Eletrobrás - Earnings Call - Q4 2024

Transcript

Operator (participant)

Procurement and Services, an interim VP of People, Management, and Culture. Mr. Robson Pinheiro de Campos, VP, President of Expansion Engineering, and Mr. Rodrigo Limp. We would like to inform you that this event is being recorded and will be made available on the company's investor relations website, both in Portuguese and English. For those who require simultaneous translation, we have the tool available via the globe labeled Interpretation. Choose your preferred language. For those listening to the video conference in English, there is an option to mute the original audio in Portuguese by clicking on Mute Original Audio. For the Q&A session, if you wish to pose a question, please provide your name and company through the Q&A icon. As per our standard procedure, your name will be announced so that you can ask your question live.

At that time, a request to unmute your microphone will appear on your screen. If you prefer not to open your microphone live, please write your name and company followed by your question in the Q&A field so that our operator can read it aloud. Before we proceed, we would like to clarify that any statements made during this conference regarding the company's business outlook, projections, and financial goals constitute the beliefs and assumptions of the company. These forward-looking statements are not guarantees of performance as they involve risks and uncertainties and therefore depend on circumstances that may or may not occur. Investors should understand that general economic conditions and other operational factors may affect the results expressed in these statements. We will now turn the floor over to Mr. Ivan Monteiro.

Ivan Monteiro (CEO)

Good day to all of you, and we would like to thank you for your participation in our earnings call for 2024. The privatization of Eletrobras was approved in the chamber and the House of Senators after one year of discussion. This is a framework that will lead to the new transformation phase of Eletrobras. Now, to manage a company with excellent performance means that the management has to be adequate, have discipline, and have a focus on discipline. We define the client as the person that gives trust to our work. We have to be better than competitors and service the expectations of our stakeholders. We work in generation and transmission, and Eletrobras cannot fail.

The security of people, our own people, third parties, the environment as a priority means that we have implemented a trajectory of strong growth for generation and transmission, actively participating in all of the auctions. Now we have thousands of equipment distributed throughout Brazil, and we use artificial intelligence and others. Now we have ever-growing availability of our assets for generation and transmission, and we have begun to focus on their operations, following up on possible climatic events.

To face the new reality of the Brazilian electrical sector and to add thousands of new consumers in the free market, we have created energy solutions for this set of new customers. This is a process that has been implemented and is undergoing enhancement. In 2025, we will be delivering our wind farm out of Boa Vista in the second half of the year with more than one decade of delay.

Now we have an evolution of our liabilities, and we have implemented a new policy which has allowed us a continuous reduction of this liability. Now we have put all of the companies under the umbrella of good governance, and we're working with adequate and competent professionals that work in the Executive Board and the Board whenever necessary. The purchase and sale actions are under the work of the holding exclusively, and of course, they have to be adequate with the return on our capital. Now the work that we carried out in Furnas clearly points out to this. We did no longer want to work in Rio de Janeiro.

In the conciliation process, we will be able to better forecast our cash flow, and the signature of the collective bargaining agreement includes all of our employees and is linked to Eletrobras financial performance with salaries that are matching what we see in the market. The distribution of dividends was only possible thanks to the enhancements we implemented throughout the company. We have BRL 32 billion with a reduction of financial costs associated. Because of the new geopolitical reality, we have made adjustments in our liquidity. All of the present and future investment programs will now be carried out with greater freedom. We hired 2,100 new professionals. That brings in new diversity to our company. This shows you the reality of Eletrobras as a new employer.

We have a great deal to do, and we truly believe that we will reach a new level of service demanded by regulators and our customers. Now this record payout of dividends is a response we give to our shareholders. We go through small shareholders as well as more than 300,000 individual persons that have invested in Eletrobras. I would now give the floor to our CFO, who will speak in detail about our results.

Eduardo Haiama (CFO)

Now let's follow our agenda. We're going to, first of all, go through the highlights, then speak about our operating performance, and finally the financial performance on slide number five, which are the great highlights. First of all, a client focus, and we will speak about the transformation we have undergone in the last two and a half years.

