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

Good afternoon, and welcome to Renova Energy Group's Earnings Conference Call. I'm [indiscernible], the company's IR analyst. [Operator Instructions] Joining us today are Pedro Antonio Aparicio, CFO and DIR; and Ricardo Martins, IR and new Business Manager. Before we begin, we would like to inform you that this event is being recorded and will be made available on the company's website, along with the materials. We will start with the presentation and then we move on to the Q&A session. The statements in this report regarding Renova's business outlook, projections and growth potential, constitute forward-looking statements and are based on management's expectations for the company's future. These expectations depend heavily on market changes, the country's overall economic performance, the sector and international markets. Forward-looking statements are not guarantees of performance. They involve risks and uncertainties and depend on circumstances that may or may not occur. Investors should understand that general economic conditions. Market conditions and other operational factors may affect Renova's future performance, which results that differ from those expressed in such statements. Now I would like to hand the floor over to Pedro to begin the results presentation.

Thank you, [ Bruno ]. Good afternoon, everyone. I am Pedro Aparicio, the company's CFO and it's a pleasure to be here with you. Moving on to our agenda. Today, we cover the indicators highlights of the quarter, Brazil's energy market, energy production data and finally, group's financial results. Starting with financial and operational highlights for the third quarter of '25. We record a net generation reaching almost 329 gigawatt hour, an 8% increase compared to the same quarter of the previous year. These numbers reflect our focus on asset efficiency and performance and demonstrate the company's solid generation capacity. Net revenue was BRL 144 million, a 108% increase compared to the same period last year and we recorded an energy result of BRL 50 million. Our adjusted EBITDA, which excludes the effects of curtailment and MPM and nonrecurring items was BRL 31.7 million, 66% growth compared to the same period last year. We closed the third quarter with a cash balance of BRL 61.1 million. As highlights of the quarter, we have the implementation of Satoshi Project in its final stage of completion with expect operations still in the fourth quarter of '25. On July 14, 2025, the company received BRL 23 million related to the sale of a credit right from projects developed in previous years. It is also worth highlighting in Slide 5, the progress of Satoshi Project with 80 megawatts data processing capacity, which aims to transform our Alto Sertão III generation into a digital infrastructure platform that will allow more efficient monetization of the energy. First, it's important to emphasize that solution is fully aligned with the electricity sector regulations. The project already has issued Access Opinion, signed Transmission System Use Agreements and modeling registered with CCEE, ensuring technical and regulatory compliance with the national interconnected system. Additionally, the project relies on existing infrastructure at Alto Sertão III, connecting the data center direct to the substation without the need for structural network upgrades. This architecture enables the data center to operate partially as a low decouple from traditional consumption, helping mitigate curtailment and increase the use of available energy. To generate new revenue from the assets we already own, the idea to use our energy infrastructure to supply energy to data centers. This way, we are using our expertise in energy and the knowledge acquiring technology to support a new business from connecting the electricity sector to the growing demand for data process across vary applications. Another important point is that we will use existing connections and facilities, resulting in low incremental CapEx. The project also stands out for its modular and scalable implementation, allowing us to expand the structure according to the demand more efficiently and quickly enabling increased cash flow that contribute to expanding operational results. And then the projects progress. Physical implementation is in final stage. As I mentioned earlier, operations are expected to begin in the fourth quarter 2025. We have obtained the declaration of compliance with grid procedure requirements and completed the deliver position and connection testing of the project Phase A. 65% of the project has already been completed. Brazil energy market in 3Q '25 energy consumption remained practically stable compared to the previous quarter. Almost all classes record declines, except for residential, which grew 2.8%, offsetting the other