Companhia Paranaense de Energia - COPEL (NYSE:ELP) Q4 2019 Results Conference Call March 27, 2020 9:00 AM ET

Company Participants

Daniel Pimentel Slaviero - CEO
Adriano Rudek de Moura - CFO & IR Officer
Wendell Oliveira - CEO, Copel Telecom

Conference Call Participants

Carolina Carneiro - Credit Suisse
Marcelo Sa - Itau
Andre Sampaio - Santander
Marcelo Britto - Citi

Operator

Good morning and thank you for waiting. Welcome to Companhia Paranaense de Energia Copel's Earnings Call to Discuss the Results of the Fourth Quarter of 2019. [Operator Instructions]

Before proceeding we inform that forward-looking statements that might be made during this conference call related to Copel business outlooks, projections, operating and financial projections and goals are based on beliefs and assumptions of the Company's management and 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 cause results to differ materially from those expressed in such forward-looking statements.

With us today in this conference call, Mr. Daniel Pimentel Slaviero, CEO of the Company; and Mr. Adriano Rudek de Moura, CFO and IR Officer. The presentation by Copel's administration may be followed on the Company's website at ir.copel.com.

Now, I turn the floor to Mr. Daniel Slaviero, CEO of the Company.

Daniel Pimentel Slaviero

Good morning. Thank you very much for being with us in this conference call for the results of the fourth quarter of '19, especially in this difficult moment that we are all facing. I hope that you are taking all needed measures and protective measures wherever you are. Right now, we are at Copel, and most people that work here are working in home office, but our team is focused in reducing activities to this new reality.

We do have a responsibility in maintaining essential services to the society ensuring lack of energy service to the State of Parana. We'll talk more about our contingency plans further on, but before I start talking about our excellent results of 2019, I would like to say that we are not in a celebration moment because we are going through an unprecedented, a very serious crisis in the country. But I'm sure that with a lot of determination, predictability and [indiscernible], we will win this new battle and we are going to come out of this even stronger.

And last one thing, we published the results of the fourth quarter, and this was the best year of our history. I would like to share the achievement with the over 7,000 employees that make us so proud and that with a lot of confidence in dedication and commitment, they are the ones responsible for the sound and consistent results. Our net income of over BRL2 billion in 2019 has increased 43% and EBITDA of almost BRL4.6 billion has increased 36% vis-a-vis the prior year. Moura will show you in detail the results, but I would like to say that and despite all uncertainties, we do have an optimistic approach for the year. And we want to improve our performance vis-a-vis last year.

Our strategy has an even long-term view and will put all our efforts into work so that Copel is a reference company in the electric industry. I would like to highlight some relevant business of successes in 2019, highlighting that all our subsidiaries have improved their performance vis-a-vis 2018 and G&T, for instance, we had a positive impact of almost BRL450 million in additional EBITDA coming from a project that have been completed during the year, Colider, Baixo Iguacu and Cutia for instance.

In addition to transmission lines and substations, this was a major landmark in our history, because after a long cycle of relevant investments and several problems during the project execution. Finally, we were able to start commercial operations in 2019. In this process, we learned a lot of lessons, and certainly those will help us avoid the same specs of the fact. So, capital allocation is needed to structure also for capital as well as a lot of discipline -- financial discipline and strong governance is and continue to be one of our main strategic pillar.

And Copel GeT, we showed that we are able to change the game. We are now at 42% -- we went from 42% to -- minus 42% to 5.6% efficiency, a great change based on the sound financial results we are already planning in the next few years. And then, as a main event, we have launched an ambitious program to modernize the energy distribution grid. It's called Transmissao, and it has three projects, Three-Phase Parana, Total Reliability and Smart Grid Copel. And this project has a perspective of investment of BRL2.9 billion in the next few years, and these three programs under the main umbrella, that's called Transformacao or transformation. It has three purposes, to improve the quality of services, reduce interruptions and reconnection times, DEC and FEC.

Cost reduction with the less need of the team being travelling and moving around, and that's going to be needed for our current [indiscernible]. And also that we [indiscernible] are posted at the page of the regulatory remuneration [indiscernible] distribution is going to invest over BRL1 million, the highest amount in the history. And that is going to be part of the remuneration base for the tariff review of June 2020.

