Centrais Elétricas Brasileiras S.A. - Eletrobrás (EBR) CEO Wilson Ferreira Junior on Q3 2020 Results - Earnings Call Transcript
Centrais Elétricas Brasileiras S.A. - Eletrobrás (NYSE:EBR) Q3 2020 Results Earnings Conference Call November 12, 2020 12:30 PM ET
Company Participants
Wilson Ferreira Junior - CEO
Elvira Presta - Chief Financial and IR Officer
Conference Call Participants
Carolina Carneiro - Credit Suisse
Operator
Ladies and gentlemen, good afternoon, thank you for waiting. Welcome to the Earnings Call of Eletrobras for the Results regarding the Third Quarter of 2020.
We inform that all participants will only listen to the teleconference and then after we are going to start the Q&A with more instructions.
Remember that this audio file and the presentation is available in PDF at the website of Eletrobras.ri. [Operator Instructions]
Before proceeding any of the things that are said during the earnings call regarding different business prospects of the company projections, operational goals, financial goals are beliefs and prefers of the Board of Directors of Eletrobras as well as being based on information that is currently available to the company. Future considerations [Indiscernible] they involve uncertainties, that's why and they might be based on things that might not happen, other operational issues might also influence the results.
Now I would like to give the floor to the President, Wilson Ferreira Junior; Ms. Elvira Presta, Chief Director of IR of Eletrobras and Pedro Jatoba, Director of Generation. Thank you. You may proceed.
Wilson Ferreira Junior
Good afternoon everyone, thank you to the investors, the analysts and everybody that is keeping up at this filing of the earnings call of the third quarter. Good afternoon.
Now that we've done the disclaimer in this presentation because of the specificity of the results, it will be a little bit longer. I will try to be as objective as possible in such a way that we can answer all the questions.
Well, let's go to page 4, here are the operational highlights. Here is the good news. The market of energy is recovering and we are here with a daily load that is already operating above what was 2019, we have a difference in 26% and in May this was changed 11% more and this situation shows it's an important evidence of what we are doing. When we look at this in the average ticket, monthly ticket, the same thing takes place in the bottom graph. We have the green area that was very strong this year, since the beginning of the pandemic and since then, we have been operating above and here the monthly base will be 4% above the year of 2019.
So, it is a situation that shows the regaining of the economy. It's important to highlight because of the specificity of Eletrobras. On the side of PLD, we see BRL327 at the beginning of the year. A little bit before the pandemic and exactly because of that drop on the consumption and the usage, the prices on the unregulated market, that price dropped anyway to the bottom until May before we realize and now it's starting to recover. We have in September BRL100 and here in the north part, it's a volume that is very important and is actually 288. We are reporting prices per megawatt that is still lower than the average values of PLD and the effective results.
Next page 5; let's see the highlights, positive points. You can see in the third quarter, the first one is the reduction of the periodic tariffs. Reduction of tariffs. We had in the last quarter talking about RBSE here we see the payment of KA and in this semester, we have BRL819 million due to that process of the hiring asset regarding the infrastructure and the transmission agreement for the new RAP and this will also have a reassurance in the transition 91 million and remove LPs and the O&M generation in the quarters. The power plants we had a readjustment in the quarter another R$123 million rise. We have a reaction in PMSO R$60 million.
I am talking specifically about that said subcontracted 4,000 people and R$60 million, we have an advancement of the dividends anticipated by September 2020, R$2.5 billion. So the payment to the shareholders of R$2.5 billion, but it impacts the net debt of the company and because of that we have a slight growth in our leverage. The sales that we had with SPEs, we had the signed contract and we're waiting for it to be concluded for 434 and 134 million.
Next page, we have the negative results, negative highlights. First talking about the generation revenue, if you follow Eletrobras [Indiscernible] had a big share of energy and they hired with a view when we started in 2014, these contract ended last year and they had a very high value, BRL360 megawatt hour. Now changing these volumes that were hired with a price that was already above the market.
In the unregulated market, we can show the numbers in the first slide in my presentation, we have two extraordinary events that were not positive. The first was the stoppage of the power plant Angra 1 and 2 longer than necessary and that mandate a provision of R$217 million in generations of the Angra 1 and 2.
We have a problem with the power plant of Candiota 3. There is the inflexibility in that period and also an adjustment of R$52 million. Each of us with Angra 2 already working. Candiota coming back this weekend, these are extraordinary events in this third quarter. They are limited to this quarter alone.
PMSO, we have an effort for the reduction here, but its third quarter is not a good quarter to evaluate this. They are less than the expectation because first we have less investments. As we can see, we got to 90% of what we predicted, but we are capitalizing less personnel with investment, with the labor due to the non-capitalization of labor for investment lower than what was budgeted.
We had labor issues. The anticipation of the vacation because of COVID-19 more expensive in the company and we had readjustments of the ACT contracts of 3.55%. We also had due to the pandemic and we had a personnel that we hired, we did the provisioning for the people, 454 people actually are leaving the company by January 2021, but we have with an economy of R$252 million.
