Image source: The Motley Fool.
Companhia Energetica de Minas Gerais(NYSE: CIG)
Q4 2021 Earnings Call
Mar 30, 2022, 2:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good afternoon, ladies and gentlemen. Thank you for waiting. Welcome to Cemig's fourth quarter 2021 conference call and webinar. We inform that this event is being recorded and it has some intended interpreting into English.
[Operator instructions] Now I would like to turn the floor to Carolina Senna, investor relation, superintendent. Please, Ms. Senna, you may proceed.
Carolina Senna -- Investor Relations
Good afternoon, everyone. I'm Carolina Senna. Cemig's investor relations, superintendent. We now start Cemig's fourth quarter 2021 earnings call and webcast with the following executives.
Reynaldo Passanezi Filho, CEO; Dimas Costa, chief commercial officer; Eduardo Soares, chief legal and regulatory officer; Leonardo George de Magalhaes, CFO and IR officer; Marney Tadeu Antunes, chief distribution officer; Mauricio Dall'Agnese, chief participation, strategy, environmental, and innovation officer; and Thadeu Carneiro da Silva, chief generation and transmission officer. Now I turn the floor to the CEO, Reynaldo Passanezi Filho, for the initial remarks.
10 stocks we like better than Companhia Energetica de Minas Gerais
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Companhia Energetica de Minas Gerais wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of March 3, 2022
Reynaldo Passanezi Filho -- Chief Executive Officer
Good afternoon and good afternoon, everyone. It is a pleasure to be here, to bring to you the results of the fourth quarter and the year of 2021. These are historical results. As we mentioned here in the presentation, this is a year of major achievements.
We are very happy to see the ability of turn around and transformation that Cemig has because the results are historical. They are all-time high. They prove the resilience and the ability of being sustainable and to overcome difficulties, and whenever we make the right decisions. So this is a summary of our achievements this year.
This is thanks to the review of our strategy and a daily effort, aiming at best management for this company and also bringing in sustainability. This is the first time that we have in the distribution area, the fulfillment of all indicators, the main performance indicators in the company. So we match our regulatory opex. We match our regulatory losses.
Therefore, we are also meeting our regulatory EBITDA. This is the first time that we are able to meet all these three regulatory targets. So at opex, we are almost at 15% lower than the regulatory standards. And not long ago, we were 20% over the regulatory parameters.
This adjustment in the regulatory is -- over BRL 800 million a year, this is the adjustment that we are making to place the company within the regulatory opex. And obviously, this is a daily effort. And also the regulatory losses, we were way above the regulatory losses level and we are very proud to say to you today that we are meeting the index for regulatory losses for the first time in this company's history. And of course that if we match the regulatory opex and losses, we are having a better regulatory EBITDA as well.
We are 18% above the regulatory EBITDA. And we are able to do that by improving the quality of our service. Here, we bring to you our DEC, which is the best one in 69 years of history. So this is the best DEC in 69 years of company, 9.46 hours, also the best FEC, the outage indexes.
And it is the best moment when we have our subsets. That's when we were able to meet the DECs by subsets as well. That shows our huge effort to aim efficiency in the company, to make operating adjustments, and having -- and this company that is healthy operational-wise. And it is this financial health and this cash generation that you see here, BRL 8 billion in EBITDA.
This is the highest nominal EBITDA for Cemig. And despite of the fact that in 2015 we had lost almost three gigawatts of capacity, 53% in our plants of our installed capacity in 2015. So in spite of a company that has a generation area of that which is almost half of what it was, we are able to have the highest EBIDTA in the company, an increase and a -- of 40% year on year. This is what allows us to think about investments.
These results allow us to invest and invest in our core businesses in distribution, in generation, transmission. You will see on the next page that we are going back to the transmission auctions. We have an strategic planning to grow 1.5 gigawatts in generation and we are carrying out the largest investment program in distribution's history. So in general, we are announcing our investment program of BRL 22.5 billion in the next five years.
This is almost four times what we had in terms of investment programs in 2018. So this is a very bold number. And this is -- this new situation of this company, this is the new scenario. Instead of investing in stakeholders out of Minas Gerais that, unfortunately, did not bring us the expected results, we are now generating more cash and this cash is fully reinvested in Minas Gerais and the state.
