now, moving on, I would like to invite our president, our CEO, Reinaldo Passanesi Filho, and he's going to talk about

our strategic plan from 2023 to 2027. I could talk with no presentation, but I think it would make things easier.

This is something that we are used to doing well first. Welcome. Thank you very much for being here with us. This is the first thing that we would like to say. We would like to thank you very much. I want to thank the investors and to congratulate the team. And I think the results that we are delivering here, this is good that we can bring results to this amazing team that we have. And in fact, we have prepared here for you the best of MENA. and the best of Minas. We understand that Semig is also part of the best of Minas. Congratulations, Carol and Leo, for this events organization. But we brought to you a great breakfast. We have cornmeal cake so that we can have a nice conversation. And we are bringing to you some of Semig that is a symbol of Minas Gerais. And I would like to start by saying that Minas Gerais is changing itself, is transforming itself. This is something that is important for me and for you. Semigi, not Semigi, but Minas Gerais in 2022 had the largest relative share of Brazil's GDP in the last years. Minas reached the largest relative share of 9.2% of the GDP. Four years ago, it was 8.7%. So it's almost a half percent more of the GDP in Minas' share in Brazil. So that, for us, means more market. And it shows how important it is our function to develop the state's administration. Minas is doing well. And of course, if Minas is doing well, we can bring even more results so we can move forward. So what do we want to show you? We have this because if we accelerate value creation and transformation, we can have results. Marcio said it very well. we have a strategy that is very clear and the strategy is the same it's a strategy to focus in minas and when this is our strategy and what we are doing now is that we are accelerating this strategy you see our new investment plan that doubles our investment value in the next five years we are accelerating a transformation process for Semiga and also for value creation. Our dream, what makes our eyes sparkle really is to keep on generating value, creating value. We have seen how much the stocks are appreciating with a known strategy and the company providing more agility, bringing more results. making more people happy, supporting Minas Gerais development and at the same time being a machine to create value. So we are having happy clients, we are providing results and we can drive Minas Gerais development and at the same time we are accelerating value creation. And that's what I am going to show you today. And then I want to talk about something that Márcio touched on. That's a macro scenario, our overview. How do I see the company's management? This is how we see it. First, what is the company's strategy? And when I got here, in fact, we reviewed the strategic planning. And this review is still valid. As I said, we are accelerating. This planning was declined. in 2021 the first one is to understand the strategy then after understanding the strategy we wanted to have a efficient capital allocation because it was very inefficient in the past we were destroying value with minority shareholding outside of minas gerais that would just divide the attention of that administration and we're destroying value for the company. We are aiming for operating efficiency in the company and we are renewing and revitalizing uh people our people area and that's what we are going to see here we are going to see a little bit of the strategy a little bit of capital allocation uh the efficiency and to do all of that people that's it that's what management is about to know what you want is the strategy to know how to use your money well generate value create value capital allocation to look for efficiency in your operation. And to do all that, you need people. So that's what we'll be seeing here. First, we start with a strategy. And a strategy. And I like strategy because it allows us to say no, because the number of things that come up to us, and that's good. Because if I have a strategy, I can say no, because that's not in our strategy. Otherwise, everything is an opportunity. It would be crazy. So the strategy is to focus on Minas Gerais and when. this was the first great result and I clearly remember a chart that I brought to us and one of the alternatives was to try again and I said no we are not going to try to try again because to try again and means any risk to to see it happening again which was a wrong movement to have the minority shareholders shareholding companies outside of Minas Gerais. So there is a very clear message to focus in Minas Gerais and there is an indirect message here, which is not focusing outside of Minas Gerais and not focusing on anything that is not the company's core business. That's why we are leaving Axten and other minority shareholding. So we are not going to focus in everything that's outside of Minas Gerais. So it's easier to say no. It is not interesting for us to invest in anything in Pará. And to win means to generate value with this capital allocation. When we say to focus in Minas Gerais and to win, it's not only to focus in Minas Gerais, but also we want to add value to the company and to add value to our investors. So by a process of results maximization and sustainable management, that's how we are going to do it. That's clearly the way that we are going to concentrate our investments in Managerais and to be concentrated is to be in assets that generate value. That's why we say to focus in Minas and to win. So whenever I invest on something, that will provide me greater profitability than the regulatory one, I'm generating value. If I invest and I have a better efficiency than the regulatory one, I'm generating value. So we are focusing in managerize, we are having cautious investments, and we are generating value. So I think this slide is very clear. If you consider from 2009 to 2018, Samighi invested outside of managerize and this, This amount is adjusted by IPCA plus 6%. So we invested outside of Minas Gerais 34.1 billion. So we invested three semis and investments outside of Minas Gerais. That's right.

Yeah.

So we got considering Belo Monte, Santo Antonio, light, Renova. is if we add all that up, we invested in minority shareholding, stakes with no control, up 34 billion reais. That's cash that was flowing out of the company, and it was not coming back to be invested here in our market, in our captive market. That will end, and we need to make sure that when it ends, they will continue choosing to make. And we did not invest in the main market. We only invested 1 billion in this main market. Unfortunately, these 34 billion did not generate value. They destroyed value. That's why our strategy is to focus in miniaturized and win. Because this was not only taking up our time of management, but also it was destroying value. And this is what we have done. clearly changed the strategy. The strategy that I believe it's a common sense strategy. What is the main characteristic of CEMIG? What are we proud of? To invest in our core business, distribution, transmission, and generation in Minas Gerais with a trading company, a huge trading company. I'll talk more about that. So we have already divested and recovered over 6.5 billion in cash. Over two thirds of our investment plan is already carried out. So if we add up Light, Renova, Santo Antonio, Axiom, Ativas, Are these the ones, Marco? But we also have a slide later on. And if you add up that, and here we have to add not only the amount that we have sold, but also what did not have in terms of capital injection, all the risks that we'll no longer have, and also the tax credit. So when we left a given investment, for instance, like when we left the light, we not only sold that, but we no longer needed to have capital injections that we would have to add 1.5 billion to keep my share. But we also recovered the tax credit. So I have the gain of tax credit. I also gained because I did not have the capital injection. And obviously, we sold the stocks. So only that has represented a cash that we're bringing in to invest here in Minas Gerais. And you will see how much investments here have increased.

so invested 2.8 billion a year on average since 2000 in the last four years 19 20 21 and 22. that's seven times our historical average so We also lost half of our generation complex. So I say a billion, but actually, when we consider the power plant losses, it's much more. So we have invested seven times more than our historical average in Minas, obviously, because all this investment was outside Minas. So we're generating more cash, and we are investing it 100% in Minas. Marnay will be talking about that. A very enlightening figure is the number of substations. From 2009 to 2018, we opened about five substations a year on average. Last year, we opened 45 substations.

That's a huge example of what that means to you. It was cash, not to invest in Rondônia or Pará. And we're going to talk about our five-year investment plan. On average, that's five substations a year.

Then in 2022, our market valuation was posted at 28.2. It's two times the energy industry index and almost six times the Ibovespa index. So clear value creation. And that's what we want to do. We want to speed up that process. Speeding up that process means following this strategy. Prudent capital allocation, efficiency, which we're going to talk about in the next slide, and doing all that to generate value to shareholders and society. This is a value generation machine, and that's what we want to do.

So the second comparison, first we have

prudent capital allocation whenever we invest and the return on investment is higher than the regulatory average then you're generating value and we can do that better than the regulatory walk and the other thing that generates value is when were able to cost less than in regulatory terms. If you look at distribution, everyone knows you have a value for PMSO, operating expenses, and another one for losses. that is added to the tariff paid by consumers so you have the basic tariffs plus capital the return on capital then p mso and then we pay for losses in the past we were never able to keep to what was in the tariff we were more expensive than the regulatory pmso or regulatory expenses and we had more losses than the loss that is included in the tariffs in 10 years time that was cash that was leaving the company because we were outside the regulatory limits and outside technical regulatory technical and commercial losses but now we are within those parameters this is a huge adjustment it's over 700 000 a year 7 billion divided by 10. that's about 50 percent of our pma so plus losses so we made an adjustment that was more than 15 percent and

We had two buildings.

We left one of them. That was the Aureliano Chavez building. That cost about 40 to 50 million reais a year. We had two airplanes plus the hangar. The hangar alone cost a few million reais a year.

That's not counting the actual aircraft.

We also had post-retirement benefits.

perpetual retirement payments, which is a right to inheritance after retirement, but life insurance added to that.

We were also able to negotiate as no longer available.

So if you add those things up, it had a huge effect on bringing operating expenses

plus losses to within regulatory parameters. That makes a huge difference to cash that stays in the company that used to go somewhere else. And that cash is reinvested into those 2.7 billion reais or in opening as we did 45 substations. And that's what allowed us.

And my hat goes off to Leo.

Five times net debt over EBITDA to less than one time net debt over EBITDA that's five to six notches that we've gained and our rating now is double A plus so in four years time to get six notches given by rating agencies that's quite a lot because it takes a long time people Reviewing ratings, it's not something easy to do. And obviously right now it makes a huge difference having competitive cost of capital because of our rating. So these are the key points for me. Strategy, focusing on minas and investing, winning, capital allocation, but always prudent capital allocation within Minas and consistent efficiency to generate cash so that we can carry out our investment plan. That is what generates value. And for the first time in history, we are within regulatory loss limits.

