Companhia Paranaense de Energia - COPEL (CPLE3) Earnings Call Transcript

Hello, everybody. Good morning. Welcome. Thank you very much for your presence here today, and we have live in Curitiba in this virtual environment. We are all here, but we are following all the health protocols. And the professionals that are in the studio, they have been tested, and they are using individual protection equipment. We are not wearing a mask, but we have been tested. And we will be keeping social distancing. I'm Daniel Slaviero, CEO of the company, and we are here with our Chairman and our whole executive committee. And I would like to put this into context, a new Copel for the new times. Copel has been modernizing itself to be present in more competitive environment, and we carried out many actions that brought the company to the next level. This is just the beginning of a very successful turnaround story. We have a company with a better governance and more predictability and long-term visibility. We compare ourselves to the best in class in this area. And this is very important to face the challenges in the electricity sector totally dominated by private companies. And the opening of the market, regulatory improvements and technologies, they are inexorable changes. And this is why our responsibility only increases. And as the CEO of the company, I can guarantee that we are prepared, and we trust the future of our company. And today is a very special day. We are happy to be able to hold this meeting, talking with analysts and investors from all over the world and all over Brazil as well. And I would like to tell you where we are and where we are heading to. During this morning, the panels are about very present matters such as ESG, people, capital allocation and our fully owned subsidiaries. And at the end, there will be a Q&A at the end of each one of the panels. So you may forward your questions via chat, if you wish. And to give the kick start, I would like to show you a brief video of our 2 most important shareholders, the government of the state and the BNDES majority shareholder message.

Hello, everybody. This is Carlos Massa Ratinho Júnior. I'm the Governor of Paraná. I would like to congratulate everybody today on behalf of -- and in the -- Daniel Slaviero Pimentel, the whole Board of executive committee. And Copel has been giving fantastic numbers for the market and breaking record in terms of revenues and with the improvement in client service, service to our citizens and also excellent investment. And this gives a very good return to the Paraná state and to the Paraná inhabitants and to investors. And in spite of all the challenges faced in the last few months or the last year, in fact, with the pandemic, Copel was able to deliver very good results. We grew the most in the industrial area in the country, fantastic figures. Last year, we closed 2020 with 40% of jobs generated in Brazil were generated here in Paraná. In January 2021, we started the year with 24,000 new jobs in our state and also investments in many areas that are important. And this year alone, we had BRL 12 billion new investments in the state of Paraná, agribusiness cooperatives and the auto sector, beer sector or sector -- many investments that we are making. And because of that, our state, in spite of all the difficulties that we are facing, all of us, we are generating jobs and automatically achieving excellent increase or improvement in the industry. Copel helps the social and economic development of the state, and they have been doing quite a wonderful job improving the management and decreasing operating costs, making major investments that are strategic for our state and breaking record, as I said before, in terms of revenues, historic records. And besides, we have the commitment to make Copel become more and more modern, consolidate itself as the best energy company in South America. This is our commitment, to deliver better and better services to the citizens. So I would like to invite you to know and be familiar with our state because we have a logistics center in South America here in our state. And I can guarantee to you that Copel is a great investment if you wish to invest to the stock exchange. And above all, it is a Paraná company that does a fantastic job in energy. Congratulations, Daniel Pimentel Slaviero and all the members of the executive committee and everybody involved in the success.

Hello, everybody. I'm Bruno Laskowsky from the BNDES, and I would like to thank you for the opportunity, for the invitation to be here at the Copel Day in order to thank Daniel Slaviero and Marcel Malczewski. And some of you know that our participation dates back to the '90s with a very strong action in the company. And now in 2020, it was BRL 46 billion in divestments. And we understand that the company is already mature and that the company was ready to follow its path without the presence of the BNDES. And this is the case specifically of Copel. Of course, in the last few years, there has been a great improvement in the levels of governance of Copel and the operating efficiency and focus on the client and with the whole series of actions more recently with Daniel and Marcel in the sense of improving governance. And it is important to say that the company plays a game that is dominated mostly by private companies. And clearly, it has a very big value to be unleashed in this competition and that the company is delivering. So the unitization of the company should be talked about. And the new committee, the Minority Committee, the Innovation Committee and so many actions and migration to Level 2, this is a concrete perspective. And all these elements converge towards an unleashing of business value and a better governance and a better efficiency in capital allocation as well and an important benefit for new investors and new shareholders of the company. Once again, I would like to thank you very much for the opportunity and say that the BNDES is ready to cooperate. And we wish you an excellent day here during the Copel Day.

Thank you very much, Governor Bruno. And I would like to mention one thing that Bruno said when they -- he recognizes the degree of maturity and the current management of Copel and that the exit of the BNDES from the company's capital is a wonderful thing in order to unleash all the possibilities. And I would like now to invite Marcel, our Chairman.

Good morning.

Tell us a little bit about the Board's view and your personal view about the current moment of Copel.

