Engie Brasil Ene Sa S/Adr

I would like to make some announcements before we begin. At this moment, all participants are on listen-only mode. Later, when we start the Q&A session, participants will be able to send their questions using the Zoom Q&A tool. Please note that this video conference is being recorded. Our file... Our files, results, release are available on our website at www.ng.com.br slash investidores, along with the ITR and other documents filed together with the CVM yesterday, where detailed analysis of financial statements, operational results, ESG indicators, and progress in the implementation of new projects, among other highlights in the period. Before we proceed, we would like to clarify that statements made during this video conference regarding the company's business outlook should be treated as predictions depending on the country's economic condition, the performance, and the regulation of the electrical sector, among other variables, and therefore are subject to change. We would like to remind journalists that if they wish to ask questions, they can do so by emailing them to the company's press office to present Engie Brazil's Energias performance. In Q3 of 2023, we have Eduardo Takamori, Chief Financial Officer and Investor Relations Director, Rafael Bosio, Investors Relations Manager of the company. Now I will hand it over to Takamori. So we have 113 participants. Well, good morning to everyone. Good afternoon. I'm speaking from our headquarters in Paris. I hope that this connection helps us. Now, when we go to our main slide with no further ado, we would like to talk about the adjusted EBITDA. There was a significant increase of 23.5%. It went to $1.4 billion to $1.8 billion. And you can see the main drivers of the results, where the transmission segment results. And number one, I would like to clarify something. The 318 million BRLs, 50% was because of the increase of the rabbit, because during the same period last year, part of the assets were under construction. And now we have all BRLs. of our assets in operations. So part of the 318 million are part of the increase in revenue and approximately 270 million come from the IFRS adjustment. This is during Q3 last year. We recognized a cost increase and this goes directly to the results because of our accounting procedures And we will not see this again because the assets are operational. There was a slight increase of revenue during Q3 this year, totaling the $318 million. That is very important for our reason. $118 million, the second item, which is positive regarding the EBITDA variation, comes from the equity income of this tag. We will elaborate this. And the net profit went $230 to $330 million, which was positive. And finally, the third element here that justifies the EBITDA variation is the result of the sale of Pampasou's subsidiary aligned with our decarbonization policy. This is part of the controlling company's a target, and with this we lose our long-term revenue. But we trust that we are on the right pathway. We are reassured on the right-hand side. Here we had the adjusted net income from $709,929,000 over a 30% increase quarter-on-quarter. And we also have the positive effect of a lower depreciation and amortization because we sold Pampasul. We do not have this asset associated and a combination of a drop of increase of financial costs. That number one was based that would be we had a $33 million, and it is adjusted by the IPCI, and it is adjusted amongst quarter. And the net result of financial expenses was positive $40 million. We had a drop in financial expenses, and the net income was 40%. So this is why we have the 43 million reais of financial reserves. And when you have a higher base, you pay over the net income. On our next slide, here we can see the main highlights. From our business point of view, number one would be we announced to the market the expanding of the portfolio diversification with the acquisition of five photovoltaic complexes. On Wednesday, we analyzed these events and we were able to announce the debt and this operation meets all the return criteria and risk allocation requirements. and these assets are positioned where our current assets are positioned. With great synergy, we would like to highlight that the assets are highly contracted in the long term. They have a capacity of two-thirds of the capacity, and the remaining tranche, For the ACR, it has also long-term contracts until 2042. The allocation is in the free market. It doesn't have a market risk. Now, on the lower part, we would like to mention that we closed the purchase operation of CEE generation, and this increased five average megawatts to our company's portfolio, totally compatible with our business. We would like to remind you that we operate Machadinho And the last element here is that regarding Santo Agostinho, although at the end of 2023 we had 12 out of 70 wind turbines, now we have 19 wind turbines operating commercially and 30% of the commercial operation is So 60% is underway, and we maintain the initial forecast for the complex to be working by the end of the year. Here we have our ESG indicators. Number one, as a result of Pampasul, there is a significant drop in the intensity of the company's emissions. Basically, what remains is scope three. We're going to address this differently. Perhaps we will have to change the structure of the slide. And on the right-hand side here, we have health and safety. That is not only something important to maintain our license. We had a significant drop in the accident frequencies, number of accidents, and we are very happy. because this is a continuous effort made by the company so that all our employees and third parties are able to go back home safely. And on here, we also have, you can see that throughout the quarters, we increased the percentage of women in the workforce. This is also a very effective policy, and we have focused strongly on this. And here we can see the evolution from 25% to 28% and in leadership process. So we have women in the company and women in leadership positions. This is an increase of 10% when we compare the same quarter last year to this quarter. Now investment in innovation and social responsibility, investment in innovation grew throughout nine months, although it is at the same level last year. The social responsibility and investments, we have the same level of investments growing. to date, when we compare last year to this year, just one observation that our resources, our incentivized resources dropped slightly, but we offset this throughout the period. Now, Rafael, you have the floor.

