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

[Foreign Language]

[Foreign Language] generation segment move fastly at a growth of 74%, totaling BRL [ 163 ] million at the quarter. On the next slide, please. Despite the challenging macro with interest rates like high enough, the leverage shows up that we owe below the covenant, 4.25 of the [ gradual ] EBITDA, just in covenants. Beside reduction of the liquid debt, our cash flow in the company closed the quarter with BRL 7 billion facing the BRL 6.1 billion at December of 2022 compared to December 2022. We had a decrease of 0.1x, reaching the level of 2.9 of the liquid debt of EBITDA. Follow some highlights on the distribution segment. In the first quarter of 2023, the energy consumption market kept stable comparing to the same period of last year despite the reduction. As we can see at EMS, ESS and [ EMC ], we must highlight the great performance of distributors located in North and Northeast. That balance the results of the group. The main positive influences came from residential and [indiscernible] classes. Mostly on food, beverages and metals, the growth of consumption was motivated by the temperature -- high temperature on North. Except the calendar of the positive growth in some distributors and growth and activity in the industrial class. In minerals nonmetallic, fertilizers -- on the next slide, we're talking about losses. The total loss we had an interest comparing to the last quarter. While on the fourth quarter 2023, we got 0.68 percentage points below the limit. Even more specific this quarter. The first quarter on the [ O&M ] represented a reduction of 1.3 [indiscernible] percentage points related to the same period of last year and a reduction of 0.27 points related to the last quarter and in [indiscernible], it became 4.88 percentage points below the residential [indiscernible] in comparing [indiscernible] equity with the values of December 2018 when the core [indiscernible], we have a reduction of 5.34 percentage points and 4.69 percentage points, respectively [indiscernible] results today show the success of these strategies fighting against the losses applied in all distributor group, especially on the companies that we acquired in 2018. Following here the analysis of the quality indicators, the distributors of the group pick up excellent performance in the quarter with a lot of distributors each reaching historical minimum [indiscernible] indicator being this one [indiscernible] Mato Grosso, Mato Grosso do Sul and [indiscernible]. The group with [indiscernible] showed the good turnaround and the good management of investments here. So showing that we can transform everything and moving it and all indicators that we have here. Of all investments that we have made, it was not like locking, but it was a virtue of the company. Now we're talking about -- in the full year, we had a report in the last 12 months, 1.24%, showing an improvement of 0.09 percentage points related to same period last year. And financially speaking, it was a reduction of BRL 41 million between the quarters, [indiscernible] 88.6 quarters -- fourth quarter 2023, it'd be mostly [indiscernible] about residential commercial [indiscernible] that they got the biggest share of clients of [indiscernible] that contributed to this default tax rates. Just a more highlight here about the future of the corporation of the Sergipe [indiscernible] that happened. Now we are a joint company, and it's possible to reduce the expense -- operational expenses and bringing benefits, regulatory aspects, operational aspects, regulatory losses in Varzea Grande as well that [indiscernible] joint the concession contract of Borborema that was [indiscernible] of 2013 was extended to 2021. And the slide you can show results of how we're working at March 2023. Now following about transmission. We follow up with [indiscernible] construction, and these projects, they add up to BRL 116 million of [indiscernible] in 8 operational transmissions, totaling 665.5 million of [indiscernible] share of optical fiber. [indiscernible] of this project according to the rules of the ruling, it allows to some -- adding to the project that are being concluded with some defined goals to the commission and sequential phases and one has a schedule of investments by phases. Today, we received 30% of [ rep ] in our [indiscernible], and we expect to get at the end of 2024 50% [ rep ]. We expect to end -- finish it in 2027 when we will have all the operational lines available. Now we're going to be talking about Energisa. We had an advance 205% comparing the quarters with [indiscernible] energy, and Brazil had a growth of only 80%. This growth reflected on the great performance, 3x more of sales that we had on 2022 with an increase of 69% on net revenue, totaling BRL 89.8 million and 55% of improvement on EBITDA, reaching BRL 11 million. And the fourth quarter also invested BRL 163 million, and adding 23 megawatt peak of capacity, closing the quarter 211.3 megawatt [indiscernible] peak installed. The growth of 169% comparing the period -- same period in 2022. And with this, we avoid 42,000 tons of CO2 in the atmosphere. And talking about the free market. We had an improvement on the EBITDA indicators and profits much -- basically what happens on the increase of our market values [indiscernible] the anticipated sales of new contracts and [indiscernible] increases of the price [indiscernible], medium long term, bringing a positive result of BRL 81.5 million. And in the quarter, we closed some deals to new clients 6x above the registration in the first quarter of 2022 and the medium-term contract varying into 2 to 5 years. On the aggregated value segment, comparing the quarters, we had a growth of 17.6% growth. We expect online and the maintenance of lines to change the substation high maintenance. And we close our -- end of our presentation, and we are open to the question-and-answer session.

