Engie Brasil Ene Sa S/Adr

I am Rafael Bozio and would like to make a few announcements before starting the video conference. At this moment, those connected are in listen mode only. Later, we can open the Q&A session where participants will be able to send questions. I would also like to remind you that this video conference is being recorded. It is made available on our website at www.eng.com.br slash investors. And the results of the presentation and earning releases, in addition to the financial statements and other documents filed at CMB, are going to be put there. Before proceeding, I would like to clarify that all statements made during this video conference regarding business outlook of the company should be treated as forecast, depending on the country's macroeconomic conditions, on the performance of the regulation of the electric sector, in addition to other variables, and therefore are subject to changes provided. We remind you that journalists wishing to ask questions can do so by e-mail and submit them to the company's press office. To present Brazil, ENGIE Brazil Energy's performance in the fourth quarter of year 23, we have here with us Mr. Eduardo Satamini. our CEO, and Mr. Eduardo Takamori, our Chief Financial and Investor Relations Officer. Santa, you start. Well, thank you, Rafael. Good morning, everyone. It's a pleasure to be with you once again, and once again presenting good results for 2023, which was a very important year for us. This is where we effectively had the company's energy transition. And of course, that all of these impacts will be a part of our presentation here today. Next slide, please. Slide number five. Here we have the company's highlights. First of all, the financial highlights. So we are saying that we concluded our energy transition and then We exchanged our assets into new assets, and you can see that this year we grew, and we lost a very important element of our Etuda composition, the Pampa plant, and we will talk a little bit more about it later. It contributed with over 350 million BRLs, or Etuda if we compare 22 to 23 BRLs. But then when we look at the generation and training, we only lost 122, which means that we have already offset part of this loss in our ETEDA by new generation assets. But we also had a transition into a more diversified company in terms of businesses with the contribution of our financial results, among others, which led us to grow 4.7% from 22 to 23. In terms of net profit, which really matters to our shareholders, we had very good net results, almost 24%, and that was a result of the decrease of inflation. And this shows that the company is robust. That's our control. And the company benefits from inflationary movements. This is important for us to keep in mind. Now let's move on to the next highlights. The company, with the sales of our coal assets, we have become the largest generator of 100% renewable electricity in the country, which is very significant for us in 23. We also bought a lot of Lot 5 at the latest auction in the full amount of $3.2 billion. and we are about to conclude our contracts. Also, in the auction, we acquired Lot 5, the Azabanka project at NIL's transmission auction, and we concluded the issuance of debentures in the amount of 2.5 billion so that we could offset the implementation of transmission and energy generation projects. In the next slide, we can see the sale of 15% of the company's equity stake held in TAG. As a group today, we have TAG's control along with CDPQ, which was our original project. but we need resources now so that we can invest in greenfield assets, continuing our diversification strategy. And now in the meeting of the board, we approved the sales of 900.94 millions, which represent 1.2 cents per share. And Takamori is probably already defining the date of TAX. With that, our total earnings for 23 reached a 55% payout and dividend yield of 5.6%. And this is our practice towards reduction so that in moments of significant investments, we have resources available to meet the company's commitment. In the next page, we have ESG highlights. For the first time ever, the company was included in the S&P Global Sustainability Yearbook. This was for the first time, and only 12% of the companies that apply for publication in this yearbook are taken into account, and therefore, This has been a significant achievement and is very relevant for ESG practices. Another important aspect, we went from a B rating to an A- rating in the CDP Climate Change 23, and this is very important to keep us within B3 sustainability indexed. We were once again included. We ranked as number five with the best position in the sector. And since it was created in 25, we've been there. Now we have the KPIs for ESG. We're not going to talk about them one by one. But the important message here are the control of emissions, the health and safety of our employees and service providers. The share of women in our workforce has grown. We are pursuing innovation to improve productivity and performance. We also work very close to the communities where we are located. With that, we try to have social investments, and this is something that we've done. It went down in monetary terms during 23 due to tax-related issues, but we intend to use all of the resources available with the communities