Good afternoon, ladies and gentlemen. Welcome to Companhia Paranaense de Energia, Copel's conference call to discuss the results of the first quarter of 2022. This call is being recorded and the replay may be accessed at the company's website, ir.copel.com, where the presentation is also available for download. All participants will be in listen only mode during the conference, and later, we will have a Q&A session when further instructions will be given. Before proceeding, we reiterate that forward-looking statements are based on the beliefs and assumptions of Copel's management and on information currently available to the company. Such statements may involve risks and uncertainties as they refer to future events, and therefore depend on circumstances that may or may not occur.
Investors, analysts, and journalists should take into account that events related to the macroeconomic environment, to the industry and other factors may lead results to be different from those expressed in such forward-looking statements. Today with us, we have Mr. Daniel Pimentel Slaviero, CEO of Copel, and Mr. Adriano Rudek de Moura, CFO of Copel, and other officers of the company and of subsidiaries as well. Now, I would like to give the floor to Mr. Daniel Slaviero. You may proceed. Hello, good afternoon. I thank you very much for participating in our video conference.
I start the presentation with the pleasure of sharing the delivering of another quarter with sound operating results, and where I highlight the record BRL 1.5 billion EBITDA, representing a growth of over 12% quarter-over-year, and a net income of BRL 670 million and a powerful cash generation of BRL 1.5 billion. Even without the extraordinary effects, which practically didn't change our data, we had the best result of the company's history for a third quarter with BRL 1.46 billion. We started well the year, but we are aware that we have challenging months ahead of us because of the macroeconomic situation, the hike in interest rates, and also the commodity prices.
These results encourage us to further our strategy with the main object of creating value for Copel, for shareholders, our clients, and all stakeholders. Before going to the next slide, I would like to highlight that in line with the proposal of the company's management and our dividend policy, we approved at the last shareholders meeting the payment of BRL 1.7 billion in earnings to shareholders to be paid by the end of July this year, referring to the remaining balance of BRL 3.1 billion of dividend referring to 2021. The highest dividend ever paid by the company and with a dividend yield of a little bit more than 16%. In this sense, the results reflect the materialization of many aspects of our strategy.
The first one with the discipline in the company's cost management focused on operating efficiency in all businesses, and we posted a reduction of almost 6% in PMSO net of the effect of provisions and reversals. The intensive investments, especially in the Copel DIS grid, which reflect the improvement in the services delivered to our clients, the increase in the regulatory remuneration base, and they can be confirmed with the evolution of our results, which represent a performance of 19.5% higher than the regulatory EBITDA. All this has been leading to a significant improvement in the services delivered to our concession area clients. I would like to mention that we have already seen the results of the Vilas Wind Complex with BRL 21 million EBITDA already in the first quarter.
Besides, in line with our commitment with the impeccable execution of our startup schedule of our project, I would like to inform that at the beginning of April, as we said to the market, we started up the first generating units of the Jandaíra Wind Complex in Rio Grande do Norte. This complex has 90 MW of installed capacity and will be in full operation at the beginning of the second half of this year. That is to say, over two years before the deadline of the delivery of the sale to other concessions or other utilities. This project reinforces the company's strategy of sustainable development for diversification of the portfolio by means of renewable sources and a significant improvement in the energy sold by Copel Mercado Livre.
We saw an improvement in the GSF, which was 95%, marking the end of the hybrid crisis and contributing to the improvement of the results of Copel G&T, almost BRL 1 billion also in the quarter. Lastly, I would like to mention all the work that we have been doing regarding the open innovation program. We have the Copel Volt in place, and on May 31, we will be holding a major event to introduce the 5 startups selected in the concept tests in the different sources, electromobility, metering of consumption, energy sale platform, energy efficiency among others. The program has the objective of bringing the company closer to the innovation ecosystem, bringing solutions that might improve the services delivered to our clients.