Thank you.

Good morning, and thank you very much for participating in our call and for your interest. We have over 200 participants now. Now our energy commercial strategy, the classic slide where we update our energy balance, our energy balance will be seen in the attachments on slide 35, but here we – you have it in charts – So for those that follow closely and follow the evolution quarter by quarter can identify that we have maintained the energy sales, although there has been a drop in appetite, which is normal in a scenario where prices are driven downwards. But we continue in the market. We continue selling. During this quarter, we dropped an average 74 megawatt average in an uncontracted balance from 25 to 28 without identifying the impact on the average sales price, which was stable in comparison to what we announced during Q2 for 23, 24, and 25. Therefore, we continue focused on our strategy, pursuing to follow the free market opening in order to capture the consumers that are migrating. I believe that on the next slide, we will be able to see this. In this slide, we identified that we have a significant growth in number of customers So 22% comparison to the same period last year. And also we've grown in comparison to the last quarter. This shows that our strategy has captured the expansion of the free market, especially in niches where the consumer has greater appetite And on our side, we can find better contracting prices. And this is reflected on our average prices of our portfolio. So now you can see our expansion. And here you can see the progress of our projects. The first project would be Santo Agostinho Wind Complex. the beginning of the operation is the first quarter, the first wind, the wind turbines, Takamori already updated you regarding the number of wind turbines that are generating, are in test or in operation, already 7.5% of global progress. So, and auxiliary works for access networks and substations 100% completed. This is operational 2023. We have Santo Agostinho, and now we have Serra do Asuroa, that is the biggest implementation complex from the ANGI group in the world, which will become operational by the end of next year. So we are adding capacity in 2023 and 2024 with Serra do Azurua. As you can see here, we started also the concreting of wind turbine foundation and excavations for the transmission line. And on 2025, we will continue adding capacity to our portfolio with the ASUSO photovoltaic complex in Rio Grande do Norte with over 750 meg of installed capacity that an implementation began in July. This combo will add more and additional two gigawatts of installed capacity, and this represents over 20% of generation that we will be able to deliver And then now our next slide. Here we see growth in transmission. And here we highlight that together with the diversification of our revenue, we have two operational projects, Graal e Azul and Noval Estado. And on Q1 of 2020 for Gavião Real will become operational. That is a small project that we bought during last year's auction. Nonetheless, on the following slide, we have the Lot 5, that is the Azabranca transmission auction. We have over 1,000 transmission lines that will be added to our portfolio to broaden the diversification of our revenue that provides stability to our results. And finally, here you can see the Giral HHP, where the controlling company has a 40% stake. There is a potential to transfer this to Engie Brasil Energia. Giral is an operational HPP in October. It celebrated 10 years of operation. The indicators here are positive. You can see that it has 100% of uptime operating factor. And during this quarter, it was the first company in Brazil to receive the IHA certification and the second plant in the world that receives this type of certification, which demonstrates the high operational level of our plant. This is a slight difference. Well, it didn't change vis-a-vis the last quarter is where we present the projects that are in a developed stage. They're not under construction, I would like to highlight. But they are waiting for the right moment, for right market moment to be developed because the expansion cost and the implementation cost is above the long-term cost. average price, but we must have a diversified portfolio of projects to be developed in the future because when there is a positive turn, when the market changes, we have to be prepared to resume the growth of the company. One, because when you develop from the beginning to the get-go can take four or five years. This is why it's important to have projects under your sleeve so you can implement them as soon as there are better conditions. So, Takamori, now I give it back to you to talk about the financial performance. Thank you, Rafael, in this slide of financial performance. Point number one, I would like to remind you that although with a number of investments, although we mentioned that there will be a 55% distribution during the first semester. We would like to remind you that our return on equity is extremely positive. Our return has exceeded 30%. That is way above the