Auren Energia SA

BOVESPA:AURE3

Earnings Call Transcript 2024-Q3

[Operator]

Good morning, ladies and gentlemen. Welcome to Auren Energia's conference call to discuss results regarding the third quarter of 2024. This conference is being recorded, and the replay can be accessed on the company's IR website, ri.aurenenergia.com.br. The presentation is also available for download.

[Operator Instructions]

Before proceeding, we would like to clarify that any forward-looking statements are based on the beliefs and assumptions of Auren's management and current information available to the company.

These statements may involve risks and uncertainties as they relate to future events and therefore, depend on circumstances that may or may not occur. Investors, analysts and journalists must understand that events related to the macroeconomic environment, industry and other factors could cause results to differ materially from those expressed in the respective forward-looking statements.

Here with us at this conference are Mr. Fabio Zanfelice, Auren's CEO; and Mr. Mario Bertoncini, CFO and IRO. The Investor Relations team is also here with us.

I would now like to turn the call over to Mr. Fabio Zanfelice, who will start the presentation. You may proceed, sir.

[Fabio Zanfelice, executive]

Good morning, ladies and gentlemen. It's an honor to have you here in the call to discuss the results of the third quarter of 2024. Let's go to the presentation so that we can have more time for the Q&A session.

As to the highlights for the quarter, the first highlight is the closing of Auren and AES Brazil business combination. The schedule is according to what we announced. We are going to complete the transaction today. The company's management will meet and everything is going smoothly. At the end of the day today, we are going to announce the completion of the combination.

So we will talk about the conversion and how the shareholders are going to be done by the company, 24% chose options of shares of Auren and the free float will increase by 11%. In terms of numbers, this will account for a raise of BRL 550 million. And this is the final value of the conversion of the base that was announced as a material fact. The integration process went very smoothly.

All the plans were devised for D1, which is the first day of the new company. And approvals will be made tomorrow and there was a plan for the first 100 days of the company. And there's another plan that is going to be applied in the first 365 days of the company. And the plan is to continue the business.

And above all, we aim to capture synergies and increase the operational efficiency of AES assets. As we announced during the moment when the transaction was executed. And this was one of the reasons why we made the purchase of the company. Another highlight is Jaíba Park that started operation -- commercial operation at 100% of its capacity, adding 500 megawatts to the portfolio of the company.

In relation to the results, the EBITDA was very significant, an increase of 7% in relation to the same quarter of last year, reaching BRL 484 million, driven especially by the performance of the company. The company took advantage of all the volatility of the market in the third quarter. And Jaíba came into operation as we have announced, and this contributed to the EBITDA and the dividend received from the minority stakes that we have also contributed to this result.

Trading segment added BRL 270 million (sic) [ BRL 296.9 million ] and in the third quarter, we gained BRL 180.4 million (sic) [ BRL 108.4 million ]. And we also raised funds in the amount of BRL 2.5 billion associated with the third issuance of debentures with at reasonable costs for us. We are very happy with the cost, which is the all-in cost of CDI+0.6%.

That is going to provide support to the company for our short-term obligations. And we also have the disbursements in the amount of BRL 5.4 billion that is associated with acquisition finance associated with the transaction with AES, and we have already announced the conditions of this transaction that took place in May when we made the transaction.

Okay. Let's move on to the market segment. As to the energy market, as always, we bring the main information about the energy information. So information about the affluent natural energy. During the year of 2024, we had important information. In 2022, we had the affluent energy close to the average. And 2024, we felt a very significant recession 30% below the long-term average -- medium-term average. And this is very different from the 95% that we observed in the previous quarter.

And the deviation reaches nearly 13.5 average gigawatts lower than we observed in the third quarter of 2023. This, of course, had an impact on the storage level. And in December 2022 to September 2023, we added 15 percentage points in the storage level in the interconnected system, which was not observed in -- until September of 2023 when we recorded a reduction of 11%.

So we have this lower affluent natural energy and then the storage level as we show in the next page when we talk about the evolution of the market. From January to September up to August, what we can see on the slide, we see the estimated number for September. The consumption of electrical energy increased in the first 8 months of the year. So there was an increase, which was focused on the residential class, showing the effect of higher temperatures in the third quarter of 2024, 1.5 degrees above the historical level, and that contributed to the consumption levels.

