ISA Energía Brasil S.A. ($ISAE4)

Good afternoon, and thank you for waiting. Welcome to the teleconference announcing the results of ISA Energia in the first quarter of 2026. [Operator Instructions] We'd like to inform that this conference is being recorded and is going to be made available on the International (sic) [ Investor ] Relations site of the company at isaenergy.com.br, where you can find and download the presentation via chat, including in English. [Operator Instructions] The declarations contained in this presentation concerning the business of ISA Energia Brasil and its potential to growth are forecasts that are based on the expectations of the administration regarding the culture of the company. These expectations are highly dependent on changes in the market and on the overall economic development of the country and other international factors and are subject to change. Future considerations cannot ensure development because they involve uncertainties and assumptions and depend on the circumstances that may or may not happen. Investors need to understand that general economic conditions and market conditions and other operational factors can impact the future performance of ISA Brasil and bring results that are completely different to those that were made in the forecast. Today, we count on the presence of the executives of the company, Rui Chammas, Director and President of ISA Energia Brasil, and Silvia Wada and the other directors and executives of the company. Now I would like to give the floor to Rui Chammas.

Good afternoon, and thank you for participating in the teleconference announcing the results of ISA Energia Brasil in the first quarter of 2026. I'm Rui Chammas, CEO of the company. And today, I'm joined by Silvia Wada, CFO, Investor Relations and New Business Director, as well as other executives to present the results released yesterday and provide an update on the main topics of Energia Brasil. Please move on to Slide 3. We started 2026 reinforcing our performance, and the company focused on consistently generating value to our shareholders, supported by operational execution, excellence and financial discipline. In the first quarter, we delivered sound results. In Q1 '26, our net revenues grew 8.3% to BRL 1.2 billion. We kept our operation's expenses under control and they were less than the inflation of the period. We also recorded a growth in EBITDA and net income, which achieved 10.6% and 6%, respectively, up to BRL 1 billion of EBITDA and BRL 357 million net income. I would also highlight the main advancement of the sustainable growth strategies in 2 relevant significant power connections that enabled us to receive BRL 330 million in annual permitted revenues. In addition to greenfield projects, we are also advancing in reinforcement and improvement. And in the first quarter of 2026, we have already invested a total of BRL 1.2 billion, an amount 10% higher than invested in the same period of last year. As you may see, in March, we announced the unwinding of asset positions that we jointly hold with Axia Energia. And at the same time, we will cease to hold the stake in IE Garanhuns, which will become 100% owned by Axia Energia, and for which we will pay BRL 1.2 billion at closing. All these achievements and advancements are being made possible by our financial discipline, which, as we have been demonstrating over the past few years, it's important to balance our growth with the remuneration of our shareholders. In February, we are announcing dividends related to 2025 in the fiscal year of BRL 1.2 billion, keeping our commitment to 75% payout of regulatory net income. Also in February, we completed our liability management operation with the 21st debenture issuance amounting BRL 3.9 billion, entirely vested to the prepayment, with which we managed not only to extend the term of the debt, but we also reduced the average cost. More recently, we completed the 22nd issuance in which we gain and raise funds at a lower cost than that of the sovereign cost. Let's go to Slide #4. In this slide, I bring more information about our growth execution plan. We announced the power connection of Block 2 at Piraque project 17 months before the deadline established by ANEEL. Piraque project that started in June 2022 located in Minas Gerais, which contributes to the flow of renewable energy produced by mainly photovoltaic plants in the northern region of Minas Gerais to load the center in Sao Paulo. With this power connection, we started receiving from the project as of mid-February 91.5% of the RAC. In east, we announced the project Jacaranda, which also won an auction in 2022. The required date for this project was the same as the deadline established by ANEEL. And therefore, anticipating connection was not advantageous. Considering this, since we requested revenue release term within the month of March, the deadline was respected. The enabled RACs for these 2 projects are of BRL 330 million and the results reinforce our capacity to plan and execute projects with an average anticipation of 11 months established by ANEEL and an average efficiency of 32% in the last 14 projects that were 100% connected by us, a result that undoubtedly sets us apart. Please let's go to Slide 5. The investment in greenfield projects, which in addition to increasing the company's longevity, have a real shareholder return in double digits, grew 6%, reaching BRL 852 million in Q1 '26, driven by the progress of Serra Dourada, Itatiaia and Piraque. In addition, the remaining block of Piraque, our portfolio also includes 2 projects under execution, which will enable the receipt of an additional BRL 570 million in revenues. I emphasize that the remaining investments will be made between April 2026 and 2028 when totally will add up to BRL 5 billion when they're all connected. Next slide, please. In Reinforcement and Improvements segment, we continue to seize opportunities. In addition to increasing the liability of the network, we've been reducing operational risks, improving operating margins and replacing depreciated equipment and reducing our maintenance costs in the existing network. It is worth remembering that these investments enable WACC with an estimated ratio between 12% and 17% of the investment made. In Q1 2026, we invested BRL 370 million, a 21% increase compared to Q1 2025. This movement follows the trend observed in recent years where the growing investment volume has exceeded the regulatory depreciation rate of 2022. Also in the first quarter, we authorized a portfolio that grew BRL 1.2 billion due to new authorizations, updates to previously authorized projects, which totaled BRL 7.2 billion. It is worth emphasizing that investments and reinforcements are concentrated in renewed contracts, which is the case of our Sao Paulo concession, and the revenue from the large-scale projects received from the respective power connections, while the revenue from small-scale projects is received from following periodic tariffs. The next RTP is scheduled for 2028, and we will evaluate reinforcement and improvement projects that were energized between 2023 and 2027. Let's move on to Slide 7. Finally, it's worth highlighting our consistent trajectory of investment and execution over the last few years, culminating at a total investment of BRL 5.1 billion in 2025, a record annual investment for the company and a direct reflection of our commitment to sustainable expansion and modernization of the assets. Looking ahead, we have a pipeline of BRL 12 billion starting in April 2026. This amount will be distributed among 3 greenfield projects that are under construction and in the reinforcement and improvements of projects that are authorized in the coming years. The company will continue competently executing projects and enable receipt of additional cash flows that will allow us to capture new opportunities aligned with the company's profile. In addition to the growth opportunities that have already been mentioned, we would like to mention that ISA Energia Brasil is a portfolio manager of concessions and the pursuit of this made this result. In the search for these results, we have announced the crossing assets of the holdings that we have jointly with Axia, IE Madeira and IE Garanhuns, simplifying the governance structure. In this operation, we bought the stake held by Axia in IE Madeira and sold to Axia our stake in IE Garanhuns, and for which we will pay BRL 1.2 billion at the closing of the operation. Considering 2025, the transaction has a pro forma impact of BRL 343 million in the net revenue of the company and BRL 255 million in EBITDA. Furthermore, the transaction will contribute to reducing the company's leverage since even considering the payment for the transaction, we will be consolidating an asset with low leverage. Now I will give the floor to our CFO, Silvia Diniz Wada, who will comment on the results of the company and the financial details. Silvia?

