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Companhia Paranaense de Energia - COPEL (ELP) Q2 2019 Earnings Call Transcript

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Companhia Paranaense de Energia (NYSE: ELP)
Q2 2019 Earnings Call
Aug. 16, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and thank you for waiting. Welcome to Companhia Paranaense de Energia e Latibex Copel Earnings Call to discuss the results of the Second Quarter of 2019. All participants are in listen-only mode during the company's presentation. Later, we will hold a Q&A session when further instructions will be given. Should any participant need assistance during this call, please request the help of an operator by pressing *0.

Before proceeding, we inform that forward-looking statements that might be made during this conference call related to Copel's business outlook projections, operating and financial projections and goals, are based on beliefs and assumptions of the company's management as well as on information currently available to the company. Forward-looking statements are no guarantee of performance. They involve risks, uncertainties, and assumptions because they relate to future events and therefore, depend on circumstances that may or may not occur. General economic conditions, industry conditions, and other operating factors may also affect the future results of Copel and could cause the results to differ materially from those expressed in such forward-looking statements.

With us today in this conference call are Mr. Daniel Pimentel Slaviero, CEO of the company, Mr. Adriano Rudek de Moura, CFO and IR Officer, and other officers of the company. The presentation will be delivered by Copel's management and may be followed on the company's website at ir.copel.com. Now, we turn the floor to Mr. Daniel Slaviero, CEO of the company.

Daniel Pimentel Slaviero -- Chief Executive Officer 

Good morning, everyone. Thank you very much for your participation in this conference call about the results of the Second Quarter of 2019. It is with great pleasure that I share with you the delivery of another quarter with sound and consistent results, where I'll start highlighting the adjusted EBITDA of over R$1 billion, representing a significant growth of approximately 30% vis-à-vis the first quarter of 2019, already growing over in the quarter R$2.1 billion in the same comparison base. In cash generation before investments, we're at over R$1.1 billion in the second quarter, amounting in the semester a record generation of R$2.5 billion.

I also want to highlight the continuous improvement in Copel distribution where basically we have reached our regulatory EBITDA considering the last 12 months. This ladies and gentlemen is a landmark in the company's history and one of the commitments of our management. These results, in addition to increasing our responsibility, also encourages us to execute our main mission, which is to create value to Copel's businesses.


We are already acknowledged by independent rating agents, and I want to mention that the national rating of Copel has been upgraded to 'AA.' That was certified by Fitch on August 2. In this review, Fitch has highlighted the strength of the company's consolidated financial profile with the expectation of free cash flow positive in the next few years, as well as an improvement in the liquidity profile of the group, benefited by the recent fundings from 2019.

And talking about funding, we already have the first half of the year which was very intense, and the capital market operations we had the execution of five operations in different companies of the group, totaling R$2.7 billion efficiencies in the period. And the most recent was R$1 billion in Copel GeT, the first of the subsidiary already as I listed company category in B, and the process of registration with CVM was started and concluded in the first month of this management, representing our commitment to strengthen continuously the governance in the company, increasing the transparency of our businesses.

Also, the funding for Copel GeT as a listed company category B also contributes to a relevant reduction in funding costs. Therefore, we will be able to say that our funding plan for 2019 has been concluded, and has met all the demands, both regarding the large concentration of terms of our debts that were over R$3.3 billion, but also considering here the investments in the period. So, considering the additional cash generation based on the improvement of efficiency, and also the entry of new projects, our net debt has started gradually to come down, as well as our financial leverage, which has reached a net debt EBITDA ratio of 2.6x at the end of this quarter, similar to what we had in the first quarter of 2019, but way below the 3.1x of the second quarter 2018.

Now, about our construction works we have already started in the prior quarter. We talked about the substantial conclusion of the works such as in Cutia, Baixio, Butiá, and Colíder, which are important projects. They are regularly in operation and help the growth of our results. I have here Mr. Bertol, and remember, these commercial operations and 100% of these projects, with them we'll have a total increase in the total capacity of the country of over 700 megawatts, which is equivalent to a growth of 13% and even more importantly, we will have an additional cash generation of around R$450 million. In addition to the generation projects, we also have two other relevant projects ongoing that when concluded, will generate an additional Annual Permitted Revenue of $R245 million, an increase of 30% on the APR existing of R$845 million.

