Ladies and gentlemen, thank you for waiting. Welcome to Eletrobras Q2 Earnings Call. Let me introduce the Eletrobras' team. Mr. Wilson Ferreira Junior, Eletrobras CEO; Ms. Elvira Presta, VP of Finance and Investor Relations; Mr. Elio Wolff, VP of Strategy and Business Development; Mr. Rodrigo Limp, VP of Regulation and Institutional Relations; Mr. Renato Costa Santos Carrera, VP of Procurement and Services; and Mr. Marcelo de Siqueira Freitas from the Executive Legal Vice Presidency, are here with us today. This earnings call is being recorded, and it will be made available at the company's IR website, where you can also find the presentation in both languages. [Operator Instructions]. Before proceeding, we would like to clarify that any statements that may be made during the teleconference regarding the company's businesses, outlook, projections, operational and financial goals are based on beliefs and assumptions of the Eletrobras Management as well as information currently available to the company. These future considerations are not a guarantee of performance because they involve risks and uncertainties, and they depend on circumstances that may or may not occur. Investors should understand that general economic conditions and other operational factors can influence the results expressed in these remarks. I'd like to turn the floor over to Mr. Wilson Ferreira, Eletrobras CEO. You may proceed now, sir.

Thank you. I would like to welcome all of you. Can you please show the slides. I would like to welcome analysts, investors, thank you for attending our earnings call for the second quarter. Let me start. Please move on to the next slide, please. We'll have a summary of six segments. That's how we broke down the company's highlights, an overview of the number one managerial indicator, which is PMSO, operational performance, generation, transmission, financial performance. Elvira will take over at this point in time. And then I'll come back for the investments and next steps segments. Let me start with the highlights for the quarter. Next slide, please. Next one, please. Another one. Yes. These are the highlights for Q2. First, collections and operations in the financial front have been concluded, given the exposure we had to the U.S. dollars. The hedging for the bonuses in yet another operation, that accounts for almost 96% have been covered, and we'll be completing that in the next quarter. There won't be any FX exposure from now on. Onto liability management operations. Let me start with the one that have already been approved and implemented at Electronorte, BRL1.9 billion. The goal is the same, to lower costs and extend the profile. Costs are 2.2% above CDI, and we have been able to extend that debt profile. We'll be detailing that shortly. Elvira will be doing that. We paid BRL1.2 billion in dividends, and the average cost is CDI plus 2.5%. Amongst those operations, I would like to highlight, though, that one on the right, BRL680 million, the first credit note for exports. One of the important covenants is the debt contract with the commitment to sustainability. Our number one goal here is the clean energy percentage. We are at 97%. Our…

Thank you, Wilson. Good afternoon. So now we're going to talk about our balance. We always talk about this every quarter. So to your left, you see the IFRS information. As you were saying, we had a 59% increase in our EBITDA, 16% increase in our net income. And to you're right, still in the same table, we see a recurring basis. So we see that the EBITDA was basically the same, but the net results were below our results year-over-year. Now let me tell you why this is happening. In previous quarters, we would always, always show the recurring results, but we would exclude our provisions, especially for compulsory loans. Because in prior periods, before we started this work, this would increase provisions, therefore, reducing results. If we use the same criteria, the reversals of these provisions, which are positive, are nonrecurring. This is why our EBITDA is capped at the same level, but we have a reduction in our net income. We have a few highlights to your right. Wilson mentioned some of them. We had around 4% growth in revenue. This has to do with Santo Antonio Energia in its consolidation. This is the last quarter where we still have to explain the effects of Santo Antonio. As of the next quarter, Santo Antonio will have been at the same base as the previous year. So we will no longer need to explain these effects because in the second quarter of last year, San Antonio had not been consolidated yet. This is why we've been explaining this effect. It represented BRL1.1 billion. In the next slide, we're going to talk about IFRS compared to our regulatory perspective. For the PMSO, we had a very positive quarter with a reduction of BRL144 million. We're also excluding Santo Antonio,…