average of the industry. And now we've seen 37% on Q3 of 2023, the return over invested capital that contemplates debt and the company's capital is 20% because this is a result of our capital structure. We are delivering more to our shareholders. Here you can see all the investments during the past years up till the date. So it's 2016. That would be almost $26 billion. And there is still a lot to deliver. Here you can see that throughout time we started as a generation company. Then we went to transmission. And now we're also transmitting renewable energy vertically. And recently, we invested in TAG. This is acquisition of 32.5% stake in TAG, which has helped us in our result. Now, throughout this period, there was an adjusted EBITDA growth of over 100%. We more than doubled. And our dividends increased. all on our own capital of $14 billion. And we're proud of this. We can go to our next slide. This is a slide that has a number of bars, and sometimes it's challenging to explain it. In summary, we had a drop of 8.5% of our net operating revenue, and And as Pampasul, the exit of Pampasul of our portfolio represents a drop of 162 million reais when we compare it to Q3 of last year. And out of these 8.5%, this accounts for 6%. This is why the rest, this is how we justify the rest. The second relevant point here would be, There was a financial asset remuneration higher. This is 59 million that our Jaguarimita and the assets are generation assets. And this is the PCA variation causes this effect on our net operating revenue. Now our next slide, we have 39 million of drop because less hydro generation quarter on quarter, although with the positive impact of export in the beginning of the year. And here, these 39 million represent 1.5% of the variation of 8.5%. On in the central bar, I would like to highlight a drop of 40 million quarter on quarter, basically because of the price and sales volume which dropped. Amongst, although with lower price and sales volume here, you can see that we have been successful in the management of our portfolio. And finally, I would like to highlight the dark blue bar of minus 65 million reais. That is a result of a drop of the revenue of our trading operations. We sold less, but this drop is not as important because there was a drop compatible to the purchase of our free trade. Therefore, the result was neutral. And it's generated a drop of 2.7 billion to 2.5 billion. Now, the result of equity income here, you can see our tag. Tag does not make an announcement. We're breaking this out so you can understand TAG has generated an important result, a net income, which is important. Here we're breaking out a little bit the result. I would like to draw your attention. Number one, that the last bar, that is, here we have a net income of R1 billion during Q3, one-third of this, 30.5%. is a contribution to the EBITDA because of equity income. And here, 320 would be the contribution to the EBITDA. How do we compare it to... From last year went to 202 million to 320 million. So there was an increase and you will see that in the upcoming slides. In the first bar, 2.37 billion of NOR. The most effect was the update of the transportation tariff. Here we have a 70% come from the update of transport tariff. We have less financial expense. because of the drop of the CDI and the impact of our refinancing and a fourth element that although we have the benefit of transport and lower financial expenses, we pay more taxes. Because there's more revenue, we pay more taxes. Here we have a variation to 202 to 320. It would be the increase of 108 million reais. Here you can see the EBITDA change. The tag is in light blue. The first point that I would like to highlight is that the TAG effect, here we have the green lines, this is the effect of the transmission distributed in three different sides. Now, the two extreme bars, this is where we have the IFRS, This is an accounting, it's an accounting requirement and the central bar, this is the effect that I mentioned in the beginning of the presentation, that is the variation of the undertakings under construction. And now their operation of this reflects the wrap of 50 million reais. So tag light blue, green would be the allocation of the result of our transmission concessions, part of the EBITDA. And part of this is adjusted for transmission for the central bars. And in the central bars, where we went to 1.66 billion to 1.72 billion. This is justified by the sale of Pompazul minus 62 million reais. When we compare it to the same quarter last year, we spoke about this in the past slides. Another important element would be lower generation quarter on quarter in EBIT. And we already mentioned this. There was a positive export. but there was a negative effect regarding the same period last year. And the last point from the central bars, EBITDA and adjusted EBITDA number one would be the blue bar that is 101 million reais, that is a drop of the volume of sales purchased. This moment of low prices, there is lower activity and purchase and sales from third parties. This is why we have a drop