Centrais Electricas Brasileiras SA- Eletrobras (EBR) Q3 2021 Earnings Call Transcript

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Centrais Electricas Brasileiras SA- Eletrobras (EBR -1.65%)
Q3 2021 Earnings Call
Nov 21, 2021, 2:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for waiting. Welcome to the Video Conference of the Third Quarter of Eletrobras. I'd like to introduce the team of Eletrobras, we have President with us Mr. Rodrigo Limp, President of Eletrobras, Elvira Baracuhy; Financial Director and Ms. Camila Gualda, Risk and Compliance and Mr. Pedro Luiz Jatoba, Generation President.

This video conference is being recorded and will be made available on the IR website of the company where we have the presentation available. We would point out that those who need simultaneous interpreting we have this on the icon interpretation on the lower portion of the screen, up on choosing that choose your language, Portuguese or English. If you chose English, you can silence the original audio by muting it. For Q&A session, we suggest you send via Q&A through the lower portion of the screen. Your names will be announced and stated and then you'll get a request for the activation of your mike.

I would like to point out that declarations and statements here in terms of perspectives of business of the company projections, goals and operational and financial goals are based upon the premises of the company as well as information currently available to the company. Future considerations are not guarantee or assurance of development because they account for risks and uncertainties and therefore circumstances that may not happen. Operational and general situations may influence the future considerations.

Now I'd like to pass the floor to Mr. Rodrigo Limp, President of Eletrobras. Mr. Limp, floor is yours.

Rodrigo Limp Nascimento -- Chief Executive Officer

Good afternoon. Good afternoon all. Welcome to our conference, video conference this time with the presentation of the results of the third quarter of 2021. We have here four of our Directors, myself, Ms. Elvira; Compliance; Camila, Mr. Jatoba, Generation. And we have the pleasure to have you here exchanging information about the results of the company on this quarter.

So that we have this starting, I'll talk about the main highlights, financial, operational and corporate. The results and the shares will be further commented by the financial board. So we're doing the beginning of all our result presentation and meetings, we have a general context that we check the load compared to the previous year, we had in 2021. A lot of that was above last year, and we kept on going regaining strength closer now in the summer time, with increasing consumption with more higher temperatures. This year nevertheless, we haven't yet started the high temperatures period GSF and PLD. In the last conference that we brought up these pieces of information of in June, we have expectation to have a GSF that would be very low compared to the previous period to the hydric crisis GSF were very low results of the scarceness of water in the sector leading on to greater thermal generation, and a reduction of our hydro-electrical generation and the extra expectation that we sign out.

Before the price of liquidation of differences and the short-term PLDs, in the third quarter, it was in the upper thresholds, ceiling values. In the fourth quarter, we see a reduction but it's still with a scenario of a lot of attention given to the hydrate situation in Brazil even though it is more comfortable than it was months ago. Mainly results of the actions taken by the government in terms of more availability of offers of thermal sources, measures allowed for better storage of water in the reservoir, especially in the hydraulic side, the rational use of energy, Eletrobras has its contribution through pro-sell that we are responsible for and we aim to incentivize the rational use of energy.

Next slide. In sheer numbers, the performance of generation so far in 2021, we see how we have a participation very relevant in the generation of energy in Brazil and the water 30% of the whole consumption of energy in Brazil -- in the country. And then, we have in the lower portion, the energetic balance. In the upper portion, we have the physical parts and then we have the effective the lower portion comparing '20 to 2021. Revenue, ACL and the short-term markets a result of PLD elevation and commercialization trading adopted by Eletrobras. During this month of scarceness of water, the company had good results in the trading of energy. More relevant information that we have the attention when we compared the energy balance maintain our focus per plant. We see participation shares in revenue and we see there is a displacement between flow as around 45% in energy balance and production. And in the financials, we have a participation that is much lower BRL1.08 billion compared to BRL6.5 billion that was actually about generation.

Next slide please. The main pieces of data in terms of performance of transmissions. We have an increasing performance since 2016, kind of unbalancing between 99.96 to 99.93. You see there is this variation here compared back to the 2016 transmission lines, now, transformers we had this availability that was 99.8 per BRL0.01 one of the highest in the last year. That's the systemic robustness, 67.7, cutoff point for load which is very good. 1.96% is the variable share, 1.3% in the whole quarter or trimester.

Here we have the main financial highlights that were published yesterday at the end of the day. Net revenue less 50% was the illustration of the strong performance of the company EBITDA up BRL3.2 billion up to BRL5.5 billion in the third quarter compared to the previous quarter and net revenue BRL965 million, a decrease of 66% of the previous year as we commented and we all comment on further on. It had been strongly impacted for the fact that we have compulsory loans now recurring facts that represent the strong operational performance of the company and the improvement of the roll-up by 45%, EBITDA set up by 70% and net revenue by up 69%. Net debt to EBITDA we are still ongoing with low investment. We were at 1 has a level now it's -- we're at 0.9 net revenue compared to EBITDA.