And together with an affluent natural energy, which was below average shows the decrease in the level of the reservoirs as we commented in the previous slide. Now discussing the trading performance. We show the balance or energy balance of our activity of trading and generation. We have another record for this quarter. So we reached the trading record for this year that accounts for twice as much as the fiscal guarantee.

And now with the addition of AES generated energy, we are going to meet 100% of our demand with our own assets. The contracting level reached 95%. So 95% of our portfolio is already contracted for the period between 2024 and 2026. And we took advantage in the price increase in the long term to reduce our exposure for the period of 2025 to 2028. So we reached the price of BRL 160-megawatt hour. This is a higher price in relation to the future expectation by the market. So in fact, we have took advantage of this price volatility scenario, and we were able to do good businesses.

The average up to 2023, our contracting level is 62%, high-level contracting for the long-term period. In the following page, we are going to discuss the operational performance. For this quarter, our assets of all Porto Primavera, which is our main asset, we had a lower operation in relation to the same period of last year as a result of the lower availability of the resources.

The GSF reached 79% and generation was at 93% in relation to the physical guarantee as we show all quarters. Porto Primavera is an asset that generates higher than the average of the complexes in Brazil with an availability of nearly 93%.

In the next slide, we are going to discuss the wind assets. And in spite of the curtailments that happened in the third quarter and this was hot topic in the generation area, but we reached generation higher than the P90 and we reached 607 generation is very consistent across all our assets.

On the following slide, we discuss availability from the managerial point of view, the assets have high performance. Our generators are generated higher than expected, and there was a negative impact which was 1.6% below in the wind generation and the restriction generation that stood at 5.7%.

And this is associated with the curtailment and considering the average of the interconnected system. We see that the assets operated at a region much lower than the national average.

On the following slide, we show the completion of the operation of Jaíba 5, and this is a project that referred to Sol de Jaíba, 626-megawatt peak, representing 500-megawatt AC.

We completed operation in September according to the schedule and below the cost that was estimated in our budget.

And now, we will talk about the financial performance. So I'd like to turn the call over to Mario so that he can continue the presentation.

[Mario Bertoncini, executive]

Good morning, everyone. On Page 16, we will discuss the financial performance of the company. The net revenue grew 26% when compared to the same quarter of last year, and it was driven by 37% of traded energy. As to EBITDA, as mentioned by Fabio, we reported a growth of nearly 7%, reaching BRL 484 million for the quarter driven by the results -- good results in the trading activities and also the beginning of the solar parks that in the beginning of the year, we're not operating and also due to the higher dividends that we managed to have this quarter.

On the following quarter in relation to the PMSO. The PMSO for the quarter had a nominal growth of 7.9% but we'd like to focus your attention to 3 activities. One was the beginning of the activities of the solar activities, this far acquisition and nonrecurring expenses related to the integration of AES. If we were to exclude the 3 variables, we would have reported a drop of the PMSO in nominal terms.

On the following page, we will discuss the management of our indebtedness. As Fabio mentioned, we had 2 issuances that have not impacted the third quarter because they were carried out in October, but those were events that are already included in our financials. Two of them are mentioned here, the issue of -- and also the disbursement that had been contracted in May in the amount of BRL 5.4 billion.

The average term for the debt without the impact of those issuances of this debentures is 7.3 years. So maturity is in the long term, and we ended with a cash of BRL 5.4 billion above what is required for the operation of the company, but we are getting ready to the closing of the transaction with AES, net debt over EBITDA ended at 1.6x. And the total indebtedness, BRL 8.3 billion, and most of it is indexed to the IPCA and TJLP.

On the following page, we talk about free cash flow and the cash conversion was 84%, which is a very high percentage. Cash flow ended at BRL 409 million and free cash flow at BRL 283 million.

And with this, I turn the call back to Fabio for him to finish the presentation.

[Fabio Zanfelice, executive]

Thank you, Mario. Okay. Talking about the business combination with AES. In the past 4 or 5 months, since the execution of transaction, we have been working hard in order to have a multifunctional team together with those companies in order to establish a robust plan and is going to be executed after the approval by the management, and we are going to start tomorrow with a plan.

And with the main objective of capturing synergies as we have committed ourselves to when we designed this transaction and go beyond that. This is and this will always be the spirit of the company. So the integration strategy had a focus, the synergy and the plans are already completed and more than 350 people were directly involved in the plant.

