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

Good morning, and welcome to the conference call for the earnings of the second quarter of 2025 of Serena Energia. We inform that the presentation is being recorded and translated simultaneously into English. The slides presented are available for download at the Investor Relations website. [Operator Instructions] Any statements that may be made during this call regarding future business prospects of Serena Energia's operational and financial goals are based on the beliefs and assumptions of the company's management as well as information currently available to the company. Forward-looking statements are not a guarantee of performance. They involve risks, uncertainties and assumptions as they refer to future events and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors may affect the future performance of Serena Energia and lead to results that differ materially from such expressed in such forward-looking statements. Now I would like to invite Andrea Sztajn, CFO and Investor Relations Officer of Serena to start her presentation.

Good morning, everyone. It's a pleasure to be here to share with you Serena Energia results for the second quarter of 2025. This quarter, we produced 2,365 gigawatts hour, a 2% growth compared to the second quarter of 2024, would have reached 2,621 gigawatts hour if we did not consider the impacts of underplanned availability and curtailment. At this production level, our resource would be close to a P50, especially due to the Delta Cluster, whose production was 66.4% higher than the same quarter last year, supported by resource 16.5% above P50 and high operational availability. Adjusted gross energy profit reached BRL 588.5 million, a 16% increase over the previous year, mainly due to new contracts and the record performance of our energy platform, which reached BRL 70 million in a single quarter. EGP growth in this period would have reached 24% without considering the positive nonrecurring events of BRL 32 million in the second quarter of 2024. Adjusted EBITDA totaled BRL 421.6 million, a 26% increase compared to the second quarter of 2024, reflecting the increase in EGP and also strict control of costs and expenses with a BRL 14 million reduction in OpEx in the annual comparison. If we do not consider the impact of nonrecurring items, year-on-year growth would have been 39%. Operating cash flow generation totaled BRL 375.5 million in this quarter, an increase of 34% year-on-year, and our net debt over EBITDA ratio ended the quarter at 4.4x, a reduction of 0.1 compared to the first quarter of 2025, reinforcing our commitment to capital discipline. We closed the semester with an adjusted EBITDA of BRL 732 million, 4% above the first half of '24 and 9% disregarding the nonrecurring positive impacts of 2024. Given the seasonal profile of our business in which historically around 60% of our annual performance is concentrated in the second half of the year, a percentage that was 65% last year, we expect to have a consistent 2025. We remain very attentive to the risk of curtailment and have approximately BRL 30 million in losses budgeted for the second half of the year. We have been closely monitoring this issue and see potential for a structural solution through regulatory discussions and lawsuits, which could positively impact our results based on the events of the last 2 years. Bernardo Bezerra, our Innovation, Regulatory Affairs and Institutional Relations Officer, will be with us to delve deeper into this topic in our Q&A session. In the delisting process, we continue to make progress. In June, at our special shareholders meeting, we obtained the approval of 99.4% of shareholders with a quorum of 81% for the waiver of the poison pill clause. This progress demonstrates the strong alignment and confidence of shareholders in our strategic plan. Completion remains subject to customary regulatory approvals, including consent from our long-term creditors. We will now begin the Q&A session. Feel free to send your questions.

[Operator Instructions] Well, as mentioned, I am here with Bernardo and we received 1 question. I think people liked Bernardo would be here with us. So we have a question about curtailment. They are asking about what do we think about the regulatory advances regarding that topic. Could you speak a bit about that, Bernardo?

Sure, Andrea. First, we believe that the regulators' understanding about this topic in terms of micro and micro and macroeconomic has improved a lot because we -- renewable generators were playing a role contributing to clean energy, providing clean and cheap energy to everyone. And this agreement has been broken. So there is a decision from [ ANS ] in the evaluation of cuts that's a 5%, 5 megawatts criteria. They show -- changed their understanding of the way to calculate that, which allows us to have a right to reimbursement of 15%. We are absolutely convinced of our right to have full reimbursement. and due to energy cuts, electrical cuts and especially because of the availability and reserves agreements. There's no legal basis or regulatory basis that would support the cuts of availability and reserve contracts that -- whose role is to be available and to have a reserve for those contracts. So from the regulatory point of view, we are looking at the public consultation 45 under [indiscernible] in which ANEEL will -- is likely to review this topic. Initially, it would discuss only the allocation of cuts, but we believe it could be a bit broader and change the way that reimbursement is made. The second option would be the Ministry of Energy making a new regulation about how the reimbursement would be made. While we await the regulatory decision, we are taking the initial steps to make sure we -- our rights are respected.

And still in curtailment sense, Andrea, there are questions from [ Rafael Besuto ] and [ Paolo Satza ]. They would like to understand about the levels of curtailment that Serena is working. Well, not only Serena, but the entire market, something that's been discussed in the industry for coming years. And what would be possible mitigation factors for curtailment in Brazil, like news about data centers that there are possible solutions in the short and middle run.

Perfect. Now Bernardo speaking. We see this year as a year with higher cuts and micro and many generations continue to increase, causing the supply to be bigger in the system than demand. But in the middle -- midterm, we see a balance between supply and demand because the subsidy period is decreasing, is ending. And we are sure that regardless of the level, we are entitled to reimbursement, especially in the contracts related to reserves and also other contracts that we -- no, we have a right to reimbursement. And the ministry also has been favorable to equalizing both types of cuts.

And there is also another question about our delisting process by [ Bruno Varela, ] if we could give the schedule for the next steps.

Well, as mentioned in the presentation and here in this call, we are in the process of delisting at CVM, and we need the approval from long-term creditors, but we expect this process to be completed within the next quarter. So that we can publish the call and then make the auction. So we believe everything will be completed in the third quarter of this year. Okay. So these are the questions we had. And now I hand the floor over to the operator to end.

The Q&A session has now ended. Now I would like to turn the floor to Serena Energia's teams for their final remarks.

Well, just one final remark, despite the cuts we have been subject to, we can show in our earnings and results, which remain in line, considering all other initiatives to increase value that have increased our margin and caused us to deliver according to plan. Thank you all very much. And as always, the IR team remains available should you have any questions. Have a good week, and have a good day.

Serena Energia conference call has ended. [Statements in English on this transcript were spoken by an interpreter present on the live call.]