One of the projects that are 100% of Copel is Lot E of Auction 005/15 of November 2015, which should be concluded after March 2021. Also, part of this project, referring to Substation Medianeira and LT Baixo Iguaçu -- Realeza is already in commercial operation one year and seven months before schedule in Baixo Iguaçu. This shows a new perspective and a new way of the company to work with these undertakings. And also, with all these projects, we will have an additional Annual Permitted Revenue of R$19 million.

Another important undertaking is the transmission line of Araraquara II-Taubaté as an important transmission line with over 840 kilometers of extension under the responsibility of SCE Mata de Santa Genebra, a strategic partnership between Copel GeT with 50.1% and Furnas. In this case, after ADK and evaluation of each stage of the project as well as the respective financial flow, we have to approve a new business plan, which has changed the conversion operation as part of some stages of the project, and had a negative impact on the consolidated results of Copel in the equity income line of R$64 million.

And I need to highlight here that the level of tolerance of the company with this type of delay has changed, in addition to a fixed follow-up in the works. In this case specifically, we have replaced all executive members, because the first plan was not followed. So, starting in August, this SCE is under Mr. Javier [inaudible], a former director of Enel. And he's a very competent director. And I would like to stress that Copel generation and transmission has reached in the second quarter of 2019 results of adjusted EBITDA R$640 million, 45% higher than the same period of last year, showing that this the main subsidiary area of the cash generation in the company.

Now, turning to the next slide, I should highlight with details the progress of the results of Copel Distribution. Basically, we have reached the regulatory EBITDA in the last 12 months of R$1.054 billion. We are just 1% below the regulatory EBITDA. And look, one year below, we had a gap of 40%, and that proves that we are being able to efficiently execute an aggressive plan of operating improvement and cost reduction and progressing consistently quarter on quarter. Such achievement is a consequence of the Travessia Plan which has been started at the end of 2015 when we signed the new concession contract with Enel, which focused a lot on operating efficiency and demanded a large effort especially because of our headcount reduction.

And now, we foresee for the next year a new blend that's going to call Transformação or Transformation, and the objective is to take that distribution in the next years to a level very close to the best references in the industry. I also should highlight that in the second quarter of '19, that this result was R$287 million of growth, over 24% vis-à-vis the same quarter last year. And that is thanks to a 1.4% growth in the grid market and the reduction of 1.9% of our PMSO. If we compare the semester, we have an evident growth of over 70% in Copel Distribution, a total of R$617 million, and a relevant drop of almost 9% PMSO vis-à-vis the same period of last year. In addition to that, we have fully applied the adjustment of 3.41 approved by Enel in the last month of June, and we maintained our statutory commitments and our governance.

For the next year, we are focused on our strategy to increase the Regulatory Asset Base for the next tariff review, which will happen in June of 2021. Currently, our RAB is R$4.9 billion, and for 2019 our capex is R$835 million. Of those, around R$410 million have already been invested up to the end of the first semester. In addition to these investments in expansion and improvement in the network, we are also investing in smart solutions to reduce costs and increase quality, especially in the regions west and southwest of the state where we have our main productive area. And these works will benefit over 200,000 people, and especially every business, which is very relevant.

And from there, we have several substations and we will have hundreds of kilometers of new, high-voltage lines and up to 2021 distribution, and we will install automatic reclosers, self-regulating devices, high-voltage regulators. There are all kinds of tech innovations in our industry to maintain that investment dynamic in distribution. And in fact, in the next month, it's how we are going to provide more reliable service by having a robust asset base that allows us to have efficient operation at lower cost.

In addition to that, we also have launched a project that will implement state-of-the-art technology and energy grids, taking a fundamental step to go into the smart bridge. The ADMS solution -- Advanced Distribution Management System -- consists of an integrated platform that adds software that is able to control the grids in real-time and with full precision, and this project has a three-year time to be concluded and will help us there. And this project will take the company to another level of reference in innovation technology efficiency and management in the energy distribution system.

