Companhia de Saneamento de Minas Gerais Copasa MG

BOVESPA:CSMG3

Earnings Call Transcript 2021-Q1

[Operator]

Good morning. Welcome to COPASA Day and the earnings call for the first quarter of 2021. We have here with us today, Dr. Carlos Eduardo Tavares de Castro, President and Director of COPASA; Dr. Carlos Augusto Botrel Berto, Finance and IR Director; Cristiane Schwanka, Director of Market Outreach; Guilherme Frasson Neto, Director of Operations; and Ricardo Augusto Simões Campos, Technology, Environment and Entrepreneurship Development Director. We will talk -- besides the results, we're also going to talk about strategies, perspectives and what are we doing at each directorship.

We inform you that we will record the presentation, audio and video, and all of you will hear the earnings call during the presentation. The download will be available at the website of the company, ri.copasa.com.br. We will also have a Q&A session. You will receive further instructions.

Before we continue, I would like to clarify that anything that is said during the earnings call that is regarding the business prospectives, projections and operational goals of COPASA are premises and expectations from the Board of Directors, and it is based on information currently available. These involve risks and uncertainties. They refer to future events and therefore, depends on circumstances that may or may not take place. Changes in the macroeconomic policies or legislation and other factors -- operational factors may affect the future performance of COPASA and may lead to results that might be different from those considerations stated today.

With that, I would like to give the floor to the President and Director of COPASA. Please, Dr. Carlos Castro, the floor is yours.

[Carlos Eduardo de Castro, executive]

Thank you, Juliana. Good morning, everyone. It's a pleasure to have you here and have several analysts of the market that had the opportunity to interact with us, and it is a great expectation to take part on COPASA Day, be closer to you and the market and the investments.

Regardless of the pandemic and its effects, we have the need to update and do this event even if it's in a virtual format so that the company can be closer and we can be closer to the investors, the market. And you can see the presentation of the results. Therefore, we're going to have a sequence of information, and in the end, we can do the Q&A session.

Once again, thank you very much. Thank you for you -- for taking part today. Thank you. Now we give the floor to the RI Director, who will do the presentation of the financial performance of the first quarter of 2021. Carlos Berto, the floor is yours.

[Carlos Augusto Berto, executive]

Good morning, everyone. It is a pleasure to be here with you. A very important day for us. So let's start already working from the financial results.

Let's do the Slide 4. Let's talk about the evolution of the revenue of the company. And from '17 to '20, we had a growth rate of 7.8%, starting from BRL 7 billion (sic) [ BRL 4 billion ] to more than BRL 5 billion in 2020. And the revenue of the first quarter of '21 grew 6% in regards to the first quarter, getting to BRL 1.27 billion. The main factors that explain this growth in the semester were the readjustment of 3.4% from November onwards, the volume of water increased by 2.5% and the growth -- the revenue of the first quarter for water which also grew 2.6%.

On the next slide, we can see the behavior of the costs, the annual growth of 6.6% in costs and expenses. And this was before what was presented for the revenue in the same period that, as was mentioned, was 7.6%. The expenses was, you can see, BRL 867 million -- and in '21 (sic) [ '20 ], they represented BRL 3.6 billion. These expenses also had a growth lower than the revenue, as we can see. And the expenses went from BRL 867 million to BRL 905 million, representing a growth of 4.3%.

Let's talk about the administrable costs -- administrative costs. In the first quarter, the costs reached BRL 594 million, an increase of 4.6%. In regards to the same period, these costs they represented BRL 568 million. And we will present the most significant variations.

There was a growth, as you can see, because of the provisions for 2020, the provisions for the participation in the profits. And there was a reduction, as you can see in the expenses. We can see consulting in S/4 Hana, and we have an increase for the tariffs. We still had an increase of [ BRL 3.4 billion ] with the increase in services. The expenses -- the accounts receivable you can see increasing because of the operations that went from 670 days to 500 days. The tariff for the cities grew 22% due -- well, we are working with 74 new funds, and there's readjustment. And that's why we are working with 74 cities.

Slide 7, we are talking about the nonadministrative costs. Regarding 2020, the nonadministrative costs grew, and we got to [ BRL 720 million ]. This growth might be explained by the behavior of the 2 accounts: electric energy, [ BRL 124 million ] increase -- well, we've had an increase mainly due to the expenses with the tariffs and the increase in the demand. We also have a reduction of 20% in the first quarter of '21 because of the best use of chemicals. And these are pertaining to the main water sources used.

The eighth slide, we are showing all the other expenses and patrimonial equivalents. We have other operational expenses, BRL 25.5 million, representing a reduction here. With the comparative cost, we had an increase of 2.2%. In the financial results for the first quarter of 2020, we had almost maybe BRL 93 million negative, and we reduced the deficit, getting to a negative result of BRL 41 million (sic) [ BRL 47 million ]. This might be due to the exchange rate. There was valuation in the dollar facing the real. And here, the -- there was not in regards to the dollar and the real.

Next slide, to Slide 9. We can present the data of EBITDA margin and net profit comparing to 2020 and 2021. The EBITDA of the company came -- well, we have BRL 1.5 billion to BRL 1.9 billion. There is a CAGR growth of 8.2%. And the margin in the same period, we had from -- a variation from 35% to 36%.

We also have the net profit. We had a growth from BRL 560 million to BRL 816 million in 2020 from '17. And the quarterly results, the EBITDA increased 9.5% in regards to the same, and the margin of the EBITDA came from 31 -- 38.1%, reaching 39% in the same period.

Now let's compare the quarters. We had a variation, and we can see the increase in the first quarter of '21. And here is the behavior of the revenues that grew in a higher standard than the expenses, as the behavior of the financial results. And we've got a reduced -- reduction in the deficit.

Let me go to Slide 10. And here is the debt of COPASA. We have the comparison from December '17 to March 2021. We had a net debt of BRL 2.8 billion and a leverage index of 1.8x. In March of '21, we had a net debt of BRL 2.72 billion and a leverage of 1.4x. It's important to highlight that these covenants -- that we are fulfilling the covenants.

Slide 11. We are managing the liabilities of the company. We can see for 2021, BRL 515 million. It will be now -- for 2022 BRL 800 million. This is comparable with the cash generation of the company. We have a reduction, therefore, from -- the average coupon from 7.5% in '17 to 5.5% in the first quarter of '21, accompanying the rate of the market.

Now Slide 3 -- 12. We are going to talk about the remuneration for the shareholders. We can see the percentage of 25% of the adjusted net revenue. The remuneration is paid up to 60 days after the approval with the exception of the fourth quarter. For the first quarter of 2021, 68 -- BRL 64.8 million was declared.

Thank you all. And here, I finish with the financial results for the first quarter. I now give the floor to Juliana.

[Operator]

Now we provide the floor for the President and Director of COPASA. Carlos Castro, you may proceed.

[Carlos Eduardo de Castro, executive]

Thank you, Juliana. So for all of you that are following, I will talk about the new landmark governance issues in the company and the introduction of the agenda that we are trying to talk about and last but not least, internal and the external landmark. Now the presentation.

