Eneva SA

BOVESPA:ENEV3

Earnings Call Analysis

Eneva Posts Strong Q3 with 50% EBITDA Growth

In Q3 2023, Eneva's EBITDA soared nearly 50%, reaching BRL 892 million, primarily due to full quarter revenue recognition from Hub Sergipe and UTE Fortaleza assets, marking a 134% growth excluding Termofortaleza's purchase agreement effects. The company achieved a substantial debt restructuring, reducing its financial debt and increasing free cash flow, while SG&A expenses plummeted 23%, saving BRL 33 million. Significant was also the signing of the first GNL storage service agreement at Hub Sergipe and locking in 84% energy contracting for the solar complex Futura 1. The stabilization processes at their various assets bore fruit, with UTE Jaguatirica II's availability stepping up to 86%, and all 22 units of Futura 1 now operational, leading to a consistent decline in net debt to EBITDA ratio to 4.22x.

Eneva Energizes Q3 with Strong EBITDA Growth and Operational Efficiency

Eneva, driven by strategic financial discipline and operational advancements, marked a significant increase in EBITDA to BRL 892 million in the third quarter, boasting a growth of nearly 50% year over year. Excluding specific acquisition effects, this surge soars to a striking 134%, fueled by comprehensive revenue recognition from the Hub Sergipe and UTE Fortaleza assets and operational streamlining, resulting in an impressive SG&A reduction of 23%. The company's investments highlight a future growth trajectory, with key milestones such as the debt restructuring of CELSE, achievement of operational efficiency, and the expansion of services at the pioneering Hub Sergipe.

Operational Milestones Underpin Future Capacity and Performance Increases

Operational metrics showcase a remarkable recovery, with plant availability leaping from 53% to 86%, and further progress in October hinting at sustained improvements. This performance is underpinned by the stabilization of key projects, notably the Jaguatirica II and the solar complex Futura 1, which has achieved 84% energy contracting and record generation levels—a commendable rise well above physical guarantees. As a result, the company's leverage ratios continue their descending arc to a healthy 4.22x net debt over EBITDA ratio.

Strategic Financial Maneuvers Reduce Gross Debt and Bolster Cash Flow

Following an adept fundraising of BRL 5 billion, Eneva executed a strategic payout of older debts, which effectively lowered the company's gross debt by BRL 63 million. Further financial engineering in Q4 brought an additional BRL 320 million in consolidated cash flow benefits, leaving Eneva in a more fortified fiscal position. This disciplined approach to debt management demonstrates Eneva's commitment to optimal financial structuring for future growth and investment.

Robust Commercial Strategy Drives Mark-to-Market Growth and Diversification

Eneva's compelling commercial strategy bore fruit, with the mark-to-market value of energy contracts soaring by 92% to BRL 693 million. This figure reflects not only improved trading activities but also a strategic diversification of revenue streams, proving the efficacy of Eneva's market navigation and operational adaptability. Notably, this strategy includes the initiation of energy export operations and self-production agreements, underscoring a dynamic approach to market opportunities.

Net Debt Diminishes as Eneva Cements Long-term Debt Quality

Eneva's net debt showed a welcome reduction from BRL 16.6 billion in Q2 to BRL 16.1 billion in Q3. This trend aligns with the company's broader fiscal strategy that has netted a lower average debt spread of 4.42% for IPCA indexed debt and stable average spread for CDI debt, testifying to the company’s effective cost of capital management. The long-term and low-cost profile of Eneva's debt structuring is another pillar supporting the optimism about the company’s future financial stability.

Investment in Future Capacity Expansion with a Focus on Efficiency and Sustainability

With a total investment of BRL 716 million in Q3, Eneva prioritized the construction of three key projects and further upstream initiatives. The meticulous allocation of capital includes substantial investments in equipment and the assembly of a liquefaction plant, indicating an active and holistic development approach aimed at bolstering future output and increasing operational sustainability.

