Companhia Paranaense de Energia – COPEL (NYSE:ELP) Q3 2025 Earnings Call Transcript

Companhia Paranaense de Energia – COPEL (NYSE:ELP) Q3 2025 Earnings Call Transcript November 13, 2025

Companhia Paranaense de Energia – COPEL beats earnings expectations. Reported EPS is $0.02, expectations were $-0.0134.

Operator: Good evening, ladies and gentlemen. Welcome to Companhia Paranaense de Energia COPEL’s video conference call to discuss third quarter 2025 earnings results. This video conference is being recorded, and the replay can be accessed on the company’s website, ri.copel.com. The presentation is also available for download. [Operator Instructions]. Then we will start the Q&A session when further instructions to participate will be provided. Before proceeding, I would like to stress that forward-looking statements are based on the beliefs and assumptions of COPEL’s management and on information currently available to the company. These statements may involve risks and uncertainties as they relate to future events and therefore, should be treated as forecasts dependent on the macroeconomic environment, the country’s economic situation, the performance and regulation of the energy sector in addition to other variables — such forward-looking statements are therefore subject to change.

This video conference will be presented by Mr. Daniel Slaviero, CEO of COPEL; and Mr. Felipe Gutterres, CFO, as well as officers of the subsidiaries. They will be available during the question-and-answer session. I would now like to give the floor to the CEO of COPEL, who will begin the presentation. Please proceed, Mr. Slaviero.

Daniel Slaviero: Good morning, everyone. I would like to thank you all for joining us in this video conference call. I’d like to start highlighting the healthy operating and financial performance of the company in this third quarter. We posted recurring EBITDA of BRL 1.3 billion, up almost 8% over the same period last year and a recurring net income of BRL 375 million. These numbers show the — how solid and consistent COPEL’s results are. Another point that deserves to highlight is the strong investment made in the period, BRL 981 million in CapEx in the third quarter alone, totaling BRL 2.6 billion in the 9 months of 2025. This level of investment reflects our commitment with quality of service expansion and modernizing our asset base and ensures that we are preparing for a historical tariff review in the distribution company in 2026, in line with our commitment to continuously optimize our portfolio.

This month, we completed the divestment of 4 photovoltaic solar plants totaling 22 megawatts peak in distributed generation in a deal evaluated at BRL 78 million. This follows our commitment to simplify our portfolio. Additionally, with the completion of the Mashigua Sue HPP divestment in the start of October, our leverage ratio is at 2.8x net debt over EBITDA ratio, well on target of our optimal capital structure. This fact reinforces 2 things. Firstly, our excellence in executing the commitments that we set forth with the market. And secondly, this [indiscernible] deal with its characteristics, it represents the essence of this new phase of COPEL, a company that is agile, attentive to opportunities and focused on creating value. On the operational side, we recorded sales of almost 5 gigawatts and the build market of DISCO grew 1.7%, still comparing with a very high base recorded in Q3 2024.

These indicators reinforce the resilience of our business, the abundance of our concession area and the trust of our customers. On the side of generation, it is important to put things into context. The results obtained by [indiscernible] were recorded in a very challenging scenario. In this quarter, we had a GSF of approximately 65% and a curtailment of almost 35%. Fortunately, these assets subject to curtailment are very small in the structure base of COPEL. On the positive side, we had an increase of PLD spot market of close to 50% compared to Q3 ’24, totaling about BRL 250 per megawatt hour. The intelligence of our strategy and trading structures led by Rodolfo and risk mitigation, coupled with the positive effect of optimizing our portfolio and special the modulation of the hybrid source made all the difference.

To end the slide in this period, for the first time, we had a consolidation of the results of Mata de Santa Genebra, the transmission company and [indiscernible] ensuring a more robust and efficient portfolio, which contributed to better results. This reinforces our differential, the fact that we are an integrated company with a solid presence in all 4 segments where we operate. I take this moment to give you an update on the process to migrate to Novo Mercado. The structure of the deal is already known to all of you, but I would like to record the steps that have been completed. On August 22, we had the approval of the common shareholders in the special general meeting, and we got waivers of debenture holders in all of the necessary issuances, and we have handled the unification of preferred shares, Class B to Class A.

Lastly, we had the approval conditioned by B3 to migrate to Novo Mercado. And now next Monday, November 17, at 11:00 a.m., we will have the Special General Meeting and the agenda is to ratify the conversion of preferred shares into common shares in a rate of 1:1 plus a new Class B preferred share redeemable. I would like to invite all preferred shareholders to take part in this special meeting and to give us their vote. This is a decisive step for us to consolidate a simpler, more transparent shareholder structure and one which is more aligned with the best practices of the market. In parallel, unification of shares into one single class will bring more liquidity to our security to our share, which is a relevant factor to attract new investors.