Now a brief time line, whether -- it's the agenda. And in July, well, you can see the time line of Law 14.206, and we've spent 9 months with the expectation of the decree and the issuance, let's say, of the decrees that should have happened before. Here, we have a landmark, which is the maintenance of the main points affected.

The next slide. Well, I believe that here, bringing for a more recent agenda, we have had a decree that was -- that's pertaining to the creation of the interministerial committee, and I believe that all the market will see the expectation. And the decree, the law will talk about the proving of the technical financial capacity of the company and their commitments. In that context, I think this will change reasonably the way that the business is done.

In parallel from the movement, well, ANA now incorporates this part. And notably, we have regulations that involve technical, and we have a great expectation. And certainly, we have the governance of the regulatory agencies, something that we've discussed in the -- well, we have the role of ANA alongside with all the other agencies and maybe the possible [ reservation ] of ANA -- of the competencies of the agency. And it's clear that this is not the case, on the contrary. And that has provided and has learned with the good practices of regional agencies so that can be multiplied.

Last but not least, we have the part of regionalization. And we have worked strongly in that part from the destination standpoint. There is going to be an official publication, and everybody is working with a maximum deadline of July 15 so that this is defined.

Next slide. Well, what does this new framework bring for COPASA? We have opportunities from the standpoint of maturity of the regulatory environment. We have an agency with a good inner working. Of course, we have the expectation that it will improve on these [ properties ]. Among this lies the predictability of the regulatory framework, which is something that makes -- that is very good for the service provider and the investor; the regularity of the tariff rules, the predictability; in the same sequence, the transparency in the definition of the tariffs.

So we are always waiting for the possibility of looking at the present and what is the path that the present will take you the future. In that same way, we have a legal, safety, security, a company such as COPASA, from the asset standpoint that have been already invested and not completely [ amortized ]. This is very important. And of course, dealing with technical capacity that has been installed, this is something that COPASA has a lot to use from the experience of the technical body. And here, there is a management of the intellectual capital here so that, that can bear good fruit.

Regulatory management that is proactive. The company has today a position -- we have the process of the review of the periodic tariffs -- periodic review of tariffs. In that sense, we are creating not only the internal infrastructure for this, but also, very important, we are bringing an experienced consulting company that is giving us support. And last but not least, we are seeking a competitive tariff that allows for the adequate remuneration for capital of our shareholders, the invested capital therefore, and that it doesn't become something that lacks the adherence -- or that prevents the adherence to bringing in of new investors.

You can see the challenges on the right. We have to work with the contracts with the new framework. We need to make them adequate and according to the new framework. We need to guarantee the remuneration of the investments that have been done. In parallel, the internal properties that has to be in adequacy, in adjustment with the regulatory body to mitigate sanctions and other things.

Now we have reached a new level not only from the standpoint of providing new services but also the issue of comparison. We can see the last item. Because with the proliferation of service providers, the agencies will have more references and different reality, and we need to be prepared for this. And from the standpoint of uniform -- making our internal processes uniform so we can add value to these processes, so we can have the formalization that is needed so that a company with our size is not really bureaucracy that is simply not adding value to our products.

Next slide, the effects of the regulatory framework in and on itself. We are looking from the strategic standpoint, and here is an operational unfolding. And from that it's important to have legal support. And all that needs to be sustained by good engineering given that we have important investments that need to be done so we can reach the universalization within the deadlines that are predicted.

We have strongly worked with the concessions. We are managing our portfolio, you can see in the middle of the slide. We have a great deal of potable water and -- concessions and sewage as well and also contract changes that might happen up until March of next year. And we submitted the contracts for the regulatory bodies as well.

And now having that conviction and we are going on the correct path, we also have different challenges for the company. All the directors have worked in an integrated way. With -- we have the regional business process. We are working with regulations with ANA. And also, we are working with the tariff review with ARSAE-MG.

The working groups that are working with these issues, more than 500 professionals involved directly and indirectly and the support of 3 external consulting companies. The idea is to bring support, external support, and this can contribute to our technical body so we can see the challenges all throughout the time. And this is before the regulatory framework.

Next one. In that context, we have the follow-up. In governance, we have a set of studies that you can see, and we are working strongly with Deloitte. There is a project in regards to the management of the portfolio. We are advancing our models with the business unit with an important support.

And the team of management are needed as well. This is a great office in Brasília that is working notably with that. And we are working with other actions in such a way that -- well, for sanitation and sewage, we have the new framework and the challenges. And we have to create the necessary conditions to be able to overcome all of these points that are up here.

Please, [ next slide ]. We have a set of opportunities, 337 concessions. So we are discussing the strategy and the opportunity for working with sanitation with these municipalities. We have 254 concessions for sanitation and sewage. And we have to really think about the expansion maybe to other space.

We've seen a few public bids, and we understood that this is not the moment for COPASA to provision itself in a bid. But we understand that this is a natural process as the scenario in Minas Gerais is stable. And we have knowledge and the technical thing that is, yes, ready to face new challenges beyond the frontiers of the State of Minas Gerais.

Now from the standpoint of governance, this is a theme that is very relevant for us. And we can see the solidity of the company of the [ over time ]. This is the corporate matrix of risk -- corporate matrix of risks. And we are undergoing implementing several new programs so we can create the entrepreneurial path of integrity and going against corruption with ethos and the -- receiving the seal of ethics from CGU. We are working with the management and also from the standpoint of how important it is for the good results of the business to have this pillar of integrity that is very alive and connected to the shares of the company.

Next one. Within this integrity program, we've seen points that involve the governance and the commitment of high management. So we have an internal audit that reports to the administrative council, and this works as -- with the management council. We have great professionals that are working in the program. We have a management -- risk management and the integrity instruments that are completely disseminated with the processes of the company.

We have training. We have the due diligence process in [ place ]. We can see the professionals in the company and also third parties that are subcontracted if it is working, starting with the cut-off in [ value ] and the period of contract that is pertaining to every worker in the company. We have monitoring. We have an ethics channel. And this is connected to the management council. And we are working with relevant information for the social control and also public transparency.

Next slide. Within the context of integrity, we have a constant training of our employees. We have the processes of training that is -- constant training, continuous education focused here on events all throughout -- spread out throughout the state and within our business units. We can train on site 80% of our employees. And last year, we are -- of course, this is the pandemic. We needed to adjust. So we got to 10,000 employees being trained. We have here -- we can talk about -- well, we have the spring water of information. And we have 111 trained associates or partners.

And here, things that are [ finer ]. So to also engage our employees, of course, working from the combat to corruption and a set of actions program that is connected through integrity and small short videos that are connected to Internet, several campaigns, as you can see. As soon as we can receive you here in the company, it is clear that we have a very objective policy and the decision-making process, those -- the KOLs that they should not receive, for example, service providers by themselves.

And this was a reality, an issue. Reinforcing integrity is in the attitude, and here is the culture that is being built. There is a campaign that worked all throughout the state. Here is just the public recognition so we can give you the commitment of these leaders. And at the end of the day, what we can offer is the commitment of the Board of Directors. And with a lot of gratitude, we have the admission of the company with -- to the Pró-Ética campaign.