Another relevant highlight is the reduction of our financial leverage. Now it's 2 times vis-a-vis 3.1 last year, and that level of leverage allows us to have a very favorable conditions to start thinking about new investments, but especially to go through this difficult moment. Also we continue focusing on reducing management cost. And after another Voluntary Redundancy Program in 2019, we ended the year with 7,100 employees, a reduction of a little over 500 employees over 2019. If we consider the last two years, that's a reduction of over 1,200 people that left the Company.

And finally, and just as important, there was a significant growth in our dividend proposal or payment of interest on equity and a total of BRL643 million, a growth of 70% vis-a-vis 2018, which also has allowed us to have a relevant tax benefit. And this is the idea of the administration, and obviously it's going to be discussed in the next shareholders' meeting in April, where we also will discuss the possibilities for payment, considering the impact of the new scenario of COVID-19. I would like to dedicate a special attention to tell you how the Company is tackling the issue.

Here we developed a contingency plan, and our priority is to monitor and mitigate all relevant impacts and its consequences in the main activities of the Company. And this is based in four main pillars in this quarter. So first, safety -- people safety and health. We are following all the guidelines from the Ministry of Health so that our employees and [indiscernible] also are protected. Second, we want to make sure that we have the continuity of our essential activities, providing us electric energy and Internet also to our consumers. Third, to help and to comply with all the regulatory guidelines; and finally, which is essential to support all the other pillars and also the contingency plan in itself, we have to protect the Copel's financial health focusing on our cash.

Fortunately, Copel has a sound cash position right now. We are following up our internal and external movement as well as monitoring possible scenario so that we can work with a lot of planning and a lot of discipline as the moment requires. As you all know, Aneel has suspended this week the disconnections of energy for all residential consumers as well as essential activities. We believe this was right because it shows the social sensitivities. But from now on, the industry needs to discuss with the agency and the Ministry of Mines and Energy the financial and economic balance of the Company because we are facing an explosive combination of lower demand and increase of the maintenance fee.

Parana Government has announced that there is going to be a special program that's called Luz Fraterna for the underprivileged. This is a public policy, and Parana is going to pick up the electric bill for those underprivileged. So, it's possible to say that the Company is still operating well, and it's important also to mention that up to now we do not have any confirmed cases among our 7,000 employees of the COVID. We are in the frontline. We are out in the street so that people can stay at home. We have an extraordinary responsibility with over 11 million people in the state, especially those underprivileged, and also all the electric sector. So we have a clear mission. We have to provide support to all the activities in the state of Parana.

Now, to conclude my presentation, I would like to summarize the main topics of our strategic agenda for 2020. Since we are at the end -- almost at the end of the third quarter -- of the first quarter this year, and so we can say that we are moving forward in several important topics of our strategy and planning for the next five years. The first topic in the agenda is the conclusion for the studies of selling Copel Telecom. They are very much advanced, and if it were not by the restrictions stemming from coronavirus, we would have that ready to go. We are waiting for the approval of Aneel and it was supposed to happen in March, but now it's going to be postponed to April. We have to evaluate the best window for this transaction continuing that the market, as always, is very volatile and stressed. But for sure, and this is our commitment and we will be holding this operation in 2020.

Another priority is to look for the better alternative to renewal [indiscernible]. So, in March, Copel G&T already talked to the Ministry of Mines and Energy to -- in order to renew the concession and to sell the control, we are now doing the follow-up with the Ministry to define the methodology for the calculation here. And that's very relevant for the success of the auction, and also the auction for the share control or the transfer of control is going to happen in 2020.

And we understand that a transparency policy for dividend generates a lot of value for the Company and we are analyzing the best practices in the market. And then, in the next few months, we will be announcing any news that we might have. And when we have that, we will let you know. In this contingency plan, we, as I mentioned, did have an increase in the amount of dividend. And also considering the Company's performance, we had room even to go a little bit further, but because of this moment, we should be more conservative and we should also preserve the financial health of the Company. And so, if the crisis is as deep as we believe, it's going to be, we might even review additional dividends in the second half of the year.

And finally, total alignment to our strategy execution. We launched the Performance Incentive Program, and it's going to attach an amount of variable compensation to executives. The meritocracy in the short-term, it's very common in the market and in the Company that has 65 years of age. This was not structured yet.

So before turning to Moura for the financial results, once again, I would like to say that we are still moving forward in our initiatives to bring down costs, and we have better operating efficiency, especially in our strict financial discipline is the only condition for us to survive. Me and the whole team will be here available to take your questions after Moura's presentation. But I want to stress our commitment and we will measure no efforts so that everyone keeps being safe and that we are also providing sound and consistent results.