Now going to the end of my part of the presentation, I would like to reinforce the priorities that we have for the next few months. First, we have been saying over the last few calls that the process is in the final phase of the renewal of concession by the agency. The updated information that we have is that it is already in the hands of the State Attorney's office in the state of Paraná for the final evaluation of the contract. We expect to sign this renewal in June 2022. Also, we have our eyes turned to the June transmission auction, and we have already signed a partnership with a major and very renowned company in the sector. We will be forming a consortium with Copel, having a stake of 49%.
As the lots are too big, with a CapEx of approximately BRL 5 billion lots 1, 2, and 3, we understand that it is strategic to have a first-class partner. To conclude, in terms of M&As, with the low leverage of the company, we believe that in spite of the challenging market situation, especially because of the interest rate and the commodity prices, we still consider there are some good opportunities in the market. Especially, our focus is on brownfield opportunities, and we are evaluating the renewable segment always with capital allocation discipline. All this based on the highest possible governance levels of the Copel Group, trying to align the company to the best practices in the market, increasing transparency and improving the decision-making process on the part of the management.
We like to say that in the last quarter of 2021, Copel migrated to level two of the B3 governance, and this is an important legacy for the company. To finalize my part of the presentation, I would like to highlight the new advancements in sustainability, which permeates our whole strategy. This week, we signed the commitment for the adoption, the implementation of the stakeholder capitalism metrics, and this is an initiative by the World Economic Forum. We understand that stakeholder capitalism takes into account the needs of all stakeholders involved and also society in general, and not only the short-term results. This is a very effective manner to create corporate value in the long term and tackle the social priorities already consecrated in the SDGs. The objective of this work is to establish global metrics that may be measurable and palpable.
In this group, there are 180 companies from the whole world and from Latin America, only five, and Copel is among them. This was headed by the Sustainable Development area of the company and which is responsible for implementing and tackling ESG. We are very happy and very proud of the fact that Copel was the only company in the sector that participates simultaneously in the three B3 indices, ISE, ICO2 B3, and GPTW B3. The company was recently recognized by the Fourth Forum of Brazil and the State of São Paulo as one of the 100 most important companies in the mobility sector since 2008. We have an electric railway with 700 km from Paranaguá on the coast to Foz do Iguaçu.
Just to conclude, I would like to mention that all these facts reflect the commitment by the management to the highest standards of transparency, as I said, and ESG, aiming at strengthening the pillars of the company for serenity and sustainable growth of our businesses. Now Moura will be getting into the details of the first quarter.
Okay.
Thank you very much, Daniel. Good afternoon. I thank you very much for participating in our call. We are very pleased with the publication of another quarter with historical results. Besides the adjusted EBITDA growing over 12% vis-à-vis last year that Daniel has already highlighted, I would like to mention the significant operating cash generation that exceeded BRL 1.5 billion in this quarter, already reflecting a significant improvement in the Brazilian hydrologic scenario with a lower need to buy energy, besides many other factors that also contributed for the improvement of this result, the growth in the grid market of DIS, a higher revenue in the remuneration of transmission assets, and also a consistent plan for cost reduction.
With that, we closed another quarter with a sound financial position and a cash balance of approximately BRL 4 billion. In relation to the net income, BRL 650 million, in spite of the growth of EBITDA of almost BRL 160 million compared to the first quarter of 2021. The increases of inflation and the hike in interest rates negatively affected the cost of debt and reached almost BRL 350 million, a growth of approximately BRL 180 million compared to the first quarter of 2021. We also saw a reduction in the financial results of almost BRL 130 million, referring to the financial result of the debt that the state had with Copel, with the CRC of over BRL 1.4 billion that was remunerated at IGP-DI plus 6.65.
This debt was totally settled in August 2021. Lastly, we are recognizing a higher part of the depreciation, about BRL 63 million in the quarter, mainly because of the effect of the renegotiation of the GSF, which started to be amortized according to the remaining area of concession of each one of the plants that benefited. One final remark about that. You can see that the non-recurrent items were not relevant in this quarter, so both the EBITDA and the net income reported and adjusted are practically at the same level. I would like to remind you that the results of Copel Telecom that were part of the 1Q 2021 results have already been excluded for a better basis for comparison. Now going to the next slide.
