Engie Brasil Ene Sa S/Adr

Good morning, everyone. We are now starting the video conference for the earnings of third quarter of 2022 of Engie Brasil Energy. I'm Rafael Bosio, investor relations manager of the company. I would like to tell you that people are connected in listen-only mode, but later on when there will be a Q&A session, you can send them by the Q&A tool in Zoom. This is being recorded. It will be available in our website, www.engie.com.br, the files of the presentations and earnings release, in addition to quarterly statements, where the details and analysis of financial statements of the quarter, in addition to operating results and advancements in implementation of our projects, among other factors, will be posted. Before proceeding, I would like to clarify that any statements that may be made during this call regarding the Business prospects of the company should be treated as forecasts, depending on the economic conditions of the country, the performance and regulation of the electric industry, in addition to other variables, and therefore are subject to change. Here with me, we have Mr. Eduardo Satanini, Investors Relations Officers, and Marcelo Malta, Financial CFO of the company. to comment on the performance of Engie Brasil Energia in the third quarter of 2022. I remind that the journalists that wish to ask questions may do so by email or send them to the press advisor department of the company. Mr. Sotanini, you may continue. Good morning, everyone. It's a pleasure to be here. for one more quarter after the election. And this first nine months of the year, we're all alive. So let's move on to slide number five of the presentation. First, I would like to talk about the highlights, the adjusted EBITDA in the quarter. When compared to the third quarter of 21, there was a decrease, but there is an important topic on the right side of the slide that is the recognition of the GFO amounting to... $372 million. So if we exclude the GSF, which is a one-off event recognized in this quarter, we would have an EBITDA with an improvement of 8%. So instead of 4.8% only, we would have a 13.2% increase in a year-to-date. So the company is very transparent in the publication of its results, and that's also reflected in the first line on the right when we see the increase in revenue due to price and volume of sales increase. Price increase is slightly lower than the inflation in the period because we had a volume increase given the better hydrology we have in 2022. 2021 was the most critical year in hydrology in Brazil. in terms of incoming water to reservoirs. In 2022, the hydrological conditions are much better, and that causes the volume available for sale in the short run to be higher, and short-term prices, therefore, are lower. So this is the reason for the small reduction when compared to the price of 12 months and inflation. We also observed that the CCEE results are quite favorable. due to the volumes and technology. In terms of results or net income, 17.2% higher in the quarter and 19.2% 2% higher on year-to-date figures, nine months. But otherwise, we would be talking about a 97% increase in the quarter as compared to the third quarter of 21, which is the effect of inflation on our debt. And we make the correlation to the right side of the slide in which the net financial income was $387 million. Another important points to highlight are the increase in the purchase of energy and the reduction in the volume of coal purchases or fuel. The reduction of coal is due to the sale of Jorge Laceda Thermoelectric Power Plant and also due to the maintenance that happened in up to mid-August. So therefore, there was no consumption of coal. We had less 83 million in terms of consumption of fuels. And when we have a energy acquisition contract, we have an energy purchase of 236 million higher. Seventy percent of that amount refers to Jorge Lacerda Thermoelectric Complex. Now, in the next slide, we'll talk about the other financial highlights. It's important that the company in September has signed the sale of the Guaçu plant. Pampa Sul, thermoelectric power plant located in Cangioata. Now we have some conditions precedent with CAGI, et cetera, to close the deal. And you see there will be some reclassification of the assets to be sold, which changes in lines of a booking process. classification of the lines. And this will have an impact in the configuration of the balance sheet for the quarter, as analysts may notice. We had a considerable volume of sales in the quarter. showing that we continue with our activity. Our policy, as you will see further on, is for this year and future years, aiming to have a high level of contract. And this is the strategy we continue to pursue. although we know that the pressure on prices is a downward one right now. But we're still succeeding in selling energy at reasonable prices. On the right side of the slide, we talk about the execution of contracts for 188 wind turbines with Vestas do Brasil that will be used to implement the Serra do Azurua wind complex, which is the largest single wind complex of energy worldwide, 846 MW. There is a larger cluster in Bahia, Campo