Brazilian Electric Power Co
BOVESPA:ELET6
Earnings Call Analysis
Q3-2023 Analysis
Brazilian Electric Power Co
A key focal point of Eletrobras' recent earnings call was the management's adept handling of hydro power capacity under fluctuating market conditions. They use a five-year average to gauge the Generation Scaling Factor (GSF) and remain agile in response to market shifts, targeting opportune moments to sell power and mitigate GSF impacts. The rise in energy prices has been acknowledged, part stemming from a higher 'Capacity Market Offer' (CMO) and generation issues, which, in turn, led to better hydro power plant performance and reduced GSF. This strategic timing aims to maximize the value of the hydro power capacity over the coming years.
The executives also addressed concerns around contracts under Law 13,182. A portion of the previously uncontracted 1.241 gigawatts from Sobradinho and Itumbiara has been renegotiated and remains within Eletrobras's grasp, reflecting efforts to maintain those high-volume customers. Despite some contract terminations, the aim is to keep the client portfolio intact by offering flexible negotiations, underlining a commitment to strengthen their market position. Investors can anticipate a 'cleaner' balance sheet in the subsequent quarters, more reflective of the real energy pricing and revenue streams.
Discussions turned to the integration of Furnas, a substantial project without a definitive completion date, yet it stands as a high priority. The corporate focus has shifted towards value generation and capital structure optimization. The explanation for past delays in interest payments on shareholders' equity was glossed over, with emphasis instead placed on future fiscal prudence and effective cash flow management. Eletrobras is consciously restructuring to ensure every invested penny is accounted for and efficiently allocated.
Eletrobras revealed momentum in shedding non-core assets, particularly thermal power plants, and plans to keep only those assets that actively contribute to the company's value. This approach aligns with resolving outstanding compulsory loan settlements, liberating more assets as collateral for further maneuverability in transactions. Historical debenture covenants that once hampered asset disposals are being resolved, signaling a more unfettered path forward for Eletrobras's operations and asset management.
The Eletrobras executive team concluded the earnings call encouraging investors with any lingering queries to reach out directly. With an openness to continued dialogue and transparency, they reinforced their readiness to assist stakeholders in understanding the company's trajectory, financial health, and strategic decisions.
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[Interpreted] Ladies and gentlemen, thank you for waiting. Welcome to Eletrobras Third Quarter Earnings Videoconference.
I'd like to introduce the Eletrobras team. We have got Ivan de Souza Monteiro, our CEO; Eduardo Haiama, the VP for Financial and Investor Relations; Mr. Rodrigo Limp Nascimento, Chief Regulatory and Institutional Relations Officer; Mr. Élio Wolff, the VP of Strategy and Business Development; Mr. Italo Freitas, VP of Trade and acting VP of Expansions; and Mr. Antonio Varejão de Godoy, VP of Operations and Safety.
We'd like to inform you that this videoconference is being recorded and will be made available on the company's IR website. You can also find the slide deck in Portuguese and English on the website. Should you need simultaneous interpretation, we have that tool available. At the bottom of the screen, there's a globe icon that says Interpretation at the bottom of the screen. Once you've clicked on that icon, please choose Portuguese or English. If you're listening to the videoconference in English, you can mute original audio by clicking on Mute Original Audio. [Operator Instructions]
We'd like to clarify that any forward-looking statements made during this videoconference regarding the perspectives, forecasts as well as financial and operating goals of the company are based on the management's beliefs and assumptions as well as on information currently available to the company. Forward-looking statements are no guarantee of performance. They involve risks and uncertainties and therefore depend on circumstances that may or may not come to pass. Investors should understand that macroeconomic conditions and other operating factors may impact the results presented in these forward-looking statements.
I'd now like to turn the call over to Mr. Ivan de Souza Monteiro, CEO, so that we can start the presentation. You may begin, sir.
Hello, everyone. Good afternoon. Thank you for joining our videoconference call to discuss the third quarter earnings in 2023. The Board of Directors and the Executive Board are both very confident when it comes to the future of Eletrobras, and I'll clarify why.
From the beginning of our journey, we have focused on value and performance. We always seek to have efficiency, manage our portfolio, manage our investments and find opportunities in the future. We have solutions offered to our clients that are based on green energy as well. And I'll talk about all of these items.
