Energy Co Of Minas Gerais Q1 FY2024 Earnings Call

Good morning, everyone. I am Carolina Senna, Cemig's Investor Relations Superintendent. We now start Cemig's first quarter 2024 earnings video conference with the following executives: Reynaldo Passanezi Filho, CEO; Leonardo George de Magalhães, CFO and IR Officer; Dimas Costa, Chief Commercial Officer; Marco Soligo, Chief Participation Officer; Marney Tadeu Antunes, Chief Distribution Officer; and Cristiana Maria Fortini Pinto e Silva, Chief Legal Officer. For the initial remarks, I turn the floor over to our CEO, Reynaldo Passanezi Filho.

Good morning. Good morning, everyone. It is a pleasure to be here with you to talk about our results for the first quarter of 2024. I would say this is another quarter of consistent results according to our strategic plan. So these are the main messages that I would like to bring to you. The first one, our capital allocation. We move on with the objective of concentrating Cemig activities in its core businesses. So we are divesting from minority stakeholdings, and we are investing in businesses that are our core business, Cemig's core business. So in this quarter, we once again show you these results. We have concluded the disposal of an asset of Aliança Energia in April. The transaction was concluded, a large transaction. It's BRL 2.7 billion adjusted by the CDI. There is another less HPP's auction to happen now in July. So we are moving forward with our divestment in minority stakeholding and nonstrategic assets so that we can focus on our strategic assets, which are distribution, generation, and transmission. And here, once again, we have results that are very consistent with record investments. We have investments in line with our budget, budget over BRL 6 billion. Just to give you an idea, it's almost 6 times the investments in 2018. So it's 600% growth in investments. Very sound results now in June. We should be opening our 100th substation that was built under the More Energy program. When I started, we had 414 substations, and our plan is to grow by 50% of that number. That is over 200 substations. We are delivering our substation #100 now in June. These are very sound results that will improve the quality and the service we provide. This is the first message. Our investment program is focused on Cemig's strategic business in managed businesses that we have full control of and divestment in assets with minority shareholding. So both programs are ongoing. Whether in the assets that will still be divesting and of course, the execution of our investment plan. It is important to say that we have BRL 35 billion of investment up to 2028. Over 75% of that is already on track, so it's not only a promise. Part of that is already contracted or we already have bidding processes ongoing for over 75% of the total. That allows us to tell you that we'll be executing the investment plan. Another significant guideline is efficiency. Efficiency for expenses, we are within the regulatory OpEx efficiency because we are within the technical commercial regulatory losses, efficiency because we are within DEC and FEC indexes, and also a greater capacity for asset operations. We are in compliance with the regulatory losses. This is very important for the company. It generates a lot of value. We are also compliant with the regulatory DEC and FEC, and this is important to decrease financial compensations. In this quarter, we moved away a little bit from the regulatory OpEx, but it is our commitment to comply with the regulatory OpEx. We are working hard to comply with the regulatory OpEx and at the same time, redirect expenses to improve the service quality provided. There is a program that we are launching. It's called Cemig Agribusiness to improve the performance of our assets in the rural area. This is going to affect OpEx, but it will be offset by reducing other expenses. Our commitment is to comply with the regulatory OpEx. Another strategic guideline is sustainability. Obviously, you know that Cemig is already 100% renewable. But right now, we are delivering within our investment plans and also considering sustainability, our first solar plants of centralized generation. So probably in July, we'll be delivering 2 large plants, 180 megawatts photovoltaic generation solar plants. Therefore, this is something that we just had HPPs, and now we are also entering the generation market of intermittent and renewable energy. Once again, our sustainability commitment and practice. Now talking about sustainability, I should mention something that is important. When we talk about climate change and what we are seeing now in the South of Brazil, you understand that this is not something that happens only with the people from the South. We need to understand that this is our challenge. Everything that we can do to help, we will be doing it. So I can tell you that we have sent a helicopter to help them rebuild substations and also to help rescue people; we are also sending generating trucks and ATVs. We are doing what we can to contribute. I think it is important for companies to support some necessary solutions for today. This is my message for everyone that is following us here today. Once again, we have very consistent results, and we are executing our strategic plan, divestment of nonstrategic assets, investment in the core areas of the company, operating efficiency, better performance for our assets, and sustainability. Now we turn the floor to Leonardo to move on with the presentation.

