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Companhia Paranaense de Energia-COPEL (NYSE:ELP)
Q3 2019 Earnings Call
Nov 13, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and thank you for waiting. Welcome to the conference call for Companhia Paranaense de Energia Copel for the results of the Third Quarter of 2019. [Operator Instructions]. Before proceeding, we inform that forward-looking statements that might be made during this conference call related to Copel's business outlooks, projections, operating and financial projections and goals for based on beliefs and assumptions of the Company's management, as well as on information currently available to the company.

Forward-looking statements are no guarantee of performance. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur. General economic conditions, industry conditions and other operating factors may also affect the future results of Copel and cause results to differ materially from those expressed in such forward-looking statements.

With us today, Mr. Daniel Pimentel Slaviero, CEO of the company; Mr. Adriano Rudek de Moura, CFO and IR Officer; and other officers of the company. The presentation will be made by Copel's Management and is on the website of the company ir.copel.com.

Now, I will turn the floor to Mr. Daniel Slaviero, CEO of the company.

Daniel Pimentel Slaviero -- Chief Executive Officer

Good morning, everyone. Thank you very much for being with us in this conference call for the results of the third quarter of 2019. It is with a great pleasure that I share with you the delivery of another quarter with sound and consistent results. Our main financial indicators keep improving significantly vis-a-vis the same period of the prior year. And I should highlight first an EBITDA of over BRL1.2 billion, growing 41% and here we do include non-recurring items.

If we consider the year-to-date since the beginning of the year, we have an EBITDA of BRL3.2 billion more than the whole 2018 and a cash -- operating cash generation in this quarter of BRL1 billion, which is also significantly better than the third quarter of 2018 and as a consequence, a drop in our leverage, which today is close to 2.2 times EBITDA over net income or net debt, sorry. And vis-a-vis over 3 in the first quarter. Another landmark I should highlight is that the EBITDA for Copel Distribution that for the first time in history went over the regulatory EBITDA reaching 3.5% higher than annual reference, only in this quarter, EBITDA for Copel Dis was of BRL331 million and if we consider the last 12 months, we have reached the record of BRL1.123 billion -- really, this is a historical landmark for the company and for Copel Distribution.

These are significant results that I share with our colleagues here in the company. Another highlight of this quarter is that we were awarded the new energy generation auction A-6, which happened in October and we sold 14.4 megawatts average for Jandaira Wind Complex to BRL98 per megawatt.

The amount of sold energy represents 30% of assured energy and the remaining energy will be commercialized by environment contracts. The complex will be built in Rio Grande do Norte, which is a region Copel's already knows and we have other wind generation assets there and that will allow us to have operating synergies with undertakings already in operation, and that is fully in line with our strategy to expand with synergies and also with capital allocation disciplined. Estimated investment for this project is a BRL400 million and in 2020, it will start with a share of 10% and total installed capacities of an average of 90 megawatts.

This is a project that is relatively small, but I should say this is a good example of this new era of Copel with a strict discipline in capital allocation, and in this specific project with the return rate over two digits about new projects, we're still moving forward looking for good investments that are profitable and sustainable and that allow us to contribute to improve our portfolio management.

I should also say that in line with the commitment of a strict control to execute projects within budget and schedule. We have delivered another sections of Lot E. In the prior quarter, we already had highlighted the early delivery of some Lot and substation of Medianeira and also transmission line of Baixo Iguacu Realeza which we already had in the second quarter of this year, we had it ahead of schedule a year and 7 months and now in this quarter, we have concluded substation Curitiba Centro and now so transmission line Uberaba-Curitiba Centro, configuring all operating surplus, we can already count on an additional annual revenue of BRL79 million of our RAP, annual revenue around 68% of the total amount for [Indecipherable] project.

I also should highlight the conclusion of 100% of all wind turbines of Cutia complex including Bento Miguel Wind Farms with 313 megawatt of installed capacity representing an incremental EBITDA and/or GeT of approximately BRL140 million in 2019. And also at the end of the third turbine, which are Binacional that should be happening now in December. All of these projects already have been bringing significant results for our cash and also for the performance of Copel GeT above our commercialization company Copel's Energy, we still foresee opportunities for sustainable growth and on 20th September, we had a solar and wind energy incentive purchase option, where we contracted 128 megawatt average for 15 years and will start supplying on January '23.