Now with the anticipation of the dividends and the impact in the net debt and EBITDA, there is a leverage of R$2.5 billion, the investments that were not done R$409 million due to -- and still which is a good news, we have here a quarter that was atypical in regards to provisions adjustment that we did with the compulsory loans and what we had provisioned and the contingency increased that we have because of the deficiency in our budget and the contingency, we’ve generated an increase of R$600 million in the quarter mainly in our controllership.
Page 7. Future agreement that we have, the official publication MT998, 2020, it says that CNPE does the conference work commercialization, fundamental issues that we can have the process of finishing Angra 3. Now with CNPE, we have the usage of 50 years plus 20 and the contract for supplying for 40 years. If we need for another 20, price of energy will result from studies done by BNDES, remember the R$580 in July of 2018, but we also and if you bring economic financial liability of the enterprise, the reasonability and the tariff will redeem modality and the adjustment for inflation and by the cost of nuclear fuel.
The discount reduction gain in cost of the energy will come from competition between the bidders once we adjust Q4 items, we can have a reduction in cost and then we can compete and we can have a lower value than what we updated for today. And the official publication is publishing each condition so that we can restart the work and once we have a CPA, we can finance adequately, the extraordinary assembly that we have impacting the credit. There is an increase in capital of [Indiscernible] that was approved at 1.8 billion.
Now GSF, we can see that 1.8 billion corporate that is the asset 539 million have a participation in SPEs with them being discussed, we will talk about this up ahead. And as I said, the impact of the adjustment in September payment that we had with the compulsory loans for us adjust elevated and adjusted to 1.9 times as I said LTM regarding the integration RBSE LTs that was renewed revenues. With that RBSE we have 2.8 net debt over EBITDA 2.8 times.
Page 8, evolution of our businesses. For generation and transmission and let's see the financial results. Generation on page 9.
We have anticipation 51,301 megawatt of installed capacity about 30% of the Brazilian capacity. All of our corporate installation, all of our participation in SPEs that assures more than 10,500 average megawatt physical guarantee in the power plants and another 9,000 megawatt average, which is quota of the hydroelectric and nuclear power plant.
Physical guarantee if you write everything, we have 20,000 megawatt of physical guarantees. Generated energy 23% of the installed capacity and we generated 23% almost 50,000 gigawatts hour were generated by Eletrobras.
Underwrite. We see those big transmission that I was just mentioning. We had breakdown of our participation looking at the quotas of guarantees of our hydroelectric plants plus nuclear in blue 2019 to 2020 reduced from 37% to 49%. There is the effects that we have already discussed. ACR that we had that contract that I just mentioned that was a reduction from 17 to 12 and this reduction promotes what we see in green, the growth of our participation in the unregulated market of ACL from 26% to 36%. And only 3% of the volume was not contracted.
The revenue from generation in terms of billions, 2018, we declined from 20 billion to 23 billion in the annual base from 18 to 19, we have to see the contribution of ACL, ACR and when we see here in grey it goes from 4.7 [Indiscernible] we have in the first nine months of this year. We can see on the right and it was impacted by the change in the price that’s in the unregulated market. We go from R$7.3 billion to R$5.6 billion in the nine months of 20 and the total is R$16.2 billion. This drop is well because we are considering three quarters, so 5.4 per quarter. Obviously, we should have a value of over 20 million, but over 23 billion of last year and the main reason is the fact that we haven't changed in contract that is very important. We lose important contracts in a very high value. We will make an effort to maximize the contingencies and we are trying to find better condition in the unregulated market.
Page 10, very complex explanation of what is called the periodic reduction over RBNI, the impact of RAB. It has in the cycle in this period and in fact an addition of R$441 million per year and [Indiscernible] component is the incremental effect, which is R$3.6 million. [Indiscernible] the new values of O&M benchmarking and the new installations that we have from 13 should become 18 when we look at down below we can see here in the middle in green, it gives you that variation. And RAP, a RAP of 1.34 billion it goes to R$1.5 billion, we don't have here in the contact and the total variation of RAP is 3.3, 2.5 effectively 8.8 [Indiscernible].
Total values we have sum divided in the contract of our companies checks [Indiscernible], but we also added as I showed you above. Very good second amount of value, which is the readjustments and then we will have an adjustment involving delays in the acquisition of this official norm and we have the review of the contractual assets.
Here are the contractual assets of the infrastructure [Indiscernible] for AAR of R$819 million addition in the revenue. In the building of IFRS 15, when we look at the results, we will find these two values and we understand that we completed the process in transmission and we are going to make value the addition that we have from the previous quarters. Something important for transmission, we are shown here in the work that we are doing page 11. First an increase of our availability regarding 99.96, this is the best indicator since 2015 third quarter, this is the reduction 27.3% of reductions by cutting of loans in the Eletrobras assessment. You’ll see for example, this year of order [Indiscernible] less than three years since we had a lot of blackouts that was over 1000 megawatts originating from Eletrobras. On one side, we are very robust with our procedures of operation.
Maintenance has kept the availability very high. And that is trustworthy that is very high. On the right, we have the variable installments where the penalties 1.66% and here we have the best results since 2015 as well. The variable installment once again is 1.66%. We got at the third quarter of 63.38%, this is the varied improvement so far to the company, its R$25 million less while we compare the application of penalty in the third quarter of 2020 regarding the third quarter of 2019. We have 43.9% coverage of over 70,917 transmission lines in Brasil and in Eletrobras. 64,000 are about 230 kV.