Thank you very much, Reynaldo. We're opening our video conference. Thank you all very much for being with us today. As Reynaldo mentioned, another quarter of consistent results. We are very proud to say and to stress once again about our capacity for execution of our strategic plan, which we brought to you in 2021. We believe that the company has been executing the strategy that was disclosed to the market at that time, and we reinforce it every year. Among the actions related to our strategic planning, we have the divestment of assets where the company does not have control of these assets or noncore assets. We had a number of divestments in the last years. Again, as our CEO mentioned, we had a divestment of Aliança Energia that was approved in the shareholders meeting we had in April, and we expect the closing of the operation after all the approvals of the competent agencies that should be concluded in the second half of this year, 2024. We would like to draw your attention to the most important topics of this operation. Here, you have BRL 2.7 billion for a 45% stake in Aliança. This amount is being adjusted by the CDI rate since June 30, 2023, after the closing that should happen in the second half of 2024, probably between October and November. This is what we expect the period of time to conclude the operation, although we are trying to bring that take forward. We are waiting for the needed approvals. This operation was done in the post gate mode. We will have the effective conclusion in terms of rights and liabilities regarding the disposal of the asset. There is a possibility of receiving an additional amount of BRL 223 million for compensation related to the Candonga plant. This amount applies to a period when this plant did not have any operations, net of taxes. Now moving forward in our next slide, also following our strategic plan execution, we were successful in the disposal of 15 small SHPs. We understand that we add value to shareholders when we dispose of these assets. They have great value in the market and the other disposal we had an important goodwill. We believe that this disposal of assets is going to happen on July 3, 2024, in B3. We have 4 plants here, not irrelevant in terms of value. Once again, we are being very faithful to our strategic plan. Here, we are talking about 19 SHPs, with some sold last year and 4 more this year, executing our strategic plan by disposing of these plants of lower results that are complex in their operations. We consider the size of the company and its operations. I think this is going to add value to our shareholders when we sell these assets. Once again, here, we have our divestment plan for investments here. In this first quarter, we invested BRL 1 billion in execution. As Reynaldo mentioned, we feel very confident about this investment cycle. There is a curve here. We remember that last year, we had BRL 3.2 billion of investments in our distribution company, and we were able to invest 100% of what was forecasted. We are confident that the BRL 4.4 billion investment forecasted for 2024 will also be fully realized. Other investments in the first quarter in our other business were at lower levels due to seasonal effects. In the first quarter, it was expected in execution of these investments lower compared to the next quarter. We are confident that this investment of 6.2%, which is the largest in the company in the last years. You can see on the slide how the company went from investments of BRL 1 billion in 2018 to almost BRL 5 billion in 2023. We are confident that we will be investing the full amount of BRL 6.2 billion in 2024. This is the company’s message. This is a growth curve for investments. We are very optimistic. Once again, I highlight distribution. The forecasted investment for the next 5 years from '23 to '28 is BRL 23 billion. As we disclosed to the market, these are significant investments in the distribution company with an important effect on the quality of service for clients, but also these investments will be integrated into the regulatory base in the next tariff cycle. These are significant investments, and the company is faithfully executing this investment strategy in this business. We have 100% control in the next few years. Now moving forward, we are going to analyze our results, the highlights for the first quarter. Once again, resilient results. We have the company's condition of having a relevant stake in a number of businesses. This allows us to have resilient results, whether in generation, trading with the larger trade in Brazil catering to free clients; our distributing company EBITDA close to BRL 2 billion. Interest on equity posted this quarter, BRL 386 million. We have been posting interest on equity on a quarterly basis. Last year, we had a very relevant yield with very attractive remuneration to our investors. This is the expectation for the next year, a company with low leverage with regulated investments that are attractive in terms of dividends. The company today is one of the main dividend payers in the electric sector, and we intend to keep on holding that position to provide good dividends to our shareholders. Once again, our trading company with an EBITDA generation of BRL 280 million just in the first quarter, allowing Cemig, our trading, to be the trader in Brazil with the highest results, both in absolute amounts or margins of profitability compared to its peers. For Cemig D, once again, we are meeting the quality indicators. The DEC outage duration indicator is compliant with indicated parameters as acceptable for the quality of energy we provide our clients, and energy losses are also lower than the regulatory limit, thanks to a number of actions the company took allowing us to reach that result. For Cemig GT, we have resilient results during this first quarter. We have already mentioned the disposal of the 4 SHPs that will join the other 15 sold last year. Now I will talk to Carolina, our IR Head, and she will discuss some other results, and I'll be back.