Thank you, Elvira. Let's move on to the next slide, please. Let me point out a couple of investments we made. And we announced that right after Eletrobras Day, BRL17 billion in contracted investments for the period '23, '27, BRL6.7 billion in transmission assets. We were talking about that these are assets for improvements that have been approved by ANEEL, which have guaranteed revenue. We also have for improvements set of mills or plants operating in the quota system, with an additional BRL4.6 billion there. BRL2.9 billion for infrastructure and environment. The first BRL1 billion is related to environmental investments. A little over BRL500 million for the social environment programs that have already been commissioned for Santo Antonio and BRL1.9 billion for infrastructure. These are optimization efforts of our costs that can be ranked as operational investments, but they are actually necessary investments through automation, robotization of a couple of processes with intelligent networks, AI, BRL2.4 billion for generation assets with new sources of revenue that have been commissioned Elvira mentioned. That's the wind process in Coxilha Negra and BRL0.7 billion in contracted M&As: Teles Pires Baguari, Retiro Baixo, SAESA and Baguari Energia. These are assets will incur in cash outflow of BRL0.9 million. That's not all. We have the outlook for growth. We have additional firepower. These are alternative sources of growth. Number one is the transmission auctions, several auctions that are scheduled for this year and next year, BRL35 billion in total. The company was very competitive. The only company that was present for every lot. This is an important growth avenue that is interesting for the company. We do have M&A operations, not only for that the reversal of cross-ownership. We had that goal, and that has to go through that reversal, just like ANEEL Energia, but…

[Operator Instructions]. Our first question is from Andre Sampaio from Santander.

I have two questions. Let's start with Angra. We saw a number of articles this week regarding whether or not the government is moving ahead with this project. Could you please comment on your expectations regarding including this in the growth acceleration program? Now let's say this project is not built, what would be the impact for Eletrobras?

Thank you for your questions, Andre. Let me start answering regarding Angra. Of course, this is a part of our fundraising process. So we're always working on the assumption that since this project is important for Brazil, they will move ahead with it. This is what we expect to see. We've seen speculation. But just a while ago, I was seeing the opposite. I was seeing that, yes, this project will most likely be included in the growth acceleration program. So we have to wait and see, of course. But we need to remember that moving ahead with this project does not really depend on the growth acceleration program. Of course, we were waiting for the BNDES, the Brazilian Development Bank, to finish its studies, its research. And after they're done with their research, then they'll think about the continuity of this project. We are working on the assumption that they are going to move ahead with this project. This is our hypothesis because this is the subject matter of this act. And we don't necessarily think that it needs to be a part of the growth acceleration program for them to move ahead with it. Now regarding the option you mentioned, let me hand it over to Limp and to Helio because they may have comments. Let's talk about your option, which is not ours.

Thank you, Wilson. Well said. Indeed, the articles that we saw in the last couple of weeks were not even regarding whether or not Angra shares will continue or not. They were talking about the growth acceleration program, and these things are not linked. So this is a part of this act. It is a part of the PPI, the CNPE, the privatization program, the separation program for electricity and nuclear. So right now, we are doing everything and we are seeing everything be done as intended. For example, they are finishing their research and they are working on the CNPE. Now should they stop working on Angra, Eletrobras as a shareholder, in the case of financing, we are the guarantors of this debt, around BRL6 billion. But we are not the main debtor. This responsibility goes to Electronuclear, and it goes up to shareholders depending on the circumstances. In the case of their debt, we are providing the collateral for that. So it's possible that we'd have to reimburse it. We do not believe that they're not going to move ahead with Angra 3. But should that happen, we definitely make an assessment of all potential impacts for Eletrobras. But we do believe they are going to move ahead with it. All right. By the way, let me stress something. We've been working according to the privatization rules. According to these rules, not only do they talk about moving ahead with Angra 3, but they also talk about governance rules for Electronuclear. Their CFO, two Board members, members from the Auditing Committee, members from co-Angra, which is the committee responsible for overseeing Angra 3 works, all of them are aware of it. So we're close to them. And this has to do with the management of Electronuclear. Of course, they are taking into account everything that is in their best interest, both for the company and the shareholders. Yes. And here we have Mr. Elio Wolff and Ms. Camila Araujo, who are representing us. And Eletrobras really values this topic. We have two VPs working on it.