I would like to highlight the evolution of the EBITDA between the first quarter of 2021 and 2022 with the contribution by each one of the businesses. As you can see, of the BRL 159 million of growth, GET contributed with most of that, BRL 137 million. DIS, BRL 45 million, with a negative impact of UEGA, BRL 40 million, due to the reduction in the level of dispatch. In the case of GET, the improvement in the hydrologic scenario, as we said before, reflected a net GSF of 95 compared to 89 one year ago, increased the result of the purchase and sale of energy from BRL 778 million to almost BRL 800 million, and already showing a positive trend for the remainder of the year.
I would like to highlight that the increase in the remuneration of transmission assets, besides improving the results of our own assets of GeT, also helped in the equivalent or the equity income of the controlled companies or subsidiaries. This is also a positive trend for the remainder of the year, considering the expectation of the increase of IPCA and the consolidated results of the Vilas Wind Complex that are already part of GeT since December 2021 and the reduction of the PMSO. At this, we are maintaining the regulatory efficiency of about 20%, although we have recognized in the first quarter of 2022 an increase in the provision for civil and labor lawsuits of approximately BRL 30 million, as well as a net complement of BRL 18 million in the PCLD that we believe are one-off and that were offset by other cost reductions.
Another remark about the PCLD, in spite of the increase of BRL 18 million, the level of delinquency at this continues within the normal range, below 1.5%. In spite of that, we monitor this very closely. In relation to the increase in the grid market, 5.8%, I would like to mention that the growth was much higher than the national average, with a growth lower than 1% in the first quarter. Getting into more details, we see a strong recovery in the commercial sector in the state of Paraná. 12% increase. Residential also 7.5%.
If we consider the effect of the compensated energy and the consumption of the medium and micro generation practically doubled in the third quarter from 2021, from 207 GWh, the net increase of the grid market was 4.2, still very good considering the national average. Highlighting our three main businesses, GeT practically reached BRL 1 billion in EBITDA, almost 70% of the total strong growth, 11%, already considering the consolidated results, including UEGA, reducing the EBITDA of BRL 34 million in 1Q 2021 to a negative of BRL 6 million this year because of the low dispatch, as I said. Just as a reference, without the impact of UEGA, the growth would have been 15%.
A very strong growth based on the execution of a consistent strategy for energy efficiency improvement and cost reduction, conclusion of project, new acquisitions, and mainly efficient management in energy commercialization. With this, expressive growth over 13% for the reasons that we have already mentioned, getting close to an EBITDA of about BRL 400 million in the quarter, slightly lower than that. We're very confident in the maintenance of this level of regulatory efficiency around 20%. We continue to be focused on the execution of the strategy for the continuous improvement of operating efficiency. That is very successful. Copel Mercado Livre continues at the top of the largest commercialization companies in Brazil, with a strategic importance in the commercialization of energy in the Copel Group, with a strong potential for sustainable growth, capturing or tapping into opportunities for the bigger opening of the free market.
In terms of results, same level of last year, undoubtedly a more challenging year considering the higher volatility in the prices of energy. In PMSO, I'd like to highlight the reduction of costs with personnel and management. Currently, our biggest manageable cost that reduced and consolidated almost 9% year-over-year from BRL 390 to BRL 280, basically due to the reduction of 636 employees in the year by means of PDI, voluntary dismissal. This reduction more than offset the increase in the negotiation that we had of 11% in October last year. In M&S, we are maintaining the levels of 21% in spite of the inflation in the period.
The main negative impact that referred to was the provision for civil and labor lawsuits besides the increment in PCLD debt, this with an increase of about BRL 50 million in the quarter. Out of these provisions and reverses, we see a drop of almost 6% in the consolidated PMSO. Before we go ahead, I would like to mention that efficiency improvement cost reduction are pillars of our strategy, and we will continue to seek opportunities by means of investments in new technologies, review of processes, and tools, and prudent investments in this that might bring about cost reductions such as Paraná three-phase and intelligent or smart meters. I still see improvement opportunities. Now, about the investment program.
