Cosan S.A. ADS

Good morning, everyone. Thank you for waiting and welcome to Cozvan's earnings conference call for the first quarter 2023. Simultaneous translation will be available during the session. To use it, please click on the interpretation button at the bottom of the screen and choose your preferred language, Portuguese or English. Those listening to the video conference in English have the option to mute the original audio in Portuguese by clicking on Mute Original Audio. The video conference is being recorded and will be made available on the company's IR website at cosan.com.br, where the complete material of our earnings call can be found. You can also download the presentation in English from the chat icon. During the company's presentation, all participants will have their microphones disabled. The question and answer session will start after the presentation. Please note that the information contained in this presentation and in statements that may be made during the earnings call regarding Cozum's business prospects, projections, and operating and financial goals constitute the beliefs and assumptions of the company's management, as well as information are currently available. Forward-looking considerations are not a guarantee of performance. They involve risks, uncertainties and assumptions, as they refer to future events and, therefore, depend on circumstances that may or may not occur. Overall economic conditions, market conditions and other operating factors may affect COSAN's future performance and lead to results that differ materially from those expressed in such forward-looking statements. Today with us, we have Mr. Luis Enrique Guimarães, CEO, and Mr. Ricardo Lewin, CFO and IRO. I will now turn it over to Mr. Ricardo.

Good morning, everyone, and thank you for participating in COSAN's earnings conference call for the first quarter of 2023. We started the year with strong results in the portfolio, with contributions from all businesses. Let's now go through the main financials and operational highlights of each business. starting with Raizen on slide number 3. Since this quarter closes the 2022-2023 crop year and Raizen has already held its conference call, I will focus on the highlights for the year. Raizen ended the crop year with expansion in all segments, achieving record global income and adjusted EBITDA of R$ 15.3 billion. The year was also marked by the focus on operational excellence, continuity of the renewables expansion cycle and record E2G production in the pilot plant, reaching 30 million liters. In the renewables segment, EBITDA increase reflected the sales expansion, highlighting the increase in global customers for both industrial and fuel applications. We have also significantly advanced in the power agenda, we became the fifth largest energy trader in Brazil, with more than 24,000 connected customers. In sugar, the year's result was boosted by the greater volume sold with higher prices, due to better pricing amid a more positive scenario for the commodity, which compensated the pressure on margins due to higher costs. Marketing and service EBITDA also present growth, considering the impact of the tax credit in the period. In Brazil, sales remained stable and the operation was affected by better operational margins, besides pressure from business environment due to greater supply of products on the market and inventory losses. in LATAM operations, the year was marked by an increase in volume, market share and profitability, despite a complex macroeconomic scenario and the scheduled stoppage of the refinery in Argentina. Let's now move to slide number 4, to present HUMO. We had a quarter with growth in EBITDA and margin, due to the increase in yield, reflecting the greater competitiveness of the Railway model. The transported volume, on the other hand, decreased mainly due to a higher frequency of criminal incidents in the Baixada Santista region that have already been controlled by the public authorities. Despite this drop, as already published, Rumo had a record volume in April, a 30-day month, showing the efficient use of the company's capacity. The strong crop will allow Rumo to capture solid transported volumes during the coming months this year. It's worth mentioning that the Mato Grosso expansion project is on schedule and on budget, as already highlighted in Rumo's conference call. Going now to slide number 5 to talk about Compass. We had another robust operational and financial quarter, with EBITDA growing 36% above the same period last year. All of our natural gas distributors' companies performed strongly, despite the downturn in the industrial activity. This reflects the continuous work on mix-off segments and efficiency driven by Congas and our new assets, Comit and Sulgas. In the residential segment, there was intense work on expanding connections. There were more than 160,000 in 2022, which equivalent to 400 new ones per day, made with great operational efficiency, using technology and solid processes. Comit's consolidation work continues at full speed, and this quarter we began to see concrete results from the new business model. we can highlight the expansion works of SUGAS in the region of Gramado in the south of the country. The concessionary is about to complete the connection of the city, which until now has not been served by natural gas. It is yet another competitive supply alternative being offered to the region, with high growth potential. The construction works of the São Paulo Regas Verification Terminal continue to advance and are close to completion. with the start of operations scheduled for the second semester of 2023. Despite the negative effect of the STJ decision on the tax benefit that impacts Conga's account in net income, Compass Portfolio has levers to preserve its ability to grow and distribute dividends to its shareholders during the 2023 financial year. In addition to prior year profit reserves, Compass remained capitalized after the disposal of equity interest carried out in 2022, and the divestment process in other five distributors is still ongoing, in accordance with the portfolio management strategy. Compass also had other assets that continued to grow, such as Commit and the marketing service segments. Let's go to slide number 6 to talk about Move. At Move, this quarter, the EBITDA was leveraged by the increase in sales volume in its operation. We grew 1.4% of points of market share in Brazil when compared to the same period of