Good afternoon, ladies and gentlemen. This is Engie Brasil Energia's conference call, where we will discuss the results of the fourth quarter through 2019 and the full year results. Our participants are connected in listen-only mode, and in doing this, we will go on to a Q&A session when further instructions will be given for participation. Should you require the help of an operator during the conference call, please press star zero. We would like to remind you that this conference is being recorded. The presentation follow-up slides will be simultaneously transmitted through the Internet through www.engie.com.br/investors. The slide presentation and the company's earnings release are also available on that website.
Before proceeding, I would like to clarify that all forward statements made during this conference call regarding the business outlook of the company should be treated as forecasts that depend on the country's macroeconomic conditions, on the performance and regulation of the electric sector, besides other variables that are therefore subject to changes. With us today, we have Mr. Rafael Bósio, the Investor Relations Manager, who will talk about the company's performance for the fourth quarter through 2019 and the full year. In doing this, we will go on to the question and answer session. We remind journalists who wish to ask questions that they can do so by email, sending them to the company's press office. It is now my pleasure to give the floor to Mr. Rafael Bósio. You may proceed, sir.
Thank you very much, and a good afternoon.
Now, before we go on to the presentation per se, I would like to mention that our CEO, Marcelo Nauta, and Eduardo Sattamini could not be with us in the call because of commitments that they had that they could not reschedule. Once again, we have the visit of foreign board members. You can see that the year 2019 was a year of a great deal of achievement for the company. On one hand, we had a very volatile energy situation despite the fact that the electrical energy levels were very similar to 2018, but the spot prices tended to differ. We had lower prices during the second and third quarters compared to historical prices and higher prices during the first and fourth quarters when we traditionally have the rainfall period.
But we did have several successes: our share in CAG that's coming into operation, the Pampasú, Umburamas, and at the end of the year, in December, the acquisition of the transmission project Novo Estado Energía. We're going to begin with slide five of our presentation, where we present the financial and operational highlights. You can observe that the net operating revenue for 2019 was a million higher than 2018, a growth of 11.5%. And further ahead in the presentation, we will go into more detail in terms of our revenue, but we can already observe that the growth of revenue was due to the coming into operation of our new plants, Pampasú and Umburana, that came in 2019, Campo Largo, in full operation at the end of 2018. And this was the first year that it fully contributed towards our results.
And also, because of the higher revenues that we have had in transmission in general, the EBITDA had a growth of 18.2%. Once again, because of the expansion in installed capacity and also due to other factors, for example, the contribution of CAG, PAG, an increase in results due to our assets in Jaguari na, and the purchase of energy in our portfolio. In the third quarter, we recognized BRL 321 million, referring to indemnity for a delay in the Pampasú electrical plant. Our net income was practically stable due to an increase in our financial expenses due to the increase in interest and monetary restatement, not only for our debt but also on concessions and a greater depreciation because of the size of our generating complex, besides having to pay a higher income tax and social contribution taxes.
We are going to refer to these in greater detail at the end of the presentation. We now go on to the highlights on slide number six. Since our last release, we draw attention to the acquisition of the Nova Estado Energia transmitting plant that will include 800 kilometers, a new substation, and an expansion of another three in the state of Paraná and Tocantins. We also highlight the BRL 351 million in dividends for CAG, once again arising from profit. And the third highlight of this slide is that we, for the 15th consecutive year, very proudly are part of the Corporate Sustainability Stock Index. On slide number seven, another highlight also linked to sustainability, the renewal of our partnership with Banco Itaú when it comes to CO2 by acquiring carbon credits from the largest cogeneration unit, the UCLA.
And finally, the last highlight, as was already expected, of course, the approval of the proposal for the distribution of complimentary dividends amounting to BRL 950 million reais. Evidently, this will have to be ratified in the ordinary General Assembly, but this proposal enables us to reach 100% of our payout in accordance with our policy, and this despite the ever-growing investments that the company has undergone. We're going to skip a few of the slides, if you allow me. We don't have any significant alteration in our shareholding structure. And thanks to the Nova Estado Energia acquisition, we're adding new lines to this project. And in the map to the right, on slide number 10, you can see the substations that have been foreseen as part of this project.