Should this measure be approved, we will be prepared to end or to complete the whole process by year-end, which will open up a path to distribute part of the dividends referring to the first event of the exercise as set forth in our dividend payout policy. This will be a historical moment in our journey to create value at COPEL. Last Friday, we launched to our employees the new element of the COPEL culture. Reason of existing ambition and our values. The T-shirt that myself and my partners are wearing today is part of the — of this event and part of the internal communication process. This year, we revisited the company’s strategic planning and thus built a vision for COPEL 2035. We cannot think about strategy if it’s not coupled with culture and vice versa.

A strong culture is a central pillar to sustain a long-term vision and a very bold one, I should say, more than a concept. We believe that our culture is a competitive differential for COPEL. All these elements of culture as well as strategic planning will be presented to the market in our COPEL Day. By the way, before I give the floor to Felipe, who will detail the financials of the quarter, I would like to reinforce the invitation for you to sign up to our COPEL Day, which will be held next Wednesday, November 19, directly from Rio de Janeiro, the wonderful city with an online broadcast starting at 9:30 a.m. It’s going to be a big event. Thank you very much.

Felipe Gutterres: Thank you, Daniel. Good morning, everyone. I’ll start highlighting the consistency of our results, COPEL’s discipline in capital allocation and the operating efficiency of our business, which is proven by the robust numbers we posted in the quarter even in a more challenging business environment. In the quarter, our recurring EBITDA consolidated grew 7.8% over Q3 ’24, reflecting the health of our operation and the efficacy of the measures adopted for efficiency. COPEL [indiscernible] was responsible for 53% of this result [indiscernible] 49%. I will give you more color on COPEL Generation and Transmission in a minute. Recurring EBITDA of COPEL Genco grew 11% over Q3 ’24, driven by a combination of factors, better performance of assets, integration of new enterprises or endeavors and consolidation of strategic asset results.

In the transmission company, the highlight was the increase of BRL 119.4 million in EBITDA with the consolidation of Mata de Santa Genebra and the average increase of 2.2% in RAP of the transmission companies. In the Generation segment, we were able to mitigate the impact through a smart trading strategy, optimization of the portfolio captured the positive effects of hydro modulation despite an adverse event with GSF of 64.9% and curtailment of 34.4%. The result was positive, especially given the BRL 23 million increase in short-term market sales, 21% up in volumes sold, incremental BRL 10 million in bilateral contracts, BRL 7 million coming from revenues of regulated contracts. I highlight the startup supply of Jandaira in the consolidation of the Mashigua Sue HPP.

These results were partially offset by greater curtailment, which generated a negative effect of BRL 39 million more in the generation deviation in the quarter. Now moving to COPEL [indiscernible] Distribution presented a recurring EBITDA 7.2% up in this quarter. This result is the result of a 1.7% growth in the build grid market with an average adjustment of 6.8% at TUSD occurring in June in RTA and the efficient management of costs, highlights going to 16% reduction in personnel year-on-year. Now moving to trading. COPEL com EBITDA recurring posted a drop of BRL 7.3 million in the margin, mainly due to the effect of legacy contracts of electricity starting from intermittent sources as well as a 39.1% increase in the PMSO expenses, a reflects of the advancement of the process of restructuring the trading company.

On the other hand, sales volume for 2026 to 2030 grew 96.2% in relation to Q2 ’25, adding an amount sold of 431 megawatts, which shows the potential of expansion of the business. So ending the analysis of, I highlight the advances obtained in operating efficiency in Q3. PMSO expenses, recurring ones totaled BRL 718.7 million, a 4.1% reduction over the same period last year. This is a reflection of the discipline in cost management, which is a priority across the company. Main highlight was an 18.4% reduction in personnel and administrative expenses driven by structuring measures such as the voluntary severance program, which contributed to adjusting the headcount. We also saw a reduction of 8.5% in costs with pension plans and health plans, reinforcing the positive impact of rationalization actions.