We're going to speak about our prudent financial management, where we are allocating capital, a bit about our ESG agenda, and finally speak about the transformation that has taken place in the energy market. On slide number two, we have reached 700 free energy customers. This thanks to a structure that we have implemented in our trading area, centralizing the process, expanding capillarity to represent the customers efficiently, enhancing robust processes for credit and market risk management, and also establishing trading guidelines and commercialization pace for the amount of energy that we still have for commercialization. All of this with a complete portfolio of energy solutions and a focus on the energy trading in the free market. On slide number seven, as part of the transformation agenda, we show you our operational cost that is reducing once again.

We have gotten to BRL 6.784 billion in 2024, and in terms of employees, 7,700. Once again, there is a trend for a further reduction. This has been a consistent reduction of our PMSO costs, but alongside with this, we also hired 2,100 new employees in this restructuring process. An important point that is part of this cultural transformation is to unify all of the collective bargaining agreements in the company across all bases. This is important going forward.

Finally, employee compensation linked to the company performance and aligned with market standards. On slide number eight, in the transformation of liability management, what do we have? Once again, a reduction of the provision for compulsory loan inventory. Since the privatization, there has been a reduction of 50%. We began with BRL 26 billion and ended the year with BRL 13.6 billion.

Along with these court settlements, we're also working with possible and remote causes of BRL 8.2 billion. On the following slide, we have spoken little about this, but we do remark on this. We have BRL 32 billion invested in several assets in Belo Monte, Jirau, and several other companies. Throughout time, we have enhanced this management. We have centralized the shareholding management in a single area. We're actively working on risk management and a return on investment for each investment. We are optimizing this equity portfolio through time, which is what you see to the right, with divestments representing BRL 15 billion, acquisitions of BRL 5.7 billion, and using technical criteria for selecting governance body members. On the following slide, Ivan has already mentioned this.

We raised BRL 32 billion from a Brazilian company last year, which gives us enormous financial solidity, and we were able to declare those BRL 4 billion in dividend referring to the payout for 2024. Now this is gross debt of BRL 75.6 billion, represents four years of funding. Now we are working with funders. We're lengthening our debt maturity that was almost one year and cash to pay out this debt that was one year in the year of privatization, along with this upgrade of the Standard and Poor's credit rating.

When it comes to our investment capacity, here you see the investments that have grown since the privatization. In the bars, I would like to highlight the green and the blue bars, which represent investments in the streamlining of our plans to guarantee energy safety and reinforcement and enhancement with the same purpose. Of course, before we invested a little more than BRL 1 billion in transmission and in generation, we are now investing in the sum of both BRL 6 billion approximately.

This trend is going forward. In this transformation process to the right, you see some of our key investments that we continue to make. We are concluding the Coxilha Negra project, a wind farm in the south, the connection with the last state and isolated state in the country, which is Roraima, TransNorte Energia, with investments of BRL 3.3 billion, and the enhancement of transportation of energy from Itaipu, revitalizing the HVDC of the line. On slide number 12, we speak a bit about this growth agenda through auctions. For many years, the company was forbidden from participating in auctions for not delivering the projects in 2000 in the gray bars.

This was the period where we did not want to participate or could not. In 2020, we did participate, but we were not successful with the privatization. We bid one line with a small investment of BRL 100 million. In 2023, we were somewhat more bold. We had BRL 37 million in CapEx, and in 2024, the great winners of the auction reaching a CapEx of BRL 5.6 billion, which means that the investments made today planned for auctions or for investment in reinforcement and enhancement in generation and transmission reached BRL 14 billion with an RAP allowed annual revenue of BRL 6.4 billion.

On slide 13, this was already mentioned by Ivan in Agenda of Innovation and Technology that we are implementing to become better and to reduce risks in the operation. These are strong investments with a focus on resiliency and operational efficiency. To the right at the top, we have the Atmos system that helps us understand meteorological models and to prepare for readiness and enhance our readiness in the case of extreme events. Below, nowadays we already have almost 90,000 assets that are monitored with artificial intelligence, IoT, significantly improving the predictability of the operation of this equipment.