Now turning to the next page, I would like to mention something that this administration, this management, and I myself have dedicated special attention, which is the focus of our strategy to contract energy for the next year. We are permanently reviewing this strategy so that it can minimize the risk for the company and gradually increase the levels of energy that are being contracted, always at an attractive price. It is important to remember that we will always have a percentage of energy available to work as a natural hedge for GSF.

Under that context, I also would like to stress that the synergy between Copel GeT and Copel Com, our commercialization company, has generated positive results to the group. Copel Commercialization, for instance, in addition to its strategic growth, has gone over R$700 million in this semester, a net operating revenue, almost 2 Gigabytes of commercialization, and have reverted and now shows the net asset positive [inaudible].

Finally, turning to slide No. 8. And now, concluding my presentation. Before I turn the floor to Moura, I would like to say that in the last weekend, we had a meeting for strategic planning for the company, and we gathered all officers, superintendents, and especially we had the participation also of the members of the board, and also the support of the specialized external consultants. And out of this meeting, we had several guidelines. But the main one is that we want to be a state company with a private mindset. And what does that mean? That we intend to maintain a consistent strategy in revenue generation, that these guidelines of continuous strengthening of corporate governance, improvements in efficiency and cost reduction, business planning and capital allocation for new projects -- we already talked about that, and I will give you an update -- the investment of non-core assets, Telecom and Compagas, and an efficient management of projects.

In addition to that, you know that it has been approved in the House of Representatives a law that allows us to enter in an agreement and extend concession contracts. So, we expect in August that this is already approved in the Senate, and that it will address our plans in forfeiting that will then gain priority. And finally, I should say that that with continued paying attention to new businesses and innovations such as the distributed generation, electric mobility, smart grids, and also services.

And these topics that I mentioned, to the purpose of additional highlight, the process of divestment of Telecom is following our plan, and we have already announced that we have hired Rothschild Bank and also the law firm Cescon Barrieu to help us in studying this sale. We estimate that the conclusion of the process will happen after March 2020. Actually, we're going to work hard so that it really happens after March 2020.

And the second topic I would like to highlight is that in this planning meeting, we talked about this, and I kind of already mentioned, that we are going to create a committee that will strengthen governance in the decision process of investment in line to the commitment of maintaining a very strict discipline in our capital allocations. And I also should say that we are following up on the discussions about the new regulatory framework about the gas industry and the changes might bring us good opportunities.

To end, I would like to remind us of something that I always say in our house. The keyword in this company is 'execution.' We want to make sure that our strategy to improve value for this company will move forward in a decisive manner.

Once again, I thank you very much for your participation, and I am available at the end of this call to take your questions. I would like to express my confidence in the efficient execution of this ambitious plan that we just shared. Now, I will turn the floor to Moura, who is going to go into the details of the results.

Adriano Rudek de Moura -- Chief Financial and Investor Relations Officer

Good morning. Thank you, Daniel. But good morning, everyone. Thank you very much for being with us on this call. It is with great pleasure that I share with you another quarter with sound and consistent results.

We know that this continuous improvement is thanks to a greater alignment of all the years in the company to our sustainable-growth strategy, and I can tell you that the execution of our executed plan so far is substantially following our targets and the market's expectations. We know that these results are encouraging, but we also know that they increase our responsibility in allocating with a lot of discipline the cash generated by our activities. And this is one of our main distribution points, by the way, as Daniel has already mentioned, and we will continue following that.

On slide No. 10, specifically about the second quarter of '19, Daniel has mentioned but I am going to highlight that the adjusted EBITDA of over R$1 billion represents a growth of 30% vis-à-vis the prior year. On the same comparison base, that is a result of the recurring items. Another highlight is operating cash generation after investments, which has grown 12% and comes with an important contribution of new projects as planned. And in the second quarter of '19, the amount of new projects, especially Colíder, and Baixo Iguaçu, and also that went from Cutia has reached approximately R$100 million, almost R$200 million in the first half of 2019. And of R$95 million, considering the EBITDA of this half of the year, R$46 million in the quarter, this was already expected. But this is a relevant contribution to the GeT results, the goal for the first quarter as well as in the half-year. And now, it becomes recurring.