Good morning, everybody. I thank you very much for your participation in the Copel Day 2021, and I would like to highlight one important point in a talk that I had with the majority shareholder. He reinforced the independence and the qualification of the members and the technical management of the Board of the company. On my side, it has been very gratifying to chair this Board, which is so experienced. We have members from many states of Brazil. Some are young. Others have been in the area for many years. And we are one of the Brazilian companies with the highest number of women in the Board. From the 9 members, 3 are women. 2 years ago, I was invited to be Chairman of Copel Board. And I tried to understand the moment of the company, who the members of the Board would be, the degree of independence that the Board would have in order to be able to work and what the product was coming from technology and innovation. And always driven by challenges, I accepted the mission to help Daniel to take ahead the biggest company in Paraná, state-owned company by means of a model of private company, promoting significant changes and aiming at efficiency gains and good invest and promoting the growth of Copel, a better Copel for the community, that is to say, our clients, for our employees and, most of all, for our shareholders. And this Board has been very active in the construction of a vision of the future and in the definition of the company's strategic plan. And the experience of our Board members, the diversity of their competencies and the broadness of their professional track record are strong points for Copel. And these characteristics were even more clear in a year such as 2020 in which the Board had to act very intensively. Since the beginning of the pandemic, our main function is to be the guardians of the corporate governance, the guardians of the best practices in management and the impeccable execution of our business plan. And we are giving special attention to the discipline in capital allocation so that funds from our shareholders may be invested adequately and may bring the expected returns. ESG in people terms are also a top priority in our agenda. I see in the company management a technical management, a competent one and totally committed to the creation of a culture of excellence and high performance. And the results delivered make it very clear that we are on the right track. The company is on the move, and the basic work done by this management has been solidified very quickly. And we see the future perspectives of Copel with huge enthusiasm. 2021 marks the beginning of a new cycle of realizations in which we will be seeking higher and higher levels of performance, of governance, innovation and sustainability. Once again, thank you so much for your participation, and we wish you a very good event.

Marcel, it's a great privilege for us to have you leading the Board. And as you said, our Board is very heterogenous. 1/3 is already made up by women. And I like what you said as the role of the Board and the guardian of governance mainly in a critical moment such as we have been living. And we have been practically weekly meetings with contingency plans with you. Thank you so much. To start this panel, we have prepared a video that tells a little bit of our history and the main achievements in the last couple of years. [Presentation]

I'm so proud. I'm so proud of our history and our turnaround. And what really motivates us is to think about the future and what we can do in order to bring benefits to this company, to all stakeholders. And we're living in a moment of a lot of diversity (sic) [ adversity ] in this pandemic. Unfortunately, yesterday, we've reached over 3,000 people dead in 24 hours. Paraná is really grieving. We have lost people at Copel, and my own grandmother died because of COVID. And we are solidary with all of you who have gone through this big suffering because of this horrible pandemic. But even with all this adversity, we made consistent strides, and we will continue like that. And I can say this with a lot of confidence because Copel has many competitive advantages, and I will be mentioning 4 of them. We are an integrated company. As you can see, our capacity of generation, distribution, the fourth biggest in the country, 4.7 million clients, over 5,300 kilometer of transmission, over 12,000 gigawatts sold in 2020. And this gives us the muscle to compete in the market. And secondly, our base is Paraná. But from Paraná, we go to 10 other states. But as we saw during the Governor's video, Paraná has a diversified economy. And the development, the Human Development Index is higher than the average of Brazil. And we have -- we are among the 6 companies that has less losses in our area. And our team is in constant evolution. We will be talking about that in the panel with Ana Letícia and how we are transforming the company that has to go through every single employee of ours. Independent management. This was mentioned by our Chairman, but I would like to emphasize is that our Executive Board is from the market with a technical profile, those who came from outside the company and those who have grown in-house. And this is what makes our environment so rich and so productive. These have been our anchors for growth. But the big question is the following: what's next? So what? What are we going to do with our -- the value-generating drivers for the future? And this is what we are focusing on here. The first one is governance. We will never be tired of saying that governance is the basis of everything, and the reform of our bylaws recently approved is a major stride in this direction. Second, the legacy. We are here to carry out structural changes, changes that will remain when this management is no longer here. After all, the major objective is to have a perennial company, is the perennity of the company. And we can see on the slide some of these changes that have been mentioned by Bruno already. But I would like to highlight one of them, the full application of the tariff readjustment. This will no longer be debatable inside Copel. Cost reduction and efficiency. This is a permanent agenda in the company. In the last 3 years, there was a reduction of almost 20% in our head count in December. In the last PDI, 480 enrolled. And because it is a state-owned company, a mixed economy company, these are all voluntary. So this is a voluntary redundancy program. And another very important point is that we restructured our whole internal projects so that the execution is always on time, on budget of all the projects. This is nonnegotiable. The projects have to be as they are in the business plan, on time and on budget. So we are going to talk about this later with -- in the panel with our fully owned subsidiaries. Our business is energy. And this photo, we are very proud of that because it was on November 9. We were there at B3 in the auction divesting from Copel Telecom and the first privatization of Paraná in over 20 years and with a goodwill -- or a premium of over BRL 1 billion. And this will be invested in our energy businesses. And this is when we go to the discipline in capital allocation. I consider this as the last big frontier so that we may have the full confidence of the market. Recently, we approved our investment policy. It will be the focus of a debate over this morning with Cassio and with Moura. But I would like to guarantee to all of you that everything is a part of a strategic plan, a bigger plan, improvement in governance, ESG, dividend policy and rigor in capital allocation. I would like to say that we want to generate value for our shareholders, for all stakeholders, and we know exactly our responsibility. A company the size of Copel, the responsibility is with the society and the communities where we operate, with the environment. And we are fully aware of the role that a company of this size has with Paraná, with the electricity sector and the whole of Brazil. Thank you very much. And now continuing our panel, I would like to invite our CFO, Adriano Moura. Adriano, good morning. You stay there. I stay here. But let's talk about the financials in our vision of the future.