that are located close to our projects and our plants. We also have an engagement index with the communities, and this is very high, and we try to meet the local needs. I will turn over to Rafael, and he will talk about our expansion and our business strategy. Rafael will talk about finances, and I will be available to answer any eventual questions. I turn over to you, Rafa. Thank you. I am now going to talk about our energy commercial strategy to update our performance in the market and also to help us model it for the company. Also to verify opportunities and exposures. If we compare the figures on the left side graph, we can see consistent evolution. We had good sales. And, of course, this was during a period where we have a lot of changes. And you can see that we have sales greater than 800 megawatts for the year 2018. And I'd like to remind you that the energy balance is found in slide 36 of our attachments, and you can compare it to our balance disseminated in 23. We have been able to maintain the mean energy price throughout this period. This was a relevant result, and it shows our capacity to leverage sales and also to start increasing our participation in wholesales. And this is demonstrated in the next slide. Well, perhaps just I would like to add something in terms of keeping prices. This has to do with the way we sell energy. We always sell We meet the needs of the market. We reduce costs when the demand is lower. And that guarantees a very resilient price in the short run. When we look at our mean prices, they have been met. And this is something that we've gone through. We have resilience of our results. And then when prices go up too much, we don't really use it that much. But this is a characteristic for resilience and stability. So likewise, Rafael, we have some diversification of the industrial sectors so that avoid all sectors which might have competition problems. Rafael, apologize me for the interruption, but this is part of our dynamics of presentation. I would also like to remind you that we contract from the regular market and also from the free market, so part of our revenue once again confers stability in our results for the long term. In the next slide, you can see the evolution for our consumers. And then in terms of volume, we have our visibility in the long term that has been a little bit decreased. The number of clients you can see here, we opened for consumers and we can see significant growth in the number of clients with an increase of 66% in the last three years. I think that We can now move on to the expansion session where we update you on the projects that are being implemented. We have some good news of the Santo Agostinho wind complex. We have turbines that are already operating and being tested. So we're moving towards a conclusion It is almost totally commissioned as we had planned. And I would like to remind you that this project has been totally contracted in the free market, adding renewable capacity. We have two other projects. The next one is in Serra do Açoeira. It is... under accelerated implementation. We have started assembling the towers so that we can start operating in the second half of this year with full operations in 2025. The project is very large, over 850 46 megawatts of total installed capacity in the northeast region, which will contribute, as Satanini said, it will help us replace the non-renewable capacity that we got rid of in the past years. And this is going to overcome what we sold. Now we have another project for the Voltec. which is an implementation. It is quite significant and is one of the largest projects being implemented in our group. It is not as advanced as the Asura project, but Asusol will start operating this year, reaching total operations by the end of 2025. It will be totally operational in 26. But this is according to our project, and now we're going to talk about the diversification of our project. The VLHL is a small project. It is an extension of the NOVO standard transmission system, which has been operating since February last year. And as planned, it will start operating in the first quarter of 24. We have other projects here in the next slide. This is a relevant project. It's much bigger. It is the Asa Branca Energy Transmission Plant. It is a project which is over 1,000 kilometers long, going through Bahia, Minas, reaching Sergipe and Espírito Santo. And it will help us distribute the renewable energy that is going to be produced in the Northeast. We are disseminating CO2 forecasting of actually 24 months, taking into account the deadline established by NAL, which is March 29. Now, in the next slide, GDAL. And this is a historical slide about GDAL. It is a growth opportunity, and I'd like to remind you that the Angie Group has a share of 40%. It hasn't been included in our portfolio, but maybe so. And this is something that we've been working with for a long time, and you all know that we had a lot of problems. We had delays. and the challenges that we faced on site. Today, the project is well balanced. Financially speaking, it is balanced. We had some cash generation to reasonable levels, which are sustainable according to the project. So it is possible that in a near future we will have to discuss it with the controller, but we have a large project pipeline.