categories, ensuring overall stability. Influenced by mild temperatures, the commercial sector was the most affected, showing a 1.6% decline. In third quarter, PLD increased mainly to the reduced hydroelectric reservoir levels caused by below average rainfall, which increased the need for more expensive energy sources. In August '25, PLD roles significantly in Southeast and Northeast reaching BRL 287 and BRL 269 respectively. This increase was driven by below-average rainfall, which led to a 21.8% increase in thermal generation. However, the effect was partially offset by 1% drop in energy consumption, influenced by milder temperatures in several regions, especially in the Southeast. Next slide, let's discuss energy production data. Our availability reached the best historical results. In third quarter '25, availability totaled 9%, a 6.5% increase compared to the previous quarter. Year-to-date for 2025, the increase was 11.8% compared to 9 months of '24. These results reinforce that initiatives implemented have proven effective, increasing the availability and sustainability of operational performance. Regarding actual wind, the average record a slight drop compared to the same quarter of previous year. However, the year-to-date for the 9 months of '25 record a 5.1% increase compared to the same period of '24. 3Q '25 actual wind was 5.9% below the certified value, while the same period of '24, the difference was 5.3%. Year-to-date, the decline was 2.5% compared to the certified value. Moving to the next slide about generation and curtailment impact. We record a historical record in gross generation, reaching 450 gigawatts hour in the quarter and 1,165 gigawatts hour in year-to-date. This represents a 13% quarter increase and 20% year-to-date increase. However, in the quarter, our energy production was impacted by 20% due to the curtailment totaling 122 gigawatts hour compared to 93 gigawatts hour in third quarter '24, a 31% increase. Year-to-date, curtailment impact was 31% representing a 106% increase for the period. Even with this impact, our net generation was 328.5 gigawatt hour, an 8% increase compared to the same period last year. Year-to-date, generation was 801 gigawatt hour, also up to 10% compared to the same period in '24. These results reflect improvement performance due to the increased asset availability and operational focus over recent months, reinforcing the company's operational capacity. It is also important to note that curtailments caused by external unavailability and electrical [ reliability ] are subject to being reimbursed, representing up to 48% of curtailed in the quarter, 67% year-to-date. Moving now to financial results. In third quarter '25, revenue was BRL 143.9 million, growing 18%, reflecting a higher volume of energy sold at a higher price. EBITDA was BRL 28.3 million compared to BRL 71.7 million in 3 quarter '24. Excluding the effects of curtailment and MTM, BRL 6.5 million and nonrecurring effects in the total of BRL 23.5 million. Adjusted EBITDA was BRL 13.7 million (sic) [ BRL 31.7 million ] versus BRL 19.1 million in the same period last year, a 66% increase. Year-to-date, operating revenue was BRL 378 million, a 125% higher than the same period last year. EBITDA was BRL 95 million. Excluding the effects mentioned previously, adjusted EBITDA was BRL 71 million, a 3.5% increase compared to 2024. Moving to Slide 14, we present that the quarter, we recorded a net loss of BRL 44.6 million due to the higher energy purchase in the period cost by the curtailment versus a loss of BRL 1.3 million in the third quarter. the company's cash balance at September '25 was BRL 61.6 million. Year-to-date variations reflect mainly debt payments and BRL 48.8 million investments of which BRL 33 million were allocated to the data center project. We conclude our presentation here. Thank you all for your participation. We will now open the floor for Q&A.

[Operator Instructions] The question is Satoshi model replicated in other platforms? Is it something punctual of Alto Sertão III?

Thank you for the question. This is a model that we can replicate. It's a way that we have to monetize the asset of the company, developing projects in the pipeline that we have in a model that is similar to this one that we are building up in Satoshi. So it's really aligned with what the company communicates on the development of an infrastructure that is digital to control these projects in this first [indiscernible] that we call Satoshi and future demand for other applications that we are going to have for data centers.

Next question. How about the data that are we going to receive revenue in crypto coin or dollarized revenue?

This contract in general are contracts on dollar, no receiving in crypt coin. The company will have these values in dollars. These are agreements of mid- and long term, but nothing in crypto coin.