Getting to the end of my speech. The ESG agenda, we have the care within the company. So that -- we are really concerned about placing the weight on actions that we perform. And the agenda ESG we had as the order of the day and the company, this allows for us to provide the actions. And we have the opportunity to improve on a lot of things that is happening, and we are going to detail a lot of programs up ahead.

And I can see that the 2 main, from the internal and external, advantage of ESG, there is a very strong reflection on the partnership. There is the 0 fewer accident program, where we have really focused on the internal management and also prioritizing ODS, which has to do with the main core of our business. And this is what we display for our public, for society, so actions that engage to transform, the social responsibility programs, so on and so forth, the challenge of 2030 and many things that you will see in detail.

Last but not least, getting to the end of my speech, as we saw, the effects of COVID-19 have affected all society. And COPASA has the benefits in 3 big blocks. The first, that was implemented in March of last year in regard to our employees, our collaborators. So we've worked to reduce the number of people that are working on site.

For those that were indispensable for our on-site operations, of course, we cannot have everyone working remotely, but we wanted to protect those professionals. So we did a lot of testing, and we have invested a lot in that part of prevention and working proactively. And I believe that the results obtained from the protection of key professionals have been very efficient, and we hope that we can vaccinate everyone from the standpoint of the clients or customers.

We are always aligned with the regulatory agency. We created special conditions so we can understand the situation of our clients. Those that are more vulnerable and they are at the social [ tariff ], in the service sector and [ where COVID ] strongly hit, we have financing programs for these customers during that period. We can guarantee the payments while still being on business.

And for society as a whole, we are assuring that we are providing the water -- the supply so that the water and sewage supply is still working. We had donation with the program that was done by the industry federation in Minas Gerais. And we donated a value of BRL 5 million for purchasing respirators, more than 300, if I'm not wrong. And we can take that to units -- well, health care units that are located far away from the main cities so we can service all of the population.

We also have the hygiene kits and also working, well, for the public cleaning of -- maintaining hygiene of our hands and hypochlorite. And we had also worked in areas so we can contribute for society to come back to their activities. And down the line, we can contribute with our businesses.

This is what I wanted to conclude. Thank you for being here. And at the end, maybe we can discuss a few topics. Thank you very much.

[Operator]

Now we give the floor to the Financial Director and RI Director for the presentation of the perspectives. Carlos Berto, you may proceed.

[Carlos Augusto Berto, executive]

This is important that we talk about people and processes. Let me show you a few highlights of our work. We are evaluating health care, safety and the integrity of the employees, the restructuring of the unit -- 0 accident program, best practices. We are working with the consulting, and this is going to work.

And also, I want to show you the -- well, we have an incentive to the professionals by meritocracy. We are working with PDPL, our program, the first step for the training of our leaders and also pre requirement to work with management work. We are working with the reevaluation of performance.

We have worked a lot with the management of knowledge, training and developing a new company with several initiatives, the remote education platform, the development of engineering and so on and so forth, the implementation of several mentorship programs. All of these programs, they allow for the review of the business so we can adapt to the day-to-day operations of the company.

And I also would like to highlight initiatives that are important for the implementation of the development of leaders for the leadership of the company, engagement and alignment of these professionals. And we are here [ for leading ] the gender equality program here in the company. Also, in regards to professionals, [ PDPL ]. we see the renewal of the people in the company. We are working with the implementation in 2021.

Processes. We have here important projects, and we've done the update of the SAP to the more updated version, S/4 Hana. The implementation of this upgrade started in March. S/4 Hana has market solutions that are very well known and future opportunities such as with agility, and the main quality, we are working with commercial to have a single platform. And we want to be more flexible in using advanced resources such as machine learning, big data and other resources that have been already embedded into tools.

We also have corporate systems that adds technology. For example, [ Quali Aguadi ] is the system that controls the water quality. We have [ Cybrus]. We have many programs, [ Jeta ] for the management of environmental and water resources.

The infrastructure for safety and protection of information, the LGPD law. To assure the guarantee of and availability of information of the company, we are working with a consulting company for the safety of information. To avoid failure, we have tests against hacking and cybernetic attacks.

In the context of the LGPD, we are working with [ diligently ] given the information of client, customers that we have in our day to day. We are -- have trained more than 2,000 employees to protect their data and the data of the company. And we are in compliance with the law.

So talking about processes, I wanted to highlight the process of restructuring in regards to planning, approval and execution of acquisitions. We are considering M&A, well, and that can be done completely electronically. Also, the prequalification and evaluation of service providers, this will give more safety to our partners and the announcement of proposals. And here, consulting, and we are in the [ public-based trades ]. And we can see great professional and great potential for the modernization and updating our logistics and distribution, and we can have better operational processes.

Now I give the floor to the moderator.

[Operator]

Now let's talk about the presentation for the market. And Market Relations Director, Dr. Cristiane Schwanka, the floor is yours.

[Cristiane Schwanka, executive]

Good morning, everyone. So let's talk about our agenda for Market Relations. And as you know, we are reviewing the tariffs, and we are talking with the regulatory bodies to talk about some data -- and talk about this data. We have the commercial relations of COPASA, and as our President has said, we will provide more details with the ESG issues.

So let's continue with the presentation. This is the first step to start the conversation, and this is the process of -- well, we are reviewing the tariff. And COPASA is organizing to overcome with success this stage with the creation of superintendents or the relationship with regulatory bodies. And here, we have the 4 big pillars to work with the construction of the [indiscernible] with the regulatory agency. And traditional processes for regulation still occur in the organization, such as fiscalization by the regulatory agency in our contract in our municipalities, mainly the ones that are related to the operational processes that affect directly the tariffs and the client relationship. And here, this [indiscernible] regulatory agency. So we can have a gain in this, this dialogue. This review of the bodies facing these procedures and the information allow us to make this relationship much more agile and transparent.

Next slide. As you know, COPASA is regulated by the regulatory body, and ARSAE is a reference in the national scenario, and it is responsible not only for the economic financial regulation but also by the technical regulation. This is an agency that has -- we've gone through 2 tariff reviews. We started at COPASA the second tariff review, and they started in 2016. And it was divided in 2 stages, closing in 2017. And now you can see in 2021, we have started the second tariff review, which is the one that we're looking right now. And this is a moment that is extremely important for the organization. And this is the first review of -- that is being developed in the new landmark. And we have all of the focus, and we are working with [indiscernible] consulting to supporting our technical team with the review of the third sanitation tariff. So we can work with the regulatory agency because this is the first tariff review in that context.

The next one? This slide, it details a little bit of what I told you before about how the first tariff happened in COPASA and also the adjustments. We have among the review, the tariff readjustment and the first tariff. The review, the slide shows that we are going through stages. And we have the readjustment that has been defined at that time.

So that's the adjustment that we got on the regulatory agency in 2020 was 4.31. And this application that should happen in August of 2020 due to the pandemic was delayed from November. It is important to highlight that we have the regulatory agency, the readjustment, due to the pandemic, [indiscernible]. And we are working with the tariff review. We have the third phase that now looks for the involvement of the regulatory body and the publication of the technical notes that we'll guide this. This moment, we have in the website the technical quality that resulted from this audience process. And society, as a whole, COPASA is presenting now until on May 20. It's [indiscernible] consideration due to -- in regards to our technique, we have important themes that can -- we can be more transparent, not only for society, but for the investors.