We focus on operating efficiency at first, reducing our PMSO. We have had 2 voluntary resignation programs, one is already well ahead in its progress, and the second has just begun, but we are certainly not putting the company at risk with these resignations.
This is going to yield benefits to our consumers, and this is what Petrobras aims to achieve. That is also the regulator's intention with clear standards that need to be met by the company in comparison to the competition. And the objective is always to have lower tariffs for the consumers. These cost reductions have a number of initiatives, and our VP is going to be fleshing them out in the presentation.
Our CapEx and investment agenda is also accelerating. Our focus is mainly to modernize retrofits. The reliability of our assets for transmission and generation is absolutely instrumental for us to operate properly.
We have earned one lot in the latest auction. We're preparing for the next auction in December. But you shouldn't expect to see major acquisitions outside of Brazil. It's not a priority at this point. Our priority is to focus on the high-quality existing assets and connect them to the efficiency agenda that we have.
I'd like to talk about our portfolio now. Eletrobras always speaks about the reduction in the SPEs, but we're not only reducing the SPEs. We are managing our portfolio. There are initiatives such as buying Baguari, the reorganization of some of the entities, the consolidation of others and other initiatives that we have whose aim is to have the generation and transmission line operating as they should. And also, we have to have clarity on where we're going to invest and how we're going to be more efficient with all of our very important assets.
Eletrobras is not concerned or afraid when it comes to the discussion of power prices. This is a company that used to have 30 and now has 250 clients. And of course, our objective is to have many more. And this client acquisition banks on the reorganization of the commercialization department in São Paulo, also the energy trading desk that will be focusing on our power, of course. And we continue to look for electrification solutions for our clients. We have initiatives that are ongoing, we have some discussions that are ongoing in steelworks and pulp and paper and mining.
We announced the certification of plant for green energy in Itumbiara that's going to be focusing on clients and solutions for these clients, for example, green hydrogen. No one in Brazil will be able to have such a good green energy portfolio as Eletrobras, and that makes us very confident about the future. We like our clients and possibilities, and we are structuring ourselves to be able to meet all the demand.
I will now give the floor to our CFO who is going to be doing the presentation for you.
Thank you, Ivan. This is Haiama. I'd like to start on Slide 5. We're going to be talking about our results.
This is a way that I'd like to look at the sector. Looking at regulatory EBITDA. Our recurring regulatory EBITDA was BRL 6.2 billion. When we look at the IFRS EBITDA, the result would be BRL 4.6 billion.
Our net income. And we have the regulatory net income at BRL 2.7 billion, and the adjusted net income as per IFRS is BRL 1.1 billion.
As for CapEx, as Ivan mentioned, be it to improve operations or to do the upkeep of them or expand them, we invested BRL 1.9 billion in the quarter. That is an 88% increase year-on-year, virtually 90%, of course.
Our financial health is quite robust. We have a twofold leverage in the last 12 months, and we have BRL 23 billion net for the prepayment of the commercial papers.
Now Slide 7, value generation. That's something that Ivan mentioned already. We have 4 main pillars. We are simplifying our structure. We have sold Candiota. That's very important for our net zero target. We have also sold our minority stake in COPEL. We have acquired Baguari Energia from Cemig and Neoenergia, and we consolidated HPP Teles Pires. We continue to study to be able to incorporate Furnas and Eletropar.
And now when it comes to costs, we have made some adjustments already where we had 2 PDVs, the voluntary resignation programs, the first of which is basically completed and should have a saving of BRL 1.2 billion, and the second program has already started, and we aim to have a BRL 670 million reduction.
Now when we think about capital allocation and structure, we have a net debt that is twofold at this point, which is very healthy, very -- much lower than all of our covenants. We have extended our debt profile. We have captured BRL 11 billion in debentures. And with that, we paid BRL 6.3 billion in commercial papers or commercial notes. With that, we have a cash -- a net cash rather of BRL 23 million in October 2023.
And lastly, when it comes to our liability management, there's a lot of liability to be managed at this point. Would just like to highlight that we have reduced the compulsory loan. It was virtually BRL 26 billion in the past, and now it's BRL 19 billion, and that's quite a victory. Now on to Slide 8. Let's give some color when it comes to the history. Our PMSO, the recurrent PMSO was 1.9 a year ago and now slightly below 1.7 with a 14% reduction. And that's not only because of the cost but also because of the management. We have eliminated 52 positions in the governance bodies.