We continue to comply very strictly with the plan, both physical and financial, including with the bringing forward some projects such as the Jandaíra Wind Complex that Daniel has already mentioned. In spite of inflation, we should continue on budget. The budget approved for 2022 that could reach BRL 2.067 billion. We have already invested in the quarter BRL 560 million, and we are focused on the conclusion of the GeT project. The main one is Jandaíra. Prudent investments in this, that all by itself has already invested almost BRL 500 million in the quarter of the total BRL 1.6 billion for 2022. Just reminding you that the investment estimated for 2022 does not contemplate new business opportunities that we are analyzing with the necessary discipline, analyzing the IRR and also being followed by the investment committee.
Just to finalize before we go to the Q&A, I'd like to remind you that we have the evolution of leverage that continues around 1x. With this low leverage, we still have the impact of the non-recurrent results of 2021, such as the sale of the telecom and the renegotiation of GSF and the settlement of the CRC last year that occurred in the third quarter of 2021. Net of the effects, the adjusted leverage would be higher than 1.5, but below our reference for the ideal capital structure, that would be around 2.5 times, as we said many times already. We continue to monitor the opportunity so that we may reach our objectives, always considering the drivers of our investment and dividend policies. As Daniel said, we are evaluating opportunities for M&A, preferably brownfield, still for this year.
By July, we will be paying BRL 1.7 billion in dividends and interest on equity already approved by the shareholders' meeting, and that will certainly affect our current leverage. Lastly, we have no exchange exposure of our debt, and the maturities are very well diluted and according to our financial capacity. Once again, thank you for participating. Now we can start the Q&A. Thank you very much. We will start the Q&A session now for investors and analysts. Should you wish to ask a question, please write your name, your company in the Q&A field. Please stand by while we wait for the questions.
Our first question comes from Lucidio Pagnusati.
Lucidio Pagnusati. What about future dividends? What is your projections regarding future dividends? Hi, Lucidio. According to our policy, and Maura referred to it is linked to the cash flow capacity, the available cash flow, discounted. Dividend, investment discounted lower than 1.5, the payout would be 75%, and between 1.5 and 2.5, 50%, and higher than that, 25%. That is a mandatory one. Our leverage net of the extraordinary effects is already around 1.5, 1.6. We believe that we are going towards 2.5, and the ideal thing would be for us to stay within the parameters of the policy itself with a target dividend of 50%. Let's say there is an excellent opportunity that justifies any move. Anyway, we are going towards 2.5 with 50% payout.
In the short run and in the medium run, we have no payment of extraordinary dividends, so we have to leave this for new deals, opportunities and other M&A opportunities that we are analyzing. This will bring very good results for the company and for our shareholders. In order to ask a question, please write your name and your company name in the Q&A field. Good afternoon. Congratulations for the result. I would like to know about the sale of Companhia paranaense paranaense de G á s. Do you believe you will be able to start the process still within the first half? You also said that Companhia Paranaense de Gás should have the concession renewed in June. Are you going to sell your stake in 2022? This is an excellent question. The name of the analyst was not mentioned. The renewal has to be organized.
It's taking more time or taking longer than we would like because of the legal requirements on the part of the agency. The 30-year renewal and the 21 and the grant bonus and other general investment conditions and caps, CapEx around 2.5 are going to be presented by the powers that be. The information that we have is that the process is already in the hands of the state of Paraná attorney's office for the final review, and we expect to sign it in June. After the process is finished, then we estimate around 180 days to organize an auction. That will be an auction at the B3 to sell the 51%, the controlling interest that we have in Companhia Paranaense de G ás . We believe it could be possible still in 2022. Let's say the approval of the sale.
Of course, we need to have the approval by a simple majority by the Paraná Assembly, State Assembly. No later than the first quarter of 2023, we believe this will be done because our focus is on the core business. We intend to leave the businesses that are not energy generation. Our core business is to generate, to distribute. We believe that we have the capacity to generate better returns for the company, for our shareholders by focusing on our core business. Mr. Mateus Nascimento, what about the date of remuneration that should come before July 2022? I congratulate you for the results. Moura, could we talk about the date and answer the question after?
