Energisa S.A. ($ENGI11)

Good morning, everyone, and welcome to the Energisa Q1 2026 Results Conference Call. [Operator Instructions] We emphasize that the information contained in this presentation and any statements that may be made during our conference regarding Energisa's business outlook, projections and operational and financial targets represent beliefs and assumptions of the company's management as well as currently available information. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions as they refer to future events and therefore, depend on circumstances that may or may not materialize. Investors should understand that general economic conditions, market conditions and other operational factors may affect Energisa's future performance and lead to results that differ materially from those expressed in such forward-looking statements. I would now like to hand the floor to Ricardo Botelho, Company CEO, so we can begin our presentation. Ricardo, please go ahead.

Thank you, operator. Good morning, everyone. First, I would like to thank everyone for joining this results presentation for the first quarter of 2026. Joining me today are our CFO, Investor Relations Officer, Mauricio Botelho; and also our Vice President and Investor Relations team. First, I ask that you please review the legal disclaimers at the beginning of the presentation before making any investment decisions. I will begin the presentation with the main headline from last week when we finally signed the Ministry of Mines and Energy signed ahead of schedule. The extension of our extensions for 30 years. which together represent nearly half of our EBITDA. This long-awaited news should be celebrated as a demonstration of the institutional maturity of Brazil's regulatory framework, which rests on three pillars; predictability and legal certainty that encourages continued investments in the distribution, economic and financial sustainability in exchange for more demanding contracts with permanent focus on service quality and consumer protection. With greater predictability over the duration of our concession contracts, we are now prioritizing the planning of long-term actions aimed at rigorously meeting the technical regulatory and economic financial requirements of these new contracts. And moving on to the key highlights of the period results, the consolidated in this first quarter. The recurring adjusted EBITDA consolidated for the Q1 2026 reached BRL 1.9 billion, representing the growth of 6.6% on a quarterly basis, reflecting the consistency of our operating cash generation. And when we include equity income from Norgas, the equity adjusted EBITDA reached EUR 2 billion with growth of 7%, reporting contribution of the gas business to the group's diversification and value creation. This positive performance across virtually all of our business lines is explained by a 7% increase in consolidated net revenue and cost management discipline, with a PMSO remaining control and efficient below the inflation rate. And your distribution contributed BRL 1.7 billion to the EBITDA, up 7% compared to the previous quarter. And another roof highlight this quarter was the Gas businesses, advancing 49% with ES Gas and 29% of basis with Norgas. Recurring adjusted net income totaled BRL 207 million, a reduction of 47% on a quarterly basis, reflecting primarily the increase in net financial expenses and a higher interest rate environment and higher cost of debt. Next slide, please. We're going to be talking about any other drivers. The consolidated remain below inflation rates for the fifth consecutive quarter. In the first quarter of this year, we recorded a modest increase of 1.6% against an inflation rate of 14% over the last 12 months and that end in March. The PSO grew only 0.4% compared to the 2025 variation. Energy Distribution, which accounts for the increase was 1.5% in the quarter. And while the transmission and gas distribution segment maintained the trajectory of expense ratio with decreases of 6.9% and 7.5%, respectively. On the financial front, net financial expenses. The primary results reached BRL 1.6 billion in the quarter, representing a growth of 36%, reflecting mainly the macroeconomic environment of higher interest rates. Even in this context, we continue with a disciplined capture strategy, active liability management and maintenance of healthy debt profile. And consolidated investments totaled BRL 1.6 billion, up 17% this quarter, and the majority was reacted toward energy distribution, which accounted 94% of the total, reflecting our commitment to investing with discipline and operating with efficiency in this scenario. And in this slide, we are expanding our view of indebtedness. Liberty and debt amortization schedule. In the Q1 cash position totaled BRL 15 billion, sufficient to comparably cover maturities over the next 3 years. This level of cash reflects the early execution of fundraising activities that were planned for 2026. We're using the need to access the market in what is simply a more volatile year. We took advantage of several wins in order to preserve financial flexibility. Additionally the debt profile was extended with an average maturity of the global one was below the CDI rate. Amortization are more balanced with a higher concentration in the long term particularly after 2030 as subsequent events on April 20 this year. Isis entered a memorandum of understanding for almost equity instrument in the amount of BRL 1.4 billion with Itau. The transaction involves the sale of mandatory stake and preferred shares of Suvari. This injection aims to strengthen the capital structure and support investment plan while maintaining financial plan health. The agreement is subject to many conditions present and CAD approval. And as a result, we closed the period with a net debt of BRL 33 billion and a leverage of 3.5x. On a pro forma basis, factoring the almost equity instrument injection, the leverage would be 3.3x, remaining at a level consistent with the financial discipline and with an adequate headroom relative to our covenants. And the quarterly result reinforces the company's ability to sustain operational growth across manageable -- variables even against a challenging macroeconomic backdrop with the benchmark interest rate at double digits and pressures compounded by the geopolitical stability in the Middle East. I will conclude my remarks here and hand the floor to our CFO and IR Officer, Mauricio Botelho.

