Engie Brasil Ene Sa S/Adr

I would like to make some announcements before we begin. At this moment, all participants are on listen-only mode. Later, when we start the Q&A session, participants will be able to send their questions using the Zoom Q&A tool. Please note that this video conference is being recorded. Our file... Our files, results, release are available on our website at www.ng.com.br slash investidores, along with the ITR and other documents filed together with the CVM yesterday, where detailed analysis of financial statements, operational results, ESG indicators, and progress in the implementation of new projects, among other highlights in the period. Before we proceed, we would like to clarify that statements made during this video conference regarding the company's business outlook should be treated as predictions depending on the country's economic condition, the performance, and the regulation of the electrical sector, among other variables, and therefore are subject to change. We would like to remind journalists that if they wish to ask questions, they can do so by emailing them to the company's press office to present Engie Brazil's Energias performance. In Q3 of 2023, we have Eduardo Takamori, Chief Financial Officer and Investor Relations Director, Rafael Bosio, Investors Relations Manager of the company. Now I will hand it over to Takamori. So we have 113 participants. Well, good morning to everyone. Good afternoon. I'm speaking from our headquarters in Paris. I hope that this connection helps us. Now, when we go to our main slide with no further ado, we would like to talk about the adjusted EBITDA. There was a significant increase of 23.5%. It went to $1.4 billion to $1.8 billion. And you can see the main drivers of the results, where the transmission segment results. And number one, I would like to clarify something. The 318 million BRLs, 50% was because of the increase of the rabbit, because during the same period last year, part of the assets were under construction. And now we have all BRLs. of our assets in operations. So part of the 318 million are part of the increase in revenue and approximately 270 million come from the IFRS adjustment. This is during Q3 last year. We recognized a cost increase and this goes directly to the results because of our accounting procedures And we will not see this again because the assets are operational. There was a slight increase of revenue during Q3 this year, totaling the $318 million. That is very important for our reason. $118 million, the second item, which is positive regarding the EBITDA variation, comes from the equity income of this tag. We will elaborate this. And the net profit went $230 to $330 million, which was positive. And finally, the third element here that justifies the EBITDA variation is the result of the sale of Pampasou's subsidiary aligned with our decarbonization policy. This is part of the controlling company's a target, and with this we lose our long-term revenue. But we trust that we are on the right pathway. We are reassured on the right-hand side. Here we had the adjusted net income from $709,929,000 over a 30% increase quarter-on-quarter. And we also have the positive effect of a lower depreciation and amortization because we sold Pampasul. We do not have this asset associated and a combination of a drop of increase of financial costs. That number one was based that would be we had a $33 million, and it is adjusted by the IPCI, and it is adjusted amongst quarter. And the net result of financial expenses was positive $40 million. We had a drop in financial expenses, and the net income was 40%. So this is why we have the 43 million reais of financial reserves. And when you have a higher base, you pay over the net income. On our next slide, here we can see the main highlights. From our business point of view, number one would be we announced to the market the expanding of the portfolio diversification with the acquisition of five photovoltaic complexes. On Wednesday, we analyzed these events and we were able to announce the debt and this operation meets all the return criteria and risk allocation requirements. and these assets are positioned where our current assets are positioned. With great synergy, we would like to highlight that the assets are highly contracted in the long term. They have a capacity of two-thirds of the capacity, and the remaining tranche, For the ACR, it has also long-term contracts until 2042. The allocation is in the free market. It doesn't have a market risk. Now, on the lower part, we would like to mention that we closed the purchase operation of CEE generation, and this increased five average megawatts to our company's portfolio, totally compatible with our business. We would like to remind you that we operate Machadinho And the last element here is that regarding Santo Agostinho, although at the end of 2023 we had 12 out of 70 wind turbines, now we have 19 wind turbines operating commercially and 30% of the commercial operation is So 60% is underway, and we maintain the initial forecast for the complex to be working by the end of the year. Here we have our ESG indicators. Number one, as a result of Pampasul, there is a significant drop in the intensity of the company's emissions. Basically, what remains is scope three. We're going to address this differently. Perhaps we will have to change the structure of the slide. And on the right-hand side here, we have health and safety. That is not only something important to maintain our license. We had a significant drop in the accident frequencies, number of accidents, and we are very happy. because this is a continuous effort made by the company so that all our employees and third parties are able to go back home safely. And on here, we also have, you can see that throughout the quarters, we increased the percentage of women in the workforce. This is also a very effective policy, and we have focused strongly on this. And here we can see the evolution from 25% to 28% and in leadership process. So we have women in the company and women in leadership positions. This is an increase of 10% when we compare the same quarter last year to this quarter. Now investment in innovation and social responsibility, investment in innovation grew throughout nine months, although it is at the same level last year. The social responsibility and investments, we have the same level of investments growing. to date, when we compare last year to this year, just one observation that our resources, our incentivized resources dropped slightly, but we offset this throughout the period. Now, Rafael, you have the floor.