Our next question is from Mr. Daniel Almeida from [indiscernible].

Regarding your next issuances, what would the rate be? Do you expect to reduce your capital cost?

This is our goal. Not only do we want to make it longer, but also to reduce costs. What happened with Eletronorte is something that teaches us even though we need to think about the debt scenario that we have right now. Somebody else may have a comment like Elvira. And I think it is important to talk about what we're doing.

Yes, unfortunately, Daniel, we can't convey any information about this because we cannot legally speaking. We issued a material fact, but this is regulated by the Brazilian Securities Committee. And this is only the beginning of their proceedings, so we're unable to share any preliminary information. We need to wait for the Securities Commission to do their work, to do their job and then we'll be able to talk about it, but this is regarding Eletronorte as reported in June.

Our next question is from Mr. Daniel Travitzky from Safra.

I actually have two questions. First, I have a question regarding energy trading. We saw implicit prices for trading in 2023, and they were very high, BRL179, which is very -- which is above the spot price. And it's even above the price curves that you showed us. How did you get to these results? Could you please talk about the rationale behind your strategy? My second question is related to capital allocation. Wilson, you mentioned transmission auctions to be held soon. Now if we think about direct current, and we have an auction for that in December, what kind of opportunity do we see there? What do you think about the competition? What would be your technology challenges to put this project together?

Thank you, Daniel. So let's talk about trading first. When it comes to these implicit numbers, these are the result of a strategy that we actually deployed last year. Trading is something that requires planning. It requires a specific view. We have a strategic committee to work on that. They think about the evolution of demand and the potential scenarios that we may see in the system. Additionally, they also think about deliverables from assets with more or less flexibility vis-a-vis the electricity system. All these three factors have an impact on pricing. So if you look at these prices 1 year ago, you have a more favorable scenario, but the economy is not as dynamic. So you sell forward. This is what happened with Eletrobras. So the first answer is to get to these prices, we actually designed this strategy last year, and we sold forward. But as I was saying, we were successful. It's important to highlight that this is not the only strategy to get to higher prices, in the case of Eletrobras, Eletrobras is one of the few companies with energy volumes that could be traded not only in the short term, but also in the long term. We retain our rights over these volumes over 30 years. So we are one of the few companies who are able to do that, to offer different offerings to customers in the long term with different propositions regarding curves or flexibility. So with our volumes, we definitely have more flexibility to customize our supply to specific customers, which we believe is important. Number three, we changed our strategy compared to last year. We were basically operating based on generators and traders, but the open market right now is 10,000 to 12,000 customers. They are what we call the…

I agree. Let me add something. I think the last auction was just the beginning. We're working on it, and we're studying. We're doing our research for December. In December, they're going to focus on a batch of around 18 billion to 19 billion. And there was a change recently. You may have seen it. Looking for better competitiveness, the regulator decided to have bids split into four sub batches. We have the converter with the main batch and four sub batches. Well, this bid is going to happen in December. As Wilson said, we've been talking to partnerships and suppliers. We have an ongoing conversation with them. We also have preliminary research trying to identify routes and the best paths. We're also trying to figure out the best structure as far as cabling goes. So we're getting ready for this auction, not only for the big batch split into four, but the other batches as well, batches 2 and 3. So for December, we are proactively preparing ourselves to send our bids.

Our next question is from Mr. Henrique Peretti from JPMorgan. Mr. Junqueira asks the next question.