Closing 2024 with New Completions and Commencements in Operations

Project adherence and capital expenditure have been precisely managed, with substantial progress on equipment manufacturing and infrastructural advancements, such as well drilling and licensing. Eneva anticipates the energization of the transformer by 2023, and the conclusion of commissioning for a liquefaction unit by April 2024. Additionally, the Parnaíba VI construction project is nearing its final phase, with expectations to commence commercial operations in the last quarter of 2024.

Earnings Call Transcript 2023-Q3

[Lino Cancado, executive]

Good morning, everyone. Thank you for participating in this conference to disclose the results of Q3 2023.

Moving straight to the fourth slide. I would like to begin by presenting the highlights we had in this period. Our EBITDA amounted to BRL 892 million in the third quarter, which accounts for a growth in the order of almost 50% compared to the same period in 2022, when we accounted for the purchasing agreement of Termofortaleza, if we do not consider this effect, the growth in EBITDA would be 134% being a result primarily of the recognition of 100% of the revenues of the Hub Sergipe and UTE Fortaleza assets throughout the quarter, the delivery on the commitments undertaken early in that year, with a standout for the financial discipline and a reduction of our SG&A.

Number three, the increase on the availability of the UTE Jaguatirica II, the plants and the result in advancement of the stabilization project of the project, as along Jaguatirica.

Furthermore, this was a period of significant investments, which will propel our results in the future even more.

Firstly, we restructured the CELSE's debt. And with this operation, we reduced our financial debt, thus increasing our free cash flow, and we eliminated some of the conditions that were hindering our ability to seize the opportunities and generate value as a development of Hub Sergipe. Habibe will explain the details of this operation as we go along.

Another highlight of this quarter was the closing of the first service agreement of storage for GNL in the FSRU at Hub Sergipe, which is a milestone for the company. It represents the first contract to monetize the broad portfolio of opportunities that we intend on developing from Hub Sergipe, thus offering new services and providing products to the gas on grid markets.

Additionally, the initiatives focused on improving the efficiency of our operations and optimizing the expenditures have had a significant impact on our EBITDA. We reduced 23% of our SG&A compared to the third quarter of 2022, which accounts for a savings in the order of BRL 33 million on nominal base.

The solar complex Futura 1, we have to highlight first the signing of a new agreement and a partnership with Vallourec, on which we are trading energy at SPE Futura 5. As a result, we are assuring the contracting of 84% of the energy of the complex in the future.

Secondly, we concluded the stabilization process of the plant in late October 2023, and all the 22 UFEs are fully operational. And in November 11, we had a record generation at 282 megawatts in average, which is considerably superior to the month. As a result in this period, our leveraging measured by the net debt over EBITDA is still in a downward trend, reaching 4.22x in late September, which accounts for a reduction to the tune of 0.6x in the accumulated number of the year.

Moving forward to Slide #5. I would like to highlight some of the progresses we had in the stabilization process in our assets in the last few months. In the first graph to your left-hand side, we see the sequential progress of the increase in the availability of Jaguatirica II since the -- since we went fully operational commercially in 2022. In the third quarter of '23, the average availability reached 86%, a growth to the tune of 33 percentage points compared to the availability of a mere 53% seen in the same period of 2022.

Now in October 2023, the availability continued to grow, reaching an average of 88%. Therefore, getting closer to the parameters on the project. Those improvements reflect all the actions undertaken by the company since the beginning of the operations of this complex system, which operates in an innovative way, becoming a pioneer in Brazil by using the natural gas produced in the -- our field of Azulão in the Amazon and transported by trucks in over 1,000 kilometers of roadway until Jaguatirica in [indiscernible].

The competencies in the learnings that we acquired in the Azulão project are now being deployed for the GNL market, transported by roadway in the state of Manage in the vicinities of the Parnaíba Complex. In your right-hand side, we see a graph that shows the stabilization process and our progress on our complex Futura 1, which went commercially operational in this year throughout the third quarter between July and early September, we had 6 UFEs discontinued to correct some issues that came with the construction process.