And those 128 almost an average of 50 megawatt are already commercialized. These also have allowed us to have significant results in mark-to-market of BRL99 million for the company's results in this quarter. We keep moving forward in several initiatives to bring down costs and to improve operating efficiency and I highlighted the new Voluntary Redundancy Program that we have launched this year or rather this month in the company. Approximately 500 employees are eligible and that represents a potential to reduce BRL142 million of turning in 2020. Historically, the Voluntary Redundancy Programs in the company have a turnout of around 30%, but in this situation, now we are not considering only the eligible employees, but in the second stage that will be available to all employees that wish to be part of this program.

So we believe the turn out will be even higher. So this is another part of our program of cost reduction improvement in efficiency and private mindset and we are all here with all the officers and that's what we are implementing in our company. So in addition to financial and operating achievements, also we should stress the improvements in our governance. These efforts have resulted in an important acknowledgment, which is the certification by B3 in the distinct program in State-Owned Companies Governance, Copel got the highest score. So far, Copel is the only state-owned company to get the highest score in such a program. This achievement is stresses our commitment to the highest Corporate Governance standards and expresses our belief that the transparency and compliance are pillars to perpetuity and sustainable growth of our business. So congratulations to all of you for the work that you have done.

So, now turning to our next slide and this chart, it speaks for itself. In two years, we have an inefficiency of 43.6%, that was a graphic regarding our regulatory EBITDA and in this quarter for the first time, as I already mentioned, we have reached 3.5% that is, thanks to the efforts to the work, and to the dedication that was only possible because the company back then in 2015, when we renew the concession contract, we knew that we needed to perform big changes to improve our performance and to meet these targets. The result of this work and the dedication is already a reality. And now, we aim to be among the reference in the industry in terms of efficiency and service quality. So, yes we understand that for the next few years, we should be among the best distributing companies in the country.

So, we have recently launched an ambitious program to modernize our energy distribution grid and it's called the transformacao or transformation and here we have three main projects, full reliability, smart grid, and Threephase Parana. The objective is to improve infrastructure, especially in the rural region of the state to improve the quality of energy supply and the agility of reconnection of service in case of interruptions. On these three projects, our investment perspective between 2020 -- 2020 and 2025 is BRL2.9 billion.

And this program, it has a triple benefit first because it improves the quality of service to our clients to reduce interruptions and reconnection periods that ELC and EFC, second because this reduces costs with high investments in technology and automation therefore, we have less need to have the teams going over two different places. And finally, as the first assumption that these investments will be fully posted to the regulatory remuneration base, we have the next cycle in June of '21 but this program is already contemplating a significant improvement for 2020, but also a roadmap that we foresee for the second cycle of the company.

Now turning to the next slide and before more going into the financial details of this quarter, I would like to stress that we will be continuously focusing in our strategy of value generation for Copel and all shareholders and we will continue looking for initiatives to bring down costs and to improve operating efficiency. We'll be paying attention to investment opportunities, just like we had in Jandaira auction in October, but always in conditions that are under our assumptions for capital allocation and operating synergies.

Third, studies for divestment our Copel Telecom still move forward is still in 2019 December, we should approve in our governance. The operating model and register it in the regulatory agencies. We should be holding the auction by the end of the first quarter of 2020 as planned another important topic that is in our agenda has to do with Foz do Areia plant. We are still paying attention to the bill of law, now in the Senate, the 3975 that addresses GSF, but also the possibility to renew these plants and we are already working on operating management and getting ready if this legislation is approved .

And then we might have an SPE to transfer this asset and we will always have that as a possibility that will be briefly considered but regardless, the opportunity, we are still preparing ourselves and we will be ready operation wise and financial wise as well for an auction at the end of the current concession in 2023.

We are also paying attention to the regulatory changes that are happening in the industry in the business model that is being proposed by the industry starting in October, the changes in the regulatory scenario in the gas market that might bring us opportunities and energy generation optimization, but we are also considering projects of innovation, distributed generation electrical mobility smart grids and public lighting and now to conclude, I would like to say that yesterday, we have approved and the Board of Directors, the investment plan for 2020 in the amount of BRL2.1 billion and out of that BRL1.1 billion is for this, also the highest in the history in the year right before the regulatory review and BRL865 million for Copel Generation and Transmission.

This plan is fully in line with our strategy to improve our investment portfolio, focusing on the conclusion of ongoing projects. Also on the efficient execution of new projects that might arise and the increase of the regular of the remuneration base as already mentioned.