In addition, we reduced 3.6% of expenses with materials, while third-party services posted a 4.7% increase, reflecting the hiring of specialized services for maintenance and operation. The others line, the 10% basically related to the write-off of the activation of assets, especially in DISCO, given the high level of investment in the period. We reduced cost of preserving safety of the operation and quality of services provided, which reinforce — reinforces our commitment to operating efficiency and excellence. In Q3 ’25, COPEL presented a recurring net income of BRL 374.8 million, down 36.5% over the same period last year, which is a result of a 7.8% EBITDA increase, offset by an increasing negative financial results, driven by robust investment cycle funded by the company within the parameters of an optimal capital structure.

In addition, in the comparative period, we had in cash BRL 4 billion, which we used to pay the granting bonus for the renewal of generation assets for another 30 years. Another highlight is the CDI increase year-on-year, which negatively impacted the cost of debt. Income tax and social contribution was higher than past year as a result of interest on equity that we executed in ’24 and have now been executed in ’25. In other variation, I highlight the impact of reduction of equity income of Mata de Santa Genebra that started be 100% consolidated. Now talking about investments in this quarter. On the slide, we can see consolidated CapEx totaling BRL 981.4 million, maintaining the planned rhythm and aligned to the company’s plan. Year-to-date, investments totaled BRL 2.6 billion with a focus on assets that broaden the remuneration base, modernize the infrastructure and ensure quality of service.

Most of the resources was directed to the segments of distribution and generation, highlights going to projects that strengthen the reliability of the energy system, increase installed capacity and promote operating efficiency gains. We continue with a disciplined capital allocation, prioritizing projects with attractive return and aligned with the long-term strategy of the company. Coming to the end, I speak about the capital structure. Net debt over EBITDA ratio was 3x in the quarter within the range established in our study of optimal capital structure. But if we consider the sale of Mashigua Sue HPP completed in October, this ratio would have been 2.8x, reinforcing our financial discipline. Net debt totaled BRL 16.6 billion with a diversified makeup among financial institutions and market insurance debentures and securities.

This diversification is strategic, reduces risk and improves the forecast of predictability of the financial flow. Important to mention that the company has a AAA rating, reflecting the solidity of our balance sheet and the dimension of our manifest of capital allocation. As for the CDI equivalent cost of debt, we had a debt costing 98.46% of the CDI to 88.7%, showing our efficiency in funding and managing our debt. We continue to pay attention to market dynamics, and we remain committed to maintaining a healthy capital structure that would allow COPEL to continue to invest with safety, competitiveness and a focus on value creation for our shareholders. With this, I come to the end of the presentation, and we can now start the Q&A session.

Q&A Session

Operator: [Operator Instructions]. Our first question comes from Guilherme Bosso with Goldman Sachs.

Guilherme Bosso: I have 2 actually. First, I believe it has been partly addressed in the presentation about the migration to Novo Mercado. I just want to clarify, I’d like to confirm if the expectation of completion remains at the end of December? Or can you tell us when this is expected to happen? And in that regard, what is the company thinking about dividend payout — are you expecting an announcement for this year after you complete the migration process? Or can we expect something before? That’s the first question. Secondly, I’d like you to elaborate on the cost efficiency agenda. In this quarter, we saw again manageable costs dropping year-on-year. So I would like to understand if for next year, the company still sees room to reduce costs. And if so, the extent of these cuts.

Daniel Slaviero: Well, I’ll answer part of your question, and then Felipe will speak about efficiency gains. It is exactly as you — and then as we said, our idea is on Monday, the 17th, if we get approval by the preferred shareholders, our expectation is that we will complete the operation — the migration by year-end. It will be towards the end of the year because if we have approval on the 17th, we have 30 days of recess as determined by law. And then the operational time line, the notary public [indiscernible] and our expectation is to end to complete the migration still this year, but more towards the last week of December, but still in 2025. And then we have a commitment regardless of the — regardless but linked to the migration, which is our base scenario, we expect to announce dividends, dividends payment for the first event of the year as set forth in our policy with a minimum of 2 events.

So it will be the first year consolidating the result of the first half and according to our financial analysis of the company. So we’re quite excited, and we are working hard. The process to obtain the waiver with several debentures being very polarized. It was very hard work led by Felipe and the whole team. By the way, I’d like to publicly thank them for the efficiency. We have the support of many financial institutions, which helped us access the huge amount of shareholders. So this is moving on, moving forward smoothly, and it’s all conditioned to next Monday. Thank you, Daniel. As regards to the process of cost reduction, we continue in an attempt to capture more efficiencies. Please remember that our goal is compared to 2023 annualized until 2026.

