Engie Brasil Energia SA
BOVESPA:EGIE3
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Engie Brasil Energia SA
Earnings Call Analysis
Q4-2023 Analysis
Engie Brasil Energia SA
ENGIE Brasil Energia significantly marked 2023 as a year of transformation, concluding its energy transition. Although the Pampa plant's divestiture resulted in a BRL 350 million EBITDA reduction compared to 2022, the company successfully filled this gap through new generation assets and diversification, growing its EBITDA by 4.7% over the previous year. This shift was underscored by their move to entirely renewable energy generation, solidifying their stance as Brazil's chief 100% renewable electricity provider.
Amidst lower inflation, ENGIE Brasil Energia posted impressive net results, with a net profit increase of nearly 24%, demonstrating the company's resilience to inflationary movements and robust financial control. The increase in net profit also brought about higher tax liabilities, a byproduct of the company's prosperous year.
The company took strategic steps in rebalancing its portfolio, which included the sale of 15% equity in TAG for approximately BRL 994 million (BRL 1.2 per share). Additionally, the company is nearing the operational phase for two major projects: the Serra do Assuruá wind farm, set to begin operations in the latter half of the year with full functionality by 2025, and the Photovoltaic Assú Sol project, which will be fully operational by 2026. These initiatives are key to surpassing the nonrenewable capacity yield in previous years and cementing ENGIE's investment in renewable resources.
With a prudent financial strategy, the company has maintained a balanced debt portfolio, slightly increasing its net debt to BRL 21 billion in anticipation of upcoming obligations. Alongside this, they also reported a net operating revenue evolution, with a noticeable drop in construction revenue, attributable to the market's accounting practices once assets become operational. These financial maneuvers have been made in concert with a dividend policy designed to maximize returns for shareholders.
Looking ahead, the company has earmarked BRL 9.6 billion for various investments, including BRL 2.3 billion for the Serra do Assurua project and BRL 0.5 billion for the early stages of the Asa Branca project. These are part of a total BRL 14 billion investment package heavily focused on ENGIE's ambition for the current year. The company also anticipates concluding a significant operation within the first quarter of 2024, further bolstering its prospects. Additionally, after an assembly scheduled for April 2024, the company will provide details on dividend payments, aligning shareholder rewards with robust financial performance.
ENGIE Brasil Energia's earnings call narrative for the year 2023 is a tale of strategic transformation, financial resilience, and future-driven investments. They navigated the loss of nonrenewable assets with agility, embracing renewable energy's potential. The company wove a story of stability, strength, and keen anticipation for future growth, playing a leading role in Brazil's green energy transition and long-term value creation for stakeholders.
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[Foreign Language]
I am Rafael José Bósio and would like to make a few announcements before starting the video conference. [Operator Instructions]. I would also like to remind you that this video conference is being recorded. It is made available on our website at www.engie.com.br/investor. And the results of the presentation and earnings releases in addition to the financial statements and other documents filed at CMV are going to be put there.
Before proceeding, I would like to clarify that all statements made during this video conference, regarding business outlook of the company should be treated as forecast depending on the country's macroeconomic conditions on the performance of the regulation of the electric sector in addition to other variables, and therefore, are subject to changes.
We remind you that journalists wishing to ask questions can do so by e-mail and submit them to the company's press office. To present Brazil -- ENGIE Brasil Energia's performance in the fourth quarter of the year '23, we have here with us Mr. Eduardo Sattamini, our CEO, and Mr. Eduardo Takamori, our Financial and Investor Relations Officer. Satta you start.
Thank you Rafael. Good morning everyone. It's a pleasure to be with you once again and once again presenting good results for 2023, which was a very important year for us. This is where we effectively had on the company's energy transition. And of course, that all of these impacts will be a part of our presentation here today.