Our next slide, our main highlights of the quarter. It was a trimester that was very moved. A lot was dealt with during this point, lot of devices. The capitalization of reprofilement approved by Aneel for this rate cycle. This accounting RBSE added BRL4.8 billion in the results of this quarter GSF, the ending of the -- granting of the terms of extension of granting of the mechanisms of the plants of real location of energy MRE. We had two stages just ending the granting of the terms actually reflect on the impacting number of BRL4.2 billion plus in the consolidated results of the company. AIC result of this quarter is still coming out of the privatization of some distributors, concessioners, Eletrobras will receive a lump sum of BRL150 million. Nevertheless, they can be paid up to 60 months, according to this Selic rate.

The reversion of impairment, so we have a lump sum of BRL454 million. And then, we are accounting here, the reversion of BRL265 million of the plants of UTE Santa Cruz and UHE Batalha, the law number14.182, BRL182 million, so in the financial result starting in the end here concerning negative impacts minus BRL348 million, Selic was replaced by IPCA over credits of inefficiency, resolution, CNPE 15/21, a negative impact of BRL432 million. The first negative impact let's comment on it. This is the most relevant of them, the compulsory loan with a provision of minus BRL9.1 billion will have opportunity during Q&A for more details. This review was realized considering the recent history of provisioning of the company especially 2021.

In the last quarter, we were constantly going for compulsory loans that encouraged the company for a revision of these compulsory loans. We had a technical analysis based on the jurisprudential analysis and unfavorable reports from 2021, BRL8.9 million was -- actually BRL8.9 billion that ended up in minus BRL9.1 billion. One out of those undergoing revision was had to do with the prescription of the period of grace, the reflection of how we deal with that that was remote, but it's most likely to happen. And it's one item that is highly impacting compulsory loans wise, the alteration of the time landmark.

So here, we're considering the diverging records of the company here based upon reports that were granted actually, BRL2.2 billion in average. Furthermore, the results we had the unfavorable judgment of the case number in with the favorable decision upon further discussion. Conversion and action should be -- the period of that decision and non-payments that reinforces the thesis of the company. Other negative impacts we had -- the contingencies of shares, the reclassification of risk and law cases minus BRL657 million. And then we had the current credit taken on by the Holding in the process of privatization of the distribution of energy minus BRL340 million. CNPE 15/2021 with negative results of minus BRL432 million.

Next slide please. The corporate highlights with great satisfaction were awarded and in fact which about transparency typical 25 years that first time Eletrobras was awarded this and it's the results of the financial board and their action. Capitalization-wise we have in this quarter ENBpar, decree 10,791, and then, we have resolution CNPE 203/21. We are talking here added value for the 22 plants of the company that were affected by law 14.182 even not the importers will be extended like Tucurui as one of the power plants. CPPI 203 establishing the main point of the modeling of privatization of Eletrobras and we have important resolution of CNPE establishing guidelines for the definition of the price of energy of what's has been generated by Angra III not only for making viable the conclusion of Angra III, but for the segregation of Eletronuclear Itaipu companies that will start being controlled by ENBpar.

One more slide, please. This is a timeline for the capitalization with some of the milestones reached the Presidential sanction in July the deliberation of CNPE with the total value established at BRL62.9 billion, BRL29.7 billion CDE, BRL23.2 billion in rent, BRL2.9 billion out of the BRL62 billion referring to credits of inefficiency of CCC as per law 14.182. September, we had the creation of ENBpar, the controller of Itaipu and October we had the CPPI based upon the studies of modeling by BNDES, CNPE premises for Angra III. November 21, the hiring of the banking industry reps checking out the banks that will be representing and banks that will be part of the offering.

We have the accounting general office waiting -- we are awaiting the granting TCU, the accounting general office is still working on the last milestone that is assessed with Itaipu and the nuclear milestone. Now CPPI and more documents we have after deliberation of the accounting general office, we have the generation of documents with new resolutions by CPPI and new resolutions of CPPA. In case we have new values in terms of granting previously approved and CPPI will reflect that CNPE decision and order changes identified by BNDES in the studies, as of those milestones will have the process of instruction of the proposal of administration, the governance structure, the technical areas council and administration and the extraordinary assembly with 30 days as a minimum period and then we have the assembly with the decisions of the shareholders with the decision upon the adhesion or not to the process and then we'll have the controllers general office. And the offer as a whole after those milestones we have follow-on based upon the data of fourth quarter, therefore, annual. By having that information, we will have the information with 134 days as of the base date that is December that would have May as the limit date for the reports on the Annual Report until May would be the limit that we could actually have more interesting windows of time in the markets to do so, April for instance. That is the timeline as it is as of now for the capitalization and then we'll have the opportunity to clarify doubt about the results that we have had and we are actually accomplishing in this capitalization process.