Now they are completely solved. In late -- at the end of the third quarter, 3 UFEs were still down, undergone maintenance. However, in late October, we concluded all the repairs that were necessary. And with that, the solar plant now has all of its 22 UFEs, fully operational and stabilized, thus reaching a generation above the physical guarantee of 231 megawatts in average.

Considering the complexity such as the generation of energy in large scale, it is only usual that you have a stabilization phase to make the necessary adjustments and optimize the plans for in its facilities. And it's important to point out that the company is in a position, it has the necessary competencies to assess, determine action plans and also to execute the necessary activities to correct any issues and optimize the operations of all our assets.

I'll now hand it over to Marcelo Habibe, which who will present about the restructuring of the debt of CELSE's and the reduction of SG&A that I mentioned before.

[Marcelo Habibe, executive]

Thank you, Lino. Good morning, everyone. Moving forward to Slide #6, I wanted to present the main impacts of our restructuring of the CELSE debt. As Lino mentioned before, our operation reflects our efforts to look for maximum efficiency on the managing of our liabilities and optimizing our financials to make sure we propel the financial results of the company board.

The refinancing of CELSE has seen some positive impacts, and we will still see some additional financial gains after we incorporate the holding Eneva asset, and some future benefits such as the development of new activities in the Hub Sergipe. On the graph, we can observe the effects of the operation, which culminated with the important addition of free cash flow to Eneva and the reduction of the total financial debt of the company.

Working with our debtors, with our lenders in late September, we were able to fund raise BRL 5 billion. Subsequently, in [ October '16 ], we paid our -- we did a prepayment of the old debt, which together would amount to a total financial debt to the tune of BRL 5.6 billion. With that, in the first half, we already reduced our gross debt in the company by BRL 63 million.

Moving forward on the graph, the cost of fund raising related to the new issuing of all the fees and expenses with the prepaid and the repurchase related to the CELSE debt, those were all paid in full in the fourth quarter. The complete disbursements was BRL 311 million. However, these costs were more than offset by the discount we had by buying the first emission at [ 94% ] of its base value as well as the revenue that was obtained with the guarantee of SERV and also the positive effects that combined added up to BRL 474 million.

With the since the positive effect overcame the results of the gross debt. At this stage, we had a positive cash flow generation of BRL 100 million. Additionally, the operation cleared the balances of the reverse accounts, which were associated to the previous debt, totaling BRL 720 million. Part of those resources were used by the company to redeem the first series of the second emission of CELSE with a disbursement to the tune of BRL 500 million.

As a result, we reduced our gross debt at CELSE by BRL 563 million, going from BRL 5.6 billion to BRL 4 billion, 4.5 billion to be precise. In the last curve of the graph, we concluded the operation with a consolidated cash flow gain of BRL 320 million.

So besides those effects, the restructuring process gives some additional benefits, such as clearing some important synergies and the future incorporation of CELSE by the holding. This operation was already approved by the Board, but it's still pending some partner and regulation approvals.

Additionally, the dissolution of the project finance structure, which were signed previously, allow us to develop some new business opportunities in a timely fashion, in a more flexible way and without the need of having the okay from the lenders. With the conclusion of this process, we under undertaken one of the most challenging financial initiatives with some financial gains, operational gains as well as strategic gains that were key.

Now moving on to Slide #7. These are some of the advancements in our expense reduction initiatives. As we've announced early this year, we mapped several opportunities to optimize our operation and our financials, and we have explored those opportunities throughout 2023. In our last disclosure, we already presented the concrete results of some of those initiatives. And at this moment, we show some of the improvements we obtained with regards to reducing SG&A, thus reflecting the success of our actions.

As the graph shows, the fixed cost with operation and maintenance to the left-hand side were reduced by 5% compared to the third quarter in the previous year for the operations at Parnaíba, Jaguatirica, [indiscernible] and our Exploration and Production segment. I emphasize that this was done very carefully without compromising the efficiency of our operations. And at the same time, as a matter of fact, we had some advancements on the stabilization of the Azulão, Jaguatirica system.