And these are the results. Our share price has gone up.

Total shareholder return was 235% from October 2018 to 2022. In terms of dividends paid out, we're talking about 5 billion reais and market valuation 28 billion reais. Total shareholder return used to be minus 25% from 2015 to 2018. And October 2018 to 2022, it's 235% up. So that's the kind of value creation we want to have and continue to have.

Is this GASMIG?

Right now, we are executing the company's largest investment plan in Minas, and we will show you that. Last year, we invested 3.5 billion. In 2017, 1 billion.

2018, 900 million. It's 3.3 times more.

And we'll be talking about the future in a minute. And we want to increase that 2.9 billion in distribution, 137 million in generation, 340 million in transmission, plus semi-exempt, plus gas make. We will break these down in a minute. But this is the overall message. We have broken the distribution record. We will capitalize on 7 billion.

in this tariff review coming up in May.

Concrete example being the 45 substations with an annual average of five in generation. Tadeu is here, our chief generation officer.

I love it.

The best of Minas for you and that symbol. It was his idea and our communications department used that. He's not an expert, but he has great communication idea generation. It had been a long time since we had invested in new plants.

Sorry, what? This year, one billion. But we are executing on ,, so that's another, what, 180 megawatts.

But that's years later since we built any new plants. won a transmission auction i have been here since we had one an option we won one last year we hope to win another one this year gas make also same thing here we are investing heavily again we're building a gas pipe The building process has been successfully concluded for Divinópolis. Again, it had been years since we had made considerable investments in gas pipelines and distributed generation.

We are market leaders.

We're very proud to say that we are leaders.

And actually, still on strategy, all of this

is 100% CMake, no partnerships. That's another change in our strategy. We no longer have any new partnerships. We want to do this with the CMake know-how. This plant is 100% CMake. Our model at CMake is also organic. If we're going to acquire anything, we want to buy 100% of the assets. This is a change to our previous model, which included lots of partnerships.

So the process is we're not going to grow generation indirectly through Renova, San Antonio, or Belo Monte.

We're going to grow generation through CMIG engineering, CMIG teams, CMIG, 100% CMIG capital, even CMIG SIM, given the new reality. now that we can use the reservoirs doing floating solar power so distributed generation with cmeg know-how cmeg engineering and cmeg teams this was our previous strategic plan 22.5 billion we've contracted 18 billion already this is the new one we announced this on Friday was it real or Saturday our strategic plan

oh the material fact was disclosed today our strategic plan was 22.5 billion is now 23 27 adding up to 42 billion so we want to

speed up a strategy that is working, that we are familiar with, it will accelerate the transformation by investing in every single area. Regulated market, 18 billion in distribution, 3.5 billion in transmission, 2.3 billion in natural gas. And in the free markets, this is probably the biggest change, 13 billion in generation, 1 billion in innovation and IT, plus another 3 million in distributed generation.

So we're clearly betting on the trust we have in this country.

We have the state support. The state is growing more than the average. So that means we'll have a market for all this investment.

And right now,

A large part of this, especially in the regulated market, has been contracted. So we just need to execute on our investment plan, which is highly ambitious, but it fits with the rest.

This will generate value, create value, and help transform CMIG and support the development of Minas states.

That's what brings a twinkle to our eyes. We can generate value, create value, and to drive growth.

Because every time we can do this with a cost of capital that is below

regulatory limits, I'm generating value because we're doing it by being efficient, keeping operating expenses and losses within parameters. And if the cost of capital is below regulatory average, as a consequence, we are creating value to the company. And at the same time, we're meeting market needs, keeping customers happy, creating employment and helping to drive growth in the state of minas so focusing on minas generation distribution transmission excellent service with maximum efficiency safety focusing on results and making the largest investments in the company's history this is

a snapshot of our divestment. Every time I say focus on Minas, that means moving away from focusing on other places.

And if you take a look, we used to have 191 companies. When you add up all of our SPCs, we now have 55. Accion, Ativa, Renova, Santo Antonio, Light. This is what we saw previously, including all the cash resources, but also the cash injection that was avoided. as well as tax credits and a lot more we used to have for instance this uses up huge management resources when i first arrived you know our board meetings our executive board meetings were all about these shares about these stakes thankfully these assets are no longer part of our everyday life so there is some risk

are no longer part of our everyday life that are worth a lot.

We have relieved some, we had to buy them because we buy power from these companies above market prices because market prices have dropped and if we had any trouble with creditors, we had to renew the PPAs based on those very high prices.

We are free from that now. Reducing guarantees in the Renova case.

We had the depersonalization risk.

I'm sorry. He's the lawyer. He knows what I'm talking about.

Disconsidering legal entities. So that renova that could be 100% transferred to CMEG, and that's no longer the case. So all of this... Obviously, we are free from all this risk. Not only do we not have to make investments in these projects and inject capital into them, but we're also free of the risks. And obviously, we were only able to do that because we were bold in our management. Accepting that a company you have a stake in goes into judicial reorganization, you have to be brave to do that. You have to have good lawyers, and you have to have the courage to say, we will face that risk in the name of the company, and we will create value, and that's what we're doing. We're creating value because we left Renova, we left Light, we left Santo Antonio, and others that seem smaller, like Ativas and Axiom in these cases. Our operation control system used to be through a company we had a stake in. How can you have the best system in the market like that? What if there are any delays? We weren't able to. So, Márcio mentioned IT. We are making huge IT changes. We're going to have a whole new ADMS because we were able to let go of risks associated to companies who had a stake in. So when we talk about divestment, it's not just about the financial value that came in. It's also about being free from all this risk.

I've already touched on this.

What's great about this is that we are making considerable investments again in the state of Minas. But the first point is we have renewed the concession for another 30 years. That's the key point. Gas makes concessions more maturing, but we have been able to extend the concession for another 30 years, which ensures huge potential. This is one of our main value creation drivers.

We have a concession for 30 years with the state of Minas Gerais, and we have another 900

kilometers of network and we have contracted a gas pipe to Divinopolis, supporting the development of the state of Minas, whilst creating value. Because the regulatory walk is higher than our cost of capital, as I said previously. Again, same thing. Everybody knows that Minas needs distributed generation, especially remote distributed generation. minas is always 10 percent of brazil generally speaking nine to ten percent of brazil on any terms the gdp population we always revolve around nine to ten percent of brazil and in distributed generation we are we account for 25 percent of brazil's remote distributed generation

The state of Minas accounts for that. Obviously, that means a huge effort by the distribution company in terms of connection. We have to connect all of this, and it happens at huge speeds, so it requires heavy investments. And we are doing that, and it's an opportunity for us. It's an opportunity because

There's a lot more investment going into remote distributed generation here than in the rest of Brazil.

Our target is 3.2 billion.

We have updated our strategy, which means these investments will be made in generation. They're 100% C-made.

We'll be using our own engineering. We have a huge potential for innovation, which is floating distributed generation. Because of our reservoir, a large part of these 540 megawatts we have here will be in floating solar

power plants in our reservoir so this is innovation and making the most of opportunity and we have all the connections we won't need to invest in connections as much the bottleneck was the connection to invest in the reservoir and we will de-bottleneck that so

That was capital allocation, investing in distribution, generation, transmission, gas, distributed generation. This is that same chart I mentioned earlier to achieve operating efficiency. So we were above the regulatory limits and now we're below.

318 to 900 to 199. That's 94.8%. Again, EBITDA minus 900 to plus 600.

All you need is look at both ends.

One billion real adjustment. We were more expensive than what was in the tariff, and now we are cheaper than what's in the tariff.

We can't go back on this, right, Leo?

Now that we have achieved this, we cannot go back on it. This has to be within technical and non-technical losses, as well as the regulatory PMSO.

It's quite an achievement. We can never lose that. It's almost like you can't put on another

grain of fat. We have to preserve this efficiency.

So I've given you an overview.

which includes a clear strategy prudent capital allocation and operating efficiency those are the three key points our strategy is very clear now we know when to say yes we know when to say no in fact we have been saying a lot of no's because They don't fit with our strategy.

Very prudent capital allocation. Substations still have a 50% load.

One new substation that we opened has a load that is close to 50% of its capacity. So what is the risk of that kind of investment? It's very low because we're starting off with 50%. How can anyone say that's not prudent? We have a study, and the planning department has played a key role in our making prudent investments.

When we invest in generation, we already have the DPT associated to that.

In Giussanti, we're doing that, but we have already signed a PPA. So this is a free market.

We are making an investment that is attached to a PPA that will ensure certain profits.

Not only do we have a PPA, but we also have a turnkey project in our capex. So it's like financial investors do in generation business and distributed generation. It's the same thing. It's a large market based on a discount applied to the main tariff, the distribution tariff.

So again, efficient allocation and efficiency. As for ESG, the environment is key to us, obviously.

I'll go back to this in a minute.