And I also will highlight an improvement in our adjusted EBITDA for GeT of R$630 million, 45% in the same comparison base, eliminating the nonrecurring facts, net of all nonrecurring facts. In addition to new projects, that is, in addition to the benefit of these R$45 million we already mentioned, we also were having improvement in the hydrological rift with the reduction of purchased energy for resale because of the higher GSF in, in the period, which was 92.9%, vis-à-vis 60.6% in 2018 and a lower spot price, and this is very significant. In the second quarter in this year, the average was R$131.37 vis-à-vis R$302.68 of last year.

Our revenue -- talking a little bit about revenue -- of R$3.6 billion, 2% more almost, vis-à-vis last year, adjusted net income was around R$420 million, an also relevant growth of 47% if we consider just the net income of the prior year. Along with the fact that that has contributed to these results, I also should highlight -- again, Daniel mentioned that this resulted in R$287 million in the quarter, a growth over 24% and almost in the regulatory target. Specifically, on this, it' important to say that we had a reversal of R$28 million regarding provisions for tobacco growers' litigations. This reversal was already a result of a taskforce we created to review all our abilities with litigation.

Several areas are working here, and we already see positive results. But these positive results ended up being taken up partially by the extraordinary increase for provisions for delinquency law, just because of the bankruptcy protection process of some large clients. We understand this is a one-time off situation, and we do not expect this to happen again in the next quarter. And now, we would like to highlight other factors that have also contributed to the improvement of results in this quarter. We already mentioned the growth of the grid market of 1.4%, way below the first quarter which was 5.1%. But there was a relevant growth overall.

Also, 9.6% growth in the consumption of the free market and improvement in industrial production of Paraná, vis-à-vis the same period of '18 when we had the truckers' strike. This is the period where we compared it in 2018. We were very much affected by the truckers' strike. The growth of electric energy supply is -- this is relevant -- is almost 18%, thanks to the increase of energy sold to final and end consumers. And I should highlight here the consumption of the industrial free market. Like Daniel mentioned, we have here a synergy which is growing really strong between GeT and Com. And also, we have the impact of the tariff readjustment in Copel Dis, which was around 16% in June of this year.

There was a reduction in our headcount. With parts seeing the results. There was a negative reduction of 1.7% and here we have several assets to be considered, but in fact, we did have a higher reduction in our Voluntary Redundancy Program. Almost 900 people left the company. Only last year, 560 employees left the company, and almost 400, all in December of '18. So, considering inflation of almost 3.5% in eight years, the cost of headcount has reduced around 5%, even if you consider the wage adjustment of around 4%, which we had in our collective bargaining agreement of October of '18.

In addition to the measures to reduce costs with headcount, we are emphasizing other initiatives for cost reduction, such as reviewing the main contracts, including services, outsourcing the fleet, focus on bringing down delinquency, and also labor litigation and other contingencies. So, I stress what Daniel has already said. The reduction of costs and improvement in efficiency is part of our agenda.

Now, turning to our next slide to compare the operating performance of each business, we show here the comparison of the adjusted EBITDA net of non-recurring facts as they were basically registered in the second quarter of last year. You see a chart below showing it, summarizing we have the reversal for impairment in R$18 million, and also provisions for labor litigations. Which last year, we had a collective action of almost R$45 million, so for a comparison basis, we are eliminating the [inaudible]. In the second quarter of '19, this year, we have identified as non-recurring an impairment provision in the amount of R$14 million basically related to the Colíder adjustment. Also, we have here in the equivalence line that we have inside R$64 million for Mata de Santa Genebra because of a change in the schedule and investments.

And the consolidated is just the results I have already shown. They stress the improvement of our EBITDA in the quarter, a growth of 30% not considering the equity method. In the top chart, we have the EBITDA for each subsidiary in addition to Dis. Also, GeT, I already mentioned that. They are very relevant. And here, I mention again that the revenue of new projects is significantly contributing to our results. And I should remember that we still have an improvement with the end of the [inaudible] that would be ready now. So, Copel Telecom had a drop of 25% going from R$44 million in 2Q18 to R$33 million in 2Q19, basically because of the fact of runoff regarding the deactivation of assets.