the previous year, reaching a participation of almost 20%. Global growth took place while preserving the EBITDA margin of more than 10%, reinforcing the company's assertive commercial and supply strategy. It's worth mentioning that the result was also impacted by the consolidation of Petrochoice and Cirreno, acquisitions made in Q2 2022, and both grew versus the same period last year. Finally, we remain focused on the integration of Petrochoice, which is proceeding as expected and is in line with our international expansion strategy. Moving to slide number 8, let's show the land segment. The land segment reflects the agricultural property management business, represented by the companies direct staking Radar, Telos and Janus. In order to provide more transparency about this business, this quarter we made a more detailed section in the earnings release. first quarter 2023 EBITDA, presented relevant growth of almost four times compared to the first quarter 2022, explained by the first full quarter of Delos and Janus consolidation. The land portfolio ended the quarter with around 318,000 hectares of owned land with a total market value of R$ 14 billion, which means a market value for Cozum of R$ 4 billion adjusted for our respective stake in each fund. The main crops are sugarcane, grains, and fibers, which represent 98% of the total market value of the portfolio, which is predominantly located in the southeast, northeast, and midwest regions. We can go now to slide number 8 to talk about Vale. On this slide, we present the effects of the acquisition of the stake in Vale, had on COSAN's results. In this quarter, we received R$ 402 million dividends from Vale related to our 4.9% stake, which had a positive impact on our EBITDA. Of the amount received, we transferred R$ 215 million referring to the adjustment of the cost of derivatives to the banks involved in the operation, that impacted our financial expenses. Considering the price movement in the period, the equivalent market-to-market impact on the results was positive and the shares were negative, as shown in the graph on the slide. The net result in this quarter of all transactions related to Values Structure was negative in 207 million reais. In addition, our CEO, Luiz Henrique, was elected in April as an independent board member of the company's board of directors. Let's go to slide number 9, which shows COSAN's proforma results. At COSAN corporate, operating expenses, excluding the dividends from Vale, increased due to the exercise of long-term compensation plans. In the consolidated results, the increase in pro forma adjust EBITDA was driven by solid expansion in all segments. Net income for the quarter decreased due to the negative impact of market-to-market updates of Vale and also Cousin shares due to the total return swap in the financial result. and also due to the impact of the provision related to exclusion of the Tax on Circulation of Goods and Services benefit in the corporate income tax and social contribution on income calculation basis, recorded until then at Congas and Move. It's important to highlight that these are non-cash effects. Recapping the tax incentive history. From the beginning of 2021, these companies began to recognize the exclusion of tax benefits from the corporate income tax and social contribution on net income calculation basis in line with the opinion of their external legal advisors and based on all the prevailing jurisprudence at that time. In March 2022, the first panel of Superior Court of Justice reaffirmed their understanding of 2017 about the non-application of corporate income tax and social contribution on presumed ICMS credits. There was over 50 decisions in that sense. A month later, in April 2022, the second panel of the STJ decided otherwise unfavorable to taxpayers. Since then, we have reclassified the probability of loss from remote to possible, as disclosed in the financial statements since Q2 2022. More recently, at the end of April, there was a trial at the first panel of STJ with an unfavorable result for taxpayers. In view of this, the company decided to set up a provision for the amount used, approximately R$ 1.5 billion, bearing in mind that the provision in this quarter has no cash effect. Having said that, I want to reinforce a few important points. First, as you can see in the financial statement, the recurring results of Compass and Move companies that were affected by the provision remain robust and growing. In addition, so far, the STTJ judgment has not been published. That is, although we have made the provision for all the past effects, we need the judgment to conclude on the applicability and the real impact in the companies. Finally, in addition to the possibility of appeals by the STJ, and that matter can be analyzed by the Federal Supreme Court , COSAN Group is willing to work with the authorities to address the past issue fairly and considering the central purpose of the tax benefit, that was to stimulate investments that were made diligently by the companies. In any case, we will keep the market informed about the developments in this matter. Moving on with the presentation, regarding COSAN's consolidating investments, we had an increase compared to the same period of 2022, which is mainly explained by the expenditures at Raizen with second-generation ethanol, Rumo with Mato Grosso expansion project, and Compass, based on business planning and in line with their guidances. Let's go to slide number 10, which shows our group's financial highlights. Regarding the indebtedness, the reduction in gross debt, it is expanded mainly by the net amortizations at high easing. Highlighting our capital allocation agenda, during this last quarter, we resumed our movement of increasing the total return swap position of COSAN shares. leverage was 1.7 times EBITDA at a great level for the company, and its reduction of 0.3 times compared to the same period of 2022 is due to the increase in accumulated EBITDA in the last 12 months, in addition to reducing net debt, mainly due to the cash flow generated at the raising. If we adjust the effects of the staking value acquisition, the net debt EBITDA ratio would be 2.1 times. COSAN has a comfortable debt principal motivation schedule, especially considering the flexibility and optionality that we have in the financing structure for the acquisition of a stake in Vale. The duration of our debt is approximately five years. Even though it's not related to the first