Alupar Investimento S.A. (ALUP11) Q4 FY2025 Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to our earnings call of Alupar to discuss the results of the fourth quarter of 2025. The audio and slides of this conference are streamed also via the English channel. To access the English conference, click on the globe on the menu and select the language. You may also select to silence the original audio. This presentation is also available for download. [Operator Instructions] We also inform that forecasts about future events are subject to risks and uncertainties and expectations may not come true differently from what expected. So our forecasts are only the opinion for the date when they are presented, and this opinion is not -- we are not bound to update the opinion. Present are Mr. Jose Luiz de Godoy Pereira, CFO; and also Mr. Luiz Coimbra. I will now give the floor to Mr. Luiz Coimbra, who will start the presentation. You may proceed, Mr. Luiz.

Good afternoon, everyone. Thank you for participating in our earnings call for the fourth quarter of 2025. Looking at our agenda, we're starting with the highlights for the quarter. Then I'll talk about the evolution of projects and their implementation. I'll also talk about the numbers of the fourth quarter and focusing on regulatory numbers and allocation of the income. And we'll also talk about the company performance in the capital market. Our first highlight is the reaffirmation of the company rating by Fitch. In December last year, Fitch Ratings reaffirmed our ratings at AAA for the national scale and BB+ in the international scale in foreign currency, both with a stable perspective. And this is very important at this moment of more aggressive investment because we still have relevant values to capture in the following years. Another important highlight of the quarter was the capturing of resource in the long term to implement the -- we currently have TCP -- TECP and TAP. TAP was incorporated into the TECP, and this guarantees the long-term funding [ TEP, ] including the long-term funding that was predicted for TAP, pending only the structuring of the long-term funding of TPC (sic) [ TECP. ] This was done through the issuing of debentures. Financial settlement happened in January, and we captured about BRL 2.4 billion. The term for the debt is 12 years with a cost of IPCA plus 6.99%, which is equivalent to NTN-B plus, minus 40 bps. The last highlight for the trimester is the payment of dividends that was approved late last year. In the period, we made two dividend payments totaling BRL 207.7 million. The first was referring to dividends approved on the 6th of November. It happened on the 6th of January in the amount of BRL 98.9 million, equivalent to BRL 0.30 per unit. Second payment was referring to dividends approved in the 18th of December. It occurred on the 12th of February in the amount of BRL 108.8 million, equivalent to BRL 0.36 per unit. Next session, we show the evolution of projects under implementation currently. We have a more detailed view of the land tenure and environmental licensee progress we made besides evaluation in contracting and works. In terms of land tenure, we had an advancement in international projects with a highlight to TCN, TEL and TEP with 100% of the substation are negotiated. In environmental licensing. Our main landmark this quarter was the previous licensing of TAP in November. And when we look at contracting, we had an important advancement in such, our project in Chile with the contracting of transformers, compensators and yard equipment. In TAP and TSA projects, two projects in Peru. We had relevant advancements. We contracted transformers, reactors and yard equipment. In terms of work implementation, we have two projects that are underway. The first is [ TEP, ] our project in Brazil. The project is 28% of physical progress. And another one is TCN, one of our projects in Peru. We closed the fourth quarter with 24% of physical advancement. Following on the agenda, we talk about regulatory numbers. Net income was BRL 932.3 million, an increase of 6.9% in relation to the same period in 2024. In the Transmission segment, it contributed with BRL 96.1 million in our income. We had two impacts: one, the readjustment of RAP, 5.32% for contracts indexed by the IPCA and 7.2% for contracts indexed by the IGP-M. And the second impact was the beginning of operations of TCE in October 2025, and this is our first transmission asset in Colombia. When we look at Generation segment, we had a decrease of 20% in income, basically because of the end of the PPAs, our bilateral agreements with the Queluz and La Virgen plants. The Queluz plant, the PPA ended in June last year and La Virgen in September. So we ended up selling at a price a little below