Thank you very much. And now, I turn the floor to Moura.

Adriano Rudek de Moura

Thank you and good morning everyone. I hope you are fine and protected wherever you are. This is really an unprecedented moment in our lives. We know how important it is to adapt ourselves to this new reality. And I can tell you that our financial area is ready to address one of the pillars of the contingency plans than Daniel has just mentioned, which is the protection of the financial health of Copel Group, here focusing on a strict cash management for each business.

And as it was mentioned, Copel has a sound cash position. We ended the year with approximately BRL3 billion. We had a quarter that was very good, and I can talk more about that, but we do have a very sound position and a very good moment to face this price. We are following up all internal and external movements as well as monitoring possible scenarios so that we can plan ourselves and to have an even more financial discipline as this moment requires.

But we do have time to talk about our results for 2019, especially the last quarter, and we are very proud of this major achievement, which is to get the best results of all times. We know that that was not an easy one, but we can only say that this is the right way to go, to have a good strategy and a perfect execution. We know that the best results do not ensure future results, especially now that we have this considerable impact in our businesses, but the pillars of our strategy should not change. We just have to do the needed adjustments so that we can move through the [indiscernible].

Turning to the next slide, I highlight here the adjusted EBITDA with no recurring impacts of over BRL1 billion in the fourth quarter of '19, and almost RBL4 billion in the year. So that is an improvement in all Copel's businesses. The fourth quarter, the net effect of positive BRL40 million basically for the mark-to-market of our commercialization company, a little bit over BRL100 million. The water tax reversal, this also allowed us to have a benefit of BRL129 million.

Also, the impairment of assets of Telecom, here we have a negative slide and also provision for our Redundancy -- Voluntary Redundancy Program of BRL43 million, some write-offs of Telecom of BRL38 million in assets and provisions for litigations around BRL60 million. The improvement in the adjusted EBITDA, GeT of 67% in the quarter vis-a-vis to 2018. In the year, we have continued at an improvement of 32% because that is thanks to the new projects and revenues that are already in operation, Colider, Baixo Iguacu and Cutia, and also new transmission lines and substations.

For DIS, the adjusted EBITDA was around BRL284 million, plus 70% in the quarter, ending the year 33% both compared to 2018 reaching levels of BRL1.231 billion. In Telecom BRL42 million, 41% higher in the quarter in the quarter and the year, BRL190 million, 23% vis-a-vis last year. In general, specifically in the last quarter, business has been positively affected by the operating revenue, 20% compared to 18%, 19% with energy supply, an increase in the energy sold to consumers. And I highlight here the increase of more or less 9% in consumption in the industrial market, Copel G&T, and 33% approximately of the availability of the electric grid and an average growth in the grid market of 4.5%.

And also, the adjustment of the tariff represent increase of 11% in the GeT. And also, the entry in the transmission line of the adjustment applied to Annual Permitted Revenue started in 2019, and also as already mentioned, the amount of purchase and selling of energy in our commercialization company, that is around BRL100 million.

Now, turning to the next slide, our manageable costs. To better compare it, we did not consider some lines, some estimated losses or provision the reversals. And remember that if we include all the items above that is the amount of payments [ph] has reduced around 7%. In the line, the personnel, net of the Voluntary Redundancy Program and considering the increase of provision and also the profit sharing program, thanks to the improved results, the personnel lines has dropped around 7% vis-a-vis the prior year with the employees we laid off last year.

Okay. Now, the personnel cost has reduced 11%. Even if we consider the salary adjustment of around 4%, that came in with a collective bargaining agreement in our program is going to be around 3% in October of '19. The other lines that are part of PMSO, here we have to consider the reversal effects of the net rate. Here, they are considered in this analysis and also considering non-recurring events, the manageable PMSO just had a reduction of around 16%.

I just like to highlight services here, 23% increase. And the main reason here is an additional expense that we had to address problems on DEC and FEC because the temperatures that changed a lot throughout the year. I also highlight on this slide that the target for the performance incentive program is still in line with our plan to reduce costs. This is -- we have a variable compensation attached to goals achieving, and we do have very aggressive goals for now. So, cost reduction is efficiency, and this is part of our agenda.

And the next slide, we have our net cash generated from operating activities and also related to working capital, and we can see here in detail the origin of this cash generation. The most important one is related to the operating generation in the results. In addition to better results, we also have here market growth, and that helps the revenue and the effort of the operations and the new projects, and the flow has improved a lot thanks to better investments than we had in the prior year.