Thank you very much, Daniel. Good morning, everybody. Thank you very much for participating in this very special day, our Copel Day. And we are really very pleased and motivated for being able to share this unprecedented moment of our company, where we are making great strides in many important strategic aspects that Daniel has referred to. And this is a very positive agenda. Besides adding value for our shareholders, it further reinforces the role played by Copel with the electricity sector of Brazil. Well, I would like to start by saying that we are very proud with the historic results of 2020 that were published last week. And besides the record net income of almost BRL 4 billion and EBITDA higher than BRL 5.5 billion, our operating cash generation exceeded BRL 5 billion. I would like to highlight the fact that Copel today is more solid financially than ever with cash higher than BRL 3.5 billion. But on the other hand, this liquidity really brings about a new challenge, which is to optimize the Copel capital structure. This has been a very much debated subject last year. And it was only after a very clear definition of the adequate capital structure that we could advance in many other future definitions such as, for instance, what is the level of investment that we want, what are the returns that we are aiming at, cost of capital, very important sources of financing and also remuneration for our shareholders. And we made a very important step here. We are very much focused on increasing the competitiveness of Copel under all aspects. And certainly, we will be delivering more value for our shareholders. And here, just to give you an idea, we follow a very robust methodology that considered regulatory aspects, research from investment analysts and benchmarking of companies in the sector. And the result was very good, and it gave us a north in terms of the adequate leverage when we recently disclosed, at the beginning of this year, the limit of 2.7. Besides being a cap, it also becomes a target. And from the financial viewpoint, I would like to say that this reference of 2.7 is very comfortable, considering mainly the characteristics or the stability of cash generation of Copel. And then the next question that comes to mind is how are we going to get there? It's a journey from 1.3 to 2.7. So the very objective answer is that the journey has already begun. We already have 2 main tools. One is the new dividend policy that was approved earlier this year, the investment policy that was just approved. And I was speaking a little bit about the dividend payout policy, which you could see from the video. This new policy has been fully applied based on the results of 2020 with a payout of 65% of the profits from the year. So this will be the highest-ever-paid dividend paid to our shareholders, BRL 2.5 billion and yield of over 13%. And this slide shows some of the financial standards defined by this policy updated in 2020 like the leverage level, which is below 1.5; net income, BRL 3.9 billion or over BRL 3.9 billion; the available cash flow, which is the generation of operating cash, less investments in the year. In 2020, that was close to BRL 3.5 billion. And I would say that all of that, in addition to further governance, transparency and predictability of this policy, so all of the standards that have been defined, they preserve the strategic and financial scope of Copel. So within a more normal leverage range, the policy establishes that from above 1.5 up to 2.7, the payout will be constant of 50% of net income. And also, we apply the limit or the ceiling of the available cash flow, which is another way to preserve or to give some more room for good investment. That's what we want, to be consistent in delivering our results. And by the same token, we also want to be consistent in the remuneration paid out to our shareholders. Now based on this criteria, and when we talk about a potential leverage, and if we just do some exercise to look at what happened in 2020 based on the results of 2020, if you look at 2.7 leverage, we would still have some BRL 7 billion of possible leverage that could be distributed between CapEx and investments. Meaning that considering all of the already-stated investments of 2020 of BRL 2.5 billion, we would still have something around BRL 4.5 billion that could be allocated to new projects. It's also important to highlight that we are talking about an additional leverage, once considering that the 1.3 at the end of 2020 already includes all of the approved investments that totaled BRL 1.9 billion in 2020, especially with distribution. I mean, this is not a guidance, let me just be clear. This is just a reference based on the results posted in 2020. Another topic that I would like to talk about, and this is something that we are monitoring very closely at Copel, is the potential valuation of Copel shares. Now if we look at this and looking at some of the market parameters, we can notice the distance between Copel's value when compared to its peers. Starting here with the equity value per share. Copel is one of the few companies where the value of the shares is below that equity value per share. Another parameter are the multiples. The multiples are also much lower, and there are some significant differences. I mean, the market consensus concerning dividend yield for 2021, which is estimated today at 8.4%, in this case, we are way above our peers. All of these information are based on market consensus. And just to conclude here, I draw another comparison that I would like to share with you. And in this case, I'm referring to the summation of Copel's businesses based on the multiples of each business. As you can tell, we still have great potential to increase our valuation. I mean, all in all, this is a subject that we will continue to monitor very closely. And our role is to continue helping the market to grasp all of these strategic values. And mainly, it's important that we tell you what we have in mind for the future. And just to conclude my remarks, I would just like to remind you of our UNITs program. We already initiated a conversion window last March 22 that we will be available on B3 and Madrid [ write-backs ] and in the New York exchange. In our last Board meeting, we made an endorsement of 60% of free float, including all shares, except the shares from the controllers. Well, thank you so much for joining us, and I hope you enjoy the rest of our event. Thank you very much.