So we evolved all people in those activities. And we created clean teams to handle competition issues or sensitive terms. And we also included marketing and greenfield projects, both teams maintain the operation going and made the proper alignment of the 2 companies. And in fact, in addition to the methodology, required by this topic, we also counted on specialized consulting firms in order to define a new philosophy for the operation and maintenance for the new company, considering all the operating challenges that we have, especially considering the solar and wind assets of the company, as we had committed ourselves to.

And we also had consulting firms in order to help us improve the organizational structure so that the structure could help us capture synergies. So this was a process that was very successful. We're very happy how the teams cooperated. And we have a plan, we have a project which is very well detailed. And as of tomorrow, we are going to apply the plan. And then we have D100 and D365 plan.

And let's move on to the final remarks. This is very important for us. We are very happy to write this message. This is the last earnings result of our outing as it is now. As of tomorrow, it will not have a 3.6 of installed capacity. And we will now have 8.8 gigawatt of installed capacity. It will become the third largest company in the field in Brazil. And this is our commitment, and this -- our efforts in the capturing of synergy and transforming this new company into an excellent and benchmarking company in Brazil.

I would like to thank our employees who have helped us come this far, and we are going to go beyond. And it was only possible because we had highly engaged teams. And this is an 8-year construction that counted on the effort of many people, many people who devoted themselves to this project. I would like to thank and welcome AES holders who opted for converting their shares to Auren shares. And we would like to thank you for your decision. And we would like to welcome all the new employees who are going to be part of the company as of tomorrow, AES Companies.

We are going to have a single team as of tomorrow. And we are going to count on the experience and competence of AES team who are going to help us reach the objective so that Auren can become a benchmark in the electrical sector. Okay. Now we're going to open the Q&A session.

[Operator]

[Operator Instructions]

Our first question comes from Guilherme with Santander.

[Guilherme Lima, analyst]

I would like to talk about curtailment. You may comment about the 5% of impact in the wind assets and 14% in the solar assets. With the change in the methodology of AMS, do you think the operation will be normalized? Or do you expect any transmission line to come in so that the operation can be normalized and the curtailment be reduced.

Would you request any reimbursement as a result of this concern, especially how they were impacted AES assets. And in the medium term, how do you see the reliability and the energy sector due to lack of load? And how would this come about in the medium term?

[Fabio Zanfelice, executive]

Thank you, Guilherme, for the question. I think that's the important question for the quarter. Everybody is concerned about this. We thought that this was the main topic for the quarter. So as to AES, of course, we cannot discuss AES figures yet. So we are not going to go into details about AES assets, but you can read AES release.

And they mentioned that Cajuina was the asset that was mostly impacted with the curtailment at 53%. And when ONS decided to increase the cluster. So it dropped to 4.4%. So this is very important news. And that changes only when the rule of ONS was applied.

In October, we had the information that the transmission lines are going to come into operation. And Aracatuba was one of the biggest problem, and that was the cause of the curtailment that happened in Rio Grande do Norte and Serra. So let me talk a little bit about what happened. Again, we cannot provide details about AES yet but the curtailment was caused by some conditions basically.

The hydrological conditions, as we mentioned, the hydrological recession was significant and that led to higher thermal dispatch and the generation of the plants in the north was very high, and this is why we had the thermoelectrical dispatch. So this was the perfect storm.

So the current curtailment would be higher. And this was very clear because our assets were not so impacted in the period. So that shows that this doesn't seem to be a recurring event for the future. In the past, we had some impacts on curtailment as a result of the demand, especially on the weekends.

I think reliability aspect was more important in this period as a result of the event that we had just commented. You said, are you going to request some reimbursement for what happened. We are still evaluating this. Well, it would be fair to have a reimbursement of the part of this amount because there was a delay in the transmission. The generators did not have any control over such restriction. So as far as we can understand, this should be fair.

We should reevaluate this. And in fact, we would have to look at the curtailment from this viewpoint. But we understand that we should be entitled to reimbursement for the future.

Okay. I believe what happened on September 17, when as reviewed the cluster. This is a sign that there is room for improving the curtailment. And that will help us make the curtailment not to be so impactful in isolated areas. It should be more well distributed so that it can be minimized when we think about operating rules. We still do not have an answer.