Thank you, Rui. Good afternoon, everybody. Good morning to some of you. I'll start my presentation saying that the advancement of the net operating revenue shows the materialization of the company's strategy with additional revenues, while RBSE [indiscernible] reduces the burden in the company's cash flow. In this sense, our net operating revenue, excluding RBSE, grew 24% compared to Q1 2025 due to the connection of both greenfield projects and large-scale reinforcements and improvements over the last 12 months and the adjustment of R&D for the cycle 2026 and 2025 by IPCA. Considering the reduction of the financial component according to the annual decision, the growth of the net revenue was 8%, totaling BRL 1.2 billion. This amount reflects temporarily differences related to sector changes and the end of the adjustment installments with the amortization of Ke portion in the financial component with a retroactive receipt in the improvement annuity. Next slide, please. The growth of our revenue, combined with the growth of our cost and operational PMSO resulted in economies of scale that can be seen -- observed in an improvement in our operational efficiency index measured by PMSO, which closed the semester at 24% in addition to the growth of 11% of the EBITDA, which reached BRL 1 billion in Q1 '26. Besides the operational improvement highlighted so far, the net income was positively impacted in the end of the RBSE's retained depreciation and has a better result of asset equivalence. These factors were partially offset by higher financial expenses, mainly due to the higher gross debt position. As a result, we ended the quarter with a net income of BRL 358 million, a 6% increase in relation to Q1 2025. Next slide, please. We ended the quarter with a gross debt of BRL 16.3 billion, in which 2/3 were indexed to the IPCA and 29% to CDI, resulting in an average nominal cost of 11.64%. This debt has a long amortization profile with 85% of it maturing after 2030 and an average term of 8.7 years. With this regard, it's worth mentioning the proactive management of the debt stock through an exchange offer carried out in February when we concluded our 21st debenture issuance totaling BRL 3.9 billion, entirely destined to the optional acquisition of older and more expensive issuances. In this way, we extended the average term of these debts by 2.7% and reduced the average contracted spread by approximately 8 bps. The company's net debt grew 9% with a balance of BRL 15.4 billion on March 31st. The company's leverage ratio measured by the net debt-EBITDA ratio ended the quarter at 3.72x. It's important to highlight that only our financing with BNDES totaled BRL 670 million as a financial covenant with a limit of 3.0x the net EBITDA measured annually based on the financial information of December 31st. And just like we did in the end of last year, we will begin negotiations with the bank to obtain a waiver. As a subsequent event, in April, we concluded the 22nd debenture issuance, which raised BRL 1 billion with a term of 15 years and an IPCA cost of 6.46%, which represents a negative spread of 87 bps over the NTN-B 40. This generates value to our shareholders, having an optimized structure and a competitive one. With regard to shareholder remuneration, we announced in February 2026 a distribution of BRL 279 million in dividends, equivalent to BRL 0.42 per share, which in the previous announcements were divided into 3 payments, all made on April 29. Added to the announcements of interest on equity distribution made in '25, the dividends resulted in a total distribution of BRL 1.2 million in proceeds related to the fiscal year of 2025, maintaining our payout of 75% of regulatory net income. The graph on the right also shows the consistency of our dividend distributing practice over the past few years. In 2025, in addition to maintaining the 75% payout, we recorded a dividend yield of 6.7%, what reinforces our commitment recurring remuneration aligned with the company's value generation. With that, I conclude my presentation and return the floor to Rui.