And more than reducing the number itself, we need to improve the structure, but reducing numbers is also important. Ever since we started streamlining the process, we have reduced SPEs in over 100 in the period. We have incorporated almost 2 gigawatts for our portfolio and an increase in BRL 441 million in EBITDA with the cancellation of results.
And lastly, when we look back to the PMSO reduction, that comes through the 2 PDVs, the voluntary resignation programs, and we have had a reduction here of 22%. But not only in the total amount but also in the number of managers, there is an improvement in the efficiency of the company in managing their processes.
Now let's move on to Slide 10 to talk about our operating performance. On the left-hand side of the slide, you can see a chart showing the breakdown of our regulatory revenue. We're going to underscore the regulatory view against the IFRS view because the regulatory view is much more transparent in terms of cash generation.
You can see here that the percentage of transmission revenue increased, and for generation, it decreased a little bit because of the ending of the quota regime. And in the short term, the scenario is more challenging, but in the long run, it is going to be more favorable.
And on the right-hand side of the slide, you can see where we are headed in terms of transmission revenue. Currently, we have 140 major developments happening in our transmission lines, and the CapEx should reach BRL 6.3 billion by 2027 with an increase of almost BRL 1 billion in revenue after these investments are concluded.
On the next slide, Slide 11, we're going to talk about generation. The short-term market, well, there was an expectation in the market that the prices would be low in the minimum spot price level for the entire year 2023, 2024 and maybe 2025.
On the left-hand side, if we look specifically at the chart at the bottom, and that is the chart that shows the hourly price. And the red line shows the spot price. For a good part of the morning and early afternoon, it was at the minimum level, and then it reached the cap of BRL 600. So this shows that although there was a supply that exceeded the demand because of the characteristics of the system, it is much more volatile now.
On the right-hand side, the chart shows that effect precisely and also what happened after the market realized that the prices wouldn't be kept at a minimum level necessarily with any -- without any fluctuation. So on the 28th, when there was an increase -- a sharp increase in the price, and you can see that in the orange, gray, yellow and blue lines, those are the average prices. Those are the benchmark prices for each year until that event happened when there was an intraday sharp increase in the price.
So if you look at 2024, prices go from BRL 65 and then it jumps to BRL 70. And as time goes by and as we have more and more days with price increases, you can see that the line goes up. And the price for 2024 used to be BRL 65, and then it goes up to almost BRL 80. And at the end of the entire period, the price increased by 20% more or less in each year. Only 2027 increased a little bit less than that. And that shows that volatility in the prices, which was not captured until that point by the market.
Now on the next slide, we are going to take a look at a snapshot of the end of the third quarter. We are gradually contracting the energy that is out of the quota regime, but we are doing that gradually with no rush. And for this year, we have almost none. For next year, we have 16% that we are still negotiating.
And we should mention here that in this percentage, we are excluding what we call hedge, which is the energy that we are going to have contracts for in the short term when there is an issue with rainfall, for example, and that leads us to take more risk. We are going to leave 1 percentage of that amount as a hedge for us.
But as we make our trading department more robust, the number that you see of 200 customers will increase. And as time goes by, the dark column will be shorter.
Now let's talk about the financial figures on Slide 14. Again, we're going to look at the gross revenue, EBITDA and net income in the regulatory figures. You can see that our revenue increased by almost BRL 1 billion year-on-year. And the highlight here, as I mentioned on the previous slide showing the revenue breakdown, you can see that most of that came from transmission, and our EBITDA grew by almost 50% in the period. And you can see the adjusted figure here.
Well, the main drivers were the RAP, the allowed annual revenue, which grew by over BRL 1 billion. And secondly, although we have uncontracted energy, we are negotiating that energy, and it is going to bring us benefits in the short term. And in order for our EBITDA to grow, we had some reductions in the cost but also in the energy that we purchase over time. And that allows us to increase our margins.
And lastly, when it comes to net income, the main highlights are the effect caused by a higher EBITDA. And on the other side, we had an increase in our financial expenditures. And in this quarter specifically, when we look at the reported EBITDA in comparison with the adjusted EBITDA, we had some decreases in the core deposits. We have been doing that and working on that since the beginning of the year. And we just finished that effort now.
