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

[Operator Instructions] We emphasize that information contained in this presentation and eventual statements that may be done during this earnings conference call related to perspectives of businesses, projections and operational and financial goals of Energisa they constitute the beliefs and premises of the company such as -- information is currently available. Future statements are not proof of performance. They involve risks, uncertainties and premises because they refer to future events. So they depend on circumstances that may or not happen. Investors must comprehend that economic conditions, market conditions and other factors can affect the performance of Energisa. And it will conduct on results that may be different from an expressed. Now I would like to give the word to Ricardo Botelho, CEO of Energisa, so that we can start the presentation. Ricardo, please go ahead.

Good afternoon to everybody. First, I'd like to thank the friends, all you guys on this Q4 presentation. And I'd like to let you guys know who is here in this presentation. Mauricio Botelho, the CFO; [ Fernando Maya, ] the regulations vice brands [ Jorel Soleil, ] Network Vice President; [ Robert Bode, Hines ] Vice President; [indiscernible] Revenue Protection Director and our Investor Relations team as well. But before we start, but first, I would like that you please pay attention to the warnings that we have on the slide before you take any action of investing in the company. And starting our presentation for this quarter, I would like to highlight some of the events that happened on the companies that we work on. On distribution, it was like a really good year for us. It was the greatest company on energy segment this year. We are 1 on 8 topics on 12 and we won we were elected the best company and beyond 500,000 consumers as well. And regarding the minimum wage, minimum numbers of consumption as well on these numbers. On energy losses, we are 0.85% percentage points below the target limit as well. And because of the regulatory items, on the privatization, we are working right around. In these results, we have an efficient capital as well in the last few years, and these results, they are recognized for our customers as well. On distributed generation, we got -- we invested BRL 842,000 million on the year 2022, and we got 108 million megawatts peak on 3 power plants this year. In regard an improvement of 57% as well, 348% on market presentation as well and the regulatory time on this period as well and our stock as well. We captured some market as well and shareholders as well. It almost doubled its results on the last few years as well. With the new contracts that we acquired maintenance and solar plants and distribution and also on automation panels and additives as well. On transmission, we evolved our portfolio relevantly in 2022, acquiring on an auction on transmission Energisa Amazonas 1 and 2; and three, 3 lines of energy on [ GEMINI ]. And we did this with 15 months before it was expected. Totaling this, we have 8 operational lines of table that represent BRL 665.5 million of revenue, ending total about BRL 116 million of repo with our 4 other construction operations. And entering our operation, solar operations on Rio do Peixe I and II on Paraiba marked a return to the portfolio of the group. With 70-megawatt peak energy installed capacity and working with Energisa, it's 100% higher until 2027. And also in 2022, we did an increase of capital of BRL 738.3 million. with the subscription bonus of the sale and mission of debentures of Energisa with [indiscernible] With this movement index became the third biggest shareholder in Energisa and this was my presentation, and I would like to give the word back to Mauricio Botelho to present his main results of the year and quarter that ended December 2022.