Another topic that I would like to approach is that we are considering some of our efforts and resources to improve our dividend policy and the objective is to provide transparency and predictability to investors about, which amount will be distributed. We are still in an initial stage of this subject and we do not have a final date for conclusion. But the idea is that this policy includes conditions related to important items for our company. For instance, cash availability, indebtedness level, and investment flow. This has been shown to be important and is strategic to add value to the company, vis-a-vis our excellent results and especially because of the reduction of our indebtedness level.

Now to conclude, I should highlight something that I always say in our calls and this is a key award and this company which is execution. We want to make sure that our value improvement strategy for the company is always fulfill and carried out in a timely and efficient fashion.

Thank you all for your participation and I will be available at the end of the presentation to answer your questions and I express my confidence in the consistency of the actions we are taking to place Copel at a new level.

Now, I turn the floor to Moura, who will go into the details about the results of the third quarter

Adriano Rudek de Moura -- Chief Financial and Investor Relations Officer

Hello, Daniel, and thank you. Thank you all for being with us in this conference call. We are very happy about the delivery of another quarter with sound and consistent results. The EBITDA of over BRL1.2 billion in this quarter, certainly is one of the best results in our history. Daniel has already highlighted that in the year-to-date, the EBITDA of BRL3.2 billion is already at the highest and actually higher than the whole last year even eliminating non-recurring effects, the adjusted EBITDA, as you can see in this chart of the BRL971 million improves 16% vis-a-vis the prior year.

In general, all businesses and all main business of Copel have improved in this quarter, vis-a-vis 2018 and on the next page that we will see that in addition to this, that Daniel already mentioned, where we have reached BRL331 million, an improvement of 18% then third-Q '18. Copel GeT improved its EBITDA reaching BRL541 million in the quarter, a little over than 10% better than 2018.

Mainly here because of the reduction of 26% of purchased energy for resale, once the average is spot price and 2019, it was much lower than 2018, BRL214 vis-a-vis 494, the average respectively. And in addition to that, the strategy for Energia location has resulted in the lower cost for short-term energy purchase. Although we have worsening of the hydrological deficit when the GSF in the third quarter of '19 reached 52.5% vis-a-vis 59.4% in the third quarter of last year.

About operating revenue, there is small drop of approximately BRL140 million in the chart, BRL4,309 million to BRL4,171 million, basically that is represented by a reduction in the results of sectorial assets and liabilities of BRL300 million, partially offset but incremental sales of BRL111 million of new projects mainly either from Colider, Baixo Iguacu, and Cutia contracts.

As well as in the case of the Dis, the growth in the grid market of 1.6% in the energy consumption in the third quarter of '19 because mainly at the growth of 8.4% of the industrial free market consumption of Copel GeT and already showing an improvement of the industrial production of Parana when we compare that to the same period of 2018.

In addition to that we had a growth of 1.8% in energy, electric energy supply with an increase of 3.5% of Energy sold volume to end users and I should highlight the increase of over 11% in consumption of industrial free market for Copel GeT and Copel Commercialization. Talking about net income, not considering non-recurring events as shown in the chart in the third quarter of '19 the amount is of BRL395 million approximately 3% higher than the prior year including non-recurring effects of the amount in the quarter surpasses BRL613 million, 42% higher than the prior year.

In the year-to-date, net income is close to BRL1.5 billion, 28% better than 2018. In terms of cash generation, which is a very important topic, operating cash, as shown in the chart had a significant increase reaching almost BRL1 billion and here we have a slight improvement in our working capital. You can see that the level of investments in this quarter has dropped and around BRL200 million when compared to 2018.

And finally before turning to the next slide, it's important to say that there is something else that has helped us in improving our results, which was the reduction of PMSO and there including provisions and reversals, which in the total of the quarter was over BRL600 million. So we had a 5% reduction vis-a-vis the prior quarter so that happened, and despite of the wages adjustment in the period, inflation and several contracts as well as increase for provisions to the profit sharing program and that's already vis-a-vis 2018.

Now turning to our next slide, it's a better compare the operating performance of each business we show here, the adjusted EBITDA per business now considering the non-recurring items that have been posted, remember that in the third quarter of last year, the net effect of non-recurring items was not relevant, a little over BRL18 million and in this quarter, the total of non-recurring items reached BRL230 million basically why reversal -- reversals of impairment provisions also gains with mark-to-market and the purchasing and selling the energy of commercialization, company write-off some assets of Telecom and also tax credit profit to Compagas.