And we have here our financial performance. On the left on 13, we have the numbers and some explanations on the right. What we assume is the report on the left in IFRS, also in the first three columns and the work that we do usually which is referring values, so we can see our results. It’s about the highlights. Our growth in our gross revenue up to percent and if we place it in a box in a recurrent is dropping 4% and this is R$348 million and it's explained because of the dropped in generation R$589 million remember that contract of ACR that I just mentioned.
We have space in this period that is lower because of Santa Cruz and the operations on the short term, we have a drop in R$94 million in PLD now. The readjustment of the hydroelectric quotas there is a credit from [Indiscernible] with easy equality and better and a higher procurement of R$59 million of ACL. We can see that the value is positive, if we just talking here on the right and non-recurrent was positive R$554 million, the first one is deterrence for RAB [Indiscernible] 819 and the flexibility of Angra 1 and 2 minus current turning 16 and 3 which is minus 52 million.
So the tariff review of RBNI is only done once. So it is R$0.5 billion. When we look as the result of this demonstration and here PMSO, we can see that there is a drop as I told you of 34 million in personnel. So this is almost a 100 million and we have an addition here of R$66 million being many taxes and expenses, additional expenses in the holding because of payments, etcetera.
If we look at the operational costs has dropped and this is due to less investment, also we have less payment in our Amazonas-GT. We see the drop in usage for example, for fuel the fields that we didn't buy in Candiota and we have here for the readjustment of the -- that was readjustment of plus 58 million. Well, the result of the EBITDA is dropping 29% and dropping 18% when we do the recurrent analysis getting to R$3 billion. We see a depreciation in amortization which is regaining the investments in the company, but still very modest growth.
Financial result. Also we have a drop in minus 13% in a recurrent way, we have from -745 to -706 this is to due to the adjustment of RBFE, the big change that we had in regards to AMDMB and the cost of capital and the transmission lines, we had an impact of the exchange rate and the numbers should change in the next quarter. If we do not have the continuity that might be positive and the effects of derivatives and the contracts that we have in the electromagnet that have to do with the price of aluminum and the exchange rate and we see the reduction of the main indicators of that in Brasil. Unfortunately, we are reporting a result of R$96 million of profit output in regards in comparison to 700 million of last year, but we see that the recurrent values, we are talking about a drop of 17 million 70% getting to R$1.6 billion. So we can see a little bit of that of what happened in the comparison of the third quarter of 19 that would draw from the net revenue from 716 to 96.
Up here on the right, we have as the recurrent, we have a reduction of 19 million and then as I've talked about on the Candiota 3 and Angra 1 and 2. The recurrent we had a drop in revenue of 3.9%, R$348 million right above we have therefore plus 2.2 billion and 194 million we're going back to the bottom the 348 million is, we have lost the contracts and now we are working in the unregulated market as I've told you, we have in that period lower prices.
Given the re-growth of the economy in the future we have great expectations. We have a growth of R$185 million that happens in the OEM and the revenues for operation and maintenance and also transformation in RBFE and contractual revenue these all the transmission values, these all the transmission values are positive and there is less investment when you're comparing to the last quarter when we talk about generation. Now because of the lack of variability of some equipment being imported or by the important variation in the exchange rate for some imported products that was difficult that we see an improvement that is important. This is what I would have to talk about, our gross revenue and here just a detail in generation and this is more complex. And we need a professor actually just to cite this. But remember the tables trying to be diverted, our volumes of energy are negotiated in the regulated free and unregulated market.
In the regulated we have the quota for the nuclear and hydroelectric power and here what you see in the first line is a drop in the volume from 2041 to 2170, a variation is 22%. We have the number four not in the terminology and that impacts in dropping 17% in the revenue because of the drop in volume that was bought at a higher value in about R$352 million per megawatt and we have the two stoppages with the hydropower plant and the nuclear plants.
Now the quota for hydro head is going to have a readjustment adding R$123 million and when we look at the right in the top table, we see the effects of PLD in each of the markets, you can see the comparison that we have here in the third quarter of the last year. The value was R$200 and R$215 and when we look at the third quarter, we're talking about values that are about R$80 to R$90 per megawatt some contracts have an indexation of the values, where we have a lower volume and this is in the bilateral contracts that we have for ACL here at the bottom and if we look at the volumes of energy there is a drop of 3% up ahead and there is just an increase of 9% almost 500 megawatts on average. We are hiring a higher volume.
What we have is, what we do not use, the variations of the liquidations and drop in PLD entity will be minus R$123 million because of the dropping of the PLD. 16 just a report of PMSO, the company personal material services is contracted and other expenses in own portfolios. The third quarter, we’re e reporting 2% drop, 50 million in IFRS, currently an addition of 3% over plus 30 million due to the positive aspects are dropping in the personnel less than what we expected and we talked about this.