Good morning, everyone, once again. So moving on with the results. We have the consolidated results for the first quarter of 2024. We already mentioned, we had a reduction of 4% of our recurring EBITDA, and we have some topics that should be mentioned here. In this quarter, we no longer have the extraordinary effect that we had last year, so when we see the gain on sale of that, it was lower in 2024 than when compared in 2023 because of our strategy of divestments that our CEO and our CFO mentioned. We also have greater OpEx pressure that our CEO mentioned, and I will show you more ahead. When we compare realized OpEx of the distributing company to the regulatory OpEx. Over the year, we have a number of initiatives so that we can end the year in compliance with OpEx. This is a commitment that we make with the market. On the other hand, the net profit had a drop because of the foreign exchange. We have issued debt in Eurobonds in the past. Over time, we have already done some tranches of liability management with a partial buyback of that debt in foreign currency. In 2024, we have the final share of $380 million. Just like in 2023, the foreign exchange had a positive effect, and our profit in 2024 had a negative effect. Because of that, the net profit had a greater reduction when we compare that to the EBITDA, also affecting our net profit, an increase in Cemig distribution depreciation because of our robust investment program, where we have BRL 23 billion to invest in the distribution concession up to 2028. Considering this investment program, our asset base has been increasing. It is natural that we have higher depreciation. The main effects on the net profits were the foreign exchange in Cemig GT because of the issuance of bonds in foreign currency and depreciation in Cemig D. It has increased because we have increased the base of assets considering our investment program. Now moving forward, talking about our consolidated operational costs and expenses, we have some important effects that are highlighted, and I will go over them. I will remind you of some important topics here. One of them is the post-employment aspect which had a nonrecurring effect in 2023. We launched a new health care plan for the company's employees. In 2023, we had an enrollment of 1,500 employees with a positive effect in our results once we had the restatement of the liabilities related to the health care plan. So when I compare 2024 to 2023, I see that the cost and expenses related to post-employment are worse, but that is because in 2023, there was a reversal because of what I had already mentioned. There was an increase in outsourced services over 2023. We shared with you that we are increasing our investment program in distribution. We have a challenge of being in compliance with the quality indicators. Therefore, we need to have higher expenses with maintenance. We already shared that with you over 2023 and is still happening in 2024. We have a greater asset base that requires greater maintenance expenses in addition to the quality indicators so that we can provide the best service to the population. Also, under other expenses, we have an important highlight, which is the shutdown of assets, thanks to our divestment program in Cemig distribution. When I remove the recurring effect of the post-employment, the increase in costs will represent 5.6%. Now in our consolidated cash flow, this is a very important slide, and we'd like to share that with you to show the strong operating cash generation of the company. As our CEO mentioned in the first slide, when he talked about the highlights, Cemig has a strong cash generation. Every quarter, it goes around BRL 2 billion. In this quarter, we also had successful funding, which was the issuance of debentures of BRL 2 billion in March so that we could increase our robust investment program. We ended with cash of BRL 4.5 billion. This cash naturally will be used as we already mentioned because of our robust investment program for 2024 of BRL 6 billion. In addition to that, we also will be paying dividends in 2 different installments a year. We'll pay the first installment in the middle of the year and in December of '24, the second installment. This cash will be used naturally. As we have shared with you, we'll be going to the capital market at a higher frequency to foster our robust investment program. Now for the debt profile, I mentioned earlier, we had fundings in the first quarter for Cemig D. This is very important, not only for the investment program but also a second series issuance with a 10-year term. We have elongated the debt profile of the company. In May 7, Moody's published a report increasing our rating to AA. Today, our company is AA+ from the 3 main rating agencies, and we are still working to improve the recognition from these agencies because when we look at our funding rate, we see that we are in the same position as AAA companies. Our leverage is low. Just as my cash will be used to pay dividends and to direct for investment programs, I believe that the leverage will also go up because of the same variables that will affect our cash consumption. For results and Cemig D results, as I already mentioned, there is greater OpEx pressure that was already mentioned, especially outsourced services and also the shutdown of assets. There was a growth of 0.7% for the recurring EBITDA because of market growth, and I will show that in the next slide. In 2024, we already have the effect of the tariff review that happened in May 2023. The net profit, as I mentioned in the consolidated slide, we are increasing the asset base with this investment program. Therefore, depreciation has increased. The profit is affected because of this depreciation, that the more I invest, the higher value I will have. As our CEO mentioned, to provide better services, we are launching what we call Cemig Agro for agribusiness. The idea is to have new installations, new reclosers to improve business for agribusiness in our concession area. As mentioned, the recurring EBITDA for Cemig D was 0.7% higher in 2024, partially explained by the tariff review with the adjustment in the '24 result when compared to 2023 and majorly explained by market growth. There was growth considering the transported energy and captive market growth of 4.4%. I should highlight here the growth of the residential area. This is a very significant increase compared to other companies, concession companies. They had greater growth, but our distribution is the one that has a very hard time with distributed generation. We always bring that information to you. We show the growth of injected energy when compared to distributed generation. In terms of the requests approved in the quarter, after 14,300, the law changed distributor generation regulation. Starting January '23, new connections, the new requests for new connections for the distributing company, we will start receiving part of that Micro DG due to transported energy. There was a significant reduction, especially in Mini DG. We have already lost parts of our market, but we will recover part of that in the investment program, but we have not recovered everything. Moving forward about losses. Our CEO and our CFO talked about this commitment that the company has made to be in compliance. We were able to be in compliance in 2021 and maintain losses in compliance. We need actions and initiatives, and we are still investing heavily in these initiatives with numerous inspections. We are switching conventional meters to smart meters, replacing obsolete meters, and converting illegal connections to legal ones. This is part of the distributing company's routine, and these are essential for compliance with regulatory losses. For operational efficiency, I'll turn the floor to our CFO to discuss the noncompliance of the regulatory OpEx.