what we expected in our contracts. EBITDA ended at BRL 709.4 million in this trimester, and that's a growth in relation to the numbers observed in 2024 as well. We had three main impacts. So one is the income, as I mentioned, also an increase in BRL 9.9 million in administrative and general expenses, basically due to the beginning of operations of TCE and also some expenses with consulting and tax provisions into transmitters. Also, a highlight is an increase in BRL 8.3 million in equity equivalents because of the beginning of operation of TNE starting September last year. It's our only asset that's not yet consolidated. Looking at profit, it was BRL 191.6 million, an expressive growth, 95.5% in relation to the BRL 98 million registered for the same period in the previous year. And here, I think we have four main impacts. The first, an increase in the EBITDA of 55.3% (sic) [ BRL 55.3 million. ] The main impact was a reduction of BRL 88.3 million in the financial results and also an increase of BRL 59.3 million in financial results because of an increase in the CDI. It was in this quarter because in 2024, it was in 2.63%. When we look at financial expenses, we had a reduction of BRL 29 million and basically due to a variation in currency exchange for the period. We had a devaluation of the Peruvian currency as compared to the Brazilian real. Also another important account here is an increase of BRL 21.4 million in participation of minorities reflects of an improvement in the results of some transmitters, the transmitters we have that indexed by the IPCA because the index was decreased in the last semester. It was at 1.08% for this semester. And also an increase of BRL 21.9 million in depreciation and amortization because of the beginning of operations of TCE starting October last year and out in July 2025. When we look at the numbers, net income grew 3.6%, closing the trimester in BRL 1.164 billion. The EBITDA ended in BRL 766 million (sic) [ BRL 782.2 million ] and the adjusted margin was 782% (sic) [ 78.8%. ] It -- this represents a growth of 22.7% in relation to the BRL 230 million accounted for the fourth quarter of 2024. Now the next slide, we show the debt of the holding. The holding had a gross debt of BRL 884.8 million for the eighth issuing of debentures. The cost was IPCA plus 6.5%, and there was a swap to 96.5% of the CDI. Cash was near BRL 1.3 billion, resulting in a debt -- net debt for the trimester at BRL 383.8 million. We also show consolidated debt in the trimester, it was BRL 12.587 billion. Cash composition was BRL 3.229 billion with a net debt of BRL 9.359 billion. When we look at the structure of consolidated debt, there was no significant variation. Most of our debt, 52%, was indexed by the IPCA, followed by CDI at 27% and the debt in foreign projects and other currencies closed the quarter, representing 14.7% of the consolidated debt. Next slide, we show the destination -- allocation of results and dividends recommended in RCA. The administration Board recommended in the company meeting of 16th of April that we approve dividends in the amount of BRL 9.9 million, corresponding to a complementary balance of dividends anticipated in December last year. It corresponds to BRL 0.03 per unit. Payout will be in 60 days after approval by the company's meeting and the record date will be the 16th of April with shares negotiated ex dividends after the 16th of April. The total of dividends distributed for the 2025 financial year totaled BRL 356 million, equivalent to BRL 1.08 per unit and a payout of 50.8%, consistent with the company policy for dividend allocation. There was a increase at 29% as compared to the BRL 29.7 million distributed for the year 2024. Also, the distribution at this moment in a strong cycle of investment reflects the commitment of the company to seek a balance between dividends and company growth. Now I'd like to go to the last session. We show the company performance in capital market. The -- at closed year of 2025, our shares had an increase in value at 29.07% and the financial volume, we closed 2025 with an average daily volume at BRL 27.6 million. And now we can go to the questions-and-answer sessions. Thank you.

[Operator Instructions] The first question is from Victor Cunha from Itau BBA.

Can you please give more details on the annual fall in energy purchase in the quarter?

Basically, this is due to three factors. Curtailment, indeed, it was not so much bigger in the fourth quarter. It depends on plant-to-plant points of connection. There's also seasonalization of [ hydroelectric ] power plants and also GSF, which was probably the lowest -- lower than in the previous year. So it's a mix of GSF and allocation. Basically, these are the factors that generate a lower cost.