Well, Moura, you talked about a lot of important things. We will soon get into our Q&A session. But can we revisit our one before last slide? Okay. Just one more. This one, please. Let's look at this once again. In all metrics, we see an enormous potential to increase the value of our shares, one that has VPA or an equity value per share which is high. If we compare EV versus EBITDA, comparing with distributors and G&T, we are also below the peers in the industry. And dividend yield, we really exceed. The estimate is 8.4% for 2021. So the outlook is -- it's very positive, and we see a great potential to increase the valuation of our shares. Yes, we do believe in the potential of our shares. And it's very important that right now, the market understands our strategy, especially if we talk about the future so that we can close that gap.

All right. So let's get your questions. Please send your questions via the chat box. We already have our first question. And then I don't know whether the question is for me or for you, but the first question is addressed to Moura. "You announced dividends of BRL 2.5 billion, the highest payout in our history. When will this amount be paid to our shareholders?"

We already announced the first part of it, BRL 1.250 million, and the remaining amount will be discussed and approved by the Board by the end of April.

We just got another question. "How about capital structure, Moura?" As you said, it's 1.3. 2.7 is our goal and ceiling, but this will be built up with time. I mean, there won't be any hiccups. We will do that gradually just to give a good horizon to our shareholders.

We are not -- we do not intend to engage in a short-term journey, meaning that we do not intend to reach that 2.7 next year. We will have to combine our dividend policy and our investment policy, and these are mid- to long-term strategy. But it's important that we give stability to our shareholders with good visibility.

I have another question. [ Andrea ] -- well, [ Andrea ] from [ Eaton ]. "According to Marcel, Copel is focusing on efficiency gains, approaching a strategy from a private company. So if this is the case, why do you insist in being a state-owned company?" It doesn't matter whether the company is a state-owned or a private company. What we need is to have a very efficient company and a company that generate results. And in fact, it's not in our agenda to engage in a privatization process in the short or mid-range. We are moving forward with efficiency, and we know that there are a few things that are difficult to overcome like the bidding process and hiring people, which is very peculiar to a state-owned company. But we are showing that with 16.2% efficiency and regulatory EBITDA and with all of our results, we are just showing you that it is possible to be an efficient company despite the fact that we are a state-owned company. Another question. "Moura, we are here constantly seeking to optimize our numbers. You talked about BRL 6.9 million (sic) [ BRL 6.9 billion ]. Could you elaborate further what is part of that? And what is the future potential? I know you already talked about it, but it's also nice to clarify."

Well, that number is based on our 2020 results. As part of that ceiling of 2.7 -- from 1.3 to 2.7, you still have BRL 7 billion left. Considering that we already declared BRL 2.5 billion in dividends, we would still have BRL 4.5 billion. Again, this is just a hypothetical potential because we are talking about the results of 2020. And even because if we are to do any investment that can generate more EBITDA in the future, this amount could even be higher. So this is just a reference figure. But let me be clear that even though we already applied our investment policy in 2020, we still have enough room for further investments.

Perfect. Another question, "The BNDES representative says that they intend to sell their stake at Copel. And when will that offering be?" I mean in the video, we already stated that. And publicly, Leonardo Cabral already said that Copel is engaged in this process. It's part of our priorities. We already hire [ Lider ] bank from the union. And so they intend to do that by the end of this year's first quarter. We will just give them all the necessary support. And as it has been mentioned before, and I myself already said that, this is one of the major potentials that will help us unleash further value for the company. But that particular window of the month, we don't know that yet. We don't have that official information on the part of BNDES yet. Another question more, Moura. Marcelo Goncalves from Versa Asset: "How are you looking at the conversion of Foz do Areia?"

Well, this is a subject that we will talk about extensively today. But let me just jump the gun right now since we got the question. Marcelo, this is part of our strategic plan. And with the decree that allows to renew that for another 30 years, this undoubtedly is the best strategy. But the question is when we would do it. It was supposed to be at the end of this year. But with GSF of BRL 1.3 billion, I mean, these are the estimates according to Copel's calculation of BRL 1.3 billion, when we extend the concession for another year, the idea is that we will use the entire track and probably extend it for another year or something close to that. But there is no doubt about the strategy of pursuing that approach because then you avoid competition. And even though you may lose control, you renew that initiative, and you ensure that for another 30 years.

This question led me to another important question that was mentioned during our earnings release call. "GSF's initiative is BRL 1.3 billion. So why is it that Copel didn't post that number in 2020 and it will now post it in 2021? And when will that happen?"

As you said, this is a relevant amount, BRL 1.3 billion, and we show that in our P&L. Copel's decision was to wait for ANEEL's certification. The process is way ahead, is in progress, and we do believe that this will be recognized in the first half of the year or maybe in the first or second quarter. But ANEEL's certification will be the trigger, will be the new fact that will allow us to post that in our P&L.

Another question, Moura. Pedro Luiz from GS, from Goldman Sachs: "How can we ensure that the company's progress will be long lasting? And how can you ensure that the culture of the company will remain at current levels?" The issue is I think that when we talked about the legacy, Pedro, this is a challenge that changes, should last for many years, even when this management is no longer here. But we are very certain about the process and the strategy. First of all, I talked about the tariff adjustment, and this will no longer be an issue because it cannot be modified or even removed from Copel's bylaws without the votes of the preferred shareholders. And the second point is migration to Level 2 is that condition to the settlement from the state government. I mean, this is here to stay. In terms of governance advances with the introduction of the Minority Committee, all of these things are here to stay. Now in terms of the culture, what we are now doing is developing a very robust process that involves meritocracy, short-term incentives, and all of that will be elaborated further here. And the turnaround in terms of payout started back in 2016. And the efficiency now is plus 16%. First of all, it goes beyond this current administration because it comes from the past. And secondly, as it becomes a full part of our culture, it also permeates our culture and our bylaws. All of these changes are here to stay, and they will, and they are already part of our culture. There is another good question from Carol Carneiro from Crédit Suisse. "First question, do you see the possibility of paying quarterly or half year dividend payout now that you reviewed your policy? Among all of the other measures to be deployed, can you update the calendar for the next coming events like new bylaws, offerings, et cetera?"

