Good day, ladies and gentlemen. Welcome to Companhia Paranaense de Energia Copel's video conference to discuss second quarter 2023 results. This video conference is being recorded, and the replay can be accessed on the company's website at ri.copel.com. The presentation is also available for download. Please be advised that all participants will be in listen-only mode during the company's presentation, and then we will start the Q&A session when further instructions will be provided. Before proceeding, I'd like to mention that forward-looking statements are based on the beliefs and assumptions of Copel's management and on information currently available to the company. Forward-looking statements may involve risks and uncertainties since they relate to future events and therefore depend on circumstances that may or may not occur.
Investors, analysts, and journalists should understand that events related to the macroeconomic environment, the segment, and other factors could cause results to differ materially from those expressed in such forward-looking statements. Presenting this video conference are Mr. Daniel Slaviero, CEO of Copel, Mr. Adriano Rudek de Moura, CFO, as well as officers of the subsidiaries, who will be available for the question and answer session. I would now like to give the floor to Mr. Slaviero, who will start the presentation. Mr. Slaviero, you may proceed.
Hello, good afternoon. I would like to thank all of you for participating in our video conference call. It is with great satisfaction that I start the first earnings conference call of Copel as a private company. It is, and I believe that the government of Paraná led this process in an irreproachable manner.
From the presentation of the bill of law and the Legislative Assembly of Paraná on November 21st of last year until today, it has been exactly 38 weeks. In this period, we have overcome numerous challenges, but we have always been clear in our minds that this model, that of a corporation without a defined controlling shareholder, with the state of Paraná having a golden share that guarantees minimum investments in distribution and the consequent renewal of its three largest plants, was indeed the best path for the future of Copel. I would like to deeply thank everyone who participated in this process. The board of directors, the management, Copel employees involved in the matter, all the legal and financial advisors, and Ernst & Young, who coordinated the entire process.
The result was the pricing of the offering in the amount of BRL 8.25 per share, a 0.5% discount from the screen price on August 8th, the day of the closing. If we consider the performance of the shares since the launch of the offering on July 24th, performance was 5.7%. The shares were in high demand. We have even seen in the financial volume after the deal, after the offering, with investors from Brazil and abroad participating. I would like to highlight some numbers so we can understand the size of this process. This was the largest utilities and energy offering in 2023, the second largest offering in Brazil so far, and the third largest offering in the electricity industry around the world.
In addition to being obviously the first state company to be privatized through a model of public offering of shares. Along the whole process, what guided us was a deep sense of responsibility and purpose towards the company, towards our state of Paraná, but also towards the country. We know that what we did here will be an example for other companies belonging to states that want to follow the same path, just like Eletrobras was an inspiration for us. Next slide. Now that the transformation process into a corporation is completed, our absolute focus now lies in the execution. We have clear in our minds what the priorities are and the action plan for each one of these priorities. I will now list the main verticals, the main items in our short-term agenda.
Let's start with our biggest asset, the people, our people. It has been included in the collective bargaining agreement with employees and the union signed in January, the launch of a voluntary dismissal program, so that employees who do not want or do not wish to continue with the company in this new phase, have the right to leave in the best way possible. This program will be launched next week. Until the end of September, we'll know exactly the amount of people who will join the program. Still, on the topic of people, our people, we have a second point in mind, which is to retain, attract, and develop talent.
Our priorities is that the current talents that are with the company, that are part of our history, will not leave Copel. We want to show that we are part of a winning company and that will play a leading role in the electricity sector. momentarily. Well, after that, we'll need to structure a process to attract and develop new competencies, which will be necessary for us to face the challenges of the industry. All of that will lead us to develop a new Copel culture. In other words, we'll get what is good in our current culture, and we'll improve it. Copel does not need any revolution, but it needs constant and perennial evolutions.