Thank you, Silvia. On this slide, we bring a reflection on why we invest in ISA core. We have a predictable revenue. We have an opportunity to continue growing, driven by energy transitions, the need to continue reinforcing the assets in Brazil, something that will continue existing in the long term. We have a competitive advantage. The company has been proving to be a very good asset operator with a capacity of delivery that has corroborated, a track record that is very relevant. We have been having a financial discipline that allows to support this growth, paying proceeds to our shareholders, while we continue having the capacity to generate energy into the market in a very consistent way. All that with a long-range view will generate value in the long way to our shareholders while creating environmental and social positive impact, all that rooted in our entrepreneurial culture that we believe is distinguished and allows us to perpetuate this business that has been reaping very good results like the ones that we have shown to you in this Q1 of 2026. With that, I close our results announcement and I open for Q&A, for questions and answers, and invite you to ask questions through the chat on the Q&A by clicking on the Q&A button on the bottom of your screen so that we can respond and continue discussing. Now I'll give the floor to our operator, so he will be the moderator of this moment. Thank you very much for your attention.

[Operator Instructions] Our first question comes from Fernando [ Huchman Barbosa ]. And initially, he congratulates the company for its great results and would like to learn how is the process between ISA Energia and SEFAZ. Any advancements perspectives in this year of 2026? This was Fernando's question.

Fernando, Rui Chammas speaking. Thank you for congratulating us in bringing good results. The discussion with SEFAZ, so the discussion with the Sao Paulo government continues. We have had some meetings. We have some others in June. And the discussions are advancing with a lot of goodwill from both sides to try to find a midterm. And soon as we have some information to give to the market, we will bring it to you in case this agreement is achieved.

Continuing, our next question comes from Daniel Travitzky, Safra. He has 2 questions. First, can you tell us a little bit how are the discussions with SEFAZ? Are there any perspectives to solve the dispute? And the second questions are, what are the perspectives for the next auction, thinking about batteries and transmission auctions?

Daniel, well, I think that the topic with regard to SEFAZ, I have just answered. The discussions continue. In case we have any advancements that can be communicated, we'll communicate, I'm pretty sure. With regard to the next auctions, I think it's important to highlight that the company now has a space that is directly to energy transition. And the market will continue having more auctions in the future and it will be necessary to be conducting reinforcements and improvements in the existing network. And we'll need more and more technology in the grid to address the consumption that we have and the demand that we have, which needs to be compensated somehow with solutions like batteries or simple compensators and so forth. So this gives us an expectation to have a great potential in the market in the coming years, and the company aims to take advantage of that. We will also be looking into the future, always anchored in the 3 pillars that we have been communicating consistently. Our projects need to be profitable, so we can continue creating value to our shareholders. They will only take place if we ensure the financial discipline in the company because this is what brings us competitiveness, resource capturing as well as the guarantee of results in the long range. And then the third point is to preserving the proceeds for our shareholders, which is 75% of the regulatory proceeds, as have been said here. So I think that we have great opportunities in the future. But as long as we are based on these 3 pillars, we can participate in batteries and transmission and auctions, conducting the same strategy of the company.

