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Centrais Elétricas Brasileiras S.A. – Eletrobrás misses on earnings expectations. Reported EPS is $0.03 EPS, expectations were $0.11.

Operator: Good morning, ladies and gentlemen, and welcome to Eletrobras’ Conference to discuss Results for the Fourth Quarter ’24. Present here today are Mr. Ivan de Souza Monteiro, CEO of Eletrobras; Mr. Eduardo Haiama, VP of Finance and Investor Relations, Mr. Antonio Varejao de Godoy, VP of Operations and Safety; Ms. Camila Araujo, VP of Governance, Risks, Compliance and Sustainability; Mr. Elio Wolff, VP of Strategy and Business Development; Mr. Italo Freitas, VP of Commercialization; Mr. Juliano Dantas, VP of Innovation, R&D, Digital and IT; Mr. Marcelo de Siqueira Freitas, VP of Legal Affairs; Mr. Renato Carreira, VP of Procurement and Services and 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 close 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. [Operator Instructions] 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. 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 de Souza Monteiro: A good day to all of you, and we would like to thank you 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 can find 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 has 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 the set of new customers. This is a process that has been implemented and is undergoing enhancements. In 2025, we will be delivering our wind farm — and 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 component professional 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 the 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 it’s linked Eletrobras financial performance, with salaries that are matching what we see in the market.

And the distribution of dividends was only possible, thanks to the enhancement we implemented throughout the company. We have BRL32 billion, with a reduction of financial cost 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 dividend is the 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: Now let’s follow our agenda. We’re going to, first of all, go through the highlights and speak about our operating performance. And finally, the financial performance on Slide number 5, which are the great highlights. First of all, a client focus, and we will speak about the transformation we have undergone in the last 2.5 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 2, 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 is enhancing robust processes for credit and market risk management and also establishing trading guidelines and commercialization pays for the amount of energy that we still have for commercialization, all of this with complete portfolio of energy solutions and the focus on the energy trading in the free market.

On Slide number 7, as part of the transformation agenda, we show you our operational cost that is reducing once again. We have gotten to BRL6.784 billion in 2024. And in terms of employees, 7,700. And 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. It is important going forward. And finally, employee compensation linked to the company performance and aligned with market standards. On Slide number 8, 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 BRL26 billion and ended the year with BRL13.6 billion. Along with the court settlement, we’re also working with possible and remote causes of BRL8.2 billion. On the following slide, we have spoken little about this, but we do remark on this. We have BRL32 billion invested in several assets, in [indiscernible] and several other companies. And 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 these divestments representing BRL15 billion, acquisitions of BRL5.7 billion and using technical criteria for selecting governance body members.

On the following slide, Ivan has already mentioned this. We raised BRL32 billion from a Brazilian company last year, which gives us enormous financial solidity and we were able to declare those BRL4 billion in dividend referring to the payout for 2024. Now this is gross debt of BRL75.6 billion represents four years of funding. Now we are working with funders. We’re lengthening 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 Board’s credit rating. When it comes our investment capacity. Here, you see the investment that have grown since the privatization. In the bars, I would like to highlight the green and the blue bars, which represents investment in the streamlining of our plants, the guarantee, energy, safety, and reinforcement and enhancement with the same purpose, of course, before we invested a little more than BRL1 billion.

In transmission and in generation, we are now investing in the sum of both BRL6 billion approximately, and 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, an isolated state in the country, which is Roraima Transnorte Energia with investment of BRL3.3 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 the 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 a period where we didn’t want to participate or could not.

In 2020, we did participate, but we’re not successful with the privatization. We were bid one line with a small investment of BRL100 million in 2023. We were somewhat more bold. We had BRL37 million in CapEx. And in 2024, the great winners of the auction, reaching a CapEx of BRL5.6 billion, which means that the investments made today planned for auction or for investment in reinforcement and enhancement in generation and transmission reached BRL14 billion, with an REP allowed — annual revenue of BRL6.4 billion. On Slide 13, this was already mentioned by Ivan, an 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 utmost system that helped us understand, meet your logical models and to prepare for readiness and enhance our readiness in the case of extreme events. And 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 standard guidelines are based on FBTI. 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 our pilot plants with green hydrogen, where we have spent BRL125 million for a production of 5.7 tons of green hydrogen. And 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 date.