[Operator Instructions] I'll start with our first question. It comes from Guilherme Lima, sell-side analyst from Santander.

I have 2 questions here. First, can you talk about the development of the company? If you can give us an update on how it has been working out with the government. What do you expect to happen about the proposition, concerning the companies and financing all the investments that may have if we think that we're going to be having a lot of [indiscernible] about this? If we have any more close up to negotiation and about the updates on ES Gás. Give as an update on how the process going on. And what do you think about the growth here?

Thanks for the question. I'm going to try to answer, first, the last question about ES Gás. We have the update of [indiscernible], allowing the recovery of the company [indiscernible]. It may happen maybe up to the end of June. And after this, we will be able to give more details about the process about growth for the company. And as we can see, as we start over after concluding the process of [indiscernible]. And I believe this must be an aspect that we'll be able to talk about it after the [indiscernible]. And talking about the renewal of the concessions, I would like to say that it's really efficient in here. We had a lot of income, a lot of benefits available that we can talk about the process. And despite the extension of this process as well, it happened in 2015, 2017 about the concessions, let's get through this part and the contract that got applied in 2015 has been working nicely, and we'll be able to work with [indiscernible] with a lot of costs with the customers, a lot of quality, a lot of index as the numbers to show up that we had on the last year's [indiscernible] on this process. And we must consider like a risk. It will show balance on our concessions. It will be good to look for the future, but not talking only about the consumers, but the whole chain. And we have certain investments that will bring -- that can bring some losses to the country here. So we defend the extension contract as we did in 2015, 2017, because with this raw model, it works. The same model works is you approve this, and they gave a lot of benefits we've been working on with the contracts that we have here. We capture the essence of what the consumers need and as we work on. And it makes easier to be working with, with the companies -- comparing the companies [indiscernible] year. So this is the model that had the efficiency on it. I'm talking about the guidelines that you must have on the consumers as we work on it. So the government already work with it and simulated, and we are on with them working with it. And sometimes we redirect these rules to the consumers about the renewal on each concession and the additional responsibilities that we have here working on developing it with the guided direction, following up with the customers. And any city that didn't have [indiscernible] country as we work with, as we execute this public policy with them as we develop it.

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

I have a couple of questions here. First question about a complement on the question about the concessions and what have you. I would like to understand if it's already find a way that's going to be working on the full consultation about the renewal of the concession. And what level we are, if you can share with us. What will be proposed about the contributions? And the second question about the appetite for investments. Are we appetite for investments about ES Gás, looking about the opportunities that we may have in greenfield or brownfield as well that may be on the market?

About the first question. This process isn't defined yet. Just portraying the fact about the process, about the renewal and the extension of the concessions in here. We expected [indiscernible] from them, such as the company, such as the government, something that may be good for everyone. And we believe that it must happen soon, so we must look at the schedule and what happens. About ES Gás, Mauricio will talk about the [indiscernible] location.

So about the appetite, as you said, our focus in here with this approval, the [indiscernible] that will be completed in the next 15 days will be focused on transforming the concessions around especially to come. So -- but investments that we have here available allocated, it's not expressing. So it's not that something like strong demanded. We always want more, and we're going to be discussing with the regulators what I have available and work with the project. That being said, we keep always looking about the market opportunities available that we have here, such as greenfield and brownfield. What about generation. Today, the market conditions that we have in the market, they aren't organized, not adequate to the market. It's new projects. So it depends on what should be available, we are going to be walking -- look about the option that we have here and see if we can obtain anything profitable to be work with [indiscernible]. Thank you

Our next question comes from [indiscernible], sell-side analyst from Itau.

Can you listen? Perfect. My question is mostly about the new methodology of cost on regulatory levels in such forward time. What's the perspective about the conclusion on this shareplan? Is this the same? And what tax reveals do you expect that this being covered by this new methodology?