Well, I can answer your first question. I can say that in our policies, we define 2 events a year. We are still evaluating the best date, but the idea is to disclose to the market what these 2 events will be very soon. And so then after 2022, the events will just follow the calendar according to the new guidelines. Well, it's almost ready to be released.

Well, we received several questions about renewable energy, distributed generation, but I will leave these questions to our next panel. But Moura, as we are distributing dividends twice a year at least, we just want to generate some obvious expectations. With that BRL 1.3 billion, plus the result of our operating performance, I think we should expect some very good results in the second quarter. And possibly in the second half of the year, according to our policy, following some very technical criteria, we will probably distribute an additional payout. Well, thank you so much. I will just ask you now to leave, but you will soon come back. Well, we will now conclude the first panel. And with no further ado, we now jump to the second panel on capital allocation.

And all of that, I was saying, the last large frontier, which is capital allocation, will be elaborated by Cassio. Well, Cassio, you noticed that we had a lot of questions about our investment strategy, et cetera. So we put those questions on hold so that you can answer them. But now tell us a bit more about our future strategy. It's very good to know that we have so many questions. So this conversation will be very good.

First of all, good morning. A very special good morning to all of those joining us today. So we are here talking about this new Copel for the new times. How can we build them based on a very strong on discipline of capital allocation? As Daniel was saying, Copel is one of the largest integrated companies in the energy market in Brazil. And this is our mission, to grow as an integrated company. As a concrete measure to pursue that strategy, we initiated our portfolio reorganization, and this has contributed to one of the lowest leverage rates posted by the company, below 1.5. And this really increases our responsibility to correctly invest our proceeds to invest -- to generate more value to our shareholders and to perpetuate our sustainable growth. We -- to that end, we drew up an investment policy. So based on market assumptions, we put together a diagram like this with minimum criteria for every business. So we detail every business. As you can see from here, in the transmission business, we prefer businesses with a RAP higher than BRL 100 million. And this favors the creation of synergies, and I'm referring to the annual permitted revenue. And this is the APR that we want. In hydroelectric plants, we favor projects with more than 100 megawatts; in photovoltaic, the same thing. As of 100 mega, we favor the creation of new clusters because we can make better use of synergies. With wind farms, the only thing that distinguish them is the minimum size, 150 megawatts. What is common between all of them are the qualifying criteria. So let's look at the development stage. In a moment, when you have to recompose your EBITDA, we look for operating profitable businesses, and that's why we have analyzed brownfields. These are our preferred areas. And the next criteria is location. With a national footprint Copel has the opportunity of getting synergies in different states and businesses. And this is a differential factor for the company, Paraná and Rio Grande do Norte are some of the largest areas for Copel. And number three, the third criteria is the size of the business. There is a minimum size for each businesses and that's why new clusters can be created in addition to those in Paraná and Rio Grande do Norte once we comply with the minimum size. And last but not least, we have to look at the capital structure. Right now, we try to have capital control and the control assets. So the this will allow us to control the investment. Partners and partnerships are always welcome as long as they have some strategic -- they add something strategically to our business. This has been applied to some of the latest investments of Copel. One example is Copel Telecom, when we talk about divestment. And what about investments? We already have way advanced projects that follow these guidelines. And in due time, we will tell you more about these negotiations. Now this slide talks a bit more about the approval that happened in March, and that refers to a new advisory committee, which is our Committee for Investment and Innovation. This collegiate consists of members of the Board, and it is supposed to ensure more stringent requirements when we talk about capital allocation. The Investment Innovation Committee rules on 3 investment areas: operating investments, strategic investments and investments in innovation. So let me elaborate in each one of those areas. So whenever we talk about operating investments, what are we talking about? These are investments related to the continuity of the business, the preservation and expansion through improvements in transmission lines and generation assets. One highlight for operating business is our distributor, Copel Dis. Not only it is recognized as company that renders the best service in Brazil, but it's also a regulated business with a well-defined return rate. It's a long-term concession and in a state that is fully developed, especially because of agribusiness. 100% of our investments were very prudent, very low delinquency level and it's operating above the regulatory EBITDA, which is really -- which is really good news. Now let me talk about strategic investments. And what am I talking about here? I'm talking about new businesses and our priorities are also very clear, as you can tell from the diagram. But our listed priorities are brownfields, renewable assets and the highlight goes to solar and wind farms, and they have to have synergies to our footprint. We prefer brownfields, but we still look at greenfields. Greenfields will be analyzed and they are being analyzed, according to ANEEL regulated auctions and also other opportunities related to PPAs from Copel Mercado Livre. The third area is innovation. And last but not least, right? In the next coming months, we will launch our open innovation program at Copel. And what is the intention of that program? We want to put our innovation site closer to start-ups. Yesterday, we concluded a very important selection approach with an advisory board that will allow us to move forward. We already have a dedicated budget for this area. Now a more concrete piece of news and interesting news is that the pitch day with the start-ups, it's already scheduled for September. But it's also important to highlight that all of these new businesses at Copel not only we have competent analysis from our internal team, we also have the assistance of some external teams, and this ensures that our analysis are updated and compliant to all of the highest competitive standards. All of the things that were shown here earlier they will be coordinated by our Committee for Investments and Innovation. And certainly, we know that all of our businesses in all subsidiaries and also at the holding, they will have to comply with a single criteria for innovation and results monitoring. So I think there is a question that will certainly come up, and it's important that the audience also think about it. What are the references in terms of rates of return for these businesses? How big is the company's appetite?