What is interesting to observe is that this price was never stable for a simple reason. We have a system that is imminently 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 BRL330 per megawatt hour and the standard deviation is BRL330, and the mean, [BRL331] (ph). So below, you see the period of January ‘22 to July ‘24, 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%. So 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 on 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 equivalents in megawatt. In 2010, it represented 5.2 in demand. And in 2024, we are at 3.7. And for more than a decade, we haven’t had a hydroelectric plant with a reservoir, so 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 [2/16] (ph) until 2024, as I mentioned, for 2.5 years, we had a floor price, BRL60, BRL66. And the market agents, in quotation marks, stated that the price was low. And if we look at this graph above, what do we have. At the beginning of 2024, we had a reservoir, relatively well behaved, 65%, 71% and in the rainfall period, which is 69 — 59, well below the historical average. If you look at the prices factored for energy, for the year 2025, 2026, we did not foresee any crisis or expectation that there would be an increase. Things that could make prices rise is quite the contrary. In 2025, we stand at BRL65. What happened 1 year later, the reservoir improved, reaching 71% at the end of February, and the rainy period in Brazil was excellent, historical average of 90%, 98%.

And that same price that one year before was BRL155 for 2026, this price presently is being negotiated at BRL200 or above. Therefore, that base 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 [indiscernible] going forward.

And 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 pace ourselves on conservative assumptions. And 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 and the north because of formerly, there was a single price, BRL10, BRL20, BRL30, now reaching — now it’s BRL300 of difference in the month of March. So we have to be more conservative and work with the lower leverage. Considering the uncertainty we are dealing with, once we decline 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 reinforcement 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, IPCA will end and everything will be more risky in terms of generation. So 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 an 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&A.

So our discussion for dividends is set on Slide 18. Here, we analyze not only the result of an exceptional year for the company, but because we are preparing for this scenario with a 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. Same under these conditions, we can pay more than the minimum, BRL2.5 million, to get to BRL4 million in dividends. Now 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 floor of the bands do 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, BRL5,100 million. 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. And 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 exposure — the supermarket exposure or other types of exposures.

And 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 cost for the year. And on Slide 24, our operating provisions. This is our last slide here. As I said, there’s still a great deal of things changing in the company.

We have a very complex balance. We’re very gradually cleaning up. We had reversions that were carried out. And after creating a new way of analyzing our assets is to, well, we treat all of the plants as if they were a single plant because that’s how we operate the plant, we don’t operate asset by asset. We operate as a whole. And this is a different way, of course, of looking at things from a financial viewpoint to onerous contracts, and this is a way of looking at this contract. And finally, in the case of the measurement at fair value of assets, in 2023, we had in courts a negotiation for the sale of our thermal plant. We had already negotiated broadly for the sale of the asset at Santa Cruz, but it did not materialize. Well, very well. Now with this, we can now go on to the question-and-answer session.

Thank you.

Operator: [Operator Instructions] The first question comes from Daniel Travitzky from Safra. Your microphone has been unmuted.

Daniel Travitzky: 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 term 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 the reason of concern. These are our two questions. Thank you very much.

Ivan de Souza Monteiro: Thank you, Daniel. I will give this to Mr. Siqueira. Marcelo, you have the floor.

Marcelo de Siqueira Freitas: Good morning, Daniel, thank you for the questions. Now regarding the agreement related to [indiscernible], 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 their 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 term are approved by their 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 portfolio and to close contracts for subsequent years. And we also had the auction of the regulated market, we sold 350 megawatts. That is auction held in December. Regarding the portfolio and the price, [indiscernible] is the portfolio and pricing manager in the company, has the fundamentals and can perhaps answer your question.

Unidentified Company Representative: Thank you, Italo. Good morning, Daniel. Now Mr. Haiama talked about the greater volatility that we see ever present in the sector for several reasons, variations in demand, a flow of heatwave and the growing use of intermission sources in our matrix, which means a lower level of storage for the sector when compared to the total demand. Now this set of factor brings about volatility. From this year to last year, we had an enhancement, a computation model working with risk aversion and we have the cost on operations of the system. Now this model nowadays better rejects the cost of operation of the system because it brought about price variations that we had as the vision the previous year. We’re working with a more evolved system, something that is closer to the real cost of operating the system.