Largo 1 and 2, but this one as a single project is the largest one we have developed in Brazil and the largest of Engie worldwide. On slide 7, we have the highlights of supply agreements with Gavião Real for Gavião Real energy transmission energy that is connected to substation of Serra Pelada. We won it in the last transmission auction. And we could have a discount of RAP that's reasonable. due to the proximity of synergies we have. Therefore, in closing these agreements, we guarantee prices and terms that are adequate with the assumptions we used in our business plan to guide the bid for the auction that happened last year. We also had an important event that took place in this quarter, ordinance from the Ministry of Mines and Energy, allowing all high-voltage consumers to adopt or adhere to the non-regulated market of energy as of 2024. This will leverage on our position as a retailer, and we'll have a return on all the investment we made in the digitization, creations of sales channels. So as of 2024, we want to be fully operational. We already have the platforms, but we intend to deploy them more intensively with a high potential number of customers that will come from the free or non-regulated markets. we'll go to 120,000, 130,000 units, consumer units. So we need all this automation in our sales process to be able to manage all these new customers, not only sales but management and back office services. on the right side you see the transparency award that is guaranteed and this is like the Oscar or the Academy Award for Transparency from Anefaki Fipekafi. So it's important to have been awarded this for the 13th time. We also approved payment of interim dividends complementing the third quarter of this year. We had already resolved on the payment of 55%. and we understand that the financial condition of the company allows us to increase the payout by another 45%, so completing the 100% payout of net income in the third quarter of 2022. Payment will be defined in a timely manner by the executive board, but it has been approved in the last meeting of our board of directors. This is a unique feature of Engie in the market. On page 8, the highlight is that Engie, Brasil Energia and Engie SA have endorsed the initiative of Corporate Knights and Global 100 Council of companies that commit to act according to the climate change and the Paris Agreement. We want to be the leader as an energy provider in the Brazilian market, and we'll continue to do so. On the right side, we have approved a change in the name of Administrative Board of Officers to Board of Officers of People, Processes, and Sustainability instead of Administrative Officer. So because it's a more up-to-date and current denomination for this officer. So these... is open to everyone on December 7th and will be open to analysts and investors. There are too many shareholders and we cannot have everyone present in our headquarters in Florianopolis. So this answers some of the questions we've had lately asking why some shareholders cannot attend. Yes, they can. But given the low availability of space, you can participate online. And we thank everyone, all our investors, for your interest. And we encourage individual shareholders to attend online. On slide nine, we have the ESG indicators. This is something new we brought this year, and it's important for the market to discuss this with our investors. We continue in this path of renewables and installed capacity. In 2023, with the sale of Pampa, we intend to attain 100% of renewable energy in our portfolio. and we have increased the percentage of renewable energy in our portfolio in this year, 2022. The intensity of emissions has been reduced due to the sale and maintenance of Paguassu that also have an influence of total emissions. In addition, the water intake has that is mainly necessary for the thermal power plant that have been sowed or are in the process of being sowed. The strength of women in the workforce, we have been investing more and more in that and having more women trained to, as an affirmative policy, to have more women in managing positions in our company. Lately, we had two important projects that are key is to insert women in the operations of the company. This is the area where there's the lowest number of women, but we are having specific projects to train women and build the skills of women to operate the plants in franigenciaria, so operators, engineers, technicians, so we can have women in operations. In the administrative area, it's almost 50-50 men and women, but we want to increase the percentage of women in operations. As for social responsibility investments, we have a target of using 100% of incentivized and we've been able to attend to reach that year after year, and this is due to the book value, the fiscal income, and that varies according to interest rate or foreign exchange rates, et cetera. So we allot that close to the fourth quarter, We choose the projects throughout the year so then we can allocate the funds in a proper way at the right volume for the efficient and maximum use of funds. Now slide number 11. energy sales strategy. No news here. We saw in the