Next slide. ESG in partnership with BNDES, we have the energy compact. The decarbonization of the electrical matrix of system isolated in the Amazon replacing the generation of diesel oil by clean energy. It's very important to Brazil especially for the Amazon region. Global Alliance for Sustainable Energy, Eletrobras as one of the founding members, CGT Eletrosul, the first mission of the Eletrobras company's worth green bonds related to transmission projects in the BRL185 million. The availability of the sustainability channels specialized in the requests related to ESG. The selection of six initiatives for organizational development, entrepreneurship and open renewable ability, and we have the reaffirmation of the commitment of Eletrobras with the UN objectives. Eletrobras is among the companies that are most transparent in this area according to the study of GRE in Brazil as per their studies. And in this water, we have three call for biddings with 352 projects, cultural ones, sports related and social, environmental in the order of BRL17 million involving all companies controlled by the group. Those were the ESG highlights and then on that note, I end the general pieces of data and then we pass on to the next slide.

I would like to pass on the floor to Director Elvira, talking about the financial performance of the third quarter.

Elvira Baracuhy Cavalcanti Presta -- Chief Governance, Risks and Compliance Officer

Hi everyone, let's carry on with our presentation. With a little more detail financial ones that have been presented in a more executive way in the beginning of the presentation. Let's start with our [Indecipherable] third quarter.

As per our standards, this first column is actually abide by the numbers that were reported upon according to IFRS and the second part, the green one recurring are the ones that we are excluding off the extra ordinary effects in the quarter so that we can evaluate the results of the company based upon recurring basis. We have had a growth in revenue in the third quarter. We have verified that starting to happen in the previous quarter. Generation and Transmission both increased and then we'll have more details in contracts with more details.

In the beginning of the presentation, we mentioned rates increased PLD, the strategy to always have part of the energy not hired or contracted outsourcing a free environment. We had BRL1.4 billion that is related to the financial share of the contracts that is very concerning and important. Furnas, one of our subsidiaries has also played very important role, the revenue was very positive. The PMSO operational expenses, personnel material services and orders will explain in more detail, 4% percent, and in recurring basis, we had a stable number in this quarter, personnel, we'll see more detail ahead. We had an effect of our collective agreements that's impacted this quarter costs and operational expenses. So we see a difference that is more significant based upon IFRS and recurring basis.

Here we have GSF and the solution. If you look up on the under IFRS, we have positive operational expenses, because here we have the record of the effect up to BRL4.2 billion that were out of the GSF -- came out of the GSF, extending the concession of the assets limited to the seven year period and that cuts down on expenses based upon IFRS. That is positive after all. Under recurring, we exclude that effect, despite being positive because it's not recurring. President Limp mentioned that our main operational aspects were the compulsory loans around BRL9 billion. That's why on the right-hand side, we discard that for not being recurring. Shareholders, we had a positive result, some events with very important numbers Norte Energia with a GSF backed as well.

And another line that I would like to point out regulatory guidelines. In the recurring basis we exclude them nevertheless RBSE, the remeasuring of RBSE is economic and not cash flow based. Cash flow has to do with reprofiling. That's why under IFRS it's seen as positive. But in recurring, we exclude that that's why EBITDA, the same for the IFRS or recurring because the negative effect due to compulsory loan was almost the same in the adjustments due to the current agreements under GSF. Financial results, we had exchange rates are oscillating. Bonds in October we had a residual that BRL960 million after the payment of October in recurring basis in BRL3.6 million.

Next slide please, where we detail the gross revenue. The main effects the growth effect doesn't have so many non-recurring effects. So let's focus on the blue bars, BRL8.2 billion on the third quarter to BRL11.7 billion in this ongoing quarter in terms of generation we had supply new contracts with suppliers' quotas that were corrected, increase of operations in free environment PLD. Transmission we have the review of the rates that includes the KE and most recently BRL1 billion out of the IPCA and the construction revenue as well. Therefore 38% in recurring basis, BRL3.2 billion in the revenue. Here we see that in more detail in revenue out of generation.

Here in the upper portion, upper hand side, GSF and PLD compared to the third quarter of 2020 and 2021 due to the hydro prices, PLD very close to the ceiling. And then, we have to your left-hand side, in a nutshell, the main contracts regulated and free environment volume average price in revenue. In the regulated environment, we have an increase that was expressive BRL206 to BRL275 this year, 17% increase in the revenue. To your left we have highlight Eletronorte, BRL130 million Furnas due to Santa Cruz plus BRL118 million. And the quota is just the inflation adjustments in fact of more or less 3% and nuclear quota last year at this point, the nuclear power plants have had downtime due to fuel. We are working on normal basis compared to a lower base from last year. In the free environment, we have an expressive change in the average prices. From 140 to 190, almost 40% and the liquidation in the short-term of PLD bilateral contracts, we have some cases that aren't more relevant, Eletronorte for instance, with a lot of energy being retraded in the free environment.