So this is point to be discussed in the future months. And the curtailment is going to drop now because this phase is about to be over. So we are likely to have a curtailment impact at lower levels. And the discussion will take place up to June next year. And this is when the strong wins start. And all the sector is considering this topic.

And there is room possibilities of reducing the curtailment. And this is a very good example that, that was a nonrecurring topic for the quarter. And I don't believe that the way we saw it, we are not going to see in a recurring way in the future. So this is how the company sees this topic of curtailment.

[Operator]

So now Fillipe Andrade with ItauBBA.

[Filipe Andrade, analyst]

I would like to ask 2 questions. So there was a very relevant MTM for this quarter. And when we analyze the balance sheet, we see there's a trading activity in up to 2025. I would like to believe this realized value is concentrated in the short term, really. And the second question is related to the volatility that we observed in the prices in the quarter.

I would like to see how Auren's sees this price change, this volatility? And what are the risks involved? And can we expect strong performance in the trading segment in the next quarter?

[Fabio Zanfelice, executive]

Thank you for the question. Most of the result will be realized in the short term this quarter. As we mentioned in the presentation, we have already locked some positions for the future. So we saw some windows of opportunity. And those who follow what we do, we always say that we didn't believe in that price in the long term in the range of BRL 100. So we make some positions in -- when it was at BRL 100, and now we traded for the future at BRL 160.

You have also seen what we have been doing in relation to the future prices of energy. Since the first R&D as we reinforced in the last R&D Day, we understand there is a surplus offer in the system. But that doesn't mean that the price will be low, not necessarily because there was a change in the system along the time. The positive side is that we expanded based on renewable energy.

So -- and using the natural resources in Brazil, and that makes a lot of sense. And there are intermittent aspects, and that changes the way we go about pricing. And that is reflected in the price. Another important factor is the following. Two years ago, we changed the way we do the pricing in Brazil. Now we do the pricing on an hourly basis, not a weekly basis. Every time we define the parameters of optimization, we increased the number of restrictions.

And when restrictions are increased, we are going to have higher costs than we had in the -- compared to the previous situation. It doesn't mean that the system is more complex. What we say that it's more accurate. We present the sector in a better way. And with the correct price, we are going to optimize expansion and operation in the electrical sector.

So this is a recurring topic. As I said, we have already mentioned this topic in the past, and this has materialized now, both when we -- in relation to the higher prices even considering that the storage level is high. And this is the new way the system is operating.

And in the future, we are going to see lower prices since there are surplus offer when the hydrology is good, we are going to have this reflected in the price. And we are going to see volatility also in other situations. Whenever we have a hydrological recession as we saw. This is the dynamics. As I said, we do not believe that the price is going to be lower forever.

We always believe that there is dynamics related to the expansion and there will be proper alignment. And in the meantime, the hydrology will play its role, bringing more volatility to the sector. And this is something that has changed along time. And the way we add value is to have a trader, which invests in market intelligence so that we can take advantage of these windows of opportunity and bring this to the advantage of the company as we have done.

[Filipe Andrade, analyst]

Still talking about this topic. Do you see any systemic risk when we see this change in price? Do you think that any company will face difficulties?

[Fabio Zanfelice, executive]

Nothing has changed for us. And we have not detected any problem. Whenever there is high volatility in the market, you may have some risks, you may have some stressful situations, but there is a trend of low prices again. So hydrology is going towards the convergence of the average. We've been operating in the sector for a long time. So not usually does it rain in October, but we have seen this happening.

So we have an expectation of higher affluences and the prices are likely to reach settled prices as we saw in the last quarter, especially in September. And this also reduces the probability of any systemic risk.

[Operator]

Next question comes from João Pimentel with Citi.

[João Pimentel, analyst]

I would like to take the opportunity and use Fillipe's question to discuss further about trading activities. So you have an average price of BRL 160 above what we see in the market today. So the contracting level is very high and in 2027, 2028 is a bit lower. Was it due to lack of demand? Or is it a strategy of the company? I know you're looking at liquidity.

So is this a strategy of the company of lack of demand because you might wait for new opportunities in the future for the trading of the energy? This is my first question.

And the second question is that we've seen important improvement in the availability of AES assets. But officially, we do not have any information, but we believe that you have done something in relation to that.