[Operator Instructions] Our next question comes from [ Guzman Totegias ], [ Visual ] Capital. We were in the Investor Day of 2025 that you said that we could reach a higher leverage between 2027 and 2028 in case of the investments to overcome the loss of revenues of RBSE. So has anything changed in the strategy in terms of perspective of capital allocation within the mid and long and short range?

Wada speaking, CFO. We mentioned on the Investor Day about the increase in leverage pretty much associated to the growth strategy. And then I want to make a correction here that the objective of these investments are not to replace the flow of RBSE, but to generate value in this growth, which is profitable investments that fortunately we found the right condition to do in a way to compensate this RBSE financial loss that we forecast to start as of 2028. With regard to the economic scenario, our strategy does not change. I think that the tactical movements we saw may change a little bit. So depending on the movement and the opportunities that we have, we can evaluate and adjust ourselves to the context. But the strategy is a long-term one and it hasn't changed. It remains the same.

Continuing, our next question that comes from Lucas [ Benarchi ], [ Track ] Capital. The time line of investments will show a decrease. Can we find some deleverage? Or the idea is to maintain this capital structure? This was Lucas's question.

Well, Lucas, like you have noticed in the material that we have just presented, 2025 was a peak of investment. When we look at the total and the reinforcement and improvements and the investments, we do expect an annual decrease in the coming years as we start delivering the projects. With regard to the reduction of the leverage, that will depend on the new projects that are coming in. And like mentioned before, we still have 2 relevant projects that are under bidding, which is Itatiaia and Serra Dourada. There they have a CapEx to happen in the coming years. So until it starts operation, it's expected that the leverage keeps on growing. And the RTP in 2028 is going to be very important because it's going to acknowledge in the tariffs the reinforcement and improvements of smaller scale, which we only receive the biggest part of the RAP when it goes through the entity. So just to explain, the economic right is acquired when we start the connection, but the cash flow is only felt as of the RTP as opposed to the large-scale ones that bring WACC upon connection, the power connection. So 2025 is going to be a turning point for us.

[Operator Instructions] Our next question comes from Carlos [indiscernible], an investor. First of all, he wants to congratulate the company on its results. And in the view of the company, the current level of the leverage that is strengthened by the interest can impact on proceeds that are lower than 75% of the profits as it has been practiced.

Carlos, a simple question. And answer, no, we do not consider changing our practice to distribute proceeds, which is at least 75% of the net regulatory profit.

[Operator Instructions] Now continuing, our next question comes from Carlos [indiscernible], an investor. Would like the company to comment a little bit about the batteries, its views and the future expectations for this topic. This was Carlos's question.

Here is Dayron Urrego, the Project Director. Carlos, as you know, ISA Energia was the first transmission company in the country to put batteries in the transmission in the grid. Our batteries are working very well. And as it's been approved, the batteries can take over during high demand times like New Year, Christmas and other demanding times. It's been very useful in the city of Registro. You ask about the expectations. Our expectation, I believe, is the expectation of the sector as a whole, which is that the batteries are regulated. So that this way, we can increase the use of this technology in the grid, bringing very good benefits to everyone. And about the future, we hope that it will continue growing, and we'll be waiting for the regulation that it really needs.

Our next question comes from [ Clemato Sevai ], [ Jalmedia ]. And the leverage range in general has reached 72x the fixed -- surpassed in the quadrant by BNDES. There is a letter of extension for 2025. What's the plan of the company to readjust this number to 2026, considering the high volume of investment forecast?

Our plan is to obtain this letter, this waiver from BNDES every year, because 3x the net profit EBITDA in the transmission with the transmission business that has its revenue corrected by inflation, which is a very resilient model in a growth model is very restrictive. So the plan, in fact, is to have this waiver extension annually.

The Q&A session is finished. Now I'll give the floor to Rui Chammas for his final considerations.

I want to thank everybody for the interest to follow the results of Q1 2026 of ISA Energia Brasil. In addition to the questions that were answered here, our Investor Relations team is available to you for any questions that you have with regard to the development of our work and the results that are being presented. Thank you very much, and have you all a great afternoon.

The conference is finished. We would like to remind you that the Department of Investor Relations is available to answer any further questions that you may have. Have you all a great day, and thank you for your participation.