For example, the remuneration of assets, key definition and correction of the regulatory framework and other things that are very important, including the new tariffs. So it is important that at this moment, we can bring to knowledge that COPASA is exercising its right, its opportunity to reworking its position due to these themes that are very important to redefine the tariff.

And next slide. We're going to talk about the commercial actions, which is our chain, our classic chain of invoicing and gathering the revenue, and what really demanded efforts and innovations are due to the recovery of the invoicing and collection. The economy has been challenged by the pandemic, and it demands more creativity and action to recover this invoicing. COPASA and the technical body decided to look inwards, not only for those classic conditions of recovery of invoicing. And here, you can leverage. And in the moment of pandemic, there is worry. And one of the main -- as you know, the regulatory body state -- regulatory agency determined that the users of the social tariff would not have the suspension of the supply done until second warning. So now -- COPASA is now promoting the suspension for the supply of the clients that are working with the social tariff probably recovered.

The -- well, always in the projects of how much of who the users are. Here, we have the commercial campaigns and negotiations in 30 days. More than BRL 19 million recovered and more than 14,000 connections that got in contact with us, 14,000 clients to effectively -- makes our payments more regular. And we also provided action for -- against fraud, and we are working with actions that, at the same time, that you recover. You fight against fraud, and then we can recover the debit of these clients. And we also have innovation.

When we analyze our business chain, we identify the opportunity for a significant amount of clients that have not been connected to our sewage network, even though the sewage network is available in front of their real estate. So we started with our program. We have the program to -- which is all engaged to transform and alongside with our social responsibility. This does -- the approach alongside client and it provides the incentives to -- for the connection -- for the sewage network.

And if that doesn't happen spontaneously, we use the mechanisms [indiscernible]. So we can start for the charging of the sewage service, and it is about 200,000 connections. And other actions for the protection of the revenue and fighting losses, not only commercial losses, as we have said, but also the losses, the critical losses.

The COPASA team has been directed to rescue a big program with methodology so we can recovery critical losses. And this contributes toward the improvement in the invoicing process. So as we have said before, we are innovating not only in the [ classic commission ] or invoicing, but also, we are increasing the invoicing of the company.

Next slide. We've talked about the issue of losses. And here, we highlight the actions that we are developing throughout the state. And as was said by our President, we have upgraded permeability in our state. We are present in more than 640 cities. So we are developing actions and methodologies to encompass all of this diversity of situations -- hydraulic situations that if it's all throughout the company, there is also -- well, we need to work with the recovery of losses in the context of each business unit of COPASA. We are talking about 6 business units that are spread out throughout the state of Minas Gerais.

And this shows how the physical losses are unfolding for these -- for our company for each of these business units. We have actions that are dedicated and exclusive not -- that are looking not only for the absolute reduction of the number but also for the maintenance of these programs in. And it is important to highlight that even though society as a whole is shocked with the level of losses that is close to 40%, we have seen in the map losses that are much lower than the national average. The efforts are also -- we have implementation of technologies under [indiscernible] of water. We have new hydrometers, new technology not only to improve the loss of revenue due to the asset that's called [indiscernible] the commercial losses but also implement these technologies that can help us accelerate the critical and commercial losses, that can help us to decrease the water losses.

Now we talk about the relationship with our clients, with our customers, another focus of COPASA. They have to do with the onlook of the customers, placing the customer at the center of our business. COPASA didn't have the position of the customer as a center of the business. We are implementing here the journey of the customer and the service journey not only with procedures -- internal procedures, but we also have technologies, modernization. We've used the on-field actions, along with the development of new tools that are [indiscernible] for the client satisfaction and digital payment of our [indiscernible]. We -- [indiscernible] with the modality of payment, which is [indiscernible] made available for its customers.

And also, we started yesterday, and this is new, our President is revealing this. Yesterday, we started to receive payments through QR Code and PIX. This is the first water company, utilities company with this permeability to implement the PIX, the PIX. We had a significant number of payments done yesterday by PIX. And it was -- we had a development period, testing period throughout April that was made available for some customers. And throughout this, the pandemic made us improve on the service for the customers.

We used to only work with the on-site branches, and we didn't provide a lot of services for them all throughout the digital channels. Therefore, we increased the digital channels. We implemented omnichannel, multichannel platforms. We had a web chat, the chatbot, the satisfaction review after our services fee. On-field services not only the effect of services that are done through the digital channels, and we are effectively placing the client at the center of the business.

We are working with utilities, not only as a commodity, but as a high-quality service that is dedicated to our customers. Besides that, as I said in the beginning, in the pandemic, that our invoicing suffered a drop, we worked through the conventional levels, and we are implementing new commercial actions. For example, the debit collection, this is a conversation with our customers. They talk to our customers to see the -- and discuss that these, I believe, that daily customer has with us and also evaluate new opportunities for not -- for avoiding losses. For example, we can submit the invoice through SMS fee, enterprise WhatsApp, the customer can get in contact with us through WhatsApp, so therefore, providing attention to the customer in our business.

Next slide. So this slide, I'm going to be talking about ESG. As our President said in the beginning and here, we have some of the social, environmental actions that have to do with -- as ESG in our business. We have internalized those actions. This is not just something that we're talking about. This is a way of working. It is a way of offering our services. So we have a few quantitative numbers here that call our attention to the way that we offer our services.

We have some environmental and social actions. So in case people have no possibility of going, potentially going in person to see a representative or if they cannot be -- if they cannot use the virtual service, then they may receive a representative at home and talk to them. So this shows how much we're advancing. I mean, when we go to the field, when we go talk to our customers, there are a few things here that are important. We are able to see the customer. We're able to update their registration data. We can also double check how we can improve our collection system and also value the sanitation system.

We all know that the sanitation service is extremely important. People understand that it's important to have water resources. But many people don't really think about sanitation. Overall, we do notice that people don't value sanitation services as a whole that much because they don't usually think about that. So here, what we're trying to do is through ESG actions, we're trying to make people understand the value of this. And so they will also believe in the importance of all this. We also have this care, not just with the portfolio of our concessions, but we also updated, we also considered that in our ESG actions.

So here, we understand that whenever people have a restriction in the CadÚnico here in Brazil, then we also have to help. We also have to work with different municipalities so that the population will have their access to [ dignity ] alongside with COPASA. So we're here alongside with them for whatever they need.

Now on this slide, we have a little bit more detail on how that's happening. This is the way we show what we're doing to the market through our website, through our investors relations, channels, et cetera. So we're not just talking about this. Our sustainability report actually brings a lot of data about what COPASA is effectively doing in this regard. All of the actions are willing to leverage the value for the company. So we know that this has to do with the entire value chain mapping. So we're analyzing the impact in terms of the SDGs, the sustainable development goals. We're looking at this as well from a different standpoint.

I mean we have interviews with our stakeholders, and then we come up with our strategic agenda. We have an ESG agenda that is connected directly with our service -- with our business. As you can see here on the slide, there are a few materials that are highlighted when we do that. By the way, this report is available for everyone. So we're talking about having universal sanitation services. We're talking about having a good management of these resources. We're talking about labor safety. So you can see here that every SDG that we're working with, they're all on this report, and we're actually implementing actions regarding that.