Next slide, please, Slide #5. Here, we have the company's highlights. First of all, the financial highlights. So we are saying that we concluded our energy transition. And then we exchanged our assets into new assets. And you can see that this year, we grew and we lost a very important element of our EBITDA composition, the Pampa plant, and we will talk a little bit more about it later. It contributed with over BRL 350 million to our EBITDA if we compare '22 to '23. But then when we look at the generation and trading, we only lost to BRL 122 million, which means that we have already offset part of this loss in our EBITDA via new generation assets. But we also had a transition into a more diversified company in terms of businesses with the contribution of our financial results, among others, which led us to grow 4.7% from '22 to '23.
In terms of net profit, which really matters to our shareholders. We had very good net results, almost 24%, and that was a result of the decrease of inflation. And this shows that the company is robust. That's our control and the company benefits from inflationary movements. This is important for us to keep in mind.
Now let's move on to the next highlight, the company with the sales of our coal assets, we have become the largest generator of 100% renewable electricity in the country, which is very significant for us in '23. We also bought a lot of -- Lot 5, the latest auction in the full amount of BRL 3.2 billion, and we are about to conclude our contracts. Also in the auction, we acquired Lot 5 the Asa Branca Project at Aneel's Transmission Auction, and we concluded the issuance of debentures in the amount of BRL 2.5 billion, so that we could offset the implementation of transmission and energy generation projects.
In the next slide, we can see the sale of 15% of the company's equity stake held in TAG as a group today, -- we have TAG's control along with the CDPQ, which was our original product, but we need resources now so that we can invest in greenfield assets, continuing our diversification strategy. And in the meeting of the Board, we approved the sales of BRL 900.94 million (sic) [ BRL 994 million ], which represent BRL 1.2 per share. And Takamori is probably already defining the date of TAG.
With that our total earnings for '23 reached a 55% payout and dividend yield of 5.6%. And this is our practice towards reduction, so that in moments of significant investments, we have resources available to meet the company's commitment.
In the next page, we have ESG highlights. For the first time ever, the company was included in the S&P Global Sustainability Yearbook. This was for the first time and only 12% of the companies, that apply for publication in this Yearbook are taken into account. And therefore, this has been a significant achievement. And is very relevant for ESG practice.
Another important aspect, we went from a B rating to an A- rating in the CDP Climate Change '23. And this is very important to keep us within B3 Sustainably Index. We were once again included. We ranked as #5 with the best position in this sector. And since it was created in '25, we've been there.
Now we have the KPIs for ESG. We're not going to talk about them one by one. But the important message here are the control of emissions, the health and safety of our employees and service providers. The share of women in our workforce has grown. We are pursuing innovation to improve productivity and performance. We also work very close to the communities, where we are located.
With that, we try to have social investments, and this is something that we've done. It went down in monetary terms, during '23 due to tax-related issues. But we intend to use all of the resources available with the communities that are located close to our projects and our plants. We also have an engagement index with the communities, and this is very high and we try to meet the local needs.
I will turn over to Rafael, and he will talk about our expansion and our business strategy. I will talk about finances, and I will be available to answer any eventual questions. I turn it over to you, Rafael.
Thank you. I am now going to talk about our energy commercial strategy to update our performance in the market and also to help us model it for the company. Also to verify opportunities and exposures. If we compare the figures on the left side graph, we can see consistent evolution. We had good sales. And of course, this was during a period, where we have a lot of changes. And you can see that we have sales greater than 800 megawatts for the year '28.
And I'd like to remind you that the energy balance is found in Slide 36 of our attachments, and you can compare it to our balance disseminated in '23. We have been able to maintain the mean energy price throughout this period.
This was relevant result, and it shows our capacity to leverage sales and also to start increasing our participation in wholesale, and this is demonstrated in the next slide.
Well, perhaps just I would like to add something, in terms of keeping prices. This has to do with the way we sell energy. We always sell volumes, we meet the needs of the market. We reduced costs when the demand is lower and that guarantees a very resilient price in the short run. When we look at our mean prices, they have been and maintained and this is something that we've gone through. We have a resilience of our results. And then when prices go up too much, we don't really use it that much, but this is a characteristic for resilience and stability.