As I mentioned, in general, with the adjusted EBITDA of the main business of Copel Group have improved. Copel GeT a little over 18% vis-a-vis the prior year and the year-to-date 24%, it is almost 18% in the quarter, more than 5% in the year-to-date Telecom 11% in the quarter and almost 20% in the year-to-date. So in average, the year-to-date EBITDA adjusted EBITDA reaches 24%.

So, Now turning to the next slide and also for better comparison, we here show our PMSO, it's not considering the nonrecurring items and it's also excluding the increase of the profit sharing program, also estimated losses provisions and reversals. Remember that including all these items above PMSO has reduced 5% as I mentioned in the fee lines increased with headcount cost was only of 0.2 percentage. Although we had a salary adjustment of 4% in October '18 and also an increase of 64% in the provision for the profit sharing program because of improvement results,

So not considering the effects of the profit sharing program line, it would have reduced to 3.8% compared to the prior year already showing the effect of the reduction of 561 employees in the last 12 months. Now considering inflation of almost 3% in the period, the cost with headcount would be reduced in around 2.7% even if we consider the salary adjustment of 4% that I mentioned.

So in addition to measures to reduce costs with headcount including our Voluntary Redundancy Program that Daniel mentioned, we are also performing other initiatives to reduce cost such as reviewing main contracts including services fleet outsourcing, we are focusing on the reduction of delinquency among others and all these efforts have allowed us to have a reduction of 7.2% in expenses with materials and 1.2% with the services that were outsourced in the quarter.

I should say that the cost reduction and efficiency improvement is part of our agenda, more than ever. In the next slide, here very quickly, we show the cash generation is starting on our operating results and also variations in the working capital, we talked about these results. But here we can see and details the origin of the generation of almost BRL1 billion in the quarter and BRL3.5 billion in the year-to-date up to September. In addition to the improvement in the operating results, thanks to better energy costs for the improvement in our revenue as well as start-up of commercial operations on the projects and measures for cost reductions, we can see a very positive a flow even for after investments that have reduced and improved generation and also the consolidated cash of the company.

Now turning to Page 13, we can see the history of our investments since 2016, you know that history But it's always good to highlight the gradual reduction of projects of Generation and Transmission that are in construction BRL1.8 billion in 2016, up BRL465 million now for 2019. The investments made in the 9 first months of this year have shown a reduction of 38% vis-a-vis the same period in 2018. Also BRL1.23 billion invested so far, of those BRL640 million basically half of that were for Dis, so that we could improve our remuneration base.

Once again, I express here that our focus will be in the conclusion of the works and in the improvement of quality and efficiency, especially with investments in technology that can reduce costs and increase our remuneration base. In addition to investments of over BRL1 billion in 2020 that we ready mentioned in GeT, we should invest BRL150 million, BRL120 million will be dedicated to what we -- we will have additional revenue. after 2021 that is going to be very important, which is the transmission line -- implement now in BRL38 million -- BRL38 million will be allocated to recent auction we were awarded Jandaira and BRL118 million to the PTH [Phonetic] Bela Vista, which is already in its initial stage.

We also highlight that Santa Genebra SPE -- Santa Genebra is already in its final stage of construction and you should also receive funding of BRL40 million in 2020 to conclude the works. I should say the level of governance for our projects and no projects is still with a strict risk and opportunities evaluation in a way to maintain the best choice for capital allocation of our group.

So now turning to the end in the next page, here we show the history of our leverage for the at last years. We are close to BRL2.2 billion in September, against BRL3.4 billion and this is thanks to -- financial discipline in capital allocation and also alignment with the investment plan and the capacity to generate cash and cost reduction, including personnel cost reduction and that contributes to the cash with the company.

In addition, I would like to say that we have executed successfully several issuances in the capital markets in 2019 as part of our funding plan, our fundings reached BRL2.7 billion, so far most of that have to do with rollover of maturities we had this year. We had a large concentration in May and July. We are able to roll out the debts, not only expanding the terms, but also at more competitive interest rates. So this is a good news. The extension of the terms are happening. In addition to that, it's so important to maintain the strategy of our funding and we link, most of that to the CDI and that also has allowed us to have significant savings in our financial expenses contributing to bring down leverage and improving our profits.

Well as a final message, I would like to express my confidence that we will keep delivering sound and resistant results in line to a sustainable strategy with a single focus and value generation to our shareholders. Thank you all very much. And now, we'll turn to our Q&A session and I will be available to answer your questions. Thank you.

Questions and Answers:

Operator

We now start the Q&A session. [Operator Instructions] Mr. Tiago from Santander has a question.