At some point in time, we will grade our participation to the levels that we had planned

and we expect to have something available by 24 or 25. We will provide extensive information to the market as soon as possible. To you, Rafa. Okay, next slide. I'd like to remind you that in addition to the projects that are being implemented, we have a portfolio of of developing projects. They are waiting for a business opportunity to be enabled, and it's very important to have these options because the market reacts really fast, historically speaking, from the beginning of the development to implementation. A project may take several years, and therefore it's important for us to keep an updated portfolio of with mature projects so that we can capture opportunities that come up suddenly. With this, I end the part of the discussion of our developing projects, and I now turn over to Taka for the financial performance. Thank you very much, Rafael. We are very happy with our results. I will make a recap of our financial balance and what was mentioned here about the carbonization of our portfolio. You can see that we still have very high levels, close to 36%, keeping an average which is superior to that of the market. Return on equity also and perhaps these relationships will change a little bit, but we still generate a lot of value to our shareholders. On the right side, I would like to remind you of the investments made from 2016. You can see $28.5 billion, which is very high, and a leverage of 84%. We used our balance to be able to leverage and distribute dividends until a point when it was possible. We evolved in terms of decarbonization. In 26, we're basically renewable generation and thermoelectric generation. We were able to decarbonize, diversify our portfolio, from the point of view of inclusion of new projects, which represent about 8% to 10% of the adjustable, or adjusted, I'm sorry, etc. Also, with the participation where we made our investments naturally, because we had partial investments, and this participation, which reached 10% to 14%, will probably go down in the upcoming year, but even so, the combination of networks, including transmission of electric energy and gas transportation, will continue representing this amount, which is very important for the stability of our results. Another important aspect, we have an important part of our energy transmission with longer-term contracts. Of the 76% of the 23, we have about 60% of regulated contracts. And this helps us to have stability of our results and recurrence. Now, in the next slide, we will talk about the net operating revenue evolution. Satamini mentioned it, and you can see here in the middle bar, the main drivers here, which made us go from 11.9 billion to the amounts we reached, are justifiable. We can see there is a significant impact in our recovery. In the next slides, you will see that there is an impact on our constitution, but in the top line here, really, there was a significant aspect. Another element, we had a decrease in trade in sales and purchases. In this case, we also had a decrease in the generation of revenue. $250 million year over year. But there was also lower purchases. You can see that the ANTEDA was pretty much controlled. And then the most relevant effect of $570 million approximately had to do with the decrease in the construction revenue. you know that a transmission has a differentiated accounting rule. Construction generates revenue even before it goes to the market. And so, naturally, we no longer have this revenue once we start operating, and this is why we had this decrease of about 10% in our net. And now I'm going to talk a little bit about TAG. TAG had exceptional results in 23. We had also commented about this throughout the year. We had a series of internal optimizations. We were able to capture this value, and the main one here was funding that generated cash, And so we really had a one-of-a-kind year here. We now expect TAG to go back to normal in the upcoming years, and you will see that the contribution of TAG to our ETEDA was of almost 1 billion BRLs. And then we had our prior participation of 32%. In the beginning of the year, we signed a contract for sales with our partner. Our position went to 17.5% as of the first quarter, with the completion of the divestment of participation in the asset. And then you will see these equalized figures. with more stable contributions. I would like to highlight that TAG contribution was significant for our results this year. Now, in the next slide, this is a graph with many columns, but it's easy to understand. The external bars for gross metadata we had significant evolution from 6.8 to 7.3 billion BRLs. Without the non-recurring events, we had an adjustment to 55 million in 2022, which didn't happen. But this is not recurring. And then in early 2023, we had something minor. When we analyzed adjusted ETEDA, we had an increase, as you can see here, It was 4.7%. And I would like to make a disclaimer. As of this year, to meet your needs or those who analyze our financial information, we decided to include the effect of quota generation. In the past, we only used the accounting effects, but we still had the non-cash events. So we decided to include it here to make it easier for you to see the operational effects that you usually analyze. And so if we remove all of the RFS adjustments, our growth performance was 6.4% year over year, going to 7 billion BRS. actually 7.028. And here we can see some effects. One of them was the portfolio purchase reduction with better defined prices. We have less interest in buying and selling third-party energy. And here we can see an important effect. with a hydrologic risk and here you probably have noted that in the second quarter of 23 we had already received higher amounts and this was an estimate we had for our plant but the accounting principles and accounting treatment evolved over the year we had some adjustments and decided that we had to review it. So we had a reversion of $125 million in the beginning of the year, and the net amount now in the beginning of the year is $115 million. But there was a significant amount for the concession, generating value to our shareholders. Now, in the final bars program, We can also see 348 million BRLs, one of the most important bars year over year, which is the reduction in our portfolio. And transmission, as we mentioned already, or transmission without the effects of the accounting treatment. And then you can see an increase of our ANTEDA as a function of RAF. So all of our assets and transmission lines, Graal e Azul, are already operational, which leads to our results year over year. Also, TAG had a significant contribution when compared to the previous year, and this is very important. We imagine that it would be lower in 2024, but even so, 2023 was a fantastic year with very important results for us. Now, in the next slide, the net profit evolution, Satamini has already mentioned that the main, in fact, was the financial result. which suffers a lot from variations of the PCA. And because PCA was much lower in 23 than 22, we already have an important variation year over year. We are relieved that in addition to this more normalized results, we have... The other plants, three of them were indexed to PCA, and when the PCA is lower, we end up having less impact in our accounts to pay.