So there is an effort to reduce costs in 2026 with an important move concentrated in some business units as status quo, but also there are other moves which are more geared by supply, the shared services center. So there are a number of initiatives and the value creation levers that are actionable expected in 2026. We’ll give you more on that at COPEL Day. And just to add to that, Guilherme and everyone, we are completing this phase of structuring efficiencies and operating excellence in cost reduction. As Felipe mentioned, during COPEL Day, we’ll give you more detail of the 10 promises that we took on at the follow-on time by Novo Mercado, we need 3. So we have also the tariff review in mid next year and the completion of this phase of structuring efficiency gains.

And then we’ll speak a lot about this at COPEL Day. Then we’ll turn the page. You’ve heard me tell you over and over that no company creates value sustainably in the long term, just cutting costs and selling assets. We have to finalize the cycle throughout 2026 and then turn the page, change the chapter and focus on efficiencies, profitability indicators. And Felipe will have a session dedicated to this in his presentation on November 19, COPEL Day.

Operator: Next question from Raul Cavendish with XP. Mr. Cavendish, go ahead.

Raul Cavendish: My question has to do with the Genco, GMT generation and transmission. What we saw this quarter was a portfolio strategy that was very well performed by the company. We can see this at a much lower cost of energy [indiscernible]. So my question is, in terms of the strategy of the trading company, taking one step back to understand the process to build this portfolio hedge strategy for the year. And what is the [indiscernible] for next year in terms of price, market and strategy to continue to maximize the value of the GEN portfolio?

Daniel Slaviero: Well, excellent question. We have worked to develop an internal expertise with Rodolfo and the whole team to add this competitive edge, this market intelligence and this trading strategy. So Rodolfo, perhaps you can share with Raul and the investors our macro strategy, — remembering that our competitors also join our calls. And then that’s why, you can add whatever you want. So Rodolfo?

Rodolfo Lima: Excellent. So let’s divide this into 2. Let’s speak about the hedge strategy for this year, and then I’ll speak about the market currently. In the mid-2024, we had some windows of good opportunities of low prices. Before materializing the need of power with the increasing price in September, we had good windows to purchase energy. And that’s when we purchased most of the energy. And coupled with that, we had a lot of swaps. We know the need for electricity in Q3 and have some excess at the end. So much of advantage of this moment to have this kind of swap using these more competitive prices in Q3. And that’s why we were successful in our strategy vis-a-vis the spot market. Now speaking about the market currently, the market is at very high levels.

We understand that there’s still a lot of room to increase. And what matters is with a lot of liquidity. We have high demand in the market. We are weighing our speed of sale. You could see that we have good sales, but quite contained compared to the amount we have available. So overall, I believe these are the 2 main insights regarding our strategy for short term, Q3 and mid- and long-term thinking about the future electricity prices. Brittol, any comment?

Unknown Executive: Yes. Good morning, everyone. Well, I think Rodolfo spoke well about the strategies. The strategies are executed by the TradeCo, but it’s all discussed with COPEL generation and transmissions led by Daniel, and we execute the strategy. We posted good results this year given the opportunities mentioned by Rodolfo for the price window for energy purchases. And during this period, we had a strong result regarding modulation of the hydropower plants, which accounted for quite a lot of our results. So this is a solid articulated strategy executed by the TradeCo based on the analysis of COPEL Genco. I can just to final comments, Raul and everyone. Brittol mentioned an important point about the benefit of hydro modulation and the role it has played and how it has been better priced here in this environment.

Given the role it has to sustain the hydroelectric system, in addition, [ AMP304, SMP304 ] that is to be approved to bring some positive elements in our view in terms of ancillary operational services. And coupled with all that is the fact that the bulk of our portfolio, especially our hydro plants are in the South region, and we see an appreciation of price. I guess this reinforces the unique characteristic of COPEL’s portfolio. In broader terms, what have we seen? And this is our strategic approach. Firstly, we see pricing structures that are much better than 2, 3 years ago, but still below the price potential that we envision, particularly if we consider marginal cost of expansion for 2028, ’29 and 2030 and beyond. So we’ll see and you will see that we have some room here regarding prices.

So what is our strategy? We don’t want to put all eggs in one single basket. So strategically, we sell some small blocks along A plus 2, A plus 3 so that we can ensure an average price. But clearly, with the price volatility we have seen hourly prices and also with the need that the system has for power, and we are going to talk a lot about that at COPEL Day. So we will need to work with more uncontracted energy, plus 1, plus 2, so that we can capture these better energy prices greater than BRL 250, BRL 280, which is what we have seen. This is the fact that COPEL has 64% stress, 64% of its EBITDA linked to the grid distribution and transmission grids. This gives us comfort in our balance sheet to be able to execute these strategies quite easily in trying to capture better price opportunities.