Now on Slide 15, let's talk about PMSO. As we said earlier, this indicator has been improving quarter-over-quarter. I'm going to focus more on the recurring figures, the chart on the right-hand side. We went from BRL 1.951 billion to BRL 1.680 billion. And we had 107 in the -- actually BRL 950 million in the personnel line, and we had some adjustments in the amount of BRL 47 million. And in this quarter, we had some impact in the increase of some services, including consulting, auditing and IT in the amount of BRL 80 million.
But in the others line, there is a highlight that I should mention, and that you can find in our release. Those are the reconciliation of our core deposits that caused an impact of BRL 846 million. And in the recurring figures, that is eliminated.
Now on Slide 16, let's talk about our provisions. The highlights here are the reversal. I'm going to start with the largest figure. There was a reversal at Chesf in the amount of BRL 636 million. We had already made a provision for that in the previous quarter. And since we won this lawsuit, we were able to revert that allowance, that provision.
And when Eletrobras was the manager of the RGR fund -- and RGR helped make electric power universal in Brazil, and Eletrobras used to be the manager of that fund. And in our discussions with the regulator, it was understood that there should be a refund to Eletrobras in the amount of BRL 489 million. And this did not impact the result as a whole, but it impacted this specific client.
And we also had an actuarial adjustment in the amount of BRL 107 million. We normalized that line so that it matched the other ones. It used to be in the others line, but now it is in the provisions line, which is in line with the practices of the other Eletrobras companies.
Now let's move on to Slide 17 about the compulsory loan. The highlight is the curve. One year ago, we started with almost BRL 26 billion. And as time went by, we negotiated and the contingencies are still in the amount of BRL 19 billion. Up until the previous quarter, when we had deals that were unchangeable, and we just removed those amounts out of the provisions line if we were authorized by the courts, but now since we cannot change it, we want to remove it from the provisions line because it is going to be a liability for sure. So we took out the BRL 1.8 billion from the outstanding liabilities, and we are including it as compulsory loan.
And here, we have some other contingencies, as you can see. And we eliminated from our balance sheet the remote and possible lawsuits and the issue related to the impact of the core deposits. As I said earlier, we had that impact on contingencies of almost BRL 1.2 billion, but now we are going to free up some guarantees and collaterals. And now we have BRL 1.3 billion. And that is part of the effort of cleaning up our balance sheet and everything that happened in the past.
Now let's move on to Slide 18. We finished the quarter with a very healthy net debt-over-EBITDA ratio of 2x. And in the BRL 39 billion that you see on the chart, since we acquired 100% of the stocks of Teles Pires, we also incorporated Teles Pires net debt. It is important to notice that our -- that the company's EBITDA was not incorporated yet because we finished the deal on the last day of the quarter. So we had to incorporate the net debt but not the EBITDA. And the EBITDA of Teles Pires was about BRL 350 million.
On the right-hand side, you can see the snapshot of our debt profile. We finished the quarter with BRL 31 billion. And that was the effect of the prepayment of the commercial papers in the amount of BRL 6.3 billion. And that liability will disappear automatically in 2024. We also extended our average tenor for our debt, which is about 59.6 months, and the average cost is 12.46% per year.
And to wrap up the presentation, I'd like to talk about a very dear agenda to us, which is ESG on Slide 20. I would like to highlight 4 items here.
The first one is that we are now part of the IDIVERSA or the Diversity Index of B3. We are one of the 75 listed companies in this index, and we take a lot of pride in that.
The second point is that we are one of the very few companies around the world in our sector that has as a goal to become net zero by 2030, following the guidelines of the Science Based Targets initiative. Those are the initiatives followed by the UN, by the way, so that bears witness to how dear this topic is to us.
And the last one is the disposal of Candiota, and that accounts for almost half of our emissions. It was a small transaction, but for the group, it was a very significant move.
And lastly, still on the topic of sustainability and zero carbon, I would like to remind you that we received a certification by the CCEE, which was created last year, and we were the second company in Brazil to obtain this certification for green hydrogen, which is considered renewable energy. So this is very much in line with everything that we have been saying in our calls. This is going to be the focus of Eletrobras, not necessarily hydrogen, but we are going to have sustainability at the core of our operations from now on.
So now I would like to turn it over to the operator to start the Q&A session.
[Operator Instructions] Our first question comes from Daniel from Safra.