And we now go on to slide number 14, skipping a few slides as well, where we show you an increase in our stake in the annual allowed revenues that were auctioned between 2003 and 2019. We had a 2% share with Nova Estado. We will now have 5% of the total annual allowed revenue, which means that we are expanding our activities in the transmission sector as was part of our original strategy. When it comes to distributed solar generation, on slide number 15, we show you the consolidated figures of the installed capacity for 2019. And we continue on with the strategy of diversifying our activity in the B2B segment. In 2019, this accounted for 91.4% of the commercial capacity, the installed capacity. We're going to go on to slide number 19 to speak about strategic sales and the commercialization or marketing of energy.
In truth, here we will speak about our contracting until the year 2021, and we're going to update the number of clients with an increase in 2019 of 20 clients, reaching 181. Now, all of this, of course, relates to the next slide, number 20, where we show you the new diversified portfolio. If we compare this graph with what we saw in previous quarters, in the previous year, sales to lead represented 4%. They have now increased to 5.7%. This is the result of being able to capture new clients and releasing some clients. Of course, all of this will tend to become more diverse with the expansion of the market. We're, of course, always there to take up opportunities for new clients.
On slide number 21, the uncontracted energy with a growth of availability for the year 2022 to more comfortable levels as part of our portfolio management to be able to mitigate, attenuate the generation scaling factor impact. And in previous years, we did carry out the sale of energy that will be delivered in 2023, 2024, and as part of our strategy. And in the next slide, you will also be able to observe our energy balance, and you will see that the year 2025 will work with 40.5% of decontracted energy. Once again, there has been an increase in the sales price for the year 2020, 2021, with regard to the third quarter. And presently, we're working with average net price and sales prices for 2022 that had already been closed previously, highlighting that the price sale is about 191 reais per megawatt hour.
When it comes to speaking about expansion, if you could please go on to slide 25, we show you the evolution, the construction of new assets that we present here, speaking about now, even with a drop in generation for the fourth quarter, our generation remains stable vis-à-vis the year 2018. What is important to highlight is the high availability level, which confirms the excellent operational performance of this asset. Speaking about this, in January, we announced that Jirau was the third plant with greatest production in the country after Demo with an uptime operating factor of 99.7%. In the next slide, an update on the Campo Largo wind complex phase two, and the energy here will be geared to the pre-contracting environment. The construction, as you can see, is progressing well, but enables us to hold on to our forecast for the year 2022.
On slide 27, the advance of the Gray Azul transmission system, and presently, we have all of the licenses for installation. The civil work continues, especially for Ponta Grossa, which is the center of the system. This was concluded in September, and we moved forward according to our schedule. We would now like to share with you a slide on the new Nova Estado Energia transmission company. And we communicated to the market the implementation of this project. We will have an additional 1,800 kilometers of transmission, one new substation, and another three existing substations. The close of this operation should happen in the first quarter, well, still during the first quarter. We're now going to move to slide number 31 to speak about our financial performance.
And here you see the evolution for the last four years for our net operating revenue with a growth of 18%, as you can see. And of course, this confirms our very sound financial performance. In the next slide, you will see in greater detail the evolution between 2018 and 2019. Net operating revenue for ENGIE Energia with a growth of 11.5% in 2019. But what led to this growth of revenue was the increase in the sales volume with an increase of 4.1%, attaining 383 additional millions compared to 2018, and a growth of 4.5% in the sales price, the average sales price, giving us an additional BRL 200 million for the year's revenue.
And because of the monetary restatement of contracts, new contracts with the trading companies, with average contracts much higher than the existing ones, we also have the additional contribution of BRL 41 million for the Jaguarina Miranda plants because of the remuneration of our financial assets, because of the increase in average balance of these assets, and because of the increases between 2018 and 2019. And of course, we would like to highlight another important point, the great contribution in our operating revenue, BRL 484 additional million for the year 2019, and the additional revenues in transmission. And of course, the segment for the sale of photovoltaic panels was BRL 61 million. And what is important here is that the sale of the solar panels was impacted. We acquired the full control of Distributed Energy Company in August of 2018.
And during the 12 years of that year, we had an impact due to the figures of this acquired plant. And this is one of the reasons why we have those BRL 61 million reais for those photovoltaic panels. Now, as factors that led to a reduction in revenue vis-à-vis 2018, we have a lesser result in the short-term market, the spot market, and we have a reduction in the electrical energy trade board compared to 2018. And of course, this was overcome by the impact of the generation scaling factor and the higher hydroelectric generation. And therefore, the results at the electrical energy trade board reduced their contribution by BRL 224 million for the revenues of 2019. In 2018, we had BRL 74 million reais, referring to an indemnity for liability at the plant in Salvador, labor liabilities, and also because of the Santa Monica plant.