To end, we will certainly seek the best and follow the best of market practices in terms of long-term incentives, and we will deploy this in the right time. A second strategic movement that we will start tomorrow is to revisit the role of the holding. We don't want just to have a financial holding, let alone an operational one, but we want to have a streamlined and strategic holding that will set the guidelines and control the businesses.
This work will be followed by a large external consulting firm to help us analyze the best market practices, both in terms of structure and fiscal efficiency. Moving to the third vertical, that of operating efficiency, I would say that this is where we are going to devote most of our time in the short term, in the next weeks and months, because a private company, without the ties of a state-owned company, can be a lot more efficient, and we will seek opportunities to reduce costs. This will be followed by a zero-base budget program that will be conducted by Moura, as the CFO, with involvement of all of the officers of GeT, Copel Distribuição, Copel Comercialização S.A., and the holding. As regards improvement of our trading strategy, here, I believe that we have good opportunities.
In March of this year, already with the mindset of a corporation, we unified our energy planning areas of generation, distribution, and trading, which used to operate in an autonomous fashion. We can already feel the benefits of this integrated operation, which is being led by Moacir Bertol , our colleague here in the board. Now, the moment is to evolve how we trade energy, increasing our sales force, improving customer service with personalized products, and adding services, aiming to increase loyalty and profitability. All of that, so we can prepare for the inexorable market opening, when we're going to have low power prices, which in our view, is momentous. This is what we have been dealing with in recent years. In terms of 2024, this is the reality that we will need to face.
This opening and the preparation of Copel to serve customers will not happen without a digitization shock in our processes, customer service, and particularly to serve the customers who will migrate to a free environment. This is our vision for this area. To end, what sets apart companies that generate value in a perennial and long-term fashion is the way in which they allocate capital. This is undeniable, and I would like to stress for everyone that we at Copel, the management, the board of directors, we will be very, very disciplined in this area, seeking only investments that will add value to the company. Growing for the sake of growing is not the strategic objective of this company. What we need is to create value.
Having said that, once we renew the concession of our three largest plants, our priority continues to be investments in distribution. We will make relevant investments to end this cycle with great growth in our BRR. The current, the current market moment, another thing to point out, the current market moment does not show great opportunities in the sector, but our team continues to be attentive in perfecting our process to identify and analyze opportunities, not only through our investment policy, not only through processes, but also with our dividend payout policy, which is a relevant part in terms of the value creation structure, and Moura will speak more about that.
Moving towards the end of my part, in parallel, we'll follow a divestment plan of Compagas and Araucária planned, both for strategic reasons, either due to a focus on energy or due to the decarbonization plan of the generation matrix, which is our 2030 vision. We intend to complete such divestments until the first quarter of 2024. To end this part on capital allocation, I'd like to stress, as mentioned before in our calls and advisories to the market, that Copel launched a corporate venture capital of BRL 150 million. This, coupled with our open innovation programs, Copel Volt, will be a relevant source of contact with startups-... will be opened and to innovations and new opportunities in value creation, and this will boost our relationship with an innovation which permeates all of our businesses.
On my part, just one last slide, I just want to mention the ownership structure post offering here, considering the supplementary a lot, the golden share. We can see here the share of the state of Paraná and the share of BNDES. What I would like to point out here is that we are absolutely certain that the new shareholders, both Brazilian and international shareholders, that joined the current investor base of Copel, well, they all have a wide knowledge of the electricity sector, and in our view, they have a long-term view, they will help us take Copel to a whole new level, a level of efficiency among all companies in the sector.
I would like to underscore here my feeling and the feeling of our team, that mission was accomplished in terms of finalizing the offering. Like I said in the beginning, we did this with the great responsibility of delivering value creation in a consistent and perennial way for our employees, investors, and all Copel stakeholders. This earnings conference call marks the beginning of a new era for our Copel. Moura, over to you.