Unidentified Participant

Good morning everyone and thank you very much for this call. I have two questions, the first one it's about the Voluntary Redundancy Program that you mentioned, you have 492 employees that are eligible. And you did mention that you have further efforts such as contract review and other possibilities, can you -- can you give us a little bit more color on that, which are these other possibilities? And where do you see that you we have chances to have other types of cuts?

And the second question is a possible -- about the possible investment coming from BNDES, if BNDES is ready to leave -- or to remove it's shares from the Company. So do you have an expectation there?

Unidentified Speaker

Thank you Tiago -- two important questions and I will start by the last one, which is more strategic. And this is a subject that we are following closely, which is this possibility of BNDES of reducing its portfolio in BNDES -- and so BNDES as the fifth largest investment at the end -- as far as of BRL3 billion. Well, this is fine and at the time when Alanis was there, there was an initial talk with us and

Unidentified Speaker

Saying that this was very strategic planning right after the larger lots which were JBS, Petrobras and Copel would be among the priority. So he left, but the rationale of the another barrel and the whole team and we have been getting signs that this will remain. So we should go back to discussing this topic, by the end of January, beginning of February, because there are some priorities ahead of that and we are open -- and if this was the once and they are strategic relevant important partner for the Group. But if that is their strategic position, we are here available to find the best way to move forward in a way that the company can be strengthened. And so, we do have fines along those lines, but no further talks yet, we should be discussing it in the beginning of the next year.

Now about your first question about the 492 employees that are eligible to our Redundancy -- Voluntary Redundancy Program. In the last year, 511 people left the company in our last program, but we do foresee other opportunities. Yes, for instance, this call center is internal, it's in-house and we are already considering to migrate that to outsource it because we understand then you know when the other companies in the industry have outsourced it and we might have efficiency gains as well as quality and service gains.

In addition to that, we are expediting our process for our shared service center, so that we can unify and gain scale in all purchasing procedures and you know the service shared services. So although this -- although most of them have already left, we do have several opportunities and we have several initiatives being studied even to centralized structures or centralized buildings we have unified the operations for distribution Copel Distribution here Chopim, so this was an optimization process. And then I can say that for the next few years, this transformation project for Parana Threephase as well as the project for Smart Grid would

Unidentified Speaker

see that this will take the company to the next level, because to have 5000 consuming units with the Smart Grid to go to 890,000 in the next three years. And this is the largest program of Smart Grid, so far in the country. It will gain scale, it will gain and in cost reduction and also gain and the team's optimization and as I said, it's an assumption we also have the increase of the regulatory base. So to conclude, we do see other funds -- other possibilities. And as we implement the programs, we will be sharing that with the market.

Unidentified Participant

Daniel, should also highlighted today we have a task force focusing on cost reduction initiatives. We have over 200 initiatives now in our review of the strategic plan for 2020. We have already included a plan for cost reduction to come with contribution from all businesses, so we will find opportunities. And so we already have good results, but I believe we will still get the better ones.

Unidentified Speaker

Thank you, Tiago.

Operator

Mr. [Indecipherable] has a question.

Unidentified Participant

Good morning, everyone. Thank you for this opportunity. I have two questions. First, can you tell me about the divestment process of Compagas, are you negotiating with the state, what can we expect from the conference. And my second question is about the Jandaira Wind Farm, can you comment if Cutia Complex construction will allow you to have expertise for this investment, whether in the construction process or relationship with the company, so what can you bring from one project to another?

Unidentified Speaker

Okay. Thank you for your question. About Compagas, this is what we are doing. First, we are facing the state law -- about the concession in 2024 or in January '19, which is what the law states and that has already been considered unconstitutional as well. So the process is that the State Government is working on plans to define the guidelines for this concessions, but also fiscal incentives for a possible

Unidentified Speaker

Construction of a gas plant or thermal plant. So this is a State Program and that -- and those guidelines should be published in the first half of 2020, after that with these guidelines, [Indecipherable] will run studies and calculate what would be the concession renewals and then for 30 years more and we expect that Compagas can regarding this possibility, we will see the level of investments and that should be concluded by the end of the second half of next year.

And then, so that we can then have the divestment plan available for Compagas in the beginning of 2021 and we expect to have that addressed by June of 2021. About Jandaira, I would say that Roberto from Generation and Transmission maybe he can talk a little bit about that. But all business plans that are developed here the look for providers or for service providers that have already worked with Copel's Infrastructure and Engineering and also Construction and Maintenance, all of those that have worked with Copel.

So Roberto, can you address the questions about our synergy in the process.

