Earnings Call Transcript - CIG Q4 2022

Márcio Luiz Simões Utsch, CEO

If we lose the market, this will be a defeat for us. Just as all of our victories will show, when people say we want to stay with you, this is the work that our team has to do. So there is a note saying that says, if you only know who your friends are, if you eat a bag of salt with the other people. And so my dad used to say that it takes a long time to eat a bag of salt. So we have a long time to develop this relationship. And I think this relationship that we are going through of process improvement, to have at the end that 'yes' from our consumers, our clients work with us. I think that is our job, and we are doing. We are working on it in addition to governance, team, technology, and service. Another topic that is really important is Cemig's privatization. All of you know that Zema, when he was elected and then reelected, he said that he wanted to privatize Cemig. This is no secret. It was openly said in his election campaign. And this is the task that has part of it to be executed by the administration and another part by the state administration because that has to be approved by the state administration. And so, we have to convince the congressman that this is good for the state, good for the population. They have to say yes to this project. And once they say yes, we have to work for that. And if they say no, we'll continue being a state company and improving all these. If you compare Cemig's results in the last two or three years, you see that we are on an upward trend. We have one other indicator of non-recurring events that sometimes are not that good, but you will see a history of improvements in our results in the past few years. So if it's not approved by results, that's okay, we'll continue working and dedicating ourselves because we know that working on a state-owned company is not dancing with my sister at the ball. It's to dance with the most beautiful lady at the ball. But if we cannot be privatized, we will be a state-owned company that is very strong. But I do believe that we should convince them because we have arguments, we have data, not only objective data, but subjective arguments as well. Why is it better? So the objective data is that, of course, the company will have a greater value. So there are different mechanisms here. We have companies that have been sold. We have companies that we sold just a part of that stock. So the market value of Cemig for the state now is around 17%. And if that becomes privatized or if that increases capital, it will be worth more. And if this amount is at will be plus 30% or some more percent, so this part that the state has will be even more valuable because Cemig is going to be even more valuable. So we're not removing value; we're adding value to people and, on the other hand, people, when I say it, the state is also part of this. People will have ability and management, as being state-owned companies. There are several times that a perfect company doesn't have because there is a lot of bureaucracy. There are a number of committees to manage state-owned companies. So I'm not criticizing or appraising it either. These are things that are there; they exist, and sometimes that takes too long. There are a lot of rules that take too long to postpone actions, reactions that could be faster. So that's a fact. This is not only a speech. You just have to look at it, and you will see. This is a subjective approach, but the objectiveness is it's going to be more valuable. The subjective arguments are that there's going to be improvement in management, in agility, and the administration. We have to take that into consideration because that is important. Finally, I would like to talk about results, Cemig's results. They have been very good as we have seen it. Of course, you as investors have to approve that or not. So far, you have approved it because we are growing market value that is very relevant, very well, when Cemig reached R$31 billion or R$32 billion not long ago. Then it came down a little bit, but it came back. It came down because of the stock market because it was 110,000 points. It's now 100,000 – 98,000. So that's not an excuse. Yes, we could have stayed; it remained on top, but we did suffer a little bit with the job of the stock exchange. So we took 50 steps forward to back, but that's okay. Part of us has to do with our work, and also part of that has to do with the market. Our results are consistent. More than that, they are repeatable. These are not one-time results. Because they are repeatable, that shows that the company is on the right track. The indexes we have with our regulating agents are all met. What was supposed to come down, came down; what was supposed to go up, went up. We are meeting all the indicators defined by our regulating agents. Our other indicators also, such as management and how companies use this, and we are doing very well. Any company in Brazil with a capital cost of 15%, 20%, and most companies are there in that range – the level of leverage, the companies have a 15% to 20% to run a project. The project has to provide you 25% of return. How are you going to allocate 15% to 20% of capital to have a return of 21%? You would be crazy to do that. We need to understand that in fact, we have to have that capital allocation done right in a very specific way and especially in moments of high capital cost, such as now at 15% to 20% of capital cost. Right now, it's not easy to have a project that will pay off if you take a debt to pay at this rate and to have a return that is lower than that; it wouldn't make any sense. But we have to be careful unless it's something needed or the ceiling is falling, and we have to fix the ceiling. So we will need to do that. But if it's not that really, we have to choose very well where we are going to allocate the capital to make sure that the company does well. A wrong capital allocation is just like cancer. If you have that, I'm not a physician, but anyway, well, we don't need to be a doctor to know that. But if you have cancer, it will eat you up. And when you find that out, and you were dying because you wouldn't find that out because of the symptoms. This is capital allocation. If you allocate now and the return term of the project is in four years from now, in the mid-term, you know right now if you have done something wrong or not. If you are not doing well, you know that you're not doing well, and you can prepare yourself. So capital allocation is a relevant art. That's part of this final part of this presentation of mine. To conclude my remarks, I think there are many challenges today, and this really comes to me as a huge challenge to reinstall people. But when you take a person away from a position where they are for a long time in a very comfortable way, and when you do that, the person has to be reinstalled in a better place; that's an art because you want to take people away from that place. People have to leave the place where they are comfortably installed so that they can be transferred and reinstall themselves somewhere else. Can you make someone do that? Of course not. But we can provide a plate full of food, but we cannot make the person eat. This is the plate of food, but if you provide, we have to do everything we need so the company can really move to where we want it to be – a competitive company, a company that does a great job, and the competitive market is over.