Let me talk about Angra 3. Part of the reason why this discussion comes up and it's a recurring topic, the market is very fearful of this topic. If it is decommissioned, the company would be losing BRL10 billion, BRL12 billion, BRL14 billion. You hear the kind of comment left and right. I may be completely wrong, but I have the impression that is due to communication problem. So once again, I would like to take this opportunity to ask your opinion, if there is a decommissioning happening, what is your take on those debt? Electronuclear would default two debts, BRL6 billion. That seems to be a very radical or extreme result. But could you explain how these costs would be broken down, how they were calculated if it happens? Along the same lines, can the company provide any kind of guarantee? Or would Eletrobras would have to collect or increase its capital? Would the company have to do that, too?

We know it is mandatory in the case of the construction portion of the project. So I think it would be interesting so that we could all share the same opinion because that volatility is not helpful to anyone. I'm positive. You are right. I would like to take this opportunity to clarify this issue. Despite the importance of this asset, so the basic scenario is that of continuity. And I'll remind you of two things: the controller of the company is the Brazilian stent, [indiscernible]. They have an almost 70% of common stock. Eletrobras has more -- a bigger stake of the capital. It has less than 40% of the common stock. Well, this company, when we operated it, it was a company that ran at a loss. It's no longer the case with Angra 1 and 2. The EBITDA is robust and positive. So it can cover for any adverse effects. It won't be able to clearly withstand all of those negative effects. And Limpy and Elvira, you can also provide more detail about the financing. And according to the law and based on the agreement that we signed.

I was trying to unmute myself. Well, on to the debt, BRL6 billion. Eletrobras is the guarantor of the debt. So if they cannot cover, Eletrobras can become sued. But legally speaking, we are entitled to look for compensation from Electronuclear, if we are executed. As to the demobilization costs, there's no direct guarantee from Eletrobras. It's up to Electronuclear. If Electronuclear is not able to cover for that cost that can reach shareholders, but not Eletrobras alone, that is also valid for the controller. If you increase the capital, we would have to make an assessment, but that would involve the entire legislation of Eletrobras. As a shareholder, I wouldn't be able to tell you whether Eletrobras would be forced to allocate resources there. If it's not related to the construction part, but we have to take a deeper dive to better understand this topic. And there are no exact answers. You cannot quantify the impact in numbers. It's not a recipe. Given the current situation, we are the guarantors, but we can find compensation. All the other costs as Electronuclear, but there's a direct guarantee as we said. But if Electronuclear is not able to do that, that can impact shareholders, not only Eletrobras.

But when you say impacting shareholders, would that mean the equity? So your equity at Electronuclear would be worth less. If you increase capital to decommission, would you have to follow the 36% rule? Or that's not the case?

Well, we do not have that answer. We have to analyze the scenario because that's not the scenario we're working with. But we have to take a deeper analysis if that's the case. You cannot guarantee anything. You'll not be purchasing equipment, the commissioning costs ex debt. The company is not -- we're not creditors, no. And that decision of decommissioning is not taken by Eletrobras, that would be the burden of those that make the decision. In such a case, this is going to be assessed by the controller. As a controller itself, we'll be answering according to our participation. Electronuclear has debt net to EBITDA about 3-odd. But the entire debt is from Angra 3. Yes, the rest is net cash. It's a very solid company, generating EBITDA. It's a 3x budget. It's a company owned by the state, but you're talking about the state defaulting of debt. A state that would be BRL1 trillion worth of debt. It would default that debt, I think the stress is due to lack of information. That's not your base scenario, but I think it's worth further explaining it on a step-by-step basis so that everyone would speak the same language. You're right. You're right. We're working in that direction with [indiscernible]. The Board will be addressing that issue.

Mr. Marcelo Sa, Itau BBA, asks the next question.

Could you please elaborate on the CapEx? You break that down by segment. But out of this commission CapEx, what part of it does not generate revenue? It's 1.5% worth of revenue generation, but there was an additional CapEx that is nonrecurring. But should we consider that BRL1.5 billion. For maintenance purposes, that wouldn't be generating revenue necessarily. And could you please elaborate on the capacity auction that is scheduled to be held in Q1 of next year? And competitors are not looking for a hydro-only solution. So what's your take on this next auction? Are there any projects willing to take part? What would be the amount available? And what is your estimate as far as capacity hiring is concerned?