quarter, I would like to reinforce other subsequent events. First, we approved at the shareholders' meeting the distribution of R$ 800 million in dividends, which will be paid on May 31st. We also had the election of the board of directors' members, which I would like to highlight a change in the composition, now with 50% of independent members, including two women, which reinforces our evolution in the governance and diversity agenda. In addition, we had issuance of a debenture in the amount of R$ 1 billion, with payments of the principal bulleted in five years, showing the company's access to liquidity and allowing increase in the debt duration. Before closing, I want to go to ESG agenda on slide number 11. In March, we signed the letter of commitment to the 100% Transparency Movement, an initiative of the UN Global Compact Brazil Network that works to engage companies in combating corruption, which reaffirms the company's position of adopting the best corporate governance practices. Regarding our business, both Hume and Compass published the 2022 Sustainability Report. Among RUMO highlights, we had the expansion of energy efficiency in rail transport and the mitigation of climate change-related impacts, in addition to the Safe Railroad operation. COMPAS brought several achievements, such as the review of its ESG strategy and the definition of public commitment should be met by 2030. in addition to the milestone of 36% of leadership positions being held by women in the company's businesses. Still in relation to ESG, we will soon publish COSAN's sustainability report, which will bring important advances in this journey. Finally, I would like to invite everyone to participate in Raizen Day, which will take place on May 24th, and inform you that our Kozan Day will take place on September 12th. With that, I finish my presentation here and we can start the Q&A session. Thank you.

We will now begin the Q&A session. To ask questions, please click on the raise hand icon at the bottom of the screen to join the queue. Upon being announced, a request to activate your microphone will appear on the screen, and you must then activate your microphone to ask questions. We kindly request that each participant ask a maximum of two questions. If you are listening to the call in English, please ask your questions in writing by clicking on the Q&A button. Our first question is from Pedro, Suarez Cell Site Analyst from BTG Pactual. We will now unmute you so you can ask your question. Please go ahead, Pedro. Good morning, everyone. I have a couple of questions, please, to Luis and Ricky. They're about Vale. Could you give us some more color on how much you would say you're devoting of your time to Vale? What was the situation you found at the company like? How different was it to what you imagined when you acquired the asset? And another question on the same topic is, Have you got any additional information for us about the 1.6% additional stake that could or could not have been exercised? Have you made any decisions on that? Thank you. Thanks, Pedro, for your questions. Considering what we shared with you when we made the investment, one of the main points was to be part of the company's board with other board members and shareholders. So I'm very happy. because the company led this initiative very well the governance committee did it very transparently very clearly there was a shareholders meeting and there were no major issues and in my opinion in our opinion We have elected some very solid members of the board with diversified expertise. So I have been a member of the board since the 1st of May, and what we'll do from now on, we'll be sharing with you on the sell side, buy side. We have Leo Pontes, who is responsible for... for COSEN's investment in valleys and will cover shareholders' issues. It's important, you know, to make everything clear about governance and my role as member of the board and the company's opinions with regard to that will be exercised. by the person who manages that investment, which is Leo. And company issues will be managed by the company itself. But generally speaking, we're very excited. We're still very excited. This is a very important stage for us. Having a board and a team working together and to have the privilege of being part of that and to make sure that we're all working for the best and to generate value for the company. So, in short, nothing has changed in terms of our conviction of when we made this investment six or seven months ago. Now, as a board member, we'll have the opportunity to make closer contributions to the management together with other members of the board. Right now, about your second question, we won't exercise. We're very happy with the 4.9 that we have currently. And as we said from the beginning, our position includes different optionality triggers, among which we'll be approving our thesis along the way. And there are stages still to come. So far, we have kept with the stages we had proposed We'll be part of the board. We'll be part of other committees that will be set up by the board, and we will be sharing that with you over the coming days. Thank you, Luis. Thank you, Pedro. Next question is from Guilherme Palhares, Southside analyst from Bank of America. We will now unmute you so you can ask your question. Please go ahead, Guilherme. Good morning, Luis Enrique, Ana, Levin. Thank you for taking my questions. We have a couple. A little more on the financial side. Levin, you talked about the provisions for this half of the year. And looking forward, what are those reserves like? What can we assume, and what are the implications of that on the dividends flow from Congas all the way to Causa, considering the Supreme Court of Justice's ruling? Could we say that the company would rather pay taxes on full results considering the tax benefits instead of creating that legal reserve for the tax benefits to make sure that those dividends continue to flow all the way up to the holding level. And the second question about the dividends flow as well, to understand those dividends you've received from Vale, from Raizen this quarter, how much of that has gone up to the holding so far and how much of the subsidiaries are under coza you know eight or nine which are the main ones to be affected by that thank you could you take that levin would you like to take that yes thank you thank you for the question i'll start with the second actually Valeist is very clear. We received about 400 million, 