Carolina Senna, President

Thank you very much, Márcio, for your participation. Now moving on, I would like to invite our President, our CEO right now, Reynaldo Passanezi Filho, and he's going to talk about our strategic plan from 2023 to 2027. Mr. Passanezi Filho, please go ahead.

Reynaldo Passanezi Filho, CEO

I could talk without a presentation, but I think it will make things easier. This is something that we are used to doing. Well, first, welcome. Thank you very much for being here with us. This is the first thing that we would like to say. We would like to thank you very much. I am going to thank the investors and congratulate the team, and I think the results that we are delivering here are good. We can bring results to this amazing team that we have. In fact, we have prepared for you the best of Minas. We brought a great breakfast. We have cornmeal cake so that we can have a nice conversation. We are bringing you some of Cemig, which is a symbol of Minas Gerais. I would like to start by saying that Minas Gerais is changing itself, transforming itself. This is something that is important for me and for you. Cemig, not Cemig, but Minas Gerais in 2022 had the largest relative share of Brazil's GDP. In the last year, Minas reached the largest relative share of 9.2% of the GDP. Four years ago, it was 8.7%. So it's almost half a percent more of the GDP in Minas' share in Brazil. So that for us means more market, and it shows how much we – how important it is our function to develop the state's administration. Minas is doing well, and of course, if Minas is doing well, we can bring even more results so we can move forward. So what do we want to show you? We have this because if we accelerate value creation and Cemig's transformation, we can have results. Márcio said it very well. We have a strategy that is very clear, and the strategy is the same. It's a strategy to focus on Minas and win. This is our strategy. And what we are doing now is we are accelerating this strategy. You see, our new investment plan doubles our investment value in the next five years. We are accelerating a transformation process for Cemig and value creation. Our dream, what makes our eyes sparkle, really is to keep on generating value, creating value. We have seen how much the stocks are appreciating with a known strategy and the company providing more agility, bringing more results, and making more people happy, supporting Minas Gerais’ development. At the same time, we are accelerating value creation, and that's what I am going to show you today. I want to talk about something that Márcio touched. That's the macro scenario, our overview. How do I see the company's management? This is how we see it. First, what is the company's strategy? When I got here, in fact, we reviewed the strategic planning, and this review is still valid. As I said, we are accelerating. This planning was defined in 2021. The first one is to understand the strategy. After understanding the strategy, we wanted to have efficient capital allocation because it was very inefficient in the past. We were destroying value with minority shareholding outside of Minas Gerais that would just divide the attention of the administration and destroy the value for the company. We aim for operating efficiency in the company, and we are renewing, revitalizing our people, our people area. And that's what we are going to see here. We are going to see a little bit of the strategy, a little bit of capital allocation, the efficiency, and to do all of that you need people. That's it. That's what management is about to know what you want is the strategy, to know how to use your money well, generate value, create value, capital allocation to look for efficiency in your operation, and for – to do all that you need people. So that's what we'll be seeing here. First, we start with a strategy. I like strategy because it allows us to say no. The strategy is to focus on Minas Gerais and win. This was the first great result, and I remember a chart that a consultant brought to us. One of the alternatives was to try again, and I said, no, we are not going to try again because to try again means any risk to see it happening again, which was a wrong movement to have minority shareholders, holding the companies outside Minas Gerais. A very clear message is to focus on Minas Gerais and not to focus outside of Minas Gerais and on anything that is not the company's core business. That's why we are leading action in other minority shareholding areas. We are not going to focus on everything that's outside Minas Gerais. So it's easier to say no. It is not interesting for us to invest in anything in Para. To win means to generate value with this capital allocation win. When we say to focus on Minas Gerais and win, it's not only to focus on Minas Gerais, but we also want to add value to the company and to add value to our investors through a process of results maximization and sustainable management. That's how we are going to do it. That's clearly the way that we are going to concentrate our investments in Minas Gerais and be concentrated in assets that generate value. That's