So, likewise Rafael, we have some diversification of the industrial sectors, so that avoid all sectors, which might have competition problems. Rafael apologize me for the interruption, but this is part of our dynamics of presentation.
I would also like to remind you that we contract from the regular market and also from the 3 markets. So part of our revenue, once again, confers a stability in our results for the long term. In the next slide, you can see the evolution for our consumers and then in terms of volumes, we have our visibility in the long term, that has been a little bit to decrease the number of clients. You can see here, we opened for consumers, and we can see significant growth in the number of clients, with an increase of 66% in the last 3 years.
I think that we can now move on to the expansion session, where we update you on the projects that are being implemented. We have some good news of the Santo Agostinho Wind Complex. We have turbines that are already operating and being tested. So we're moving towards a conclusion. It is almost totally commissioned, as we had planned. And I would like to remind you that this project has been totally contracted in the free market, adding renewable capacity.
We have 2 other projects. The next one is in Serra do Assuruá. It is under accelerated implementation. We have started assembling the towers, so that we can start operating in the second half of this year with full operations in '25. The product is very large, over 846 megawatts of total installed capacity in the Northeast region, which will contribute as Sattamini said. It will help us replace the nonrenewable capacity that we got rid of in the past years. And this has -- is going to overcome what we sold.
Now we have another project Photovoltaic, which is an implementation. It is quite significant and is one of the largest projects being implemented in our group. It is not as advanced at the Assuruá project, but Assú Sol will start operating this year, reaching total operations by the end of '25, it will be totally operational in '26.
But this will -- this is according to our project. And now we're going to talk about the diversification of our project. Gavião Real is a small project. It is an extension of the Novo Estado transmission system, which has been operating since February last year. And as planned, it will start operating in the first quarter of '24.
We have other projects here in the next slide. This is a relevant project. It's much bigger. It is the Asa Branca energy transmission plant. It is a project which is over 1,000 kilometers long, going through Bahia, Minas [indiscernible] reaching Espírito. And it will help us distribute their renewable energy that is going to be produced in the Northeast. We are disseminating a COD forecasting of at least 24 months, taking into account the deadline established by Aneel, which is March 29.
Now on the next slide, Jirau, and this is a historical slide about Jirau. It is a growth opportunity. And I'd like to remind you that the ENGIE Group has a share of 40%. It hasn't been included in our portfolio, but maybe so.
And this is something that we've been working with for a long time, and you all know that we had a lot of problems. We had delays and the challenges that we faced on site. Today, the project is well balanced.
Financially speaking, it is balanced. We had some cash generation to reasonable levels. Which are sustainable according to the project. So it is possible that in the near future, we will have to discuss it with the controllable. We have a large project pipeline. At some point in time, we will take our participation to the levels that we had planned. And we expect to have something available by '24 or '25. We will provide extensive information to the market, as soon as possible to you, Rafael.
Okay. Next slide. I'd like to remind you that in addition to the products that are being implemented, we have a portfolio of developing projects. They are waiting for a business opportunity to be enabled. And it's very important to have these options because the market reacts really fast.
Historically speaking, from the beginning of the development to implementation, a project may take several years in the [indiscernible]. It's important for us to keep an updated portfolio with mature projects, so that we can capture opportunities that come up suddenly. With this, I end the part of the discussion of our developing projects. And I now turn over to Taka for the financial performance.
Thank you very much, Rafael. We are very happy with our results. I will make a recap of our financial balance and what was mentioned here about the carbonization of our portfolio. You can see that we still have very high levels close to 36%, keeping an average, which is superior to that of the market return on equity also and perhaps these relationships will change a little bit. But we still generate a lot of value to our shareholders.