Thank you, Daniel. Good day, everyone. I would also like to thank all of you for participating in this historical earnings call, which indeed marks the beginning of a new cycle, where all of us here in the Copel team have the responsibility and the commitment with an impeccable execution, as Daniel mentioned, in this very positive agenda. Just to highlight the four pillars, we spoke about people first, the role of the holding, operating efficiency, and capital allocation. Our priority, as of now, is to deliver gradually and consistently, quarter after quarter, the results that we promised. As regards, specifically second quarter earnings, I'd like to highlight a relevant cash generation of BRL 1.5 billion, up 3.1% over Q2 2022, about BRL 50 million more. We had EBITDA efficiency of Copel DIS of 16% in the last 12 months.
On the other hand, in terms of IFRS, we had a relevant negative impact in correcting the base of GET transmission contracts and the controlled companies jointly through equity income. This effect was BRL 260 million due to the reduction of IPCA index in the comparison of Q2 2022 and Q2 2023. It's good news that ended up impacting the base of transmission contracts, and this is just an accounting effect with no cash impact. I also highlight the adjustments of RAP of transmission companies to BRL 1.6 billion, up almost 14%, and that starts having an impact on the integral cash as of Q3. Considering the hydrology scenario and the lack of expectations of Araucária Plant dispatching, we recognize an impairment adjustment in the order of BRL 150 million.
On the next page, we have the three financial KPIs, EBITDA, adjusted net income, and cash generation, which reflect basically the highlights I've just mentioned. An accounting impact on the transmission assets of BRL 260 million, explaining basically the whole EBITDA reduction in Q2 of BRL 1.5 billion, down to BRL 1.28 billion, a reduction of BRL 220 million, which was partially offset by other positive results. Adjusted net income of BRL 485 million in Q2 2023, without the impact of the Araucária Plant impairment of BRL 150 million, which I mentioned, and the reported net income will be BRL 308 million.
Let's remind you that in Q2 2022, as you can see, we reported a consolidated loss of BRL 522 million, given the reversal of PIS COFINS amounting to BRL 1.2 billion. Without this impact, net income would have been BRL 667 million in Q2 2022. Cash generation, I mentioned BRL 1.5 billion, almost BRL 50 million lower than last year. Year to date, BRL 2.6 billion. Comparing with the second quarter, there was a negative impact of about BRL 200 million. Given the ACT, the collective bargaining agreement, that was completed in January, including an indemnification of almost BRL 140 million, given the extinction of the benefit of another one-third of vacation that was granted to all employees of Copel, in addition to the already constitutional one-third.
Cash balance in the quarter was BRL 4.5 billion, already considering the funding of BRL 1.6 billion for investments in the Copel DIS , concluded in the month of June 2023. Here, we have non-recurring items. As I highlighted, the main one was the impairment of BRL 150 million of Araucária Plant. In the second quarter of 2022, we had BRL 810 million of PIS/COFINS. I'd like to remind you that in the net income, the impact was BRL 1.2 billion, considering the financial component, which is included in the calculation base. Next slide. Here we see the contribution of each business, highlighting once again, this with a relevant improvement of over 30% in EBITDA. BRL 100 million of contribution.
I highlight the growth of Parcel B, due to the growth of 2% in the great market and the readjustment of 16.5% in TUSD. Here, considering energy compensated of MMGD. In the GET, of the BRL 307 million drop to BRL 160 million, are the effect of the remuneration of transmission assets, as I highlighted. The positive side is a result of the acquisitions of Aventura Santa Rosa and Mundo Novo complexes, acquired on January 1st of this year, and the start of operation of the Jandaíra complex in October of 2022. Also, we had greater generation in other wind farms of around 8%-9% compared to Q2 2022. At Copel Mercado Livre, a increase of 11.3% in EBITDA compared to last year, essentially, given the better trading margin.