why we say to focus in Minas and win. Whenever I invest in something that will provide me greater profitability than regulatory ones, I am generating value. If I invest in a better efficiency than the regulatory one, I am generating value. We are focusing in Minas Gerais, having cautious investments and generating value. From 2009 to 2018, Cemig invested outside of Minas Gerais for R$34.1 billion. If we add all that up, we invested in minority shareholding stakes with no control. R$34 billion. That's cash that was flowing out of the company and was not being reinvested here in our market, in our captive market that will end, and we need to make sure that when it ends, they will continue choosing Cemig. We did not invest in the main market. We only invested R$1 billion in the main market. Unfortunately, this R$34 billion did not generate value; they destroyed value. That's why our strategy is to focus on Minas Gerais and win because this was not only taking up our time of management but also it was destroying value. This is what we have done. The strategy I believe is a common-sense strategy; what is the main characteristic of CEMIG that we are reprieved to invest in our core business distribution, transmission, and generation. We have already divested and recovered over R$6.5 billion. Two-thirds of our investment plan are already carried out. If we add up the amount we have sold but also what did not have in terms of capital injection, all the risks that we'll no longer have, and also the tax credit. When we divested a given investment, we no longer needed to have capital injections that we would have needed to continue the share, but we also recovered the tax credit; so I have the gain of the tax credit. I also gained because I did not have the capital injection. Obviously, we sold the stocks, so only that cash represented the cash that we are bringing in to invest here in Minas Gerais. We will see how much investments have increased here. We invested R$2.8 billion a year on average since 2000 – in the last four years. That's seven times our historical average. So we have invested seven times more than our historical average in Minas. All this investment was outside Minas. We generated more cash, and we are investing 100% in Minas. We broke the distribution record. We will capitalize on R$7 billion in this tariff review coming up in May. We opened 45 substations last year, a huge example of what that means to be use cash not to invest in Rondônia or Paraná. We will see that in our five-year investment plan for 2022. Our market valuation was posted at 28.2 times the energy industry index and almost six times the Ibovespa index; so clear value creation, and that's what we want to do. We want to speed up that process, and speeding up that process means following the strategy, prudent capital allocation, efficiency, which we're going to talk more about in the next slide, and doing all that to generate value to shareholders and society. This is a value generation machine, and that's what we want to do. We have prudent capital allocation. Whenever we invest and the return on investment is higher than the regulatory average, we are generating value. The other thing that generates value is when we can cost less than in regulatory terms. If you look at distribution, everyone knows you have a value for PMSO, operating expenses, another one for losses that is added to the tariff paid by consumers. You have the basic tariffs plus capital, the return on capital, then PMSO and then we paid for losses. In the past, we were never able to keep to what was in the tariffs. We were more expensive than the regulatory PMSO or regulatory expenses and had more losses than the loss that is included in the tariffs. In ten years, we have managed to consume R$7 billion out of the tariffs that was cashed. If you were leaving the company because we were outside the regulatory limits and outside – regulatory, technical, and commercial losses – but now we are within those parameters. This is a huge adjustment; it's over R$700,000 a year. We made an adjustment that was more than 15%. The loss ratio we are now must stay and now we have 99.4% on R$1 million. It’s part of the process. Thank you very much for your attention, and I hope that we can count on your continuing engagement over the next few years.

Carolina Senna, President

Thank you very much, Reynaldo for the presentation of the new strategic planning. Please, I would like to have you a few more minutes on this stage. We’ll have 10 minutes of a Q&A before turning to the results of the fourth quarter of 2022 with Leonardo George. So now we’ll go for a Q&A.

A - Márcio Luiz Simões Utsch, CEO

So should I tell a joke? So we’ll have a microphone here for questions.

Unidentified Analyst, Analyst

Good morning. This is Pedro from J.P. Morgan. Thank you, and congratulations to the whole team. About expansion in generation there are R$13 billion invested in the next years, and we have not seen good returns, especially in greenfield. How do you intend to work with the capital cost also in GD? This R$2.5 billion are in the new rule or the old rule for the GD?