highlights that we sold 88 megawatts average. We continue with our strategy to sell energy for future contracts, and we continue with a reasonable contracting level for the next year. As you may see in the left of the energy balance chart, we have 11% in 2022, 13% in 2023, 20% in 2024, which is a quite low volume that despite the favorable energy in 2022, we had a very poor hydrology years in the past. And that could configure in future years. So we need to have some backup energy, so to speak, because we have – hydroelectric plants play an important role in our portfolio. So as other sources of energy grow such as solar and wind that distribution changes. So In terms of sales volumes to free customers, we have a distribution among segments of the economy and two important segments, which are food and steel industry. But we don't want to be limited to any specific industrial segment, so we are present in many segments. Continuing on to the next slide, we had evolved in increasing the number of non-regulated consumers, and with the hydroelectric crisis in 21, we had to reduce the volume of energy sold to non-regulated customers, but We maintain a certain pattern in terms of number of customers, and we expect that in future years with the opening of the high-voltage market, we'll have a significant growth of those customers, and we are getting ready for that. We have 72.5 thousand consumer units. And we're talking about 120,000 or 130,000 consumer units that will be of high voltage that will be available. Our market share is around 10%. and although our generation amounts to 6%, that shows how strong we are in the non-regulated market. 35% of our operating revenue comes from the non-regulated customers, and we have long-term agreements made at the time of large hydropower plants, and also the wind energy auctions, as well as of the share of transmission. So a part of our portfolio is wind, sold to non-regulated customers, and the other part is for other customers, ensuring our resilience in the long term. Now let's move on to growth. We talk about the wind projects in construction. In Santo Agostinho, we have some trouble in the supply chain, which caused some delay in construction, but we have adjusted the need for such energy in our portfolio. That will affect a bit our profitability, but there are other factors that improve return. especially economic impacts. So we still have a return on investment that's quite good on this project. The same applies to the transmission project of Novo Estado. As you may recall, in 2021, there was a very serious accident. We had to interrupt construction in the north part of the project and replace the supplier. But now, there is 45% missing from the RAP, and that will take place until January of 2023. Now, next slide, number 16. We talk about Gavião Real. As we have anticipated, we have engaged suppliers and the contractor for civil construction, and we'll provide you with more information in coming months. Asurwa. This is a more recent project for which we are now approving the contract with Vestas as a supplier for this wind complex, and we expect to start construction in 2023, and gradual operation will occur as of the second half of 2024. Now, in terms of growth, Girao, there was a review of TUST that happened in 2022, and with operational improvements made in the last two years with Evason Silva as CEO of Girao, now we have a project that generates cash and is less dependent on the sponsors of the project. And that brings to the discussion a possible transfer of this asset to Engie Energia as it was originally planned. Everything will be made on an arm's length position coordinated by a related parties committee with the voice of minority shareholders. and economically feasible and adequate in terms of pricing for other parties. As we did last year, a transfer of two assets of Flores and Maracatu, that brought interesting returns for us, purchases inadequate for sellers. This will be the idea. We haven't had any signal from the controlling shareholder to start this process, but since I am part of the board of Jirao, we start to see a possibility since the asset now is generating cash. So we'll bring a healthy asset to our portfolios. On slide 19, projects under development. This is the pipeline of projects we have. We are investing, we are growing, and we have a pipeline to continue to grow. Of course, it will depend on market conditions. If prices are not attractive to develop new projects, these projects will be capped in our portfolio for future development. It's important to have prices that are compatible with the cost of development and deployment for projects. Today, there's a small mismatch given the rise in costs of raw material, logistics, and et cetera. As compared to the prices we have currently in the market, there is an excessive supply that we can visualize for the future. We have lots of contracts for this period, and we expect this to be eliminated through the compatibilization of future energy auctions. with no longer having discrimination or differentiation between existing energy and new energy. Today, we have a model that allows for this change