On slide 14, to speak a bit more about our ESG agenda, we have validated our goals for net zero 2030. Now the standards and guidelines are based on SBTi. This is very important. For the first time, we approved the company's first human rights policy, a very important achievement. To the right, we show you two examples of how the company has contributed to the decarbonization agenda. First, we have a pilot plant with green hydrogen where we have spent BRL 125 million for a production of 5.7 tons of green hydrogen.

Below, other projects we are working on, for example, gaining a better understanding of how the battery hybrid system operates to enhance the service offered throughout our network as a whole. On slide 15, I would like to refer to what is happening in the energy market. Of course, this is of the utmost importance. If we look at our two main segments, half lies in generation of the hydro plants, and of course, this impacts both segments considerably. What is important here when we look at this graph? In the graph above, we see the fluctuation of the energy spot price corrected by inflation since 2010 until more recent dates. What is interesting to observe is that this price was never stable for a simple reason.

We have a system that is eminently hydroelectrical, hydrothermal, but we can't say this anymore because of the intermittent points that we have had in recent years. Now, when the period was eminently hydrothermal, we still had a great deal of fluctuation. Now, if we consider the more recent periods where we have more renewable energy, the average price in this period reached BRL 330 per megawatt hour, and the standard deviation is BRL 330, and the mean BRL 331.

Below, you see the period of January 2022 to July 2024, which in our opinion was an atypical period. What is normal is the price fluctuation. Why was it below during this period? In the graph below, you can see what happened. The intermittent renewables were little representative in 2023, and this matrix evolved in such a way that in 2024, we had 36%. It is presently at 37%.

Along with the excellent rainfall we had during the period, this generated a false impression. There was a drop during the period, but in our vision, it's more interesting to look at the medium and average at the top of the graph that we showed you and the standard deviation than this period as a reference going forward. Besides this, this vision is backed up by what we call AR, the maximum amount of reservoirs that we have in energy equivalence in megawatts. In 2010, this represented 5.2 in demand, and in 2024, we are at 3.7. For more than a decade, we haven't had a hydroelectric plant with a reservoir. The trend is that these levels will be ever lower and that volatility would increase. Now, how did this impact the market?

On slide 16, between 2016 until 2024, as I mentioned, for two and a half years, we had a floor price, 60 highs, 66 highs, and the market agents in quotation marks stated that the price was low. If we look at this graph above, what do we have? At the beginning of 2024, we had a reservoir relatively well behaved, 65% to 71%, and in the rainfall period, which is 69% to 59%, well below the historical average. If you look at the prices practiced for energy for the year 2025, 2026, we did not foresee any crisis or expectation that there would be an increase. Now, things that could make prices rise, quite the contrary. In 2025, we're standing at 65 highs. What happened one year later?

The reservoir improved, reaching 71% at the end of February, and the rainy period in Brazil was excellent, a historical average of 90% to 98%, and that same price that one year before was BRL 155 for 2026. This price presently is being negotiated at BRL 200 or above. Therefore, that phase that we observed at the end of June of 2024, when prices began to rise, because this is a volatile product, is now being translated into price as well.

All of this to tell you that in slide 17, this has to be part of our strategy, our vision, our capital allocation, and referring of this for investments in growth and integrity and security of our assets. We're living in an environment that will tend to become ever more volatile. Why? Because the reservoirs are shrinking. We have intermittent sources being used more steadily.

In a scenario like this one, we truly have to act in a more conservative fashion when analyzing the flows going forward. When we look at our two segments, what do we have? In transmission, nothing will change. It will be as it always was. It is the more predictable one in the Brazilian market. We could work with a higher leverage, but in generation, for all of that energy we have contracted, we need to base ourselves on conservative assumptions. In the presentation, we show you mismatches that did not exist in the past. We call this a supermarket price. Prices we see in the southeast, in the north, because formerly there was a single price, 10, 20, 30 highs, now reaching now 300 highs of difference in the month of March.