Materials are 8% less than less than last year. Another 5 million and there are things of OBV COVID in services drop of 97 million. Here we see the aggregate of the subcontracted contract of [Indiscernible] on the other side, we have others that was very heavy this month in the quarter actually, R$166 million in red, the 126 million of dropping the credits that are negotiating with clients and the labor cost of chefs 24 million for the donations where the campaign was COVID-19 something very important from the standpoint of our social responsibility. We take that around the installation for Eletrobras and we have 12 million of insurance at Eleticas of R$12 million.
Well, you need to see the glass half full and page 17 we see the evolution. We are still with an important reduction in PMSO, you see that the number of employees in yellow 12,487 and 16 now, close to 6,000 our cost is well, we are talking about nine months. I'm sorry, it was the numerical there was 26,000 now 12 000, the PMSO cost R$12 billion in PMSO and it dropped to R$5.8 billion. And what on the previous year, we had R$9.8 billion in costs for the PMSO. We are making this value ever lesser we have a cost of material and personnel and next year, we will have another 500 employees leaving and we will have more economies.
Now page 18 reassures benefit. We have a draft of 1.2% in the recurrent and 2% under current. Actually when we look at the energy that was bought for resale we have a[Indiscernible] and they were less exposed in the short term. We had negative results in fullness that is a reduction in R$28 million in fuel and this is getting all of our installations, a drop in the fuel because of the energy in Santa Cruz and as we've done before there is a drop in the building investment, a drop of 13.5% minus 35 million.
From here we go to page 19, more difficult issues provisions, operational provisions are important. We need to have a governance that is important for this and here the main aspect of variation is regarding the contingencies that are here highlighted. Fullness is the main one, a very important growth in regards to the previous quarter almost R$262 million in neighbor and the contingency for the compulsory loans we have R$377 million. We have aspects connected to PECLD in the perspective of Amazonas, the perspective risk regarding PECLD CPC48, we have a work that we are still developing with [Indiscernible] and the provision for annual ticket, we still need to do it and here the Amazonas distribute, so here we have the bad debt increasing in regards to last year.
We have a reduction in the provision of ANEEL, we have Onerous contracts remember the impact of Jirau [Indiscernible], we are working with the controllers in Jirau and Czech, the values for -- well we have a lot that you can see and it's a vision that we just talked about Candiota, the inflexibility here which is 31 million in losses of credit of the coal in is R$76 million. This is necessary due to a high level of governance so we can have the best evaluation of our contingencies.
Page 20. We see the one page on compulsory loans. Remember that they determine the issue of shares, 142 million shares basically half of our PNB, over 9% of the capital of Eletrobras. This quarter if we look at the lower graph, we're leaving a provision of 16.197 billion and we have additional provisions. The update of the exchange rate, 155, we paid the claims of 1.286 and the position that we have here at the end of the third quarter is 15 billion, 143 million. So a drop in 754 million. We have two events that are important on the right that imply in R$558 million in non-recurrent provisions that are additional to our contingencies.
First, operational provision, we can see the shares that need to be delivered updated in their value, in the second quarter it was running 68 now it's requiring that update equals to 321 it's R$353 million of updates in regards to the shares differential B shares that should be delivered. And we have the financial result of the company compulsory that is not paid. Consumers that disagree with the loan is updated by the IPCA E plus exercise of interest rates during the time of top day so in this case we have an authorization an update from 219 to 424 million more an additional R$205 million. Now we talked about the compulsory, with all that we have the impact of EBITDA, reporting EBITDA 29% in a recurrent way 18% the main aggression that you say in this drop is the operational net revenue that we just mentioned that has to do with the contract of A0 that was granted and the stoppage in Angra and Candiota.
And in the recurrent participation everything that was there was a drop of 9% and the operational cost the MSO and the current costs we reported an improvement of 1.2% 23 million we had PMSO recurrent going up 30 million and we had operational provisions recurrent mainly from the contract of Amazonas [Indiscernible] and ensuring the provision of [Indiscernible] and other reversals of variation of 205 million. And it goes along with the net revenue, the aggressor responsible for the addition of the 18% of our data returned at the quarter.
We are reporting on net revenue. We have the 87% in the quarter where we have the recurrence, we have a lower cost instead of 620 million we go to 327 million. We go from 1.9 billion to 1.6 billion -- is EBITDA and we have here the financial result plus depreciation and amortization, there is a drop of 1% so can you and obviously because of the worst result dropping the income tax of R$343 million.
Let's go to page 23, where we talk about the financial discipline. I said in the beginning that we had an increase of our -- well we have EBITDA that was reported 12.8 through R$12 billion dropped EBITDA and an increase in the net debt by two aspects, the main one is the dividends 2.5 billion and second the payment of the loans, compulsory loans. It gives you a variation on almost R$4 billion, which is what we show with the increase in the net debt this makes our indicators go up slightly through 2.8 and 1.9 respectively.