And as we have resources in all of the supermarkets, 50% of our sources in south and in the southeast — of one-fourth in the Northeast and one-fourth in the northern market, when we carry out portfolio management, of course, we work with estimates that mismatch from the market for each period of the year. In March and April and May, there is a considerable mismatch for the North and Northeastern markets vis-a-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. And using the portfolio, we look at the different scenarios we have for the company seeking the best possible result.

Daniel Travitzky: Thank you.

Operator: Thank you, Daniel. Our next question comes from Bruno Amorim from Goldman Sachs. You may proceed. Your microphone has been unmuted.

Bruno Amorim: Thank you and a good day to all of you. I have two questions. First, referring to investments and reinforcement and improvement, you delivered BRL3 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? And also in terms of how this will be received by the regulator? Will they approve more investment for coming years? The second question refers to PMSO. You reported levels above that of the last quarter. I understand the 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 de Souza Monteiro: Thank you for the question, Bruno. I will give this to VP Haiama then continue the answer.

Eduardo Haiama: Good morning, Bruno. Thank you for the question. Of course, in the recent past, we came out of an investment of 1 billion, and it has reached 2024 in BRL3.4 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 improvement. Now through time, of course, we will improve. We’re speaking of 2027, 20 — and going forward. Now more important than involving the figures is to do this correctly. We don’t want to increase investments excessively, as this could cause risks to execution. 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.

So 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. And this is what we’re 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 BRL6 million. And the company will obtain 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: Thank you.

Operator: Have a good day, Bruno. Our next question comes from Fillipe Andrade from Itau BBA. You may proceed, Mr. Andrade.

Fillipe Andrade: Good morning, everybody. Thank you for taking my question. I would like to hear from you as 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 project? And how is the company attempting to protect itself from other trading agents, once again, because of the volatility that you mentioned.

Ivan de Souza Monteiro: Well, thank you Fillipe. I begin here with President [indiscernible] and then Vice President Limp.

Unidentified Company Representative: Well, we’re always approached that the fact, the topic is the action that we end up adopting. Well, the goal is to protect 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 what the default situation has been disclosed. And we’re monitoring the market very closely regarding generators and trader as well. We make sure that we don’t have any exposure as was mentioned before. [indiscernible] has implemented a risk methodology, a methodology against other parties. So 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: Well, thank you, Fillipe, for the question. To reinforce what I said in the previous question, as we have resources in all of the supermarket, it is possible to carry out a more efficient portfolio management. And the risk of niche match between supermarket which we have observed very strongly at the end of the third quarter. We also can see this in the second quarter. And 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 ’25 and also for 2026, with the prices going up in the second half of the year, especially in the Southeast and North supermarket. And we look at our entire portfolio and accept all possible scenarios of price mix matches.

Operator: Thank you, Fillipe. Our next question comes from Andre Sampaio from Santander. Your may proceed. Your microphone has been unmuted.

Andre Sampaio: 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 de Souza Monteiro: Thank you, Andre. Well, seasonality happens. It’s undesirable. And well, you can expect a reduction for this year, but it does happen. And 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.

Unidentified Company Representative: Now, the transaction of the thermal plant is ongoing. Several of the conditions have been surpassed, especially when we speak about the [indiscernible] 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, but follow this natural court. In terms of the M&A, well, the time tends to be lengthier.

Operator: Well, thank you, Andre. Our next question comes from Antonio Junqueira from BTG. Your microphone has been unmuted.

Antonio Junqueira: Good morning, everybody. Well, 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 is there was one when they received dividends — at the level of the bylaw. And of course, this is a very important message that you gave 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. But are you thinking of giving us a numerical reference to be able to follow up or project dividends in the coming years?

Unidentified Company Representative: Well, good morning. Now the idea is for remuneration to be quarterly. We had components that were in accordance with predictability in the company, capacity, behavior, contentions — containment, all of this has been properly stressed. And of course, this enhances the way how we look at this discussion.