So because you mentioned beforehand that availability may increase, but it may not reach the availability levels that we see at our end. So those 93% is the ceiling point for improvement? Or do you expect this improvement? And what have you done in engineering terms, so that you reached this improvement so fast?

[Fabio Zanfelice, executive]

Thank you very much for the question. As for Trading segment, yes, there is liquidity at play. And because the long term did not respond so well as we expected. And this is the reason why we just involved a portion of the position. So we have liquidity. But we understand that we will face moments like the one we have now, and we are going to be able to capture better value in relation to the positions. In relation to AES assets, this is what can I say. So according to our agreement, when we were doing the negotiation and we did everything that was within our limits in order to help the company.

So some sensitive topics, new businesses and other things, we cannot do much. But as to the operation, we improved -- we provided our help. And we purchased equipment in order to improve the performance. So we worked together. It was a joint effort. So there is room for improvement compared to what you see now.

As we mentioned, some assets are not feasible from the economical viewpoint considering the way they were devised at first. And we have been addressing some actions in our D100 plan, and we are going to continue the efforts as of tomorrow.

[Operator]

Our next question comes from Marcelo Sa, ItauBBA.

[Marcelo Sá, analyst]

I have 2 questions. One is in relation to the integration. Of course, we're talking about 2 private companies. But I imagine there are some redundancies when you have a merger such as this. First question, I would like to understand if the redundancies have already been mapped out, have the measures being taken? Have the decisions been made? Or are you going to go about this in the future months? Are you going to do any sort of the dismissal program?

And considering everything that we can see, the volatility, the curtailment, the source that we imagine that would be the cheapest was the solar, but we see that the solar dimension has some challenges in relation to curtailment. When you think about wind and solar energy, considering all the risks that we can see for the future, which one makes more sense to develop thinking about the future? What would be the cheapest source of energy? And how do you see the marginal expansion cost considering the risks that I mentioned?

[Fabio Zanfelice, executive]

Thank you for the question, Marcelo. In relation to the plans, we have already mapped out everything. This was done during the transition process. All the synergies that could be captured have already been captured. I'm not going to go into the detail because we need to wait for the conclusion of the transaction. As soon as the plans are being implemented, you are going to be notified.

We have designed everything. We hire specialized consulting firms. For you to have an idea, we have mapped out the AES assets for WTG. So it's not my part, it's by WTG. This was something that was done previously, and we are going to look at individual aspects. And we will also include all the synergies that we have captured. In relation to the possibility of expansion, you said it well. The market would compare solar and wind according to the LCOE. And according to the literature, we see that these are not comparable. This is something that we mentioned in the past. And that would even include Jaíba project. We said we would go for this direction if we had a natural hedge.

And now we can see that it's something very important, essential to have in the electrical sector. We understand the LCOE of solar had to have the curtailment and our hedge be implemented. And wind was a little out of the market because the CapEx was not produced after the pandemic. And that shows that in spite of the curtailment, it's more resilient than the solar dimension. So it's a moment when we are going to think about the pricing of the assets, and this is going to be very relevant to the country.

Let me try to go back to the marginal cost of expansion. So going back to what I was saying. Solar and wind energy have to be priced differently. For the solar, we have to have a hedge for curtailment and according to the time. And wind, especially after the pandemic, show that the expansion is more expensive than the solar, but it is not so impacted by the curtailment.

And another one is the power factor of wind, which is much more variable. We have different capacities that changed the competitiveness of each wind project. If there is a wind project that is with a power factor of 60%, we can make this project being visible according to the current prices of the market. And this is not what we see in the solar projects.

So if it's not easy to have a project that runs at 60%. So Marcelo, those individual characters of each project will make a difference and the hedges are going to be included in the price. And back to one of the questions that I was answering tend to increase the expansion marginal cost. And if the long term has converge into the expansion marginal price, so the trend is to have higher prices in the long term in Brazil.

[Marcelo Sá, analyst]

Let me add something that I asked because you are very knowledgeable about the trading segment and maybe you can give more light into this. Have been approached by players who only have solar assets? And this -- for example, there is a player that sold flat to a consumer. Are you giving this sort of hedge? And how much would that be if you would have to do that considering the risk you have for the future? As Eletrobras usually says, they say -- they prefer not to direct this product to anyone. So how do you see this?