Well, 2 excellent questions, Cassio. And I would ask you just to take one step back so that we can call Moura back to our panel. But also, you said something quite important that we will explore in our Q&A session, which is our intention of having control, also operational control of all of our investments. So I want you to elaborate further on that soon. Well, excellent question. I mean the ball is in the field. What is the expectation of a minimum return rate? I know that you cannot give us details because it's a very strategic subject. But maybe you can give us a general all idea?

Cassio, congratulations for that initiative. The purpose here is not to talk about the concept or maybe to talk more about the concept than the rates itself. This will be a more strategic debate. But the idea is not to give you details and numbers. But I would say that we restructure all of our governance and methodology related to these rates, including also assumptions from independent and external sources and reliable sources, also regulatory references, benchmark with companies from the industry, opinion from market analysts and also recent M&A transactions in addition to contributions coming from financial institutions. And a good point of reference, as you can tell from this slide, is the distribution WACC that now came to 4.02. Now you see the generation projects. They tend to be slightly above that rate, in the case of transmission, slightly below. There is a regular updating process depending on changes in the assumptions, and this is quite important if we want to stick to the current macroeconomic moment. And finally, I mean this is the basic grade, but we also define a spread, and this will depend on the characteristics of each business. But there is a very robust process to define these return rates that at the end, are submitted to the Investment Committee. And also, they are submitted to our Board.

Excellent, Moura. I think this is very clear. And this really resonates with what Cassio just said. He talked about clusters and whether there are synergies or not, looking for bigger assets. Now we saw with the transmission on the transmission side, there was a goodwill. There was a huge goodwill. So it was not competitive for companies of Copel's size. And then whether it's brownfield or greenfield, all of that is part of our strategy to be analyzed by our Committee for Investment and Innovation. As Cassio was saying, they will have a lot of work ahead of them.

So now let's open for questions from the audience. And Cassio, if you could talk about the assets where we want to have a majority stake and the balance sheet and that we are open for partnerships. And then if the audience has any interest, they can post their questions via chat.

As Daniel was saying, and I made it clear, it's very important to us to consolidate. To consolidate our P&L, we have to have a majority stake and operating control. This is the basic assumption. When I say the partnerships are welcome, certainly, if they can have -- they can add strategically to Copel, they will happen. And when do you think that this will happen? A good example is what has been happening with the financial restructuring that we've been promoting. Structuring with BP or more creative structures. They are all some things that are interesting in terms of partnerships. And when we think about a technology that Copel does not master or something where we are not just there, we also analyze the possibility of a partnership. So partnerships are packaged like that. The second point of that answer is about what projects are in progress at the moment in our pipeline. When we look at brownfields, I think the entire market knows because this is a governance practice, the projects are protected by NDAs. And Daniel, what I can say is that our team is working diligently in this priority. And my team's workload is 80% to 85%. So what can I say about the auctions? And you said it yourself, you mentioned the result of our last transmission auction. We have projects for all auctions, the main auctions that will happen this year. So we have projects where we will try to make them feasible, especially regarding the transmission auction, which is auction to -- for transmission from ANEEL because there is a lot of -- they have a lot of synergies with us. They have assets in Paraná, you already started the studies.

So everybody is working quite hard, right?

Yes. 24/7, and I really mean it.

And there is another question, Cassio. We have already answered one in the previous panel, but what about the privatization of the Compagas, okay? So maybe you could talk a little bit about that?

The privatization of Compagas has an interesting characteristic. We have just carried out a similar process with different areas, of course. But they are similar. And the team heading the -- well, the team is exactly the one that really took ahead the process of Copel Telecom. So we have been mapping all the important phases in our flow chart in order to have a process as successful as Copel Telecom and more objectively now. We have mapped in a flow chart up to 210 days after the renewal of the concession. The renewal of the concession is based on the regulator. But it might happen still within 2021.

We have 2 questions here in the pipeline, one for Moura [indiscernible]. The business mix of GeT and the participation in the results, do have an ideal composition between this and GeT and...

Well, there is no magic formula. GeT has always been our main business, and this was more -- was less relevant. And fortunately, it is occupying a more relevant space, so to say, almost 30% of our results. And I would say that this is a combination that will continue. Maybe GeT will be a little bit more, considering the potential for new investments. But what really matters, it's not this, but the profitability of each one of the businesses. Provided we have a good profitability, it doesn't matter if it is 60-40 or whatever. What really matters is profitability. This is the keyword. And we are on the right track.