Next slide? PMSO operational, personnel services and others. To your left we have what was under IFRS and I'll focus on the right-hand side recurring, the number was aligned with the same period of last year that there are compensation among the personnel for instance, we had an increase of 6% that reflects the collective agreements 6.76%. We have liabilities in terms of actuarial liability, shares has been able to accelerate capex. Shares fell Eletronorte to the reduction of PLR that have been provisioned up on the total, but it was actually lower than expected and services that we have an increase of 450 to 513. We have distinct effects here, but the most relevant actually was Eletronuclear. We had downtime in Angra II and we have to account for this maintenance services, reduction of 32%. The main point being we have losses, liabilities that weren't actually accomplished, as expected in terms of legal cases.

Operational provisions compared to the same quarter of last year. We have 9.3 now the most impacting point is the compulsory loan to main groups here. Interests and the reflection of those upon and then the timeline in terms of unfavorable legal decisions, outcomes, and the impact upon the company. In the third line, we have a reduction compared to last year, but 375 is predominantly subsidiary shares that had a detailed review with the reclassification of some risks and the updating of some processes with IGPM as an index and the positive effect reversion of the legal action Chesf actually had some negotiations on the side that's actually allowed to have these better outcomes. It permits and long-term, we had some reversions that are highlighted here on the right-hand side that is positive and for Aneel CCC, we had to do send provision, BRL9.3 billion of provisional aspects.

And next slide, we have the graph that actually points out how EBITDA was IFRS last year's quarter as compared to this third quarter. The values actually compensated values were very similar in terms of the remaining duration of RBSE and the hydrologic measurement of risk measurement. That's why in recurring terms EBITDA was almost the same that was reported on IFRS. When we are comparing 2020 2.2 to 3.6, 45% comes from revenue increase. The shareholders fee of BRL550 million increase, GSF in North Energy BRL105 million, operational costs. A lot of relation to this patch of Santa Cruz buying energy importing of energy from Uruguay increasing costs but energy as well. PMSO recurring basis aligns and provisions when we take the effect of the non-recurring we have around BRL200 million increase of provisions.

Getting to this total amount and the remeasurement of the hydrologic impact, Eletronorte, it has the effect of Tucurui mainly, the evolution of the net revenue BRL2.1 billion going on to BRL3.6 billion this year, 69% increase, EBITDA 66% of this variation. We have some variation of the financial results that has to do with the exchange rate we have the dollar increasing and the effect of the revenue taxes.

Now very close to the end, we have two slides. So I have the financial discipline as we always present, we have our goal to be below minus 2.5 fold, almost the same point as last year at the same point. EBITDA increasing as we see in the graph below here recurring basis based upon 12 months, BRL20 million. And then we have the gross debt BRL48 billion, BRL12 billion in the short run and BRL36 billion in the long run.

Liquids, net debt BRL19,106 million, our net has to do with what we still have to receive to your right lower portion. Some important points, the payments of the residual of the refinancing of bonds of 2021 that was paid up on the end of October BRL646 million valued in Portuguese was BRL3.5 billion, BRL852 million to get from Angra III and AFAC. We had a very relevant AFAC agreement with Eletronorte with El Paso without reversion that generated further BRL100 million, the third installment was paid recently. And the value is pointed out here in the slide. capex-wise it's been very challenging between the planned and the outcome. For many reason, we have been accelerating in different trimesters and quarters.

We are in the second quarter, almost BRL180 million in the third quarter, we are in the order of BRL1 billion, we are currently compared to -- in the order of 50% in terms of growth, we have to point out Angra III power plant. We have a bidding for retaking some of the construction work, the release of AFAC's. We had to postpone few decisions for not having the authorization of the regulatory body for the stoppage or downtime that would be necessary and we didn't need further infusion of cash, which is positive.

On that note, I'd like to end the second part of presentation then we can start the Q&A session. On that note, thank you.

Questions and Answers:

Operator

Now we'll have the Q&A session to start. We invite you please to ask the questions all at once and then wait for the answers. Send your questions via Q&A in the lower portion of your screen. Your names will be stated so that you can ask your questions. And then you'll have a request to activate your microphone. Our first question is by Mr. Andre Sampaio sell-side analyst from Santander. Andre floor is being opened for you.