This is the bolder -- the boldest program and the largest program in the company, BRL 22.5 billion. A lot of investments in distribution, more energy. Minas 3 phase, Minas LED, I think we already talked about that in our Cemig Day. So we are going to grow in generation in renewable 1.5 giga and also transmission to be able to go back to auctions, and we are able to do that.
I think that we can go to the next page. We are able to do that. And also maintaining our financial health. This is one of the best ratios in the company, and I was going to talk about that but we have a leverage that is close to one time in EBITDA.
That's a very controlled. That best rating of our history, and we have other topics that are also important. We also worked on structural issues that are very important for the company, such as the adjustment of retirement benefits and adjustment of 415 billion, with the adjustment of the retirements regarding life insurance, also the exposure of the company to the FX rate we bought bought back $500 million of Cemig GT. And this will also been mentioned and we have two additional years in extension of concession for Emborcacao and Nova Ponte plants.
So I would like to go back to this topic that our aim is to focus in Minas Gerais and grow. And therefore, we want to divest to other stakes that are not in Minas Gerais. So here we concluded the sale of Light's stake. This is only for this of 1.3 billion regarding the 22.6% stake that was sold in January.
So now we are -- we have concluded our sale of Light. So effectively, if we had maintained the same stake, we would have to add capital to Light. But now this is a very positive effect. We can use these funds to invest in Minas Gerais.
Also, we have announced the sale of our stake in Renova. Thus, we'll be signing on this very soon and we move forward with the divestment plan. This is a public plan, and our objective is to move on with its execution with Aliansa Taesa and a sale of up to 49% of Gasmig, Santo Antonio, Belo Monte, and the smaller stakes that Cemig has, such as Ativas and Axxiom. This is a strategic plan.
It's strategic for the controlling shareholder and is strategic for the management so that we can concentrate ourselves in thinking about Cemig and growing Cemig and its core activities. We also started transferring the commercialization contracts that were under Cemig GT to the holding company. This will allow us to have a clearer view between the on-generation business and generation. This is positive we will generate value.
And another important topic here, which has to do with bringing in a private mindset, a modern management, and we have that possibility. Up to 40% of the leading professionals at Cemig come not necessarily from Cemig. This is a policy that was approved by the board of directors. But what is important here really is to highlight whether these leaders come from Cemig, we do have a private mindset that is geared toward results, and I think that's what we are delivering, single results and unique results in the history of this company.
Well, this is what I wanted to bring. And I will turn the floor to Leonardo. And I would like to thank you all very much. This was and has been a wonderful year.
Thank you very much for your support and thank you, who work at Cemig and you turn the company -- great company to be in.
Leonardo George de Magalhaes -- Chief Financial Officer
Hello, everyone. Thank you very much for your participation in our conference call. Now we are going to point out some highlights. Some of them Reynaldo already mentioned in the opening of this conference.
On Page 6, we talk a little bit about our investment program. We invested 2.1 billion in 2021. We wanted to invest more, but in the quarter. And I believe that we have talked to you in the prior call and mentioned how difficult was, especially the first half of 2021, in the supply chain.
We had effects, variation effects. And so investments in the first half of the year were lower than what we were expecting in our planning. we see that the fourth quarter has already been a great quarter. We were able to invest 714 million.
Therefore, we ended the year with 2.12 billion net in spite of being a number that was lower than what we expected for the year. If we compare that to the all-time average of the company, it was almost two times more than what we have for 2019. And for 2022, we want to invest around 4 billion in 2022. It's an important year, especially for our distributing company, because it is the year prior the tariff review, which will happen in '23.
So this is a program of 3.2 billion in investments that if they happen in the year, we will be able to have this already remunerated in the tariff in 2023. So we are focused then working in order to invest successfully develop this investment plan in 2022. And a next slide, once again, I want to stress our commitment regarding the sale of non-strategic assets. So we have already completed sales of Light.
We are very close to Renova's closing and end this process of sale of Renova. And in line to the strategic planning of the company, down here we have some of the main companies in which we intend to sell. They are smaller companies but we are interested in selling them, Taesa Aliansa, Santo Antonio [Inaudible] Taesa. Since 2021, we already announced that we were interested in selling it.
It didn't happen last year, but I stress that we intend to sell the stake -- our stakes in these assets, especially because we believe this is going to bring us a very positive return and it's going to generate value for our shareholders. Now, moving forward. This was something new and very important. That's an index that we have.