With regards to SG&A, consolidated SG&A, we reached an impressive 23% savings in the annual comparison even with the strong growth of the company with the acquisitions concluded last year and the new projects, Futura 1 and UTE Parnaíba V. This result comes after a careful review process in terms of processes contracts and capturing synergies between our internal teams and our new assets.

Once again, we reached a level of debt -- expenses, pardon me, that is lower than the historical levels that we believe will be sustainable down the road. We are also backed by our commitment and our financial discipline, and we will continue to strive to generate value and efficiency.

I'll now hand it over to Marcelo Lopes, who will present an updated situation of our trading segments.

[Marcelo Lopes, executive]

Thank you, Habibe. Good morning. Good morning, everyone. Now moving on to Slide #8, we present to you the development of the results that were obtained thanks to the advancement of our company. We see that the fair value of the energy commercialization contracts, the MtM has reached BRL 693 million in the end of the third quarter. This result accounts for a growth of 92% compared to the BRL 360 million that we reported in the closing of the first quarter of 2022 when we first acquired Focus Energia.

Since then, we restructured our commercialization at Eneva. We reallocated the contract signed at Futura 1 for the commercializer, and we continue to strengthen our trading activity.

Furthermore, it's important to point out that we conducted roughly that we realized roughly BRL 145 million in 9 months of 2023, and we more than offsetted this value with the addition of BRL 366 million to our book.

On the lower left side, we show the breakage of the fair value of the contracts of trading per year, of which the presented values have already seen the discount. This graph shows the significant results that was contracted or amount that was contracted for the coming years, which represents a guaranteed free cash flow to the company.

In the central graph, we see the growth trajectory of the balance of MtM through time, which is the result of our active posture and also the constant search for opportunities. It's worth pointing out that the reduction of the book MtM to the tune of BRL 20 million in late June and late September 2023, which reflects the impact of the increase of the price curve of energy that was registered in the first quarter, especially because of the sudden increases in temperature and the load of the system associated to a lower availability of power in the hydropower plants and also a change in the wind power offering.

Despite this slightly negative effect, I would like to point out that Overall, at Eneva, this increase in price and the signaling of the thermoelectric adjustment for -- to meet the requirements of the system, thus bring a positive contribution to the company. There is a positive monetization effect on our gas reserves. And this in fact is already complete in terms of the processes we've done in early November, of which you will see a positive impact in the last quarter's results.

Furthermore, besides our commercial book, the competencies we develop in the trader are still contributing to diversify the revenue streams of the company, such as, for example, the operations of exportation of energy and also the signing of self contracts that were -- the self-production agreements that were signed at Futura 1. We can see a growth trajectory with the results obtained outside of the regulated market.

So in other words, thermal energy exportation and trading in the segments of solar, for example, reaching BRL 593 million in the accumulated of the year compared to BRL 333 million in the same period last year, which underscores Eneva's capabilities and also maximizes its asset value.

Now I'll hand it over again to Marcelo Habibe, who will present our financial performance.

[Marcelo Habibe, executive]

Thank you, Marcelo. Moving on to Slide 10. I will present the main impacts on EBITDA quarter-on-quarter. Consolidated EBITDA grew 49% in Q3. This is as the same period last year. If we not -- if we fail to consider the effect of the bargain purchase of Termofortaleza in Q3 2022, EBITDA would have reached 134%. Hub Sergipe and UTE Fortaleza contributed BRL 444 million to our EBITDA in the period, which reflects the full recognition of the two assets in the company's EBITDA. Futura 1 contributed BRL 28 million, which is below its total potential given the scenario towards stabilization of the compounds in the quarter.

As regards to Jaguatirica II EBITDA grew by BRL 65 million, driven by the increase in availability and the average dispatch vis-a-vis the same period last year and the reduction of fixed O&M costs in the year. EBITDA of the Parnaíba Complex dropped slightly quarter-on-quarter, and there was a significant reduction of the exported energy between the periods. This was partially offset by an improvement in the fixed and variable margins. Additionally, the coal segment grew its EBITDA by BRL 15 million, which reflects the impact of the readjustment of contractual fixed income and the improvement on O&M costs.