Unidentified Speaker

Well, this acquisition -- this auction was very important for Copel as you can see the price was very good at BRL98 megawatts hour for installed power of 90.1 and assured power of 47.6 average megawatts. So we do have synergies, we know the region. This is a call for the Copel's has in wind generation in Rio Grande do Norte and Jandaira, it's close to Bento Miguel and there is another side that we also have in Rio Grande do Norte. The several BOP is the same one that have a built Cutia and all our people know that area very well and we already know the wind turbine generators. So we do have a great expectation for this auction. We should confirm all is down with the schedule and also as possible advancements, which are on the

Unidentified Speaker

Our business plan. This is an undertaking that will bring positive results to Copel. And just to conclude, there is a part of OEM that will be provided by Copel's itself, which already has a structure there. And this will bring down cost to us and gain efficiency. We feel very comfortable about this project, it's a small project, but it is signaling this new stage, this new era of the company.

Unidentified Participant

Perfect. Very clear. Thank you.

Operator

Mr. Marcelo Sa from Banco Itau has a question.

Unidentified Participant

Hello everyone, congratulations on the results. I have a few questions, the first one is to try to better understand your capex, you disclosed that you already have BRL835 million in GeT and in GeT, you have BRL302 million as others. First, I would like to understand what are others in your capex. That's my first question.

Daniel Pimentel Slaviero -- Chief Executive Officer

Hello Marcelo. Moura, can you explain?

Adriano Rudek de Moura -- Chief Financial and Investor Relations Officer

Well, BRL1.1 billion is Dis.

Unidentified Participant

I think it's clear, of this 165 [Indecipherable] conclude, the finalization. The others as the process Moura can you detail that information?

Adriano Rudek de Moura -- Chief Financial and Investor Relations Officer

I do not know if you have the same communication, but in release that we published yesterday, we have all the breakdown there. So just to give you an example, we have an expectation of Colider of over BRL80 million next year, Baixo Iguacu BRL26 million. So these are amounts that by when they are added up, they got to do a relevant figure, but these are regarding the end of constructions we an amount invested in Lot E and considering transmission lines could less supplemental and deposit, we are talking about almost BRL180 million. I mentioned in the call 58 Bela Vista 120 million and on the others, we have a modernization also that we are concluding now and now for maintenance capex from modernizations for ongoing projects, this is more or less the breakdown of the GeT investments for next year.

Unidentified Participant

Great. And another question, it's about the possible innovation and I would like to understand your for future challenges. I understand that one of the pending issues this GSF because this is a bill of law that has nothing folded than to calculate it of this early renewals. You need to

Unidentified Participant

define before, but I would like to understand what are the pending issues now. I know that you need to request that five years ahead and you don't have that much time for that, I would like to know if that can be changed or if you need to lookout for that, so if you can give us more details, please.

Unidentified Speaker

Okay, great. Well, this is a relevant subject for the whole for the whole industry and obviously for us as well. First, with the GSF we are going to get an extension of the concession for Foz do Areia, Caxias, and also Segredo and these are the three plants that corresponds to 90% of generation capacity of the company. So the first staff of the process is to get that it approved in the Senate. We understand that this is a political matter, because you cannot change the wording either and how the representatives will understand it and you know that that has to do with GSF as well as the reduction of the interest manifestations period of time for renewal, that is related to privatization. Today, it's 60 months, in the bill of law this is reduced to 36 months and that would take us a September of 2020. But if you consider that, we have an adjustment of GSF and an extension of this period and that can be allocated according to the interest of any company. Well, look Copel can allocate a little bit for Foz do Areia and the remaining in the other plants and so this would allow us to run the process. At the same time, we know that the Ministry of Mines and Energy with the Ministry of Finance and is working on studies to regulate that by a decrease, so this is just an information that we have, there is nothing real here, but if this bill of law does not move forward the day we've addressed this period of time for the manifestation by decree and obviously that is not going to address GSF and and that really is a binded to the law. So we are waiting. The definition of the regulating agency with our congress and it depends on what's going to happen and at the same time we are working on feasibility studies and we are

Unidentified Speaker

tracking attractiveness, because even if we have 49.9 -- the fact that you're not participating in the auctions and you are not competing for an auction and if you -- you have to pay an extra amount and that by itself is an interesting possibility. And we are taking internal measures and yesterday in the Board of Directors, we approved the creation of an SPE for the company and the transfer of this asset to this company under the control of Copel Generation and Transmission. But this SPE will be during the request to renew the concession allowing a private partner to have control. So we do believe this is a possibility that we'll see in the future and we may be still in 2019 but Brasilia is out of our control as you know.