Good afternoon. I appreciate your presence here on our earnings conference call for the quarter and the year as well. And with the results, the results of 2021, they were represented as well. And we identified it with our numbers. The need to recheck some of the information and the results that wasn't checked as well and to have a better reflection comparing these periods and having clarity on our information, financial information to show you guys. So we're going to show you previous presentations as well and about the stock as well. And then not working on revenue -- it didn't impact on the customers as well. And with the taxes and we have any difference on volumes on the revenue that wasn't checked as well with this volume that we have here over. But over the taxes that we have the methodology, we'll be able to show you guys here. We are talking about 0.6% in 2022 and 19% in [ 2022. ] And this is going to show any difference with our dividends even with Energisa for its partners. And these numbers, they keep stable. So the results that we have available on screen with you guys? It's going to be compared to 2021 years compared for to check that. And in this quarter as well, virtue the adjustments that I mentioned earlier here. And with the recurring information, the conventional EBITDA, excluding the B&R of the distribution and including the regulatory transmission regulatory EBITDA, adding -- we took off the effects that were -- didn't impact the EBITDA. And the recurring EBITDA increased 8.3% and reached BRL 1.44 billion in the fourth quarter 2021. And in 2021, more precisely in the first quarter, we had a nonrecurring effect of BRL 95 million. That helped on the results on this year. And on the results of the check. Further effect that we had here. [indiscernible] effect of the EBITDA. All of them check on each quarter on this way, reflecting better comparing between quarters. We consider this the nonrecurring one. Everything that didn't belong in the fourth quarter. So the adjustments on -- the adjustment was on the first quarter was with BRL 152 million and BRL 226 million in the fourth quarter of 2021. By adding everything, the adjusted EBITDA had a growth of and reached BRL 5 million -- BRL 5 billion sorry, and now the EBITDA without the adjust had a growth of BRL 1.44 billion. And without the adjustments, it had a growth on the same level, 9.1% in the first quarter and 19.2% on the reach and reached almost BRL 7 billion. Next slide, please. Sorry, just regard to talk about the PMSO over -- the group keeps working with discipline. On the operational costs that as you can check, the PMSO had a growth of 2.1% on the period, 2.5%. $294 billion the growth was below the taxes 5.8% in this year. And talking about distribution, that's the biggest part of our cash flow generation. We had a reduction of PMSO of 2.1% and 1.2% with the year and got this number. Now talking about the net income. Like we talked about EBITDA. We showed net recurring net income, including effects on stock that we have marked the stock options and subscription bonus. This quarter, the net income -- the adjusted net income was BRL 535 million, 35% bigger than the BRL 396 million registered in the fourth quarter 2022. The nonrecurring effects it had a negative of BRL 120 million, while in 2021, it was a positive of BRL 50.6 million. In the year of 2022. The net income, it had a growth of 4.4%, totaling BRL 1.7 billion and checking about the profits, the revenue at the year, it was about BRL 2.4 billion, representing about $12 billion. It had about a loss of 13.7%. Most of it explained by the increase of the expense -- financial expenses and taxes higher than the economy. Next slide Please. Talking about the investments. We had an expressive growth comparing to the year 2021. Being influenced mainly by the distributors that had a tax review, and we are going to be passing through a tax review into 2023 in meaning MET, MS and in [ Abran Rondonia Agri ] at December. Talking about April, we got a base of we had an increase of [ 41% ] and EMS, we got a base of BRL 3.2 billion, representing 33.5% and [ Sage ] as well, protocol growth. It represented about 25%, BRL 1.3 billion. And we believe that once confirmed this information, we're going to go -- we're going to have a good recovery in the second quarter. Talking about the investments of the year. We had a total investment of BRL 6.5 billion against BRL 4.2 billion in 2021. The total growth on the distribution segment. It was 52.7% and reached the start mark of BRL 4.7 billion. And adding it's important to mention that investments on distributor generation, the region BRL 843 million. And in transmission segment, it was BRL 592 million. Next slide, please. So on the slide, we're going to be talking about loan-to-debt besides the growth that we've got and the investments and the taxes increase its levering, but we kept like healthy below the limited of 4.25x the debt comparing to the same time the last year, we had an increase of 0.2x closing the year at 3x the debt I'm talking about the bimester of 2023. So as we showed on our release I'm talking about events of -- 20 events. And we worked on to [ MR15 ] getting information acquiring information and reached BRL 1.8 billion and BRL 1.4 billion as well on capital and reinforce the cash flow on 45% of the debt we'll be working on in 2023. Talking about on other information as well that we have on the [indiscernible] and it's about BRL 957 million and then as well. And it's going to be available, I believe it's going to be available on this semester as well. And now we're going to be talking about our distribution segment. On this slide, we have the energy market here, [indiscernible] . And the growth that we got was 1.4% comparing to the same time in 2021, highlighting the North regions, that were benefited with the hotter weather improvement of loads with good highlights to [indiscernible] that had a growth of 6.4% as well. Moving on with the recovery, both COVID. The commercial class and the power, the took it up with 50% of the increase of