The next question is from Mr. Vitor Sousa from Genial Analisa.

Can you hear me? Well, I understand you reached 18% of your income in assets outside Brazil, looking at what you had in Chile before a transaction from 2016, you showed there. And I think that relating to the assets outside Brazil, they would be more valuable than the ones inside Brazil. Do you have a strategy to shed light on the value of those assets? For instance, in the case of a spin-off followed by an IPO for assets outside Brazil. Is there anything in that sense to bring a better perception on the value of these assets for the company as a whole? Or is there no discussion about that?

I believe at this moment, the issue of perception and value of each asset is connected to the fact that there are new projects under deployment and environmental licensing. So all that generates a perception that we must not yet count on that so much. Now relating to multiples, it's case by case. You have to analyze project by project. Some are concessions, some are different. The terms for concessions are longer, some are not for life, others are for life. And it depends on the model. Also, the fact that you have a term for execution that's long, 5 years. That leads you to maybe give high discounts during that period because you have a risk related to execution. So basically, these are the factors. The projects are always being implemented and that incorporates value to the company. And relating to spin-offs, at this moment, we are not thinking of that. It doesn't mean it cannot be thought about for the future. But at the moment, it's not our idea. We have an important synergy issue here. And we -- and with the spin-off, we would lose some of the synergies between all our assets. But that doesn't mean you can't discuss that in the future. I'm just saying that at this moment, we are not looking at it.

Next question, Mr. [ Eric Salucci, ] an investor.

Can you hear me?

Yes.

Congratulations on the results. About curtailment that you showed there, it was the most frequent factor. I imagine the company is looking at that for the future and forecasting things. But I'd like to know if there is any anything being built in order to mitigate potential impact of that on the balance sheet?

We work with [indiscernible] policies here. We do [indiscernible] for aluminum, but each project has a different weight as compared to other projects. So we take all of that into consideration in each business model. Regarding curtailment, you're talking about energy. We have to analyze our portfolio year-to-year because we have a little more on next year. So we will manage our portfolio according to our sales and exposure. So this is something we're always doing. Curtailment impacts the physical guarantee, of course. But I am still very hopeful that curtailment will be solved. We have made big steps towards that. A lot has been done. We have -- there's lots of legislation on that. There are some details to be adjusted. But I think that will solve along the time. And also because of the reinforcement of our transactions. So those two points will relieve the issue. We manage the portfolio, and we forecast curtailment based on best practices possible, and we manage the portfolio. So that's what we've been doing.

Next question is from Mr. Ricardo Bello from Safra.

I'd like to know what you think about the level of attractiveness in Brazil and auctions you have been participating lately.

It's hard to say. It depends on the auction and the number of aggressive players present. The last auction we participated, we didn't win any lots. The aggressiveness was too high for the market. Latin America, same case. It's case by case. Some projects have huge competition and aggressiveness of players. So it's very hard to say it's going to be like that or like that. It's case by case. When you have synergies -- there may be synergies. So it's a big study we do of projects and project preparation. It's hard to just say. It's tailor-made.

Next question is from Mr. [ Alexander Fabel, ] an investor.

What's the estimate for the year-end for the investment cycle of the company?

Are you asking about earnings or CapEx? At the end of the assets that we have in this package is 2029. So by the end of 2029, all these assets will be operating in terms of CapEx, we're talking about $2 billion more or less, about BRL 10 billion of total CapEx for all these projects. Basically, that's it.

[Operator Instructions] Now the question-and-answer session is ended, and we give the floor to Mr. Jose Luiz for his final considerations of the company.

I'd like to thank everyone who participated in this -- participation in this earnings call and also to make ourselves available to everyone, investors, non-investors who are interested in learning more about our company. You can talk to our team. I wish you a good afternoon and see you next time.

Now the call of Alupar is closed. We thank you for your participation and wish you a good afternoon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]