I'll turn it over to Elio Wolff, and then Limp can jump in to talk about CapEx and the capacity auction. Over to you, Elio.

Hello, Marcelo. The first block is related to revenue, and I mean transmission. The second block, the maintenance CapEx. And this should be regarded as recurring CapEx that is nonrevenue-generating. It's BRL1.5 billion or BRL0.75 billion in 3 years. So that's the maintenance recurring CapEx that will -- this is the nonrevenue generating, right?

Yes, exactly. The BRL3 billion is a mix. Part of it should generate revenue from improvements and there's a part from modernizing equipment. And I think it's important to speed up that process of MSO. But this is a one-off event. As far as the environment, most of it coming from size, these obligations would be dwindling. As years go by, these are nonrevenue generating, but there's a progressive phasing out of that process. And the [indiscernible] is a new asset, and then there's M&A. So in essence, as far as modeling is concerned, BRL1.5 billion is nonrecurring -- rather is recurring, non-revenue generating. This is the best answer I can give you for your model and for the auction.

Well, let me clarify one thing about CapEx. As you're showing, you said that nonrecurring for generation, there's a little bit of improvement. But in 30 years, would there be any leaps for modernization efforts that would be outside those BRL1.5 billion? Are there any surprises looking ahead?

No, there are no relevant surprises further down the road. Well, if we detect any opportunities to modernize or maybe repower our units that could generate important revenue, of course, we'll take that into consideration, but we don't envision any of those surprises as we speak. On to the auctions. We have projects of renewable sources. As far as thermal plants, we are divesting or divesting from those operations. It's currently underway. There's a teaser in the marketplace about it. So we are divesting in those areas. But of course, we'll be addressing the capacity depending on how EPE designs it. We'll be looking for opportunities not only to sell energy, but also to come up with new projects to make that opportunity possible for the group to grow even further. But we have no volumes set aside, specifically for the auction. We have to learn how the government will be defining that auction, the types of modalities, direct participation, whether it's a possibility, hybrid services. So these are possibilities we have to take into consideration so that we can define how we are going to be part of that auction.

[Indiscernible] from Trulia investments is asking the next question.

Can you elaborate on your interest in the capacity auction for next year?

That's the question we have just answered. I think he read Marcelo's mind. Would you like to say anything else, Limp?

No, that's it. We have to better learn about the premises and how the rules will be detailed just like the previous auction. Only for thermal plants, that would be completely the opposite of our directions today.

We turn over the floor to Mr. Wilson Ferreira for his final remarks.

Well, thank you for attending our Q2 earnings call. I'm very pleased, as well as the team is, as to the start of the realization of the results after the privatization process. Some benefits are evident. We're talking about more revenue from the free market. This is the result of that decommissioning. And we have better benefits to extract once we have the trading company set in place. Last year, the company was reduced through to a series of voluntary termination program. We have had two of these programs. We are hiring new people, some people are leaving the company and we do have to have a mix in place that can provide more productivity and cost reductions and being more productive in the marketplace. We have a very experienced team as far as MSO head -- or led by Renato Carreira. He has a lot of experience, even abroad, but we brought in several people from or to Renato's team to be able to better negotiate materials, third-party services inventory. We have 95 warehouses. We have 7 data centers, 4 shared services centers. So we have been working hard to optimize these assets. These are currently underway. And once again, we have advanced significantly our liability management strategies. We'll be able to show those results in the near future. We've done that at Electronorte. So this is just the beginning of that effort. We still have a lot of homework to do as far as tax and fiscal optimization. That's our focus. This is our priority. And absolutely, we not only have to operate efficiently and with safety, but also remaining competitive and focusing our opportunities on transmission. I'd say it's a need for the country. That's exactly where we can contribute substantially and also generating value and being…

This concludes Eletrobras earnings call. Thank you for attending. Have a good afternoon.