From Marcelo Sá from Itaú. You said that you intend to grow more in renewables. Is there a big asset that you are considering buying?

Yes. Marcelo is right to ask the question. What can I tell you? In brownfield, as I said before, our workload is 80%, 85% of our team working on this. Yes, there are projects that we are working on, and we are protected by NDAs, and what I can tell you more specifically about greenfield is that we have been seeking to develop mixed project. That is to say, wind and solar, based on our wind footprint. So Copel has a timid participation in solar in photovoltaic, and this year, we opened a project of 5 mega in [indiscernible]. And after testing and operating the asset, we want to go further. And one priority for our team is that we might use our wind footprint so that we may have mixed energy plant.

Perfect. And adding to what you said, you are working 80% at 85% on that. And we have been participating and talking. We participated in investment in [indiscernible] Petrobras, but we lost. But our governance proved to be very sound. And in the auctions, we participated in a small lot with a big synergy, and there was a discount of 46% of RAP, similar to the average of the private companies and with a lot of discipline. So we have another question here. In 2010, Copel was leaving a situation very similar to the one today with a low leverage and it was not as prudent in terms of investments. And how can you guarantee that this will not repeat itself? And I would like to answer this because I think this is very important, and I really want to answer this myself. What happens is the following. One of the most important jobs that we do here is to look at what happened and avoid repeating mistakes. And we are looking at low leverage and capital structure and taking measures that may ensure discipline in capital allocation. The first one in 2010, this is -- this didn't happen because it was the dividend policy in place that think of growing at any cost. And we want to have a balance between dividends. And if we have no projects, so the percentage of the dividend go up, according to our policy, and the possibility of extraordinary dividends. And the second is the following. Of course, we are interested in growing, and this is why we are here today, and this is what Cassio does all the time and the committee does all the time. And we have been evolving in the structuring of this policy with the committee, approval by the Board, and this gives us a very strong ecosystem, so to say, of governance so that we may only do businesses that may add value for the company and may bring synergy and may bring value for our shareholders as well. [ Camilla Meyer. ] The brownfield, are they only wind? Or are you evaluating solar? Cassio, could you answer and could you tell them about us and solar?

Daniel, in the brownfield, we evaluate everything that was detailed in the matrixes that you saw on the slide. Our most important focus is solar and wind. However, we already have a very clear mapping. Let's say we have the opportunity to invest in a very good electrical one. We will analyze it. If there is a transmission line that really has all these conditions, we will consider it as well. Solar, in fact, is a frontier where we must make greater strides and Daniel, Camilla, these solar assets are among our priorities and our analysis.

Very good. Pedro from Goldman. Moura talked about the minimum return. What about the difference in the rate in subsectors? And greenfield and brownfield, how do you gauge this spread?

The gauging of the spread will depend on the stage of the project. And what we want to define is the minimum WACC of this, for instance, which will certainly be added to the spread so that we may close the deal. So there is a whole combination of factors, in fact, and that we use in order to define these return rates. But never less than the reference rate in this and a little bit more in generation and transmission a little bit less. This is the idea. Yes, and I would like to remind you that in the greenfield that you have the risk of construction. Of course, the spread will have to be bigger. And it's only natural. Although we restructured the process, it's only natural that the spread may be higher. Well, the important thing is to generate value for the company and for all shareholders.

And Marcelo Sá from Itaú, last question. The controlling shareholder conditioned. For the state in order to sell their stake, the price would have to be higher than the book value. The price of Copel's shares are close to the book value. And the government of Paraná will make the decision when the BNDES decides? Or when will this be done? I want to answer this myself, Marcelo. This is one of the most important points. And this has been generating a lot of questions from investors and analysts and the Secretary of the State of Paraná said they don't want to use the whole surplus of 58%. They do not want to use all the surplus for 2 reasons. First, because they believe that there will be an appreciation of the company, and they want to leave some room so that Copel may the way follow on a primary, and I think this is a very good sign. And this will happen at the end of the unit window. When the government converts, it will be clear. They said it wouldn't be more than 50%, okay? This is the first point. And the second point, whether they're going to sell everything or not and -- from this amount that they will be converting, which will be in mid-April. I think this is very much linked to the BNDES strategy. Their stake is very big. They have been evaluating this together with the banks of the syndicate. Whether they are going to do everything at once, whether it will be by blocks and one block for some time, this is not known by us, but we believe that the state will follow a strategy more or less defined by the BNDES. And the BNDES is the ones that really commenced this. And I would like to remind you that Eletrobras also has a very small percentage, BRL 100 million. The value is small, but they also requested the same. So the BNDES is the captain of the boat, so to say. So there will be a first moment in the conversion. And the second one, having to do with the size of the lot or the block that the BNDES might do. I would like to thank my colleagues, both Cassio and Moura. There are some other questions, but we will be addressing them afterwards by e-mail, by chat. But with that, we come to the end of this block. Thank you very much, Cassio and Moura. And we have come to the end of our second panel. We will have a very fast break, 5-minute break. I don't know what time it is now. But in 5 minutes, we will come back. 43? 6 minutes. In 6 minutes, we will be coming back, so that we may follow our agenda and our schedule. Stay with us and the next panel is super important, and we treat it very seriously, which is ESG and people, and we would like to announce some news to the market. So in six minutes, we will return. Thank you very much. [Break]

And we are going to talk about ESG and people, and this is a very serious matter here at Copel. And for many years, not today only. So we have an exclusive panel to talk about ESG, not only the environment but also social and governance and then people. I would like to invite our Governance, Risk and Compliance Officer, Vicente Loiácono.