We have to be more conservative and work with a lower leverage, considering the uncertainty we are dealing with. Once we define our revenues, and we're quite calm that the cost trajectory that we had in 2023 will continue on the right path, where we would allocate capital. First, where it is mandatory, we're going to invest in the streamlining of the plants and maintenance, and on the part of transmission and reinforcements and improvements to improve the security of our assets and the energy security of the country.

On the other hand, whenever we see how to allocate capital, we're thinking of the medium term because we know that in 2028, the RBSE will end and everything will be more risky in terms of generation. We have to focus on the midterm. Now, we have an agenda to optimize our portfolio. We could have capital surplus or we could invest for improvement. Now, after all of this, we're going to have a balance between shareholder remuneration through dividends or otherwise, or investments in greenfield or M&As.

Our decision for dividends is set on slide 18. Here we analyze not only the results of an exceptional year for the company, but because we are preparing for this scenario with very prudent financial management, we were able to conclude all of the negotiations to have comfort in the trajectory of costs throughout time and an improvement in the pricing, especially in the short term for energy in 2025, 2026, when there is greater liquidity when negotiating energy, saying under these conditions, we can pay more than the minimum BRL 2.5 million to get to BRL 4 million in dividend. This is the dividend proposal for the company on slide 20.

Very quickly, we will speak about our energy balance. We have always said that while the prices are at levels that we understand to be good, and when we negotiate energy, of course, we want to negotiate our capacity and the floors of the bands to show that yes, we are very active in this scenario with customers reaching 751 of free contracting environment. Going on to slide 22 regarding a sound financial performance, our recurring EBITDA BRL 5,100, and here we have two important factors.

The first relating to cost. We have always said that PMSO had stronger seasonality in the fourth quarter. This time was not different, but in the next slide, we will speak about the cost of the year as a trajectory. Secondly, it is very difficult to make a quarterly projection of results in this highly volatile environment of the energy market.

We know that on our side, we're always being very prudent to avoid exposures, the supermarket exposures or other types of exposures. Of course, there are some things that are very difficult to understand, especially when you focus on the quarter of generation when it comes to net income. For some quarters, we will have fluctuations given the restructuring and the assets that we still have in our accountability and that we want to optimize through time. Of course, they will have an impact. What is important here is to continue our improvement and clean out our balance. Here we speak about the PMSO adaptation. As I mentioned, there is some seasonality and this continuous improvement of cost reduction, and we said that the trend was towards a greater reduction focusing on global costs for the year.

On slide 24, our operating provisions, this is our last slide here. As I said, there is still a great deal of things changing in the company. We have a very complex balance. We are very gradually cleaning out. We had reversions that were carried out, and after creating a new way of analyzing our assets is to, you know, we treat all of the plants as if they were a single plant because that is how we operate the plant. We do not operate asset by asset.

We operate as a whole. This is a different way, of course, of looking at things from a financial viewpoint to onerous contracts. This is a way of looking at these contracts. Finally, in the case of the measurement at fair value of assets in 2023, we had in course a negotiation for the sale of our thermal plants. We had already negotiated broadly for the sale of the asset at Santa Cruz, but it did not materialize very well. Now, with this, we can now go on to the question and answer session. Thank you.

Operator (participant)

Now, we will now go on to the question and answer session for investors and analysts. Should you wish to pose a question, please give us your name and company through the Q&A icon at the bottom of the screen. Please ask all of your questions simultaneously and wait for the company's answer. Please hold while we pull for questions. The first question comes from Daniel Travitizky from Safra. Your microphone has been unmuted.

Daniel Travitzky (Analyst)

Well, good morning, everybody. Thank you for taking the questions. We have two questions. The first, referring to the agreement or a pre-agreement with the federal government, and I would like to gain an understanding of the coming steps if we should reach a final agreement and if you could refer to the terms you have pre-agreed upon. The second question refers to the trading of energy. When we look at your energy balance, we see trading presented in bands, and we can see that the bands have increased now, which is the liquidity of the energy sold during the quarter. If you could refer to the energy prices you're looking at and if that difference in some markets is a reason of concern. These are our two questions. Thank you very much.