I've got 2. The first has to do with the power balance. We see that there are agreements being entered to from 2023 to 2027, 150 mega in agreements. Can you just give us more color on these agreements as per the terms of the contracts, the prices for the agreements? That would be great.
And my second question has to do with costs. We saw that was a significant reduction in PMSO, and I'd like to understand what your expectations are for the future. What do you expect for the coming quarters? And what do you expect in terms of recurring costs? If you could just add some more color on these points.
All right. So I'll answer the first question, and then our VP of Trade is going to support me in the second question, and then Ivan is going to be answering the second question, too.
Some questions were posed once we published the release and the results. One of the comments was, hey, in the second quarter, you had an average price that was such, and now this average price has dropped, but the volume is very similar. What's happened, right? Nothing major happened. So let me answer this question already. I know this is not exactly what you asked, but it's important for everyone and also for your question, too.
In 2015, some of the generation concessions were renewed, and [ Caduf ], amongst other clients, were kept with a set price. And these clients had a relatively high tariff, but not because Eletrobras was paid a high tariff, but because part of this price difference was used for some funds, some sector funds such as the Southeast or the Northeast funds. And what's left as net cash for Eletrobras, that's a low tariff.
So BRL 200 is the gross number. And what we have is -- will have net for Eletrobras is below BRL 100. And some clients ask to stop using this model now. And considering the volume that we're going to have for 2024 onwards that's going to be available, we started finding new contracts. And that's what we did, but we did it at market prices.
And that's not too far from what we were being paid when you look at the net value, the net value paid to Eletrobras. But when you look at the average price, which is what you saw in that power balance, I mean you had that -- the gross number in the power balance. And then you have the impression that it's dipped, but it hasn't. So it hasn't been a major change.
And now I'd like to turn it over to Italo because -- I mean you mentioned 150 mega and with the efforts that we needed to make to contract to sell the energy and show that our commercial team is up and running. Italo, please.
This is Italo. Yes, that's right. It has to do with Law 13,182. And then it's not 150 mega, right? With the changes we had with these major clients, I mean we are restructuring our operations with the commercial team. And we're bringing people from the market. We're hiring people who know their stuff when it comes to selling energy, selling power, and we're really preparing our department to deal with the future.
And we sold 368, which is what we expected to have for this quarter. So we have -- I mean that's what we sold, and that covered what we had lost in the uncontracted items. And then there's new megas here, too.
And Daniel, as for the improving efficiency, you can expect this to continue. We're still far from the efficiency levels we aim to have. When we look at the competition, we see that -- even when we look at what the regulators expect from us. So all of initiatives are going to continue to develop.
Next week, we're going to have a meeting to talk about the budget for 2024. And this is a line item that we're going to be pursuing continuously, seeking to improve our efficiency with everything that you already know that we have been doing. But as we gain more knowledge, we gather more information and as we have new solutions, especially in technology using the cutting-edge tools that are available to manage our assets and to also reduce the hierarchy levels between holding company and subsidiary companies, also reorganizing the SPEs and also with the knowledge crossing from one SPE to another, right, lessons learned and all. But we'll be focusing on continuous substantial reductions.
Next question from Gustavo Cunha from UBS.
Piggy-backing on the last question. When we look at the PPA contracts, do you see flexibility in the free market contracts? And how flexible are they?
Thank you for your question, Gustavo. Italo, can you please answer that question?
This is Italo. We have a very diverse group of clients now, each of whom has their own characteristics. Some call for more flexibility. They are not many. But flexibility is about 5% to 6% in some contracts. But it's not that many clients who are asking for this flexibility. And when they ask for flexibility, of course, we charge for that flexibility somehow because being flexible is a service.
Next question, Gilmar Lima from Santander.
As for the reduction in the balance, we see that the compulsory loan had an impact, and we saw a good discount in the compulsory loan. There was a BRL 2.4 billion and there was a BRL 3.5 billion payment. So these proportions, are they to be expected in the coming quarters as well? Can we expect the provisions to have similar reductions?
And for the liabilities in the contingency, we saw an increase in that, in the contingent ability in comparison to the past. Is there any new process that's playing a role there? We had BRL 44.8 billion in the second quarter, and this quarter, it was around 48 -- pardon me, BRL 47.3 billion. Is that just an adjustment? Is there any new process that is having an impact?