Raul Cavendish: Perfect. It is clear. If I may ask another 2 quick questions. Because there is, in terms of looking forward and turning the page in terms of cost cuts and efficiency gains, the strategic vision in addition to the auction of capacity reserves and now including batteries, I would like to understand how does the company see the opportunity in batteries? Does it make strategic sense for the company or given the structure, this is a kind of a [indiscernible] business that will not add so much value to the portfolio. And in terms of prices, if I may ask another question, we have seen some small complex elements that have pushed prices down. Nothing transformational, but kind of a weaker load given the climate in the end of Q3, beginning of Q4, slightly better rainfall. In your view, do these elements would [indiscernible] downside for 2026? Or have you priced this?

Daniel Slaviero: All excellent points. So let’s start with the end. Rodolfo, perhaps you could give us more color on the second part of the question, and I will answer the first question, and Felipe can help me.

Rodolfo Lima: Well, excellent. I think that you raised the main variables that can impact price. But we see this happening in a one-off basis. There is 1 month with more rain perhaps. The trend is that the prices will be higher. Why do we say this? If again, how the system is being operated this year compared to last year with the same scenario of storage and rainfall, the prices are different. We’re talking about a floor versus BRL 300 in March. So I can’t have a specific month when it rains a lot, and I don’t have the need for thermal dispatch and the prices can be lower. And that’s when we take the opportunity to hedge the operation, as I mentioned. But in the midterm, the need for thermal dispatch is abundant. So I think it is almost impossible to have a scenario where it will rain a lot throughout the year to the point that we can only serve the system with hydro.

And that’s why we believe that prices will be higher in the mid- to long term. Very well put. And Raul, looking forward, I think it is important to highlight that the efficiency agenda remains. It is permanent. Cost, it’s like nails, you trim them, they grow back, you trim them, they grow back. But the centerpiece is that previously, we had structuring inefficiencies, either due to the hiring process, materials, bidding forces, everything we know about. I just want to make this clear. The centerpiece of our agenda will lose some momentum and this other agenda focus on efficiency. Good, correct disciplined capital allocation will gain more relevance. To that end, [indiscernible] CAP in our view is a strategic point with 2 products in 2030, 2031.

Of the 5.5 gigawatts recorded for both auctions, 2 gig COPEL project, Foz do Areia and Segredo. We’ve been repeating this, but this auction was expected to happen has been postponed. And now it has been set for March also because there are very important needs from the system. So I guess it will arrive with very competitive projects. We’ll analyze size, product size, capital price. There are some elements that are not yet very clear, but we are going to be very disciplined. Although we do like the project, although the projects are competitive with all necessary licenses ready, it is at the moment of the auction that theory will meet practice. Having said that, as for batteries, well, we’re looking into that. We have a due diligence for that.

But I think that this entails an assessment of the level of competitiveness that we can have, that we can add to these auctions, considering that most of it is linked to the battery acquisition cost. If you have easier access to the inputs, they might be more competitive. But we believe a lot in the elements of power and need. This can be supplied in different ways. Hydro — reversible hydroelectric power plants that exist around the world, China with almost 90 gig, Japan and others, this can be a path forward, and we will address this in the future based on this work front, where we have know-how, knowledge, engineering expertise of decades, which is the management operation and construction of hydroelectric power plants. And also Raul and everyone to end, I think we will speak a lot about this.

We have to work towards a scenario where prices will reflect the operation. There’s an effort by ONS to move to this kind of model, and we will need to discuss greater progress so that the price signals will be correctly aligned with the effective cost of generation. Where else we’re going to see what has been happening in Brazil over and over the explosion of cost subsidies and so on and so forth. But anyway, this is a different discussion, and we can talk about this later at COPEL Day, we’ll speak more about this. And mainly then regarding attributes of the hydro source. This needs to be done.

Operator: Next question from João Pimentel with Citi.

João Pimentel: I would like to build on Raul’s question and also saying that [indiscernible] Always talks about.

Daniel Slaviero: Can you hear me? My thoughts and my connection has crushed. And you normally said that the company cannot create value over time just paying dividends that eventually you need to look at opportunities for growth and so on and so forth. And now talking about [indiscernible] And the batteries auction, this is kind of mapped already. So beyond that, I’d like to understand what are you looking at beyond that? Are you considering any other segments in addition to the ones you operate in or in the segments where you operate, do you see any opportunities in terms of inorganic growth? We see a number of players of renewable sources facing difficulties given curtailment. They don’t have such an integrated portfolio with COPEL.