Ivan Monteiro (CEO)

Thank you, Daniel. I will give this to Mr. Siqueira. Marcelo You have the floor.

Marcelo Siqueira (Institutional Relations Manager)

Good morning, Daniel. Thank you for the question. Now, regarding the agreement related to dean as disclosed, we are presently debating the wording of this term of conciliation. The intention is to conclude this in the coming fortnight to convene an extraordinary assembly where the shareholders will comment on the terms of this agreement. We want to hold this assembly on the same date as an ordinary assembly. It, of course, depends on concluding the drafting

Once we hold the extraordinary assembly, once the terms are approved by the shareholders, this will be submitted for approval at the Supreme Court, and there is no period expected for this. Now, regarding the topic of trading, Daniel, in the last quarter, the market liquidity was good. Of course, it's the end of the year. There's always a renewal of contracts. Consumers will begin to analyze the portfolios and to close contracts for subsequent years.

We also had the auction of the regulated market. We sold 350 megawatts. That is this auction held in December. Regarding the portfolio and the prices, the Limp, as he is the portfolio and pricing manager in the company, has the fundamentals and can perhaps answer your question.

Daniel Travitzky (Analyst)

Thank you, Marcelo.

Marcelo Siqueira (Institutional Relations Manager)

Good morning, Daniel. Now, Mr. Haiama spoke about the greater volatility that we see ever present in the sector for several reasons.

Variations in demand, a flow of heat waves, and a growing use of intermittent sources in our matrix, which means a lower level of storage for the sector when compared to the total demand. This set of factors brings about volatility. From this year to last year, we had an enhancement, a computation model working with risk aversion, and we had the cost and operations of the system.

Now, this model nowadays better reflects the cost of operation of the system because it brought about price variations that we had as a vision the previous year. We are working with a more evolved system, something that is closer to the real cost of operating the system. As we have resources in all of the supermarkets, 50% of our sources in the south and in the southeast, one fourth in the northeast, and one fourth in the northern market. When we carry out portfolio management, of course, we work with estimates and mismatch from the market for each different period of the year. In March and April and May, there is a considerable mismatch for the north and northeastern markets vis-à-vis the southeast. This will tend to be reduced, and the north will be closer to the southeastern market.

In the northeast, there is still mismatch because of the large amount of sun and wind energy in that region. Using the portfolio, we look at the different scenarios we have for the company seeking the best possible result.

Daniel Travitzky (Analyst)

Thank you.

Marcelo Siqueira (Institutional Relations Manager)

Thank you, Daniel.

Operator (participant)

Our next question comes from Bruno Amorin from Goldman Sachs. You may proceed. Your microphone has been unmuted.

Bruno Amorim (VP of LatAm Energy, Transportation & Infrastructure and Equity Research Analyst)

Thank you, and a good day to all of you. I have two questions. First, referring to investments and reinforcement and improvement, you delivered BRL 3 million of investments this year. What can we expect for coming years from the outlook of how prepared the company is to make investments in people and processes? Also, in terms of how this will be received by the regulator, will they approve more investments for coming years? The second question refers to PMSO.

You reported levels above that of the last quarter. I understand there's seasonality in this figure. Could you indicate what we can expect going forward? I know that you don't give guidance, but which would be a recurrent level going forward? Thank you very much.

Ivan Monteiro (CEO)

Thank you for the question, Bruno. I will give this to VP Haiama and then continue the answer.

Eduardo Haiama (CFO)

Good morning, Bruno. Thank you for the question. Of course, in the recent past, we came out of an investment of BRL 1 billion, and it has reached 2024 and BRL 3.4 billion. It's very difficult to estimate how this will evolve during the years. We have an enormous backlog of investments to be made in reinforcement and improvements. Now, through time, of course, we will improve. We're speaking of 2027 and going forward. Now, more important than involving the figures is to do this correctly.