That's an achievement that we have to celebrate in this fourth quarter of 2021. We were able to reach and be below the loss a standard, the loss parameter. We had total losses of 11.23. And the regulatory coverage of our losses is here 1,128 and we have been talking about that every quarter.
And we are stressing our commitment that thanks to all the actions that we developed throughout the year, we wanted to meet this index or this standard, and we were able to do that by the end of 2021. And on the right side, we can see several actions that have been taken to prove that this is a sustainable effort and this is a sustainable result. And it happened thanks to our efforts. And especially when you compare that to 2020 to 2021, because we were able to reduce over 1% in terms of regulatory losses.
This is over 200 million EBITDA a year. So it's really a reason to celebrate these results by the end of 2021. Now, on the next slide, we have DEC and FEC, our audit indexes. We already had the best DEC in 2020 and we continue to have that objective.
And the results were great, but also we were able to improve service to clients. In addition to our good financial results, our DEC and FEC are lower than the regulatory limits and these are the best results that we have reached in the 69 years of existence. Moving forward, fighting delinquency. Collection, not only the losses came down, the quality of service was maintained as a very good at the best levels of all time.
And also collections did bring great results 98.66% in terms of receivables collection index in 2021. And possibly one of the best indicators among all the energy distributors in Brazil. Also, thanks to many actions, we increased the number of disconnections, 1.4 million disconnections, probably much higher than what we had in prior years. And we expect to have 1.7 million connections in 2022 in order to maintain these levels of collections in 2020 -- that we had in 2021.
And we expanded the means of payment so that our clients could have the opportunity to be on time with the company. And we were -- well succeeded. Not only collection improved, but also we were able to maintain our ADA at very low levels. We had here reviews of some of the criteria, but regardless of these reviews, you can see that the figure is much lower, lower than the 1% of revenue that is usually used as a reference.
So you can see that the indexes for 2020 and 2021, both were very low and we expect to have something similar for 2022. Moving forward, we have great financial results. This is a company that historically is recognized by its indicators, by the sustainability. Sustainability is in our DNA.
We are part of all the main sustainability indexes, both domestic as well as the international ones. And we highlight some of our actions during the COVID pandemic, where we analyzed over 400 towns in the state of Minas Gerais, and we offered coal chambers, refrigerators, freezers, and there was a volunteer effort of our employees so that those small towns could keep the vaccines well refrigerated, and that was very important. We are very proud of the support that we are able to provide to the state of Minas Gerais, which is our concession area, to these over 400 towns. And the next slide, this is our proposal for allocation of our profit or our net income.
We are proposing 52% of payout of the net income to pay dividends. This is a dividend yield of 8.8%. We understand this is very attractive, so we believe that the company has an attractive dividend and it also allows for a retention of part of this part of this net income to provide sustainability in order to bring in the investment programs and generate more revenue. We believe it is balanced out and it's a very attractive dividend for our shareholders.
So now we are going to analyze the results and Carolina will talk about the results of the fourth quarter and also for 2021 and then we'll come back at the end.
Carolina Senna -- Investor Relations
So moving forward about the main results in 2021 and separating those by companies, the highlights that we have for the Cemig holding, and we mentioned those in the third quarter, is the transfer and the commercialization contacts from Cemig GT to the holding company. And the objective here is to provide greater visibility in the commercialization business. In 2021, we transferred 233 million in EBITDA and 115 million -- 154 million in net income. We also highlight the significant participation of Gasmig in the consolidated results.
In 2021, its EBITDA was up 681 million and also the adjustment of the retirement benefits for life insurance only in the amount of 415 million in the results. For Cemig distribution, we already mentioned it, but we would like to stress it. We were able to deliver the EBITDA above the regulatory EBITDA and the opex below the regulatory opex. And also our losses were within the regulatory parameters.
For Cemig GT, we would like to highlight the buyback of $500 million of eurobonds. Also the GSF renegotiation with an impact of 1.3 billion in the results and we have a negative adjustment regarding Santo Antonio in the fourth quarter of 2021. Moving on, here we have the results. For the fourth quarter of 2021 for Cemig holding, we can see that EBITDA both IFRS as well as the recurring one was the recurring one for 30.3%.