On the next page, we have our PMSO, adjusting also the extraordinary facts as we already said. There was a reduction in around R$5 million, and costs of headcount had a reduction of 1.7% vis-à-vis last quarter, or the quarter last year, because of the reduction in our headcount. And part of that also is a higher provision and the participation of profits. Also, because of the good results of the quarter. So, if we do not consider these effects of cost-sharing program, the costs with the headcount had a drop of 5.4%. If we consider inflation, the collective bargaining agreement with the weight of adjustment, we could say that we have real reduction of 8.5%. This is a significant result in one of the largest costs for Copel currently.

On the other line, in the second quarter of '18, we had a non-recurring event in the amount of R$72 million, which was the payment coming from suppliers of goods in Brisa Potiguar. Therefore, if we compare the whole base, the amount was basically stable. With these adjustments, manageable costs have a reduction of 1.8% in the quarter, and if we consider inflation, the real reduction was over 5%. Which shows, once again, the effect of the company's strategy to improve efficiency in new businesses. And I would like to end by saying that we continue having other initiatives that are going to be implemented during the second half of the year so that we can reduce more costs, and then improve even further our efficiency.

In the next slide, very briefly, I show here the cash generation for operating results, highlighting the variations on the working capital which is positive both for first and second quarter especially because of the increase in the suppliers' accounts. So, we are improving results and also the efficiency of our assets and the working capital. We have already talked about the results, but here we have R$1 billion in the quarter -- this is before investment -- R$2.5 million in the semester.

In addition to the improvement in the operating results, we are also accounting with that participation in our results showing that our terms are in line with our cash generation ability emphasis. Our goal is we are not going to spend more than what we generate in cash.

Now, turning to slide 14. Very briefly, we can see the history of our investments since 2016, highlighting the amount of that was directed to generation and transmission targets. And now, they show the results. We are talking about a reduction of expense that we already made this year when you compare to last year. So, it's a 30% reduction, almost R$400 million. And here, we highlight the R$974 million spent in the first half of '19. Not most of that, but 40%, approximately R$400 million, were directed to investments on Dis, stressing our strategy to increase our RAB as we already explained the market once again, I said also that this would be the conclusion of the works in the improvement and quality efficiency. We are totally focused on that, especially when we talk about investments in technology in this, which may reduce costs and increase the generation base of the capex.

As Daniel said in the introduction, we are going to have a new level of governance for this new project with a fixed evaluation of this and other opportunities in a way that we can maintain the better choice of capital allocation. And I believe that's also going to strengthen the governance.

Now, turning to slide 15. We have the history of our leverage, dipping 3.4x in 2016 and reaching the end of this half of the year to the reasonable level of 2.6x. So, everything that we've said so far. I don't need to repeat myself. And as we always stress, leverage is one of our main priorities. And I am confident in saying that this leverage is going to be reduced from now on when we conclude all these works, and we do not have any expectations to have new debt. At least, not for the next year, considering the main level of investment that we have already approved on our board.

I would like to highlight once again, as Daniel has mentioned, the five issuances in the capital market in 2019. Wonderful work from our team over [inaudible] and fund that we'll meet the demand of investment, and now we have a large concentration of those that happened in May and June. So, we started seeing the gradual reduction of our debt. And of course, that we are supported by the good performance of the company. And we can also say that with the funding, we'll extend our liabilities, issuing the ventures at the lower interest rates for the past few years in addition to extending the duration of the debt.

Well, these were my comments. Thank you very much for participating in this call with us, and we are now available to answer your questions.

Questions and Answers:

Operator

We now will start the Q&A session. If you have a question, please press *1. Our first question is from Mr. Andre Sampaio, Santander.

Andre Sampaio -- Banco Santander -- Equity Research Analyst

Good morning. I have two questions. The first, you mentioned the gas and the new regulatory framework for gas, and I would like to understand more about this opportunity. And my second question, you mentioned that you might have a very good level of contracted energy, and I am thinking about what is this optimum level of contracted energy so that we can understand that vis-à-vis the GSF.