215 of which were passed on to the banks that were part of the operation structure. Why? If we had kept the dividends, then the strike price would have changed dramatically. as in the theory, there would be a change in the strike price of the derivatives. So we prefer to pass that on to the banks and to keep the strike prices of the derivatives the same. In terms of the preferential, there's a gray spirit of six months in the dividends payout. So dividends will flow up to the two holding companies, KOSAN 9 and 10, but they haven't gone all the way up to the holding companies. So all dividends have stopped at Cosan 9 and 10. With regards to your first question, it's interesting because our intention is to go back to the way things were before 2021, when we took advantage of these tax benefits. That's what everybody was used to seeing at Congas. And we believe dividends will flow as per usual. Obviously, if the tax benefits can't be used, then there will be an effect on the dividends going up, but the idea is to continue to take those dividends up, respecting the tax benefits decision, because we need to pay for our preferred structure for Cozanne 9 and 10, and to take up the dividends to the holding company in order to pay for the principal and interests. I hope I've asked you questions, but if you have any more, please feel free to ask them. Yes, that was very clear, Levin. Thank you. So let me just make sure I got it right. The dividends flow will continue. And at the same time, as we look at the dividends, dividends have stopped at COSAN 9 and Raisin. No, COSEN 9 and 10. 10 from COMPAS. Actually, let me take this opportunity, Guy, to reiterate this, because I think it's important to all investors. These tax benefits and provisions will not affect CONGAS's fundamentals. CONGAS has always been a strong investor. dividends payer the business has been growing in terms of volume in terms of sales mix and let's not forget that it has a very strong portfolio with comet soul gas as part of the portfolio and as i said during the presentation There are many dividend payout levers that can be used inside Compass. I just wanted to reiterate that as a segue. Thank you. That's great, Levin. Thank you, Guy. Our next question is from Luis Carvalho. We will now unmute you so you can ask your question. Please go ahead, Luis. Good morning. Can you hear me? Yeah, we can, Luis. Go ahead. Hi, Luis. Hi, Levin. Hi, Ana. Thanks for taking my questions. I also have two. Last time we spoke in person, Luis, at the end of last year, you talked about many of the group's challenges. You addressed those. If we look at all the company's projects. There are many relevant projects. The challenge at Vale, Rumo's project, at Compass as well, and Raizen. You mentioned that the company's main challenge was to deliver on all these projects on schedule, on budget, and with quality. Could you update me on what the priorities are right now? What are you and your executives devoting most of your time to? And what are the main challenges you see as part of this process? Second question is on a macro level. It's been about five months of this new administration, and I'm not about to ask you a political question, but There have been some discussions on the tax framework. So what part of that tax framework will make a contribution, will have a contribution from the private sector? So we've seen tax on oil exports. We're also seeing, I don't know if that was the case or not, but more appetite on the side of this administration to tax things. There are ongoing tax negotiations. So I'd like to hear from you about key topics, such as the Suberda-Serra discussion, royalties on mining, How do you see this macro scenario, and what kind of an impact, if any, will it have on the company's group, on the group's companies? Thank you. Those are great questions. Well, I'll start by talking about our projects and our time allegation because that's very relevant. As you know, we've shared with you over the past few years, we've reiterated the importance of the partnership among the group's executives and the connection with our chairman, the founder, and shareholder of the company to create the ability to continue to take leaps, both in terms of the sizes of the operations and opportunities to complement our portfolio in the five areas that are key to this company, to the future of Brazil and the world. As you can see, in terms of becoming a member of the board, I have left Rumo and Compass and Leo Pontes has taken on that responsibility. So he's devoting some quality time to that. All of us, myself, Rita and Leo are required at the holding company and Musa at the company, Nelson, Filippi and Beto at the companies to make sure that we have the right time balance, obviously supported by Marina, Livin and Paola. playing their own roles. So we have rebalanced that in order to free up some time so I can devote more time to Raizen and to Vale. Obviously, always looking at moves, international expansion and providing support to Leo at Kozan Investments. But myself, Marcelo and Bill have rebalanced our time so that we can devote more time and energy to each of our investments. I see your second point about the projects. They're on track. Obviously, you know that. We spoke to you, but I will reiterate it. Engineering is still a challenge in Brazil. The installed capacity in this country for works is a challenge, so we're using different strategies in our projects. Obviously, major construction companies that were around in the past have been greatly reduced, and so has their capacity, so there's a number of companies of different sizes. some of which are local, they're sharing projects, which means it requires more management effort on our side, but that's the combination of risk, cost, and return. So we've been able to make progress on our three main projects, E2G, the regas terminal in Santos, and expanding the north network in terms of size and complexity. but they are moving forward considering that challenge right there is no surplus capacity in terms of engineering execution sometimes something as simple as soldering something welding something but you know we do have a very solid team we are dedicating specific resources to that to make sure that we are supervising supervising things closely as breusler at the santos terminal we also have a dedicated team which beto has allocated to the expansion of the north network and musa is fully focused on managing multiple sites