Oh, I went back. i'll go back in a minute so i'll skip this one so we're starting with g rather than e we'll talk about g but then we'll talk about e and to everything marcio has been saying so i'll start with this one This is a major topic.

We have to thank the board for the opportunity to our team. The board has approved up to 40% of CMIG leaders

made up of professionals who don't have to sit an exam.

Right now, it's 14%. So it's a mix of internal and external talents and professional management, and it will make all the difference. Because we need people to do everything I've just told you about, to implement that strategy, to have prudent capital allocation, to have more efficiency. To do all that, we require good people and also to bring oxygen and to combine talents and to have more diversity at CMIG and that means not necessarily having people who sat a public examination

There has never been any political influence on what we do.

We have no connection with the governor or any government representative. Our management is 100% professional, and all directors

All chief officers were hired by headhunters and internal employees go through a formal assessment. So it's a formal assessment conducted by an independent company or

professionals hired by headhunters. I was hired by a headhunter, Tadeu, Tadeu was, Osias was, no exceptions.

And our own talent. It goes through an assessment.

And right now, we're able to do that not only for directors, but for all leaders.

So 14% of our talents didn't sit public exams.

And that brings in new oxygen, more diversity, new ideas, which also creates value for the company. And we can see that. In our climate survey, we went from 64 to 75. Overall satisfaction, 86. Diversity, 82%. Opportunity for growth, 64%.

And the way we think, what we want,

is to work so that we can have a client centric culture. Our family is Minas Gerais because I have in mind catering, serving the Minas Gerais clients that are here. This is a gradual change and that's what we have been doing. We are leaving a procedure culture and we are going to a culture where we have the customer at the core. We have to... the clients at the end, but we have also to follow the procedures, but the rationale is first I need to think about customer satisfaction and to reach customer satisfaction I have to follow all the rules and procedures, but when we think about the customer's pain, I have to go that extra mile differently when I just look at procedures. So I have to work with both. So people as a process, and I'm going to repeat what Marcio said, people as a permanent process in a number of things we have. ground we have evolved here you see this new talent and we have a lot to be done to evolve and that has to do with creating a customer-centric culture and that's what's going to make all the difference when the market opens if i'm thinking about the client that's what's going to make all the difference i don't know how much time i have but i would like to congratulate the team from the commercializing company Thank you very much and congratulations to the trading team. Dimas and Marcio, once again, I have to share a secret publicly, but it's not a secret, of course, because I'm saying it out loud here, but whenever I go, I hear companies say, and they tell me, well, I have contracted your energy. Large companies contract our energy and they say, you will play a hardball in negotiation. And that's what we want to do. We want to play a hardball at negotiation, but we want them to close with us, to sign the deal with us. So we have the largest market share in energy trading in Brazil. We are leaders here in Minas Gerais. And we are very strict because we also want to ensure profitability in this leadership. So really, I congratulate you because I was at an opening, SIGMA's opening. It was Friday, if I'm not mistaken. This is a lithium company here at the Chiquitinhonha Valley. This is a huge transformation in Minas Gerais. This is a company that now is worth $3 billion. They are producing green lithium in the Chiquitinhonha Valley. Where did they buy their energy from? From us. They could buy from anyone, but they buy power from us. And that shows our capacity of delivering. And obviously, it shows the potential that the state has, that the state is seeing in terms of growth opportunities. And because new investments are coming into Minas Gerais. So this is the culture that we have. This is the culture. for the next moment when we have a market that is clear but this is what we already have been able to reach with our trading company i already talked about this other slide here we have some other important topics i will talk about asks we talked about governance about the professional management all the internal and external talent that come in via assessment or headhunters. That's a very professional management with no political interference. This is a culture that aims at clients and customers, especially at the core.

And here, in terms of other programs, considering our social responsibility,

Now we have 1.2 families benefited from our low-income tariff. And that's also thanks to simpler procedures. We were able to more than double the number of families enrolled in the low-income tariff program. We are thinking about the clients, the customers. Before, we had so many procedures, they were not able to enroll. Now we simplified it. We doubled that number. So here, we were able to include more than the total population of Belarus in terms of number of families that now are under this low-income tariff program. And that means that they were able to save around 56 reales a month in their energy bills. And that's money that they have to spend on food, for instance. And that is just because we were able to change a special procedure, and we were able to benefit. a huge number of people by the means of this low-income tariff program. There is another program that is called Energia Legal. Here we have public lighting using LED in 100% of the municipalities, a huge program. 490 towns, over 120,000 public lighting fixtures. And also, it was important for us because it decreased losses. Energy is also important for us to decrease losses. And we also are able to take electricity to all those people that have a hard time receiving it. So this has a huge impact. socially, and also in terms of carbonization, because when we go into our zero target... That's our ambition.

Our ambition is to reach carbon neutral up to 2040.

Up to 2030, we want to be 75%.

That's right. So most of companies is 2050.

We want to be carbon neutral. in 2040. In 2030, we want to be 75% clean. And our challenge is the losses. So whenever we are able to improve losses via Minas LED and also via Program Energia Legal, we are also aiming to be neutral carbon. And this is what we are proud of. We are in the Dow Jones Sustainability Index for over 20 years. We are the single company, electrical company that is in the South Jones Sustainability Index for the last 20 years. And also we got here the Carbon Clean 200. This is the certification we are ranking the 37th in the world. And in Brazil, we are number one. And our objective, which is very clear, is to have a zero target, a target zero for 2014. For 2030, we want to be at 75%. I already talked about our program Energia Legal. I think that's it. So I am finishing within my time here.

I was able to... Well, I still have eight minutes left for a wrap-up.

I would say that I need to say that I'm very happy to be participating in this journey. That makes a lot of difference for us. We have to keep that sparkle in our eyes. And I do wake up every day with that sparkle in my eyes to continue carrying on this transformation project. And when we see the results, we only get even more encouraged. And so we would like to count on the support of all of you to move forward in this transformation project and i am sure that it's already generating value and we continue generating value and at the same time we will allow for a company's transformation and this company will be the driver of minas gerais development improving the quality of service providing also providing a better life for our consumers and that's why we are here and we are always paying attention to that we obviously have our own biases and it's always important to hear from you to hear your opinion so that if there are any improvements to be made we are willing to do so all the executive board will be available by the end of the day here in our afternoon so that we can have a Q&A session and we just want to be a machine to create value, to transform, to change, to generate value to shareholders, to drive Minas Gerais development and to better serve the people from the state.

Thank you, Reynaldo, very much for the presentation of the new strategic planning piece.

I would like to have you a few more minutes on the stage. We'll have 10 minutes of a Q&A before turning to the results of the fourth quarter of 2022 with Leonardo Giorgi. So now we'll go for a Q&A.

So should I tell a joke?

So we have a microphone here for questions.

Good morning.

This is from JP Morgan.

Thank you and congratulations to the whole team.

About expansion in generation, there are 13 billion to be invested in the next years, and we have not seen good returns, especially in greenfields. How do you intend to work with the capital cost. Also in GDP, this 2.5 billion are under the new rule or the old rule for the GDP? Let me start by the... first question the 3.2 is the old rule of course the number of incentives that we have in the old rule was much greater than in the new rule but we do have enough projects so the answer is that these 3.2 billion we already have assigned projects that will allow us to reach those 3.2 billion of investment. The second question, I think your comment is good. We know how low is the energy price right now, and we do have a challenge to turn projects feasible. But we can always have brownfields. If we don't have the greenfields, we can have brownfields. we prefer to have the green fields and my team's my soccer team's color is green so not many times in life will you will be winning as much and I had to make that joke so so obviously what we have done with Boa Esperança is Greenfield but and in general i would say that it doesn't make sense to have the largest trading company of the the country and to buy outsourced energy if you also generate energy so we change their strategy we have the largest trading company in the country we have a single understanding from our clients we see the results of our trading company and we were doing that buying energy from good parties. So we have a technical capacity to produce projects, to manage projects, and we have our trading company that has a single understanding of our clients, and we are going to put these two things together. If I can put these two things together with a greenfield battery, if there is no feasibility for a greenfield, we do have M&A projects that are feasible. And then what is important is to have the discipline that we are going to look for these M&A projects within my strategy, that is, in Minas Gerais. Very close to Minas Gerais eventually, but it has to be in Minas Gerais. I'm not going to go for an investment project outside of the state.

Good morning. Daniel Travitsky from Safra Bank.