in regulations, and we have asked the Ministry of Miners and Energy and regulatory authorities not to have these changes. not having this differentiation, to have an action of energy that is common to everyone. So that's important. We would like to have a common option for all types of energy. And now I will turn over for the financial part to Marcelo Mauta, and we'll be back for the Q&A session. Thank you, Satamini. This slide shows our financial performance. We remain with high levels of return on net equity and net invested capital. This is due to our financial discipline and efficient allocation of capital. On the right chart, we show our history of performance In the period from 2016 to 2021, we have invested around R22 billion, with a leverage of 82%. Our own installed capacity has increased a total of 17%. It was not higher due to the sale of assets of the Jorge Lacerda thermoelectric complex, and we have increased our installed capacity in renewable energy by 32%. We have acquired TAG at the percentage of 32.5%, and we entered the spot market for gas. also joined the transmission operation with the construction of two transmission lines, the first in Gralha Azul that has been completed and Novo Estado that is in the final construction phase expected to end construction in the first quarter of 2023, as Atamini said. Our adjusted EBITDA has grown by 113% in the period. and the net income by 34%. This increase in net income was not more significant due to the impairments that we built for Jorge Lacerda and Pampa Sul assets. And we paid dividends and interest and equity amounting to R$11.1 billion. This slide shows the development of the net operating revenue. Some of these impacts have been mentioned by Satamini already. The rise in revenue due to increase in prices and volume of energy sold. There was an increase of 8% in our average price and a growth in volume of 9.3%. The compensation of financial assets or the Jaguar and Miranda power plants had a negative impact on the comparison period. due to the reduction of inflation rates in this quarter. At CCE, on revenues, there was a negative effect of $109 million, but you will see that on the EBITDA, there was a positive impact of $188 million. On trading transactions, there was a drop in the volume of trading transactions, A traded volume in a period, but the EBITDA, the impact was positive by R$4 million. The transmission revenue has dropped by $677 million, but the net impact on EBITDA was $229 million. And here, it's worth highlighting the accomplishment of the effect of transmission energies on which is only economic and it is due to the adoption of a specific accounting practice for transmission assets. And the bridge of EBITDA will make a note to this considering this transmission assets and including the RAP that we had in the period. On this slide, we show the financial performance of TAG, T-A-G. Among quarters, it had a profit of 50 million reais higher. And the reason for this increase in profits is the raise of tariffs earned by TAG. Almost all the revenue is indexed by inflation and the impact of the OEM internalization that was also significant. This is a large chart, but it shows the EBITDA. And the purpose was to show the variations excluding non-recurring effects, which is basically the reversal of part of the impairment that we created for Jorge Lacerda assets in 2021. And in 2022, a reversal of impairment recorded for Pampasul. With the elimination of these one-off events, we had a variation, a negative variation on EBITDA of 15.7%. But as mentioned by Satamini, excluding the positive result of GEFOM in the first third quarter of 2021, we would have had an increase of 8% on EBITDA. As mentioned previously, we also excluded the economic impacts of transmission assets, and with that deduction, there was an increase of 7.3% on the adjusted EBITDA. If we exclude the impact of GFOM, this would be 41%. It's important to mention that this negative effect on this comparison among quarters for transmission assets is basically due to a reduction of COPX in this quarter when compared to the same quarter of the year before, which generates a reduction in the transmission margin. In addition, there was an increase in our COPEX due to the effects of the renegotiation of the supply agreement. The supplier responsible for that accident that we had in the past. So that... caused the need to have an additional capex. And due to that accident, also, there was a delay in the COD of the acid. So these were the main reasons for this negative effect on transmission. And I would like to remind you that this is only an economic impact. So this chart shows shows that these impacts were excluded, and we included the RAP for transmission that reached 121 million on a comparison of the quarters. The Novochi is about 700 million reais per year. So in addition to the effect on transmission assets, there was an increase in sales volume and sales price. And CCE, I have already mentioned, we had a net positive impact of 188 million reais. That is basically due to a better hydrology combined to a significant reduction on spot price. Satamini already mentioned the