Well, on this slide, I reinforce what I said before. This is not just something that we're talking about. This is something that we're really implementing. These are a few of the programs that we have that are connected to the millennial SDGs, sustainable development goals. So these are some of the programs that COPASA is taking part in, like the [indiscernible] program, the engage to transform, which is something that I mentioned before. So we're trying to convince employees at COPASA about the importance and the value of this service. So that this employee will be able to understand that and bring it or extrapolate it to their service for the entire society.

We also have the [ inova ], the innovate program at COPASA. And this is not just for people working at COPASA. We're actually looking at innovation outside of COPASA as well. We have the [indiscernible] program. We have the [indiscernible] program as well. It is interesting because these types of programs, people are able to help children through the indirect adoption of children, so to say. We also have the female empowerment program. So we're trying to bring diversity inside of the organization. And to the leadership, we want more women as a leader here with a very high decision power. And as the President said as well, integrity is present all throughout these programs.

Now to wrap up here my part of the presentation, I would like to talk about the COVID actions that we have implemented as well. Well, we have anticipated a few actions with important customers. We talk to them to understand how this was going to happen in terms of our contracts, in terms of the demand. Whenever we notice that the economy was not doing great in terms of schools, in terms of shopping centers, et cetera, et cetera, we discuss each and every contract with these clients to understand what was happening. And now we have most of them back already.

Clients that had a lot of demand, and then for a while, they didn't have that demand anymore. And then we try to measure their consumption very effectively according to what they were really consuming and not the average that they had before. We also did some monitoring for some other clients, and we checked to see the quality of the sewage systems. So more and more COPASA is allowing for the possibility to have better treatment, better sewage treatment through a certain cooperation, technical cooperation and monitoring with different players.

Now in the social category, we are also thinking about payments in quotes whenever it's necessary and installments actually whenever it's necessary. So we're negotiating that we're discussing this with our clients to regularize payments.

Now some other categories, they were also benefited. They also benefited actually from this. So now as the economic activities start to resume, we will also think about an innovative way of working with all these players, all these clients. And keeping them in our portfolio is very important, of course. So whenever we want to regularize those debts, we still want to negotiate and make sure they continue in our portfolio. So the idea here is to overcome this very difficult stage of the pandemic and also make sure that this is going to be a good opportunity for the company to extend our business.

Well, that is the end of my presentation. I will turn it over to the moderator again.

[Operator]

Thank you. Thank you very much. I will now turn it over to the Director of Operations at COPASA, Guilherme Frasson. You have the floor.

[Guilherme Neto, executive]

Hello, everyone. Good morning. Well, we had a long and important transformation in 2020 with huge challenges. I will be telling you a little bit about this transformation, about the level of the reservoirs that we have. We'll be discussing the use of the resources that we have at the company. Let's start with the first slide, please.

Well, in terms of the organization, the company has 3 operations committees with a level monitoring team of superintendents in 36 different places. Well, we understood that it was important to actually rethink that structure. That was the previous structure that we had. But it would be important to actually maybe make it easier for the system to work better. So I decided to continue with 1 main directors committee and with 6 business units and with 20, say, smaller management units because it would be easier to understand what's happening at different places where we're present. So this is a great work of the company here in that regard to improve the operations structure.

Now talking about safety -- or actually, security here. Right now, we have a very good reservoir level, I would say. As you can see here on the graph, it's similar to what we had last year, which was quite good for us in terms of operations in our network. We also have an expectation over the next 2 or 3 months to also have Paraopeba, the Paraopeba system integrated here. So the company feels comfortable in this regard.

Now in terms of the expectations of rainfall. We believe that the worst-case scenario would not take us to the -- like the right level or the bad level in the reservoirs. So again, we are feeling quite comfortable, as you can see from the graph, that it should be well under control. The Paraopeba system is also responsible for an important percentage of the [ falling here ].

Now I will quickly talk about the process optimization. As I said before, we had to restructure the operation scheme that we had. So now the idea is to use or to actually strengthen the management unit here. This way, we'll be able to optimize the administrative structure and strengthen all of the operations aligned with the strategies that we want to have to really achieve our results.

We are reviewing the processes. We are trying to standardize them. So they will be all correct for the execution of our plans in Brazil. Well, through the use of good practices, we have been working on a very broad training program for our teams, recycling their knowledge, I would say, especially in terms of customer service, whenever we have to assist a customer, but also in terms of social, environmental issues. And also in terms of complying with the regulations. So we have hundreds of negotiations happening, and we have to ensure good quality in all of them.

And you can see here on this slide, we're talking about optimizing resources for the improvement of management of all of our systems to have good interaction with the operational team. So we're talking about 1,500 connections usually. And we're now maybe trying to expand that even further to strengthen the operations.

We've also been working to have new contracts, continuous contracts, and we want to standardize them as well. So this is for water resources maintenance, this is for connections, this is for sewage. I mean we want to have a broad contract -- or broad contracts. And we have to establish some guidelines for how those contracts are going to happen.

We want operational improvement, and we want to -- we now have 454 systems. And the idea is to get to 356. So we're going to actually have a few hubs, I would say, that will make sure that all of the municipalities, all of the cities around these hubs will receive the right services. So this way, we're going to have fewer hubs or fewer units, but we will make sure that everything is standardized to serve all the cities around.

Ever since 2019, we've been working to also restructure huge operational control center for the company. So on a daily basis, we receive information from all those different units. We integrate all of the operational processes. We understand where it's necessary to work on maintenance, where it's necessary to work on connections, et cetera, et cetera. So it's important internally, so we can understand what's happening. We understand that the broad picture here, that this way, it's going to be easier to resume if we have any issues. Until 2022 with the implementation of SAP 4 HANA, I'm sure that we'll also have a very modern operational center, and we're going to be able to monitor everything in real time.

Now on this slide, since we're talking about monitoring, I would say that we have already expanded a lot on the mobile part of our system. This way, with the mobile systems, we're able to have a good asset registry management. We understand how the vehicle fleet is working. This makes it much easier for our operations, for our planning, actually. Ever since 2020, we've also been working with the new operational efficiency program at the company. This program is aimed at improving the efficiency of supply systems performance for water, for sewage, and we also want to identify where there is maybe an issue in terms of performance so that we can work on that noncompliance and make sure that everything meets the regulations. So we really want to focus on small details on a daily basis so that we can implement all the necessary changes, all the necessary improvements in places where there might be an issue.

Well, in terms of operations, that would be all, and that concludes my presentation. Please let me know if you have any questions, of course. I will turn it over to the moderator again. Thank you.

[Operator]

Thank you. We will now have the presentation of the technological development, environmental directors committee. Ricardo Campos, you have the floor.

[Ricardo Campos, executive]

Well, I'm sorry about that. I didn't notice. Well, hello, everyone. It's great to be here. We're talking about technology, we're talking about the environment, we're talking about our ventures, our enterprises and how we'll connect innovation to all of this and how we'll standardize our quality controls. We want to have the right conditions to have good environmental and technological development so that we'll be able to improve the conditions for the environment in our state in Minas Gerais.

