Centrais Electricas Brasileiras S A American Depositary Shares (Each representing one Common Share)

Good morning, ladies and gentlemen, and welcome to Eletrobras' earnings call for the second quarter of 2025. We have with us Mr. Ivan de Souza Monteiro, CEO of Eletrobras, Mr. Eduardo Hayama, VP of Finance and Investor Relations, Mr. Antônio Varejão de Godói, VP of Operations and Security, Ms. Camila Araújo, VP of Governance, Risks, Compliance and Sustainability. Mr. Elio Wolff, VP of Strategy and Business Development. Mr. Italo Freitas, VP of Trade and Energy Solutions. Mr. Juliano Dantas, VP of Innovation, R&D, Digital and IT. Mr. Marcelo de Siqueira Freitas, VP of Legal, Mr. Renato Carreira, VP of People and Services, Mr. Robson Pinheiro de Campos, VP of Expansion Engineering, and Mr. Rodrigo Limp, VP of Regulation, Institutional and Markets. We would like to inform you that this event is being recorded and will be available on the company's Investor Relations website, along with the presentation shown here, both in Portuguese and English. If you require simultaneous translation, the interpretation icon is available at the bottom center of your screen. You can select your preferred language, and if you're listening in English, you can mute the original Portuguese language audio by clicking on Mute Original Audio. For the Q&A session, if you wish to ask a question, please type your name and company through the Q&A button at the bottom of your screen. As per our format, your name will be announced for you to ask your question live. At that time, you will get a request to turn on your microphone on the screen. if you prefer not to speak you may write your name company and question in the q a field so that our operator can read it aloud before proceeding we would like to clarify that any statements made during this conference call concerning the company's business outlook projections and operational or financial goals are simply the management's beliefs and assumptions based on information that is currently available to the company. Forward-looking statements are not guarantees of performance as they involve risks and uncertainties and depend on circumstances that may or may not occur. Investors should be aware that general economic conditions and other operating factors may affect the actual results and may be different from those expressed. I will now turn the floor over to Mr. Ivan Monteiro, CEO, who will begin the presentation. Go ahead, sir. Good morning, everyone. Thank you for being here. This is a quarter that consolidates several initiatives that the company adopted since it was privatized. I would like to list four main The first is the simplification of the company's shareholder structure and cost reduction was a major example that came from this initiative. Liability management was also an example as we have been able to reduce the company's compulsory debts from from 20 billion to now under 12 billion. Another highlight is the conclusion of connected works. We have the Ponchila Negra wind farm concluded in the first quarter and 1390 Manaus Boa Vista, which is a connection we will deliver later on this year. We're also continuing investments and making record disbursements of nearly 2 billion Brazilian Reais. And the consistent improvement in the commercialization area is also a highlight for the quarter. All of these initiatives aim at increasing the predictability of our results. which allowed us to announce the €4 billion dividend payout yesterday. We will continue with this initiative to give more predictability, increase investments, reduce costs, and manage our liabilities. And with that, the company aims to improve its process and its trading to become a company directed to serving clients. We are demonstrating, with the support of the board, that we are concluding the turnaround stage and building a budget for 2026, which will help us to overcome this stage completely. I will now hand it over to our CFO, and thank you for being here. Thank you, Ivan. Good morning, everyone. Looking at today's schedule on slide three, I will be talking about the main highlights for the quarter, and then we will discuss the financial performance of the company this quarter. We'll discuss our energy trading strategy, and finally, our capital allocation strategy. On slide five, you see the main highlights for this quarter. Starting with shareholder remuneration, $4 billion. in dividends. This was due to the reduction in risk, as Ivan said, that we were able to execute this quarter. And this is also connected to our long-term vision for energy. Our second highlight was the contribution from generation to our margins, which went up 21% versus Q1 and 16% versus Q2 2024. and this mitigated a drop in transmission revenue. The third point was this 1.2 billion reduction in compulsory loans, which is now below 12 billion Brazilian Reais, investments which grew 116% versus the first quarter of 2025, and we're focusing on investments in reinforcements and improvements. And we concluded the first post-privatization transmission auction, which is the Caladinho project. We also concluded financial and economic rebalancing for Transnorte Energia. As Ivan mentioned, we concluded the last transmission line this year. Finally, in terms of capital allocation, we concluded asset uncrossing with Coppel, and we acquired Eletronet's participation. Continuing with our financial performance on slide 7, we had a reduction in our AP, and this was partially offset by our revenue from generation, as I had mentioned before, discussing our margin from generation. On the EBITDA line, which impacts our generation margin, this helps to offset this reduction, but looking at our regulatory EBITDA, we remind you that we have to consider and other companies, and the variation was nearly 800 million in equity income, which led to this reduction in EBITDA year on year. Slide eight discusses our income. So we had a reported loss of 1.3 billion, and this is basically due to the regulatory re-measurement of our transmission contracts, the RBSC financial component. Adjusting for this effect and other adjustments to our adjusted IFRS, including ElectroNorte, our net income would have reached 1.4 billion, which is around 40% higher than last year. slide 9 as you've said shows our cost reduction journey that is continuing with our pmso of 1.4 billion a reduction from q1 and q2 24. And there was also a reduction in the number of employees, but we contracted a significant number during this time. So it's a cost reduction with improvements in efficiency for the entire group. Slide 11 discusses our energy trading strategy. First, we have to remind you where our generation resources are present. We are present across Brazil. in the southeast for example um during the second quarter we had seven gigawatts of physical guarantees in the southeast and adding six mega in purchases we would be

at around 800 in quotas.