so we have an eye on all of these three projects if you look at them in terms of sales e2g has contracts at rumo we have annual contracts but there's a clear demand there is capacity and as for the regas terminal there is a contract to supply three million cubic meters with congas so The challenge is the execution for them to be ready on time and ready to meet that demand. That will help us with monetization as, as you know, in terms of cash generation, these are very important projects because once we have the capex for the E2G plants or the terminal or the north network, then cash generation and the conversion from EBITDA to cash is quite strong at all of them without any major recurring costs or capex. So as of 24, in terms of value and deleveraging, we have a great trajectory ahead of us. So that's the priority, Luis. Nothing has changed. We're on track, but we're always concerned with making sure that our partners, our team, and our suppliers have their eye on the ball and are delivering. From a macro point of view, obviously, it's been five months and it's been a significant administration change, I'd say. This new administration has chosen to replace a great deal of people at the ministries, which obviously led to a slowdown and challenges. So our main concerns and what we see as positive, well, in terms of concerns, there are questions concerning legal security, especially with regards to taxes. That's a key topic. There are some major discussions going on in Congress as we speak in terms of CARF, and many other topics, the structural points of the tax reform, the transition of tax credits. Brazilian companies have a considerable asset in terms of tax credits, in terms of PIS, COFINS, ICMS, so it needs to be looked at very carefully. the minister of mines and energy and the minister of finance have already talked about how to use tax credits and debits from the federation's balance sheet to encourage investments in green economy and we think that's very positive they're being inspired by the american ira and the green deal in europe so We're already seeing some signs from Minister Alexandre Silveira and Minister Haddad. We believe that would be extremely positive for Brazil. How can we use this tax, so to speak, dysfunction, and associate that with the VAT, a better direction, and to use those rights and responsibilities to encourage the green agenda. That's a very positive agenda. In terms of the framework, the wording was published last night. It's hard to express an opinion on it, but it's better to have some kind of compass than nothing. So I think it's positive. You've seen the future interest curve coming to an interesting outcome the real is appreciated in terms of foreign exchange it's too soon but my concerns are basically to make sure that this administration will ensure legal security because some past issues may lead to insecurity we wouldn't like that and also we must recognize this country's green opportunity The president and the ministers must do that. That can lead to different licensing agendas, not only for mining but for oil. I think the government needs to really go from words to practice and create responsible and sustainable mechanisms that will unlock Brazil's potential. I think there is good intention, but it needs to be put into practice and to take the tax reform forward so that it can simplify and use this huge asset as part of the government's balance. 0.8 trillion worth of credit and 2.7 trillion worth of tax disputes that could be turned into investments and encourage major private investments. I think we need to keep an eye out for these tax issues. There are positive signs in terms of expanding the green agenda, which will drive a lot of our investments. And now with all these new members in the new ministries, in our case, the Ministry of Mines and Energy and Transportation, so that our gas infrastructure, mining and rail agendas can move forward and unlock Brazil's huge potential, you know, As you know, it requires a lot of discussion. We need to be present, discuss, but the role of the private sector, associations, and businesses is to make a contribution with concrete proposals. It's not just about raising issues. We also need to make concrete proposals. That's what our institutional relations team has been doing, myself, Thiago, and our shareholder is taking part in an open discussion about this country's future opportunities, obviously always trying to create a regulatory environment and legal security in order to attract investments. We also need foreign investments together with local investments so that we can move this agenda forward. That's very clear. It was almost like a lesson. Thank you so much. Thank you. Our next question is from Gabriel Vara, sell site analyst from Citi. We will now unmute you so you can ask your question. Please go ahead, Gabriel. Hi, Luis. Hi, Ricardo. Hi, Ana. Thank you for taking my questions. I have a question and two quick follow-up questions. First question is about what we've been talking to the market about COSAN. We've been seeing major changes in the company since the corporate structure was simplified, the capital allocation, your investment at Vale. And one of the things we've been discussing is your portfolio. Please correct me if I'm wrong, Luiz, but it's a long-duration portfolio with major investments being made. now that we have higher interest rates. One of the things that we have been discussing is the company's consistent revisions to its portfolio. So could you share with us what you've been discussing at the company with regards to that? The IPO window is slightly tighter this year. There are some uncertainties. The market is a bit tougher. How could we possibly improve Think about that portfolio management via private placement as you did at Compass. or maybe a direct M&A investment through a player? What have you been discussing at the company for this year? It'd be great to hear about that. And the two follow-up questions are first about the 1.5 billion provision. A couple of points, I'd like to clarify the impact of that looking forward. what will be recurring out of that 1.5, looking on a monthly basis or an annual basis so that we can understand the impact on results and the monetization of that impact. As you said, this is not a cash provision, it's an accounting provision, but it might become cash at some point. Do you have a timeline for that? And on Compass, could you talk a bit more about the decision? A lot