Andre Sampaio -- Santander -- Analyst

Good afternoon. We have two questions. First of all, I'd like to understand the discussion on the compulsory loans. The main question to us here is in the level of how conservative you were, how much do you understand? Do you see that actually BRL9 billion as expected when we look at what was descripted into any until now. We're talking about a remote that was lower than this BRL9 billion, so we can see what happened with the remote and then we will have position and loans that is more conservative. We have questions from investors here in terms of release for guarantees for the participation of listed companies, Quelles for instance, I think that is the company I'm most doubtful about.

Rodrigo Limp Nascimento -- Chief Executive Officer

Thank you Andre for the question. First of all talking about the compulsory loans, I would say that conservative wise we have and how conservative we have been. We have had provisions of BRL400 million, BRL300 million, BRL500 million. So we had a technical review based upon the development of jurisprudence and the most recent decisions and granting and result of report. For these processes of the compulsory loans there were changes. And according to our perception, the most, the best prognosis of risk for them is that they are likely, which is different from us, not agreeing with our thesis. We will still work upon -- still rely upon our thesis. But from a law standpoint, we had to bet on the best possible standpoint, the evolution of the jurisprudence recently in the last trimesters or quarters. That is the best perception of the company in terms of risk prognosis, in terms of compulsory. We did our homework and we've been successful so far. And we'll keep on doing so our risk prognosis is that it's likely and it fits better within these items.

Now the replacement of the warranties. This is a process that we have as a strategic guideline from our board. So that we have an analysis for the -- indication of alienation of them, but it's a very diffuse process in many region. And there is always the unexpected timeline, whenever know how long it will take for the decision to be made legally speaking or many other unexpected aspects we might have, as it's not always as timely as one would like.

Elvira Baracuhy Cavalcanti Presta -- Chief Governance, Risks and Compliance Officer

The second question that is most more direct, Elvira. Shares and warranties we have a table 17.4 and Quelles, the company that you asked about we made a lot of advancements, we have 25 to 26 blocks, it's this number was 100% in the past. Mr. Limp was right, this is still a focus, there is a decision of Board of Directors that takes into consideration the alienation, but it's a very slow process, because it's always depending upon the company. We are organizing this basis, we are checking things with the bank's web process, we are guaranteed. We had petitions for the replacement of this warranties and this is what has been happening. And that depends upon the courts actually granting with the pandemic we have a lot being done remotely and a lot of legal work that is physical that depends upon physical files have not been digitalized. Therefore, they cannot keep up with them online, 26% is still blocked, but we are still working on it.

Andre Sampaio -- Santander -- Analyst

Thank you. If I could follow-up concerning the compulsory. The doubts that I still have is the other processes we had in the 20th December it's 17.5b plus BRL9 billion now. We have BRL11 billion of risk and BRL8 billion in the remote. How can we imagine currently in terms of remote and possible would we have any relevant aspects and in this aspect or remote would be BRL8 billion?

Elvira Baracuhy Cavalcanti Presta -- Chief Governance, Risks and Compliance Officer

Remote wise we have BRL5.2 billion. That was the likely interest and the reflection of those. So we still have few aspects related to subsidiaries. And if I may add, please, just to add here we have provisions that, we have BRL7.2 billion that was from remote according toward the global analysis of the provision of risk. So there was a modernization of the remote to likely. The other value, BRL2.1 million was the move of a specific parameter, there was an alteration of the milestone and anticipation so that we could actually work on the share. And in the past, we had the counter verse installment, when we had a report, when it was granted as unfavorable by the Judge. We had to appeal nevertheless, many a time a Judge, in the first instance would actually sets out the directions for a payment for providing a time for the company to make payments, and sometimes it was too short. And that's why we didn't have to review that the adding of 2.1 is not an alteration of a parameter per se, but an anticipation of the milestone of the counter verse installments so that we have repairs, the possibility to be at the counter verse installment upon anticipating that milestone not only reports during liquidation, but sentences out of the process of acknowledgment that is sometimes contrary to the thesis of the company.

The company understands that it's more -- based upon that we see the processes that are being provisioned. And you see that, if we have to check for the provisioning of that milestone. Remotely speaking, we have interest and we have a lower installment, lower than 2.1. So this is the order that the company uses to use what can be paid and should be paid in the first place. Understanding that they can consider page for the installment concerning interest and it's always about what's less burdening. So it's always a point of decisions. So that's why it remains on remote and in trimester here we have credits of companies that were incorporated not mentioned by the authors of the initial petitions, but that have to be executed along the process.

We have credits in the order of BRL2 billion, BRL7.5 million was what we had in the past bonds to the bearer. We have bond to the bearer in remote more than we expected. In remote, altogether we had BRL2 billion. And then we have reflection of possible application of interest post assembly as in the case realm. That's considered impossible and credits for credits and subsidiaries and branches that have to be taken into consideration even though they are not in the initial petition -- in the opening petition, those amounts are considered possible and impossible. HomePlus especially the part concerning the branches and subsidiaries BRL15 million and likely with the additional provision BRL26 billion. This is what the company can estimate actually from what they can foresee in terms of compulsory loans.

