Renova Energia S.A. (RNEW3) Earnings Call Transcript & Summary

Good afternoon and welcome to this presentation today. My name is Gabriela Medeiros and I am an HR analyst. If you want to hear in English, please click on the link below. We have here with us Vitor Hugo, our CFO, Ricardo [ Martins ] , our RI manager and new businesses manager. And this event is being recorded, and will be available at the website of the company. We will begin with the presentation. Afterwards, we are going to have a Q&A session. It's important to mention that the information here and declarations that are made here, are referring to business perspectives and businesses are, of course, the premises of the administration of the company as well as the information that are presently available. The future -- forward-looking statements are not guarantees of performance. They involve risks and uncertainties. They may or may not occur. Investors should understand that general economic conditions, market conditions and other factors affect Renova's future performance. And now I would like to pass the floor to Vitor, that will begin with the presentation.

Good afternoon to any one of you. Thank you for being here in the third quarter of '24. And so here's the agenda, we are going to talk about subsequent events, important ones that happened in October. Some highlights, financial and operational in the third quarter, '24. The Alto Sertão III wind complex, the Caetité solar complex under construction in Bahia, the new brand that is being used already in this presentation. The context of the energy market in Brazil, the wind energy market, the curtailment, the consolidated financial results and the judicial recovery plan of Renova. And about the subsequent events on the 30th of October, we had homologation by the jury of the seventh addendum to the Judicial Reorganization Plan and the fifth addendum to the Judicial Reorganization Plan of Alto Sertão. This impacts Class II creditors. This is an important fact because we were able to renegotiate our debt with the banks, and now we are in a better health situation. Another important factor that happened in October was the approval on the 24th of October of the increase in the share capital. This is to be confirmed by the precedent conditions. So we don't really have details of the value of BRL 500,000. And also, we are going to talk about the new brand. What's valuable to us is inside of the brand. This is our new logo. And now talking about the operational and financial highlights in the third quarter. We had an impact of 23.5% in generation -- from this 43%, we had 45% in September, in the third quarter, although we had the curtailment we had an increase compared to the same semester last year. The net revenue increase in BRL 12 million BRL from 57.3 million in '23 to BRL 69.3 million in the third quarter. Energy result is now in BRL 51.4 million in the third quarter of '24. EBITDA adjust was reduced a little bit. This year, we closed EBITDA -- adjusted EBITDA in this BRL 16.9 million. Net loss in this quarter was BRL 1.3 million. Free cash balance was BRL 127.1 million. And now talking about the Alto Sertão complex. We had an investment in the fans biggest complex in Latin America with an installed capacity of 432.6 megawatts. The commercialization of the energy is 50% in the free market and 50% -- around 50 -- 53% in the free market and 47% in the regulated market. Caetité solar complex has a capacity. We have already hired the company working on the transmission lines. And it's been impacted this by the strong rains in the region, the rains -- and so it's impacting -- probably it will impact also in the beginning of the operation of the park. But still, we wanted to be operating by the beginning of January. Now the new brand, the group is advancing towards becoming an integrated platform for the development, implementation and operation of renewable energy projects. The company maintains its objectives and reinforces its commitment to sustainable development practices. And this new identity seeks to reflect the dedication of its professionals. What is valuable to us is inside our brand. And now about the energy market in Brazil. To the left, we have the National Energy consumption gigawatts per hour, we saw an increase of 5.4% from '23 to '24, impacted by the warmer weather related to the last year, same period. Also, we had an increase in all the segments grew residential and to the right, we have our PLD. Last year, PLD was minimal, BRL 69. September is the final period of drought. It's the beginning of the humid period. And this year, we had BRL 307 in Northeast and BRL 243 in the Southeast. The difference reflects an accident of renewable energy in the Northeast. We have the curtailment there, limitations of the transmission network of the country. So this is why we have this difference in the prices in the region. Here data about the production of energy, wind, third quarter '24 compared to '23. We see that is more or less aligned with the variations in this quarter, we are in 9.5% variation between the certified about minus 5.3%, but it's aligned more or less with last year's result. And to the left, we have the potency curve of our turbines. So when it's below 3.5 gigawatt hour, it is not generating. So wind below this doesn't