Now page 24 and 25, the investments. Good news is that we improved in regards to what we've done in the second quarter. We've invested in corporate generation $334 million out of these projects that are detailed down below, a growth introduced to the second quarter of 115% in the corporate transmission of growth of 66% getting to 281 million this quarter total corporate climbed 84%. Like here SPEs e because our total investment we look at the last column the last line would be 3 billion 693 and in fact this means 575 SPEs, in the first couple of nine months we invested 91 million. This is the news because we are investing in SPEs was either to cover mainly issue, which is connected to GFE and we don't need to do that this year because of the standstill that a great deal was a ban from this. So it's the details it's reasonable to think that we should be comparing ourselves across to 3 billion and 28 and not 3.6 billion. And at this moment we have 1.3 billion invested and I will show you in the next page. If we do an evaluation that we did R$681 million, we didn't do investments in 290 million, but for the aspects that are connected for the impacts of COVID and authorizations of ANEEL, we have here optimization of costs and we have mainly in the case of Angar, we need to have the legal budget for a general real budget and we didn't have that authorization.
It was done recently and out of the 85 million it was a value that was limited and that was eventually resolved because of the authorization and that's why we will recover that schedule mainly what has to do with Angra 1 and 2. And in the quarter because of the expense goal, we invested in general for over 400 million. Now the total budget was 1 billion 88 million and if we see what we did not do because we couldn't do because of our legal limitation or because of COVID, we would get to something like 956 million or 89% of what was predicted.
I am getting towards the end of the presentation. I wanted to show you some relevant highlights those of you that have been following since 2016, when we had 178 SPEs now we are on the 11th of here 131. We sold when we closed also, you can see the closing and incorporation and those that are ongoing in such a way and here there is an observation. Due to some delays, we have the prediction that at the end of the year, we're going to get one from 178 to 16 we're going to get one this is due to the sale of the selling that we already formalized. And the incorporation right now with SPE, TGO, TSV, sorry TGO 1, 2 and 3 and we have [Indiscernible] now we are closing here 7 SPE, 8 in total. So we got 21. What did we not do, we could not conclude the process of selling TRV 1 and 2, 15 and 30, and we have a few closings that were presenting more complexity well, we have announced, we have on [Indiscernible] Baleia famous rationalization of the structure of Baguari and Famosa SPEs. And they're going towards next year. Here I am advancing that our planning, we should conclude this process of restructuring with 49 SPEs by December 2021.
Page 28. Just to report the public consultation of annual number 56 2020 regarding CCEE actually, we have here all of our corporate power plants. The first observation of 1 billion 823 are the nominal calculations. Here, we don't have Candiota that is not any corporations due to the renewal of the confession of CCEE that was in the context of NME being recommended by ANEEL yesterday and this is the official publication 3108 of 10/11/20. This is a very important point.
Second point, there is as you know, there was a public consultation, all the companies configured it through the media and there are things that we are saying IPCA over the spend capital, the allocation of regulatory assets it's an alternative. So you can have the limitation of the maximum deadline, but we have a lot of contributions. We should have in the ninth of December, a normal resolution and the rules for the commercialization after the public consultation and then after six days we will present a new calculation for CCEE on February 9th. Once, we do that in 30 days we have the publication of the consultation plan on March 9th, 60 days we have to if they accept that extension we have to announce the legal proceedings.
Now the investors, the issue of sets has the value that is not paid, which would be appeal 1.278 billion and here 891 million without our credits retaining at SPE so that this process is working. The net value that has to be paid, we do that the difference is 387 million as you've seen there should be some installments, some payments in installment and going up ahead, we have the report of Amapa, an extraordinary event, very difficult, but here reporting that Eletronorte our controller here in the north immediately was working and they were volunteers to contribute with this work of the energy in the state of Amapa. We mobilize engineers, specialists, technicians all 70 people, we support it through our regionals, so we can move equipment transformer, oil, etcetera, investment we actually have an official publication -- so they can do an emergency procurement of 40 megawatts and that is distributed by the generation and it can be up to 150 megawatts.
We have the cost coverage to factorial expenses after the approval of the NEL, this is an approval that is ongoing and here are the assets that were made available. So once again transformers, power and remember that there, we only have one important method which is the UHE quota studying unit and is one of the suppliers of energy of the region. We have to close in the next pages.
The highlights of the ESG that we reported increased the number of ODSS that we prioritize in our activities. We have here the growth, economic growth and now we have a consultancy with DuPont, there's a new program for the health and safety at the workplace that is developed by the DuPont here [Indiscernible] 86% of the labor is tested every 15 days. We did over 60,000 tests of COVID-19 in Eletrobras.
The climate changes, we have the 13 actions and we established the test, the commitment with the task force on climate-related financial disclosures through the climate change and in human rights everybody adhere on the right hand program, which is an initiative of childhood Brazil as the objective of fighting against sexual exploration of children and adolescents in Brazil.
And on the next page, we have the client relationship. We have a satisfaction report that goes close to 89%. We went over the goal of last year. In the [Indiscernible] we are reporting contributions and donations that we've done over R$23 million to 109 hospitals benefited around our operational installations. We have the actions for the implementation of the LGPD here at Eletrobras and the sustainable management of suppliers. We have within the edition of the national meeting with suppliers, with over 300 suppliers and I conclude here saying in excess, we have up ahead on the short term, the reduction of our personnel and 454 people that are leaving our GSF regulatory asset with the definitions that we mentioned the issue of the AFAC of Angra III, which actually R$370 million that was transfer to [Indiscernible] safety 640 still waiting for the legal PDG, we will solve this issue with this implementation. The effort to simplify our shareholders’ SPE from 131 to 49 up until 2021.