We also had an, an, a mark-to-market adjustment of BRL 22 million, which were excluded from this adjusted EBITDA. To end this part and moving to the next topic, I would just like to stress what Daniel has mentioned. Copel Mercado Livre has a relevant strategic importance in the trading of energy for the Copel Group, and it has a great potential of growth with the opening of the free market. Moving to PMSO. Here, I would like to highlight three impacts. First, the increase in variable compensation, PL, PLR and PPD. In Q2 2022, they were practically zero, given the reversal of the provision for PIS and COFINS, amounting to BRL 1.2 billion in that quarter. The increase here is BRL 63 million.
Second highlight, a growth of BRL 165 million in provisions, basically due to impairment of BRL 150 million of Araucária Plant, as mentioned, and there's also a provision for regulatory litigation referring to MCSD calculation, around BRL 17 million. Thirdly, an increase of almost BRL 40 million in third-party services. In the test, as a part of this, BRL 21 million referring to maintenance of the electricity system, and the difference in GET is due to increased maintenance costs, given the new acquisitions, Aventura Santa Rosa and Mundo Novo wind complexes.
Another highlight in the personal line item, neutralizing the effects of provisions and reversals of PPD and PLR, and considering accumulated inflation by INPC of 3% between Q2 2022 and Q2 2023, there was a reduction in real terms of 1%, despite salary adjustment of around 7% applied in October 2022.
There was improved efficiency and/or improving efficiency, and cost reduction will continue to be strategic pillars with clear and objective targets for the whole group, particularly starting now. As Daniel mentioned, we have an action plan underway, which will be part of next year's budget. Talking about CapEx. Until June, we have invested BRL 1.1 billion of the BRL 2.2 billion approved, totally in keeping with the physical and financial schedule. In this, the focus continues to be Paranatóri phase against Smart Grid, which will bring benefits in terms of reduced OpEx. At the GET, investment focus are to reinforce and improve transmission lines. Here, just 1 additional comment.
I'd like to remind you that the acquisition of wind complexes in the beginning of the year are not included in this expected BRL 2.2 billion, not even the concession bonus of BRL 3.7 billion, which will paid by year-end, given the renewal of concessions of FDA, Salto Caxias and Segredo. Moving to the final stretch of my presentation. Leverage remained at 2.5 times, despite the acquisition of wind complexes in January 2023, including the respective funding for the acquisition of these complexes, as well as consolidation of the indebtedness of these assets. Well, level of leverage will certainly be reassessed in this new post-corporation scenario by the board of directors, already representing the new shareholders in terms of amortization, annual amortization of our debt. This is totally in keeping with our ability to generate cash. No issues here.
Even this concentration in 2025 is totally addressed with our economic and financial planning. Lastly, with the closing of the second quarter, 2023, in the next meeting of the board of directors in September, we will submit a proposal for dividend payout referring to the first half of 2023, which will follow the dividend payout policy of the company, with payment expected still in 2023. Thank you very much for your participation. We can move now to the Q&A session. Thank you.
We will now begin the Q&A session for investors and analysts. If you wish to ask a question, please type your name and company in the Q&A. Our first question comes from Mr. Daniel Traviski with Safra. He says,
"Could you speak more about PLR, the profit-sharing program, this quarter? Because the levels seem to be relatively high for the quarter."
Hello, Daniel. I think Moura can give you more detail, but this is in keeping with what Copel was already executing for the years prior to 2022. In 2022, as Moura mentioned, PIS and COFINS led us to zero the PLR and the PPD or any type of performance-based compensation. We are just going back to the same level that we had in 2021. I think that there was a year in 2021, then it was kind of very high at the time, but we are basically returning to the average that Copel had from 2019 to 2021. Moura, anything to add? Well, Daniel, and to answer the question by Daniel, there was no change in the methodology.
On the contrary, we are maintaining exactly the same indicators and always working with the base, base one hundred final assessment at the end of the year. The only impact was regarding net income. Last year, it was practically zeroed with the provision for PIS and COFINS, and now we are resuming normal levels.