And the net income, if we remove the non-recurring effects, we had an increase of 68.3% in our income. The main highlight for 2021 of non-recurring, the largest ones are down here in the chart -- in this chart, the negative adjustment for Santo Antonio and the write-off for this life insurance for retirement -- retired employees. Now, our results for the year. We can see that there was a significant growth in the IFRS of 40.5% in the EBITDA that our CEO already mentioned BRL 8 billion and the recurring result for the EBITDA, 21.7%, reaching 5.9 billion.
And the net income, there was an increase of 31% in the IFRS result and that of the recurring effects, 48 point -- 49.8% in 2021. We already mentioned to Santo Antonio, the adjustments for the life insurance of retirees and also the renegotiation of the hydrological risk of GSF. Now for Cemig GT results for the fourth quarter, we can see and we are now highlighting something that we already mentioned that part of the results of Cemig's GT are being transferred to the holding company. So in the fourth quarter, there was an effect that was transferred, a 108 million of EBITDA and 71 million in the net income.
So analyzing the EBITDA, we can see that the IFRS came down. But if we analyze the recurring EBITDA of the company, we see that there was a significant growth of 27.8% even with this partial transfer of the commercialization activity to Cemig H, and that income under IFRS had posted a negative result of 51 million. But net of the non-recurring effects, there was a growth of 56%. And in the last quarter we have the negative adjustment of Santo Antonio.
Now looking at 2021 for Cemig GT. Once again, we have the same commercialization strategy being transferred to Cemig's H. The effect on the year to date is higher. There was an effect of 233 million and -- for EBITDA and an effect of 154 million.
And the net income EBITDA IFRS was up almost 37%. Net of the non-recurring effects, the growth was up 2.2%. And remember, the main effect and a non-recurring here is the renegotiation of hydrological risk, which had an effect of BRL 1.3 billion. Net income was down 17.5% in IFRS, but net of non-recurring effects there was a positive result of 30.7%, even after transferring part of the commercialization activities to the holding.
Even then, Cemig GT had significant results. Now moving forward for Cemig D, we now see the market and remember that in the fourth quarter in the state of Minas Gerais, we did have a lot of hang fall. Therefore, cooler weather so we had a reduction of the residential and rural volumes. But when we compare quarter on quarter 2021 to 2021 considering transport and captive market, we see that there was an increase of 0.6% even with the result of added energy -- distributed generation which has grown in Minas Gerais.
When you compare quarter on quarter, there was a growth of 74 -- 79.4% and that represents 4.8% of total market within Cemig distribution concession that related to injected energy. Now the fourth quarter for Cemig D, there was an increase in the EBITDA 113.6% of IFRS. Now net of the recurring effect of the life insurance, we see that the growth was robust, 46.8%. Net income was up 112.5%.
And removing that effect of the life insurance, it was up 35.2%. Over 2021, we had a growth of Cemig D of 33% in EBITDA and net of the non-recurring effects of 25.4%. For net income, growth was 41.5% and recurring was 32.6%. The same effect already mentioned.
Thus, the main impact here was the life insurance issue. Now moving to opex, we already mentioned that our performance is below the regulatory opex and we are delivering more than the regulatory EBITDA. So we see that over 2021, opex was below 448 billion, representing almost 15%, and I should highlight here, an important reduction in the PMSO. Now looking at the EBITDA, I am performing higher than the regulatory, 473 million, and that represents 18%.
That is Cemig D is doing its homework and it is delivering not only quality energy to its consumers, but also significant and important results to Cemig's group. Now turning to consolidated operating costs and expenses for the fourth quarter, we can see that there was an increase of cost, but that was because of the energy purchased and that were purchased for distribution, energy, bought and transferred to consumers. Now in PMSO, so we had a reduction in the fourth quarter of 32.6%. And here, the main contribution to this reduction was the life insurance benefit that we mentioned.
We also had a reduction of 2.2% with personnel, with head count. It's important to mention that. And also there was an effect of 40 million that is regarding to Itaocara. Now, the effects over the year of consolidating and operating costs and expenses.
We also had a growth and expenses here because of purchase of energy in the fourth quarter. And looking at PMSO, there was a reduction of 4.8%. And part of this reduction is also related to the life insurance benefits already mentioned. And we also had a third-party expenses.
And we say this is good because it brings in an added revenue. This was because we have had an increased number of disconnections. They were higher than 2020, 685,000 in 2020 and over 1.3 million disconnections in 2021. And that extra expense also bring in extra revenue, so it has built in and added value.