So I’d like to understand how do you see this dichotomy between I’m going to grow, I’m just going to pay dividends or I’m going to grow and I want to transform COPEL in a much bigger company than it is today. So I’d like to hear your take on growth.

Rodolfo Lima: Well, you have an excellent point actually. And just to clarify, what I normally say is it has always been and will continue to be, given my own belief and the partners’ belief that the company does not create value in the long run, just cutting costs and selling assets. Paying dividends is a good and interesting option for us and one that we intend to materialize either paying dividends or through a share buyback program. We have a minimum payout in our policy of 75% as a consequence of an optimal capital structure as is with the current base of 2.8. In addition to being the boldest in the sector, it is a big competitive edge for us.

Daniel Slaviero: And we see an appreciation of compressing our return rate. You know this better than a lot of people. You know this dynamic of how things work. But I think that our case and Felipe has been saying this that we can balance both. We can be a good company, paying good dividends because we have mature assets, a solid cash generation, a lot of depreciation. So we are not just fixed on net income, although it is a fundamental reference for any dividend payout policy. But we look at the whole context of the company being a cash cow in the context of good opportunities. Good opportunities in our view, do not appear every year. So we have to be prepared with a well-behaved disciplined capital structure so that as opportunities arise, we can make structural moves.

And to address another point of your question, which was excellent, by the way, we are actively — whether we are actively looking at an asset. I can share this with you. We are not also because we are still in the phase of digital transformation of looking internally. And next week, we’re very much focused on COPEL Day because it is our big event. We’re preparing for it. And we are going to announce the CapEx plan of the distribution company for the next cycle and also for the generation company. So we still have a lot of room to invest organically, which is low risk with super attractive returns. In addition to the regulatory walks that [indiscernible] and Genco have, these bring efficiency gains with this [indiscernible] to create with the operation with cost reductions.

We had an event last week. You will follow that. We had an event a tornado of climate events. We are having extreme climate events, and this has required a new model of operation. [indiscernible] is also going to give you more detail on this at COPEL Day. And this has to do with our CapEx planning, with our — it has to do with our operations, number of crews and so on and so forth. And this is a strategic view. And I think that COPEL in that episode and in others has shown to be a benchmark in the sector.

Operator: The next question from Giuliano Ajeje with Citi. Just a correction. I’m with UBS.

Giuliano Ajeje: Okay. I have 2 questions. Daniel, we’re getting to the end of the year, and that’s the moment when we start looking at 2026. And next year, we have a super important event for the company, which will be the process of tariff review. And this is going to be the first tariff review process with the company having been privatized. So what do you expect from next year’s tariff review process? What is the company doing differently? My second question has to do with [indiscernible] I think it brings 2 points that kind of change the long-term horizon of the company. The first is [indiscernible] contracting of energy. Could this reduce the size of [indiscernible] next year? And what could the company do with its current project?

And secondly, [indiscernible] under the possibility of renewal of hydroelectric power plant? And if your base case continues to be a [indiscernible] process or given that there’s a possibility of renewal could this quite inorganic growth in jeopardy with more possibility of the hydroelectric power plant assets.

Daniel Slaviero: Excellent points. Very important structuring questions, which I think. Let me try to address them. First tariff review. I think that this is a milestone. It’s going to be a historical tariff review. [indiscernible] is dealing with this firsthand, but we have our regulatory VP, the whole team, accounting. We are all working together. We hold weekly meetings. I, myself, lead a working group following this on a monthly basis, given the importance it has in this expertise and the freedom that a private company has, of course, it makes us look at all opportunities. But this is a regulated sector. And COPEL has a track record of good tariff reviews. In the last 2 cycles, the denial that COPEL had resumed [indiscernible] a good track record.

But of course, there is always room for improvement. [indiscernible] and how we can optimize things. And Ajeje, you have your reports and you have talked with us, have approached us on this before. And I think you know that we have the right conditions to exceed the consensus of the market, which is around EUR 18 billion or slightly above EUR 18 billion. And this is our commitment. Felana, would you like to comment on this? And then I can speak about the [indiscernible] 304.

