Energisa S.A. (ENGI3.SA) Earnings Call Transcript & Summary

[Audio Gap] We inform you that this video conference is being recorded and is going to be available at the company's IR website, where the current presentation is available. We highlight that for those that may need simultaneous translation, we have that tool available at the Globe icon written Interpretation located at the bottom area of your screen. By selecting it, choose your preferred language, Portuguese or English. For those listening the video conference in English, we have the option to mute original audio in Portuguese by clicking on Mute Original Audio. [Operator Instructions] We are counting on your comprehension. We highlight that the information is contained in this presentation and eventual statements that may be done during the video conference related to business perspectives, projections and operational goals and financial goals from Energisa, they constitute on beliefs and premises of the administration of the company, such as information currently available. Future statements are not proof of performance. They involve risks, uncertainties and premises because they refer to future events. Nonetheless, they depend on circumstances that may or not occur. Investors must comprehend that general market conditions and other factors may affect the performance of Energisa and conduct to results that differ materially from those expressed in such future statements. Now I would like to give the word to Mauricio Botelho, Financial Director and Investor Relations of the company, to start the presentation. Mauricio, please go ahead.

Good morning, good morning. It's a pleasure to be with you guys for the presentation of the third quarter of Energisa. With me today, we have our CEO, Ricardo Botelho; the Vice President; some directors and the Investor Relations team. I kindly ask you guys to observe the disclaimer at the beginning of the presentation before any decision taking of investment. Please on the next slide, starting our presentation. We are going to the highlights of the period that was marked by relevant advances in many segments. On the consolidated adjusted EBITDA recurring had a growth of 17%, totaling BRL 2 billion. We're highlighting the distribution of energy that had a growth of 14% on the same indicator. And we had a good evolution in many business lines as we're going to be seeing next year. Following the disciplined cost management, our PMSO consolidated had a growth of only 2.8% at the quarter and the growth of almost 0 considering the 9-month period of 2025. The recurring profit EBITDA, they had a loss of 13.6% influenced by -- with big financial expenses at the period. Given the information for the distribution of energy, EBITDA adjusted recurring had an evolution of 14% in the quarter and affected by the growth of 2% in the market with like a big basis last year. We should highlight on the third quarter of 2024, we registered the biggest consumption in this quarter in 11 years. Talking about the PMSO despite a growth of 7.9% on the quarter, accumulating the 9 months, we had the same financial discipline with a growth of 4.3%, so below the inflation. Another point for us to highlight at the segment of distribution of energy was the lowest loss from energy and consistent performance on indicators of quality. On the highlights as well, we're talking about transmission of energy. We had the expansion of the margin on the regulatory EBITDA with the reduction of 26% of PMSO in the quarter. Talking about the natural gas, we had some evolutions highlighting the ES Gas and Norgás distributors. They had a growth of 26% and 28%, respectively. At ES Gas, the development of the distributed volumes and review -- tax review, they contributed for a good performance at the quarter between the distributors invested at Norgás, Copergás was the highlight with the excellent recovery in EBITDA and the net recovery related to the third quarter 2024. Talking about the distributed generation division from Energisa, we had a great performance operational and financial this quarter. And we keep like on the continuous recovery with loss of churn and debt. We had a great PMSO that had a reduction of 33.4% and the EBITDA totaled BRL 43.2 million this quarter and had a growth of 24.3% this quarter. Next slide, please. The results economic, financial, they reflect the consistency on the execution and quality of the portfolio that we have even in the challenging scenario of macroeconomic, and we show like a good effort with this. An additional comment here like in our like last 5, 10 years, our growth was 15.2% each year and 17.7% each year, respectively, each one in the last year. On the net profit, despite the tariffs challenging in this moment, we had a growth in the last 5 years of 23.5% in the last few years -- in the last 10 years and 31.3% as well. And talking about the quarter as well. On controlling here, net profits totaled BRL 430 million in the quarter and BRL 1.5 billion on the last 9 months. Efforts are being made for the recovery of the profit with measures like with cost efficiency and improvement of overseas without working against our deliveries. And we're going to be talking ahead with these measures, successful measures on the cost reduction and indebtment. And talking about investments on the next slide, the consolidated investments in 9 months, we are 0.1% below what we did in 2024, mainly with the entrance of the operation of projects in construction and transmission and smallest expansion park on the distribution generation. On the gas distribution segment, ES Gás, we had an expressive growth of 29.1% in the last 9 months, highlighting the expansion of net and implying the number of customers. Talking about the indebtment. The quarter was marked with many numbers that we had totaled BRL 7.6 billion with an average cost of 100% of CDI. We did an exchange offer operation and 84% of the people like work with this corresponding to BRL 3.2 billion, which resulted in enlargement of 5 years of our indebtedness on the cost of the operation. And today, we did another debentures action with the cash flow with here in the group, BRL 1.77 billion. And the leverage indicator remained stabilized in 3.2x the net debt and EBITDA adjusted for the 3 quarters consecutive. So we keep here compromise dedicated here, working with all the opportunities to work our debt profile and structure the capital of the company. And talking here, talking about the distribution of energy here and all the results that we have here, highlighting the cost control and the evolution of indicators -- operational indicators such as we talked here before. The permanent focus here and to do the correct allocation of capital, we have a lot of consistent results for our customers that benefited with the investments and improved quality. As we're talking before as well, on this quarter, we had the lowest historic level of total losses at all settings of actives with 7 of the 9 distributors operating below the regulatory limit. At the same time, we expanded the tax consolidated with 97.16%, the best historical results for the third quarter. So we're keeping excellence. We're talking about losses and recoveries despite the challenging scenario that we have here in the country. We are adopting here a lot of methods and with -- and working with a lot of frontiers with recoveries of receipts in here, talking about quality, we like that, in fact. We keep inside between -- inside the limits with some distributors like overflowing with our own record. So the general indicators and quality, talking about the individual results of the electric groups, and we're going to be working here with like greater attention. Talking about energy consumption, we surprised here in the quarter despite the temperatures more cool with 40% of the day above the average against 65% in the third quarter 2024. We are observing the growth in segments like commercial, industrial, highlighting Central West and Southeast in our fees. Talking about Paraíba and Sergipe with a great growth. And we're talking about Brazil as well. Talking about consumption, the regions that we operate keep having a growth bigger than the average growth with 2.3% in the quarter and 0.8% accumulating in the last 9 months despite the big penetration of the distributed generation. Talking about transmission, we reached 83.2%, influenced by the reduction of 25.6% from the PMSO. We highlight the authorization of efforts by the regulator. We generated RAP of BRL 8 million. And talking about construction losses, we keep compromised with the entrance with these projects. In Energisa and the free market, the revenue grew 46.3% driven by prospecting new customers. Despite the spread results and market-to-market of directional trading operations from previous years have been hurting the division's results with gradual elimination of exposures, these effects tend to be eliminated. In distributed generation, we are performing a turnaround after a very negative period of sales and results in 2024. Results have been improving each quarter. Churn reduced 3 percentage points and sales increased 60% in the quarter-over-quarter comparison. As a consequence, we showed 24% of the evolution in the EBITDA, which reached BRL 4 billion in the quarter. In the value-added service segment, we had a recovery in the sales pipeline for upcoming quarters also recovering with new expansion projects for industrial and commercial clients. Energisa specialized services are increasingly valued in the gas distribution segment. ES Gás continues producing excellent results, 26.3% EBITDA growth and 17% gross margin growth in the quarter. Investments remain intense with more than 30% increase compared to the last year. Contributing to the results, distributor volumes expanded by 14%, number of customers by 8.5%, and we went through the first tariff review cycle as a prioritization. And Norgás distributors, the scenario is similar. Gross margin with 21.6% growth, totaling BRL 143.5 million in the quarter and the EBITDA of BRL 85 million. The equity equivalents result at Energisa was BRL 25.4 million in the quarter. These results reinforce the growth potential of the natural gas segment, and we are beginning to see the first results of implementing good regulatory and operational management practice from Energisa, which confirm the success of capital allocation in the segment. Next slide, please. Now we're going to be talking about -- as we announced on November 3, we completed the acquisition of transaction of 52% of Lurean, which operates in waste treatment and organic fertilizer commercialization. The plant is strategically located near various industries, generating all organic waste, agricultural producers demanding fertilizers and large natural gas consuming industries. We intend to modernize and expand the waste treatment in new fertilizer production unit and build the second biomethane production plant of similar sizes to [ Agriq ] that works in Santa Catarina. This transaction accelerates the company's strategy in the biomethane segment and reinforces our positioning as a provider of complete low-emission energy solutions to meet our customers' demands. We conclude here the main highlights of the quarter and move to the question-and-answer section. Operator, please.