The positive performance was partially mitigated by the results of the trading arm in the function of lower margins and the accounting impact of the negative variation of MtM on future contracts. In the holding, the impact of the bargain purchase of Termofortaleza has driven the results in that period, but the negative variation in Q3 2023 relative to 2022 was partially offset by the reduction by BRL 54 million arising from savings with expenses and greater allocation of expenses to the company's segments. As a result of these effects, EBITDA was BRL 892 million in Q3 2020.

Moving on to Slide 11. We will look into the main impacts on the financial results between the quarters. The net financial result was negative by BRL 636 million in Q3 this year, vis-a-vis the negative result of BRL 114 million in Q2 2022. As you can see, this grew in view of the new debt arising from the acquisition of sales and new projects that came on stream and the noncash effect of the contract of the FSRU in Sergipe.

Moving on to Slide 12. You will see the main changes in the cash flow in the quarter. And here, the impact of CELSE restructuring on the company's cash was booked after the closing of this quarter. The operational cash flow was BRL 934 million in the quarter and was driven by the operational performance of the company and the positive variation in the working capital in the period.

In terms of investments, this was BRL 792 million having to do with the CapEx disbursement for the growth of the Azulão 950 project, the small-scale plant in Parnaíba and the payments -- the pending payments for Parnaíba V. Lino will give you more details about the investments made.

In terms of the cash flow from financing, we had BRL 818 million entering our accounts, and this has to do with the positive effects of the early receipt of the contracts of commercialization of Itaqui and Pecém II for BRL 850 million, the raising of BRL 577 million through export credit notes and disbursements with [ FD&E and B&B ] relating to credit lines for Futura 1 and for Parnaíba VI. These amounts were partially offset by the amortization of principal and interest according to our schedule and also expenses with chartering in the period.

As a result, at the end of the quarter, our cash position was BRL 2.6 billion. If we consider the impact on the cash amount arising from the restructuring of CELSE's debt, the cash balance in the company would have been BRL 3 billion. That is BRL 320 million in cash addition.

Moving on to Slide 13. You will see more details about the company's capital structure after the conclusion of the restructuring of the CELSE debt. First, we see the net debt of the company, which went from BRL 16.6 billion in Q2 to BRL 16.1 billion in the third quarter of 2023.

Leverage also is going down, and now net debt over EBITDA is 4.2x, which has to do with the results of our operations and other financial initiatives. There are the graphs of the slide show the profile and quality of our debt, which is in the long term and at a lower cost and is indexed to IPCA being hedged naturally by our fixed income.

In Q3 2023, the average duration was 5.3 years, with most of the maturity concentrating in 2027, which is in line with the start of operations of our main projects. After the refinancing of CELSE's debt, the average spread of the IPCA indexed debt was 4.42%, 71 basis points lower relative to June 2023. And the average spread of CDI debt was 1.26%, which is relatively stable relative to June 2023.

I'll now turn the floor over to Lino, who's going to give you an update on the investments and the status of our construction projects.

[Lino Cancado, executive]

Moving on to Slide 15. You will see the investments made in Q3, which totaled BRL 716 million on an accrual basis and were targeted to the three projects under construction and the upstream activities in the Parnaíba Basin. In the Azulão complex 950. In Amazonas, we invested BRL 276 million in the period, of which BRL 168 million were for the payment of GE for the milestones relating to the equipment of the power island of the single and combined cycles, BRL 38 million were given as down payment for the beginning of the activities of the construction and foundation work and BRL 46 million went to E&P in the Amazonas basin.

Upstream, we invested BRL 130 million in the quarter, BRL 54 million went to the development of the gas fields in the Parnaíba complex. All the amounts were invested in the acquisition of a new perforation drilling equipment for the operations of exploration and production so that we can continue to improve continuously and increase our operational efficiency and improved costs in the perforation campaigns.