On the right side, I would like to remind you the investments made from 2016, you can see BRL 28.5 billion, which is very high and a leverage of 84%. We used our balance to be able to leverage and distribute dividends until a point when it was possible. We evolved in terms of decarbonization in '26, we are -- basically renewable generation in thermoelectric generation. We were able to decarbonize, diversify our portfolio from the point of view of inclusion of new products, which represent about 8% to 10% of the adjustable or adjusted -- I'm sorry, EBITDA.
Also with the participation where we made our investments naturally, because we had partial investments in this participation, which reached 10% to 14% will probably go down in the upcoming year, but even so the combination of networks, including transmission of electric energy and gas transportation, will continue representing this amount which is very important for the stability of our results.
Another important aspect, we have an important part of our energy transmission with a longer-term contracts, of the 76% of the '23, we have about 60% of regulated contracts. And this helps us to have stability of our results and recurrence.
Now in the next slide, we will talk about the net operating revenue evolution, Sattamini mentioned it, and you can see here in the middle bar, the main drivers here, which made us go from BRL 11.9 billion, to the amounts we reached are adjustifiable. We can see there is a significant impact in our recovery.
In the next slide, you will see that there is an impact on our constitution, but in the top line here, really, there was a significant aspect. Another element, we had a decrease in trading sales and purchases. In this case, we also had a decrease in the generation of revenue, [ BRL 250 million ] year-over-year. But there was also lower purchases, you can see that the EBITDA was pretty much controlled.
And then the most relevant effect of BRL 570 million approximately had to do with the decrease in the Construction revenue. You know that transmission has a differentiated accounting rule, Construction generates revenue even before it goes to the market. And so naturally, we no longer have this revenue once we start operating. And this is why we had this decrease of about 10% in our net revenue.
And now I'm going to talk a little bit about TAG. TAG had exceptional results in '23. We had also commented about this throughout the year. We had a series of internal optimizations. We were able to capture this value. And the main one here was funding that generated cash. And so we really had a one-of-a-kind year here we now expect TAG to go back to normal in the upcoming years, and you will see that the contribution of TAG to our EBITDA was of almost BRL 1 billion.
And then we had our prior participation of 32%. Also in the beginning of the year, we signed a contract for sale with our partner. Our position went to 17.5%. As of the first quarter with the completion of the divestment of participation in the asset. And then you will see these equalize figures with more stable contribution. I would like to highlight that TAG contribution was significant for our results this year.
Now in the next slide, this is a wrap with many columns, but it's easy to understand. The external bars for gross EBITDA. We had significant evolution from EUR 6.8 billion to BRL 7.3 billion. Without the nonrecurring events, we had an adjustment to BRL 55 million in '22, which didn't happen. But this is not a recurring and then in early '23, we had something minor. When we analyze adjusted EBITDA, we had an increase, as you can see here, it was 4.7%.
And if we -- I would like to make a disclaimer. As of this year, to meet your needs or those who analyze our financial information, we decided to include the effect of quota generation. In the past, we only used the accounting effects, but we still had the non-cash events. So we decided to include it here to make it easier for you to see the operational effect, that you usually analyze. And so if we remove all of the RFS (sic) [ IFRS ] adjustments, our growth performance was 6.4% year-over-year, going to BRL 7 billion -- actually BRL 7.028 billion.
And here, we can see some effects. One of them was the portfolio purchase reduction. With a better defined prices, we have less interest in buying, selling third-party. Energy, and here, we can see an important effect with the hydrologic risk. And here, you probably have noted that in the second quarter of '23, we had already received higher amounts. And this was an estimate we had for our plant. But the accounting principles and accounting treatment evolved over the year, we had some adjustments and decided that we had to review it.
So we had a reversion of BRL 125 million in the beginning of the year and the net amount now in the beginning of the year is BRL 115 million. But there was a significant amount for the concession, generating value to our shareholders.
Now in the final bars, we can also see BRL 348 million, one of the most important bars year-over-year. Which is the reduction in our portfolio. And transmission, as we mentioned already, our transmission, we down to the effects of the accounting treatment. And then you can see an increase of our EBITDA, as a function of [ ramp ].