Thank you, Ricardo. Good morning, everyone. Thank you for joining Grupo Energisa's earnings call this quarter and continue the presentation. Over the next slides, I will share the key highlights for each of our businesses showing they're going to be working with the distribution. Energy distribution highlights, we're going to be turning on. The group closed the period of a total losses of 12.30% result better than the same quarter of the prior year and in line with the controlled trajectory observed in the recent periods. For the fourth consecutive quarter, we are operating below the group's consolidated regulatory limits that was about a 12.96% widening the positive gap. And actual regulatory losses to 0.66 percentage points. This performance reflects the constancy of our structural loss reduction initiatives supported by integrated management, the use of analytical intelligence, network modernization and operational discipline across all of the group's distributors. In the period under review, seven of our [indiscernible] are already operating below their respective regulatory limits. Even in distribution on the limit, [indiscernible]. We observe a downward trend in losses over the last 12 months, reinforcing the effectiveness of the initiatives implemented. And energy sales totaled 117 gigawatt hour, with a growth of 3.5% outperforming the Brazilian market, which contracted on an active 0.3% over the same period. And this was driven by the residential segment, up 5.1% and distribution segment as well of 2.8%, reflecting consumer base expansion, higher temperatures, especially in the north and [indiscernible]. Growth performance in sectors such as food minerals, oil and gas as well as the entry of new loads. This growth was broad-based with 8 of the 9 distributors post expansion with notable performance on [indiscernible]. On collection indicators, we recorded a consolidated collection rates of 97.80% over the last 12 months, the best historical results for first quarter. This performance was achieved despite a more challenging environment and reflects the evolution of our collection processes, leveraging analytical intelligence and reoperations. The deferred rate closed at the period of 1.4% and impacted by a nonrecurring effect related to the Grupo Telecom client undergoing judicial organization. And exclude this event, the educator would be continue on improving trajectory coming at 1.35%, highlighting the quality of our credit management. And regarding the quality indicators, or FAC. Our group distributors have already achieved the 80% target with particular recognition to [indiscernible] Southeast within they reached 100% compliance. For that 6 of 9 distributors already exceeded the regulatory target ,the 80%, the remaining ones continue to execute recovery and compliance plans. Bear in mind, this takes place that he earned. These performances all the more significant under the regulatory evolution promoted by ENEL since 2020, introduced more granularity indicators and higher standard for valuation, the quality of the service delivery. And take advantage of this moment in which we are discussing quality, I would like to highlight important aspect of our operational, regulatory discipline. Looking at the past 8 years, energies among the groups that have paid the fewer regulatory fines and penalties in the sector. When considering the average in Brazilian reals per consumer unit. This chart compares I mean, economic groups in the power sector and clearly illustrates consistent over time long term as well as the soundness of our strategy, long term plans rather than relying on emergency creative actions to address quality deviation. And also, I would like to highlight our customer satisfaction and recognition. The most recent release, Paraiba was named the best in Brazil for the third consecutive year. And the group was once again recognized as the most outstanding in the country. This results in addition to reinforcing the consistency of our managed model, with its focus on service quality, operation efficiency and customer entry, represents an important milestone within the regulatory environment. And moving on to another segment, the gas segment. We continue to strengthen our management structure, integration of businesses within the group strategy. And in this context, we recently announced a leadership change at ES Gas, who previously served as commercial and technical director. He assumed the presidency of distributor, showing having nearly 20 years of experience in the natural gas sector. And at the same time, [indiscernible] is now covering the holding of the group. That covers methane and biofertilizer businesses. This move reinforces our focus on nurturing internal talent, integration, capturing synergies and developing new growth platforms within the segment. I will now hand the floor to [indiscernible], who now present results, and he's going to be talking about Group's Distribution for business.