Thank you, Carol. As already mentioned, in this quarter, we had some nonrecurring events related to the level of provisions that were much higher than we had in the prior quarters, and that has affected the company's compliance with regulatory limits. Since 2020, Cemig has had OpEx that is lower than the regulatory limit and is solely in compliance with the regulatory levels stated. Also, our EBITDA is over the regulatory limits established by the official agencies. We intend for this noncompliance in this first quarter to remain an isolated situation regarding what we expect to see in the year, which is compliance with our OpEx and EBITDA. Carol, please take over.

Now moving to Cemig GT results here in the first quarter. At the end of the year, in March of this year, when we talked about the results of 2023, we said that 2023 had amazing results for the trading company and that in 2024, we would also have an important result with one of the best margins in the industry, but it would not be the same result of 2022 because that was a window of opportunity when we sold energy at prices over BRL 200. So when we look at the recurring EBITDA of Cemig GT, it was down 1% because of the lower margin I mentioned, which had already been shared with the market. Regarding nonrecurring aspects for Cemig GT, and which was also highlighted during this presentation, is the conclusion of the disposal of 15 SHPs, and we will have the disposal of more assets in July. About our net profit, we had a greater reduction because of the foreign exchange in 2023, the FX exchange of the Eurobond and the remaining installment that will be due in 2024. In 2023, it was a higher installment which had a positive effect; in 2024, it became a negative effect. So this drop is explained because of the closure we have already mentioned. On the bottom, we show you the trading activity. Once again, we started a transfer of contract trading to Cemig H. This is not 100% concluded. We still have part of the trading under Cemig GT, but if we add both EBITDAs to show the EBITDA of the trading company, we had a drop of 3.5% because of the same lower margin in 2024 when compared to 2023. Now moving on, Cemig, as you already know, is consolidating that mix of results. We had a reduction in the EBITDA explained by 2 reasons. First, in 2024, we did not have a compensatory parcel, which works as a variable compensation account for distribution but differs because in the gas regulation, it is added to the quarters. In 2023, we had an additional compensatory parcel, and in 2024, we did not have any balance for this compensatory parcel. The other explanation is volume; there was a volume reduction of around 10%, which has affected the EBITDA drop, and therefore, the net profit as well. Nonetheless, Cemig has a very significant EBITDA in the group. We always say that it represents around BRL 850 million to BRL 900 million a year. This is our last slide, and I would like to invite our CFO once again to close the presentation today. Thank you very much for your participation. After his remarks, we will open for the Q&A.

That's great. Carol, we like to conclude with this slide because it represents a summary of the commitments the company has taken with shareholders. We believe it's an opportunity to show you what we have been doing, what we have done, and what we will be doing. We see here a number of actions that have been completed, the compliance with the regulatory levels, the strengthening of Cemig D's investment program, the liability management of our bonds. We already committed ourselves to gradually reduce our FX exposure, and we have done that. Now we have BRL 380 million less than 25% of total bonds issued abroad in 2017 and 2018, which was BRL 1.5 billion. This is a final parcel to be settled at the end of the year and also the divestment in holdings with complexities. Now in progress, as we already mentioned, we expect to comply with the regulatory OpEx and the reference EBITDA for the company's concession in this year 2024. We are still in the process of digital transformation, divestment in minority holdings. Aliança is a great example of stake where we have no participation, and we are divesting while investing in renewables and focusing on leadership in energy retail trading. Cemig, the largest trader in Brazil, aims to be a leader also in this retail trading. For the next year, renewals of generation concessions and also compliance with the DEC outage duration indicator, that has to do with our strategy so we can focus on providing the best service quality to our clients. Thank you very much for being with us for this presentation. Now we will turn the floor to a Q&A session.