here. Here, Jaguari Miranda, that is the 59 million BRL bar. This is a result of the remuneration of financial assets. And there has been an improvement of the EBITDA because we have no more fuel costs. The last point that is important to note is that after our adjusted EBITDA, on the extreme right-hand side, we can see 61 million reais that are non-recurring. This is basically because of Solan Maracatu, we had a strong wind event. The damaged part of the equipment, part of these equipments, so this was a loss of 61 million BRLs. And although we recognize this impairment, These assets are insured and this will become operational. Briefly, we'll give you more news regarding the unfoldings of this problem. There was a significant growth When we talk the IFRS of 23%, when we exclude the effects of IFRS, the EBITDA drew 24%, quarter and quarter. Now the next slide here, the evolution of the net income. Here you can see a growth of 31% from $709 million to $929 million. The main element here is the EBITDA. It went to $1.4 billion to $1.768 billion. There is a variation of $336 million, as we already explained. We also had depreciation and amortization because we no longer accord any bump of minus 43%. Forty-three, the which is because of the increase of expenses and the net positive of revenue minus financial costs and income tax, it says here. And our results are $928 million regarding adjusted net income.

Now you can see our debt balance starting 18.7 billion.

This growth step was the same during QT. with a slight variation at the end of 2022, very similar. The great difference is that we had a more cash robust position during the second quarter that was 4.7 billion. And because of cash, because of dividends, this cash position dropped 3.1 billion. And our net debt here, that was around $14 billion, went to $15.3 billion net debt. So regarding ratios, we maintain the level of 2.5 net debt EBIT and 2.12 times the net debt over the adjusted EBIT. This is a comfortable position for us. and compatible with our moment so that the company can carry out its investments and to execute the operations that we announced during the past weeks. The debt profile shows us that we have a long-term, we have a short-term position of $2.4 billion. part in CDI and NIPCA until the end of next year. After 12 months, we have $600 million to settle, so it will be $3 billion from now until the end of next year. A profile that is adequate for our cash generation capacity, $2.2 billion, $2.3 billion in the upcoming years. And with with IPCA structure, 80%, 10% CDI, 9% TJLP. So we are comfortable with our position here. And our next slide. Here we have our investment planner. Here you've already seen the profile of the debt. Now you can see our investments. A lot of things will happen in the upcoming years. We will be bearers of good news in terms of future investment. This year we invested $3.5 billion. We are in the final period of Santo Agostinho Serra da Suruá as well. We invested over 1 billion reais throughout this year. And I would like to highlight for 2024, well, 6.9 billion reais in investment, which is compatible with our cash generation leverage level and all our track record of financial discipline and financial capacity. and 3.5 billion of Serra da Surua, 3 billion Nasusol. These are significant investments that are part of our capital structure. Our next slide. Here we can see our dividend distribution. Throughout the years, we distributed 100%. of the net profit. And throughout our story, we dropped. That was limited to 55%. And here I would like to highlight that although we mentioned during the first semester, 55% of payout, I would like to share with you that you know our track records are a financial discipline. It is natural that the dividend distribution should be compatible with our growth moment. You just saw a slide with the company's expansion, and the dividend policy has to be compatible in order to to give a better payout to our shareholders. So these are our comments regarding the slides that have been presented. And now we can go to our Q&A session. And now we will... please send your questions through the Q&A tool. Our first question, Taka, comes from Julia Zagnolo from Santander. She has two questions. I will first ask the first question. The tag result, although excluding the non-recurrent effects, was positive. What are the expectations for the upcoming quarter? Should we expect a continuity of these levels? of the tax results with financial results pressuring less the bottom line? Julia, it's a good question because TAG always surprises us. So it is something different to what we're used to deal with. TAG is an investment and we do not give guidance for TAG. I would, this would be a wild guess because we have a one-third stake in TAG, and TAG has its own management team. I really cannot share any expectations for the upcoming quarters. I do hope that it still provides us a lot of return. The second question would be, Could you update over the interest and possibility that Engie has in participating in the next reserve auction? Well, Engie