Unidentified Participant

It was very, very clear. A final question, if you allow me, I would like to have more details on the sale of Telecom. When do you intend to publish that notice. Are there any regulatory or legal of pending issues and when do you expect to conclude this transaction? Thank you.

Unidentified Speaker

Well, Marcelo, I left Wendell, who is the CEO of Copel Telecom and he is following that up and he is working with the control agencies internal governance and after this is approved and the Board of Directors this model, we will also be working with them Wendell, so I will turn the floor to him.

Unidentified Speaker

Marcelo, thank you for your question. This subject has been the reason of a lot of work here and Copel Telecom. We are working on a divestment study. And as I said before, we have hired Rothschild Bank to help us in addition to [Indecipherable] office in Sao Paulo. So we are working on it. Today, the possibility of divestment and this study is being should be concluded by the end of the year and we will -- we have a process of internal approvals and it will be submitted to our governance and we should conclude the process in the first half -- first quarter of next year. But we are at a final stage of internal approval and most of those assets should be sold, we will only a key the strategic assets to conclude

Unidentified Speaker

activities -- or to continue activities for distribution and generation companies. So this is the current scenario. And that's what we have right now regarding Telecom divestment. Marcelo, allow us please to work on it, the last of amortization that we have in the Parana state was in 1998 when [Indecipherable] that is over two decades ago.

So this is a long process and we are working on this process here and the state and in the company. So after all the governance items and all the reports internal on exports and after they are ready and also after the approval of our Board of Directors, all the model and the design and previous approvals, especially coming from now all of that will be done in a way that when we open the data room and have the public notice there available in case that is approved by the shareholders, it should be the easiest to understand as well as the easiest to operate. So that it could encourage other investors, other players, not only traditional players in telecommunications, but other players also might be interested and looking at this asset, because obviously this will bring greater competition to the process. So as I said, the next month after December, we should be approving the model in here in our Board of Directors also in the Company's Governance, this will be registered with the courts of account and now this model will be registered there and this model, by the end of the first quarter by the end of March of 2020, this auction should be done. We can find already would B3 and we believe that this will be executed in the best way possible fulfilling all the deadlines.

Unidentified Participant

Thank you very much. And once again congratulations on your results.

Operator

Francisco from XP Investments also has a question.

Gabriel Francisco -- XP Investments -- Analyst

Hello everyone, congratulations on your excellent results. I have a question on Marcelo's question and it has to do with the project regarding [Indecipherable] but the decree 9271 of 2018, which allowed Primavera privatization factories privatization.

I don't know if that could -- couldn't that be used -- couldn't that be applied to use and that's my first question. And my second question has to do with Copel's Telecommunications and it has to do with the activity for the Group and somehow it's shared with GeT right and that needed to be addressed, so no questions rised when you find a passage right, so Copel Telecom in the past had something like that, right of passage do you have to sign an agreement to return feasible the sale of the subsidiary with no questions. And if yes, what would be the amount of this right of passage in that area for Copel Telecom. That is -- these are my questions. Thank you.

Unidentified Speaker

Hello, Gabriel. Thank you. About GSF and the optimization of the decree, in the Primavera circuit that cannot be applied, because they addressed those 30 months, the period of time has already expired to revert that option regarding the decree. Is there anything else this decree? No, that's it -- Primavera in south, we had over 60 months after those maturity of the concession, and remember that in this current situation that can be by the Copel but [Indecipherable] also has some clients and C3E also has a plant and that situation and then it's set to sale, they traumatized the whole company. And in our situation, the idea was only for this plant Copel Generation and Transmission will remain with its on capital structure.

Now about your second question Gabriel, we cannot go into further details yet but in general today, we have a whole infrastructure within Copel Telecom and the idea is that the assets that are important for Copel energy whether generation and transmission or distribution that they are transferred to Copel Energia, which is the lower share of the 34,000 kilometers, much lower of those 34,000 kilometers and that we have a

Unidentified Speaker

a swap contract between Copel Telecom and Copel energy so that Copel Telecom can as a whole, the whole structure and tax number of clients and asset base. All of that can be available to the market. So that is the most information I can give right now. But the design of the model and that's what is taking 90 days of discussion internally here -- also discussions with the companies which have come and the banks and that our, we got to the model and then obviously that will have the approval of all needed regulatory agencies, so that we can do exactly what you said -- we want to provide as much security as possible to investors -- investors look at this asset and intend to buy it, they will have the guarantee that all processes, the contracts, and the agreements among related parties, all of that is going to be established. We will again have the amount and the approval, so that the investor can start to operate and optimize a very important asset, just remind you and I don't want to extend myself, when we are saying the investments because in a strategic manner, because we want to focus on energy, energy is our core business, but that is an outside that is very good, the example for the last 10 years, if a private operator with in terms of capital and also scale gain will be able to optimize a lot this asset and that is the value of this asset will have private investors.