Candiota 3 returning in November 2020 and we're still waiting for regulatory solution for over a procurement of Amazonas D with by Amazonas-GT. We have a lot of work and once again thank you and I apologize not only for the result that saddens me, it was a very small result, but I am sure that it will be the effort in the governance. And the report, the rest of valuations etcetera, of course we have here extraordinary events and we will very quickly go over this with Eletrobras, so in the name of my colleague Elvira, I am available for questions.
Question-and-Answer Session
Operator
Very well. We will do a Q&A session. [Operator Instructions] We’ve a few questions. The first one from [Indiscernible].
Good afternoon. I have two questions. The first question in regards to the privatization. We have a lot of news where the blackout in Amaba, if can comment. What is the impact in the privatization process? And what is the trend upper head is the first question?
And the for second question is hydrology. We have a poor sedation of rains and the consequence will be that the prices will go up and a very big impact for GFF for next year?
Wilson Ferreira Junior
Thank you. Now in regards to weather, we have well the elections and everything. And this is as a result that we have in the slide that's it common here below in this page that hava a limitation here and Brasil is always developed in extremes. Now we have in the case here, we have a reservation and fortunately this is a event that is not clearly clarified. We lost both transformers in the distribution of energy, the distributor is being -- as a process of being privatized. And unfortunately, we have the negative results of the pandemic.
And here, we don't have the conclusions of all the reports that are being -- the investigations we have, the due diligence we have five days leaving that force that involved [Indiscernible] and we had our contributions of Amazonas D and here the challenge is to reestablish the system and obviously spare the [Indiscernible] Amapa is very difficult and rare situation in Brasil. We are now talking about an event that takes place in Brasil so often, I understand that there is a dislocation because of the possible area of movement of Electromarte of that privatization. While that investment, maybe there were some phase of it and they couldn't win. A review of investment is private. So if we have regulation, when we will modernize the regulatory framework discussions in the several levels of the government that is important too effect investments and the investments will be private.
And if we do not recognize that I always tell you, we improved a lot, but we don't have the financial capacity to do all the investment in regaining the market share of the company and that is happening in Brasil and throughout the world. And we have been [Indiscernible] capital to actually five projects on the long term is that, have higher profitability than interest rate in the country. This is important for pensions. There is no changes and you are talking about privatization.
I think that the administrative part of that is, as said has made available to start in regaining these projects and it is natural. Well, this is not an event that it is necessary to see what happened. So we can hold [Indiscernible] either us or whoever it is, possible for this unfortunate event. I believe that once again that we’ve best of ministers, but our minister of mine and energy [Indiscernible] and I am also part of the economy, we have the public -- with all the condition of [Indiscernible] we are living, well we are going to ask it to do it generally, so it will be necessary more and more that we see that the -- is also being worked with privatization. This is why, I don't want to believe that there will be any changes and of course the plan was to do, restart this year and we have the elections.
And we will have a regain of the question of Eletrobras at the beginning of the year. And we have minister [Indiscernible] and the secretary that has done an extraordinary work with that. Well, about the range, November 11, I know, we believe that we are waiting for the rain on the 15, we wait for it in the beginning of the month. But it's on the 15th that we should get the rains again. And we believe we have still a year that we have [Indiscernible] phenomena. And we have more rains in the North and Northeast. We are still optimist and we will finish the end of the year better than last year. This is an important point. And somehow, we have to look at the market. We have an impact and that will make the prices lower. And I still think that there is no reason for us to be worried, and we concluded several projects and all of them giving contributions to the system. I think it is early for us to worry about it. And we don't have to go -- thank you very much.
Unidentified Analyst
Very well.
Operator
Next question will be Carolina from Credit Suisse.
Good afternoon. Thank you for the call. If you can talk a little bit more about the provision? You did a very good job for recycling in capital allocation, a worth event has been very significant. And this part is complicated, but it shows how many things are very well event for a strategy. I wanted to know if talking about the compulsory loan, is there anything and specifically with Amazonas, I will mention at the end of the call they were expecting maybe the resolution of ANEEL and the procurement. Is there any other option or something else that we can do to avoid that bad debt will continue to give us problems?
Wilson Ferreira Junior
Thank you Carolina for your question. I think it is important to highlight that we have two important liabilities that are being addressed with as a priority for the company. One is the compulsory loans. I believe that we have two things here. First, most of the projects and the claims are being concluded. We have had responses and sometimes we have a response, we need clarity, but here we have a small variation and where they are provisioned. 1.2 billion this quarter is because of that.
Now, we have other lawyers here and we also issued here the policy of agreements and that happens for the provisions of loans so that we can anticipate into agreements that are lower than what was provisioned. A lot of companies they might be interested in closing the process and therefore giving an advantage to the paying party. And this is what we're looking right now. The compulsory loan, we will have more lawyers that will help us with agreements in the issue of the labor issues, and here we have a system of the same thing that we have for SAP. We have Artificial Intelligence and we are implementing this at the Eletrobras group. This is very important because we had [Indiscernible] and this is being phased to systems. And also we have to do these defenses or at least a great part and this asset will be shared with the private lawyers to represent Eletrobras in these processes regionally.