Rodrigo Limp Nascimento -- Chief Executive Officer

Just adding to that, I think Elvira added a lot of details of that. In terms of the compulsory loans, we have legal decisions that differ from our expectation. But I think that's the latest review in this last quarter will allow for the mitigation of future provisions. We cannot ascertain that there will not be provision in the future, but we can mitigate that risk with new provisions for being now more adherence to the effective jurisprudence sub-served by the company in the courts of law.

Andre Sampaio -- Santander -- Analyst

Thank you, all.

Operator

Next question, Carolina Carneiro, Credit Suisse. We will open your microphone so that you can ask your question.

Maria Carolina Carneiro -- Credit Suisse -- Analyst

I'd like to change to capitalization. You passed on and then updated the main dates in the next steps. If you could actually, I'd like to explore two further points. Firstly, you maintained with date estimated to November, the Controllers General Office, CGE and granting, we have seen out there in the media this news about the fact that these decisions actually may not be at, as a matter of fact, in the effects in this new timeline, this new schedule of yours, do you foresee maybe a revision of value? And I'd like to understand what main points or what other points if you could share could take a lead on to a delay in this new schedule? Rodrigo, you mentioned that this is more a deadline than a fixed date. I would like to ask what other events may cause a delay of this estimated deadline? Thank you.

Rodrigo Limp Nascimento -- Chief Executive Officer

There's a lot of news about the decisions of the Controllers General's Office. And since the beginning of the process we have been in keeping up with the Controllers General's Office with the Reporting Minister, Eletrobras, we are up-to-date aligned with the Ministry of Energy. We've been talking to all nine ministers, the Board of Eletrobras, Camila, Elvira, our part of the discussions and our perception within the Controllers General's Office. We had an analysis of the Superintendency of Infrastructure and Energy Generation, SINFRA with an analysis with a proposal of forwarding. The reporting officer forwarded that to the Controllers General's Office and there is a report on that and then it's back to the Reporting Minister that is actually deciding on the direction of their vote.

So it depends upon how we act and interact with the ministers, and how we see and how the court of law sees and does due diligence. All that is happening, adjustments and improvements are part of the due diligence. So I believe we are within the normalcy of, in terms of a period that you mentioned November, we are in the second part of November, but it shouldn't be a main problem. If we go over to 2020, we can see a review of our schedule. We have seen things that have to do with the government that has been leading the negotiations with the court of law. The privatization was that once a kind of gap carried out off either factors that may cause -- it's a process that is rather complex.

For the fourth quarter, we have positive and negative aspects, the closing of an annual result is always more complex, it requires operational much more complex from our team's SPS corrugated subsidiaries and based upon law, we'll have to be very radical and very, very sticking to our original schedule as per plan. After the decisions of Controller General's Office, CGO, CNPE, we depend upon many decisions of BNDES. Another item that we have monitored is the legal actions. We have had many legal actions on many level. We have a task force coordinated by the Controllers General's Office to avoid that legal actions may cause deviation in our processes. So all these points are under control nevertheless may come into effect and into the equation if they change from what we're expecting. And they are not only a point of Eletrobras, but PPE, PPI, Eletrobras and the Ministries that are related to that, the capitalization is to happen as soon as possible by May, maybe happen in April, as I mentioned.

Maria Carolina Carneiro -- Credit Suisse -- Analyst

Thank you, everyone.

Operator

Our next question is Adriano from PSBB [Phonetic].

Adriano -- PSBB -- Analyst

Hi, everyone. I have some questions. Let me start with this one of the capitalization. Just to make it clear, you believe this first stage that is the -- that you believe that the granting is still this year, but the legal bodies actually are to go on recess from the 7th to the 17th of January or the end of December to the beginning of January. So what would happen in terms of the schedule if you foresee that? What do you foresaw in terms of the provisions? Does it affect the next stage along the Controllers General Office in terms of the results of the third trimester? And if that update of the results of the first around the provisions may cause?

And I have another question on provisions that are not very clear, whether this increase in the provisions, if there was a fact that it was generative or whether there was a matter of fact there is a problem or whether the winning in the case, Roraima, and let you want to review that? So that is my question. Especially if this winning in the case, legal case, Roraima, and mentioned minor shareholders. We have two questions as soon as you alienate 26%, if you unblock the remaining 26%, if you can alienate the whole thing or if the TRPL is in a way similar to Quelles?