I have a question about the return rates. A large part of your investment in the strategic plan goes towards distribution and you have a return rate of 11 to 14%. So I would like you to compare the return rates for the distributing company, how much you see that above the regulatory level, and if you can talk about how that compares, how the return rates compare. And a second question, if you allow me, is how do you see the risks involving the distribution contracts extension analyzing this amount of investments in this segment thank you I think you cannot compare invest 18 billion and invest in distributed generation or investing the regulated marketing and the competitive market obviously the profitability in the distributing company is lower than the distribution the profitability in GD But the capital considers the existing risk. So the distributed generation has a high potential of return. And the figures are very positive. And we see that there is a rush also from Banco Safra Bank to invest in distributed generation, a huge rush of investment in distributed generation that tends to turn a more normal return but that will depend on the discount that you are going to give so here we have an embedded risk the risk that you know the discount that you are going to have in the final tariff in the current situation this remains to be a profitable investment and that's why we have a fluctuating uh solar generation it costs a little bit higher than the internal gd But because the connection is easy for me, I can be agile, I can be quick. And that's what explains this investment in distributed generation. And when we look at the distributing company, that's a whole set of things. It's not that I'm going to have A, B or C, a specific profitability by asset, but I will have that profitability according to a capex so for the uh situation number one is for a total caps capex that i have invested and then we have two objectives so first i i would say that If I have 10 billion of investments I want to have zero disallowance because if I have disallowance that is going to affect less my basis second of the capital cost Our capital cost is lower than the regulatory walk. So if I am able to finance Lower than the debt cost that is on the regulatory walk and i i understand that it's lower than it's lower than the regulatory walk i can't generate values so we have to ensure a that obviously that is attractive in terms of leverage And I have to leverage lower than that cost that we have at now, the regulating agents, and ensure that the disallowance is as minimal as possible. Let's hope so. I can't do it in the middle of the tariff review. But in the last tariff review, it was zero disallowance. Everything that we are doing requires a huge planning in order to ensure that this is a needed investment. So there's an advantage here because we didn't invest much. So now we need a lot of investment, and I can do it. So here, when we open a new substation, in average, we have 50% to 55%. That's a lot.

So it's conscious, right?

And also there is a qualitative consequence, right? Because with the line that we have a huge line for the connection request. So if distribution is not prepared, this line won't move. We won't have the connection ability. So you connect and you connected nothing. So it's also important to meet this growing demand.

Andres Sampaio from Santander.

Marcio, I have a question for you. I would like to understand what is the difficulty, what are the challenges in dealing with a company that has a natural turnaround process, a company, and you mentioned in the beginning of your speech and comparing that to the privatization process so how do you bring together these two processes in a way that one does not get in the way of the other and to make sure that both of them can work hand in hand Well, these are two simultaneous projects, as you said, but one is really moving forward, the turnaround projects, and here are the results. We just work on them, we carry out, and we are able to achieve some objectives. The strategic plan, as Renato said, is a limit to say no.

The worst thing that we could have in a strategy is the good idea.

So when you have a plan that is defined, you say no to any other idea. So you have a wholesome plan because you can carry forward this turnaround project. You have a strategic plan that allows you to say, to define what's in or out of the projects. And you can say no to some good ideas. Otherwise, you are going to have a patchwork thing. On the other hand, the prioritization plan nowadays, for CEMIG is more of a preparation. I mean, we have to be ready so that when you are ready to do it, we are really ready for the process with all the questions already addressed, with the most relevant issues taking care of everything related to the corporate structure because it has to do with the state. So this is more of a preparation for when the General Assembly approves some type of privatization. That could be a simple privatization. It could be a corporation. There are a number of options. So we do have a plan that is ongoing that is bearing results. And the other area is a preparatory area, I would say. we will be ready to execute the other plan when the time comes. Another question about the transmission capex. How much of that transmission capex is regarding new lines, and how much of that is just to reinforce existing projects in the original contract? Most of them are just to back up improvements by far.

We will have a Q&A with all the other authors.

So, please, you can ask Marcio questions here. And no problem, you can ask anything you want, but we will be here the whole afternoon and there's going to be a Q&A by the end of the day. My name is Juliana from Bank of Yes. So, how much of your agenda today is focused in privatizing the company. That's my first question. And how much the agenda of the board and the CEO is taken by the privatization possibility. And also on generation, out of these 13.4 billion, do you have a target here? For mega, all of that is focused in Minas Gerais. And how much of that is from HPP, and how much is renewable? About the agenda, we had an agenda consumer in the agenda that was huge. And that was light and renova. really used up and consumed a lot of our agenda. It was really, that would take up a lot of our time and hours, but also our intellectual agendas. So we cleaned up that agenda and now our mindset is focused in Minas Gerais. Once we left the low profitability or negative profitability assets. And now we're focusing on the good ones. So that allowed us to concentrate on privatization. And here we are working on that. And we are working closely with Minas Gerais administration so that we can show Minas Gerais administration and tell them the reason why this is a good option for them and to be able to approve it. In addition to that, we have a preparatory agenda. There's nothing much that we can execute, that we can actually do. And how this is going to be on the day after, it's just a preparation. So it's done. What are we going to do on the next day? So we had advisories that we are working with and internal actions that we're doing to be ready. But there is something that is key we need to have. the government's approval. So now we have a favorable environment. We from management are favorable to that because of the objective reasons, because that's going to improve the value of the company and also for subjective reasons as well. This is the single non-privatized company in the country we are the only ones is that right so uh i think it does make sense to take that into consideration we always communicate with the government and we always have meetings so that's also very active First, I would like to tell you my personal opinion, just like Marcia's. Also, this is the opinion of the top management and I believe that as an officer, I believe that it's great for Semiga to become a corporation to go through this privatization process. So this process of acceleration and value creation is going to be even more accelerated in the movement that we might have of turning into a corporation or have the privatization of the company so i'm thinking here as an executive i think this is positive of the company the company will no longer have some management ties and that will allow this amazing company that we have to generate even more results to the investors and to the society and also to we believe this is very positive for the company itself the company will gain sustainability and long-term survival now as far as our relationship with the state assembly and with our officers, we have something that we need to discuss, which is the concession, which are the concessions. And Alexandre is here, and he can tell you more. But by November of this year, we have to request the extension of our concessions within those 49%. And I don't know the number of the decree. It's decree 9271. our concessions are doing 26 27 but we have to send a letter saying that we are interested in the automatic extension and this letter has to be sent by november of this year and we also need A report from the State House the State Assembly by November of 2023 they have also to approve the extension of these concessions and here is more than 50% of our productive areas. So we have been discussing that with the executive power and the state assembly to avoid what happened in 2015 or 17 when we lost some of the concessions. It was in 2015. So about our capex, the 13 billion, obviously that is associated to a number of megawatts. How much is that, Tadeu and Mauricio? 1.9% average. And obviously, it's 100% renewable. And that includes the renewal of the concession grant. So part of that is because it includes the renewal of the concession grant. But the investments will be in wind and the photovoltaic. I'm sorry, they are not using the microphone, so we can't hear what has been said.

Yeah. So just so that you can understand, we have two options.

First, we can change our head office, and that needs the state assembly. And that's the option Paraná's administration chose, they will ensure 100% of the renewal of their concessions by changing the corporate structure of the holding company. And we have another option, which is to retain 49% of the SBE, the concession grant that is due, and then I have another private entity will take over the 51 that's under regulation and for the second option we need an opinion from the state assembly the state assembly needs to approve this model ensuring that we have the automatic approval of our 49 and that has to come by november of 2023 and i can also go for the auction i think our time is up but just one more question please well this is from btg a lot has been said about privatization and the obstacles but we do need the approval of the state assembly and something very simple here you said that you were not discussing with the State Assembly. When the government intends to discuss with the State Assembly, what is the timing here involved? When do you think you will be able to start and follow the process of our privatization process. And we know it's a long one. Next year, we have municipal elections. We know that is a critical period of time. So we don't know when that's going to happen. That's what we would like to understand. Are you going to submit this proposal to the State Assembly right now? It's a negotiation that takes time.

Do you have a timeline involved here? We want to do it right now.

We don't want to waste any time.

We've had meetings with the government where we emphasized the need for the government to mobilize right now with the assembly. That's what we want. We want to get the approval.

But obviously, the government has its own interests. It's not just about teammate.

There is a strategy to take those topics to the assembly to get approval from our side.

We believe in it. We've been working very hard on it.

I believe that it will happen in this term.

It didn't happen in the governor's previous term. But it takes time, as you said.

So we need to work hard. We need to bring in potential bills and try to get immediate approval. But it's not just in our hands, because shareholders own the capital, and they should be doing that. They have the power to vote.

So we've been supporting that, providing information to get approval, but it's not in the hands of the company's management.

We just operate.

The capital plan is done by the government.

Thank you, Reinaldo, for your time. As we heard, we will have another Q&A session with the CEO.

Now we'll hear from Leonardo George about the last quarter and the year of 2022 result.

Good morning everyone.

good morning thank you for joining us and thank you for joining us online we have our foreign investors who are listening to the simultaneous translators and we also have our investors here analysts bank representatives who are here with us thank you so much for coming to the land of cruzeiro sports club i'm sorry i apologize but i do have the microphone

i have the power of speech and i'm going to make use of it but i wanted to talk about investments

showed you the investments we'll be making in the regulated market in competitive markets we do have the balance there's 42 billion our leverage will be kept at levels low levels so as not to affect our rating but in free markets competitive markets the future price of energy is one of the main variables for the company so investing in the free market those 13 billion we saw for generating for instance will be made considering future energy prices in brownfield or greenfield and marcio mentioned many times during his presentation that we need to have the right capital allocation and the right capital allocation plus financial discipline in allocating resources that's part of our everyday life and an important part of decisions when we disclose them to the market that they will be adding value to our shareholders considering market variables

with regards to raising funds and the future price of energy which is a key variable especially right now or when energy prices are so low considering the last few years of favorable ideology. But we'll have an afternoon presentation by Dimas about this topic. And during Tadeu's presentation about generation, we'll also be hearing more details about how ready the company is for this future how the company is getting organized to make the most market opportunities i'm going to have to continue talking about my football team no maybe i shouldn't As I said, these investments will respect the discipline will have in allocating our funds over the next few years.