naturally, it monitors all the opportunity to contract energy in the long-term reserve capacity. All these auctions are observed by us. There is no special treatment. We are always trying to maximize the return over investment and to lower the risks. So we are always paying attention to this. Thank you. Taka from Mr. Bandera. That is an individual. And he says, the company has not changed this dividend policy. Policy changes. When will you announce the payouts that have been approved and provisioned, and if there will be more profits this year? This is a good question, but we cannot share this right now because it depends on a number of factors. the evolution of the business and other investment opportunities that made a merged capital, there are many things that can take place. And it would be very premature to give you dates or moments or give you values or payout percentages. So, unfortunately, we cannot anticipate any or advance information. What we can do Our distribution policy maintains is unchanged. The policy, as you can see, the minimum payout of 55%. So we have the flexibility to pay 55% and 100%, depending on everything that Takamori just mentioned. there is this is a recommendation and the board has to approve this but the policy itself is to pay at least 55 percent and this should not be changed and naturally with a less leveraged position it was easier to distribute a hundred percent of the dividends Nonetheless, 55% that has been communicated throughout the first semester is way above what the market in expansion distributes. So we do magic. So, yes, we are a dividend of growth and pay. And we pay money. We pay more than the market and we're growing at an accelerated pace. The next question from Daniel Travitsky from Safra. He has two questions. I have the first question and then the second would be the acquisition of solar complexes announced last year. Why not to develop greenfield like other companies did? Isn't the CapEx per megawatt competitive, or are there other reasons? Can you explore this? Well, basically, we continue developing a number of projects. Rafael showed you our portfolio of our pipeline of projects. The matter here is that To start from scratch means that we have to contract long-term energy to reduce the market risk. It is not a good moment to initiate a contracting process. And as always, we observe the market and we see the opportunities of capital. Now, solar projects are compatible with our long-term objective of renewable energy. So all the assets that we are incorporated are in states that already have operational undertakings and there is a long-term contract. So this is the best of the world synergy, the undertaking that makes sense to us, contracted at long-term and at good prices and enabling us a long-term recontract that makes sense to us and it has to complement our portfolio. So there is not one or the other. Actually, we have to allocate our capital the best possible way. And the second question, can we comment the contracts of energy sold throughout the semester Although the volume is small, the prices are interest. Could you talk about this? And how can we copy these contracts? Okay, this is what I mentioned in the commercialization slide. We... We diminish the appetite where the price is pressured, but we've tried to broaden this in the free market where we have a win-win. We can sell at a higher price, but the consumer is also buying energy at a lower price, lower than at the distributor. And with this, we can drop the impact. in the average price of the portfolio, we have a major portfolio totally indexed. So this is a strong moment where we need a major volume of energy sold at a lower price than the average price to see the significant impact. And we have offset these impacts because we are highly contracted in the short and mid-run. Thank you, Rafael. Now Enrique Pereche, an analyst from J.P. Morgan, he asks about the CapEx during the first semester the company invested around 1.9 million And the year guidance is $3.5 billion. Therefore, he would like to know where does this slow down in our capex during the fourth quarter due to the level of leverage after the incorporation of Atlas Energy? Will there be a pause in the acquisition of new projects? Enrique. Enrique. Although only we invested $2 billion during the first quarter, we have the third quarter where we've invested part of this. We have Santo Agostinho that is in its final stretch that will need an additional investment to end the project. And part... Of the difference, more than half of the difference is from Serra do Surua. This is a project that initiated the works. We will invest significantly in equipment during fourth quarter. So Serra do Surua will require a lot of investments, by the end of the year and about our leverage level. No, we don't expect a pause. We continue. We are financially disciplined. We have a good balance. And if we have to, if there is the right project with the right investment with the right risk profile we will do it with the best capital structure respecting all the investment criteria