We do not want to increase investments excessively as this could cause risks to execution, but it will always be growing because of this investment backlog in transmission. Now, the addition of technology that we have underscored makes the quality of the investment more sophisticated. This is a process that is underway. As Mario said, there is a trend for growth, but we have to look at the reality using the best technology available. This is what we are incorporating gradually in the company. Regarding PMSO, yes, there was seasonality, but it is on the drop. For 2025, we have a recurrent PMSO for this year below BRL 6 million and the company will attain this figure after the signing of the collective bargaining agreement for all of our employees.

We're convinced that the trajectory will be on the fall because of the absorption, the use of new processes, and because of the degree of freedom that we now have to manage the company, looking at the outlook of return that is demanded or requested by our shareholders.

Bruno Amorim (VP of LatAm Energy, Transportation & Infrastructure and Equity Research Analyst)

Thank you.

Eduardo Haiama (CFO)

Have a good day, Bruno.

Operator (participant)

Our next question comes from Felipe Andrade from Itaú BBA. You may proceed, Mr. Andrade.

Felipe Andrade (Equity & Derivatives Sales Trader)

Good morning, everybody. Thank you for taking my question. I would like to hear from you as to how the company is thinking about the price of 2025 with those supermarkets that you mentioned. If you have been approached by generators located in the northeast and have contracts in the southeast for hedging, if you have appetite for this type of product, and how is the company attempting to protect itself from other trading agents? Once again, because of the volatility that you mentioned.

Ivan Monteiro (CEO)

Thank you, Felipe. I begin here with President Italo and then Vice President Limp. We are always approached. That is a fact. The topic is the action that we end up adopting. The goal is to protect the company portfolio, and I will answer both of the parts of your question regarding traders.

We have zero exposure to all of the defaults that there have been in the market from those traders that are public, and the default situation has been disclosed, and we are monitoring the market very closely regarding generators and traders as well. We make sure that we do not have any exposure, as was mentioned before. Haiama has implemented a risk methodology, a methodology against other parties. We have a robust risk analysis for all of the operations we carry out here. Regarding the other topic, I will give this to Rodrigo Limp to speak about the supermarket he manages that.

Rodrigo Limp (VP of Regulation and Corporate Relations)

Thank you, Felipe, for the question. To reinforce what I said in the previous question, as we have resources in all of the supermarkets, it is possible to carry out a more efficient portfolio management and the risk of mismatch between supermarkets, which we have observed very strongly at the end of this quarter. We also can see this in the second quarter. Of course, we look at the company's global portfolio to have protection to maximize our results, even in this scenario of greater volatility. There will be great volatility for 2025 and also for 2026, with the prices going up in the second half of the year, especially in the southeast and north supermarkets. We look at our entire portfolio and assess all possible scenarios of price mismatches.

Felipe Andrade (Equity & Derivatives Sales Trader)

Thank you, Limp.

Rodrigo Limp (VP of Regulation and Corporate Relations)

Thank you, Felipe.

Operator (participant)

Our next question comes from Andre Sampaio from Santander. You may proceed. Your microphone has been unmuted.

Andre Sampaio (Equity Research)

Good morning, everybody. We have two quick questions. One regarding the seasonality of the cost, which you have remarked on, which is your long-term strategy. Of course, the goal is to reduce costs. Will you be able to reduce the seasonality going forward? The second question, which is your expectation for the closing of the thermal plant operations, simply for purposes of a projection.

Ivan Monteiro (CEO)

Thank you, Andre. Seasonality happens. It is undesirable. You can expect a reduction for this year, but it does happen. This is one of the remains of the privatization of being a state company for many years, but it will be mitigated.

It is not something welcome, and we will work during the year to minimize this. Regarding the second question, I will give the floor to another VP.

Rodrigo Limp (VP of Regulation and Corporate Relations)

Now, the transaction of the thermal plant is ongoing. Several of the conditions have been surpassed, especially when we speak about the CADE, the Antitrust Agency. This is a very complex negotiation, but we believe that the closing of the operation is very close. Beginning the second quarter, perhaps we will be able to close this, but it follows its natural course in terms of the M&A. The time tends to be lengthier. Thank you, Andre.