And here we're highlighting our ACR sales. We are doing this because purchases in quotas are not managed by us. The quotas will reduce to zero by 2027. And so we are receiving a fixed revenue from this. In order to understand our trading strategy and how it's changing, we have to look at all of these assured capacities plus purchases and subtract quotas from that. And that shows how much we are really generating per megawatt hour that we have available for trading. Slide 12 shows this effect. So last year, with the energy we have available for trading, we had made 1.1 billion in contribution margins, and then the second quarter just went up to 1.6 billion. But it had been 1 billion in the first quarter. In addition to that, on the right-hand side graph, we are showing how the resources we have are evolving throughout the year. It's important to remind you that nearly 99% of our generating area is made up of hydroelectric power plants, and this energy production has a seasonal pattern. So, in the first quarter, we were at 12 gigawatts to be traded, generating 1 billion in contribution margin, but for the second quarter it was at 9, and we still generated 1.1, excuse me, 1.6 billion. For the third quarter, because of the seasonal pattern that we have, this is the dry season in Brazil, so it will go down and then go up again in the fourth quarter. On slide 13, we see some of our strategy that we had mentioned in the first quarter. Our vision is that after November and December 2024, there was a high expectation that the rainy season from April, December to April would be close to the historical average, and that would make prices collapse. At the time, we were concerned about conserving the first quarter, as I showed in the previous slide, where we have the most resources available, but If the expected rainfall did not come from the second quarter onwards, we would have a much more positive scenario for prices. And this is what happened. You can see here our price from January 2nd. And we drew a line on March 13, which was when we published our results for the fourth quarter of 24. You can see that prices continued to move. So, the forecasted prices for 2026 and 2027 are a little bit more volatile, but we believe that this will be more constructive. Slide 14 shows our energy balance as it currently stands. evolution in resources for 2025. We're no longer trading this band. And this gives us a constructive vision for our prices, as I mentioned before. Now, looking at capital allocation on slide 16. So here we have our methodology guidelines to declare our first dividends in December and then complement it on March 13 with the fourth quarter results. We got many questions about how this is being analyzed, so we decided to include these guidelines in more detail in this presentation. So this is our methodology. First, we're always looking at the long-term horizon. We're looking at a five-year horizon. And for these five years, we are assessing how our capital structure will be at the end of the fifth year. we're also analyzing our leverage with this capital structure. So first, we have to consider financial net debts, so bank debts, market debts, and so on. And over that, we add the inventory in compulsory loans. We are reducing these liabilities with payments, And this is all being considered in our cash flow. And finally, we also include our regulatory obligations from the privatization, CDE and basins. On the EBITDA side, this is just to note that besides EBITDA, regular EBITDA, we're including our proportional equity income into this calculation. how we try to define the optimal leverage range for a company like Eletrobras. In generation, we consider it to be between 3 and 3.5 times. That would be comfortable, of course, depending on price. And in transmission, between 3.75 and 4.25 times. So we have a weighted average according to the size of our businesses as predicted for the fifth year, and that will give us the optimal target leverage. After we do that, we compare our net debt and our optimal leverage projected for the fifth year and see if there's enough space to pay for that, and that's exactly what we did. slide 17 shows this calculation and of course it takes into account everything i'm going to mention in slide 17 and i'm referring here to risk since 2022 when we had privatization taking place and there was a strong acceleration especially in the last six months our risk improved significantly. Compulsory loans started in 2023 at 24 billion and now we are below 12 billion. The investment in Transnorte Energia was complex, over 3 billion reais and it's being concluded this year. We are repositioning the transmission revenue and we are extending the concession terms. cost restructuring is ongoing. We had a simplification when we compared to with the furnace merger, so the corporate structure was streamlined. We also had an uncertainty for our shareholders about what disbursements we would have. There was a partial completion of the sale of thermal power plants, a completion of the RBSC financial review, and also a release of some credits that were withheld at CCEE due to the GSF auction. That was a release of nearly 400 million. So this all brings us to reduced risks, gains that we had over time with these transactions, better short-term outlooks for an energy company. We are reviewing our methodology. So despite having posted reports 4 billion in dividends for 2024 recently being able to pay out an additional 4 billion in dividends is very significant slide 19 highlights the significant growth we had in investments this quarter a growth of 116% versus the first quarter, especially in reinforcements and improvements. And finally, on our ESG agenda, out of the main investments that we have in the company currently, we're nearly at the end of the Transnorte Energia line. So we're interconnecting the last isolated state in Brazil, which is Roraima, This had been stopped for 10 years. It had a capex of 3.3 billion, and it will be within term and within the forecasted cost. And we repositioned our revenue. Our RAP was increased from 395 to 561 million. and we expanded our term from 17 to 27 years. This creates 3,500 direct and indirect jobs, and we're interconnecting Roraima. So that will reduce thermal generation, and that – is nearly 2 billion in costs in CCC and CDE. We're also reducing carbon emissions by doing this. It's a potential reduction of 612,000 tons of CO2. So that concludes my presentation. We can continue with the Q&A. Thank you. We will now begin the questions and answers session for investors and panelists. If you would like to ask a question, please state your name and the company you represent through the Q&A button. Please ask all your questions at once. If you would like to state your question in writing, you can submit it through the Q&A button. Please hold while we poll for questions. The first question will be asked by Felipe Andrade from Itaú BBA.