Good morning, Daniel.

We prepared a video, just to tell you what we were going to talk about. And then Vicente will come back. We apologize. Now we are going toward the video, okay? [Presentation]

Okay. Now we are on track. So Vicente?

Thank you very much, Daniel. Good morning, everybody. And the video has just shown that we are pioneers in good practices. We are recognized as an ethical and responsible company [indiscernible] supporting and monitoring our practices so that they may be safe and sustainable, with high standards of health, safety, respect to the environment and corporate social responsibility. And I would like to highlight one substantial change here that places us on the next level in relation to our commitment to fight climate problems. We approved our carbon-neutrality plan, and it aims at neutralizing greenhouse gas emissions up to -- or by 2030. And with the definition of goals based on science, this neutralization will occur with the reduction of emissions of greenhouse gases and the compensation of residual emissions for the assets where Copel has operational control in order to contribute to the commitments established in The Paris Agreement. And besides the reduction of greenhouse gas emission, the plan provides for studies related to the opportunity of sale of the RACs -- the renewable energy certificates, RECs. We are also advancing in the metrics or the risk metrics related to the climate with the participation in the TCFD. All this will be part of the scope of the work done by the Sustainable Development Committee that will attract the goals and the operationalization of our neutrality plan. Here at Copel, sustainability is part of our culture and part of our business strategy as well. And Daniel, I would like to announce now another milestone of our firm commitment in this matter. One of the indicators of our variable compensation program for our executives and managers of Copel already now in 2022 will be linked to social environmental goals. So this is our commitment materializing, and I would like to mention, before I close, our integrity program, which is structured according to the highest excellency standards in terms of corporate good practices in Brazil. We have evolved and focused on risk management and internal control processes. I would like to highlight that our integrity program of Copel is based on the five pillars, as you can see on the slide. We are on the right track, and we are very proud with the results that we are reaping, obtaining the Pro-Ética seal given by the General Controller's office of the federal government, is evidence of our excellent performance. Another example was the state governance program of B3, where we got the maximum score. And I would like to remind you that our slogan is to do right is in our DNA, and this is why I say integrity is nonnegotiable. Thank you very much, Daniel.

Well, very important. The carbon neutrality program was approved by our Board last week. And today, you are bringing this news this information that our short-term incentives will be based on climate targets and coordinating all that, we will have this Committee of Sustainable Development, which is established in our bylaws. These are the best references in governance. So I think Copel is really getting among the best in the sector. So much so that BlackRock, which is a very well-known fund. Every year it publishes an annual letter, and this is being incorporated by many managers among the banks. And yesterday, we communicated to the market this. And he increased their stake by 17% of the company. So I think this is a very good evidence. And this is the third largest shareholder after the government of Paraná and the BNDES. And they only invest based on very strict criteria. They only invest in these companies that are as serious as we are, and I'm very happy, we are very pleased with the process. Vicente, now I'll ask you to give a step back but continue here with us. Now I would like to call Ana Letícia, our management officer. Ana, we want to talk about people. We are talking about turnaround, transformation, revisiting our business, but changes cannot occur without people or without leaders. So I would like you to talk a little bit about that and tell us how we are dealing with that subject at Copel.

Thank you, Daniel. Good morning to all of you. Good morning to those joining us today, and this is a very good opportunity. Daniel talked about Copel of the future, and at this Copel, people are in the core of our changes. To move forward in order to sustain the growth strategies of our business, we work diligently in digital transformation, focusing on results and innovation. And in order to reach that goal, we work with 3 major pillars. The main one is meritocracy. So after we introduced variable compensation, which was a big accomplishment for Copel, as you saw in the video, we continue to change all of the people management tools. We are integrating model's performance with remuneration. And also mobility tools and the development of competencies and succession they are all part of our new approach, and this is something very new in the 66 years of our history. With all of these actions, we elevated our competitiveness standards. We are totally engaged to reach the goals set forth by the company. And the second pillar, digital transformation. The focus is on new technology tools. And the pandemic added a new challenge to companies all over the globe. How can we continue to produce since we are all distant from one another? About 4,000 employees are now working from home. So the digital workplace has become a reality that works. We are gaining agility and efficiency, using powerful tools with artificial intelligence and robots to digitalize our processes. With that, talent development has gained momentum. And in this entire process, we made a symbolic decision or even more symbolic in 2021, Copel's headquarters will change. The historical building occupied by Copel for over 50 years will be sold. And we, from the executive team, will join more than 1,500 employees. And this strategy to unite us will add an additional potential to our company, making us more integrated. Our environments will be fully integrated, promoting collaborative work, boosting innovation and the constant improvement of all of our processes. And even more, these new headquarters with green spaces and good environment will be even better to take care of the quality of life of people. And finally, to endorse this transformation, we are also engaging in permanent actions to develop our people and our leaders. Our collaborative university -- or our corporate university will prepare our leaders at different levels so that they will be able to lead this major transformation. And with this evolution, we will also be able to structure the succession process which is really paramount to ensure the perennity of the company. Our leaders in People Management Department will continue to work diligently towards this transformation and growth journey. Thank you very much.