generate energy. The wind generates energy only after 4.5 gigawatt hour and we reached full capacity when it's 8.5 gigawatt hour. And our curtailment here to the left, we have last year curtailment almost 0, but then it begins to rise in June, August, September. So we had 25 gigawatt hour in September last year. In '24, there was an increase regarding last year. And the peak was in September with 45.4 gigawatt hour. So this represents the curtailment of last trimester was 23.5% of our generation. Even with the curtailment that was almost double of last year, we had an increased generation compared to last year. And now the comparison of the accumulated curtailment here below. So it's almost the triple of last year results. Here revenue net revenue consolidated in the quarter has an impact at 20% bigger than the same quarter last year, although the curtailment was worse. And when we look to the 9 months, we had a reduction of 5%, BRL 9.4 million less than last year. So in the first quarter of the year, we had low winds, worse winds and also the curtailment that was above very much higher than last year's one. EBITDA, we had an increase of 293%. So now we are in the third quarter, '24 with BRL 71.7 million EBITDA 9 months also a significant increase. Now we are in EUR 139.2 million the first 9 months of '24. Adjusting the nonrecurrent effects, we reached an EBITDA that is a little bit lower than the same quarter of last year. So there was a reduction of 7.4%. So the adjusted EBITDA of this third quarter of '24 was BRL 16.9 million, BRL 25 million was the assets alienation in the year, if we compare the EBITDA of '23, it was EUR 56.2 million and the adjusted EBITDA in these 9 months of '24 had a reduction of 22.6%. So the earnout of AS and the assets selling to CDV, we had this adjustment only EUR 5 million are MTM. Now the profits and the net loss of the company. When we compare the quarters '23, '24, we are now BRL 1.3 million, an increase -- an improvement in the results. And the accumulated, we are now in BRL 49.4 million, was an improvement in the net loss of the company in the first 9 months. Adjusted net loss, apart from the MTM, we had debt loss -- a net loss in the third quarter of '23 of BRL 47.9 million and in this quarter, BRL 26.6 million and accumulated in 9 months, we had an adjustment of MTM. And so the loss is aligned with the last year. We closed the year -- the 9 months. with BRL 140.2 million, an improvement of almost BRL 2 million, as you see. Now the cash balance. We finished last year with BRL 17.6 million. We paid PRJ Class III EUR 24.4 million in February and August of this year. Investments is positive. Because of the earnout in the CDV, we have BRL 22.8 million, and the cash balance is then BRL 127.1 million. About the judicial recovery, we see divestment here. In '23, we had a debt of BRL 1,351 million, and now we have BRL 1,476 million. Well, we had a readjustment of the debt, Class II is now BRL 118, Class III although we had a payment of BRL 24.4 million, we had no other payment that was recognized as Class III. So we had an increase of BRL 40 million. And the other effect is the payment made in October of BRL 19 million after signing the amendment everything to Class II, BRL 19 million. And the company signed new amendments to the judicial reorganization plans of the company itself with the unanimous approval of the secured creditors for Alto Sertão III. These amendments are aimed at re-profiling the debt and were ratified under the terms of the Article 45-A of Law 11.101. It alters only Class I. The other classes didn't change at all. And here, main changes on the Class II debt, we had a change in the rate. Now CDI, we have up to 2 years. It cannot be less than IPCA plus 5%. Also, we have now a debt extension to 2035 with the changes in the indexes. So we have 2 years' time to do these changes. Also we have an additional grace period for the principal until August '26 and reduced interest payments paying 75% and the February '25, an installment of 25%. Another point that was put in this amendment that now Renova must sell at least 750 megawatts at each windows. So it will end in August 2035 totalizing 3.0 gigawatts. Another point that was included with the cash sweep. Renova shall use a surplus cash to extraordinarily repay the Class II creditors limited to the original flow of the approved plan. We can never surplus the original plan. So the expenses are now controlled, with expenditure on holding and maintaining the pipeline will be limited to projections presented to creditors. We have expenses in the maintenance of our pipeline. And now down there, you have the curve of the amortization flow. Well, I think that's it. Ricardo now the floor is yours, and let's open the Q&A session.

Thank you, Vitor. Now we are going to open our Q&A session. If you want to ask something, please send it by the chat session. Non-identified answers -- questions will be answered by the RI channel. Vitor, Very good presentation. But so far, no questions. Let's wait through for another minute. Maybe we have some delay. Let's wait for another minute, okay? Well, we have no questions. So I would like to close our call, and we will be available through our IR department. Thank you so much.

Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]