the results that we have here. On the fourth quarter of 2022, the total consumption of energy with the Energisa Group they retreated 0.3% comparing to the next year -- last year, sorry. We had a decrease of the consumption of rural classes. And the factor is it's because of the Resolution 901 with the cascading classifying customers as well? And as we can check about weather, we'd be using less irrigation. Okay. Moving on to the next slide. Talking about losses on the energy losses in the fourth quarter, it was 0.51 per central points, small lower then the results showed up on fourth quarter 2021 and 0.14 lower than the third quarter 2022 and about the restraints that we have available with the pandemic and the total reduction losses, it was up 29 gigawatts. And between the 10 distributors of Energisa Group, 9 presented a reduction of the losses related to the same time last year. And the consolidated of the group, we've reached the lowest landmark of losses. Only [indiscernible] is a little bit off the edge, 0.04 in above the levels and we must highlight here as well the excellent performance of none that on the fourth quarter presented that we got inside the limit of the loss with 1.85 percentage points comparing to the same time 2021 and comparing to December in 2017, one year before the IPO. And we had an improvement of 5.68 percentage points and in [indiscernible] as well, it was of 7.11 percentage points. And we keep investing in technologies that invest technologies, checking the on wrong usage, we are inspecting checking fraud, and we're protecting our revenue by doing this. And on the next slide, please. We're talking about that, in fact. We've kept our good performance on the last few quarters, staying below the regulatory level and the main high-- some of the main highlights are [indiscernible] has reached the best result of history both [indiscernible] had a reduction of 3.28 hours related to December 2021, in fact, had a reduction of 10.42% and equivalent to 0.85x related to 2021. On donnas well, the capped the improvement in tendency and they reached the best results on the history for FEC with a reduction of 2.51x and 1.55x, respectively, related to December 2021. Next slide, please. Closing our results of 2022 with BRL 368 million with provisions and in 2021, this result was about BRL 240 million. But with comparative effects, we must expect -- exclude the nonrecurring effects that have in 2021, and it brought a positive effect of BRL 9.4 million. And by the way, we just by Fed we had a number that went to 1.44% to 1.28% by '21, a difference of 0.16 percentage points and you can check as well the decline in trajectory by recovering along the year. We are working simultaneously revisiting our groups to try and improve our service. Besides our work here, we don't know how it's going to be working. And next slide, please. And now talking about transmission as well. The year of 2022, it was a lack of a big transformation for us. We concluded the acquisition of GEMINI for BRL 822 million. Composed of 3 transmission lines already operational that allowed us to do more than duplicate the revenue of the segment. We acquired an auction on the middle of the year, the Energisa Amazonas 2 with our other projects that we have on Amazonas and at the end of 2022 and the beginning of 2023, we completed the construction, and we started our biggest project. It's Energisa Tocantins 1. Adding everything, we have 8 operational lines of [indiscernible] and 4 in phase of construction. We are focused to deliver all these projects as planned. And these constructions that we have, and we did this like with an average 15 months before the expected time that we did. So we improved the revenue for the group. Since we got inside with Energisa Group on the Transmission segment in 2017, we delivered a relevant evolution in the receipt terms -- in revenue terms, as you can check. We had a growth from BRL 83 million from to BRL 781 million as considering. Next slide, please talking about Energisa here as a note. Energisa is the brand of the group that we united the business not regulated or distributed generation working with this energy on the free market with the one-stop shop concept. In the year 2022, we added 128.3 megawatts peak of ones in 32 new power plants. And we closed the year with a total of 181.1 (sic) [ 188 ] megawatts peak and 53 power plants operational. The equivalent to support a city of 0.5 million and we must highlight as well that on the 2022 the growth of the installed potency of the company. In Brazil, it was up 78% and Energisa was greater. We had a growth of 215% making it possible to be supported on micro -- small and medium companies, and we got a base of 3,000 customers as well and talking more about this topic. And we were ahead of a lot of restrictions with [indiscernible] as well. And we got an improvement and increase for in other areas as well, and we keep compromised with our plans of growth in the [ GD ] and talking about commercialization as well. We had an excellent performance in 2022 of 43.5% with EBITDA against a negative of BRL 26.2 million in 2021 and reversing got a profit of BRL 16.3 million. And this turnaround was because of -- because we got the right opportunities and the best moment as possible to adequate our portfolio of contracts. And talking about medium and long-term lots we totaled 1.9 terrawatts and 100% generated, and we got 17 megawatts median on our power plant on [indiscernible] and so, [indiscernible] 1 and 2. I worked on for the period of 2023 to 2027 and complementing the energy solutions portfolio for Energisa, talking about aggregated value services. We registered an expressive growth of net revenue of almost 80% with the increase of the construction and management line mainly because of Tocantins transmitter 1 because it got on judiciary recovery. And you must highlight as well? And we are now achieving another O&M contracts of transmission. And I finish here my presentation refer to the year 2022 this quarter. and we're opening -- we are open to Q&A session.