and this is the advantage of being part of a multinational group okay We would like to remind you that the debt is only one part of the equation of our capital structure. We do not only do business with debt. Marcelo Sá, he wants to know what do you expect in legislation changes because the PL 404 died in theory. So, because the Secretary Efrain said that the sector will be resetted. Marcelo. We always are moderately optimistic with Brazil. You can see it because of all, due to all the investments that we've done here Although the PL-404 remained a long period of time in Congress, we know that the industry reset can be still a generic expression. It can converge with some articles of the PL-404. We can have a new version. And, well, we hope... that's something good comes out from all of these legislative discussions we are counting with the market opening correction of energy self-production we ex we expect the regulation to be honed so that brazil becomes extremely competitive in renewable generation and that this results in a higher GDP. There are important things that can happen that favor the electric sector and the company. Another compliment from Marcelo Sá. What about the capacity auctions? If we have hydro projects that can participate, what is the potential capacity? And if we have any idea, what would be the demand of this auction? No capacity auction. We have two hydro projects. Salto Santiago, Fonte de Pedro, Salto Santiago are major machines. Here we have two wells available with over 700 mega. Salto Santiago and Jaguara. In Jaguara, we also have two existing wells. And we are constantly assessing the economics in order to enable these two projects. Yeah, these two complexes. In total, they represent 1,000 mega, 701, 700 the other. Now, the auction demand. We always question this because we see that on one side, you have an absurd capacity of hydro generation. But recently, thermal... Electric generation in some regions. You have to see nuclear generation availability. There are a number of things here. There is capacity need. But how we calculate this capacity isn't clear. The models... aren't sufficiently developed. Therefore, we don't feel 100% reassured regarding what will be the necessary capacity in the mid and long run. And Marcelo Sá, about how we see the PLD volatility during the summer period. where there'll be a detachment of prices because of a greater price detachment. It's easier to win the lottery than to answer this question. There have been situations throughout the years where the market was convinced and everything went down the drain. And all the convictions want the drain. So perhaps we don't know. Rainfalls will anticipate, will delay. We will have more availability of assets. Macroclimatic effects. Well, it's becoming very difficult to interpret this. The risk is always present. There are... There can be a detachment, as there was a price detachment a couple of weeks ago, which was a major detachment. So it's very difficult to anticipate and to predict. Starzizio Ramos, which is an individual, he's with the investment of $3.5 billion this year and $3.8 billion next year. Well, will be your net debt over EBITDA during the next year? Good question. Connected to what I just mentioned here. The debt is a way of funding for investments. Historically, we've maintained our FIT rating AAA. We will continue pursuing this. And for this, there are a number of of leveraging the most, we will continue pursuing this. There is no internal element and no shift of route that will deviate us. We also have the covenants with our higher debts or contracted debts. Therefore, we will continue with the same efficient management of our capital and we also do not announce projections. We will not do anything that will threaten our rating. We will focus so that this doesn't happen. Diogo Bebei now with the low prices and the short and middle run that affect the the sales mix price and the trading operation. What can Engie do to maximize the results in this market moment? I believe that we have to manage our portfolio. It's something that we do to manage properly our customers to approach the consumers to get closer to our smaller consumers where we have greater margins. Nothing different from what we're already doing. We invest a lot in the efficient management in our capital and our energy portfolio. And to just pay attention to uncontracted projects. So now we have to pay more attention to transmission than to generation so that we can properly use our capital. Thank you, Taka. The next question from Mr. Tarcisio Ramos, an individual investor. He wants to know if Engie assesses a new acquisition in the gas sector like TAG or any organic growth in the TAG sector. Okay, there are two effects here. There is Engie Brasil Energia that is this public company. and we controlling company also invested. So these are two investment groups in infrastructure. We don't see why we shouldn't invest more. The organic growth of TAG is something natural, but we are always discussing where are we going to invest. So our focus here is the electric