We want to make sure that we're serving all of the demands of society nowadays and also the regulation institutions. Let's see the first slide, please. As I was saying, we structured our unit so that we'll have technology and environmental development to structure all of the processes of the company such as our -- all of our undertakings in terms of maintenance, resource, capturing, engineering work and execution per base. This way, we'll be able to expand, implement, rehabilitate and modernize our operational systems. We're talking about water, services, sewage and also solid waste, which is also very important for the company.

In terms of technology, innovation and quality, this is what we have. These are some of the main projects. Alongside with the administration council, COPASA approved certain policy for these matters, for technology, innovation and quality. And it is a policy that stays on 3 main pillars. I mean, first of all, we have this internal execution where we're trying to bring creativity and expertise of COPASA into this to encourage the development of such technologies that we're using at the company. We want to enhance it and bring more innovation.

At the same time, we are also working with the academia to bring more knowledge to all of our systems, to bring more innovation and new alternatives or different solutions for the company. This way, we'll have better operational conditions and more up-to-date processes that are in line with what we want nowadays for our technology base.

On top of all that, we've been working with the market and with different start-ups to make sure that we'll bring other alternatives, other solutions to the company. We are also working with the migration of the business units for the market and a reduction of electric energy. And basically, from this model, we are doing our first bid for the energy market, where we will -- with those units that are using high-power energy and that they -- well, something that consumes that is about 35% of the usage of the company, this publication won't be able to address all this. And in the month of June, there is also the publication of the month of January for the private interest manifestation where we presented the details of everything that was presenting.

The 7 groups of the government and the 7 companies that are developing their proposals, in the sense, of offering the company alternatives for the use of energy, photovoltaic energy, and also for the usage of the affluence of the nonpotable water for industrial services and for the generation for the treatment of sewage and for big generation of energy for the sludge, using the sludge for the generation of energy. And COPASA will be ongoing with these processes by the month of June, and COPASA will verify the best way of doing this usage.

Within the context of renewable energy, we have today the alternative of the photovoltaic energy and also the possibility of using our late -- our reservoirs as a point for the implementation of photovoltaic farms, basically, that will facilitate the introduction of that technology for the company. Also, the reduction of the energy cost, the introduction of an energy that is clean.

Consequently, this will bring improvement for the image of the company. And as to the reuse water and new market, these are experiences of success in the country. And we have here, when we are talking about the reuse, when the company had some experience in that sense, the idea is to improve that experience and expand it. Has to provide an optimization of our treatment units, water treatment units and sewage treatment units to best use the residues, mainly from the sewage treatment facilities.

And in my opinion, as Guilherme has said, we are implementing new procedures, new technologies, technologies that are simpler, more efficient, that will allow us for the introduction of the process of automation in the operational systems of sewage and water treatment, not only the big -- the larger systems, but also implementing the technologies that improve, that allow for the automation in the smaller treatment systems facilities to improve more and more our efficient -- our operational efficiency with the reduction of costs -- direct cost, mainly.

And introducing the company, the issue of information intelligence through adequate platforms that can make the use of the data already available so that we can use this in real time. And by using real time, we can provide for more service, quicker decision-making processes using more effective data. And this is a new system for the management and operations of the company and has improved the company's operational efficiency.

In the context of environmental development, we have today the [indiscernible] program, the [ pearl ] spring water program for the improvement and the quality and quantity of the water in our springs so we can preserve this alongside with [indiscernible] society, with the municipalities and the involvement of the agricultural sector in such a way that together, these bodies can work in a harmonious way in the sense of making our springs last longer and reduce the effects of the climate change and the impact of climate change, which is something that we have been experiencing, and we've seen the impact of this.

The program has this focus and also the issue of the management of water resources, environmental resources, the issue of decreasing our environmental liability in keeping the profitability of our business unit and allowing with this the monitoring of the quality of the water of the spring so we can keep the water supply in such a way that we can have the company always update us from the environmental standpoint, answering not only to the demand of the expectation but also of the entire demand on the improvement of the environmental conditions that we are looking for to implement.

We also have [indiscernible] this program is mainly focused on youth, school children to create a culture, a culture of environmental development and developing the quality of our spring waters to work in a preventive way to raise awareness in the children should let me know how the waterways work. And we are talking about the management of the water supply and implementing the best management of the waterway, also conservancy. And the company today has areas that are around the water supply, mainly the reservoirs. Therefore, we can guarantee the quality of these reservoirs. We want to maintain the quality of the water there that is there stored and also the safety of the dams or the reservoir. We have the emergency and plans for the best management of the tailings and its reservoir. Therefore, we can assure the best working -- in the workings of these units.

Finally, we're talking about entrepreneurship. We are talking about our programs of investments. For 2021, we have an investment program that is about BRL 1 billion. For the first year, we've done 93%. We've implemented 93% of what was in program, and that corresponds to 10% to 11% of what is scheduled throughout the year. This is in line with what we planned. The investment program is about 60% of it is connected to the execution of works. And within the planning of these works, it was particular, the first quarter of the year, we would have a program in an acceleration and it is strongly influenced by the period of the range. And the month of January is impacted by the way that the companies that provide services.

Well, they -- usually, in the first week, they are still with the vacation period, and that impacts the productivity. And now for the month of April, when we start with the dry season, the program accelerates. And we keep that acceleration until the month of September when from October onwards, we start through a new rainy season that impacts the execution of these works and we have implemented 93% of the program.

For the period of 2022 through 2025, we have a program of prediction of investment of BRL 1.3 billion per year towards the year 2021. In terms of providing conditions to fulfill the program of investment and providing the conditions of effectively developing it in the way that it was planned, I mean the way that the company needs to fulfill its commitment, its contracts and face the liabilities program as the -- as our speaker has also mentioned and also promoting the environmental actions for development that we have here scheduled, we have a series of actions that have been structured.

Amongst the introduction of technologies, the P&L, we hired a consulting company to provide support for the introduction of the P&L, but mainly to disseminate this culture and provide the company the necessary tools to be able to develop this in a way that we can land our actions for the effective project management. The unit of -- this business unit was structured that in such a way that centrally, it will work with the P&L, and we have decentralized the actions through 6 units of -- providing 6 units that provide services that are disseminated in the -- where we have the headquarters of the business units. Therefore, we had the integration of the expansion alongside with operations, once all the activities of the expansion are implemented to give support through the -- provide the best support for the operational unit. So this business unit structured in a way that it's an operational PMO and through the strategic PMO is very strategic for the Board of Directors.

We want to provide better follow-up and better management of the enterprises and for that, we have contracted a subcontracted company that not only gives support for the inspection of the building site but also guaranteeing the quality programs, the safety level that the company needs and provides but also in the sense of contributing for the effective implementation of the investment program.

We hired -- we did the procurement of companies to help us with engineering projects in a different way -- in an innovative way. We have companies that will provide more efficiency to the contracts of projects, providing better conditions for the service -- for the company that provide services and allowing us to have a backlog of projects. And there is an agreement with the investment program of the company. We have the service lines that are in working conditions and that we don't have any problems in the process of execution.

So we're talking about the ways and the works in the working site and regular addition of land titles so we can have the area free, so we can do the implementation of the building and to give support for all the environmental licensing process, which is the precondition so we can have the building site, so we can have the conditions of developing effectively the program and its investments in the way that it was originally planned, not only for 2021, but for the subsequent years. Thank you very much.