We expect any combination of loan and the assets that have to be once again, we need an effort and the provision that needs to be done more perfectly with our assets. This quarter we did this movement, but we need to do two things; anticipate that this might bring the benefit to the company and on the other side, we have to work in the sense of mitigating the occurrence of any similar event in these two things and this is the great work of Eletrobras and we will have an important event over the last quarters.
Operator
Thank you. Next question will be [Indiscernible]?
Hello. Thank you everyone for this opportunity. I have a question. Next year you start to think about this new RBSE, the generation of capital for next year. This is very important. Well after the strong reversal of RBSE and as you commented, it is complicated and I wanted to understand with you if there is a payment of dividends about what was practiced before in the fourth quarter of 2020, is that a possibility?
And would the privatization will hinder this process? The second point, I just wanted to understand how and what was the effect of the pandemic in the contracts, we have the free market in the company? Was there a structural change in renegotiation or short-term reduction?
I'm going to ask [Indiscernible] to talk about the contracts but in this first thing where you talked about the dividends, the answer is no. And I need to highlight that we were never called so that we anticipate the dividends. And we never had that demand presented through the government. I just wanted to say one thing, along with the controllership something in around 2 billion, and we've seen in our -- to make the controllers make the type of payment in such a way that we can in the first opportunity do the payment that is regarding the FY of 2018. And this is in our favor to debate this issue and take it to the Board of Directors to do this. We don't have any perspective payment.
If we have projects, we are evaluating participation in the area of transmission. This is one of the projects that we have, so we are evaluating this. You talk about capacity to be entrepreneurial and we have almost a lab, so we can really act as a company establishing committees that validate the financial framework, so we can see the return rate that clearly has to be above the capital cost. And the company regardless of the environment in the private, in the public, we don't have to pay the dividends above what was expected. It's important to highlight that we have a robust cash flow.
Now the demand, it's better to do this payment, we don't have any prediction of payment above the minimum return of the company and we will only have things that are regarding the payments of dividends that are retained, so we can mitigate this. And in regards to the second theme, contract, we had a big movement right at the beginning of the pandemic and maybe [Indiscernible] can talk a little bit about this situation. And I would just like to say that a great deal of them may have the difficulty of immediate payment and keeping as a criteria here, the students and some type of seasonality. Can you comment on that [Indiscernible]?
Wilson Ferreira Junior
Thank you for the question. The dividends took place in April and May due to the -- we didn't know the impact of the crisis and we through the committee of commercialization we established the guidelines and we want to preserve the economic values of the contracts and the management volumes. We have very little problems with the regrowth of the demand from June, July. It was practically normalized basically we do not have any case just like last month.
Thank you. Thank you for the answer. Now the subsidiaries you have a cash that is retained at these subsidiaries?
The idea is to, well is there any other thing in the pipeline to optimize the capital, the size this up going up of the dividends of these subsidiaries, is there any well I know that we have the concessions, but we have the other concessions along the way. But we know that there is a potential a path for the recycling of capital of the SPEs also.
Yes, we have clearly the freedom to lead, but yes, we understand that we had a lot of contracts with BMS where we have costs that are comparatively higher than we can get in the market. So this discussion occurs with our subsidiaries. It's important to highlight that the contracts we have very honest conditions. So this has to be done with a lot of care. We are not the only ones, we have compliments for financing with the countries that are the objectives of verification, so we can in fact pay and this is worth and our companies as you've said in the past that had contracts, financial contracts withholding and the case of [Indiscernible] that can given the financial solidity, getting financing directly without having any need of assurance from the holding. So this is something that we are taking care and we've done a great work with this. Some of the things that you followed recently we also had the rollout in -- so there is still space and opportunity with our operations with the controlled companies. Thank you.
Next question from [Indiscernible].
Thank you for the call. I have a question in regards to GSF, we did the calculations that would be NPV positive and I wanted to know how that would impact the results of the company and should this take place? Is there any payment of taxes or whether we have pay zero, this is the first question. The second question and we'll ask you a comment that you did and while they will participate, in this case you will get into a partnership with someone or would it be Eletrobras as the controller for the investment?
I'm going to ask Elvira to talk about this, the first thing here for tax, but I'm just going to try answer the second. This is going to participate closer. We should participate alone and the issue of partnership is synergy. I cannot add value to the asset or disagree of synergy with other assets, but we are closed to have partnerships. We have preference, corporate speaking with our controllers, with our regionalized projects, so we can have the capacity to compete alone. This is the idea that we're nourishing right now.
But giving the preference to the corporate investment that were recently authorized and with the exceptional shut, they have been authorized to participate. Can you talk about that?
Well, in regards to the accounting, we still internally, we depend on the final solution and will this be something that we can infer and that this will be an asset that will be registered once and we have to do a technical discussion. But it's something that we do not have a definition. And in regards to GSF, we would have to do a payment.
Do you think that the payment will be done once or the companies will have a chance to defer this payment?
I don't know if they have a capacity to pay or not pay, so there should be other companies that have cash flow. They might have difficulties maybe there is a government plan to finance this amount. I do not believe that there will be any support from the government to do this type of financing. But yes, I believe that we will establish as it happened before a process of negotiation where we have the installments. Expensive, but using the effect of the amount that is involved, well we are fighting against a bad debt in this process and in this case we can have the [Indiscernible] and yes, there will be some sort of payment installments. Thank you.