We've been doing presentations for a few years, and when we did this presentation a few years ago about talking about the companies focused on planning, we were dealing Very difficult question.

Some investments that didn't work out. Our debt profile wasn't great in the short term. There was a lot of pressure on our cash management and our divestment program at the time.

It had to do with how the company was dealing with cash pressure. Sometimes it had 10 billion reais maturing in two years' time. It was a very tough time for the company.

But in the last few years, we have been able to change history. In the past, there were also discussions with the federal government about renewing concessions.

losses that led to the loss of half of our generation complex these were tough questions which isn't that scary right now but at the time it was very high so since then Over the last years, we have been able to reorganize.

Our leverage ratio is very low. We have the balance we need to make the investment.

Reynaldo showed us we have invested in operating efficiency, and we are on a whole different level now. So our drivers now are our operation and our everyday

We have an issue with our files, so we're going to switch you and Marnay, if you don't mind, Leo, and then we'll come back with ourselves.

Marnay, would you be so kind? You think I know my presentation by heart?

As Reinaldo said, Marcio left one minute, Reinaldo left eight, and you left 29.

There's no way I'm going to beat that record.

Okay. Yes, first slide, please. Good morning, everyone.

Welcome.

Analysts, investors, it's a huge pleasure to have you here with us. I also want to thank Reinaldo for believing and supporting our wonderful project. Leo, all the directors, all the superintendents who are here today. And I also want to thank

everyone who's working here, and our clients, the hotel. Am I changing my own slides?

Okay. And I want to thank the hotel, one of our 9 million clients.

And I want to say that we are going at 106 kilometers an hour, 106 an hour me. Every year, we connect 106 new customers to distribution.

And those customers need investments. So if we want to speed up our connections, we need to increase investments. And if we do it well, like Sigma did, or Leonardo, Palo Rec, Protect Fertilizers, Morro do Ipe, those amazing customers we connected this year will need more investment. And that will make it easier for them to join our trading company.

It all starts with distribution.

We need to meet their needs so that we consolidate our relationship with our clients. As I said, our solution lies in expansion and focus on our clients. Just as a highlight, we used to waste a lot of time Establishing relationships on all channels with our customers.

We had a strategic partnership with IBM.

We brought them on board with us so that we could digitize our customer care, which has made our life much easier and has allowed us growing and improving operations. We all know that. And I think it's important to say I always say this to my team.

Losses and default go hand in hand in distribution.

The company has to be doing well, both in terms of losses and in terms of because if we stop will go up. Losses will happen anyway. In distribution, we have to have a consistent plan for losses.

And that's how we work. And that's what I'd like to show you right now.

Before I highlight, our investment was record 7.8 capex in 2018, 60 substations as Reinaldo said. Last year alone, on average, as Reinaldo said, we have an aggressive number of substations But that is what will allow us to connect our clients. So these are heavy clients, clients that use up energy. 2.5 billion substations, 1,500 blocks of line. We have a broken program to eliminate wood transmission lines, because these are very high tech. And we have a lot of burn-downs. There's a lot of burn-downs. And wouldn't transmit if I suffer a lot. We really have the right material here. In addition to building replacing 2.5 years worth of transportation costs. We're also connecting our generation points, 180,000 works and clients. They complain we have to keep our deadlines.

What about revenue?

This is very important. We have 235 meters. They are smart meters in total. 260,000. It's close to 9 million clients. It's not a lot, but 64% of our energy is protected in our billing. We monitor these clients' consumption. And our revenue is in here because we also monitor all of our costs. Also,

860,000 obsolete readers. Those are being replaced.

So more than 1 million last year alone.

Considering a 9 million customer base,

So, more than one meter, these meters are obsolete. I did not have enough of the meters so that we can have a better compensation basis. Let me want to replace

all of the obsolete meters, and that will stop losses on our customer base, and we will also not lose any energy.

That's the main thing, because when meters get old, everybody knows. They favor customers. focusing on the mso that we're not how do we reduce costs like this and we want 30 000 single phase and these Reconnectors are completely automated. They are the best. They reconnect automatically. They bring the numbers down to zero without having to do anything. Any temporary.

outage needed a team outside. We had to send people outside. And you know what miniaturize is like.

Distances are very far. So wherever we've installed it, we have reduced the interruption by 23%. That is PMSO, and it's system reliability. Now, let's go to CAPEX. 23 to 23, 30,000 kilometers of single phase will be converted to the team. This will turn family agriculture into

agribusiness owners. This is all about development, as Reinaldo said, and this is the contribution we're making.

We want to help rural farmers to develop. We'll also be building 3.5 thousand kilometers of distribution line, and we will be installing 1.2 hundred meters of stock. we have the largest number of of the energy legal program thousand companies connections they're stealing it's because there are problems or it's not allowed to have power. We are working with the government to make these areas legal that we can provide services.

There's a neighborhood in Rio de Janeiro with 6,000 families and 4,000 families.

have connections thanks to the flow to find a solution and mais energia, the more power program. We will be building another 136 substations. InvestMinas is a government program offering this at new industries coming in.

Hopefully, this number will only increase from now on. These are our substations.

We had planned seven out of three, three billion with investments.

And as Renaldo said, our distributed generation funds come out with 100%.

Yeah, it's crazy because when we put our...

energy availability map for the distribution generation. You know that there's a limit of up to 5 megawatts. On average, 2.5. 5 is only if it's exclusive.

No, it's not building a substation now.

We'll only open it two years from now.

We have to deal with red tape. buying equipment. When they do that, they place the order. And then we just wait. And everything goes together.

They want to connect closer to the substations. They buy the land. They get everything ready. And they just wait for the substations to be ready.

And the loads revolve around 55% to 60%, depending on the region, because our substations are overloaded.

We have more power, we have another 200 substations, 50% more both in number and also in power.

It's an amazing increase in energy availability.

It's all about investing in minutes.

This is also interesting.

I asked our engineering department to come up. We talk a lot about the pent-up load.

Last year, it was 3.54 megawatts.

If it's not available, customers will go somewhere else. I want to talk about the loads that we are working on right now that we connected over the next 24 months. 2.2 gigawatts of loads that are required and are being met by the substations and the lines available. This is a climb.

who had these generators.

And we thought, I can't believe this is happening in the countryside of Venice. I don't know what it's like in the countryside, but this has to be updated to help them join the power work, because it would be much better for them, much better for us, much better for everyone. I'm not even talking about the planet and sustainability. Look at these generators.

Look at our Buritaze route.

Huge pleasure. We're very proud to have this project at the company.

These new substations have to do with people moving from cities to countryside. It's the end of the pandemic. Rural areas are growing.

considerably, and there have been requests in urban areas and rural areas. The green bars are those rural areas. After the pandemic, as you can see, there was an increase. And we also began to make more load available. So that 2.2 we've been dealing with, in addition to the organic growth, the increase in the number of houses and flats. This goes to show that there's potential for even more.

I mentioned 2.2 and coincidentally, we completed the year with 2.2 megawatts of distributed generation.

These are all the connections. And we really have to make an effort to offset which isn't bad for us because we are compensated according to Tuesday. And this is the captive market, which accounts for 30%. If you look at the total market, we're talking about 6% of the energy. Now, system reliability, these substations, in addition to making the load available, as Dr. Marto said, we also need to improve

energy supply quality and reliability we're talking about 948 right now the regulatory is 99.9 percent availability of energy so

That's GPT. If you Google it, you see that this public service index is well above all other services. 99.1% reliability. That's a very high level of public service. And to consider all of these investments, all the work that is being done, we had to change our strategy, engineering, And this is our logistics operation. This is how we get our materials. We had to set up two distribution centers.

We have a third one being set up.

We requested another one. We're talking about 1.4 billion meters. I talked about 1.1 obsolete meters. regulatory deadline the posts have to be ready when they are ready

And that's a role. There's a lot of work done that is allowing us to also implemented our reverse logistics.

I mean, images speak louder than words.

We are reusing materials. This is the kind of that we might be losing.

If we remove a material that hasn't been 100% used up, we have to make use of it. Otherwise, that's a loss. So our asset management focuses with logistics

All of these materials were being directly managed with the construction companies.

So we brought this to our distribution center so that we can have logistic gains, so that we can have more control over materials and something else. All of this was directly dispatched by them. So when the customer called our call center and complained, it went straight to the construction company. And the construction company would work directly with clients, but they only had their interests in mind. And that's not how they work. to do what the customer needs as quickly. The faster we can do that, the more indirect gains we get, such as satisfaction, faster energy availability. As for losses, we had high levels of losses. And for two years and four months, we can't have any losses because one month worth of losses is difficult. We have been within the regulatory limits of losses.

We did something really important.