So all of our assets and transmission lines Gralha Azul are already operational, which leads to our results year-over-year, also. TAG had a significant contribution when compared to the previous year, and this is very important. We imagine that it would be lower in '24, but even so '23 was a fantastic year with very important results for us.
Now in the next slide, net profit evolution. Sattamini has already mentioned that the main effect was the financial result. Which is -- suffers a lot from variations of the PCA because PCA was much lower in '23 than '22. We already have an important variation year-over-year. We are relieved that in addition to this more normalized results, we have the other plants. Three of them were indexed to PCA and when the PCA is lower, we end up having less impact in our accounts to pay. You can also see the adjusted EBITDA. And of course, because Pampa Sul, we have less depreciation and amortization. This is less depreciation and amortization year-over-year because our results were better, we also pay more taxes, which is a natural result of doing better.
And then regardless of how you analyze it, a net profit or adjusted net profit. Our results were fantastic. We had almost 29% of net profit or 24%, when we include the nonrecurring adjustments. And therefore, this was really a fantastic year.
Next slide. Here, we have our debt, which remain balanced. We can see our net debt, It increased. We want to anticipate the need for cash for this year. We have a series of payments to be made, but we increased our debt from BRL 18 billion to almost BRL 21 billion in '23. But we have not used the resources yet. Our cash also significantly increased and we kept our net debt at a level of BRL 15 billion approximately.
In the next slide, we can see a very comfortable profile -- comfortable debt profile and composition for the payment of our debts. We will keep it at 55% and are at a comfortable position. As I had mentioned, 80% of our debt is indexed to IPCA, 17% to CDI and to 5% to the TJLP because of the older contracts with the NDS. The nominal cost of debt is 10%, a little bit lower. So it's a very efficient cost of debt, which enables us to reach our ROI.
In the next slide, in terms of investments, we consolidate everything Rafael mentioned, in the previous slide. We have BRL 9.6 billion. And of this BRL 9.6 billion, the gray bar depends on the closing of Atlas, an operation, which is about to be concluded. We signed it at the end of last year. We still need [ EP ], but we expect this operation to be concluded next week, still within the first quarter of '24. About BRL 2.3 billion have to do with [indiscernible]. Serra do Assuruá will start operating by the end of this year.
So this is the area that we will need the most CapEX. And so an important part of our commitments here, will go to Serra do Assuruá. Also we have 2.8 -- and we also have Santo Agostinho conclusion, the kickoff of Asa Branca. Asa Branca does not require a lot of CapEx right now, but it will be in the order of BRL 0.5 billion for this year. Whenever we add all of our investment commitments, we have a total of BRL 14 billion. A lot of it concentrated this year. So this is going to be a year for investments.
And in the next slide, we will talk about our dividend policy. Of course, we make an effort to maximize dividend distribution. Most of the years, it was at a level of 100%, but it's also expected that in moments of great investments, we will have a reduction, but always keeping a healthy level of 65% of payout.
But this -- it is expected and only natural, that we will have to maintain an adequate capital structure, when we make investments.
Rafael, with this, we close the presentation part of our call and we can open for Q&A.
Well, perfect. Thank you very much. I already have some questions here. I would like to thank those who have submitted their questions and I will start a little bit with the commercial area. We actually have 2 related questions, and I will try to combine them. Victor Cunha, an analyst from Itau BBA. He says that PPA sales were accelerated in the first quarter. Can we expect '24 to be an agitated year in terms of PPA sales because of the recovery of energy prices? And what is the view of the company for energy prices in the upcoming years?
Well, I will start answering this question. Perhaps you can complement it. We had the seventh worst December of our history and the worst January. And of course, that has an impact. I need to start my video. It looks like it is off.
