Alupar Investimento S.A. (ALUP11) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to the Alupar's conference call to discuss the results for the first quarter of 2025. This event is being broadcast live with audio and slides available simultaneously. [Operator Instructions] We would like to inform you that any forecasts of future events are subject to risks and uncertainties. It may not happen. They can be different than what's expected. They only emit the opinions when they are done, and the company is not obliged to update it. We are joined today by Mr. José de Godoy Pereira, Alupar's Chief Financial Officer; and Mr. Luiz Coimbra, the company's Investor Relations Director. I'd like now to turn the floor over to Mr. Luiz Coimbra, who will begin the presentation. Please go ahead, Mr. Luiz.

Good afternoon, everybody, and thanks for participating in this call for the results of the first quarter of 2025. Our agenda is divided in 5 topics. We are going to -- first, we are going to talk about the highlights of the first quarter of this year. And then afterwards, we are going to talk about the status of the implementation projects. And then we are going to talk about the quarter results and the destination of these results. And then finally, we are going to have -- we are going to hear a little bit about the performance of the company and the capital markets. Talking about highlights, we signed on the 29th of April, the first additive term to transfer tech, the subsidiary TAP to TECP, which will cease to exist the TAP. We would -- we can optimize the structure of capital of these 2 assets and have a management more efficient in implementation and operations of this project. Talking about the next slide, we have the second highlight of this quarter, which was the approval of a new ETVG transmission installation of this new transformer. We had an increase in load, and this reinforce it was the installation of this new transformer. CapEx foreseen BRL 62.2 million and a revenue of BRL 9.5 million based on this new cycle of 2024, 2025. The relationship RAP CapEx is 13.7%, and the operation will start on the fourth quarter of 2027. The third highlight was the approval of dividends for 2024 in the Annual General Meeting that happened on the 16th of April. As it was being recommended before in the Board meeting of 26th of February, we approved the distribution of dividends and BRL 76.6 million equivalent to BRL 0.24 per unit. The dividends will be paid up to 16th of June 2025. With this distribution, the dividends of 2024 totaled BRL 275.7 million, equivalent to BRL 0.87 per unit, representing a payout of 51.5%. Now going to the last highlight in relation to the results also. At the same Annual General Meeting, we have a stock bonus in the BRL 349.5 million corresponding to 38 million new shares. We emitted 38 million new shares that were given to shareholders in a proportion -- in a ratio of 4.0 stock bonus. The attributed value was BRL 9.17 equivalent to BRL 27.57 per unit. Now talking about the next topic of our presentation, we are going to talk about the status of our projects. We have 4 projects that showed advances, the TCN, the first one. We had the license for installation of the last tower. With that, we are not going to have any restriction to the execution of the project. We also could make advances when compared to the last quarter, and now we have a 99% physical advances. Another project that was significant was in the North Street of ELTE transmission company. It reached 98% of physical advances. TNE also had a very expressive evolution, we evolved more than 14% when compared to the fourth quarter of last year. The works reached 84% of physical advances, and also, we have the TECP. This project has 10% of physical advances, and it has its own characteristics. It has got like 5 stages, and we will have the recognition of revenue after every single stage is finished. Now we are in Stage 1, and we had BRL 8.9 million in revenue, equivalent to 11.9% of the total revenue, and we have another block of projects being implemented that contemplate 5 projects, 3 in Chile, 1 in Peru and 1 in Colombia. These projects are in the beginning. The advances we have done are in the foundation front and hiring substation equipment, and related to the other projects, we still don't have any expressive advancements. They are being developed, and as we have advances as these projects are being developed, we are going to bring more details in the next future quarters. Now talking about the numbers of the company. We start with the numbers in FRS with BRL 1.223 billion, a growth of 22.8% when compared to the same period last year. And in the segment of transmission, it has an increase in BRL 205 million, especially because of the revenue in monetary correction. We have an increase in financial indicators. The GP is in 2.29% against 0.29% in the first quarter of '24. IPCA also has got an increase, not so expressive, but it increased 2% in this quarter against 1.83% in the first quarter of '24. The segment of generation grew BRL 41.9 million in revenue, and I would like to highlight the main 3 factors. We had an increase of almost BRL 15 million in Ferreira Gomes because of the sales of carbon credit, and we also had an increase of BRL 10 million in PCH Morro Azul, our company in Colombia because of better hydrology in this quarter. And then finally, we had an increase of BRL 5.3 million in La Virgen and the price of the export market was much higher. We had an average price of BRL 256 by BRL 195. Looking at the EBIT, it totaled BRL 932.5 million. It grew 14. 6% compared to the first quarter of '24. And the main impact of that, it was in revenue, what I just mentioned. And then we had a growth of BRL 89.2 million in infrastructure costs because of -- due to the investments for the transmission projects in implementation in Brazil. We also had an increase of BRL 19.7 million in the purchase of power. And there are 3 main points here. We had a decrease between -- we had a difference in prices between Southeast and Northeast. And the second impact we suffered, it was, we had an average in our assets, wind assets, 16% of impact, and for our solar assets, we had 24%, and then finally, the increase of the settlement price for differences in BRL 143. And in the first quarter of '23, this price was BRL 62. And then finally, we had an increase of BRL 33.4 million in equivalents. The only asset that TNE, as this asset is being built, it has grown in infrastructure. So it shows improvements in the results, a better result. So we bring this increase via equity investment. an increase of 17.2% in relation to the numbers recorded in the same period last year. The main impact was the first BRL 120 million in EBIT. Second impact, an increase of BRL 20 million in the financial results because of increased interest rates in this quarter, especially the IPCA that represents a huge amount in our debt, 2.204% against 42% the same period last year. Another impact important to highlight the increase of BRL 19 million because of taxes and improve in our consolidated results in general, 21%, aligned with the 22% that we had in the same period last year. And then finally, we had an increase of BRL 39 million in the participation the noncontrolling interest as detailed previously. Now going to the next slide, we are going to present the variations of regulatory numbers. The net revenue was BRL 857.5 million, 8.3% above the numbers reported in the same period next last year. In transmission segment, it contributed to BRL 29 million in revenue, and we had 2 main highlights. The first one was the commercial operations in May 2024 of the south strip of the ELTE transmission. And the resolution of July 2024 established the cycle '24, '25, the power generation represented a huge increase. This number was detailed before in the IFRS. The EBITDA, BRL 685 million, 2.5% above the numbers reported in the first quarter of '24. The main impact of this, it was an increase in revenue that I just explained. And then afterwards, we had an increase of BRL 19.7 million in energy purchase in the EBITDA. And then we also had an increase of BRL 8.3 million in other expenses. We had a low write-off in some projects that were discontinued annualized profit, it was BRL 141 million. The impact was this million. Then we had an increase of BRL 20.9 million in our financial results because of the increase of our expenses because of higher interest rates in the first quarter. And finally, we had an increase of BRL 78.4 million in the noncontrolling interest. We are showing now the holding company debt. It has a gross debt of BRL 877 million. It's related to the eighth emission of debentures, IPCA plus 6.5% and CDI, and we closed with a cash position of BRL 1.203 billion and a negative debt net of BRL 325 million. We presented a consolidated debt. The gross debt was BRL 12.588 billion with a cash position of BRL 3.678 billion, resulting in a net debt of BRL 8.909 million. We didn't have any significant variations. Most of our debt, 75% was connected to the IPCA, followed by the CDI with 26%. Destination of results on the next slide, the Board approved the distribution of dividends in the amount of BRL 69.2 million, which is BRL 0.21 per unit, a payout of 52%. The payment will be done to shareholders 60 days after the approval, which happened yesterday, and the record date will be the 15th of May with shares being negotiated as ex dividends from 16th of May onwards. Now the performance of the company in the capital markets in the closing day yesterday, our shares valued 18.3% IEE 24.9%; IBOV 13.3%. And another thing I'd like to highlight here is an improving financial volume. We closed the year up to yesterday with a financial volume of BRL 27.8 million, which represents a growth of 7.3% when compared to the same period last year. With that, I will wrap up my presentation, and we can go to the Q&A session. Thank you.