This is, of course, among other factors, BRL 74 million revenues in 2018, but without the same revenues for the year 2019. We would also like to remind you that in the third quarter of 2019, we received an indemnity for a delay in the construction of Gray Azul, BRL 320 million, an amount that was, of course, incorporated into the results of 2019 as operating revenue, but without an impact in our total revenue. But this did have an impact on revenue, as we see in slide 33. We had a growth of EBITDA vis-à-vis 2018 with a margin of 52.7%, an increase of 3.1 percentage points vis-à-vis the previous year.
And we would like to highlight that the margin was affected by our trading operations, the recognition of revenues and costs from transmission, and the sale of these photovoltaic panels that have had a margin that is lower vis-à-vis the other activities managed by the company. There is a dilution of margins, but despite this, there was an increase when compared to the year 2018. We'll speak about the annual variation of EBITDA besides the impacts mentioned in the previous slide, the increase in volume, the average price sale, a higher remuneration for Jaguarina Miranda and Gray Azul, and the indemnity that we received. We still had a positive impact in terms of the drop of the sales volume in the 2019 portfolio, once again due to the generation park. And this led us to having a reduction of BRL 185 million in costs.
And with a positive effect, the contribution of BRL 81 million reais as equity income from TAG, T-A-G, Transportadora Associada. With a negative impact on EBITDA vis-à-vis 2018, we had higher recurring expenses because of the coming into operation of our new assets. There was an increase of BRL 90 million in the cost of material, third-party services, BRL 84 million with the cost of personnel, administrative, and other expenses, BRL 53 million reais additionally in charges for the use of the electricity grid because of our new capacity besides BRL 21 million reais with the cost of fuel for the coming into operation and consumption of Pampasul and the consumption of our own coal.
And another negative effect, BRL 74 million because of the asset and fines, something we had already had in 2018, and an increase of BRL 73 million in the short-term results, largely due to our exposure in the market in the Northeast, Southeast, and Centereast, with an impact on the annual results. And finally, the trading result is BRL 38 million reais lower, but once again, this is an effect of the mark-to-market between 2018 and 2019. We now go on to slide 34, if you please. We have already remarked on this. There was a reduction of 0.2% in our net income, which means it was practically stable vis-à-vis 2018, but with a worsening in our financial results.
We would like to remind you that this is due to the payment of interest on a higher debt as well, and also due to an increase in variation and interest in the concession to be paid for. It's natural to expect that with the mitigation of the debt, if we tend to contract new debt for our project, we will have an improvement in our bottom line, a gradual improvement. And in 2020, we will have the contribution, the full contribution of the assets attaining to our holding last year, Almirante and Santos. We now go on to slide number 35, where we show you the consistency of our financial indicators, the return on equity growing vis-à-vis the third quarter of the year, with a small drop vis-à-vis 2018, and the return on invested capital with a minor drop compared to 2018.
Of course, the ROIC with a drop due to the higher indebtedness of the company. But despite all of this, you can see that these are highly consistent indicators, especially if we compare ourselves with other peers in the market. On slide number 37, we will speak about the evolution of our indebtedness. At the end of 2019, the net debt ratio in 2018 was 1.6, but there is already a drop compared to the third quarter, where we reached 2.3 times. Potentially, this indicator may increase again in the coming quarter because of the acquisition of Nova Estado, but also because of the need to invest in the project. And in the first quarter of January, we are going to pay out dividends, referring to the first semester of 2018, with a reduction in our cash, of course.
On slide 37, you'll see the evolution of our net debt for the fourth quarter, with a drop of 9.2%, with the inclusion of the BRL 351 million in dividends received from TAG and reserves on our net revenue. In slide number 38, we show you our debt profile and the composition of this debt. This new expansion cycle did present an opportunity that was made the most by the company to optimize our capital structure. And vis-à-vis the year 2018, we went from 35% to 40.24%. When you see the TJLP and IPCA with a cost of debt in 2019, 7.6% for 2019. And to conclude, we continue with very strong cash generation to be able to fully honor our commitments. And of course, this will enable us to maintain our movement forward. On slide number 39, you see our investments, our CapEx.