And if you have any questions, I return the floor to the moderator.

[Operator]

[Operator Instructions] Andre will ask the question.

[Andre Sampaio, analyst]

I just want to ask a question if you can comment a little bit on the issue of regionalization. What is the expectation? How would that work for the inclusion of cities in the works -- in the work about to provide services for?

[Carlos Eduardo de Castro, executive]

Andre, the process for regionalization is being conducted by the secretary of -- state secretary of environment. There is a technical group that is formed by several secretariats about the company that is connected to the economic development. So we have a seat in the Board of the secretariat. The understanding of the government is to gather the public opinion as to what is the best format COPASA has, so that it's important to consider that there is a big block, let's just say, today installed, which is the one that is operated by the company. And the creation of regional blocks has to contemplate the specificity.

And the feedback is that from the secretariat is that all of this is being taken into consideration, and we have other keys over municipal companies that are relevant, and we also have private companies, even though we had very few private companies in this market. So we have the initial design of grouping them by the waterways, and this will be observed in the final format. And they are organized according to hydrographic basis, as I commented.

[Operator]

Carolina Carneiro. I think that there is a technical issue.

[Carlos Eduardo de Castro, executive]

Now let's have Dr. Cristiane asking -- well, responding to questions. Once again, I'm going to read the questions, and then we will define who will answer according to the time.

The first question is from [ Vladimir Pinto ] and he questioned, in the case of the concessions where COPASA only has the water services, will there be -- will it be mandatory to request sewage services? How will the company will be able to compete with the private players?

[Cristiane Schwanka, executive]

Well, we are working in COPASA within -- with our strategy with all the contracts for the extension of the providing of the service. And we have the viability where we are providing services that is maybe one of the big opportunities, [ Vladimir ], for providing services and, at the same time, is one of the big questions in the context of this sector.

Well, this is not news. You're not -- it's not necessary to give the public this from a separate way. But COPASA is preparing itself to broaden its scope of work for the utilities and sanitation as well.

[Carlos Eduardo de Castro, executive]

Okay. Second question is from [ Marcelo Goncalves ]. And he asks, do you believe that COPASA has the capacity to invest to work with sewage and water utilities in Minas Gerais in line with the new goals of the sanitation model that we just discussed?

[Cristiane Schwanka, executive]

Thank you. Even this is -- even though this is a very specific question, there is a strategic context. Not only there is an understanding, but there is an internal analysis that indicate our capacity to work with the necessary investments. Of course, we're waiting for the decree from the disciplinary standpoint for the proving the economic financial capacity of the company. But from our standpoint, this is not a difficulty due to our level of investment and our capacity to find credit to face these necessary investments.

[Carlos Eduardo de Castro, executive]

Third question. [ Marcelo ], he talked about the extraordinary dividends for the dividend due on the middle of the year. Will COPASA pay this dividend because investment would be much lower than the goal of the EBITDA. Financial director, please?

[Carlos Augusto Berto, executive]

Well, [ Marcelo ], once again, as you have commented and you know we have 2 windows for the distribution of extraordinary dividends. One, 3 months after the publication of the annual [ DS ] and after the second quarter. It's important to remember that we are doing the review of the tariffs, and we will know -- we expect the results by July of this year. So it is normal to understand that the Board of Directors will take this discussion for the third quarter. This Board of Director has the objective of generating resources for the CapEx and paying the shareholders.

[Carlos Eduardo de Castro, executive]

Next question, Marcelo Sá. He goes back to the issue of regionalization. We had the formation of the realtor bases where the regionalization presents 20 blocks. And he's questioning the base that's formed by the government has not taken into consideration the financial viability. For example, we wouldn't have a lot of relationship in between here with the concession or privatization model that the state will follow. So the question is, would all of this make sense? How is the formation of blocks for a potential privatization? BNDES Bank will propose this? Do you have an idea of the timing?

[Cristiane Schwanka, executive]

Thank you for your question. So we will answer now the question about the regionalization block. This is a very good point. It is important to limit our scope. The government of the state, the state had by obligation to have its sanitation policy and within that, the creation of the regional blocks appears as a very important route.

We need to observe this in the follow-up of the process of the creation of the regional blocks. On the other hand, there is the process of [ de-stratization ], as you know. There is a public interest. The Governor Romeu Zema and his team since before the elections, and this is public, because BNDES Bank has been hired to conduct this process for the many shareholder. So there is a policy of the state, and the secretary of the environment is working with utilities and sanitation.

And we have the outlook of the controller to try and find the best way of the specified -- the company where being the assets are controlled. And there are dates, yes, Marcelo, that BNDES is working. There is a schedule that has been very much detailed. But if I've had the opportunity to answer specific questions and with the details in regards to the process of the applications, I request that these questions be submitted to the secretary of development or the expectations secretariat. All the actions that have been implemented. They are -- they have the vision of placing COPASA in the condition of being competitive regardless of who controls it, and we have worked intensely to strengthen an operational excellence, bringing gains for the shareholder, whoever the controller is.

[Carlos Eduardo de Castro, executive]

Thank you. Next question from [ Renan ], and you had already answered this. Encompassing their questions, by the plan of the controllers for the privatization of the company, and will the company continue to work? Can you -- will you work with concessions in other states? Do you want to add anything?

[Cristiane Schwanka, executive]

No. I believe that this has been answered.

[Carlos Eduardo de Castro, executive]

If you allow me, I received a question from [ Guillerme Baretto ] and this question connects through the success of the publicity that happened last Friday with [ Sedai ] in the state of Rio de Janeiro. It is natural that there is a positive expectation in regards to the effect in Minas Gerais.

[Cristiane Schwanka, executive]

Due to the main shareholder represented by the governor, they already issued their opinion. And to answer Mr. [ Guillerme ], the response to the objective is -- has been demonstrated by hiring the BNDES Bank and their work. In that sense, showing that the government follows with the same purpose that was implemented.

In the past, and this is my personal opinion, the success of the 2 bids will certainly stimulate the main shareholder to follow on its purpose. This is my opinion. The details of this process have to be submitted for the pertinent secretariat.

[Carlos Eduardo de Castro, executive]

We don't have any more questions via webcast. So now the moderator can continue.

[Operator]

[Operator Instructions]

[Carlos Eduardo de Castro, executive]

We received another question through the webcast from Maria Carolina. And you mentioned that we can expand to other states in the sight for opportunities of growth. I'm questioning, would it be the model for the participation of the public bids, for example, just like [ Sedai ]? Or would it be a different arrangement?

[Cristiane Schwanka, executive]

Certainly, we have studied and we have taken a look at the opportunities. And I believe that this is a natural path for COPASA to associate to another company, private and public, so we can capture interesting synergies. As we have said, I understand that this is a moment due to the tariff review and the -- this is the moment to look inwards. But the subsequent step will be to look beyond the walls of our state, and we will look at the opportunities that bring best synergies so we can take into consideration the contracts or not.

[Carlos Eduardo de Castro, executive]

One more question in the pocket. [Foreign Language] She would like to get more clarification about the context for water supply that is not clear. Will that be done via rebalance and also the expansion to other states? This is a long-term plan or is there anything already on the short term?