[Operator Instructions] First question from Mario Wobeto from Banco Safra.

I'd like to understand how can you evaluate the possibility of participating in the next transmission bid that's going to happen in Brazil. And if you also can talk about the pipeline of opportunities of transmission in Latin America.

Related to the possibilities here, we have to analyze. It's difficult for us to know. We are going to check the projects, and it depends on the conditions. And that applies to Latin America. We have less auctions this year or bids, less than last year. So this year, there are fewer opportunities in general. But anyway, the market is supposed to grow a lot with the renewable situation. I think you have seen the blackout in Europe because of this transition and the needs of reinforcement of the grid of transmission. So it's a natural thing. Of course, that's not going to happen in a linear way. Some years, we have more projects, some years, we have less projects.

Next question comes from Victor Cunha from IBBA. Mr. Victor, you can ask a question. Your mic is open. Next question comes from [ Vitor Sousa ] from [ Genial Investimentos ].

I would like to ask how is the process of the TNE line going? And I would like to know the plans of the company after the results of the balance of this line or if you would like to operate or until.

In the case of TNE, it's still ongoing. We have expectations, good expectations that regardless of anything, we think that our thesis is right, is correct. So we have good expectations related to that. In case of line operation, we have an agreement in place with the resumption of we signed agreements with Eletrobras. So we have an asset that we have a share participation together with Eletrobras. And we have this order from the TNE. So our agreement foresees that we have a reduction in participation. We have been having that in social capital. It's been diluted throughout the project. We gave prediction with this other said from Eletrobras that we have together. In the end, when TNE is in operation and the arbitration is completed. I can imagine that the evaluation will be another moment. It must be completed. The project is well advanced and the execution of the project and the conclusion of the arbitration to define the RAP.

Beyond that, what has been announced, do you have any other backlog or pipeline for improvements from the new site because from Alupar, it's a less exposed deal to this kind of thing. But the idea is to leave this idea of investment more clear. I would like to know about it.