reduction on the consumption of fuels due to the sale of georgia-la-sava acids. and maintenance at Pampasu plant. The reduction of personnel costs is basically driven by the sale of Jorge Lacerda complex, and we also... mentioned the new agreement on the hydrological risk, as well as the increase in the volume of purchases for the portfolio, basically due to the contract signed with Diamante. as a commitment for the process of sale of that asset. We also had a lower compensation or remuneration of financial assets due to the reduction of inflation rates. We had a positive effect of 58 million regarding the results of TAGI and a positive impact of 4 million in trading transactions. The evolution of net income, as mentioned by Satamini already, there was a very significant impact on that, resulting from the better financial income because of the reduction of inflation rates on the periods and the comparisons. And our debt statements, our debt continues at equivalent levels or similar levels to the previous quarter. The net debt over... EBITDA, gross debt, this decrease in the gross debt over EBITDA results from the exclusion of the PAMPA SU debt, as mentioned by Satamini. Due to an accounting practice that is specific, because we have signed the sales agreement, so That causes Pampasu to be recorded on the balance sheet as an asset that is for sale. So all the assets and liabilities of Pampasu are now booked on a specific line of named assets that is capped for sale. And the profile on composition of debt. We have a maturity schedule that is quite balanced throughout the years. Our debt, as you may know, is composed by indexers that are quite defensive. And the volume of our debt indexed by IPCA accounts for 72% of the total. The nominal cost of our debt at the end of this quarter is around 12.3%, which is equivalent to an IPCA plus 4.8%. Our investment plan on slide 28. Our investment plan remains robust and shows our growth plan and our ambition for growth. from 2018 to 2021, we have invested around 20 billion reais, and the prospects for 2022 to 2024 is an investment of 11.5 billion reais. In 2022, we have the expenses made to construct Santo Agostinho, and The cost of acquisition of Serra do Açua, Floresta and Paracatu. In the year 2022, we'll have Açorua and Santo Agostinho. And in 2024, only Serra do Açorua. This is the history of dividends paid. The payout has been 100% in most of the years. And as mentioned by Satamini as well, we have decided in this quarter to pay an additional 45% plus the 55% dividends that we had approved in the previous quarter. With that, I conclude my presentation of the financial aspects, and now I turn the floor over to Rafael. Thank you, Satamine. Thank you, Malta. We have two questions. The first one comes from Rafael Nagano from . Good morning. Referring to the projects in the development pipeline, has there been any change in the expectation of implementation of these projects, considering current levels of CapEx and energy prices? Satamini, would you like to comment on that? Yes. Well, this mismatch of realities in terms of the marginal growth costs and prices leads to a reflection about future projects to be implemented. We have a portfolio approach. We understand that in the long term, a mismatch such as this cannot be kept or maintained in the sense that prices will have a positive movement in the past. Otherwise, investments will be postponed or canceled. So this mismatch will certainly disappear in time. at some point in time. As I have said during the presentation, we have a large volume of contracts for the next two or three years, so we do expect that there will be a reduction in the excessive supply, and prices will once again adhere to the marginal growth cost. And we'll observe that eventually some price adjustments may happen. But this is an equation that should be balanced in the long run. And this is what we expect. Thank you, Satamini. The second question from Rafael. is whether the company continues to seek growth through M&A, and which segments we see as greater opportunities. Only solar and wind energy, or do we plan to grow on hydro as well? Well, in terms of pipeline of green fields, there is that limitation. The opportunity for growth through M&A's seems favorable. if there is an adequate level of contracts. Otherwise, it will add more uncontracted energy to the portfolio, and this is not desirable at the moment of excessive supply. So, yes, there is a possibility of considering M&As, but it's worth reminding you that we do have a financial discipline, and we want to add value and return premium to our shareholders. So if this happens... you will certainly be sure that we're adding value to shareholders. As for the sources of energy, we have a We have grown through non-renewable energies so that we can balance our portfolio among technologies. But we also considered growth through M&As of hydro energy. There's no problem in that. Our greater focus is to have a better balance of technologies in our portfolio. But if there are good opportunities coming from hydro power plants, we can make the most of that. The next question comes from Marcelo from