[Fabio Zanfelice, executive]

Marcelo, we haven't been approached directly, but we see that companies have already recognized that this is a very important topic and protection is required because this -- it's not so much related to the average value, but the difficulty that we have in defining the price. So we have a flexible product that would make sense such as solar source.

So hydro, wind and solar, it makes sense, but this is a hedge which is not easily calculated. For example, when you are at the bottom price, you reach a flat level. If you go to the [indiscernible], you also have a flat price. And we see that we have a lot of variation during the day. It's very difficult to calculate this hedge. And maybe the premium may be too expensive, and there won't be any market for that today, even though it's necessary.

After having said that, we don't do the negotiation of the natural hedge that we have in the portfolio. We always say that we consume at the optimum portfolio. And part of the acquisition of AES is related to this. We did not include that in the acquisition price but we are going to maintain the flexibility that we have in the portfolio in order to meet the customers' demand or even to provide support to an expansion of the company when we need to have a hedge of an asset, and we have to calculate this.

So we are going to consider the natural hedge that will allow me to continue expanding. And this is the philosophy that we have adopted in the company.

[Operator]

Our next question comes from Daniel Travitzky with Safra.

[Daniel Travitzky, analyst]

I have a question in relation to the integration of assets. You mentioned that you have 100-day plan, 365 plan. I understand you cannot give us a lot of detail. But I would like to understand what's the finish line, where you want to get, when this plan is completed? Or when it's over, what you expect in the next year of integration?

And if you could talk about capital allocation, you have just completed this acquisition of AES. But looking into the future, what are the opportunities, such as capacity auctions, transmission auctions, so I would like to understand, how you see those opportunities for the future after the acquisition you made?

[Fabio Zanfelice, executive]

Daniel, just to have an idea of what our plans are, we have synergies that can be quickly captured and some synergies that will take longer, but not too far in the future. There are some synergies that need an equation of the systems. But that's not only applicable to us. In any transactions, when you merge companies, it takes longer to have an equation of the systems, especially SAP that takes a while.

We mentioned a 100-day plan because there are procedures that we have to go about in order to make an alignment with the system. There is the RP also. And this is the invoicing system of the trading company. It will take months, but maybe not 1 month. So we are going to capture all the synergies we can do in the short term. And there are some synergies that would require a change in the corporate reorganization level. So there are some that are associated with the restrictions.

We are not so much talking about the difficulty of appliance synergies. As I said, I cannot provide a lot of details. We have to wait for the completion of the transaction. But as soon as the transaction is completed, you can get all the details. In relation to the investments, the M&A team, [indiscernible] continues looking for opportunities. What we can do now is a very good -- very well done incorporation of AES.

So the integration is on the right track and very well advanced. So the focus of the company is to deliver what we promised when we signed the agreement. But sideways, we have the capacity auction that we are observing. This will not require too much effort from the company. It requires efforts from [indiscernible] teams.

And we continue looking at that. As to transmission, we like the asset, of course, we have to see if the opportunity would make sense to us. especially considering the size of the company now. And in fact, we keep on looking at the opportunities. So we are going to do what we are going to deliver on our promises first.

[Operator]

The Q&A session has come to an end. We would like to turn the call back to Mr. Fabio for his final remarks.

[Fabio Zanfelice, executive]

Thank you very much for your availability to talk to us. As I said, this is a historical earnings result event for the company. And next call, we are going to be very enthusiastic because we are going to double the size and we have to change the format of the presentation because we increased the number of assets, the number of topics and Mario is already working on a different format so that we can disclose the results.

This was a very important quarter. We are very happy with the results of the company, especially driven by the performance of the trader. And as of tomorrow, once the transaction is completed, we are going to be at your service to discuss more about the company's details and present a plan considering what we are allowed to disclose because some actions have its own strategy to be implemented, but we will be willing to discuss details about the company.

So I would like to thank Auren's employees, AES's employees. And I'm confident that we have built a case. We have built a plan. And during the months that we got to know this new company, we saw things that were surprising and much better than we expected. And we had the chance to meet fantastic people on the other side.

So I would like to thank Auren's team, AES's team who are helping us to transform this dream into reality.

[Operator]

Thank you very much. Earnings conference has come to an end. We would like to thank you for attending this conference, and have a good day.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]