energy sector. I have no specific information to disclose, but we have two investment vehicles. This was something that I wanted to highlight. We have a number of questions that will be sent to the IR department. And if you wish to pose questions, please do it through our Q&A tool, Fabio. Fabio wants to know about the maintenance and operational cost of the solar and wind complex. Do you already have any statistics regarding the hydroelectric relation and what about distributed generation and the improvement of technologies of off-grid batteries? What is your long-term view considering the risk Now, well, your first question, I am going to have to do my homework because I don't have this answer on the tip of my tongue. Well, what we can say in EBITDA margin, we've seen greater in wind farms, But hydro, hydro energy, they're similar. But there's nothing that draws our attention. The second part of distributed generation. Distributed generation is always a complex matter because the subsidy is high. So distributed generation, although it doesn't have a battery, damages the electric sector. It takes space away by PCH. There is a lot of subsidies. So it is already a risk for the company. And not only for us, but in addition of being a risk regeneration company like us, the population bears the brunt because they can't pay it. But for example, individuals cannot install distributed generation. Number two is that even if we were successful in the regulation discussion, well, if you have distributed generation with off-grid batteries, you would have to invest in order to enable the off-grid batteries. This happens in some places in the world, like Australia, where you have a price that justifies the installment of battery. Chile is doing this, California. But you need market conditions for this to happen. Before reaching these moments, All the electric sector agents will coordinate to dispatch the best way and to better use your hydroelectric plant that is a gigantic battery. So there is a lot of space to optimize our system before climate change. carrying out a distributed generation with off-grid battery. We cannot create a subsidy policy for battery. Because you are giving more subsidies to a technology that doesn't generate energy. And this means that you're not using your resources efficiently. In some places of the world, it does make sense. But in Brazil, we believe that this does not make sense. Correct me if I'm wrong. There is an additional factor to the strong subsidies that we've seen in Brazil. There is a market reserve. We cannot compete directly with GEDs. With the individual, when the free market is open, there will be a competition and we will see how competitive DG is because conventional generation, centralized generation, we have a number of assets that are depreciated, amortized. There is a competitive generation price to face DG. I don't know. Yeah. Extremely timely, and it is an antidote for the amount of subsidies for distribution generation. In the market, you can optimize the existing resources. You can use all the idle capacity, price it adequately, and generate value to society with no new investments. which is excellent for everyone. This is a highly complex matter. We have a subsidized source with market reserves. No.

Okay.

This is our limit. our questions will be sent to our IR department. And I will give it back to our Takamoron Alexandre for final remarks. I would like to thank all of you for your participating and your interest. We continue at your disposal to answer questions that weren't answered or that emerged afterwards. And I will give it back to you, Takamori, to end our call. Thank you very much. I also thank you all for participating. The last point that I forgot to mention that was regarding the evolutions of the PL in Congress there is a matter that we haven't noticed. It's the deliberation of RDCE. Generally, this is the value that was paid by all the users of the transmission network throughout the last years. ANIEL technically perceive this and due to the complexity of the matter and the impacts, this matter has not been deliberated. It's part of the agenda. And the impact is extremely significant for all the users. In a moment when we're talking about excessive subsidy, a high amount of taxes on the sector, we see that it's natural to start by the most important matters and one of them is RDC that has to be instructed by Neil. So we believe that this will have a significant impact of a billion to society. So we also hope this matter is deliberated in brief and to receive the proportional reimbursement. The user isn't only generation, it's the generator, the free consumer, the distributor. So this was... This was an important matter that I wanted to approach because it is highly relevant for society. And perhaps this represents one third of the total cost of generation throughout the year. But this is important. So with this, I bring our presentation to the end, and I thank you all for your participating. The ANG Brazil Energy Conference call has come to an end, and have an excellent afternoon.