Now we go -- with this, we, of course, had an impact on our prices. We know that it takes the market some time to react and prices have gone up. So we have a price scenario that was triggered by the situation and also because of a stronger demand than we expected, and this is indeed going to be something frequent this year.
Even though the period was very weak, we already started our dry period. So we have to see how the humid period will behave and what impact it will have in the future. This is a characteristic of our system. We have a lot of heat generation and this already has an impact on prices. So it is indeed going to be a year with good sales opportunities. But in the longer run, the prices have already been affected by these events and will depend on consumption in the next few years and also on methodology.
A question by [ Jean Guoan's ] analyst of Bradesco BBA. It is related to sales, and he asks if the sales volume for 2028 is related to the opening of the free market to smaller clients? Or is it related to the rolling of existing client contracts?
Well, it is more related to prices really because when prices improve, we use this opportunity and hire. The market opening has some volume, but it's very small. We have many very small clients, which do not make a lot of difference in our total volume. We understand that this market is going to increase, and it's going to become more relevant. But we still have the main sales drivers based on our large corporate clients.
Another question by Victor Cunha from Itau BBA. He asked us if we have any news on the auction for capacity reserve, is the public consultation going to be opened in the first quarter? And is ENGIE going to participate in the auction with Jaguara and Santiago plants.
Yes, we intend to do so but we need to put this possibility according to the characteristics of the auction. I think the anticipated date was April, but it will probably be delayed a little bit. This is somehow good so that we can prepare and discuss the participation of hydroelectric plants in this area.
Perfect. Thank you, Sattamini. Next question, Rafael Rata our investor and shareholder physical person. He comments that on TAG's relevant event. We mentioned there is a synergies between generation and transmission. So he asks, if we can conclude that the focus of ENGIE Brazil will be on the expansion of any generation, as well as increasing its participation and becoming more relevant in the Energy Transmission segment?
Well, I think he captured the idea really well. Our main business is Electric Energy. We've seen the opportunity of gas as an opportunity to participate in energy transition to replace the more polluting fossil fuels, but this is based on the group's expertise for the operation of gas pipeline.
So Here, we have a company of the group, which participates in TAG and has a higher participation than ours. Now that we decided to divest. So there is a trend towards focusing on the growth of the sectors that are related to Electric Energy.
Thank you, Sattamini. I had a question from Lucas Javier, an investor and he asked us if we are going to participate in the transmission auction?
And the answer is yes, correct. We are analyzing somewhat, studying them so that we have a strong technical basis, optimize engineering, so that we have a competitive and profitable environment. Competition does not meant that we're going to give up having a return. Also we have to optimize the performance of our assets.
Perfect Satto, you actually already addressed the second part of this question. Thank you very much. Next question, Takamori has already mentioned it, but I think it's good for us to restate, when we're going to disseminate X data or payment of dividends?
Well, we have to wait for the confirmation of the dividends in our assembly on April '24. After that, we will inform about this date. The main thing is to guarantee the correct amount, so that we can communicate it. And that's after April '24.
Thank you, Takamori. We have another question from Safra. Actually, 2 questions in one, about TAG's participation. Can we expect the remaining sales in the short term? And how will the Jirau participation be part of the scope of this rotation of assets?
Well, it could happen, but I do not see a need or an interest to do it right now. Regarding Jirau, Jirau is an asset that is part of our report. 70% is contracted. We can generate value by means of commercialization. So at some point in time, it will be part of our scope. This hasn't happened yet because of the decision of the controller. The controller understood that we had to really round up our results before we do that. And then we will analyze how this asset will be brought into our scope. Is it going to be through sales funded by the controller? Are we going to have any share transactions? We haven't started discussing this yet, but this is probably what we are going to discuss with the committee.
What we can say is that we anticipate this will happen. We have a constituted governance to guarantee the best in governance possible and equal conditions as well.
Well, thank you very much, Sattamini. Next question by [ Ilan, Arbetman investments ]. How do you see the current leverage in 2.1x? Do you -- are you going to issue new debentures?