Now, turning to the next slide, here we can see the history of the investment program in the terms [ph]. This year, we should end it with a total of BRL1.9 billion, and just BRL200 million are addressed to new projects. For 2020, we estimate BRL2 billion and BRL1.100 billion more or less is related to our distributing company operation. And the focus here is investment in technology, quality, efficiency and cost reduction.

Now, turning to the end of our presentation, in the next slide, here we show the history of the leverage in the past few years from 3.4 in 2016 and now we are into 2 times at the end of 2019. And this really gives us more room to go through this serious moment and crisis, and we will have other opportunities, which we will be monitoring obviously. After the situation normalizes, we'll see how it's going -- what's going to happen now. So, I would like to say that we have a total of loans that have the maturity in the short-term or in the total of BRL1.4 billion. And of those, BRL300 million we already talked about and do now in January. I highlight these maturities for this year fully compatible with our cash, even if we consider lower revenue and a possible delinquency.

And finally, I would like to say that on the several measures we are talking about and we are executing, we are in an advanced stage to release funds for the financial support to build the assets of [indiscernible]. The perspective here is up to BRL430 million for that. Part of that is going to come in this year, it has been approved by the Board of Directors in February, in the beginning of the month of February. And right now, we are submitting the right documents so that we can have the partial approval financial tools for these funds in the coming weeks.

Once again, thank you very much for being with us in this call. And now, I turn to the Q&A session.

Question-and-Answer Session

Operator

Thank you very much. [Operator Instructions] Ms. Carolina from Credit Suisse has a question.

Carolina Carneiro

I have two questions. The first one is about what Daniel said in the beginning regarding the recent merger announced by Aneel, which is the suspension of charges for those residential electric sales. And you mentioned -- I think there was a request by [indiscernible] saying that there was a possibility or trying to check with Aneel. This increasing delinquency could be allocated to another segment. And considering you're an integrated company, that obviously could impact your segmental generation and transmission if this type of allocation happens. I would like to hear more about that. If really -- this request is really out there and if it makes sense? Maybe it's possible that the companies have signed it.

And second question also Daniel about what you mentioned about other measures that might help distributing companies. And what kind of measures then you might have been considering so that you can face a higher working capital. It has to do with funding from the MDS. What kind of measures could we see there to face these next 90 days considering what has been announced? Thank you.

Daniel Pimentel Slaviero

Thank you, Carol, for your questions. Basically, as I mentioned in the beginning, Aneel has taken these measures, which all of you know, it's for essential activities and residential customers. Once again, that has shown, as we believe, that the agencies with the right measure with a social responsibility action, but now we need to start discussing, and we are already doing so, about measures that we will guarantee the economic balance of the industry and all distributing companies. Obviously, we cannot sign and we do not know how long this crisis will last, and neither the impact that will come from it. But as I said, it's an explosive combination because we have a lower energy demand.

And the distributing company will be under-contracted and an expectation of a delinquency increase, and several areas in the economy. They really are -- they came to a halt or they are working in very minimum condition. So what is on the table, and we are following that up with the authorities. All of that that we were saying, so in the first level financing, of course, and all the charges that these companies have with the industry, especially CDE that may and should be reused in the second week also is already on the agenda at the federal administration and has to do with taxes, federal and state tax. We believe that there should be some flexibility there.

And, if these measures are not possible to be taken, also a great extension line or loan line, this has happened in the past, but also we should be discussing all the links in the chain because in spite of Copel being an integrated company, this can also fall back on the distributing company because that is one of the main entry points for the industry. So, this is a concern. We have to avoid getting to this final wave because then we are going to unbalance the other length of this chain, if we cannot pay what we need to pay with CC, that's going to be very serious issue.

So, we expect that the government in the end just as in the whole economy, but also in the electric sector, they are working at shows that we do not have any imbalance. But if it is too broad to severe this crisis, this is something that we have no details about of course, but it's being discussed with the other distributors and with the associations.

Anything else, Moura, would you like to add?

Adriano Rudek de Moura

Well, the MDS is also providing some credit lines for different industries. They are assessing also the power sector as well so that we can have access to part of these funds. And remember, we also have a funding coming from the MDS that should be into -- should be moving to our cash.

Carolina Carneiro

Okay. Thank you very much for your answers.

Operator

Sa from Itau has a question.