In the liquefaction plant, which we are completing in the Parnaíba complex to serve Vale, Suzano and new markets. We invested BRL 56 million to pay milestones in the process of electro-mechanic assembly of the plant and another BRL 23 million relating to the milestones of the acquisition of equipment for the liquefaction unit.

And finally, in UTE Parnaíba VI, we invested BRL 88 million, mostly for the purchase of equipment and the payment of the completion of milestones relating to the construction of the facilities. We also received the cooling tower ventilators and the water pumps of the boiler, and we have also completed the works in the pump wells in the cooling tower.

On Slide 17, I'll give you an update on the small-scale LNG in the Parnaíba Basin. We have completed all the foundations and basis for the plant's equipment, and the project now is at 93% of adherence to the schedule. Additionally, we have started the commissioning of the first cryo boxes, and we have received the first batch of equipment in the regasification plant, which is being built in Suzano's facilities.

The main milestones for 2023 are the manufacturing and commissioning of the cryo boxes and the receipt of all the equipments of the liquefaction plant. The project is within the schedule with the completion of the commissioning of the liquefaction unit scheduled for April 2024, whilst the regasification plant should be completed by May 2024. The commercial operation is scheduled for the second quarter of 2024.

On Slide 18, we will look into the update for the Azulão 950 project. The physical adherence of the project is 100% and 48.3% of the CapEx has been contracted. The construction work are underway and 100% of the basis of the gas turbine has been completed and 35% of the base of the second turbine has been completed.

The contracts were the acquisition of the equipment, which could be in the critical path for the project, such as transformers, cooling towers, condensing pumps, boiler and circulation pumps have been completed. All of this equipment is under manufacturing.

Additionally, we have completed the drilling of three more wells, which are part of the gas production system to serve the project. We have also obtained the preliminary license for the gas pipes and clusters of the wells, and we have held the public hearings in the municipalities of Silves and Itapiranga relating to the environmental licensing of the project. The hearings meant to continue to discuss the matters presented in June and went as we predicted. This year, we will complete the contracting of the construction works for the project.

The gas pipelines are scheduled to begin construction in April 2024 and then the energization of the plants should take place in October 2025. The COD of the single cycle is predicted for January 2026, and the COD of the combined cycle is predicted for July 2026 with commercial operations started for the fourth quarter of the same year.

On Slide 19, you will see the Parnaíba VI project. We are at the final phase of construction and assembly with a physical adherence of 90% and 83% in terms of accumulated physical progress. We have positioned the basis of the generator condensing unit and steam turbine, and we have completed the assembly of the equipment in the substation yard and the assembly of the cooling tower. We should energize the transformer in 2023, and in 2024, we should carry out the hydrostatic test of the steam recovery boiler and then start the operations of test in August. The commercial operation is expected for the last quarter of 2024, and the CCEAR should start in January 2025.

I'll now turn the floor over to Felippe Valverde who will begin the Q&A session.

[Felippe Valverde, executive]

Thank you, Lino. We are going to now begin the Q&A session. [Operator Instructions]

Well, first question came from [ Filipe André Rocha, Itaú ]

[Unknown Analyst]

The company -- does the company expect that given the worst conditions, we should expect a greater dispatch not only in Parnaíba, but in other thermal plants.

[Unknown Executive]

Thank you for the question. We should expect it, but -- and we are also seeing this happen. As I said in the call, -- since the end of September, whenever the load goes up and there is a peak in terms of heat. The system has sought thermal power plants to meet the peak demand. And now in November, that is when the load is even higher, higher than September, higher than in October. This is becoming even more constant.

Two weeks ago, we had a dispatch in the Parnaíba complex. And yesterday, we had a dispatch in the Parnaíba complex again. And also this week, nearly all the thermal power plants in Brazil have dispatched. Today, the peak demand should be 105 giga which is a record. Yesterday, it was 102. So that to meet this instant demand, the operator needs to rely on all the thermal power plants, ours and also the power plants of other operators.

[Unknown Analyst]

What about the negotiations to capture energy with regards to the CELSE contract for monetization operations of this one?