Unknown Executive: Yes, we have a working group with several departments involved with full attention on the tariff review event, which goes beyond the investment plan. We are looking at the regulatory standards of [indiscernible] indicators. We are looking at losses, recovery of unrecoverable revenues [indiscernible] and also to complete the main works of the investment plan by December because we know that whatever goes or stretches to the next year will only remunerate in the next cycle. So we meet on a weekly basis. We follow all the works and all of the process of the tariff review. And [indiscernible] all of the people on the call, the market consensus is close to EUR 18 billion, as I mentioned, given the relevance and our track record of fulfilling our promises.

It is very important for us to be able to achieve this number or perhaps exceed it or deliver. Having said that, tariff review is at the top of our agenda. This will change the game for COPEL, this point COPEL. [indiscernible] Well, Ajeje, we could have an earnings call just to talk about that. But I’ll go straight to the points that you raised, this compulsory contracting. Of course, it tends to affect the dynamics of the LR cap. But in our view, it will not be that structuring also because of thermal power plants in the Eletrobras law, fortunately, they were left out to run the risk of analysis of [indiscernible] That’s a big risk. I don’t know how many gigs it will be 5 or 8 gig is flexible in the sector from the technical standpoint, it does not make any sense.

And this would be the most deleterious effect in our view. Fortunately, the Congress had common sense and didn’t take forward this point. And the second point is that we’re very confident in the hydric products because they’re unprecedented. We recognize [indiscernible] M&E was and everyone involved with the auction. They made an effort to include 2 hydro products because they are national technology, renewable and with a totally national industry. This will be the cheapest product compared with any other thermal product with all respect. But the hydroelectric plants have the conditions to offer an end price to consumers that will be lower — always lower. So there will be some impact. But it is not going to be that relevant, and we believe that the characteristics of the hydro products tend to perform better.

As regards to renewal of the HPPs, I think that a lot of expectations were created. But what the text of [ BNB ] says is basically part of the legal framework with the exception of the quotas. And when [ BNB ] [indiscernible] talked about the possibility of renewable and concession that will be in the hands of the breaking power. In our view, this was the base scenario, one of bidding process. We at COPEL do not envision a scenario without a competitive process. Given what is happening in other sectors, what’s happening in highways, renowned [ DS ] highway and all the other highways, they all go through a bidding process, given the auction of GSF by [ CCE ] 60% margin. So this competitive process shows the appetite that the operators have. They have an inherent advantage.

Of course, they know it’s better than anyone else, but that other competitors can bring. In our base scenario, the law didn’t change anything. Actually, brought a benefit, which is not allowing the renewals to be by quotas. But in our view, I don’t think it’s very likely. I think it’s highly unlikely that there will not be competitive processes given what’s happening in other infrastructure segments in the country, either by the granting power or by resolution of the Federal Court of accounts.

Operator: Next question from [indiscernible] with Santander.

Unknown Analyst: Congratulations on the results. I have 2 quick questions. First, still on MP1304. [indiscernible] Understand the company’s view, what were the most relevant points that were left out in the text and that should be discussed in the short to medium term if you need a quick resolution of the issue. And another quick question about the possibility of extraordinary dividends with the possibility of taxation of dividends. What do you think about that?

Daniel Slaviero: [indiscernible] all right. Let me try to slice your question. Let’s start with the dividends. Felipe, you’ve been studying this — could you give us more color on what we’re thinking and our studies to address this? And then I will answer about the 1304.

Felipe Gutterres: We cannot disregard the phase in which we are migration to Novo Mercado and the current dividend payout policy. And the taxation environment, the taxation on dividends in 2026 still to be approved by the President. We haven’t come to a definition yet. This is most likely happening in the coming weeks. We are studying the several scenarios and possible impacts using our shareholder base, here also supported by our external advisers and by our tax department. But of course, we will position the company with a defined framework and strategy in light of the current shareholder base.

Daniel Slaviero: Excellent. And Felipe, you’re leading this process in the coming weeks as you put it yourself, we will be announcing what we intend to do. But obviously, there is a new fact when you have a 10% taxation individuals for foreign investors, even if there are some [indiscernible] to sovereign funds and others, there is a new fact there that requires, as Felipe mentioned, some diligence with the company. We have to look into this. And we have to do the best considering the company’s balance sheet. There we have a profit reserves, which is reasonably high. And also considering that in our trajectory, we are focused on attracting new investors. So we have to find the optimal point at sweet spot. And I’m sure that Felipe and the whole team will bring you something quite balanced until the end of the year.