Operator (participant)

Our next question comes from Antonio Junqueira from BTG. Your microphone has been unmuted.

Antonio Junqueira (Equities Research)

Good morning, everybody. We got the message of the dividends. It's not only the magnitude of the payout, but I don't remember which was the last year if there was one when they received dividends at the level of the bylaws. Of course, this is a very important message that you give out. Now, my question, the methodology, it's very clear how you think, which is important. What I'm missing in this methodology is a number reference. Of course, the company is going to look at cash generation. The company will focus on the midterm, for example, the RBSA that will be lower beginning in 2028. Are you thinking of giving us a number, numerical reference to be able to follow up or project dividends in the coming years?

Ivan Monteiro (CEO)

Good morning. The idea is for remuneration to be quarterly. We had components that were in accordance with predictability in the company, capacity, behavior, contention, containment. All of this has been properly addressed. Of course, this enhances the way how we look at this discussion.

Antonio Junqueira (Equities Research)

Thank you.

Ivan Monteiro (CEO)

You have to be careful with some things when it comes to methodology because this could eventually impact the trade strategy of the company. We are being extremely cautious when we try to accommodate this vision. Of course, for those who are on the outside, I understand the anxiety, the need to know the details, but we do not want to impact our operation. This is very important. Having said that, through time, things change. Nothing is carved in stone. Nothing remains forever. If we look at both segments, because in portfolio management, we also have minority participations with an entrance and exit of cash, and we are going to simplify this strategy. Now, when we look at both segments, what do we have?

The transmission sector is hyper-predictable, and we have a good financial performance. We operated easily. This is not an offense for the more predictable segment in Brazil. In generation, there's a variable that I cannot mention because of our conservative vision, because of the basic price. Now, once we have that conservative scenario, once we feel calm when it comes to price, to say that in the generation segment, we're going to operate less leverage, three-sum with a conservative view on prices, I think this is a reasonable parameter. What we cannot do is work with leverage scenarios for generation without having anything to give and working with prices that we deem would be the fair price. Now, fair price is good if you have an infinite possibility in the market where there's only you there to buy and sell.

I don't know if this is helpful at all, but once again, there are some things that we truly cannot share with you. It would go against the company, whether this will be quarterly or every semester. The semester will be the main cash entry for some time until we recover all of our assets, and the cash generation will be very important based on the IPCA.

This is not immediate. It will take some time, and generation will be very important here. What we are proposing to do, and we have been debating this for some time, is that every quarter we're going to reassess how we work commercially, and if we feel confident in saying, given this situation, we can already create new situations, maintaining the parity, a proportion of one to ten. We will do that. We are not interested in retaining cash.

This is not interesting. There was a graph in our presentation. It was a scale. I don't know if you saw it. It's a scale where there is balance between shareholder remuneration and future investment. Future investments, of course, have to be interesting. Otherwise, the scale will be imbalanced. We do have to have good shareholder remuneration. Has this helped?

Antonio Junqueira (Equities Research)

Yes, it has. I have a follow-up question. When you look at the company leverage, as the company has CDE, the compulsory loan, what are you thinking about this? How do you use these indicators, G4, G3? I believe that you're looking at this for longer than 12 months. Now, what are you including on the side of liabilities?

Ivan Monteiro (CEO)

On the part of liabilities, we look at all of the assets and liabilities that can have an impact on our results. Not working capital, of course, but whatever we know will become a cash disbursement or entry into the cash is included in our accounts. Now, besides the gross debt that we have, the financial debt, we look at our obligations as privatization, CDE, the basins, the hydrographic basins that have to be paid off. Now, compulsory loans that we're negotiating, were we not negotiating them after 50 years? We probably would not be here.