Also important is the participation of Gasmic and Cemig's group. Here, we show the expansion and growth of Gasmeg. We can see that it has had an increase of gas so of 19.5% for industrial class of 205 for thermal because of the water draw, too, that we had in the second half of the year. We can see in the EBITDA that it increased to 57.6% from 432 in 2020 to 681 million in 2021.
Now looking only the fourth quarter, we can see that EBITDA was up 25.1%, reaching 174 million in the fourth quarter of 2021. Now, moving on, we are going to talk about the debt profile. And I will turn the floor to Leonardo, our CFO.
Reynaldo Passanezi Filho -- Chief Executive Officer
Now talking about the company's leverage is very close to one time to its cash generation. It's measured by total net debt over EBITDA. It's a very comfortable situation for the company. Looking at the debt profile, we see that in 2024 we have a larger amount of 6 billion.
These are the bonds and we are constantly talking about that. We are following up the market and also following up the premium of our securities in the secondary market and the extension for FX protection and all the opportunities and, well, products available in the market so that we can keep on working on our liability management. What we can tell you is that we are following up this topic up and closely. Now the dollar rate is at BRL 4.70, so it makes it easier because the cost is lower and a possible additional buyback, the cost is a little bit lower.
So we are paying attention to the best opportunities so that we can work on our liability management. Now in terms of cost of debt, those increase the by the end of 2021, but that is because of macroeconomic issues. All Brazilian companies had that because interest rates increased and also inflation increased and that -- all of that has affected the cost of debt for the company and for all Brazilian companies. So we believe that 2022 will have these high rates.
We understand this is temporary if we consider that long-term trajectory that we have of interest rates going down in Brazil. But right now we have higher rates that are more challenging and higher than what we have seen in the past few years. Moving on, we have our cash generation. It's very nice that -- and it shows our cash generation capacity, which is wonderful, over 6 billion, even with a CVA of 2 billion that we will have in the next tariff adjustment in the distributing company.
By the end of May, we are able to amortize 4 billion in payments and loans. And most of them are regarding to the buyback of the 500 million of the bonds. And even with this buyback with the CVA and with this amortization payment, we end the year with cash of almost 3 billion. And I think that's a very comfortable position for the company in order to face its financial obligations.
Now and in the year, we always like to show this slide. I think it's good to bring a type of a balance of all commitments that we have made with our investors and all the stakeholders. Since 2020, we are stating that we are committed to this transformation process and taking actions that will generate value to our shareholders. And these are a several of our actions that have already been achieved.
And they are thanks to our efforts and they have good results. You can see that we are bringing consistent results to the market. In our earnings call, you can check. Here, we have several of these actions already achieved.
We have here this negotiation of the retirement benefit plans. We already -- we were we were able to make the reversal of almost 400 million, and we were saying that this was something important. It was a structural that demanded a lot of effort. And we were able to show the initial results and this fourth quarter at this rate of the life insurance.
But we are committed to reduce these costs and also in terms of the pension plans and also healthcare plan. We are still working on that. We are motivated, engaged in the restructuring process for these plans so that we can reduce that terrible risk for the company and bring benefits in terms of cost reductions as we were able to do in this fourth quarter regarding the life insurance. And also other ongoing actions, once again, divestment in Taesa.
We already -- have already been able to divest from Light and Renova. It's concluded. And other actions that are ongoing, we are paying attention to growth and retail energy commercialization. This is an opportunity for the company as we had the free market a few years ago.
We understand that this is an opportunity to create value. We have expertise in this topic and also investment in generation from renewable sources and concession renewals. So in a very brief, a manner we just brought to you the main highlights for 2021 and the fourth quarter. And we are available to take any additional questions that you might have.
Thank you. [Operator instructions]
Unknown speaker
Good afternoon, everyone. I have two questions. The first one is about Gasmig. If you can comment on how the process was for the tariff review and the public hearing, and when do you expect to conclude the process? And the second question, if you can talk more about the next steps for arbitration in San Antonio.
Which is the next step of the company to try to avoid the consequences of the first conclusion of this arbitration? These are my first two questions. Thank you.
Mauricio Dall'Agnese -- Chief Participation, Strategy, Environmental, and Innovation Officer
Andre, good afternoon. This is Mauricio Dall'Agnese. I am responsible for a Cemig PAR. About tariff review for Gasmig, this is an ongoing process still, but it's already at its final stages.