Marcelo Sa

Hello, everyone. Congratulations on the results. I would like to better understand the impact that you are expecting to see for the generation sector. We know that the three market contracts you have some type of flexibility clause, some companies can reduce that in up to 20%. But I believe this might be considered as a force majeure event. And then consumers might be able to change the terms of the contract and even to cancel out PPA.

So, what are the discussions that you were having with consumers -- your free customers? Do you see any type of request like that coming in? And also, I would like to understand if you believe there are that you have sold to [indiscernible] market, because considering that the distributing company might be under-contracted. I don't know if there is a possibility of reducing the regulated PPAs, and then reducing the over-contracting of the distributing company? I just want to know if there's as a possibility or not?

Daniel Pimentel Slaviero

Thank you very much, Marcelo. Once again, thank you for congratulating us. But as I said, this is not a celebration moment, it's a moment where we are facing this crisis. And so, I will separate your question about generating and then the regulated market. About the generating companies, other contracts say that, yes, they do state force majeure. We do have that cost, and we already see some generating companies, some commercialization companies that have started making changes to make sure, and they are not yet happy for contract review. But they're saying, this is a force majeure and there is a situation here that involves force majeure.

So, we are following that up with a lot of attention because this needs to be well-addressed, otherwise to -- at final links, we have problems because we have the generation companies and also the consumers, so this needs to be very well-addressed. In our situation, we already see worldwide movement, especially in the hotel sector and also in other segments where we have the free market. The customers, they are asking to reduce a low, then to have some type of renegotiation. And the Company is addressing that case-by-case, sector-by-sector having flexibility to maintain the VPO of the contract. There is a closed hotel chain, of course, they have a total different consumption, right.

Now, about the regulated market, this is a more structural issue. We have not seen so far or any discussions or any risks that these contracts are not going to be paid, but this is something that we are monitoring. Our contingency committee meets every 48 hours. So that's something that is on the top of our agenda right now. We are keeping an eye on it.

Marcelo Sa

Great. Very clear. Thank you. If you allow me another question about the auction that should happen by the end of April. Considering the current scenario of under-contracted distributing company, and also the exchange rate is very high, and a lot of the thermal capex is dollar denominated, do you think the government could cancel or postpone this auction?

Daniel Pimentel Slaviero

We do not believe that this auction is going to be held in April 30th. The Ministry already have that on their radar, and it's just a matter of time. It should be postponed, and the auction of June also seem to us, the transmission auctions for June, it seems to us that they would be postponed as well. Everything points to that. And the December ones, we do not have any signs about those yet, but we are prepared and for the April one, although I do not believe it's going to happen. June's auction has no assets that we consider to be strategic growth. And December -- for the December auction, yes, we have the countryside in Sao Paulo, Parana, we do have assets that would be strategic for our synergy, but we have to wait and see. It's going to depend on the unfoldings of the market and the crisis. And I think that for April, it's not going to happen, it's just a matter of time to see it being postponed.

Marcelo Sa

And my final question now about over-contracting. Do you have an updated number of how much competitor should be [ph] distributing company is at today, 64, 63, or it's closer to 100, do you have the number?

Daniel Pimentel Slaviero

It's within the limit. It's 102 and 103 for the next five years. So, within the limit of 105, a little bit beyond of what we were expecting, because we thought there was going to be a recovery of the market and the countries. All of this has happened, and unfortunately all the economies, everyone will end up having the impact. It's everything that Copel and the country does not need. We did have an extraordinary year.

We had an extraordinary perspective for this year, and in spite of keep on working, obviously everything will be under a new analysis according to this crisis. We see what's happening in other countries. And in Brazil, the government will have to bring in measures, socio and economic and financial measures so that we do not have a big depression. Everything shows that we were below 105, we should be on that limit for the next year. And if there is a drop now, of course, there is going to be a change, but we'll keep an eye on it.

Marcelo Sa

Thank you very much.

Operator

Mr. Andre Sampaio from Santander has a question.

Andre Sampaio

Good morning. I have two questions. The first one is about distribution and volume. If you can give us more details about what you foresee in terms of volume, and also I want to have an idea of how much do you believe this drop of 1% of volume could -- how much that could impact in the distributing company's results? This is my first question.

And second question, about [indiscernible] and the south reservoirs. We saw recent problem in the south because of hydrologic conditions and also the need of triggering [indiscernible]. With the start-up of Mata de Santa Genebra, would you have any change in terms of [indiscernible] or do you believe it's going to keep on operating?