Reynaldo Passanezi Filho, CEO

Let me start with the first question. The R$3.2 billion is the old rule. Of course, the number of incentives that we have in the old rule is much greater than in the new rule, but we do have enough projects. So the answer is that these R$3.2 billion, we already have assigned projects that will allow us to reach those R$3.2 billion of investment. The second question, I think your comment is good. We know what is – how low is the energy price right now. And we do have a challenge to make projects feasible. But we can always have brownfields. If you don’t have the greenfields, you can have brownfields. We prefer to have the greenfields. And my team is – my soccer team's collar is green. So not many times in life will you be winning as much. I had to make that joke. What we have done with Boa Esperança and Jusante is greenfield, but in general, I would say that it doesn’t make sense to have the largest trading company in the country and to buy outsourced energy if you also generate energy. So we changed our strategy. We have the largest trading company in the country. We have a single understanding from our clients. We see the results of our trading company, and we were doing that buying energy from third-party. So we have a technical capacity to produce projects to manage projects. We have our trading company that has a single understanding of our clients. We are going to put these two things together. If I can put these two together with a greenfield battery, if there’s no feasibility for a greenfield, we do have M&A projects that are feasible. What’s important is to have the discipline that we are going to look for these M&A projects within my strategy that is Minas Gerais very close to Minas Gerais eventually, but it has to be Minas Gerais. I am not going to go for an investment project outside of the state.

Daniel Travitzky, Analyst

Good morning. Daniel Travitzky from Safra Bank. I have a question about the return rates. Large part of your investment in the strategic plan goes towards distribution, and you have a return rate of 11% to 14%. So I would like you to compare these return rates for the distributing company, how much you see that above the regulatory level. And if you can talk about how that compares – how the return rates compare? How do you see the risks involving the distribution contract extension analyzing this amount of investments in this segment? Thank you.

Reynaldo Passanezi Filho, CEO

I think you cannot compare invest R$18 billion and invest in distributed generation or invest in the regulated marketing and the competitive market. Obviously, the profitability in the distributing company is lower than the distribution – the profitability in GD, but there is the capital and the capital considers the existing risk. The distributed generation has a high potential return, and the figures are very positive. We see that there is a rush also from Banco Safra–Safra Bank to invest in distributed generation, a huge rush of investment in distributed generation that tends to turn to a more normal return. But that will depend on the discount that you are going to give. Here we have an embedded risk, the risk that – the discount that you are going to have in the final tariff in the current situation. This remains to be a profitable investment, and that’s why we have a fluctuating solar generation. It costs a little bit higher than internal GD, but because the connection is easy for me, I can be agile, I can be quick. That explains this investment in distributed generation. When we look at the distributing company, that’s a whole set of things. It’s not that I’m going to have A, B, or C a specific profitability by asset. I will have that profitability according to a CapEx. So for the situation number one, it’s for a total CapEx that I have invested. And then we have two objects. First, I would say that if I have R$10 billion of investments, I want to have zero disallowance because if I have disallowance that is going to affect less my basis. The capital cost is lower than the regulatory walk. If I am able to finance lower than the debt cost, that is on the regulatory walk, and also I understand that is lower, then it’s lower than the regulatory walk. I can generate value. We need to ensure that obviously that is attractive. In terms of leverage and I have to leverage lower than the – that cost that we have now the regular rating agents ensure that the disallowance is as minimal as possible. Let’s hope so. I can’t do it in the middle of the tariff review, but in the last tariff review, it was zero disallowance. Everything that we are doing requires huge planning to ensure that this is a needed investment. Here, we need a lot of investment, and I can do it. So when we open a new substation, on average, we have 55% – 50% to 55% load. That’s a lot.

Márcio Luiz Simões Utsch, CEO

This is conscious, right? There is also a qualitative consequence because with the line we have a huge line for the connection request. So if distribution is not prepared, this line won’t move. We won’t have the connection ability. So you connect and you connect nothing. It is also important to meet this growing demand.

André Sampaio, Analyst

André Sampaio from Santander. Márcio, I have a question for you. I would like to understand what the difficulty is – what the challenges are in dealing with a company that has a natural turnaround process, a company that you mentioned in the beginning of your speech and comparing that to the privatization process. So how do you bring together these two processes in a way that one does not get in the way of the other while ensuring that both of them can work hand in hand?