[Unknown Executive]

Yes. Thank you so much for the question as well. This discussion is well underway. As a matter of fact, as per the contract itself, we have the estimated growth further next year. Now if -- I mean, should we want to utilize those estimated goals, whether it's to service this demand or for other uses. This is already considered.

What we are discussing not only with this with Qatar, but other players is some different alternatives to make sure that we can add on to our offering and supply portfolio to make sure that we can create some competitive solutions for the gas market, considering how entering to the grid in the second semester next year.

[Felippe Valverde, executive]

Next question from Guilherme Lima from Santander.

[Guilherme Lima, analyst]

Could you please comment on the anticipation of the fixed revenue of coal cost cash effects? And could we expect new anticipations from coal or other businesses? Is there any specific reason for you to choose coal as opposed to gas?

[Unknown Executive]

Thank you, Guilherme for your question, for your questions. So with regards to the cost aspects, the anticipation cost, well, it's roughly CDI or the interest rates, the interest rate plus 2%. That's the spread. And we actually have notes #16 with all the details and information about the accounting, the specific costs. So you can see that in detail. But in rough numbers, we anticipated BRL 850 million, which is what we got in our cash, and roughly 50% of the average of receivables for the next 4 years.

So we're going to receive, obviously, I mean, the distributors when they pay to Eneva for the fixed revenue, automatically, we are going to reimburse the bank. We're going to reimburse that for the anticipation at this cost, CDI plus 2%.

So there is a specific reason to ask for us to go with coal. Both the coal plants, they had some dealings with Eneva with our holding also to the tune of BRL 850 billion. As we anticipated, this number, the BRL 850 million. This money went into the coal operation. And on the same day, we paid this amount anticipated.

So at the end of the day, the money went to Eneva to the holding, which is where the money should sit. This is where we have our major investment. And with that, coal is now debt free. Of course, we have a commitment to transfer part of that fixed revenue to the banks that anticipated this receivable to us. We don't have any additional plans to do operations like this one, but we do have an option.

And by the way, on CELSE, this which is completely free to do transactions like that after the liquidation of the anticipated liquidation of the vendors, we have BRL 2 billion of fixed revenue per year up to 2044. So it's a very substantial volume of fixed revenue that can very well be utilized in an operation like this one. We do not intend to do that, by the way. And besides all the benefit from the transaction, from a tax perspective is very positive because there is no -- there are some tax that are alleviated.

And from a credit perspective is positive as well because when you discount this receivable, the amount of credit is not consumed by Eneva, but rather by the lender of Eneva, so the distributor itself or the system itself. So it's a win-win situation in this operation.

With regards to the financial cost. We're dealing with different credit limits in different pockets here. So of course, we have a very high volume to utilize, but we do not intend to utilize it in the coming months.

[Felippe Valverde, executive]

Okay. So an additional question from Guilherme.

[Guilherme Lima, analyst]

With regards to Futura. Can we expect new PPAs being announced in this format before a potential sale? What is the process going -- how is the process at this point?

[Unknown Executive]

Thank you, Guilherme, for your additional questions. With regards to new PPAs, we still have a small volume. We still have some volume available, which might be added to our medium- to long-term agreements. We are working towards that. So there should be some news coming down the pipe in this sense. With regards to the sale process, well, there is no news to report at this moment.

[Felippe Valverde, executive]

Thank you, Marcelo. We received a question about coal as well. Has there been any advancements on extending the PPA terms for coal? What is the current status.

[Unknown Executive]

Yes. for those that saw the [ Enel ] meeting to this morning. They postponed the deadline for 246 additional days. So the contract is going into effect until September 2, 2028. It was going to be December 31, 2027, and it is now September 2, 2028. They're going to publish the information officially, but it's now -- this is a public knowledge information. This is on the Enel website. Then there's going to be a discussion about the PPA of [ Takeda ]. That one is a little longer, and we expect to have a positive outcome very soon.

[Felippe Valverde, executive]

Thank you. Next question here from Daniel.