Daniel Pimentel Slaviero

Thank you very much, Andre, for your questions. I will start backwards, OK, talking about the WEG. WEG really with a low level of reservoirs in the south, there is a displacement of the spot price in the region when you compare to the southeast. So, WEG did operate for two weeks in that share format at an amount that is expensive for the system, but very attractive.

For the WEG, for the TPB, and even before Mata de Santa Genebra, that allowed us to have lower -- over [indiscernible] southeast to the south even before that because of the job perspective -- not perspective, but because there is a drop in volume. We did -- it did have been suspended by the National System Operator. There is an initial estimate for three weeks, and it came down to two weeks, but it's operating as a replacement plant. It's still operating but out of the order of merit. It's operating as a replacement energy. This is an agreement we have with Petrobras.

About distribution, and just one more thing, Andre, that's important. Mata de Santa Genebra is an important line in the sector, very important for the electric sector. 62% is already energized operating, and it's ready to receive the Annual Permitted revenue. The remaining portion are in the final stages. But what happened there was really unprecedented in the Company. We did have that in the region.

Over 50 problems regarding [indiscernible] ended up delaying the process. This is no excuse because the responsibility of the undertaking is ours. But what happened in the region and in the industry cables and people that buy that in the black market. So, also we had the police in Parana and Sao Paulo working to catch these thieves. But OK, we are now moving forward and fast enough to make 100% Mata de Santa Genebra concluded and energized.

Going back to the first question, I'll separate it in two and help me in the second half. About volume distribution, what we have seen in the first week compared to Tuesdays, Wednesdays and Thursdays with the average of the prior weeks, the drop has been between 8% and 9%. This is very significant. But it's not alarming as we have seen in France of 20%, 15%, but we are in the very initial stage of this problem. Let's see how it goes. And that drop of 1% of energy that you mentioned, Mark, this is working on that, right?

Yes, what is important is that we have realized a drop in the market just this week. Last week, we have not identified anything. Just now we had initial drop and we are monitoring that. It's around 8% to 9%, and it's too early to identify impact in the results because it will depend on the actions that regulating agency is going to take. We believe that Aneel is going to have some mitigating action because we are here in this industry, but I think it's too early to talk about anything in terms of the results.

Andre Sampaio

Perfect. Thank you very much for your answers.

Operator

Marcelo Britto from Citi has a question.

Marcelo Britto

Good morning everyone, and thank you very much for the call. I have a question. Actually it's a debate about Copel Telecom. You are holding test for that and also a significant write-off at least in the next two quarters, at least BRL200 million, if I'm not mistaken for that asset. What is the nature of the significant adjustments in such an asset and as you are moving to a process to sell this asset?

Daniel Pimentel Slaviero

Hello. Britto, excellent question. Really the impacts here are constantly being monitored. We are also constantly monitoring the market, our competitiveness, cost structure and asset that can be written off or not. These are significant amounts, BRL260 million over the year, and I would say that Wendell, our CEO for Copel Telecom, can give you more details for you and the market.

Wendell Oliveira

Hello, Britto. Good morning and thank you for your question. Yes, this was a year of adjustments, and we didn't have different focus. But the most significant one that we had was regarding deactivations. For each customer, we have to do an asset write-off corresponding to the investment that was used to provide the services. So, here we have clients of customers write-offs. These are the main -- the business would be like a breakdown. Also, there is market competitiveness where we have one of the highest appetites in the market.

We see that competitiveness is getting worse over time, of course, the optical fiber market. Also prices, Copel Telecom's prices we had a significant adjustment in 2019. We have a cost in average of $0.09, which was $0.40 in the beginning of the year. So we did have to make these adjustments. We have inventory adjustment, but most of this amount that you mentioned come from deactivation from retail, and that is a base of 180,000 customers and a smaller share on top of deactivation of corporate customers that we call conventional.

Operator

[Operator Instructions] We now end the Q&A session. Conference call of Copel has ended. Thank you very much for your participation and have a nice day.

Daniel Pimentel Slaviero

Thank you very much for your participation. And I will repeat myself, we are being -- we are going to work strongly to face this unprecedented crisis, but we hope that with the same speed that it came in and with everyone's help and the government's help, we hope that it goes away soon and that we can have recovery in the second half of the year because this is going to be a difficult moment for the economy and for the Company. And so, we keep on working providing energy and Internet access to the population.

Thank you very much once again.