Gabriel Francisco -- XP Investments -- Analyst

Excellent. Thank you very much for your answers.

Operator

Ms. Carolina Carneiro from Credit Suisse has a question.

Carolina Carneiro -- Credit Suisse -- Analyst

Good morning, everyone. I have two questions, first about commercialization of energy. I want to know if there is any update about the amount that you have to sell for the next few years and also the market liquidity in terms of price and term for that energy and my second question, I would like you to tell us a little bit more on manageable costs, you had some adjustments here on the slide to get in this final amount that you mentioned and one of them you made it clear that is a referred to BRL55 million of non-recurring, but here for profit share in distribution, I think is BRL20 million. So, do you remember what is the rule for the profit sharing program. So that

we can do this update for the compensation for employees for the next months or quarters? Thank you.

Unidentified Speaker

Hello, Carol. I will address the first part of your question analytics and then Moura can tell you more about our profit sharing program rule, because it is only healthy that this profit-sharing program increases and there are some -- so that it doesn't grow proportionally, but talking about the sale of energy, one of our actions since the beginning of the last quarter that is always in order to reveal the amount of energy, they contracted backup

power generation and transmission has and to run this project also in our commercialization company.

So we are looking for a reduction of the the contracted energy for the next few years, so that we can have more predictability and a greater assurance to the company as well as to our shareholders, avoiding therefore to be exposed to the inflation of the stock price and I consider that the results that we are having in the quarter over the year do show that there is great competence in the company in the energy allocation and as well as then the optimization structure of our spot price, but we are reducing the contracted energy. This is not in the presentation, but it was in the release. And for 2020, we are already at our minimum needed, which is the natural hedge lower than 15% and 2021, '22, '23. It is around 50%, a little bit less than '21 and a little bit more '22 and '23.

So there is an effort of the company here toward that. So we have customers and we have the opportunity to have the stock price in our mix BRL185 [Phonetic] over that mix, we will be executing the sale and to decrease the volume of the contracted energy because that is going to provide safety and is stability to the company and that is the rationale. And for the next few years, we intend to gradually and in a very aware fashion -- very conscious fashion, we wanted to decrease that for the next subsequent years.

Now Moura, about the profit sharing program?

Adriano Rudek de Moura -- Chief Financial and Investor Relations Officer

Well, the program is basically related to net income or dividends, which is higher, there's a fixed percentage for net income of 6.69% and for dividend is

14.46%. So this does have the slot, this limit so that we don't pay much more. Basically that's it. So when the net income increases, we have the adjustment of the provisions. That's what happened in this quarter you, the adjustment was a 4.64% and the year-to-date net income is over 30%, so we have an adjustment of 40% vis-a-vis last year, year-to-date when we compare that for last year.

Carolina Carneiro -- Credit Suisse -- Analyst

Okay. Thank you very much for your answers.

Operator

There are no further questions. We now turn the floor back to the company for their final remarks.

Daniel Pimentel Slaviero -- Chief Executive Officer

As a final remarks, I would like to thank you very much for your questions, also high number of participants in this call. And I would like to stress that we are very proud, very happy, me, all the officers, officers for the other subsidiaries. This is the third quarter where we have the significant results. We are consistent in this new cycle of the company that did not start in 2019. It started in 2017, but now we are starting to have consistent results. Thanks to our efforts. This is a no-return way. We have increased responsibility also higher challenges and we are obsessively focused on a perfect execution. So that in the next quarters, we can keep on delivering significant sound results and also working on the divestment project, so that we can keep on improving and appreciating our company. Thank you all.

Operator

[Operator Closing Remarks]

Duration: 65 minutes

Call participants:

Daniel Pimentel Slaviero -- Chief Executive Officer

Adriano Rudek de Moura -- Chief Financial and Investor Relations Officer

Unidentified Speaker

Unidentified Participant

Gabriel Francisco -- XP Investments -- Analyst

Carolina Carneiro -- Credit Suisse -- Analyst

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