has been said about SNMP. You're talking to the regulatory agencies. A lot has been discussed about transportation, gas pipes, or distribution gas pipes. If you could give us some color on that, that would be great. Thank you. Thanks, Gabriel. I'll start with the last one. And then I'll turn it over to Levin. Well, the discussion among the regulatory agencies are still going on, ASESP in São Paulo and ANP in Rio. They are discussing a harmonization process. and they're trying to come to a definition based on everything that's happened, the legal proceedings, public hearing about the investments and the gas issues and the decrease. There are no updates. The agencies are working hard on it, and they're working responsibly on it to try and find the best solution. The whole investment and construction process has been conducted by the company as was announced in the tariff review in 2019. So the company is in compliance with everything that was agreed on in terms of regulation processes. Obviously now the terminal will be concluded in the second half of the year that's another important piece of the state and national optionality of supply it will increase competitiveness it will encourage the free gas market so we're confident that both agencies are competent and responsible and they will look at Brazil as a whole to deal with these infrastructure challenges we have in Brazil. Everything in Brazil takes a while to be conceived, implemented, and built. And Congas and Compass are role models of companies in the gas industry that have been making relevant investments and positioning themselves so as to make sure that their clients, and as a consequence, the gas market always goes in the best direction possible. So no news, no material news to share with you. We just believe these conversations between the very competent agencies is very important. As for the portfolio, you're absolutely right, Gabriel. We constantly discuss that. Compass and Move will always be ready for IPO or private placement moves. Our teams are very sharp. I don't know if you attended the conference in New York last week, but MOVE was there as part of the private health companies to be in contact with investors, to share their case, to listen to the market. So we're very confident, given the quality of both assets, that at the right time, Obviously, there's the use of proceeds for the business, and we'll be ready to do it, whether it be through the traditional market via IPO or via private placement. But the main point about the portfolio is the debate within each company. Myself, Marcelo, Levin have been keeping up to date. Each company has in its portfolio assets that can be monetized because they provide more value to third parties. and it is our clear intention to monetize on them to improve the company's capital structure so as to make more profitable investments. I always like to use Rumo's terminal as an example, but there are other opportunities at Rumo, at Ryzen, at Compass, as Levin mentioned during the presentation. we're still divesting from five gas distribution companies, which will happen. So it's a fact, it's a clear fact that we will be generating additional funds through divestments, whether it be by attracting partners to the companies at the top, wherever it makes sense, or by selling full assets or partial assets at the bottom, as we have done and will continue to do if we believe those assets are more valuable to third parties or if we should monetize them, as is the case of Rumo, to expand the north network so that it can fit properly within our financial and value structure. As for the provision, Just to reiterate what Levin said, this is a right. When we made the decision, it was based on legal advice, jurisprudence. Obviously, there was a change that took place in the following weeks. But we will continue to pursue our rights. So... This is a solid right more than a thesis. We've done our part and we will continue to monitor the situation. You know us from accounting terms, we needed to set up that provision because in legal terms, things have moved forward. The right thing to do is to set up that provision and to be transparent with you. But we don't have a timeline. We don't have a monetization schedule because, as we said, we will pursue our rights through all means available whenever we believe they are still available to us. So we will continue to discuss the issue at the many different fora that are available to discuss it. Levin, any additional comments? Yes, let me share the figures with Bara and the investors. It's important to say that there have been no losses. We will not have an upside that we used to have from the additional credit that we used to take out. So considering Compass and Move, we're talking about roughly 200 million reais a year at the companies. Then you need to do the math to go all the way to Cozum because the cash impact on Cozum would be less than that, not in accounting terms, cash impact. And just to reiterate what Luis said about monetization, The Supreme Court of Justice has not made a ruling yet, so it's hard to know what of that will actually materialize. So our legal counsel is monitoring the situation, and we will share any news with the market as soon as we have it. That's great, Gabriel. Thank you, Louise. Thank you. Next question is from Bruno Montanari, sell side analyst from Morgan Stanley. We will now unmute you so you can ask your question. Bruno, please go ahead. Good morning and thank you for taking my questions. If we can go back to Vale, please. We know that This is a long duration structure. It's well protected with derivatives. But could you give us some idea about what you'll see happening over the years to make the decision to convert that into an effective stake outside the derivatives or unbundling the operation? What are the decision-making factors that you will consider over the years so that this investment can be realized second question is could you give us some more color on the final stages of the regas terminal and what will be the early ramp up for this project thank you with regards to valley as we've been saying since october last year when we made the announcement It will be to check if our value unlocking thesis come to fruition. And as a minority shareholder at the company, we are in constant dialogue with the board, with other shareholders, And that will take the company in the direction that will unlock the most value potential. It's a different model