Daniel Pimentel Slaviero -- Chief Executive Officer 

About gas? Just like all the factors, we are following up the measures that are being announced by our federal administration, but we are still in our preliminary studies. We are checking with Rio but in addition to normalizing this operation, which is our priority, a new gas supplier so that we no longer have that monopolization in Petrograd. But also, there are several groups here discussing that, thinking that over. The hope is getting close, and we are interested in Paraná and south regions for possible opportunities about LNG and other projects related to TBPs. But this is very preliminary, very initial. Because first, we want to see the consolidation of these new measures in the gas factor before we make any consistent moves.

About the energy contract and the level of energy contractors for the natural hedge of the GSF, our expectation is always to have it around 18%-20% of energy available. Except for that, we are regularly reviewing the level of energy contracted for the future. But we always intend to have more of a conservative profile with zero risks, always guaranteeing the right average mix. So, as you see in our presentation, Copel GeT and all our wind undertakings are consolidated, and therefore, we have a global view of our portfolio. That is a permanent concern of ours. So, it's important to say that the company has had a very successful strategy in the past eight years, and any change is going to be gradual. And we'll have to discuss that with our technicians. But yes, higher energy contracted levels will provide stability for the company and for the market.

Andre Sampaio -- Banco Santander -- Equity Research Analyst

Thank you very much. And now, a quick follow-up in the gas market. The priority would be really to focus on electric energy and not focusing on the gas market, right? It would not be as specific as transportation, or maybe give up the sale of Compagas, right?

Daniel Pimentel Slaviero -- Chief Executive Officer 

No. Transportation? No, that's for sure. No. About Compagas, we are maintaining our strategy of investment. There is no new real fact, although Compagas has had improvements. And also, because of the fact, Compagas has opened a public offering that is going to reduce cost. And Petrograd sales have already come forward with lower costs, but so far, we do not have any real facts to review the gas distribution process. We want to focus on energy generation, regardless the source. Except coal, for instance. This is something that we are reassessing.

Andre Sampaio -- Banco Santander -- Equity Research Analyst

Perfect. Thank you so much.

Operator

Mr. Gabriel Francisco from SP Investments has a question.

Gabriel Francisco -- XP Investments -- Equity Research Analyst

Good morning. Good morning, Daniel, Adriano, and everyone else. Congratulations on your results. Continually on direct questions but going into the details, but recently, Petrograd has expressed their intention to sell its TPPs or maybe a share of that on your side. Is there any interest to address [inaudible], maybe to become the controlling shareholder? Is there anything along those lines, considering that now gas has a lot of [inaudible] in the sale? Now, second question. You are moving toward a drop in your leverage, which should happen very quickly. If there are no other opportunities of growth with return and if the company goes into a zero-leverage scenario, then if you have room in your balance would you consider increasing the payment of dividends?

Daniel Pimentel Slaviero -- Chief Executive Officer 

Gabriel, thank you for your two questions. The first one I will address. The second Moura will answer. About Petrograd, as you said yourself, the media published today that it would be willing to sell 15 out of the 26 TPPs. Yes, next week, we are going to have a meeting. I, Bertol, and Moura will go to Petrograd to have a meeting there with the director of this area. Exactly to understand the timing of that strategy. And if they have the divestment plan, and if they have that included, the divestment of the 20% they have in WEGA, obviously, we should be able to go for it under the reasonable market conditions.

But gas today is the sexiest subject on the market. We are following that up, and this divestment plan of Petrograd is something that we are going to take a look at. But our priority is to have WEGA at its full operation; the way it was for 14 or 15 months is a huge loss for the company.

Adriano Rudek de Moura -- Chief Financial and Investor Relations Officer

Gabriel, you are right about the leverage. So, yeah. The expectation is to reduce it even more, but let's not forget that we have a huge challenge, which is Foz de Areia concession that is due in 2023, and we have our relevant debt there so that we can take part in this auction. Or, as Daniel has mentioned, if that sale is approved, we might have a lower need for funds. But even then, we would have to increase our leverage to make that investment. So, this is a relevant investment, and we have that mid-term view. But our mission, yes, is to look for new projects that are sustainable with the strict financial discipline level with the investment committee where we discuss opportunities in a very timely fashion.