Thank you.

Good morning, and thank you very much for participating in our call and for your interest. We have over 200 participants now. Now our energy commercial strategy, the classic slide where we update our energy balance, our energy balance will be seen in the attachments on slide 35, but here we – you have it in charts – So for those that follow closely and follow the evolution quarter by quarter can identify that we have maintained the energy sales, although there has been a drop in appetite, which is normal in a scenario where prices are driven downwards. But we continue in the market. We continue selling. During this quarter, we dropped an average 74 megawatt average in an uncontracted balance from 25 to 28 without identifying the impact on the average sales price, which was stable in comparison to what we announced during Q2 for 23, 24, and 25. Therefore, we continue focused on our strategy, pursuing to follow the free market opening in order to capture the consumers that are migrating. I believe that on the next slide, we will be able to see this. In this slide, we identified that we have a significant growth in number of customers So 22% comparison to the same period last year. And also we've grown in comparison to the last quarter. This shows that our strategy has captured the expansion of the free market, especially in niches where the consumer has greater appetite And on our side, we can find better contracting prices. And this is reflected on our average prices of our portfolio. So now you can see our expansion. And here you can see the progress of our projects. The first project would be Santo Agostinho Wind Complex. the beginning of the operation is the first quarter, the first wind, the wind turbines, Takamori already updated you regarding the number of wind turbines that are generating, are in test or in operation, already 7.5% of global progress. So, and auxiliary works for access networks and substations 100% completed. This is operational 2023. We have Santo Agostinho, and now we have Serra do Asuroa, that is the biggest implementation complex from the ANGI group in the world, which will become operational by the end of next year. So we are adding capacity in 2023 and 2024 with Serra do Azurua. As you can see here, we started also the concreting of wind turbine foundation and excavations for the transmission line. And on 2025, we will continue adding capacity to our portfolio with the ASUSO photovoltaic complex in Rio Grande do Norte with over 750 meg of installed capacity that an implementation began in July. This combo will add more and additional two gigawatts of installed capacity, and this represents over 20% of generation that we will be able to deliver And then now our next slide. Here we see growth in transmission. And here we highlight that together with the diversification of our revenue, we have two operational projects, Graal e Azul and Noval Estado. And on Q1 of 2020 for Gavião Real will become operational. That is a small project that we bought during last year's auction. Nonetheless, on the following slide, we have the Lot 5, that is the Azabranca transmission auction. We have over 1,000 transmission lines that will be added to our portfolio to broaden the diversification of our revenue that provides stability to our results. And finally, here you can see the Giral HHP, where the controlling company has a 40% stake. There is a potential to transfer this to Engie Brasil Energia. Giral is an operational HPP in October. It celebrated 10 years of operation. The indicators here are positive. You can see that it has 100% of uptime operating factor. And during this quarter, it was the first company in Brazil to receive the IHA certification and the second plant in the world that receives this type of certification, which demonstrates the high operational level of our plant. This is a slight difference. Well, it didn't change vis-a-vis the last quarter is where we present the projects that are in a developed stage. They're not under construction, I would like to highlight. But they are waiting for the right moment, for right market moment to be developed because the expansion cost and the implementation cost is above the long-term cost. average price, but we must have a diversified portfolio of projects to be developed in the future because when there is a positive turn, when the market changes, we have to be prepared to resume the growth of the company. One, because when you develop from the beginning to the get-go can take four or five years. This is why it's important to have projects under your sleeve so you can implement them as soon as there are better conditions. So, Takamori, now I give it back to you to talk about the financial performance. Thank you, Rafael, in this slide of financial performance. Point number one, I would like to remind you that although with a number of investments, although we mentioned that there will be a 55% distribution during the first semester. We would like to remind you that our return on equity is extremely positive. Our return has exceeded 30%. That is way above the average of the industry. And now we've seen 37% on Q3 of 2023, the return over invested capital that contemplates debt and the company's capital is 20% because this is a result of our capital structure. We are delivering more to our shareholders. Here you can see all the investments during the past years up till the date. So it's 2016. That would be almost $26 billion. And there is still a lot to deliver. Here you can see that throughout time we started as a generation company. Then we went to transmission. And now we're also transmitting renewable energy vertically. And recently, we invested in TAG. This is acquisition of 32.5% stake in TAG, which has helped us in our result. Now, throughout this