[Operator Instructions] The first question is from Raul Cavendish, sell-side analyst from XP.

I had actually 2 questions. The first one is referred on the ANEEL that they published the technical note talking about investors of high investments going to the wide tariff and with consumption each point checking how Energisa is going to be positioned on this market solutions? Talking about the agenda of peak shaving generation with the measure? Or if this is a vertical that's going to be relevant with Energisa as a distributor for leveling? Want to penetrate on this market -- to enter in this market with like a high number of rentability and talking about the move. We didn't advance this on [ 1304, ] like public statement talking about the politics. We're going to be talking about this a lot and how the company is going to be talking about this debate in Brazil in the next few months, how the company is going to be moving on this?

Okay, Raul, I'm going to be splitting in 2 people. [ Pedro Gomez ] is going to be talking with this with Energisa. And the second part, Fernando Maia is going to be answering, okay?

Okay. Thank you so much. Thanks for the question. Talking about the peak shaving and the time shift. We are positioned. We are focused on the full green tariff. We are working on this area. Distributors with North and Northeast where we have a bigger difference each point in the white tariff here, it's too recent. So we have to counsel on this. We're still like digesting as we say, this new reality to adapt ourselves or action points.

Raul, complementing with the tariff, the white tariff -- that is a measure that ANEEL is still thinking about taking, looking the reality that we have in here that we have an excess of energy and white tariff when it was implanted like as an option, it didn't work like as much. Not at mandatorily, we're going to be providing an economical value for the consumers that they can use this with a cheaper price. So when we have an excess of energy, it's going to be a benefit for the systems. And it's going to be like a win-win. And we are already testing Sandbox with tariffs. Energisa is like really advancing with this to implement this with these tariffs. And talking about the second question about [indiscernible]. It was like an attempt and it came from ANEEL to capture those benefits and the distributors, they insist that this should be like a [ distributing ] of the fiscal benefit. It was created to incentivize investments on the regions of North, Northeast. And if you capture it, so we are not like helping it. The distributor would be without the benefit and with a restriction of the usage of these reserves then. So this would be like working against it. It's going to be worse for the consumers. So we're working like this, even if this like comes back as a law, the debate is going to be like long, and I don't believe that this will be implemented.

[Operator Instructions] The next question comes from Daniel Travitzky, sell-side analyst from Safra.