So that’s the first. And secondly, this needs to be finalized whether this conflict with the corporate law, if this is going to be paid in 2027, ’28, ’29, which is not so likely or whether this is going to be paid only within the 12 months. So there are some elements that need to be more clear, right, Felipe, so that we and all publicly traded companies can position themselves. But after Novo Mercado, that will be the top priority in our agenda. And as for the MP1504, absolutely, the topic that was left out that should not have been left out and that shows how the pressure is important is the [indiscernible] distributed generation in the apportionment and the curtailment in terms of having a contribution of EUR 20, EUR 15 or whatever. So I think that the reality will impose itself if this is not addressed and it will be because the reality is physical.

— knows this is already causing terrible problems for the system. This needs to be addressed because this has become big. It doesn’t make sense for this segment to carry the level of subsidies that exist today. So I think that [indiscernible] Pedro, this is the more pressing matter to be addressed in this initiative by ANEEL in terms of tariffs, white flags, that could be a mitigating path. And I think that this will help remove the perverse incentive of the subsidies in the electric system [indiscernible] . What could improve the separation. We have several initiatives, LR contracting capacity in the form of voltage. We should have the separation of ballast and energy as expected in [indiscernible] that was being discussed at Congress. It was not addressed.

And now we have to wait for the approval of MP1304 and wait for the regulation and see what will happen in terms of modernizing the electricity, the [indiscernible]

Operator: Last question from Victor [indiscernible] with Itaú BBA.

Unknown Analyst: I’m sorry to go back to this [indiscernible] Could you could tell us what they included in terms of curtailment and also the definition that should come in the next 3 weeks, 21 days regarding what is renewable versus oversupply, renewable oversupply, if this can have a significant impact and what will be considered curtailment that could be reimbursable looking forward, depending on the definition by the Ministry of Mines and Energy, MME and whether the totality of curtailment could be reimbursable. Could you give us more color on that specific point that would be much appreciated.

Daniel Slaviero: Victor, I think that is an excellent point. We are monitoring this, not just in the press, but the discussions of several sectors about that. I think that we have to look at the glass as being half full. A half full glass means that it is possible. It is consolidated that the electric part and reliability is of value of the pure renewables, the wind plants and the solar power plant. They will have the right because this happened independent of [indiscernible] . The big problem, as you mentioned, is the energy piece. In my view, when we have the original tax and the amendment of the tax, in my view, that’s a sign that one of the 2 will be too. And I think that this is a legitimate discussions on both ends of the generation companies trying to address this by saying that this will not have an impact for the consumer in terms of charges or not reducing tariffs.

This is undeniable. There will be an impact. This is a structural decision. This is about what the government wants, what the Ministry of Mines and Energy and the central government understand. This is a risk of the entrepreneur, which is one thesis or if this could be reimbursed if they choose. If they choose this path, think that this will not have an impact on consumers, well, this is not sustainable. But we’re monitoring this closely because, of course, curtailment is something that needs to be addressed in the future because it is indeed a topic that has made this segment of wind and solar power feasible specifically. I think that we are going to be seeing what’s going to happen next, and we’ll see what the government — how the government will interpret the policy and understanding how to reconcile these 2 arguments, which are legitimate for both sides.

Operator: The Q&A session is closed. I would like now to give the floor to Mr. Daniel Slaviero for his final statements.

Daniel Slaviero: Well, I can only thank all [ COPELLIONS ] for another quarter of solid, stable results. They show how COPEL is a predictable company that has been performing well and delivering consistent results quarter after quarter. I think this is the first element. Secondly, I’d like to thank all of you for joining us your questions that were very relevant. The sector is going through a transformational moment and the regulatory and legal framework will undoubtedly have many impacts in the coming months and over 2026, some regulations will be necessary. But I think that we are moving forward with some structural changes. We have some positives, some not so good things, but we are moving forward. And I always stress the price signaling.

If we have adequate price signaling, that’s the best way. Whenever the government chooses certain segments or categories, I think that this causes future long-term deleterious effects. And we’ve seen this not just in the energy sector, but in several sectors. Once you give players benefits to remove them, it is very hard to remove them. And I’d like to close with the elements here on the T-shirt, it’s about the culture, the cultural transformation that we are living at COPEL. As I mentioned on the 19th, we will share with you these elements about our culture, our ambition, our bold ambition, one that is relevant value generation, value creation for the company. Myself, all of my partners and all [ COPELLIONS ] are enthusiastic and very engaged with this new moment of COPEL, a moment that we are building together.

We are building together a company that is and will continue to be a big benchmark in the Brazilian energy sector. Thank you very much. Have a good day.

Operator: COPEL’s video conference call is closed. Thank you very much, and have a good day.