Márcio Luiz Simões Utsch, CEO

These are two simultaneous projects, as you said, but one is really moving forward the turnaround projects, and here are the results. We just work on them; we carry them out, and we are able to achieve some objectives. The strategic plan, as Reynaldo said, is a limit to say no. The worst thing that we could have in a strategy is a good idea. So when you have a plan that is defined, and you say no to any other idea, you can carry forward this turnaround project. You have a strategic plan that allows you to say no to some good ideas; otherwise, you are going to have a patchwork thing. On the other hand, the prioritization plan. Nowadays, for Cemig is more of a preparation. I mean, we have to be ready so that when you are ready to do it, we are really ready for the process with all the questions already addressed, with the most relevant issues taken care of – everything related to corporate structure, because that has to do with the state. This is more of a preparation for when the general assembly approves some type of prioritization. It could be a simple privatization or a corporation. There are several options. But we do have a plan that is ongoing, that is varying results. The other area is a preparatory area, I would say. We will be ready to execute the other plan when the time comes.

Reynaldo Passanezi Filho, CEO

Another question about the transmission CapEx, how much of that transmission CapEx is regarding new lines and how much of that is just to reinforce existing projects? Most of them are just to back up improvements by far. We’ll have a Q&A with all the other officers. Please, you can ask Márcio questions here, and no problem. You can ask anything you want, but we will be here the whole afternoon, and there’s going to be a Q&A by the end of the day.

Unidentified Analyst, Analyst

My name is Juliana from Bank of Yes. How much of your agenda today is focused on privatizing the company? That’s my first question. How much of the agenda of the Board and the CEO is taken by the privatization possibility? Also, on generation out of these R$13.4 billion, do you have a target here for mega? All of that is focused in Minas Gerais? How much of that is from HVP, and how much is renewable?

Márcio Luiz Simões Utsch, CEO

About the agenda, we had an agenda consumer that was huge. And that was Light and Renova that really used up and consumed a lot of our agenda. It was really about that took up a lot of our time in hours but also our intellectual agenda. We have cleaned up that agenda and now our mindset is focused in Minas Gerais. Once we left the low profitability or negative profitability assets, we are now focusing on the good one. That allowed us to concentrate on privatization. Here we are working on that. We are working closely with the Minas Gerais administration to show them that the reason why this is a good option for them is to be able to approve it. In addition to that, we have a preparatory agenda. There is nothing much that we can execute that we can actually do. How this is going to be on the day after? We are just preparation. What are we going to do the next day? We had advisory that we are working with and the internal actions that we are doing to be ready. Something that is key is that we need to have the government’s approval. Now we have a favorable environment. We, from management, are favorable to that because of the objective reasons because that’s going to improve the value of the company and also for subjective reasons as well. This is the single non-privatized company in the country. Is that right? It does make sense to take that into consideration. We always communicate with the government, and we always have meetings. So that’s also very active.

Reynaldo Passanezi Filho, CEO

First, I would like to tell you my personal opinion; just like Márcio. This is the opinion of the top management. I believe that, as an officer, it is great for Cemig to become a corporation, to go through this privatization process. This process of acceleration and value creation is going to be even more accelerated in a movement that we might have of turning into a corporation or having privatization of the company. This is positive for the company. The company will no longer have some management eyes and that will allow this amazing company that we have to generate even more results for the investors and for society. This is very positive for the company itself. The company will gain sustainability and long-term survival. Now, as for our relationship with the state assembly and our officers, we have something that we need to discuss, which are the concessions. By November of this year, we have to request the extension of our concessions within those 49%. I don’t know the decree number, but we have to send a letter by November of this year saying that we are interested in the automatic extension. We also need a report from the state assembly by November of 2023. They have to approve the extension of these concessions and here is more than 50% of our productive area. We have been discussing that with the executive power and the state assembly to avoid what happened in 2015 or 2017 when we lost some of the concessions. It was in 2015.

Unidentified Analyst, Analyst

A lot has been said about privatization and the obstacles, but we do need the approval of the state assembly and something very simple here. You said that you were not discussing with the state assembly? When does the government intend to discuss this with the state assembly? What is the timing here involved? When do you think it will be able to start and follow the process of our privatization process? We know it’s a long one. Next year we have municipal elections, so we know that is a critical period of time. We don’t know when that’s going to happen. That’s what we would like to understand. Are you going to submit this proposal to the state assembly right now? Is this a negotiation that takes time? Do you have a timeline involved here?