The new systems, they had a -- you get a company just a CTEEP or Furnas or Eletrobras, as they are very old lines and the lifespan of their assets is already in the final phase, there is a need for replacement of this equipment, and that generates this opportunity of RBNI for older companies and because you have resources for the expansion or replacement of equipment that are in the end of their lifespan. And you can -- so according to -- as systems get old, this has started to happen until the end of the concession, you will have a few projects that might need equipment replacement because they are already in the end of their lifespan. We -- recently, we had -- I can raise you later more data. We always had -- we completed the project that we announced recently, the RBNI of BRL 130 million from ELTE project in the sea side of Sao Paulo. We have 2 RBNIs in ENTE and the sum of both of them, it's something like BRL 600 million to be executed in 3 years. And also, we have some other projects that we can see the need for replacement of this equipment. So ANEEL knows that. And we will inform them and then we can negotiate to change this equipment -- pieces of equipment.

Our next question comes from Victor Cunha from Itaú BBA.

I would like to know the vision of the company. Recently, we had ONS indicating that we could improve the flow in the Northeast in 1 gig. So up to where the ONS must present in the June meetings, and Alupar vision, this measure can help, what's the normal level looking ahead? And can you comment about the exposure of the company in the risks of the company?

Sorry, I couldn't hear really well. What happens is entertainment. We have been following up with them periodically. It's very active related to this negotiation. And I think it's positive because we have a law that has been approved. The problem, we don't need to change any laws. You can just apply what the legislation has determined. What happens is that they created a regulation after the law with a series of things that kind of distorted and it generates this issue of curtailment for all the companies. And cargo load transfers that started last year when there was a blackout in the Northeast region. So the operational system is more restricted in this load transfer. I don't have any numbers here, exact numbers, but I remember that this flexibilization of the IMS was something related to 1 gig or 1.5 gig of the systems between the North, South and Southeast that would improve every single way. The price is high at Southeast and in the South. So just to finalize the curtailment situation is not an issue that must be placed only on the responsibility of the wind farms, renewable wind farms because who is paying this bill are the renewable ones, and we have thermal dispatches that are flexible. They have preference GD. So there is a lot of preferences of other agents. And why do they have that and doesn't have it, because -- so we have to -- maybe we'll have an agreement in the sector to understand the issues of curtailment and the reinforcements in the basic grid. It is an issue that doesn't make a lot of sense with the high prices, it means like it's been too heavy for consumers. So we might have a reform and negotiations that are ongoing.

The next question comes from Andre Sampaio from Santander.

Just a follow-up on the first question about the issue of investments in Latin America. In 2025, it seems like it's a calmer year, but I would like a more optimistic prediction for 2026. I would like to know about the scenario connected to the more relevant CapEx and new investments. What's the strategy? What's going to happen? Is there a limitation where you prefer not to offer, that will depend on the opportunity. If you have a very interesting opportunity, all the shareholders, they might -- maybe an equity offer will be interesting.

It's not in our planning today because we have long-term planning. And within our premises that were adopted, we don't have this need. But if a very interesting project would appear with a return rate that's very attractive and it generated relevant amounts for the company, yes, maybe we could maybe go to the market.

And another thing, I'd just like to know if you have observed any other markets with potential to participate or if you're going to continue on the same market?

Yes, we have been looking at other markets, but I wouldn't like to get into the details here. We have been looking at other markets. And in fact, what happens is that the whole world is going through this energy transition and investments are in basic networks are appearing from everywhere. So we have been trying very carefully, we are trying to find new opportunities, but in a very cautious way. Maybe things will come up in the future in other places, but always focus in our own characteristics in what we do.

Our next question comes from an investor.

I would like to know how can you see the results of energy generation? Are there any perspectives of improving net profit? Are there any energy generation projects in the pipeline? Or do you -- are you just going to focus on transmission projects in the near future?

We don't have anything in our pipeline. While we don't equate all the issues and it's a bit complicated. We have grown a lot in retailers, there are demands for energy. Maybe that can be a source in the future of revenue. For new businesses, I can see that the market is changing. I don't know if you have been following up new law, projects of law and the idea is to open the market in general for all the consumers so they can access this market freely. So this market is changing. The bids of distributors will be smaller and smaller. And I can see positively in -- at least in a macro way, of course, there are things that don't make any sense. But in a macro way, I can see that these changes are positive. And this year, in the generation, we have been having a lot of problems with curtailment and Severo also last year. In short term, that will be a little bit harmful, it could harm us. But from the next year onwards with everybody using the premises, the new premises, added volatility that will stimulate the hiring of -- in long term of consumers and companies. So I can see in a positive light these changes, and I can see that the generation area can be attractive, very attractive. But it depends on all these other issues that might be addressed.

The session of question and answers is closed. Now I'd like to give the floor to Mr. Jose Luiz for the final considerations of the company.

I would like to thank you once again for participating of our presentation of the first quarter results. And again, I'd like to like to know that the company is available to you. So if you want to get to know the company better, to learn more, our team is available if you want to talk to someone and clarify any points that you may have questions about. So see you next time and thank you.

The conference of Alupar is now finished. Thank you for your participation, and have a great afternoon.