But dividends are a consequence, and we have to discuss that further on. That's not on the agenda right now, because we are focused on addressing the problems that we have in '19 and '20 in the short term. But this is about the possibility; if we do not find the projects, the revision of this dividend policy will be then a consequence.

Gabriel Francisco -- XP Investments -- Equity Research Analyst

Perfect. Thank you so much.

Operator

Ms. Lilyanna Yang from HSBC has a question.

Lilyanna Yang -- HSBC -- Research Analyst

Thank you for this opportunity. The results were above expected, and this is good. But I am concerned about what you said on Mata de Santa Genebra. You had an impairment of over R$100 million? What is the return that you expect for this, and do you have a possibility of reversing this impairment? And also, related to that, how can we avoid or how can Copel use better use of cash from now on? You mentioned that probably you are not increasing the payout level, because you are going to look at other opportunities and you have to maintain your cash for funding it, right? So, I would like you to comment more on that. Could you look Mata de Santa Genebra? How do you look at potential investments? What is oppressive and what is not? And if you have changed anything in terms of the decision-making process to avoid investments that are non-performing.

Daniel Pimentel Slaviero -- Chief Executive Officer 

Thank you very much, and you all have very good questions, especially considering the recent history of the company. So, addressing the first question about Mata de Santa Genebra, the only thing that was not exceptional in this quarter, the only thing that was not good in the results of this quarter effectively was non-delivery for August 31st, which was forecasted in our business plan. And this review now is planned up to February of 2020, since the construction works have been concluded in 91%, we feel comfortable. Because this is a new policy, and Mr. Bertol is following up on a weekly basis on this subject. We would also wait for a new CEO, but we want to deliver this construction already under the new plan and look for in this period some alternative that might improve the possibilities that have been lost in this progress.

So, this is smaller, but I should highlight there is a consequence policy here in this company, and I already mentioned that, in regard to the managers that do not execute. So now, we have to conclude this 8% final that we need to end, and then look for possibilities for financial settlements to improve the results that we have lost here.

About the capital allocation discipline, what we are doing is exactly that. We are learning from the past. The self-creation of this assessment committee is almost too basic, but it's being structured in a very organized fashion here in the company. And the project execution also is a challenge, because these large, recent projects would start with a capex and would end at very different conditions.

So, this is what the company has learned. We are trying to be more cautious, more conservative, and we are looking for projects that mainly will maximize our current assets. We just talked about when to buy and invest in ground field projects such as we often do with an exceptional return. So, we are working on a staged process, and I mean, we're imaging new businesses and new innovations so that the company becomes more modern. Moura?

Adriano Rudek de Moura -- Chief Financial and Investor Relations Officer

Yes, I have an additional comment. This is already happening, if we consider the history of the last three years or a little more. Copel does not get options in which we are not competitive. So, we do have our mix, we assess opportunities. But we have entered in projects that we know will bring good execution, and that the results will be good. This is what we have in our recent history.

Lilyanna Yang -- HSBC -- Research Analyst

Perfect. Thank you so much.

Operator

To ask a question, please press *1. If there are no other questions from participants, we turn the floor back to the company for their final remarks.

Daniel Pimentel Slaviero -- Chief Executive Officer 

Once again, I would like to thank you very much for being with us in this call. Thanks to all our officers that are here, and we continue with a focus to work here.

Operator

Thank you very much for being our host. Ladies and gentlemen, the conference call for Copel about the results of the Second Quarter of 2019 have ended. Thank you.

Duration: 49 minutes

Call participants:

Daniel Pimentel Slaviero -- Chief Executive Officer 

Adriano Rudek de Moura -- Chief Financial and Investor Relations Officer

Andre Sampaio -- Banco Santander -- Equity Research Analyst

Gabriel Francisco -- XP Investments -- Equity Research Analyst

Lilyanna Yang -- HSBC -- Research Analyst

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