The public hearings have already been carried out, but we are still waiting to -- for the final disclosures of the decisions. There was -- we already saw a small reduction of around 10% in the rate, but the final result is still yet to be published. The other question was about arbitration in Santo Antonio. Yes, we do have this arbitration.
It started in 2014. And it questions events related to the construction works and contracts signed to construct to build this plant, I think these are contracts for 2009, and this is a topic that has been discussed for a long time now. In February, there was a decision by the arbitration that determines some payments, but this has not been concluded yet. So we have requested more explanations and Santo Antonio is already preparing its arguments to better position the company.
This process is confidential in the courts and we do not have a schedule of when this is going to be concluded.
Unknown speaker
An additional comment, Andre. Thank you very much for your participation in this meeting. About the tariff review, when the process is concluded, will come forward and we'll disclose the process and its conclusion because I think it's important to bring visibility to Gasmig. This is a concession that we have up to 53.
It's an important asset for the company and it became relevant to the company within our results. So we will have -- we'll disclose the results as soon as they are out. About arbitration, Mauricio already talked about that. Just to make it clear that in the worst case scenario about the arbitration, and this is a still in this process of verification, but all of that, we are not expecting any other relevant fact related to Santo Antonio in our financial statements, considering that the main impacts are already recorded in the fourth quarter of 2021.
This is our expectation. And of course, Santo Antonio's management is working on this topic and with a relevance with a lot of care and because it's how it needs to be tackled.
Just a quick follow up about Santo Antonio. Just in case the arbitration does not come with a positive resolution, are you going to court or are you just going to work with the arbitration?
It is possible. I think there are several avenues for the company, but this is still being analyzed. It is too soon to tell you which is going to be our final decision. Well, we are a stakeholders in the company.
We do not have veto power there. Thank you very much.
Questions & Answers:
Operator
Now, Antonio from Athena Capital. [Operator instructions] Next question from Enrique from JPM.
Unknown speaker
We have no sound. I apologize. I have two questions. The first one is about the movement of -- from Cemig GT to Cemig holding.
That has to do with the potential of using the tax losses of the holding. If that's the case, what is the size of that and what is your timing to recover it? And second is about Taesa sale. We know that this isn't -- the shares are at a good moment because they are high. That would be a good moment to sell your stake in the company.
So it would be better if you were able -- if you had been able to conclude the process last year. Fortunately, it didn't happen. Is it still possible to Taesa this year? And how are you going to tackle the tax issue if that happens?
Enrique, thank you. Asking about a Cemig's commercialization company, well, there are two things here. First, we want to provide more visibility to our commercialization business. We always say that we are also a large generation company.
And commercialization being with generation, sometimes it's difficult to have the right pricing to our commercialization business. And we understand that if commercialization is under Cemig holding, at least most of it, we can have better visibility of that to show how this is relevant for the company. And thanks to our expertise and relevance when compared to the free market, how we can generate value in this business. And we are talking about hundreds of millions every year just for our commercialization business, not talking about a generation's gains.
So this is one of the main drivers that will help the market price Cemig in a more fair way. And second, considering all the possibilities that we have regarding to tax credits and the holding company and also we -- interest on equity, which is a possibility, an alternative, and the company can keep using under Cemig holding. So we understand that tax wise, it makes sense to have commercialization under holding -- the holding company because it's going to add more value to our shareholders because we are able to have a better use of this tax credits and reduce the cash impact because of the interest on equity amortizing the impacts related to possible tax payments. So I can tell you exactly how much of tax credits we are able to offset because obviously in the year, you could offset all tax credits with the interest on equity, but it is a relevant effect in terms of tax reduction considering that in the holding company with the interest on equity, we are able to have this relevant tax benefit for the company.
So both things, greater visibility for the business and also tax optimization for the commercialization business. The other question regarding Taesa, I will turn the floor to Reynaldo.
Reynaldo Passanezi Filho -- Chief Executive Officer
I think we already mentioned. Good afternoon, Enrique. Our objective is to move on with our divestment program. Really, I am more and more convinced that we want -- I want to move on with this divestment program.
And I want questions to be about Cemig. And the questions are about Taesa, about Cemig. And this really proves that we have to concentrate our efforts in Cemig. Our objective is to move on with the divestments program and we have, yes, positive expectation to conclude Taesa just like other assets still now in 2022.
Unknown speaker
Thank you very much, Reynaldo.