Unidentified Company Representative: Well, thank you. You have to be careful with some things when it comes to methodology because this could eventually impact the trade strategy of the company. So we’re being extremely cautious when we try to accommodate the vision. And of course, those who are on the outside, I understand the anxiety, the need to know the details, but we don’t 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 entrance and exit of cash, and we’re going to simplify the 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 operate it easily. This is not an offense for the more predictable segment in Brazil. In generation, there is 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 [indiscernible] with a conservative view on prices, I think this is a reasonable parameter. What we cannot do is work with leverage scenario for generation without having anything to give and working with prices that we deem would be the fair price. Now pure price is good if you have an infinite possibility in the market where there’s only user to buy and sell.

I don’t know if this is helpful at all, but 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. Well, 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 situation, maintaining the parity, a proportion of 1 to 10. Well, we will do that.

So we’re 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. And future investments, of course, have to be interesting. Otherwise, this scale will be imbalanced. We do have to have good shareholder remuneration. Have this helped?

Antonio Junqueira: Yes, it has. I have a follow-up question. When you look at the company leverage, as the company has CDE, the compulsory loans, what are your 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?

Unidentified Company Representative: Well, 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, CDA, the basins, the hydrographic basins that have to be paid off. Now compulsory loans that we’re negotiating, were we not negotiating them? After fifth year, 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 to digital 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. And if you enter that snowball scenario, that proneness propension to be conservative, will increase. And this, of course, will impact our commercial activity. We’re not going to allow that scenario to materialize. So the entire time, we look at the global situation. And we can eliminate specific years where perhaps we could surpass that prudent attitude. But we have to be extremely cautious with the leverage — the global leverage of the company.

Antonio Junqueira: Of course. And 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.

Operator: Thank you. The next question comes from Joao Pimentel from Citi. Your microphone has been unmuted.

Joao Pimentel: 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, and part of this is coming through reinforcement and improvement. And we see the quantum asset, the transmission asset, [indiscernible] assets. Are you looking at this asset? Does it make sense? Or is the focus of the company is to grow in transmissions 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. Now how can this become a strategy to negotiate the compulsory loans because the main causes of the compulsory loan, the most relevant one, the largest agent, all of these have been resolved.

And presently, this is a fragmented business. Is there a higher trust to use this cash availability to create broader a agreement with a smaller counterpart immediately and in a simpler way? These are my two questions.

Elio Wolff: Well, thank you, Joao, the second question, the answer is no. Flexibility and liquidity give us what has already been remarked on. And because of our vehicle BP, well, 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, well, this is a goal for the company, but mainly focused on simplifying the assets. We spent two years with 25 M&A transactions. Now we focus 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.

And of course, M&A is in transmission that are more attractive. For this moment, this would not make sense. So our strategy at present is to continue with M&As for simplification, to focus on greenfield. There are several auctions this year. I believe there are three this year and the coming year. So we will begin to invest in greenfields that will spearhead our growth.

Joao Pimentel: Thank you very much.

Eduardo Haiama: Now, a quick comment regarding to what Elio said. When we look at our transmission segment, and we should divide this into two parts, where based on contracts we had in 2013, BRL60 billion in assets for transmission, very similar to what we have in the regulation. Now we have to revitalize those assets that presently have been in existence for more than 30 years. There’s a high potential for investment in that segment. Now when it comes to the auction, if you add what we gained in the past and what we gained recently from auction and our stakes — minority stakes, a 10% stake proportion of stake. If we could be one of the largest players simply in the part of auction with our main asset, this shows you, of course, that Eletrobras transmission is a power and this is what has helped us at all times to undergo turbulence in a very interesting way.

So the focus, well, we’re going to focus on what we know how to do and have done ever better focus on the auctions, execute our work, and 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.

Joao Pimentel: Well, thank you, Haiama.

Operator: Well, thank you. 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 de Souza Monteiro: Thank you very much for your attendance. And should you have any questions, please send them to our IR department. Thank you very much.

Operator: The Eletrobras conference ends here. We thank all of you for your attendance. Have an excellent day.