Our question is from Victor, a sell-side analyst from BBA. I will ask Leonardo to respond to this question. It seems Victor did not unmute his microphone, so we will move on to Leonardo. Our next question is from Andre Sampaio, a sell-side analyst from Santander.

Good morning, everyone. I have a quick question about the regulatory OpEx. Now is voting on the final rules for the regulatory OpEx for distributing companies. I would like to know if you have an initial opinion about that. And still on that topic, one of the important changes in the rule has to do with the DEC of meeting not only the total global DEC, but also the subsets, and you still have work to do there. What is your plan to recover and improve the whole set of DEC?

Andre, thank you very much for your question and your participation in our call. I will start talking about the regulatory costs, and I will talk about DEC; if Marney wants to add his thoughts on the distribution offer, he can also comment. About costs, the regulatory costs are just now being defined for the distributing companies. We are following closely and despite the company's efforts, this review will affect our company in the next tariff review. But what I can tell you is that we have a commitment to operating efficiency, and all the measures that the company takes in terms of post-employment costs have been within the commercial losses, reducing its costs in other areas so that we can focus on its PMSO and the quality of service to our clients while also providing positive effects on revenues, reducing financial losses and fines. We understand that there is a positive effect when you invest more in the network. We have higher operating costs in these last quarters, related to outsourced services in terms of recovery and maintenance of the network; it has to do with the concern of quality of service to our clients. But in summary, we are following the process. We must say that we are committed to meeting this new regulatory benchmark established by the regulating agency. Regarding DEC, we understand that this needs to be met for distributing companies like Cemig, but we understand compliance with DEC and FEC is essential for our strategy of providing the best service to our clients. This DEC reduction also positively affects the reduction of financial offsets paid by the company. This year, we have a percentage for the OSAT DEC. This is a trajectory of the company. We believe we will be able to meet the DEC, the whole sales according to announced definition, but I would like to invite Marney to comment if he wishes.

Good morning, everyone. Just adding to that, we have 58% of the sets met by the end of the year. We have 54% of those within our target in line with Aneel as well. The 2 programs mentioned by our CEO in the beginning, Minas Gerais, which is the construction of 200 substations, will help the whole set DEC because it has decreased the size of the sites, and also Cemig Agro, which aims to provide better service to the rural area. These are 2 large projects and also our maintenance plan and OpEx that we already discussed. We have specific plans to clean areas of 42,000 kilometers. It's just like going around the Earth just cleaning the land.

Our next question is from Daniel Travitzky, sell-side analyst from Banco Safra. Daniel, you have 2 questions: one about pension funds and health care plans. I will ask the CFO, Leonardo, and also the next step for the divestment plan; I will ask Marco Soligo to answer.

Actually, I just would like to have an update on the negotiations of liabilities related to the health care plan and pension funds, just to understand where we are in those negotiations. If we can see any progress on those fronts still this year? And second question, I would like to understand how the divestment plan will follow after this disposal of Aliança and all the other sales of SHPs. What are the next steps to be implemented?

Daniel, thank you very much, and thank you for your questions. The company has disclosed the need to manage its post-employment benefits for a while now. These have no regulatory coverage, and there are significant amounts, around BRL 6 billion of obligations that are on the balance sheet of the company. Strategically, it is important to take actions that can mitigate our position related to these costs. The company already has a successful history in those topics. We had benefits related to life insurance, where we were paying part of that to retire employees. No other listed companies were paying that benefit. By a collective agreement, we could remove that benefit from our financial statements and our obligations. Now we have issues that involve the pension fund and health care plan. As we disclosed to the market, these are very complex issues that involve a number of discussions and a lot of study, and we would like to achieve convergence still this year, allowing us to have social justice in terms of health care plans for our retirees who have a lower income while also reducing the company's exposure related to that, because these are very relevant costs. Once again, we are optimistic about solving this issue and expect positive news this year on those fronts. I will turn to Marco Soligo, our Generation, Transmission, and Participation Officer for comments on your other question.