to what we've done in the past. Control or co-control, as is the case of Raisin. But given the size of the company and the size of the opportunity, in our opinion, we had to choose a different tack to work collaboratively and to align our objectives for the company. and to see if that will work, and if production value generation through agreements that need to be signed, progress, also value generation through new technologies there's a whole set of attributes that the company does have you know based on the quality of the assets and everything it has to offer so we'll see if they evolve at the speed we believe they can as investors obviously not as members of the board and so we have the option to do that if they do then we'll turn that into a direct stake. If not, we'll take the required time and then we will undo the operation. As for the regas terminal, as I said, the latest good news is that we have drill on both sides to connect the terminal underwater all the way through to the coast until to the receiving point which is the integration gas pipe connecting the terminal to the city gate that's a key stage and it was concluded a few weeks ago so we're now moving to the final stretch we'll be commissioning it in the second half of the year and the ramp up stage will start at the beginning of next year so that will be the agreement with congas and compass's team is negotiating with other clients three clients other gas suppliers other trading companies so that we can ramp up the terminal based on our optionality agreements at the end with the product availability. Everything is on track. This drilling was a bit harder than we had expected in terms of geology, but projects like that are always the same. There's always a surprise. But we did have time available in terms of monetizing on part of the contract that happened in that period, whilst it's still not in operation, and it will, the physical ramp-up will begin at the end of this year, beginning of next year. So we'll be using the second semester of this year to run tests, configurations, to train the team, and to commission so that it can deliver on Congas' contract, which is key to complement the offer and for Congas to comply with D24. That's great. Thank you. Thanks. Next question is from Andre Vidal, sell-side analyst from XP. Well, now I'll unmute you so you can ask your question. Please go ahead, Andre. Good morning, everyone. Thank you for taking my questions. The first one is to Luis. The market has been saying a lot about potential Petrobras changes in the last two weeks in terms of derivative pricing. Today, there was an official announcement of the new policy. At the end of the day, not much has changed, but not many people talk about gas, and that's another topic the government has been talking about. It's been saying that it wants to use Petrobras to reduce the price of gas in the country. And it's much harder to have a gas benchmark in the market than for diesel or gasoline. So how do you see that possibility of Petrobras reducing the price of gas? And what kind of benefits and risks do you see on Cozen's different businesses? My second question is to Livin. How do you see the company's need for funding? In our opinion, and please correct me if I'm wrong, you know, you've raised the benches in 23, so everything seems to have been addressed, but in 24 maybe to address valleys. maturing installment, you may need to raise some funds in the market or to sell assets.

How do you see the company's need for funding over 2023 and 2024? That would be very helpful.

Thank you. To your first question, there's not much to add than what we've heard from the company itself and what they've said to the press. It's always a controversial subject and it needs to be translated into practice, into a pricing policy. that will allow Petrobras to send a sign to the market as to what the model will be. Minister Alexandre Silveira wants to grow the gas market and has captured Brazil's potential in that segment from the pre-salt. The challenge now is how to turn that into a pricing policy. You always need to instruct the market because if you don't, it won't encourage investments. We don't believe in miracles.

So they need to make sure that there is the right infrastructure for transportation, distribution, the LNG infrastructure.

pipes need to be created along the brazilian coast to provide options flexibility and competition you know if you consider employees import prices and opportunities in the market we went through a war last year the market is only now getting back to normal people are thinking oh prices are going to be terrible it's never going to go back to normal there are cycles sometimes prices are competitive sometimes they're not and the infrastructure is created so that you have options so that you can ensure supply to your clients and value generation optionality so that you can move margins and optionalities posed by the market i feel very optimistic when it when it comes to this whole conversation about the secretaries, the Ministry of Mines and Energy, which has made this topic a priority. And Petrobras will at some point have to define something as they've done for diesel and gasoline. They're saying they will compete with the best alternative for each of these supply areas, which, in my opinion, is the right way of looking at it. Each administration will have their own mechanisms. And it's an important position for distributors because, in this case, We offer service optionalities, but we don't run the molecule risk, which is great because it means we can make the most of opportunities as they appear. In fuels, at COMPAS all the time there are molecule opportunities, parachute opportunities from suppliers, from clients. That's the beauty of being involved in fuel and gas distribution in our opinion. Hi, Vidal. You saw that we issued a five-year debenture with a bullet principle worth one billion Reais. That was about two or three weeks ago. And the clear message here is that we haven't exercised any firm bank guarantees. Everything was done through the market. So it goes to show that the companies have good credit, a good debt profile, and therefore access to liquidity. We shared a debt amortization chart with you during the presentation. This year, we had 6 million Reais of the principal to be amortized. And in addition to that, there's the second, our log in the venture installment and the Valley installment. The first point is that we have