Rodrigo Limp Nascimento -- Chief Executive Officer

I think there's a lot in this question. If you haven't been at all clear, please let me know. Thank you, Julianne. Now I have taken out of the questions, so that I don't forget. CGO, you, as I mentioned, the Controller General's Office, the reporting officer has been part of many similar process and I think that favors the analysis and the treating of that process may have an expectation that is good in terms of good outcome in terms of the court of law still in 2021. I'm still not sure if this is the last session, I think the last session might be on the 8th, not on the 7th, we have that expectation and the second agreement will naturally be in 2022. Well, I wouldn't be able to tell whether it would be in January. January, I don't think it will be done because given the complexity of the need of analysis by different legal bodies and the Controllers General's Office, it might affect our schedule therefore and how that impacts as we can see in the resolution of the PPE, there is a definition of a minimum price that comes out of a valuation of Petrobras that considers the liabilities of the company. So it should consider that. It should consider not only the compulsories for all and for the calculation of the minimum price, not only for the company, but for the Controllers General Office.

Compulsory credit as I mentioned, I have all the recent decisions, we haven't had the relevant decisions in 2021 and that would have motivated us to make those actions. We had an important provision in July, Supreme Court. Other than that we have the growing analysis of provisions for the facts that had those provisions to happen in the Roraima case. Paola, please let me know if I'm wrong. The fact that we have a positive decision, it doesn't change things immediately because those values weren't provisioned for, they are within possible, but they are not within the likely. We don't believe we will have more unfavorable situations that would change the provisions. The expectation currently is not to -- these provisions are OK as they are not within the likely CTRPL.

Oliveira, would you like to comment on that or other questions?

Pedro Luiz de Oliveira Jatoba -- Chief Generation Officer

I had a problem in the connection, I didn't hear the last question, I only heard up to case, the legal case, Roraima, Julianne, Elvira?

Elvira Baracuhy Cavalcanti Presta -- Chief Governance, Risks and Compliance Officer

Quelles, if that's as soon as you unblock 26% you aim to sell them and the TRPL, how is it. The decision on what to make with Quelles and many others is much related to the process that we currently as a state-owned company we have to follow. We do not have the same flexibility that we will have after the capitalization. There are some predictions that we need to have motivation for the alienation. We have the proof that the proposed value has to be fair, it could be an OPA. If one of these companies actually that we are minor shareholders, we can think of an OPA. As a state-owned company, the processes is lower. And another situation we'll be after the capitalization in all of them. We have work to work on deliberation of these actions that are given in warranty. And all these companies in our core business, we do not have the intention of alienating. So further on, we'll study that with our admin board.

Adriano -- PSBB -- Analyst

A technical question, if the minimum rate of referendum by the Controllers General's Office, will it be a limit in the operation? The capitalization can't happen below the minimum price.

Rodrigo Limp Nascimento -- Chief Executive Officer

Yes, that's precisely that. If it's below the minimum price, the operation doesn't happen.

Adriano -- PSBB -- Analyst

Thank you.

Operator

Our next question comes from Marcelo Sa from Itau. Marcelo, please go on with your question.

Marcelo Sa -- Itau -- Analyst

Hi, everyone. I have a question about the Attorney General's Office. And they were questioned the fact of the granting going to above BRL10 million. I'm trying to understand what is the role of the company in the questioning of a request by the Controller's General Office and is there time to review that, we have to counter arguments with different rates, if rates may be too high now that rainfalls are changing. So I wonder what will happen if they are not abiding by the promises?

Camila Gualda Sampaio Araujo -- Chief Governance, Risks and Compliance Officer

CGO, the Controllers General's Office is the decision up to the CNPE that has the prerogative to make the final decisions. If it is a final decision, it has to be incorporated. There could be some level of appeal anyway, a recommendation is wise. The government actually will have the last word in case of the criteria that should be considered for rates and what was for signed documentation and was recognized by the press. It was that an increasing the grant of the -- was the media actually was based upon a number of BRL5 billion.

On top of what would be deliberated by the CNPE, whether that will happen or not or will the Ministry will get involved in order to make that final decision. For the decision of the Assembly, the price of the granting is a piece of data. It's up to the company to show how advantageous that is to the process or not. And the final decision is of the shareholder. Excluding the government, the government within that, whether they are going to do that the destatization. Now, the Controller General's office has been discussing with the ministry and the company and we are not a part that can -- a party that can actually question directly, what is the very safe final decision made.