[Cristiane Schwanka, executive]

The scope of the increase of the scope of water, we are discussing this. And we said that we are trying to balance the service provision between the public and the private service provider. So we've seen the increase of the scopes. We are looking at it in the same context of the private contracts. So we are debating this, and we've identified that this can service the needs such as legislation has seen to it, which is to guarantee the universalization of the service by 2033. And this is the way that the company has seen as an opportunity for the providing of the services and to provide the service throughout the population.

In regards to the other states, the expansion, I don't think that this is the short term. We can talk about medium to long-term because we want to give a solution for the internal questions but this has a horizon by March 2022. This should be submitted. In parallel, we have followed up on the market movements or the big public bids that have already taken place.

[Carlos Eduardo de Castro, executive]

Another question from the [ Luciano Sitan ]. The question about the 25% payout that was defined in 2021. Analyzing the results and projecting the next result in the scenario that he has worked with, he verified that the reserve of profits would overcome the declared capital. With that, we would have in the second semester a bond [ effication ] with extraordinary dividends. What is your opinion?

[Cristiane Schwanka, executive]

Since [ Luciano ] has already answered, I give them the floor so he can complement.

[Carlos Eduardo de Castro, executive]

There's another question that I received from Antonio. So both are very permanent, and they are regarding the dividends policy in 2021. As our presentation has shown, the Board of Directors has approved 25% of redistribution, mandatory for this year. We have 2 windows for the publication of the extraordinary dividends. One after the earnings, annual earnings at the end of the year. And the second one is after -- it will be 90 days after the second quarter. Now as I have said, we are reviewing the tariffs. We will know the effect of this by July this year. So the Board of Directors is taking this discussion to the third quarter.

Once again, the objective of this Board of Directors is to pay the shareholders. At the same time, we can generate resources to fulfill the CapEx for this year.

With no further questions in the webcast, I provide the floor for the moderator.

[Operator]

[Operator Instructions] Thank you. The Q&A session is closed. Now we give the floor to the President and Director of COPASA for the closing of the event. Dr. Carlos Castro?

[Carlos Eduardo de Castro, executive]

Thank you. Well, I would like to thank you all, the investors, analysts, journalists that have followed our team, the technical team, the Board of Directors. And I would like to close by sharing with our public that is following in the format that we wanted to show you, and we are certain that we will do this event again in an on-site format.

But I would like to bring you a few highlights from the internal standpoint. And this was the objective, to share with you a few of the actions that we have developed now throughout the time. Not always, we can -- on the specifics in the format of our earnings call, we cannot always show you the details. Well, the journey for the transformation of the client, of the customer. What we are seeking is the finding the customer as the core of everything. We understand that the company, mainly for many years, ignored this very important element, which is an effectual element. It is our reason to be. So there is the work today that works with other actions that we have developed that, of course, involve all the Board of Director teams.

The more visible phase, for example, conducted by Dr. Cristiane, but there is an involvement of all to please the client, the customer at its core of our business, ensure the quality and help for these people, protecting the environment, but in a very transparent, ethical, honest way and seeking from there better results for the company.

Another point that demands a highlight is Dr. Guilherme showed how the company was. He has been working and he -- for many years, he has shown us that the model that was implemented until we did a change was from the 1980. And communication and technology was completely different and outdated. So we did a big movement to change and update the processes, and we are creating the branches, the polls. And when we see the reduction in the number of systems, it's not that we're going to have less systems. But we are reorganizing the company based on technology, based on processes, tools in such a way the business units. The space is subdivided in 6 tech units, so we can have a [ non-look ] for the generation of value, focusing on the customer.

From the technical engineering entrepreneurship development environment, it's a big issue. We want to talk about innovation. And today, we're talking about new technologies. The utilities, sewage and water in the infrastructure sector didn't receive a lot of investment. And now the new legal framework is contributing for a positive change. And at the same time, we are capturing the last benefits. So we are looking for innovation.

And [ Dr. Ricardo ] and the team has strongly been dedicated to this to create in the area and spreading this through capillarity, new standards, so we can have a homogenous COPASA so we can have our modus operandi that is replicated all throughout all the different units and branches of business units.

Now the investments, especially last year. Once we had the effect of COVID-19 and all the impacts that we've noted and the lack of projects, this is completely different. From the standpoint of assets, we have projects that have big changes. We don't need to -- well, we need to review them, but we need to have -- well, we had 70% of our investments for FY '21 was already subcontracted.

All of these investments, 70% were subcontracted. So we're very close to our budget, 93% fulfilled. But what is predicted in the quarter is the challenge, and there is a context of work for that. In the financial directorship within the restructuring, we had 8 Board of Directors. Now we have 5. We have conducted a set of challenges that is very relevant that has to do with the management of personnel. There is a big evolution from the standpoint of strategic procurement, strategic sourcing. And we have the expectation to add value to this, and all of this has the backing of a big program that we had the joy of developing with SAP Brazil from the standpoint of the implementation of S/4 HANA.

And in utilities, maybe we're going to be the first one to implement the full package. And even though from the company from -- we're going to be one of the first ones among all companies, and we expect that this will allow for big transformation within this infrastructure.

And I would like to finish. Thank you for your patient time. And once again, COPASA is a company that's not only has a high level of covenants, but also is a company that wants to talk to the investors, the turn with our shareholders, in general. And I would like to finish from our [ FG ] agenda. I did a very quick -- I talked very briefly in the beginning, and we had in more details. And what Dr. Cristiane has said and what we have talked through our team, I can say that what happens at our Board of Directors happens in the other directorships. The big work that has been developed by their team was to gather a key appointment of an [ NFG ] agenda.

And we're highlighting this fact because we don't want to transform the ESG agenda from just a theory standpoint -- a theoretical standpoint. We're really implementing these programs, and they work in all of the functions in the company. So we're talking about the -- more than 11,000 people working at the company, and it shows that we have a real commitment. So we're working with the foundation here. We're working with something that is quite relevant for the society, and we need to make sure that we reach our goals for water supply, for sewage treatment, for everything that we're working with in the different cities. But that doesn't mean that we have to -- or that we can ignore environmental issues. We still have to be sensitive in that regard and pay attention to the people that need that.

And we have -- I think we can say that we're proud to be a company that no matter what stakeholders want, we're trying to find the best results. We're trying to offer our best because good results will allow us to continue to reinvest and take this company even further. So this is what allows us to say that we're sure that COPASA will have a very important role in this new sanitation scenario. So no matter who the stakeholders are, no matter who we're working with, the idea is to work for this company to be even more efficient, more modern and competitive.

And any arrangements that we want to establish have to be beneficial for everyone. Well, once again, I would like to thank you all very much. I hope to see you all soon. And who knows, maybe we'll be able to meet face-to-face soon. Thank you very much.

Now, Julianna, you have the floor.

[Operator]

Thank you. Thank you all for participating the COPASA Day and our results discussion for this quarter. Thank you very much for the first quarter of 2021. Thank you.

[Carlos Eduardo de Castro, executive]

Thank you very much.

[Cristiane Schwanka, executive]

Thank you. Have a great day.

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