We found losses and we wouldn't negotiate with clients. We can't do that. We have to go to court. We have to stop those losses and we've changed that. The other one was safeguarding the network, the BT0 network. What does that mean? Zero flow voltage. There's no secondary way of getting the energy. Clients can't steal energy. And PT0 is precisely where most frauds can happen. And right now, there is no fraud. And that helps to reduce losses. And obviously, we have 400 technicians out in the field conducting inspections. That was one of our main gains. 40 an hour you know what 14 hour is 40 frauds detected every hour that's a lot so we have to do something we have to find the right innovation the right technology the best inspections possible to have the best systems so that losses can remain below regulatory limits.

And I was talking to my kids the other day. We want to see a code play shows. And there was a huge sign that I think most of you from Sao Paulo probably have seen it. Return the bracelets because this is a sustainable show. Each band that comes in brings something new. They had the number of places, the countries that were returning the bracelets the most or the least. And who was the worst was Argentina with 80%. And then I thought, what is going to be what? How Brazil is going to rank? And my daughter said, it's going to be 100%. But the results were out. It was 79%, so even lower than Argentina. So yeah, even that leaflet from masses of people take it away. Can you imagine the energy? Power 24 hour available. This has to do with the inspection program. But we have a balance point here. What if I have an electrician in each home? We won't have fraud. Great. But we have losses coming down, delinquency coming down, and our PMSO also coming down. Then we can invest more in losses and bring this back to us. Well, I think we are fine here in terms of losses. I covered everything. The ARFA index, the Receivables Collection Index, that is how much we were able Well, the, the, the buildings that are due on the month over what we collect on that month. So, here we have the accumulated from other periods, but that has to do with the efficiency. We're looking for it right now. We are at 99.68% of that's the amount of billing over the. amount of collection over the amount of billing so that our alpha indicator collection over billing we also have the last 12 months results so in our delinquency we are also with good results Now, talking about operating efficiency, we have another example here, which is collection. Collection is expensive, but here, using digital channels, we are at 57%. 56.5 percent a significant development we are bringing down uh the lottery houses that also collect money and that has a reason to be expensive because people don't have that don't have a bank account they use the lottery places to pay the bills but here we are looking at our average tariff for a collection at zero 79 for a client build and i have a number of examples here and and leo likes this one because it you know involves money and whenever it involves money he likes it here we have our default provision our allowance for doubtful accounts obviously here we have an improvement in the accounting rules always aiming the best practices in the market how other companies are doing it but there was a change here but here what we really have to consider is the assertiveness of this connection so that delinquency doesn't move up and we are reaching 2.5 million of this connections. That's why it's a cultural thing. That's why clients pay the energy bill. Otherwise they know it's going to be disconnected. We cannot, lose sight of that so these connections are crucial but these connections are expensive so what we have to do we have to have other types of technologies so that we can collect uh quicker or send whatsapp send what sms and also make our clients life easier so that they can pay the bill of those that don't have a bank account only have only can pay with money we can have another option for them closer to their home so that they can uh pay their bills so that will improve us our results in our ada and here we have some other parties still in this area we have campaigns for picks that instant payment system. Also here, we had 2 million temporary disconnections. So we do have to be aggressive in that action and fighting delinquency. We have here 80,000 remote disconnections. And it's important to say that our client A group, all of that is protected. Second category, we're the clients of average voltage, all of them protected, then indirect low voltage clients, the ones that consume the most, all of them protected, and they will perform the 280,000 clients I mentioned. And now when we are at the low voltage, we are not going to add them to the ones that consume the most. No, we are going to add that on the clients where we have delinquency problems, fraud problems, which is the BT0 or low voltage zero network. And also safety, because in some of the neighborhoods, you just cannot go in to make any disconnection. So it has to be a remote meter or a smart meter. So that shows that we are on the right track. And this is also good, because many times, the clients are delinquent, and not because they don't want to pay is just because they can't and a lot of those tell us I'll get my payment tomorrow or I'll be paid on Monday and then we reconnect because we trust them because you know it's easy to do it and it's easy to disconnect again on Monday if they don't pay so it's a good relationship that we have with our clients so for low-income delinquency for instance why did we have a low delinquency in the pandemic period, because these connections were suspended for a long period of time. And when these connections restarted again, we brought solutions, energy efficiency, and also installment payments, just as we have done with the stores when they were closed for a long period in the pandemic. We created special conditions. for merchants to pay so this is a very humanized relationship because a lot of clients are not in that situation because they are fraudsters it's just because they are unemployed So, we respected that a lot and that has helped us to bring facilities to offer easy solutions. So, for instance, when we go for a disconnection, we bring in a credit card machine or allow them some time to pay using the PIX, the instant payment system. also we have the regulation of the debt of public authority in hospitals because of prior strategies they removed the relationship with public authorities of the public power we did not have direct service to city administrations now we created a project that's called approximation or approximation and our goal is zero problems with the city halls, with the city administrations, and we have 774 of them, and we have been able to control delinquency. There is one of them that there is a problem, but everything else is solved. Credit cards option I already mentioned, and we have that low-income tariff that already was mentioned here. When we increase the number of clients enrolled and that really helped them. Thank you very much for your attention. And in the afternoon, I'll be here available to take your questions.

Thank you, Marnay.

We have time, Marnay, for two questions. So if you can stay there. And we can take two questions now. Otherwise, we'll move on. No, we don't have questions now. Thank you very much, Marnie, for your presentation. Leonardo, please, can you come back to the floor so that we can resume your presentation? i think now it's gonna work right but you saw my nice presentation and sometimes we see our collection index that better than before the pandemic lower delinquency the losses behind the regulatory but behind that we have a number of actions that allowed us to reach those results. That is thanks to a lot of work from our distribution team, from our operations, so that we could reach those results. Today, our collection, when compared to other distributing companies, we always compare ourselves to the best ones in the market. I do not consider the fact that we are a state-owned company, but we are always among the best ones in the quarter, and we say that our collection rates are among the best ones in the electric distribution sector. There are not many distributing companies that are meeting the regulatory indexes, and we are, and we are proud of that. Well, some athletic routers sent me a message because I talked about cruzeiro and then the presentation didn't work. You know, routers from competitor jinxed me.

Yes, I'm being bullied by the competition here, by the competitors, the soccer team.

I think it's going to work now.

Very well. This is our presentation about the fourth quarter of 2022.

We published on Saturday that these results were filed on CVM, the Brazilian SEC. And now we turn in the slides. I don't think this is working. The clicker doesn't seem to be working. this is a quick disclaimer I don't think I have control of it and with this clicker this is not working okay now it's working these are the main factors and results we always draw your attention to the transferring of our trading contracts from semi gt to semi holding this is something that we have been doing a little by little but that adds value to our shareholders we were able to transfer 30 percent of contracts and when we talk about amounts they are substantially higher and this is an interesting piece of data holding for semi age here totally uh transferred in terms of contracts and then everyday in 2022 of 721 million so just in the fourth quarter it was almost 300 million with a total of 2022 is a total in 2022 of 721 million extraordinary results and we understand that in addition to the tax efficiency of transferring these contracts to the holding company we can better visualize how much semi a commercial trading company adds to same sometimes the results are under semi gt and that is combined with the results of energy generation and we were not able to have that understanding of how this trading company really is uh special in the market not only in size as the largest energy trading for final clients but also how much value we are generating by this trading area. The figures are really amazing. This is MED. Here we have operating efficiency and investments in 2022 are within the regulatory limits. We are one of the largest distributing companies in Brazil. We have 9 million consumers. I believe we are the largest. and with the quality indicators also in the regulatory limits that are established by ANEL, our regulating agency. So we are delivering sound financial results and distribution company meeting the regulatory indexes and also reaching the quality indicators. So we believe that we are in the virtual cycle of systemic distribution and with investments that we have for next year. And we are already doing that. We believe SEMIGI distribution will jump to another level. And for SEMIGI GT, we have significant results, very good results. Of course, SEMIGI generation and transmission hydrology also helped here. And the results were very significant. And we'll see more of that in details. And we reduced our effects exposure around $244 million that was done in 2022, and we'll talk more about that. Saint-Miguel TT had 1.5 billion of effects exposure in 2018. At the end of 2018, we published a plan to reduce this effects exposure, and we are moving towards that strategy, and I'll talk more about that in a minute. We have our consolidated results and we see that in the pure results, we had a reduction of 14% from 8 billion in 2021 to 6.9 in 2022, but when we adjust that, by the non-recurring areas. In 2021, we had that huge agreement of GSF and we had to post extra one million in the results because of that agreement. So, in 2022, we had a huge provision related to what involves the tax credits uh on the cms that the tax gain that we had and because of an approval of a law in 2022 we had to make a provision for that and that has affected our results in one billion but even with this provision we see the results were very robust close to 7 billion, and when adjusted, it's close to 7% higher, is to be the priority. And same thing for net profit. Adjusted, it was 30% higher than the prior year, and we do believe this is an extraordinary result, very consistent for the company. At every quarter, we can have a non-recurring effect. higher or lower, but in general, our quarterly results in the past few years have been consistent. And when we look at the fourth quarter alone, we also understand that these were very consistent results adjusted EBITDA close to 1.7 billion and our profit 21% higher than what we had in 2021. even if we do not consider inflation, the company is adding value to its shareholders with these special results. So, talking now about PMSO,

I think we should talk more about that.