[Unknown Analyst]

Can you talk about the peaks on the energy demands that happened in the last few weeks. What are some of the effects estimated for the fourth quarter? And how does Argentina fit into that context?

[Unknown Executive]

Okay. Now with regards to the demand peaks like I mentioned, operators are now resorting to thermal power generation to complement to supplement the demand that has happened since late September. And in November, they picked up the pace. Whenever we have a heatstroke, whenever we have an increase in temperatures like we are experiencing in the country now, this tends to increase. And when it happens, the Brazilian system needs this energy, needs power to meet the internal demand.

So the possibility to export that energy to Argentina gets disrupted, but it's worth pointing out that now in late October, early November, Argentina has not demanded additional energy because El Nino has brought about some droughts in the Northeast of the country and some heat waves in the Southeast and a lot of rain in the South.

So hydropower plant availability in Argentina is very elevated, so they did not import additional energy since then. But if they had any necessity in these days, the operators would probably not authorize it, at least not in the peak demand in those periods here in Brazilian market.

[Felippe Valverde, executive]

Next question about expenditures from [ Diego Tejeda ]

[Unknown Analyst]

What are the expectations of the O&M and SG&A expenditures for the next quarters? Can we expect a new reduction? Or will it be stable?

[Unknown Executive]

Thank you for your question. I believe that our main initiatives have been well concluded. We can expect some slight improvement from now on, but I think the company is committed to stabilize the situation in this sense. Now if we grow, we are going to try and grow below the inflation. Our fixed revenue is growing with that rate, but we have our fixed margin, and that is growing here on a yearly basis. So I believe it's going to be a slight growth, and we're going to grow below the inflation.

[Felippe Valverde, executive]

Next question from -- is also to Marcelo.

[Unknown Analyst]

Can you give us an update on the M&A process of Eletrobras thermal power plants? Are you analyzing that? When do you expect this to be completed? Would you need supply or because there is no debt, your balance sheet could accommodate that?

[Unknown Executive]

Thank you for the question. We are analyzing the process. We are analyzing the Eletrobras divestment process. I can't give you any more details because this is a confidential process, and it's a process that has to do with Eletrobras. So it's not for me to talk about their process. We are interested in the assets at a fair price.

We are now going to carry out a diligence, and it's going to take some months. And whether we would need supply or rather an offering, we wouldn't need that. We are decreasing our leverage and the results that these assets could generate for the company would allow us to have a funding structure with the cash flow of the asset that we may acquire.

It's a leverage buyout comparable to what we did with Termofortaleza, where we used the balance of the asset acquired to leverage the company. And in the end, we had a weighted deleverage of the company. We can do that with the assets of Eletrobras. There is a market for that. So it's not a theoretical transaction. But the structure of capital, if we carry out that acquisition, we haven't discussed that. But yes, we could do it.

[Felippe Valverde, executive]

Our next question goes to Marcelo again.

[Unknown Analyst]

Could you give us a little bit more color about the gas storage contract? What is the economics for Eneva?

[Unknown Executive]

Thanks for the question. As regards the economics, we cannot talk too much about it because of confidentiality issues. But the contract works like this, we offer the idle availability of the [ FPRU ] of the FSRU so that the LNG trader can use that inventory to do some move towards optimization. Qatar has chartered this time to us so that they could take advantage of a move of prices upwards in the LNG market. So they bought this in the low and I want to sell it in the high. So it's a gain-gain for LNG traders and for us who have the infrastructure.

[Felippe Valverde, executive]

We have one last question.

[Unknown Analyst]

Was there any impact on the works of the Azulão 950 project, given the drought in the north region?

[Unknown Executive]

If there was an impact, it was it is positive with the reduction of rain -- we are now building the foundations, the stacking and dry weather is very favorable for that. And all the logistics is being carried out on the roads. So there was no impact for us with the lower level of the reverse, much to the contrary. This has helped us move forward with the foundations.

[Felippe Valverde, executive]

And with this, we end our Q&A session. Thank you all very much for participating in this video conference.

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