Mateus, what was approved was payment up to July this year, the end of July, and we are making our best endeavors to bring this forward a little bit. We don't have a final date yet. We are going to submit this to our board of directors during the next meeting to validate this, but we intend to bring this forward. In order to ask a question, please write your name and your company in the Q&A. Leandro Batista, with a hike in interest rates, is there a negative impact for the company? Thank you. Mateus was asking the ex-date would be May 2. They have already started to be negotiated. Leandro, unfortunately, there is a significant hike in the Selic and the CDI 12.75%, and they are already impacting our results. BRL 183 million increase in the cost of debt.
We believe that this is stabilized unless there is a significant change on the part of the monetary authority, the central bank. Unfortunately, there is a significant impact because all our debt are based on the Selic or the CDI. As was said, we have no dollar debt or euro or any other currency. Our only debt is in real. This protects the company to an extent. Matheus Lyu, shareholder. Electric mobility. Are you preparing yourselves for this revolution, 5G and the smart grid? Okay, but what about infrastructure for electric mobility? I wish you all the best success. Matheus, there is no doubt whatsoever that electric mobility is something that is coming at great strides in the country.
We always try to reinforce our innovation spirit, and we were the first distribution company to make a corridor of electro ways over 700 kilometers connecting Paranaguá to Foz do Iguaçu. In this endeavor of Copel Volt, we are dealing with startups that are developing electromobility so that we may extend this to the north. Or we have no doubt whatsoever that this will be part of our strategy, our road and development strategy on the consumption side, because you will have a whole fleet of cars and buses and trucks in the future that will be hybrid first and later on, totally electric. You need a very robust infrastructure. This is why. This is our position always. In terms of the infrastructure, the chargers, et cetera, we are analyzing specific opportunities that could be monetized, so to say.
The infrastructure itself, be it by Copel or any other partner in Paraná, will be giving support to this trend in electromobility. I would like to remind you that in order to ask a question, you should write your name and company. Rafael Teixeira. In the CapEx investments, do you intend to invest in biomass generation? Bertol, could you answer?
Good afternoon, Rafael.
Good afternoon, Rafael. This is a very important question because it is part of the expansion of electric energy supply and the electric planning of the PDE by the ministry, the expansion of biomass. Copel is also looking at all generation segments, namely, as Daniel said, wind, photovoltaic. We are also structuring or studying the possibility of biomass, both sugarcane bagasse, as well as urban waste. The opportunities does exist, and we are studying all the opportunities for the expansion of energy generation, as well as Copel Geração e Transmissão investment strategies according to the guidelines of the group. Alyson Tostes. Net income of the first quarter was under pressure because of increase in costs and expenses. What do you intend to do regarding your operating expenses and costs? Alison, it was not the increase in operating costs in the company.
On the other hand, quite oppositely, we reduced our PMSO, dropped 6%, and the payroll cost, which is the highest one, dropped by 9%. This was all because of a major program that we had in place, a voluntary dismissal program, what we call PDI. Over 600 people left the company. The company or the group has less than 3,000 direct headcount for the first time. This issue of cost reduction and efficiency increase is a very important part of the company. We can do this not to the detriment of the quality delivered, quite the opposite. What we had was an increase in financial costs. The first one was because of the debt restatement, because of the increase in the interest rates. As was mentioned, the CRC account.
The CRC was a debt that the government of Paraná had with the company. At the time when it was renegotiated, I think it was 2014 or 2015, the rates were very attractive. With the possibility on the part of the debtor to make the prepayment, and this is what they did. From our viewpoint, in spite of having lost this financial revenue, have the money in cash, and the money can be invested in the project that we have. We believe it was quite adequate from. If you analyze, your concern is our concern. We must have a very strict control over our costs, mainly with the two-digit inflation impacting all the services and the labor and all the materials.