Márcio Luiz Simões Utsch, CEO

We want to right now don’t want to waste any time. We’ve had meetings with the government where we emphasize the need for the government to mobilize. Right now, that’s what we want. We want to get the approval. The government has its own interest; it’s not just about Cemig. There is a strategy to take those topics to the assembly to get approval. From our side, we believe in it. We’ve been working very hard on it. I believe it will happen in this term. It didn’t happen in the Governor’s previous term, but it takes time, as you said. We need to work hard. We need to bring in potential bills and try to get immediate approval. It’s not just in our hands because shareholders own the capital, and they should be doing that. They have power in the assembly. We’ve been supporting that by information to get group, but it’s not in the hands of the company’s management. We’re just operating capital plan done by the government really, and we’re working hard to get.

Reynaldo Passanezi Filho, CEO

Thank you, Márcio. Thank you, Reynaldo, for your time. As we heard, we will have another Q&A session. But before now, we have Leonardo George about the last quarter and the year of 2022 results.

Leonardo George de Magalhães, CFO

Good morning. Thank you for joining us in person and online. We have our foreign investors listening with the help of simultaneous translators, along with our investors, analysts, and bank representatives present. I appreciate you coming to Cruzeiro Sports club. I apologize for having the microphone, but I will make good use of it. I need to share our fourth-quarter and yearly results with you, but first, I want to discuss our investments. Reynaldo highlighted the investments we will be making in both the regulated and competitive markets. Our balance stands at R$42 billion, and we plan to maintain low levels of leverage to protect our rating. In competitive markets, the future price of energy is crucial for the company. When investing in the free market, the R$13 billion allocated for generation will consider anticipated energy prices, whether in Brownfield or Greenfield projects. Márcio emphasized the importance of proper capital allocation and financial discipline in our resource decisions, which is integral to our daily operations. Our disclosed investments are aimed at adding value for our shareholders, factoring in market variables related to funding and future energy prices, which are particularly low now compared to the previous years' favorable context. We will delve deeper into this topic later in the afternoon presentation. During Tadeu’s presentation on generation, we will gain more insights on how well-prepared the company is for the future and how we are positioned to maximize market opportunities. I might stray off topic by discussing my football team. These investments will adhere to the discipline we maintain in resource allocation for the coming years. We have conducted presentations over the past few years, and during one such presentation, we faced challenging questions. Some investments did not pan out, and our debt profile was less than ideal in the short term, leading to cash management challenges, including having R$10 billion maturing within two years. It was a difficult period for the company. However, over the last two years, we have turned things around. We also engaged in discussions with the federal government regarding renewing concessions, which resulted in a significant loss of our generation complex. These challenges caused a drop in our rate change and raised the cost of our debt issued at the end of 2017. The rate was quite high at that time, but in recent years, we have successfully reorganized our leverage ratios to very low levels, allowing us the balance needed for investments. Reynaldo mentioned our focus on operational efficiency, and we are now in a much better situation, with our operational performance driving our everyday activities.

Unidentified Analyst, Analyst

We’ll have issue with our files, so we’re going to switch you, if you don’t mind Leo, and then we’ll come back.

Marney Tadeu Antunes, COO

Good morning, everyone. Welcome analysts, investors. It’s a huge pleasure to have you here with us. I also want to thank Reynaldo for believing and supporting our wonderful project. Leo, all the directors, all the superintendents who are here today. I also want to thank everyone who’s working here and our clients, the hotel. Am I changing my own slides? Okay. Great. I want to thank the hotel for one of our R$9 billion, and I want to say that we are going at 106 kilometers an hour; 106 an hour. We connect 106 new customers to distribution. Those customers need investments. If we want to speed up our connections, we need to increase investments. If you do it well, like Sigma did, as Leonardo mentioned, those amazing customers we connected this year will need more investment. Make it easier for them to join our trading company. It all starts with distribution. We need to meet each other so that we can consolidate our relationship with our clients. Our solution is by expansion and focusing on our clients. This is a highlight. We used to waste time, establishing relationships. Our partnership with IBM brought them on board with us; our customer care has made our life much easier and has allowed us to improve our operating results. We know this, and I think it’s important to say, I always say this to my team: losses and default go hand in hand and distribution. The company has to be doing well. Both in terms of losses and in terms of it because if we stop, we’ll go up; losses will happen anyway, so distribution will have a consistent performance, and that’s what we work for.

Leonardo George de Magalhães, CFO

Thank you very much for your attention. In the afternoon, I’ll be here available to take your questions.