We're negotiating them. And the intention of the company is to continue to do so. It's an exit. On the part of assets, what do we have? Those escrow deposits, judicial deposits, and so on and so forth. Why? Because in Brazil, with the present-day interest rate, the project, the cost of the project will be 15% if you consider a minimum spread on that debt.

If you're very leveraged structurally, you could go into that snowball scenario. If you enter that snowball scenario, that proneness, propension to be conservative will increase. This, of course, will impact our commercial activity. We're not going to allow that scenario to materialize. The entire time, we look at the global situation, and we can eliminate specific years where perhaps we could surpass that prudent aptitude. We have to be extremely cautious with the leverage, the global leverage of the company.

Antonio Junqueira (Equities Research)

of course. As you say, the leverage allows you not to have sold energy two years ago when the price was truly very poor. Thank you very much.

Ivan Monteiro (CEO)

Thank you.

Operator (participant)

Our next question comes from João Pimentel from Citi. Your microphone has been unmuted.

João Pimentel (Equity Research Director)

Good morning, everybody. Thank you for the call. We have two questions. The first, based on what was just remarked, the recovery of the transmission revenue. Part of this is coming through reinforcement and improvement. We see the Quantum assets, a transmission asset, Brookfield assets. Are you looking at this asset? Does it make sense? Is the focus of the company to grow in transmission exclusively through improvement? The second question, based on a higher cash availability. As part of the agreement, you're not anticipating the CDE, and you have positioned yourself to eventually speed up the pace of that payment.

How can this become a strategy to negotiate the compulsory loans? The main causes of the compulsory loan, the most relevant one, the largest agents, all of these have been resolved. Presently, this is a fragmented business. Is there a higher trust to use this cash availability to create a broader agreement with a smaller counterpart immediately and in a simpler way? These are my two questions.

Ivan Monteiro (CEO)

Thank you, João. The second question, the answer is no. Flexibility and liquidity give us what has already been remarked on. Because of our Legal VP, we do work with all of these counterparts, but global solutions are not possible. There are different situations. We cannot work with fragmented offers. This would destroy the company. Now, the M&A. This is a goal for the company, but mainly focused on simplifying the assets. We spent two years with 25 M&A transactions. Always focused on simplification. Now, looking backwards, we look at opportunities. We look at all the transactions that arise in the market. When it comes to capital allocation, we still think about improvement.

We participate in auctions. Of course, M&As in transmission that are more attractive. At this moment, this would not make sense. Our strategy at present is to continue with M&As for simplification, to focus on greenfields. There are several auctions this year. I believe there are three this year and the coming year. We will begin to invest in greenfields that will spearhead our growth. Thank you.

João Pimentel (Equity Research Director)

Thank you very much.

Eduardo Haiama (CFO)

Now, a quick comment regarding what Elio said. When we look at our transmission segment, and we should divide this into two parts, we are based on contracts we had in 2013, BRL 60 billion in assets for transmission, very similar to what we have in the regulation. We have to revitalize those assets that presently have been in existence for more than 30 years. There is a high potential for investment in that segment.

Now, when it comes to the auctions, if you add what we gained in the past and what we gained recently from auctions and our stakes, minority stakes, 10% stakes, proportional stakes, we could be one of the largest players simply in the part of auctions with our main asset. This shows you, of course, that Eletrobras's transmission is a power, and this is what has helped us at all times to undergo turbulence in a very interesting way. The focus, we are going to focus on what we know how to do and have done ever better, focus on the auctions, execute our work. The transmission segment does have enormous attractiveness. It began enormous within the company, whether it was with the auction last year or with the renovations that we had in 2023.

João Pimentel (Equity Research Director)

Thank you, Haiama.

Eduardo Haiama (CFO)

Thank you.

Operator (participant)

The question and answer session ends here. We would like to return the floor to Mr. Ivan Monteiro for the company's closing remarks. You have the floor, Mr. Monteiro.

Ivan Monteiro (CEO)

Thank you very much for your attendance. Should you have any questions, please send them to our IR department.

Operator (participant)

Thank you very much. The Eletrobras conference ends here. We thank all of you for your attendance. Have an excellent day.