As a reminder, if you want to ask a question, you can simply type your name and company in the Q&A. Please hold as we collect more questions. Our next question is from Mr. Marcelo Sá with Itaú. Mr. Marcelo Sá, your microphone is enabled. Go ahead.
Hello, everyone. Thank you for the call. I'd like to ask about Araucária Plant and to understand the selling process. I know you were totally focused on the privatization, so this was on hold. My question is, how to make this kind of operation feasible? There is a difficulty in supplying gas when the project is not dispatching it. It generates a negative EBITDA of about BRL 80 million. Do you think that the alternative would be perhaps to try to hire in a capacity auction? Perhaps that would be the way to go, or possible interested party could think about making a move even before the auction, because in a way, they could make the whole structure viable. Thank you.
Marcelo, your point is excellent. Araucária Plant, unlike Compagas, which had the concession renewed, which has an investment plan and some investors interested. Araucária Plant is a more challenging topic. It had a recent retrofit, and it, it enjoys a position in the market close to GASBOL. Which I would just like to go back and say that... This was a divestment process initially led by Petrobras, and then Copel joined. We even have a financial advisor. Araucária was in the process of receiving unbinding proposals. That was around March and April of this year. You will remember that Petrobras itself asked to suspend all divestments for a 90-day period to reassess things.
This period of time is over, like you said it yourself, Marcelo, we were very much focused on the transformation process into a corporation, we didn't focus on that either. The idea is to open a consultation so that Petrobras will answer by the end of August, whether they intend with their divestment program. 18% of Petrobras stake in an asset of 484 mag, is like, a grain of sand at Petrobras. The first question is to them: Will you continue the process initiated by you? If so, which I believe is the best way, great.
If not, Copel will continue on its own. With its 82% share, will or stake, will continue so that we can have a taste in the water to assess the level of investment. We have received not many, a few, consultations about this asset, and some parties are interested, even without being contracted. Of course, if we joined an auction, if we contracted, the return for the company would be better. This is an uncertain scenario because the auction was supposed to be held in October, but then postponed to March. With this excessive supply, I wouldn't be surprised if it's postponed one more time because the whole system is not in need, in need of that. We cannot wait for that, because as you said it yourself, it's 80 million barrels per annum.
Of course, we are not going to be the-- selling this at just any cost.... just like separate turbine pieces. Our goal is to continue with the process so that our target, which, which I mentioned in the beginning, that by the end of first quarter 2024, this process will be concluded. Unless we have an offensive proposal, and then we'll reevaluate. Bertol? Well, our goal is to make the Araucária Plant business viable, that will be attractive for Copel, that will give us a return. In terms of the ability of this thermal power plant, it is a unit with 486 megawatts combined cycle, two gas units and one steam, with an active transmission contract, with connections to the basic grid. It's a TPP that is very efficient.
Given the market scenario, the energy scenario, and the supply and demand balance with a surplus energy, the distribution companies are over-contracted with a surplus of energy. The perspective of dispatching from this plant does not lie in the short term. For Copel's twenty-thirty vision, we will try, and I believe we will be successful in divesting from this plant and focusing on our renewable assets, particularly generation and transmission, as well as in distribution, as Daniel mentioned. We have good expectations. We also have a gas contract with Petrobras. This is an intermittent contract. It is evaluated on a monthly basis, considering exchange variation. As you can see, our price is high, with an expectation of generation. This is our goal, to sell it, but it is an operational asset in good conditions, with good maintenance done.
If we have order from ONS, this plant can start operating. Let me just add to this, Marcelo. Investors who came to us, who approached us, one way or another, they have access to the gas molecule in better conditions than Copel, because we are very much linked to GASBOL from Petrobras via GASBOL. For other investors, there is a better competitive edge. Despite the very short-term challenges, Copel's decision is to divest this asset, this is based on our Copel 2030 plan, which thinks about complete decarbonization by 2030. It makes sense to sell this asset. We have wind farms and solar power, we want to have a generation matrix, which is totally renewable. This is going to have a lot of value for investors and for the market in the coming years.