Thank you, Mauricio. Good morning, everyone. Thank you for joining the Energisa earnings call. And during this quarter, we observe progress across our key operational and financial indicators. The equity adjusted EBITDA, an indicator considers the act of Norgas alongside, EBITDA grew 3.5%, reflecting improved performance and the evolution of results. This movement is also reflected in the expression of the combined gross margin, which advanced 19%, sustained by operational gains in a greater efficiency and management. One more evolution, we expanded our customer base and distributed volumes, reinforcing Energisa's ability to transform the business in which it operates as well as roll-offs gas and broadening the group's portfolio. We maintain investment split, purchasing higher return projects and strategic expansion of infrastructure. The lower investments in Norgas reflect the natural phasing of projects and do not compromise the structural role of the segments. ES Gas meanwhile maintain the single investment record in the last year -- the previous year. I would also like to highlight the strategic levers that have been underpinning our opportunities in the second. For example, [indiscernible] 2026, it represented a significant event for the Brazilian energy sector. by reinforcing the security and reliability of the national interconnected systems through the contracting of gas-fired thermal plants. For Energisa gas segments, the auction also important opportunities for sector expansion and asset base strengthening. The contracted projects create long-term demand for the expansion of gas distribution networks. And considering gas and altogether, the projects associated of the auction, the amount has made a potential of BRL 367 million in revenue. In addition to significant demand growth and operational expansion opportunities, gas, for example, the project involves 7 new thermolatic plants and has made a potential of 3 million cubic meters per day. In the distributors, we observed significant capacity expansion and market potential across different states in the Northeast. On operational growth, Elestrin revenue predictability and creates conditions for the continuation of investments and the energy infrastructure, capture opportunities associated with the energy transition, supply security and regional developments. We therefore continue to advance the relevant agenda for the gas segment, combining growth efficiency and value creation. This concludes our overview of the gas distribution business highlights for the which continues to advance in infrastructure expansion opportunity capture and the integration of the group's platforms. I'll now return the floor to Mauricio who will continue with the presentation.

Thank you Fabio with your presentation. And now joining on to the Energy Transmission segment, as you can see on the slide here. This quarter, the regulatory EBITDA reached BRL 170 million increase by BRL 10 million compared to the first quarter of 2025. The reason was driven by the agro resulting 5.32% tariff adjustment for the '25-'26 cycle start of operations of the new assets. Next slide, please. And now speaking about in the quarter, deliver operational progress. Of course, it's different businesses in efficiency, commercial expansion and value generation. Combined EBITDA totaled BRL 64 million, a significant improvement compared to the compared to the negative BRL 11 million in the first quarter '25. We also see a notable improvement and market-to-market variation of the trading company's portfolio as a result of its strategic proposition. In distributed generation, we continue to advance with EBITDA growth of 8%, customer base expansion of 33%, improvement in default and a 4% reduction in the PMSO, reflecting greater excellence in sales and operational efficiency in the three market segments. Highlights include operational evolution with an additional BRL 69 million in EBITDA compared to the first quarter of BRL 5 million, with the growth of 3.6% in Energy million and cost control with 9% reduction in PMSO. In value-added services, we observed -- we had a 105% EBITDA growth and expansion of the operating margin compared to the first quarter '25, reinforcing those segments ongoing evolution. On a consolidated basis, we continue to strengthen the group's energy solutions platform expanding a recurrence and efficiency of the segment. Finally, turning to votes. We maintain the trajectory of rational progress and enforcement of its positioning. Within the group Energyst, total revenue will advance 64%, reflecting the expansion of the portfolio and the ability to serve different customer profiles in both the B2C and B2B business customer business segments. With [indiscernible] cash generation net income, we saw a slight contraction of 5% in percent, respectively. The main highlight of the quarter was the evolution of profitable caters and HOC, return to positive levels. This movement evidence is the efficiency gains, financial investment and the operational avatar of our fintech. We [indiscernible] acquisitions contributing to revenue diversification, customer relationships and value generics for the group. This concludes the highlights for the quarter. I would like now to open Q&A session, please.