What is important to highlight here is that in this graph, in this projection of investment going forward, we have not included the amounts that will be used for the acquisition of Nova Estado as an investment or for its construction. Our investments in 2019 reached BRL 419 million. And it is important to observe that in the last four years, we invested more than BRL 15 billion reais. This, of course, is important because on slide number 40, you will observe that this is the same period in which we had 100% payout. So despite this very high amount of investments, we paid out all of our profit to our shareholders. I believe that with this, we will conclude the presentation, and we would now like to offer you the floor for the question and answer session. Ladies and gentlemen, we will now go on to the Q&A session.
Should you wish to pose a question, please press star one. To withdraw your question from the list, press star two. Our first question comes from Carolina Carnero from Credit Suisse. A good afternoon, and thank you for the call.
My first question, I would like you to comment on the possibility of participating in the gas auction that will be held in April now. This was printed in the official Union newspaper, and we would like you to perhaps comment on what you're going to do, if there's going to be a planned conversion or some sort of retrofit to be able to participate in this auction. The second question, if you could speak a bit about the development of a complex that you were about to close down. You spoke about this in investor day.
I would like to know if there's any novelty in terms of the contracting and the free contracting environment.
Yeah, Apparel, thank you for the question. Regarding Jorge La Cerda, there is a possibility that it will take part in the upcoming auction, especially when we speak about coal. And we will have more details when our CEO returns to the company. And what we want to do is to leverage this asset in the market. And if it is successful in the auction, we may have a 15-year contract, which would transform or enhance the sale conditions for this asset. This possibility does exist when it comes to Sanpa Agostino. We're working with contracting in the free contracting environment, but the time has not come yet to begin the construction, but this strategy is still standing. And of course, this will enable us to begin construction.
I don't have a date that I can give you, a specific date that I could convey to you at this point.
Thank you very much. And if you allow me to ask an additional question referring to the hydrological scenario, which seems to have been quite good, if you had any problems with location, with the service charges, and if you could speak to us of the scenario specifically for this year.
Well, we don't normally disclose our strategy, but we're very far from having a strategy that is in conjunction with that of the sector. And last year as well, the position was quite inverted. This year, the sector has allocated more energy at the beginning of January, with less energy allocated in February until the beginning of April. And now, in fact, the prices are dropping with this improvement in hydrology.
And our outlook for GSF is not very different to the one that has been forecast by the market. We're working with very similar figures. And of course, we might have to intervene eventually to close one of our positions.
Thank you.
Our next question comes from Gustavo Neri from Itaú BBA.
A good afternoon. This is Marcelo speaking to you. I would like to have more color in terms of your expectation of the PR for the hydroelectric sector this year. What do you think will happen? And if we could have a vision of when you believe that you can implement more energy, if this is going to happen the coming year or further ahead.
Hello, Marcelo, and thank you for your question.
I think that very few people would be able to give you a schedule of approval of the PL and a change in the contracting of electrical energy. But things need to make headway in Brasília for that. We do know that the government understands that this is an important point in their agenda to unlock the market in the short term and for the planning of the sector, that issue of contracting of free energy. And beginning the next year, I think that we will have a better signaling of which will be the market prices. And because of the need of contracting this support for energy, regulatory agencies are working to guarantee this and attempting to contribute towards the sector, towards the regulation of the sector, and also seeking greater expeditiousness. Once again, this is completely out of our control, Marcelo. Thank you.
And which is your expectation in terms of the PL of the GSF? It's something that has stopped in the past. Do you think that a certain part of this will be vetoed? We had heard news that the Senate would not vote on this. We then received more positive news. Once again, which is your mindset when it comes to this? And if you believe there will be a solution for this PL, or should we just simply wait and see this dispute come to an end?
Well, one thing depends on the other. I think that the vote on the PL will have to happen, but it would be a lottery to try to guess when this will happen. We continue to follow up on this. Thank you.
Our next question comes from Fernando Leucão from JB Investments. A good afternoon, gentlemen. Thank you for the call.
When it comes to Geral, which would be the more favorable conditions so that the participation can go on to EGE, and if there would be a financial counterpart for this?