[Operator Instructions] Next question is [Indiscernible]
Good afternoon Wilson. Thank you for the opportunity. I want to explore a little bit about the shareholders. First question well, you have a prediction of getting in December of 2020, 49 SPEs I want to understand how is your perspective up in the future that's 49 is stable and where would we have more space for the simplification of the structure?
Now, I have to talk about this, we have SPEs of any type even international participation etcetera and we made a decision that is strategic what was the strategic decision that we had SPEs where we can increase our participation. I think we hold the SPEs, sometimes the partners stopped and they followed. So we did that sequence and what we wanted to do okay and this can be a company that can be accounted for. We wanted to incorporate a company buying 100% and incorporating it as a corporate asset and there is an advantage.
SPEs have a management, Board of Directors and actually what makes SPE work is the operations that are local. What we did here, I think it was 13 and if memory serves me right, and we have this process here these are processes for incorporation. Then we had an evaluation here of the cost of the partner. We did the negotiation and actually we made the negotiation viable and we will finish with 14 SPEs, these were created and not made viable in the last year. A great deal of them related to wind power, which are the contracts remember the provider that went bankrupt and then we had the difficulty in the construction.
In this case we got into that bid of not hiring and then we eliminated the risk. The next step is closing that's why you have the second. And also we did a strategic analysis where we wanted to remind you that this sales process was preceded by a recognition of our debt after that of the controller, the control company in such a way to check, to reduce this so we can do a process that is systematic. And we can attract more competitors and we have the complete competitive process and the only thing that we didn't sell is this one. Now these assets have been chosen because they are assets that they had conditions that were important for the debt of the controller and the holding and these are assets that we would have the same activity as the control.
One criteria that you need to know is, we weren't working with hydroelectric power assets. What we have today is the GSF, which is the condition of those companies. They followed many that time and they were not successful and a great deal of that is due to the social GSF. Now, we have to think about this in an important way from now on the companies have a perceived value by the market different than what they've received before. So you have the critical assurance and there is a set of activities that are here placed. The objective was to simplify with the focus in the asset of generation transmission in these 49 and create deal where the hydroelectric power plants.
We have Delamonte and with that 49 we have a focus here. A great deal of them will be integrated with the corporate asset and we have the private partners with this account, this operation. And then we can work for the consolidation of the assets. There is no defined plan. I just wanted to show you that in fact, we implemented a plan for the reduction of the number of SPEs, which contributed for the reduction of the debt on the controller with the company and a very strong work and I even joke around that this is the substation of the Olympics. I can see the difficulty that I was concluding this process.
So we need to proceed here and we've done that and we will be happy to finish the year with 81, 100 less than what we have with an improvement of the results of the 14, the values of the SPEs, we can revert it we have several here. We have 40 last year. 30 this year and we will try and find out an asset that makes more sense because of the size of Eletrobras. This is the idea in this process of rationalization.
In regards to Amazonas distribution, obviously the problem of Amazonas distribution affects us because the supplier of energy has contracts that's not necessarily, they are not contracts that service the road of the distributor. So this has been adopted of one norm not only one and the debate on the ministry of energy with the participation of Amazonas entity and Amazonas energy and ANEEL. I am very optimistic that we will have a solution for this in the next 60 days. We will have a better expectation in the processors that are here, we will have one director that will answer and we will focus in our challenge and also the sector. And I believe that this will happen and that's to say we have operation authorization and this mitigates a little bit of the problem and then it gets a great deal of the problem for the cash. We can do it via Amazonas distribution and we have less risk of non-payment.
Thank you.
Operator
We close here the Q&A session and now we gave the floor to Wilson Ferreira Junior for the final thoughts. Mr. Wilson.
Wilson Ferreira Junior
First of all, thank you for your attention. Once again, it is difficult as a President to do a report. We believe that we could have done much better. Counterpart is that we make equality more robust and this implies in the improvement of our processes and our controls. Evidently, we were affected by the pandemic are one and true, but I'm very trustworthy in the recovery of the economy and the processes that we are developing in the company to train and evolve in our commercialization. We have and thereafter the meeting that we are doing with all of the directors of the company was the cultural transformation and well, having this digital time of the pandemic, so we can have a network that is more modern, more contemporaneous, more collaborative, more synergistic, more sustainable. We're working towards this and I believe that we advance and we will advance even more.
With the standardization of our organizational structures, I do not see yet the perspective for the reduction of costs we are making an effort. Sometimes we have an expectation of a lower impact in the pandemic, but we have an equipment that has a stoppage and that investment as a whole. So we had a quarter that unfortunately we had a lot of events that are extraordinary and events that were predicted. But I am very optimistic in regards to Eletrobras it's a company that is recovering and will in fact know the perspective still limited by the financial capacity is to restart the perspective of investments. I hope that this was the worst quarter that I will have to report in the last four years. I am very optimistic that we will restart with the perspective that we had over the last few years. Thank you and now you're healthy. Thank you.
Operator
Therefore the audio conference of Eletrobras is complete.