Operator
Next question from Daniel from Wood Chair Investments.
Unknown speaker
Congratulations on the results. Can you give us an update on the pension fund of the company?
Hello, Daniel. Thank you for your question. We have been talking about the retirement benefits and that rounding up, we have around the 3 billion regarding pension funds and three regarding our healthcare plan. And the company is now discussing with our retirees and employees associations the possibilities for these plans.
About the pension fund, specifically, the company aims to restructure this plan. Currently it has no new participants, but because of the participants of the -- current participants of this plan and we do have a relevant financial obligations for the company. Therefore, we do have actuarial risk and we want to create a financial contribution plan and to allow these participants to a new plan. This is an approach, a methodology that has been used by other companies in Brazil.
So we are not doing anything that is new, but it is feasible and we see that the other companies were successful in the process and that's what we expected to have as well. And we understand that with this possibility we will have a two positive effects. In addition to removing the actuarial risk from Cemig, it can also generate positive effects and the obligations already posted to the balance sheet of the company. Considering these are relevant amounts, over 3 billion and a reduction of 10%, 20%, 30% will be significant values in terms of cost reductions, and that can also apply to healthcare plan.
So we have over 3 billion in our balance sheet in this restructuring process and the healthcare plan involving the creation of a plan and conditions that will be different, such as more affordable healthcare plans with the last participation of Cemig in the total share of these obligations. We -- also we'll have benefits then. So as I said in 2021, we have taken an important step regarding life insurance and we are very optimistic about the pension funds and also healthcare plans. Of course, that regarding the pension funds, we have a regulatory schedule but I think that by 2020, 2023, we will have good news on this topic.
Operator
Next question from Jean Victor Pagondes, Bradesco BBI.
Francisco Navarrete -- Bradesco BBI -- Analyst
Good afternoon. This is Francisco from Bradesco BBI. Can you hear me well?
Unknown speaker
Hello, Francisco. Yes, we can hear you.
Francisco Navarrete -- Bradesco BBI -- Analyst
Great. Thank you very much for the opportunity of taking my question. My question is about Cemig, and this is a topic that is being discussed, which is the exposure to renewables and incentive-based energy and which is the exposure that Cemig has. I understand that there is a portfolio of BPAs that you have put together of over the years, and so you have an interesting position on incentive-based energy.
There is a spread of around BRL 35 now, but there are a number of theories saying that this could substantially increase and might even double because of a four clients flow from the regulated to the non-regulated market, creating a demand for these incentive-based assets, and there is a limit, which is March 2026. I would like to hear from you. I believe it is very relevant for all players and generating companies in Brazil, and I don't know if it is very clear for those that follow up Cemig in terms of the size of this exposure. And now so their risk in your portfolio that you have, if all the players that are developing these projects will be able to deliver that on time and with no delays.
And so and what would be the problem if that were to happen?
Dimas Costa -- Chief Commercial Officer
Very well, Francisco. Good afternoon. Thank you for your question. This Dimas, commercialization officer.
Yes, we purchased, and Leonardo mentioned and also Reynaldo talked about that in 2015, we lost over a half of our generation capacity. And in order to maintain the leading market and the free market, at the time, we couldn't make no investments, so we chose to buy energy and we purchased around 1.5 giga. And this energy is already being delivered this year. Some of it was delivered early -- earlier in 2020.
Of those, I can tell you that we had delays and problems of only 20 mega. So we have the performance of all these generators that are ongoing. Some of them already have been concluded and others are ongoing about this count that this is an incentive-based energy and Cemig, now the main consumers are working mainly with self production. So in the past few years, we started directing this energy to a more attractive market, which is the A4 group, which is this incentive-based energy.
It not only maintains our market, but also we are prepared for the transition, which is going to happen to the retailer commercialization. In terms of the schedule, of course, all this bought -- this purchased energy has a discount. And now and the legislation changed a little bit, right? Because the -- in the beginning, if you were to submit the concession request by February, we would have a discount. But it looks like there was a change in the law and now it is.
If you submit it in the next four years, you will be able to seize the discount. So now from March up to March of 2026, that's a period of time when we could go in. Now we are no longer purchasing energy and now we are investing in a -- because of possibilities of investment, we are investing and we are acquiring pipeline. So we have some ongoing undertakings.
But to meet that 1.5 giga, we are buying pipelines. And within these pipelines of course that we are looking for those that already have the concession grant and can have any possibility of providing discounts. I don't know if it is clear.