Definitely [ Ilan ]. This is a very comfortable level. We have an opportunity to leverage more. And this is going to be our strategy for this year. So unless we have any transformational event here, which requires other capital structures that are a little bit more differentiated, we will have to control it to meet our capital needs. I'd like to remind you that we've done part of our homework. We issued debentures last year, that reduces our needs for this year, but we see it with optimism. That's leverage.
Well, thank you very much. Daniel from Safra asked if we see any liquidity in the market because of the recent context?
Yes, it is increasing, and this is good because consumers tend to benefit from it in the short run. But when we start having this volatility because of the complexity of the market, we can see that consumers understand that's not their expertise and transfer risk for our longer-term contracts. So we have seen a higher liquidity and a higher interest of consumers to make things more consistent.
Thank you very much, Takamori. We have a question from João Pimentel, analysts. It is more specific about TAG. So I will try to answer it. He asks if we can explain the reason for the TAG revenue in the fourth quarter and also -- he wants details of the provision for the return of penalties that had an impact on EBITDA?
This has to do with the return of the penalties that were provisioned and they will be returned throughout '24 and '25. But I'd like to remind you that the impact was more significant because all of the penalties for '22 and '23 had an impact on the fourth quarter alone.
And we're moving towards the end of our Q&A. [ Vinicius Santini ], our shareholder asks if we have any news on green hydrogen projects?
We have -- trying to do it. The industry is still in the early stages. We still do not have regulations, that will encourage this activity. We have Congress Associations and how we can make this industry start operating because it's very positive for generation. It is a consumer of energy, but we still need to have a regulatory framework that will facilitate our business. And this is the main barrier for the development of green hydrogen. But we have worked with some industrial projects, which may be economically feasible as long as we have a valuation of carbon decrease. And the cost of carbon is an element that will enable the creation of this industry.
These are ongoing activities. They move very slowly, but we are discussing them. And it is possible that we have some kind of evolution in '24. We are working to do that.
Next question from Antonio [ Laugu ] us, a shareholder, and he asks if we are interested in [indiscernible], in case is -- does not use its privilege?
Well, we're not looking at that. I cannot comment. We do not have a position today, so I can't tell you we're not participating in that process.
One last question. [ Matthews Ketan ], our shareholder. He wants to know what the prospectus for this sector are and how the company sees the feasibility of new energy actions when compared to others?
Well, new energy, there's no demand. If you do not have a demand, it won't happen. And if we have excess offers, a lot of clients are being lost to the free market. And so we will probably have an involuntary exposure leading to increase fees for our consumers. So, this is a situation where they go to the free market, leave their accounts for those who stay, things become more and more expensive. This is the craziness we're going through now, and it is stimulated by the incentive for distributed generation.
This is a message we've given the government has to stop and evaluate because, the poor consumers, the one who have less resources, we'll end up having to pay for those who are mature and smarter. This is the message we share with everyone in the Congress, with the government. It's been difficult. And we hope that they should understand it and the government starts doing something, which is very important for the health of the sector.
We're now definitely moving on to the last question so that we do not leave any questions without an answer. And that's in line with the last answer you gave. Do we have an interest on the ESD assets in Brazil?
Well, we're always into studying generation assets. We look at them. We participate in the process. And at some point in time, those things might come true or not. I'm not saying that we will participate in the auction or not. That generation and transmission assets, that they have a good return, if they make sense, if they add value to our portfolio, we will analyze them. And this is undoubtedly an interesting asset. We're talking about 2 plants in the Southeast. And so I think that within this process, we will have some interest.
Sattamini and Takamori, since we do not have any more questions. I now turn over for final considerations.
Well, once again, thank you all very much. We hope that in '24, we involved in regulatory terms for the Electric sector. And as you know, we navigate very well, any type of actions. We have the best thing possible, and we count on the support of our investors. And this interaction with you is very positive for us. So I thank you very much, and wish you all a good day.