As for the compulsory loan negotiations, we're getting better discounts than we had planned for in our budget, which is a result of our good negotiations. Paula Prado used to work for Investor Relations, and now she's 100% focused on the compulsory loan negotiations. And that has yielded good results. Paula's extremely knowledgeable about this.
And when you become a privately held company, you can recognize the specific needs different customers have. So this freedom we had from the management of the company and these results -- yield the results that we have -- you have seen. And we're going to continue to pursue further reductions in this line item in 2024. This is a priority for us.
And Haiama is going to answer your second question.
When I look at the remote and possible lawsuits, you're talking about the civil ones, right, and tax ones, I won't be able to say that off the top of my head exactly where the difference lies.
Not a problem. I just wanted to see if there was any specific item.
No, no, there was nothing major, I mean, nothing specific. Maybe it's just an adjustment of the final balance, and that was posted now in the third quarter around the liability, but no new liability, I would say.
Next question from JPMorgan by Henrique Peretti.
Can you hear me now? Sorry, I had an issue here with my mic. My first question has to do with the compulsory loan. It dropped to BRL 3 billion in the third quarter. So what is expected when it comes to a reduction in the fourth quarter? There's a 14% reduction that we have already had in the third quarter. So what is the expectation for the fourth?
And the second question has to do with the power balance. So when you showed the chart around what has been uncontracted, when I look at 2027, there is an average of 3 gigawatts for hedge, right? And that's about 18% of the power available. So the GSF that you are forecasting for the long term, is it being planned for already?
Thank you, Henrique. Around the first question, I mentioned that during the presentation and until the second quarter, whenever we had an agreement, even if they were uncancelable agreements, right, we would only take away from provisions when the adjustment was registered, but the contract was in, so the liability was clear.
In this quarter, we noticed that we needed to change this practice. We needed to look at the agreements that we had signed as unchangeable and just waiting for the registration, we needed to post them -- we noticed we needed to post them to liabilities, too. So when we look at this BRL 3 billion reduction from the second to the third quarter, BRL 1.8 billion of those BRL 3 billion were written as part of the compulsory loan in agreements.
So in the fourth quarter, if there's no negotiation or any agreement, this is what's going to be posted because I used to say, hey, there's this many billion in provisions and then there was a settlement. An agreement had been reached, something had been settled already. But now it's best to set it as liability and no longer have it as a contingent liability. I'm not sure if it was clear, and I don't think it was.
So you changed the classification, but it's still sitting in liability but in a different line item, right? So it's as if it was 9, but 1.8 is still compulsory, is that it?
Yes, that's right. Okay. So it's no longer a contingency because you already have the settlement, but it has to be recorded in the balance sheet anyway, so as a liability. Yes, that is correct.
And I'll ask Italo to help me address your second question. By definition, we try to be conservative in the way we sell our energy, but we need to be flexible as well. 18%, 15% or 10% in the future, well, we are going to reduce that hedge or the spread so that we are not completely exposed to the spot prices.
But I'll turn it over to our expert here to address your question.
Well, that is correct. We use a proxy of 5 years, an average of 5 years. And in our proxy, of course, the figures change year-after-year, but we keep a close eye on that together with the markets and the portfolio teams to see what the reaction of the market is so that we can take appropriate action and sell that power when there is a good opportunity for us to reduce GSF and when there's a good market opportunity.
As we explained earlier in the presentation with the charts that showed an increase in prices, because there was a higher CMO due to fluctuations in the system and other issues, for example, issues with generation, that caused, we should bear in mind, a higher capacity and production in the hydro power plants, and that causes GSF to go down.
So this is our projection. It is an estimation for the next 5 years on average. But our teams are paying close attention on what's going on so that we can seize the best opportunities out there in relation to the use of the capacity of the hydro power plant.
The next question comes from Mr. João Pimentel with BTG.
I have 2 questions actually. The first one is about a point made by Italo and Haiama and the contracts under Law 13,182. You said that some of those customers have already terminated the contracts and negotiated with Eletrobras. And in the presentation, in the first quarter, you said that the total volume related to Sobradinho and Itumbiara was 1.241 gigawatts. How much of that is still left to be terminated and renegotiated? My question is, the cleanup of the 1.24 gigawatts has already happened in the quarter or is there some of that left for the coming quarters?
And the second question is about Furnas. I would like to know how the studies about the integration of Furnas are going and if that process can be completed this year.