I don't know whether I've made myself clear, Marcelo. I think it is clear, but I'd like to double check on the understanding of some aspects. One is recommendation, this CMDA may or not follow, if it is a recommendation, the hardly a person from CNPE would go against the Controllers General's office, that decision would be made by the shareholder in assembly or not. But there shouldn't be after they found the decision by the Controller General's office, there wouldn't be further room for questioning. As we have mentioned, is there a possibility to have a minister that might not be directly involved in the process require a review, for instance, given it is a theme of high complexity, I don't know whether all ministers I don't know, if I may be corrected here. I don't know whether all ministers would be able to have the knowledge and the backgrounds to be able to question that decision on that level. As you mentioned, if the Controllers General's office promote that recommendation. If they understand it is pertinent, they will abide by that. So otherwise they won't but if they do not abide by, they have actually to go to provide proper ways.

Rodrigo Limp Nascimento -- Chief Executive Officer

I was just questioning if at all, every minister has the grounds actually to require a review. It's very similar to what Aneel adopts, the minister may bring a new position but they can discuss with all other ministers and the technical areas of the different departments of the government's administration. They may do so. I think there is that possibility. But our way to try to mitigate that is trying to discuss openly with all ministers.

Adriano -- PSBB -- Analyst

Thank you, all. It's very clear.

Operator

Our next question Pedro Manfredini, Goldman Sachs. Pedro, floor is yours.

Pedro Manfredini -- Goldman Sachs -- Analyst

I had asked questions through the chat here, but I will repeat. Thank you for the opportunity. The fiscal credits from the compulsory loan, how is it done? What is the activation of that credit? If you have that credit, I believe we do so and how it is done, we see plus BRL9 billion. We see the tax credit that is generated here. If it is actually generated in the payment of that or whether that is different.

And the second question would be dividends wise, the offer going up to May, we see Eletrobras generates a lot of cash flow and offer and whether there will be an expectation in terms of free offer and the review of default policy for dividends that have been adopted by the company.

Elvira Baracuhy Cavalcanti Presta -- Chief Governance, Risks and Compliance Officer

Compulsory loans, the holding actually -- they are Eletrobras Holding not subsidiaries. We cannot activate those credits because we have to have a taxable projection. In practical terms, we cannot use those credits. That only can be done later on, but we are now only doing the provision for that. We're evaluating alternatives to have additional revenue for the holdings to have a taxable alternative, so that we can activate those credits, currently we cannot use them.

And your second question concerning dividends. Currently, we do not have that expectation to have a new payment. We maintain our policy of 25% that has been done, that can be reassessed. We are concerned in terms of our obligations, both capitalization. The CNPE decision may go through adjustments. The decisions of the court, there are decisions that we want to make for the future. So you're still analyzing cautiously additional dividends to what would be 25%, that would be our policy.

Pedro Manfredini -- Goldman Sachs -- Analyst

Thank you Elvira for the answer. The activation of the credit, if you as today would have some sort of revenue on the holding, create any trade within the holding. Do you have any idea how much could be activated here depending on how much you could actually create in terms of revenue? But let's suppose that the holding would be responsible for the markup of the company what PLD notional?

Rodrigo Limp Nascimento -- Chief Executive Officer

Something in the order of BRL9 billion. We do not have much of a notion, so it's important to question that.

Operator

Our next question comes from Ricardo Galdo from Mako. Ricardo, floor is yours.

Ricardo Galdo -- Mako Trading -- Analyst

Probably there is a question here. I'd like to understand the data for May 14 for capitalization. If it doesn't happen, so what could happen or when could it happen?

Rodrigo Limp Nascimento -- Chief Executive Officer

14th of May is the limit, they first have the operation considering the results of the fourth quarter, which is the dates that stands for the 134th day after the last exercise in that day, if we do not do that by May 14, we'll have the first quarter of 2022. That would be taking the operation probably to the end of June with the idea of accomplishing that fully by the beginning of June. And I see that there is a -- was able to get on now.

Operator

The mic actually is locked but he can hear us. That question was the last question of this Q&A round. The floor is Mr. Rodrigo Limp's. Floor is yours.

Rodrigo Limp Nascimento -- Chief Executive Officer

Thank you all. I'd like to thank the participation of all. We had a participation that was very numerous. It shows the interest for the company which is very satisfactory and we are available to you. To our area of RE, you can clarify further questions. Thank you all for your time and the attention.

Operator

[Operator Closing Remarks]

Duration: 92 minutes

Call participants:

Rodrigo Limp Nascimento -- Chief Executive Officer

Elvira Baracuhy Cavalcanti Presta -- Chief Governance, Risks and Compliance Officer

Pedro Luiz de Oliveira Jatoba -- Chief Generation Officer

Camila Gualda Sampaio Araujo -- Chief Governance, Risks and Compliance Officer

Andre Sampaio -- Santander -- Analyst

Maria Carolina Carneiro -- Credit Suisse -- Analyst

Adriano -- PSBB -- Analyst

Marcelo Sa -- Itau -- Analyst

Pedro Manfredini -- Goldman Sachs -- Analyst

Ricardo Galdo -- Mako Trading -- Analyst

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