Now we're going to be opening the Q&A session. [Operator Instructions] First question comes from [indiscernible].

You speak a little bit more of the PDD that you guys see ahead, excluding the one-off related to oil. There is a bigger impact at EMS because of the end of the subsidiary basically is impacted for the second quarter of 2016 ahead. How is the scenario -- how is the scenario for the distributors?

Good morning, everyone. Net revenue projection here. Ricardo, for the question. As you said on the question excluding with one-off, we have a result of 1.34 improvement from last year, reduction from December '25. As again, we can see the results of the short term here, as we have reported here, the improvements implies in the short term that we had in here. And we had a lot of incoming here at the short term. We can understand that with the actions that we have in here. We have a lot of good results in default and the one-off of telecom from the second quarter. We're going to be looking at the good moment that we have in here with the Sinhala program. shortly, we're going to be having a media campaign to have this -- the interest that the population they have, also the media that has been generated. And as the fact that even you talk on the MS, we have everything complete on the results. There's been a year with the change of the results here that the state had an extra expenses with the social income. And it also reflected in full anything like extra to be happening in the future on the rulings.

[Operator Instructions] Let's go to our next question. It's coming from [indiscernible].

I want to talk about the renewal of the concessions and the distributors. How is going to be working with the income after the reuse, you're going to be redimensioned, paid back or they're going to be -- moving on, normally is the stat that we are as they were. And talking about the perspective of the company on the unleveraged. As the tariff reviews, they're still going to be taking some time to start having an effect on the EBITDA of the company.

We're talking about the -- [indiscernible] There's not going to be moving along like changing anything. It's going to be the same way that it is. And the we're going to be checking only the income. They're going to be skipping positions and the depreciation is going to be happening, but long term, but the big effects of NR are going to be moving on -- after each anniversary on this action [indiscernible] differences. But as results accountabilities in here of impacting or not having, we are going to be further ahead. And about the leverage, as you can see in here, we have market dynamics that's interesting with Energy that we had a growth of 13.5% in the Brazil market. And the Brazil market had a depreciation of 0.3%, 0.5%. So we're going to be having a cash flow generation here. Something that's going to be coming here looking on within time on the future, the tariff reviews, and it's within the process. And so because it's on the cash flow that's going to be moving on with it, it's being discussed. So it's going to be bringing a relief because a readjustment on acknowledgments it's going to be happening at each period for 5 years. And we believe that this will end here. It's going to be moving online here. Is it going to be checking the depreciation of the conditions of the marketing here on the global and Brazilian situations as well.

[Operator Instructions] Our next question comes from [indiscernible] .

Congratulations for the results, the particular value for the investments is already considering the renewals of the concessionaries that were already anticipated?

Yes. On this case, everything is already considered in numbers of the concessions.

[Operator Instructions] We close the Q&A session and ending the video conference for the first quarter of 2026 from Energisa. The IR Relations apartment is available to answer any further questions. Thank you, everyone, and have a good afternoon.