Our adjusted costs for the results of 2021-2022 had an increase of 17% for PMSO costs, but we should explain that if we look at our personnel expenses and profit sharing, these were very controlled

post-retirement.

It's something separate. We'll be able to discuss that in this event. We'll be able to talk more about post-retirement, but this has to do with actuarial issues and the higher costs this year has to do have to do with outsourced services, 255 million based in 2021. But as I mentioned, we should break that down and explain that we have SG&A costs at every budget discussion. We want these costs to increase less than inflation.

So we want them to be very efficient.

not only with lower adjustments when compared to inflation but here in 2022 the company had some expenses that we understand that are more towards investments such as inspection targets that makes us lose lost to decrease losses or increase the disconnections that reduce delinquency because there is a huge relation between disconnection and delinquency. And when we increase this constant, it might look like a loss of efficiency or higher expenses, but if you look, at that ratio of revenue increase and expenses increase because of the higher number of disconnections. For instance, you see that this effect at the end of the day is good for the company. So we do have those related inspections and also related to connections and some costs related to maintenance. of our electrical grid. So CEMIG was spending a lot with corrective maintenance instead of spending with preventive maintenance. That is much cheaper, of course. Now CEMIG is changing that. We are increasing our costs in preventive maintenance in a way that we reduce our corrective maintenance costs in the mid-term. we still have those two types of expenses mixed i hear the corrective and preventive maintenance so they are a little bit higher because of that combination in a period of time the corrective maintenance will be reduced. So that is what explains the increase of these costs. And we are also investing more in IT. That investment was approved in the strategic planning. We did not invest in IT for a long time, and Ilania, our IT officer, can talk more about that. in the afternoon, but IT is a cost that by nature and the past and investment, we had storage, a large hardware investments. And so when you turn it to the cloud, it might seem that you have more expenses with IT, but actually it will move from CapEx to OPEX because of the tech innovations. And now you will be paying more of a lease. And before we had large hardware structures where we were capitalizing all these costs. So basically that is what explains most of these costs. that we mentioned here and that explained that increase above the inflation when compared to our prior year but as reynolds mentioned all the budget discussions discussions of the company you know we will not maintain our costs above inflation this is crucial for us these costs will be always disciplined but as i mentioned We have some costs that can be considered more of investment, and they will be always under the regulatory index. So these will be covered by our tariffs. This is the cash generation of the company. Really amazing, 7 billion of cash generated in 2022.

Part of these amounts, we are already

returning the tax credits to consumers and the distribution company 1.5 million that's relevant that is to be reimbursed in 2023 we had amortization of loans and when we look at the net payments we decreased our indebtedness level and that helped our leverage And we ended the year with a cash close to 3 billion. We have a large investment in the next few years. This cash generation for semi is very significant and combined with funds from the market and i think this is part of a company a utilities company with a significant investment plan we think this is a sustainable combination it will maintain our leverage at low levels and it's not going to affect our credit quality here we have our debt profile in 2024 we have a larger amount due basically the bonds the 4.5 billion most of that are the bonds But if we were to remove 600 to 700, which is the hedge or protection here, this is a debt that is under 4 billion for 2024. And also, when you talk about our strategy here in the same day of 2021, we told the market that we had a strategy to reduce our dollar denominated debt that we would do it in stages we would be reducing that debt in the second semester of 21 we reduced 500 million of that 1.5 dollar denominated debt and by the end of 2022 in december we reduced 244 million more that was the market's demand so today basically open we have 750 million dollars

that are part of this 4.5 here.

Most of that comes from the bonds. And of course, these bonds will not be due by the end of 2024 for a single payment. We believe that we have to keep on reducing our dollar-denominated debt. And we expect that if the market has more favorable conditions, that in the second half of 2023, we are able to do a new payment. In December of 2023, we can already buy the bonds in the market without any premium paid. And we expect that by the end of 2023, we can buy back more dollars in order to reduce our exposure here and to have a more flat that profile. Removing that pressure from 2024 compared to what we had in the prior years, which was 1.5 billion, it has already reduced 50%. So we have a much lower risk now, and that has been reflected in our ratings. They have been up even more than five notches in the past few years that reflects the credit quality and everything that the company has been doing in the next few years in in the past few years and we see that in a scenario where the companies are going through downgrades several companies are going through downgrades this is public information available in the market and that is because of the risk perception in some of the sectors and we believe semi is an And the other way, we are already a double A, but we are not happy about that. We think we deserve to become triple A. very soon because the company is keeping leverage at a low level or a capital allocation discipline. We reduce financial guarantees in Santo Antonio. All of that has a positive impact in the credit quality of the company. So we believe that our credit quality of the company, our trend, when we think about the current management, it is an upward trend. in terms of credit quality here and moving forward here we have the cost it has increased but because of macroeconomic issues and that involve with interest rates and that that's not something that the company has control of but still we have a low leverage so we do not have any problems with the sustainability of our operations neither the execution of our investment plans And now moving forward, we had an adjusted result of 597 million, close to 600 million, 12% lower than what it had last year. Here we have two issues affecting it, as we already mentioned. One of them is related to the market, and we will see more of it as soon and this was this market was resilient in 2022 even increasing an increase of distributed generation it grew a little bit but because of that cost that i mentioned that were concentrated in the fourth quarter related to maintenance of installation some it costs all of them happened in the fourth quarter and they affected semis d results but we did have some favorable non-recurring events that happened in the fourth quarter that also were good for the results. And that was because of energy sold mechanism that SEMIG distribution had a surplus contracted and it was able to sell part of that energy and post a significant gain of 200 million considering the rules of the regulation. And in the year, And the net profit of 318 million, very close to the EBITDA variation because of the problems of the issues I already mentioned. This is the market in 2021 compared to 2022, if we consider here transmission. and build the market we have a growth of 1.4 percent where we can see here the classes in which we have a higher consumption so we had some reclassification here but rural went came down because of a favorable hydrology less irrigation and of course the rural class would have a reduction and That's a volume of build market. And here, as Marnay mentioned, the 6.4% that Marnay mentioned, that's over a total market of Semigui had a tariff. will have a tariff review now in 2023 and the market will have an adjustment uh to this new reality of the company because of the distribution generation affecting our market this is one of the main effects that we consider to be positive for the company there's a tariff review on this market adjustment that we will have in 2023.

We continue within the regulatory limits, both of OPEX, our OPEX is fully covered by the tariff, 5% below our effective expense in relation to what is established by ANEEL in the tariff coverage. and an EBITDA of also 2.3% above the EBITDA reference of the regulatory ring, considering the benchmark and regulatory premises used in our tariff review process. Continuing here, the CEMIG GT, results, as we mentioned, very favorable, it was a very good hydrology year for CEMIG GT, so it was able to buy that energy, that mattress that it has to buy to be able to together with the commercializing company, working for CEMIG-GT, in this case, to cover the GSF and to buy this energy at much lower costs. And also the commercialization at CEMIG-GT at very competitive prices, very important margins. Dimas will comment on this for us after lunch. we had an impressive result, almost 40% of libidin increase here in relation to 2021, and a liquid profit that was doubled. The liquid profit here in the fourth quarter was actually more than doubled, it was 107% higher, is precisely showing the quality of our CEMIG operations, generation and transmission, combined with a very favorable hydrological regime. So we'll talk about it later, but I think this is one of the great strengths of CEMIG as an integrated company. It is precisely at some point, when you have some segments with some kind of less favorable scenario, you have other markets that can protect the company, protect its consolidated result. Here the result of Gasbig, also a company with very solid results, the EBITDA in 2021 had already been a very good EBITDA of almost 680 million, almost 700 million and this year 14% above, almost 800 million EBITDA. It is a company that we understand that has a very valuable concession, a renewed concession until 2053. It just went through the tariff review process, all its OPEC covered by the tariff and has presented results that we understand to be really impressive. A profit of almost half a billion, billion reais in the year 22 and it is a company that adds a lot of value to the CEMIG group. In the afternoon, we have here the presence of Gilberto, who is the president of GASMIG, and will be with us here in a Q&A session. We can explore a little more the issues that involve the operation of GASMIG. Reinaldo already commented a little about the expansion of GASMIG, but it is a company that has presented relevant results to the group. Continuing, here is the part of the dividends. Another year where we understand that Semig is distributing dividends in a very relevant way. Our yield here is 12.2% when we consider all the dividends that we declared in the year 2022, all the JCP that we declared, plus the dividends that we declared in the Assembly in the year 2022. A total profit of 2.2 bi, close to R$ 1 per share, which makes that if we make only a division of this dividend by the price of the share, today it is a yield close to 9%, another year where CEMIG is distributing a yield that we understand very positive. So, it is among the largest in the electricity sector, for sure. So, we see that this is another issue that I think is very important in our conversations, always with investors, is how CEMIG is a good dividend payer, and more than being a policy, this is in our statute, because we have many companies where they establish a dividend policy, but always conditioning the future dividend payment, leverage and other variables. No, in our case, our statute already establishes 50%. This gives a stability that we understand in the dividend payment to our shareholders, very large. An advantage that we understand for those who want to invest in the company is precisely this predictability in the results. A company that has a low leverage, that has consistently represented results, has paid good dividends, maintaining a yield that we think is very attractive in the market today, which is established in the statute. So, we think these are important issues in the analysis of CEMIG. Today, a company that pays good dividends, that has a low leverage, that has a robust investment program and a discipline in capital allocation. We think that this is our strategy, a sustainable strategy of the company and makes us optimistic in relation to our future. So that's basically it, the information we wanted to bring about the fourth quarter. Carol, we are available if you have any specific questions.