It's happening with Geral. As you could see, operationally, this asset is performing very well, but economically and financially, it has suffered because of the generation scaling factor. It is not 100% contracted, and it has lost a great deal, as well as other hydroelectric generators, despite the fact. It doesn't cover the full GSF, and there has also been the impact of the expenses with the indebtedness of this plant.
My understanding is that the holding company and the partners are looking for a way out, perhaps lengthening of the debt to alleviate the weight of these financial problems and to seek a lucrative exit so that the partners will not need to recurrently inject capital, as has happened. It's stopping the bleeding, as we call it, and then this asset can be transferred. But of course, none of this means a financial exchange. In truth, this asset will be valuated at the time of the transfer, and financially, it may be a better asset than it is at present. I would like to remind you, notwithstanding this, that because of the model that we use, there will be no destruction of value between the transfer of this plant between the holding company and NG Brasil.
And of course, this is a transaction led by minority owners, and of course, this will be fully respected. Thank you. An additional question, if you allow me, regarding TAG. You have already received a positive contribution at the end of the year. Which is your expectation and impact coming from TAG throughout the year 2020? Well, we don't offer guidance nor projections, but the fourth quarter results, I believe, will represent a good benchmark, BRL 86 million reais as net income or net revenue from TAG, and perhaps this could become a reference because starting now, TAG is paying its commitments, this reduces the cost of the debt, and of course, liquidity should increase as well as the contribution. I would say that this would be a good reference to use the contributions during the fourth quarter.
Very well, thank you very much.
Our next question comes from Pedro Monteriggini from Goldman Sachs.
Thank you for your time and for the presentation. A question that is very simple: that energy that you purchased and you increased the amounts in the last quarter, you carried out a short-term purchase for the coming three years. How much of that energy is conventional, and how much is incentivized, and if you ended up buying more conventional or incentivized energy?
Pedro, I can't give you this breakdown, and I don't think I could anyway. Perhaps we can do this beginning with the next quarter, but it tends to be conventional energy. Of course, we also buy incentivized energy, or we work with an energy swap. We sell conventional energy by incentivized energy, but I do believe it must be mostly conventional.
This is energy purchased for the short term to mitigate the effects of the ESF, the service center. It wouldn't make sense to buy incentivized energy if we can't resell it. We would only do this in the case of the demand of a client, of course. Very well. So these are paired purchases.
Another question about the sale of coal. Has there been a recent consultation?
I believe this process is still open. This is in the hands of the holding, and you have to carry out the sale decarbonization.
So this process is still pending. Has there been any recent consultation from any company, anything that you could remark on?
Yes. We have a process that has basically divided in two. We have the Jorge La Cerda complex and Pampazo. Pampazo is awaiting its background of operation. The operation will come into operation in June.
There have been some generation problems with higher availability. This was resolved last year, and we are now going to wait for some months of operational performance to achieve an adequate availability to be able to sell this asset. But we should have a return of the process of sale of Pampazo this year. Now, the Jorge La Cerda process is a continuous one. It continues to be in the market. We have received some proposals, but they were not binding, and therefore we're awaiting a further evolution of the process. One of the measures that we took, and I mentioned this in the previous question, was to enroll Jorge La Cerda in the 04 auction, the April auction, to have a contract at the plant and offer this contract to a potential interested party.
Several of these interested parties want contracts with us for lengthy periods, which makes no sense if the idea is to decarbonize. It makes no sense to purchase energy from a thermoelectric source and to offer contracts with the distributors as part of the package. Now, if we are successful in the auction, if we do not receive an appropriate binding offer up to the auction, we're working on this, and there should be some novelty in the coming months.
Thank you very much.
Our next question comes from Gabriel Francisco from Exbank.
Thank you for taking my question. That is very simple. In the fourth quarter 2019, based on what is in the release that year, there has been no result as part of Alianza only for TAG.
I would like to gain an understanding if this is how you're going to proceed going forward, if you have no debts in terms of Alianza that you have presently or expenses of any other holding. This would be my question.
Gabriel, in this case, I need to observe that there was a reverse incorporation of Alianza. The company Alianza no longer exists. There was a merge with TAG, and from now on, it will be a sole company, and all the indebtedness is now part of TAG. That is why I mentioned that this was the first quarter with a company with reverse incorporation using our resources and because this would represent a good reference.
Very well. Thank you very much.
The conference call for NG Brasil Energia, and here we would like to thank all of you for your participation.
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