Thank you very much for your question. As our CEO mentioned, we are strictly following our divestment program of minority companies where we have no control. We have Taesa and some SHPs where we have some stakes, and we are working to address and dispose of these assets. I cannot go into details about specific negotiations, but they are moving on, and we want to do it smartly and make sense to the company. Taesa, for instance, is more complex. The way we do it is complex, while others like Belo Monte are not easy to dispose of. But we are discussing, we are talking to the market, and we believe we'll address that. This is what I can bring to you, Daniel. Thank you very much.

Our next question is from Eduardo Lazare, buy-side analyst from GTI. I will ask Leonardo to take your questions.

I would like to know if you have savings expectations on expenses with these migrations. If you have anything along those lines, and also an update on leverage. I would like to understand your mindset for the next years. Where would you feel comfortable in terms of your net debt? If there is an expansion in case you have an opportunity for inorganic expansion.

In your question about post-employment that we just talked about, and about leverage, our debt policies establish a target close to 2.5 times EBITDA. We feel that this is comfortable as it maintains the company's credit quality and allows the company to engage in potential business opportunities and investments without reducing our credit quality. As Carol mentioned, our leverage is part of a curve. We have many investments to make in the next few years. By 2027, we should be close to 2.5x our EBITDA. This is our target leverage. We feel it is comfortable; it's more efficient financially. Regarding new investments, we have a robust investment program, and we believe this is a winning strategy. The company currently has low leverage, but this low leverage now allows us to make strong investments that will increase our revenue, whether in transmission or mainly in the BRR for a distributing company. Considering 2023 and 2027, investments will be integrated into the next tariff review. These will be relevant amounts that will double the base of asset remuneration of the company, the tax tariff review. This strategy will also maintain our status as a major dividend payer. With this, we believe we will continue with this leverage and the investment programs that are regulated and integrated into the regulatory remuneration base. This strategy ensures our investors feel safe, generating revenue and securing our position as a leading dividend payer in the electric sector.

Still with you, we have a few questions from investors that are concerned about the dividend payment, asking if in 2024 because of the investment program and the natural cash consumption, if there are going to be any changes regarding the quarterly results and what they can expect in terms of payments of dividends.

As we mentioned in our last question that I just answered, we are very optimistic about the company's results. We see that our individual investors are very interested in the company. They see that our dividend policy is very attractive, and we aim to move forward as we are doing right now. Our plans create stability for the company. The minimum payout is 50%, and that allows us to feel safe and optimistic. We are confident that we can provide attractive dividend payments to our investors, and we understand that the interest on equity posting every quarter is efficient and creates value for shareholders; we intend to maintain that practice.

Our next question is from Giuliano Ajeje, sell-side analyst from UBS.

I have a question. Can you give me an update on the federalization process of the company? Also, I would like to know if there is a possibility of privatization of the company. Another question: in 2 years from now, the governor will change. I would like to understand what is being done to maintain this legacy and good management that you have had in the past few years.

I will start with a brief comment, and then if our CEO wishes, he will also comment on your questions. What we are telling the market about federalization and productization is that this is not a company's agenda. This is our controlling shareholder's agenda at the state of Minas Gerais. We have a strategic plan that has been approved, and regardless of these issues, we have the strategic plan to be executed. We are executing it, not allowing external issues that are not in the company's agenda to hinder the execution of the program. We believe we are successful in executing this investment program; it's our strategy and also our liability management, the dividend policy, so that we are not affected by the controlling shareholder's agenda. We are optimistic about the company's future. The investments we are making, especially in the regulated areas of transmission and distribution, are our strategy, and that is a winning strategy despite any changes in state administration. It's in the interest of our shareholders and our clients. Reynaldo, would you like to add anything on this topic?

I don't think so. You said it very well. Federalization is a matter that is in the hands of the controlling shareholder. We are managing the company with this strategic plan, focusing on Minas Gerais. We are divesting from minority stakes or disposing of assets that do not fit in the company. It's important to say that 75% of this strategic plan is already contracted. We are working on improving the quality of service. Delivering 100 substations has an impact. The Cemig Agro program is coming in, making significant changes. We have new technology coming in. All of these topics are contracted. I am sure that this will provide great quality and significant improvement in service for the Minas Gerais population.

We will be closing our call now. For the other questions that we do not have time to answer, we will respond via e-mail from the IR area. I would like to thank you once again for your participation in this video conference, and I wish you all a great day.