Now we're going to start the Q&A session. [Operator Instructions] Now it's going to be our first question. from sell-side analysts from [indiscernible]. We are going to open or to that you can ask your questions Marcel, please go ahead.

Good afternoon. you guys I'd like to have 2 questions. The first one, it's about the concession renewals with -- and these stocks already started if they already started or you like you were reading about the -- some information as well. And your question is about GD and CapEx. And if you noticed any decreases on panel prices and the profit is going to be getting better or not and about the taxes. And I'd like to know how you guys are seeing this and how we can work on this moment on CapEx.

Good afternoon, Marcelo. Answering your question, Okay. The concession information, it's legally available construction contract and then the constitution as well, and it's possible to be working with the public. The company understands that this extension, it's not the best option that works with this public interest as well but it keeps working on with the services available that we have here. And this change that's been discussed. It's a permanent situation. And the regulation, it works each 5 years changing and we end up with these information.

And you must not mix it with the discussion of extending the contract was not any way to work with this contract? It may show a distortion by comparing the results, and it may show the reverse resolution that we expect and checking about the tax charges and improvement of the quality of the services that we have here. And the company understands that the ideal situation would be a faster resolution of the situation that's because of some concessions. It's being near to its end and it may compromise to the flux of the investments, and it works against the public interest. That's the main goal to be reached. But talking objectively about naming the Secretary Executive Secretary. We don't know his position his side of the situation, we didn't have an opportunity to talk with him. But must may have the situation shortly soon. And answering the second part of your question for myself. And to put some points you're able and the modules that we bought and we -- that we may have to do this on this year. We already did everything and deliveries. They are already happening. They are scheduled and about the price of the plates, solar plates that we have here. Yes. And it had a small decrease of the value from what we expected in 2022 and mostly about resulting about the delivery situation costs that we had here. So we could see this difference here stating 2023 against 2022 and about the tier. And so we are in a competitive market here showing up, and we must show our position. And we don't show this. We keep this inside as a strategy. how we work, but thank you for your question.

[Operator Instructions] Onto our next question is from Guilherme Lima from Santander. We are going to open your audio so that you can ask your question live. Please go ahead.

Good afternoon. I have 2 questions here as well. First one, I will talk about the topics, the concession topics and with the interactions that we have with the technical information of NL MME as well. If you notice any align with proposals on how we can talk about this concession renewal? And do you understand if it has any damage comparing to any other option, about curing some hard as well. And if you can negotiate something else about the delivery of these services as well. If you understand that there is any option of able to work with this what does renegotiation with these contracts as well with the context with the distribution? And the other question is about the results, if you could improve the numbers with the retroactive results that we had on 2021. I'd like to know if it affected any quarter of 2022 and how you guys noticed this? How you guys know and how you guys can show us about these numbers changing? And about the Texas numbers of the 2022. And if you can tell us about this about [indiscernible].