period, there was an adjusted EBITDA growth of over 100%. We more than doubled. And our dividends increased. all on our own capital of $14 billion. And we're proud of this. We can go to our next slide. This is a slide that has a number of bars, and sometimes it's challenging to explain it. In summary, we had a drop of 8.5% of our net operating revenue, and And as Pampasul, the exit of Pampasul of our portfolio represents a drop of 162 million reais when we compare it to Q3 of last year. And out of these 8.5%, this accounts for 6%. This is why the rest, this is how we justify the rest. The second relevant point here would be, There was a financial asset remuneration higher. This is 59 million that our Jaguarimita and the assets are generation assets. And this is the PCA variation causes this effect on our net operating revenue. Now our next slide, we have 39 million of drop because less hydro generation quarter on quarter, although with the positive impact of export in the beginning of the year. And here, these 39 million represent 1.5% of the variation of 8.5%. On in the central bar, I would like to highlight a drop of 40 million quarter on quarter, basically because of the price and sales volume which dropped. Amongst, although with lower price and sales volume here, you can see that we have been successful in the management of our portfolio. And finally, I would like to highlight the dark blue bar of minus 65 million reais. That is a result of a drop of the revenue of our trading operations. We sold less, but this drop is not as important because there was a drop compatible to the purchase of our free trade. Therefore, the result was neutral. And it's generated a drop of 2.7 billion to 2.5 billion. Now, the result of equity income here, you can see our tag. Tag does not make an announcement. We're breaking this out so you can understand TAG has generated an important result, a net income, which is important. Here we're breaking out a little bit the result. I would like to draw your attention. Number one, that the last bar, that is, here we have a net income of R1 billion during Q3, one-third of this, 30.5%. is a contribution to the EBITDA because of equity income. And here, 320 would be the contribution to the EBITDA. How do we compare it to... From last year went to 202 million to 320 million. So there was an increase and you will see that in the upcoming slides. In the first bar, 2.37 billion of NOR. The most effect was the update of the transportation tariff. Here we have a 70% come from the update of transport tariff. We have less financial expense. because of the drop of the CDI and the impact of our refinancing and a fourth element that although we have the benefit of transport and lower financial expenses, we pay more taxes. Because there's more revenue, we pay more taxes. Here we have a variation to 202 to 320. It would be the increase of 108 million reais. Here you can see the EBITDA change. The tag is in light blue. The first point that I would like to highlight is that the TAG effect, here we have the green lines, this is the effect of the transmission distributed in three different sides. Now, the two extreme bars, this is where we have the IFRS, This is an accounting, it's an accounting requirement and the central bar, this is the effect that I mentioned in the beginning of the presentation, that is the variation of the undertakings under construction. And now their operation of this reflects the wrap of 50 million reais. So tag light blue, green would be the allocation of the result of our transmission concessions, part of the EBITDA. And part of this is adjusted for transmission for the central bars. And in the central bars, where we went to 1.66 billion to 1.72 billion. This is justified by the sale of Pompazul minus 62 million reais. When we compare it to the same quarter last year, we spoke about this in the past slides. Another important element would be lower generation quarter on quarter in EBIT. And we already mentioned this. There was a positive export. but there was a negative effect regarding the same period last year. And the last point from the central bars, EBITDA and adjusted EBITDA number one would be the blue bar that is 101 million reais, that is a drop of the volume of sales purchased. This moment of low prices, there is lower activity and purchase and sales from third parties. This is why we have a drop here. Here, Jaguari Miranda, that is the 59 million BRL bar. This is a result of the remuneration of financial assets. And there has been an improvement of the EBITDA because we have no more fuel costs. The last point that is important to note is that after our adjusted EBITDA, on the extreme right-hand side, we can see 61 million reais that are non-recurring. This is basically because of Solan Maracatu, we had a strong wind event. The damaged part of the equipment, part of these equipments, so this was a loss of 61 million BRLs. And although we recognize this impairment, These assets are insured and this will become operational. Briefly, we'll give you more news regarding the unfoldings of this problem. There was a significant growth When we talk the IFRS of 23%, when we exclude the effects of IFRS, the EBITDA drew 24%, quarter and quarter. Now the next slide here, the evolution of the net income. Here you can see a growth of 31% from $709 million to $929 million. The main element here is the EBITDA. It went to $1.4 billion to $1.768 billion. There is a variation of $336 million, as we already explained. We also had depreciation and amortization because we no longer accord any bump of minus 43%. Forty-three, the which is because of the increase of expenses and the net positive of revenue minus financial costs and income tax, it says here. And our results are $928 million regarding adjusted net income.