Itaú BBA. About Santo Agostinho, is there a penalty to be paid by the supplier of the wind turbines due to the delay Yes, all our contracts provide for damages, and this will be discussed on a timely manner. Whenever there is any time of delay on the interim contract, periods or final deadlines, we had part of our costs refunded. So when we look today, this delay will be at a period where energy prices are low. So I believe that the penalty will be enough to cover our losses. At the moment in which prices were higher, this wouldn't occur because since the spot price was very high and the liquidated damages defined the energy price to be recomposed, if you have to go to market with a very high spot price, you cannot recompose that. But at a lower price investment, this recomposition happens naturally. There's a question about Giral, whether Angie plans to show its interest to Eletrobras or buy a stake of Eletrobras, because it would make sense to operate Santo Antonio and Giral jointly. And he also asks about any interest... in the acquisition of the controlling interests of Foz do Areia from Coppel. Yes, it makes sense. There is no conversation about that for the moment. Wilson is more concerned about other priorities right now. But it may be that we can have some ideas of operating together. It doesn't need to be changing positions or anything like that. We are open for discussion as ENGIE. If it's a good deal for both companies, we may choose that path that you mentioned. As for Jarea, we'll keep on looking, and we have discussed that in the past with Coppel. It will depend on the format, prices, and conditions in which this asset is brought to market in this new invitation to bid. Thank you, Satamini. Next question comes from Enrique Pereche from JP Morgan. It's about the additional payout of dividends that accounted to 100% of payout on net income of the quarter. What were the new facts on this quarter that motivated the company to pay out every other profit? And can we expect full payout for the 2022? We were conservative. in making a decision in an uncertainty environment in terms of what political path would be taken with the electoral process and the elections. And we understand that the elections happen in a safe way, in a democratic way. So that made us comfortable to make a decision. that although there is a change in administration, we don't believe that the risk will be high. So this is the main reason. We now feel more comfortable to pay out the extra 45% that we had previously retained. Okay. Thank you, Satamini. The next question from Andres Sampaio from Santander. He asked us to comment on the auction of margin, how that could impact the market. Could you repeat the question? The auction of access to transmission. Well, I believe that this is being used more to solve the number of projects that exist today, which is not compatible with the transmission capacity available, especially in the Northeast. At Enel, we had 95 gig of wind power. plus 150 plus giga of solar energy in a country with installed capacity is 180 some. So it's totally incompatible, this demand volume for granting concessions with NL, so separating what will be the actual capacity I believe that this is the final goal of ANEL in making these auctions for margins of transmission. So it's a natural selection for projects that are really with a concrete prospect for being implemented. Some people want to sell projects without having the conditions to continue, and that generates a huge amount of work for Enel and ends up blocking the entire process. So this is a way to organize demands for Enel. I think they thought it was a good solution they came up with. André asks for an update on the ordinary review of physical guarantee and the public hearing about the opening of the low-voltage market. Well, like him, I still don't have any information on that. But I do envisage that at some point in time, the ministry will have to define the review of the ordinary review of a physical guarantee. Believing that they were waiting for elections outcome, I believe that they should – publish an ordinance defining the new values. A question from Joana, investors analyst about CapEx. I believe we can give her more details because she's saying that we see almost $4 billion for 2023 and 2024 in CapEx investments, and we have mentioned that it will be only Serra of Asuroa But we do have other projects being implemented. It's $6 billion in the period. Yes, Santo Agostinho, we also have investments in Santo Agostinho. In 2022 and 2023, Novo Estado for next year. So, there are other investments in other projects as it's being implemented that adapts to this field of investments for coming years, Joana. Asuruá, Santo Agostinho, and a bit of Copics for Maintenance as well. Yes, that's true. Daniel. Daniel. from Banco Safra, asks about the transmission auctions that happened of 2023. Does it make sense to continue to assess that? And how is the distribution of earnings? Yes, why not? Of course, we make our calculations, we participate, and if the price is rational, we can bid. if the discounts have other reasons other than economic reasons and