We believe that from now on, there might be other programs for the voluntary dismissal, but not as big as the ones that we had. They would be more specific, more directed to certain areas where we might have carried out some actions. On the macro side, the investment plan, as was said here, has this as the objective. When you make a strong investment in, such as the ones that we have been making, you have three benefits. You improve the services to our customers, it improves the regulatory asset base, and it reduces costs, mainly when you implement a smart grid, when you have remote operation, so you don't need to have people carrying out the reading and more human intervention. In the case of G&T, with artificial intelligence in the substations and with the remote and centralized operation, you can save a lot.
We are unifying all our operations of GeT, bringing everything to one single command center in Curitiba. It was already unified, but this is going to be very close or closer to us. Just to conclude, we have been building a relationship with third parties and outsourcing a few things that can be more efficient if done externally than in-house. Wagner Johansson, how will you be using the funds from the Compagas sale? Not yet. We do not have the final calculation about the minimum price, and I do not believe that we will have the premium that we had in the sale of Telecom, but some kind of interest will exist for a gas distribution company in a market that is being opened.
In a state such as Paraná, the only certainty that we have is that we will not be investing in energy. That. We don't know whether this is going to be in transmission auctions or in the increase in our commercialization, but it will be in the energy business. This is the guideline of our strategy. Flavio Veles and Matheus Nascimento, what is the projection for your generation matrix? Will you be keeping the thermal one? According to the last quarter of 2021, you talked about investments in sustainable energy. What is the target to develop this matrix in percentage terms? What about the project for the startups? Thank you, Flavio. Thank you, Matheus. I'm going to answer part of the question that will add to what I say. First of all, our matrix is totally renewable, 87%.
In the last few years, we have been making a very big investment in pure renewable energies, or namely wind. With Jandaíra in place, we will have 13% of our generation from this source. Our objective for 3-5 years is to have at least 25% wind and solar, which are pure renewable. Thermal, well, there is a very good debate that is going on, and we are dealing with that in the company, and one of the major external consultancy companies in the country is working with us in order for us to build our vision for Copel 2030. We have already said this during the last call, and by the end of the current year, we expect to be able to bring our vision, and this is an ongoing discussion. Gas certainly will be important for the energy matrix of the country.
As a country, I have no doubt whatsoever that gas will continue to be very important. If Copel wishes to have a stronger position or a bigger footprint there besides Araucária, this is a discussion that is still ongoing. We already have a plan that last year, as a supplement of our portfolio, it was really strategic. It was very necessary for the results that we delivered in 2021. There will be an auction, a capacity auction at the end of the year, and we have the condition to participate in competitive conditions. It will depend on the geopolitics of the world, and we're still evaluating this, whether we're going to expand or not. Regardless, at Araucária TPP or UEGA is an excellent asset, and we intend to participate in the auction to have a middle and long-term supply.
Just to conclude the innovation part, we are very enthusiastic about the program because it really brings us closer to innovation and to the startup world, so to say. We have been very much linked to generation and distribution in terms of research and development. This has or gives us the opportunity to improve our services and our operating income. The first ones selected will be presented to you on May 31, and this could mean a partnership or service contract or even a new investment. On the 31st, our new businesses area, which means of Cássio, who is the officer, we will get into phase number 2 to bring new options on board, new companies to the Copel ecosystem.
Please stand by. We are waiting for new questions. The Q&A session has come to an end. Daniel Slaviero will make the closing remarks.
Once again, I thank you very much for your participation, analysts and investors, in our call. We're very happy to deliver another quarter of sound results in all the business areas, and a special highlight is Copel DIS. Distribution, also the maintenance of Copel as the biggest trader in the country. Of course, we have to continue to be very careful because the year is very challenging, the macroeconomic situation and the situation not only in the world, but specifically in Brazil, are challenging. We have to continue to have austerity, which is one of the guidelines of this management. We will continue to contribute to the development of energy generation and also delivering better services to our customers and bringing benefits to our shareholders, to the company, to society in general. We are very happy with everything that we have been doing.
We have our eyes turned to the future as well because we believe that it will be a new cycle that will start as of 2023. Thank you very much. I thank all our colleagues here, the colleagues of the holding company subsidiaries. I thank all our people for the results delivered during this quarter. Copel's conference call has come to an end. Thank you very much for your participation. We wish you a very good day. Thank you.