Thank you, João. Well, first of all, we need to clarify a point here. The contract for Chesf and Furnas related to the renovation in 2015, what is coming to Eletrobras as free cash is less than BRL 100 per megawatt hour. We are going to charge more than that, of course, because part of that amount goes to our fund, and it is in our restricted cash. So that is very important.
So in terms of cash generation, at the end of the day, even if the benchmark prices without considering our spread, it would be better for us to negotiate in the free markets than keeping that price. That point is very important.
When it comes to volumes, Italo, would you like to address that question? Or should we not disclose that information?
No, I think I can answer the question. What matters here that I want to highlight is that part of that uncontracted energy or capacity, that energy is still with us. We negotiated with them. Those are major clients that use a high volume of energy, but part of that energy was negotiated with them. They're going to terminate the contract, but I can sell that energy to them.
And obviously, the clients have their own power strategy. Some are using their own generation and they are using corporate PPAs. But what you should bear in mind is that part of that energy is still with us. And the law allows them to terminate the contract throughout the term of the contract. Of course, they need to observe certain deadlines. But the idea here is for our teams, whenever there's a request to terminate a contract, we try to negotiate with clients to keep them in our portfolio.
All right, I understand that for sure. I believe that this is a neutral effect for you. But I would like to know when we are going to start seeing a clean balance sheet for you or with the energy balance because you price energy in the gross price. And although you have a net revenue, but the price between the terminated contracts and the new contracts, the price seems to be very similar.
But since we are not going to working with Law 13,182 anymore, I would like to know when we are going to see a balance that is more similar to the reality.
Well, I think you're going to see that in the coming quarters.
But the major cleanup has already been done, right?
Yes, that's right.
João, this is Ivan. We cannot say right now that we are going to be able to finish this, this year, but this is a priority front for us. This is one of our biggest priorities here.
The next question comes from Mr. Marcelo Sá with Itaú BBA.
First, I would like to know more about the payment of Furnas and the payment of interest on shareholders' equity. I would like to know why you didn't do that before and you are doing it now. Is there any specific reason?
And the second question is about the suspension of CTEEP's offer. I would like to know what happened exactly and if that can cause an impact on the sale of other assets, too.
Thank you, Marcelo. Well, the interest on shareholders' equity is a consequence of everything that's happening in our company. The company is focusing sharply on the generation of value. There are companies that pay a lot of dividends, and some companies could improve their capital structure, and that's why we are restructuring the whole thing.
And that's why when Ivan said that the point here is not about reducing the number of SPEs, the main point here is about optimizing the structure and improving the capital structure as a whole and also how money flows.
I cannot talk about the past and why that didn't happen in the past, but I can tell you what's going on from now onwards. And we are going to take good care of each penny in the company and where it's going and why it's going there.
And the second point -- before that, Marcelo, this is Ivan, well, we can only talk about what we disclose to the market. Of course, as we advance in our settlements in the compulsory loans, we are going to free up more room and more guarantees. But that does not really interfere with what we announced in terms of selling our assets. We have a project to sell thermal power plants, and that project is going on really well, and there is no interference between the 2 things.
We are increasing the number of assets that were provided in the lawsuits as collateral. And now we are freeing up those assets. We can sell them and keep in our portfolio only the assets that generate value.
Well, if you allow me, I have a third question. There's a clause in some of the debentures that you issued about the disposal of assets and that you could have a waiver or you would need a waiver from the creditors. Could that have any impact on this?
Well, in the past -- and by the way, that's not going to happen anymore, many subsidiaries would issue debentures. And it's true, that clause was in many of those debentures and covenants that were not compatible with the company's reality, but that does not interfere with our decisions of selling the assets or not.
We believe that the process of settling the lawsuits about the compulsory loans, that will allow us to free up the guarantees and collaterals, and that will allow us to have more freedom to have the deals in the size and in the format that is more compatible to our operations right now. But yes, that is true. There was a covenant in some debentures that restricted the sale of some assets.
Now I would like to turn it back to Mr. Ivan de Souza Monteiro for his closing remarks. Mr. Ivan, please go ahead.
Thank you very much for participating in our conference call. If you have any questions at all, please feel free to contact us. Please contact Carla, our Investor Relations Head, and we are going to be able to help you. Thank you very much.
This concludes Eletrobras conference call for today. Thank you very much for participating. Have a good day.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]