Serena Energia S.A. (SRNA3) Earnings Call Transcript & Summary

Good morning, everyone. Thank you very much for attending our conference call to announce the results of 2023. Here at the company, we're all very happy feeling that the mission has been accomplished because we have just completed the highest investment period in history. And we wanted to show you the prospects of the company after this and our 2023 performance. Today, we'll talk about the company's outlook. And then we are going to give you an update about 2023. We are going to talk to you about our main social program, A window to the World, the Janela para o Mundo. We're very proud of it. And then we are going to have a Q&A session when we go deeper into the most frequently asked questions for investor relations. So the year had 2 very positive aspects. One is a very good operating result, not just associated to the capacity of our newer power plants, but many initiatives to gain efficiency, higher margins, cost reduction. And all of this has led to a cash generation of BRL 1.5 billion in terms of operations, cash flow and deleveraging that peaked in 2023 and has been going down considerably according to the new projects, and as the revenue from projects goes up. But maybe the most important thing in a year was the completion of the investment of BRL 4.5 billion. So we started the year with 148 turbines. It's not easy. It's a very complex structure, but we are able to deliver this with consistency, and we created about BRL 2 billion in value, which is not just the confirmation of our ability to create value despite difficulties and challenges with low energy prices in Brazil, but also taking a first step as a high excellence developer in the United States that are going to give us new opportunities in that region. Now going into a little bit more detail about 2023 EBITDA. The increase can be broken down in 2 main shares. One share, as I said, BRL 200 million is related to an increase in capacity along the year. Week after week, we increased capacity. So revenue went up with BRL 200 million and then the rest is a composition of different factors. Number one, higher margins because of better production and trading. Number two, strict cost and expense management, which led us to save along the year. And number three, the result of a restructuring of our investments in Chuí, which started in 2023 and also had a positive impact on the EBITDA, and this led us to almost 10% increase in EBITDA comparing the guidance for the year of 2023. As a result of this new investment between '22 and '24, we are going to increase almost 70% of EBITDA. And this is going to continue to generate a falling trajectory for our debt. The peak of our leverage net debt over EBITDA was in the second quarter of 2023. We closed the year with 5.4, already considering the disbursement for Goldman Sachs, which was in the beginning of the year, but considering that we have 5.4x. And our intention is to get to 4.5x before the end of the year. And then -- and as we said this before. Another highlight here is the company's cash conversion. We had BRL 1.5 billion in terms of operational cash, which is a number that is similar to the guidance for the EBITDA for the year. So we have a lot of cash, and this is what we wanted. We wanted to leverage the company faster. And you can see this in the numbers of the last quarter of the year. It's also was talking about resources. Between 2010 and 2017, when we had the IPO, the resources were way above historical averages, but then this was offset with more difficult times in terms of resources. So this year, production was below expected, but it's not just because of resources. So it was below -- number one, because of resources, but also because of that implementation curves were slightly more flat. We delivered the plants within schedule, but the curves were flatter, and also a matter of availability in some projects. So both of lower availability in some projects and also the curves -- the implementation curves that were flatter when we saw -- we received an economic compensation for that. But I think that the main message is that even -- or despite lower resources year after year, we've been able to deliver very consistent results. And as I said, from '17 -- in 2017, we had a year with resources well above historical averages. And then from 2018, resources worsened was [ 58 ], but then this was in line with the consensus and even with our guidance year after year. Why is that so? Because we have a broad [ report ] of initiatives, costs, margins and everything as we demonstrated this year to achieve the objectives in our business plan. Now moving to the main landmarks for the implementation of Assuruá 4, 5. So CapEx about plan in Assuruá 5, it was 1 month late. That was paid by GE. The CapEx savings was above target and Y-o-Y returns above average. So in addition to being cheaper than we initially expected. So these marketing operations had higher margins than expected. So if we add up everything with good implementation and cost management led us to returns that were considerably above our business plan. For Goodnight I, it was on schedule with a slight CapEx savings almost in line and return a little bit above we expected. And all of this combined led to a value creation of more than BRL 2 billion with the investment plan, and we continue with a balance with investment plan with GDs with preapproved debts that are going on in terms of implementation. And as I said in the beginning, these landmarks are important, not just for value creation, which is a founding principle for us, but we are also able to create value at more challenging times, low energy prices, higher inflation. So we diversified to the United States. We started something different, which is to invest and then sell the asset and so on. But this is a process that is going to add value in the future, and we have good initial results. We got in GD, which is an activity that has proven to be very profitable. And increasing participation of our share in Assuruá in the middle of the works. This added value. So all of this combined shows that we are one of the reference developers in the two markets. As to the guidance for 2024, I would like to share with you 2 aspects. So we had a 2-year guidance beginning last year too. So it was a 2-year guidance as an extraordinary measure. And now we are adjusting the BRL 2 billion to a little bit less for 2 reasons. It doesn't change the value of the company, much to the opposite. It increases the company's value, but the explanation is the following. Number one, now we are more confident that we are going to close the operation of asset swap between ourselves and the EDFR. So we're going to have Bahia. They are going to get Pirapora. This has 2 effects. Number one, our EBITDA is going to go down because Bahia has a lower EBITDA in 2024 than Pirapora. So BRL 50 million lower. On the other hand, the synergies that we have in Bahia with Assuruá and the debt profile of Ventos da Bahia. And the contract curve for that, we can create almost BRL 100 million value for the operation. So there's an increase of EBITDA. But value creation, if we complete the operation in the first quarter, which is what we hope we will do. Number two, it's easy to explain. In the beginning of last year, we had very broad inflation curves with high inflation. As 2023 inflation was corrected and also for '24, we have an adjustment, as you know. So -- and if we combine the 2 things. So we -- hadn't we had done the asset swap operation. And if inflation was the same, our guidance for this year would have been a little bit above BRL 2 billion as we had been expecting in the beginning of 2023. Lastly and something we are very proud of. I would like to briefly talk to you about the IJPM, the window to the World Institute, Janela para o Mundo. And so we have been making efforts to invest in education and income generation in the regions where we have projects. We started small and with the effort of the team to help people and it grew and grew. And it was so successful that recently, it's become an institute. And today, in addition to Serena, we have funding from customer suppliers that are helping our institute to succeed and to continue creating value for the community, especially in the Northeast, but in our projects as a whole. In terms of numbers, last year, we had 1,331 students. Our -- [ ROI ] is one of the biggest in social enterprises in Brazil. We continue on this path and if you want to get to know more about it, get -- go to the website. You can just ask me questions and ask questions to our Investor Relations team. [Statements in English on this transcript were spoken by an interpreter present on the live call.]