Daniel, this does not exclude studying to participate in the capacity auction expected for March of next year. Thank you.
Next question from Mr. Francisco Navarrete with Bradesco BBI.
Two questions. First, about the management team compensation plan and also to attract new executives, if necessary, when will it be implemented? The second question: If we do not have opportunities for greenfield/brownfield expansion that will create value, what can we expect regarding payment of dividends?
Thank you, Navarrete. I think you touched on two strategic points, which are part of those four main pillars or avenues. I will start with your question regarding compensation plan. We have advisors helping us with a macro view of these processes. They will help us understand how other companies in the market operate. Of course, when we align objectives with long-term incentives, we create value.
We have to be very careful to send the right signals. I believe that we have a big, big benchmark, which is BRL 8.25 on August 8th. Based on that, well, this is our benchmark. This is the reference for us to create value, and in the right timing, gradually, we will address these points, always taking into account of our governance practices. Now, we have a people committee specifically to deal with this, and we also have to take into account the best practices in the sector. To your question, if we don't have greenfield, brownfield opportunities, considering the investments of Copel this, in spite of being robust and increasing in the final stretch of the cycle, they're still insufficient. They're still little compared to the company's cash generation. Right, Moura?
This is the analysis. If we don't have any opportunities, if the market in general, with this power price, is not pointing to anything very attractive, that will give us. Every time that we understand it's reasonable and adding value to the company, I believe that the way to go is to pay dividends. We have a dividend policy, we have flexibility so that if leverage starts decreasing, right, Moura? We have a leverage. If we have a leverage way below or below what we have today, 2.5 times, up to 2.7 times. If there are no projects in the pipeline, the natural way is to pay dividends, because dividends is also value creation. It's part of our value creation approach, I think that we have a good track record regarding that.
When we are under-leveraged, we say, "Let's get to 2.5 times." We analyze the investment. We also have to take into account the dividend payout policy that will give us a return, a dividend yield that is very much in keeping with practices in this industry.
Our question from Mr. André Silva:
Will dividend amounts be defined in September of 2023?
Hello, André. Yes, as I said, we will be submitting in the next board meeting, that will take place in September, a proposal to pay dividends, which will basically follow our dividend policy. No surprises there. It depends on the results of the first half of the year, I believe we have all of the components ready to submit the proposal.
Definition of payment will be discussed in this meeting of the board, but undoubtedly, this will take place still in 2023. Last year, we submitted the same proposal, and we paid dividends referring to the first half of last year, in November of last year, I believe we should follow the same path. Our policy includes two events per year, two dividend events. Indeed, the first event also refers to the first half. It's normally paid in November, and the second event is paid based on the result for the full year. The difference, considering the approval of the income statements after the general shareholders meeting.
As a reminder, if you want to ask a question, please type your name and company in the Q&A field, and then your company. Please hold as we collect the questions. The Q&A session is over. I would like to turn the floor to Mr. Daniel Slaviero for his final statements.
Well, once again, I'd like to underscore this big event. This is the first earnings call with our investors after the transformation of Copel into a corporation. This is a milestone, not only for the company, not only for the state, but it is a reference for our country and to us, it is very clear we have to deliver. Now, we have to execute our strategic plan that we talked about and that we presented today. Again, that it's not just about the track record of this management, but the fact that we will continue the work that we have been developing so far. We have mapped the times when things will happen, the first steps, and I believe that this is going to give us a lot of agility and speed.
Our officers and all Copelians, all employees of the company, know the company really well, and they know what the opportunities are. On our behalf, on behalf of the whole management team, I would like to acknowledge and thank the whole team for the work. Like I said, this marks the beginning of a new era of Copel. Now, as a corporation, recently established and the best moment of the market. Again, this is ground zero. Our ground zero is August 8. From now on, we hope to generate and create more value for our employees, investors, and for all the Copel stakeholders. Thank you very much.