set up this finance structure because it reinforces our flexible structure and it gives us optionality. So this structure can be brought forward if the time is right, or it can also be delayed if it's convenient. when amortization time comes so there's a lot of flexibility there's no pressure in 2024 but obviously we want to have options we want to have the optionality and to do that we have some capital sources as we said during the call about valley the first one is the lab management through the local market or the external international bond market so that we're ready whenever there's a window, we can access those markets. The other alternatives, as Luis said, companies are constantly looking at their portfolio management so that they can invest and pay out more dividends. A classic example of that is the sale of 80% of T16 and 19 at Rumo. And if there is a window, we might do our portfolio management at our main portfolio as long as we don't lose control over any of the companies. But I just want to reiterate that the structure that we have set up allows us not to be pressured by the market. That's great. Very clear. Thank you. Next question is from Regis Cardoso, sell-side analyst from Credit Suisse. We will now unmute you so you can ask your question. Please go ahead, Regis. Hello, Luis. Hi, Levin. Hi, Anna. Can you hear me? Yes. We can hear you loud and clear, Regis. Great. Thank you. Thank you for taking my questions. I'll try and be objective. Could you give us an update on COMPASS, especially COMET? What kind of potential have you mapped to replicate home gases, experience the different regulatory frameworks? If you could give me a general update, that would be great. What about the other distribution companies as well? And a follow-up question about ICMS and the provision. Just to make sure I got it right. So the recurring effect looking forward will be 0.2 billion on a pre-tax basis, right? And also about Vale, that 1.6, wouldn't it make sense to convert that into a structure that will give you the right to vote and considering the cost difference between the two structures? And still about Vale, considering the color maturity in 2024, Is renewing that structure a net cost or net premium? Because I got the impression that you were giving up on an upside at a higher price and you would only make something at the top range and sounded like it was a net premium to receive as a receivable, not payable. What is the instrument to roll over that instrument if required? Okay, so an update on commit, and then I'll talk about the 1.6, and Levin can talk about the ICMS, the provision, and the maturity. Everything goes well at COMET. We have all the teams in place. Obviously, they are different models in the different geographies. We have SOGAS. We have the other distribution companies. which have the state stake involved. We've been welcomed by Mitsui and all the states where we're present. We do see a clear potential that we mapped when we made the acquisition to grow among the residential and commercial segments and considering the regulatory framework, and that is reflected in the company's figures. their ability to solve existing problems in the many different states, pending issues with clients, regulatory issues are all being addressed by COMET team. And obviously the opportunity to replicate the technology model to reduce the cost of connection by using more modern materials, different methodologies, suppliers, safety practices. We're very confident and very excited. Obviously, realities and speeds will be different depending on the corporate structure we have at each of the companies below. But so far, so good. I think this porter's results were very good. You know, the profitability is in line. Actually, it's above our business case when we approve the investment. Considering the company's spin-off and exercising our preference, our idea is to conclude that divestment still in 2023. Obviously it's not just up to us, but it's part of our portfolio management to monetize on these five distribution companies. As for the 1.6, if we convert that into a different structure, then it will become a debt. And right now we're carrying a smaller debt than most of you had projected when we made the acquisition. We don't think now is the right time to do it. We feel comfortable with a 4.9% from an economic and from a state point of view with other shareholders. So far, as I said, so good. We will continue with our 4.9%. because we don't want any more debt pressure and we believe that to be a comfortable position right now on all aspects economic governance and stake regis i'll start with valley's structure obviously if we want to renew that there is a negotiation of the strikes, we could keep the same strike values, but it might generate a premium to be paid or received depending on the market. So I couldn't tell you now whether that's a net cost or net price. There will be a premium to be paid or received depending on what the market looks like down the line. What we are renewing is the financing. And in order to be a risk-free operation, the put option net present value is the value of the debt. So they will be making that adjustment. In terms of the provision, You're talking about the 200 million recurring effect. Yes, that's precisely it. But as I said on a different question, it's not that we're giving up something. If you look back, we didn't have that benefit. So we're not... using that benefit anymore. So the 200 million isn't before tax. It is the tax. So it's 200 million. And let me take a wild guess. Let's say it's roughly 150 to 180 at Compass and the rest at Move. But that's at the company base. As I said, the cash is relative. that relates to Colzant, you need to do the math to get to that. This is the consolidated accounting effect on the companies at the top. Is that clear? Yes, that's great. Thank you, Luis. Thank you, Levin, for your answers. Thank you, Regis. The Q&A session is now concluded. I will now turn it over to Mr. Ricardo Levin for his closing remarks. I just want to say thanks to all the investors, to all the sell-side investors for joining us. If there is any news, we will be sharing it with the market. Otherwise, I'll see you during the next earnings call. Thank you and have a great week. Colzant's first quarter 2023 earnings video conference is now concluded. For further questions, please contact the Investor Relations Department. Thank you so much for joining us and have a great day.