Francisco Navarrete -- Bradesco BBI -- Analyst
Yeah, just to make it clear, maybe I have not understand -- understood. But do you have PPAs of 1.5 giga or you --s o the equivalent to 1.5 giga and you have to find energy took over for that?
Dimas Costa -- Chief Commercial Officer
No, we acquired -- we purchased there's 1.5 giga and it's 1.40 something. And out of this 1.40 something and if you consider the -- four years from now, five years from now, we have already 80% of our energies. So of course that you do not sell the full -- all the energy for 20 years. We have the -- in terms of the PPA, we have around 20%.
So this is what we are working on it every year we add more sale to our portfolio. So we have the energy in our portfolio but we do not have it all sold. It will be coming in in the next two, three years but we'll be selling it and delivering it within a specific schedule. So when we are able to sell it for 10 or 15 years, it's wonderful.
Unknown speaker
OK, Dimas. I think we have -- it's a coincidence because we -- it's the same figure. We have 1.5 giga that we bought in PPA last year and we have 1.5 giga, which is our strategic plan for growth and that's what was Dimas is telling and we have a pipeline to build another 1.5 giga so this will give -- that's the stake in the market, so it's just a coincidence and a coincidence in the figures and part of those will be projects that are being developed at Cemig and part of that will be from others, developers, projects that we'll be purchasing. Thank you.
Operator
Next to Mauricio Cudio from [Inaudible].
Unknown speaker
I would like to know more about divestments, if there is any perspective of moving forward over 2022, especially regarding the companies that you've already mentioned?
Mauricio?
Yes, Mauricio.
Mauricio Dall'Agnese -- Chief Participation, Strategy, Environmental, and Innovation Officer
This is our objective. We do intend to conclude these divestments over 2022. As I mentioned here, we want to concentrate ourselves in Cemig.
Operator
Now, Ellen Sousa from Estado Agency.
Unknown speaker
Good afternoon. I would like to know if Cemig is interested in participating in a transmission auction that will happen in the middle of the year and if the company can give us more information on that?
Reynaldo Passanezi Filho -- Chief Executive Officer
Yeah, go ahead.
Thadeu Carneiro da Silva -- Chief Generation and Transmission Officer
Good afternoon. This is Thadeu Silva. I am the officer for generation and transmission. Thank you, Ellen, for your question.
And the answer, yes, yes, we will be participating on that auction. And in line to our strategic planning, we are going to look for lots here in Minas Gerais and looking for synergies with our operating assets, established engineering, both implementation and OEM, and the knowledge that we have about this estate. We do have that competitive advantage in the market.
Operator
Next question from Roberto Capello.
Unknown speaker
Congratulations on the results. Your retained earnings are a little bit higher than your capital. Are you going to distribute dividends on part of those profits? If yes, how?
Thank you for your question, Roberto. Well, we do have that information in our financial results. But this is a very extensive and, of course, probably we will have to submit it to the shareholders assembly, a proposal for a bonus share of 30% so that the retained earnings are below our capital stock but -- so that we can meet the law.
Operator
We now end the Q&A session. I would like to turn the floor to Leonardo George de Magalhaes for the company's final remarks.
Leonardo George de Magalhaes -- Chief Financial Officer
I would like to thank you all very much for trusting in our company, for participating in this conference call. And once again, I would like to say that we understand that 2020 was a great year. 2021 was a year of a great achievement. And we understand that several of our commitments have been fulfilled and we are very optimistic about the company's future.
2022 is a new year in which we are continually investing in operating efficiency and of all our commitments, we would never let go of the quality of service and -- within our area. So this is an optimistic message from the whole management and we hope that in the next quarters we bring back to you more consistent results. Thank you very much.
Operator
[Operator signoff]
Duration: 61 minutes
Call participants:
Carolina Senna -- Investor Relations
Reynaldo Passanezi Filho -- Chief Executive Officer
Leonardo George de Magalhaes -- Chief Financial Officer
Unknown speaker
Mauricio Dall'Agnese -- Chief Participation, Strategy, Environmental, and Innovation Officer
Francisco Navarrete -- Bradesco BBI -- Analyst
Dimas Costa -- Chief Commercial Officer
Thadeu Carneiro da Silva -- Chief Generation and Transmission Officer
This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.
The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