Carol, that said, what I had, if they have any questions, we'll be available to take them.

Thank you very much, Leonardo.

If you have any questions, You have a few minutes for a Q&A regarding the results. Hello, Leonardo.

Hello. A quick question about gasmig.

There was a significant drop in volume, but at the same time, the EBITDA had a significant growth year on year.

Can you explain what happened at GASMIC, please?

Well, our GASMIC CEO is here. Would you have any comments on that? This is for a question from João from BTG Pactual. Last year was the other way around. We had an increase on distributed volume but the thermal was down because of hydraulic favorable conditions for another type of energy not the ttp dispatches i think he's talking about the volume of the market where they have lower margins right and we also had a tariff review last year that although it decreased our margin a little bit It increased because of inflation. So we went down 40% in effective margin. But because of inflation, we ended up increasing 5%. So there was a higher number. The collection was higher because of that. We had the TTP. And we also sold more energy, more gas. I don't know if I addressed your question. Well, we will have a special session in the afternoon where we can go into the details, right?

Can you go back to page nine, I think, and the cash flow?

I just would like to check something there.

Yeah, that page.

What we can see here is that if you roll out the debt, you will be generating cash of 3 billion, 3.5 billion, considering a capex of 3.4. The projection now is to have the 40 billion of capex over the five years. So it's more than double your capex here, right? would like to understand how your leverage is going to behave in the process and if that's that is interfering in the dividends payout and also not only the capacity of getting loans but also the operating capacity to execute this capex first for distribution for semi distribution and i'm i'm starting by the end of your question the our ability to execute the program we have an investments close to 1 billion and to go from 1 billion to 3 3.5 which is no reality for some distribution it's not simple you have to have a restructuring process in your operations and our logistics today is totally different we have centers uh all over the state we have control in the process in the investment process in our hands and that is system systematized way and we have already invested two to three billion so uh to make organized itself to be at a higher sales level than what we had before and with no disallowance we have a an internal process to follow up these costs to see if they are meeting the regulatory compliance. We are very disciplined. This is multidisciplinary and we are ready for these investments. About the other investments we see that investments in solar energy, you can do it quickly and you start generating EBITDA. So in our results, when we consider our leverage in the long term, considering this program and the type of investments that we are doing, and of course, here there is a caveat, we will only be we'll be making non-regulated investments if they provide returns to shareholders. And if we say that there are no opportunities in the market to invest, we will see that investments in the free market are not attractive to the company. Then we will have a discipline in capital allocation. We cannot lose that from our side. But considering that we'll be able to make these investments and we will have opportunities in greenfield or brownfield for those investments are leveraged, when we'll be following the 50 of evidence payment and that's in our bible that's what it's in our strategic planning so our strategy our leverage would not reach two times our our evidence so we know we could reach 2.5 at the most, but thinking about our results, how much SMEGD in our next revision can generate in our operating efficiency in the house, we believe this is a sustainable program. We understand that the cash generation, in summary, cash generation and the new funding and other investments that we are making and maintaining that 50% policy leverage is lower than two times our future cash generation.

I just want to make clear that this is part of our strategic plan.

The sustainability of that investment plan is extremely important to us.

As we said, this program is sustainable.

We have the balance that we require to execute on it.

Question. about the same topic.

There's a wall in 2024 when you'll be paying for the bond and the credit market right now is quite tight. So there are other instruments that are being used that are not so conventional. What is CMIG's access to capital market considering that significant CapEx increase? Are there other options? Well, with our normal operations at CMIG and our businesses at CMIG-GT, there is no cash pressure in 2023 or to pay for any debt. CMIG distribution has a relevant program, but we need to understand that. There is a credit restriction in the market and CMIGD has great credit quality. And in our industry, there's a predictability in terms of generating resources. It's one of the very few industries that are still attractive in terms of predictable results. It's very reliable for our investors. So during this fundraising period, the deadline will be shorter and the cost will be higher than it would be last year. Obviously, we understand that, but we don't see any problems in going to market to raise funds in these conditions to keep our distribution programs up and running. That wouldn't be a problem now. Obviously, fundraisings had longer terms, but in the short to the mid term, things are a bit less favorable than they used to be a few months ago. But that's not just CMEG, it's everyone. But we'll be able to deal with that.

I mean, it's part of the game.

Market conditions are not that favorable, but we have no problem to conduct a well-structured fundraising considering our investments and also our credit. But for CMIG GT, as I said, we're not going to leave it to the end of 2024. Maybe we'll raise funds in the shorter period so that we can amortize more than 50% of that bond, which will be close to $300 million. So we can go to market and raise funds because CMIG GT's leverage right now is practically the bond. So we'd raise funds. just to improve our debt profile. And CIMIG-GT does have the credit it takes to go to market until the end of the year. But we are monitoring the market and there's a chance to divest as well. We're not counting on that. But if there are any divestments, we could use those funds. But even in this challenging scenario this year, it's not going to affect our investment plan for the year. There will be a partial amortization of bonds towards the end of the year. I mean, conditions would be favorable to that. But as of December 2023, we can buy the bond. It could be December, January, February. We'll monitor the market and see when things are looking more favorable.

Gustavo from Bank of America. About results. Costs were higher than inflation, especially in third-party materials at the distribution company. Does that have to do with your corrective rather than preventive measures?

And might that decrease over the next few months? We could talk about that.

Will there be a reduction in the next few months because of the preventive and predictive maintenance?

And do you have any OPEX predictability for the rest of 2023? Or have you done most of it last year? well to give you some more color we think that investing in innovation is extremely important we spent a few years not making any investments and investing in technology is very important to our business in the short term that means reducing costs We will be making more investments in IT over the next few years. That's part of our strategic plan. And we think that investing in IT is important to us and it will help us have a more sustainable and efficient operation.

We also talked about maintenance and we believe that cost increase, which we believe to be short term, you have corrective and preventive maintenance still at higher levels.

But on the same level, we believe we should be investing more in preventive maintenance than corrective because it's cheaper.

But that's a short-term issue. It happened in 2022. We believe that cost will be lower now.

It will grow close to inflation rates and those are the rules of the game. But those costs should reduce looking forward. But the message is we have to reduce costs in other areas so that we can keep costs below the regulatory limits. we're not going to stray from that we're not going to say oh this happened that happened therefore our costs will be above regulatory limits that's not going to happen that's our strategy we need to have expenses that make sense that help to reduce costs in the mid to the long run But even though those costs have to do partly with investments, they will not go over that which has been established for the tariffs.

Luisa from Itaú. I have a very quick question.

You talked a lot about migrating some GT contracts to the holding company that about 30% of that spinoff has already taken place.

How is that going to progress over the rest of the year?

How will you conclude the spinoff? i have the trading our trading officer is here i think he can probably help me with that answer do you want to answer that now or will you be talking about that later hi good morning actually good afternoon right now we're migrating those contracts because we have to agree on the prices for which we bought that energy We believe that by the end of the year, we should have migrated all the energy that we purchased from third parties because we haven't traded CMEX. We have traded CMEX energy plus third party energy. So by the end of the year, we believe we will have concluded our negotiations with the sellers By the end of the year, close to 100% of those contracts will have been transferred and the holding trading company will be managing all the energy that we have purchased from third parties.

Good afternoon, Mayra from FSB. You just recognized the voluntary retirement program worth 4 million.

So how much will you be saving on personnel?

because of that voluntary retirement program. Well, that program is excellent for the company because we are bringing in new people, new talent, which is extremely important. These people have been in the company for a long time, you know. I was practically born in the company.

We have 25,000 employees right now.

It's not as much as it should be.

When I joined the company, there were 18,000 companies. employees joining us are usually at the beginning of their career the company doesn't have benefits that it used to have benefits that were usually seen as state-owned companies we no longer have those we're much closer to a private company policies but what we're saying is that new employees cost practically half of what employees who are retiring cost us and it pays off in about eight months that's important for the company and it's important for our operating efficiency as well make sense for us to continue to implement those programs in the future. Obviously, when that will happen depends on the company's strategy. When those programs have been implemented, they've had very positive effects on our operating efficiency. I think that's it, right, Carol?

Yes.

Thank you, Leo. So, with that, we'll conclude the morning session.

You are all now invited for lunch, which will be served at the Belo Horizonte. Room to my left. And...

analysts investors and company officers will be to interact we have reserved tables for you and cmix team will also be available to answer your questions and be back at 2 30. thank you and enjoy lunch