return will be out. So that's part of our core. We believe that is in line with the energy transmission because it allows for energy to be delivered to large consumption centers, which is part of our strategy. So if there is a profitable risk-return ratio, we'll be part of the auction. There are other companies that have reasons to offer RAP with very high discounts and let them take it. But it remains part of our strategy to look at auctions. Thank you, Satamini. We have two last questions from Gustavo Faria from Bank of America. Merrill Lynch. The first one has been answered. It's about the delay in the supply of generators or rather wind turbines. These are the last questions we have for the Q&A. His question is also about the COPX for renewable energies. What have we seen at the COPX levels and whether we believe that we are at the COPX levels that are structurally higher in terms in the long run? Well, I think so. I do believe we have higher COPX levels. Well, first of all, we understand that the companies that manufacture wind turbines have suffered greatly. Most of them have had losses. and it's not sustainable to continue with losses for many years. So they will probably have to set different price levels for the business to be sustainable. That's first. Secondly, we believe that with the energy crisis in Europe, there will be a higher demand for renewable energy, to replace fossil fuels and gas that comes from Russia that's not available or gas is arriving to Europe in some other ways. So, that are more offshore wind projects. That is the solution available in Europe due to the scarcity of land for deployment. And also the capacity factor that you have on the sea in Europe is different. I believe that this will put pressure on the GoBlo supply of equipment for solar and wind generation. So, yes, that's a new level, and, yes, that will present higher price levels in the long run. that are compatible with the higher growth of the market. This is our vision for coming years. And according to the group's view, prices of energy will increase given the higher demands that we see due to climate change discussions that we've had. One last question is whether we have any advancements on the production of green hydrogen. Well, green hydrogen is an important bet in the market, but we'll have to create the conditions for this fuel to be integrated. The major potential consumers we have in the world still have an initial transformation phase which is the replacement of coal or other fossil sources with gas and then later on hydrogen or any molecules deriving from green hydrogen could be green methane or natural gas coming from hydrogen. An example of this that we have talked about and will be The topic of a seminar that will be conducted in Mexico next week by the Latin American Steel Industry Association is the example of steel industry. They're highly dependent on coal and cox, and the change to natural gas will significantly reduce their emissions significantly. In order to be net zero in some point in time, they will have to use renewable energy and add to their process different molecules from natural gas coming from fossil sources. They will have to have a synthesized gas to attain that goal. But these are steps. We start in the reasonable scale. We have the definition of a construction project in Bahia, a customer we have and tag pipeline. We had an initial partnership with them for H2 Global, which is the German initiative, but they continue on their own on their investment decision despite that. We do have projects that we are developing with potential partners of takers of hydrogen. But this is something that has a journey that's starting today and will depend on a series of factors as well as on the support of governments. We see other countries taking that type of initiative of supporting this industry, such as in Germany. United States with some initiatives as well. And here in Brazil, it will happen at some point in time. But it It cannot be on the electric sector. It should come as if there is a subsidy, it should use funds from the Treasury not to pose a burden on other agencies. Okay, thank you very much. I believe that with this answer we close our Q&A session. And now I turn the floor over to you for your final remarks. I am very happy with the number of questions and everyone's interest. We've had one more quarter of solid results showing that our long-term strategy is very adequate. And we await the end of the year with excellent news. And I hope we have a regulatory development for the country that is good with technical decisions to change the regulatory framework valuing the attributes with hydropower plants, with the PL 414 being resumed again next year with less of a political bias, and to have an efficient allocation of funds to the industry. We want a healthy environment in which consumers pay for energy at a fair price without damaging any other industry. Okay, thank you all very much for attending the call. Please feel free to get in touch with the investor relations area if you have any further questions. We remain available. Thank you and have a good afternoon. Goodbye, everyone.