You can also see the adjusted ETEDA.

And, of course, because of Pantasu, we have less depreciation and amortization. This is less depreciation and amortization year over year, and because our results were better, we also pay more taxes, which is a natural result of doing better. And then regardless of how you analyze it, a net profit or just a net profit, Our results were fantastic. We had almost 29% of net profit or 24% when we include the non-recurring adjustments. And therefore, this was really a fantastic year. Next slide. Here we have our debts, which remain balanced. We can see our net debt. It increased. We wanted to anticipate the need for a crash for this year. We have a series of payments to be made, but we increased our debt from 18%. to almost 21 billion BRLs in 23. But we have not used the resources yet. Our cash also significantly increased, and we capped our net debt at a level of 15 billion BRLs approximately. In the next slide, we can see a very comfortable profile, a comfortable debt profile and composition. for the payment of our debts. We will keep it at 55% and are at a comfortable position. As I had mentioned, 80% of our debt is indexed to IPCA, 17% to CDI, and 5% to TGLP because of the older contracts with the NDS. the nominal cost of debt is 10%, a little bit lower. So it's a very efficient cost of debt, which enables us to reach our ROI. In the next slide, in terms of investments, we consolidate everything Rafael mentioned in the previous slide. We have 9.6 billion BRLs. And of this 9.6 billion, the gray bar depends on the closing of Atlas, an operation which is about to be concluded. We signed it at the end of last year. We still need our EP, but we expect this operation to be concluded next week, still within the first quarter of 24. About 2.3 billion BRLs have to do with Cruzeiro. Serra do Suruá will start operating by the end of this year. So this is the year that we will need the most KPACs. And so an important part of our commitments here will go to Serra do Suruá. Also, we have 2.8. And we also have Santo Agostinho conclusion, the kickoff of Asa Branca. Asa Branca does not require a lot of CapEx right now, but it will be in the order of half a billion for this year. Whenever we add all of our investment commitments, we have a total of 14 billion. A lot of it concentrated this year, so this is going to be a year for investments. And in the next slide, we will talk about our dividend policy. Of course, we make an effort to maximize dividend distribution. Most of the years, it was at a level of 100%. But it's also expected that in moments of great investments, we will have a reduction. But all is keeping a healthy level of 65% of payout. But it is expected and only natural that we will have to maintain an adequate capital structure when we make investments. Rafa, with this, we close the presentation part of our call, and we can open for a Q&A. Well, perfect. Thank you very much. I already have some questions here. I would like to thank those who have submitted their questions, and I will start a little bit with the commercial area. We actually have two related questions, and I will try to combine them. Victor Cunha, an analyst from Itaú, BBA, who says that PPA sales were accelerated in the first quarter. Can we expect 24 to be an agitated year in terms of PPA sales because of the recovery of energy prices? And what is the view of the company for energy prices in the upcoming years? Well, I will start answering this question. Perhaps you can complement it. We had questions the 7th worst December of our history and the worst January. And, of course, that has an impact. I need to start my video. It looks like it is off. Now we go. With this, we, of course, had an impact on our prices. we know that it takes the market some time to react and prices have gone up. So we have a price scenario that was triggered by this situation and also because of a stronger demand than we expected. And this is indeed going to be something frequent this year. Even though the period was very weak, we already start our dry period, so we have to see how the humid period will behave and what impact it will have in the future. This is a characteristic of our system. We have a lot of heat generation. and this already has an impact on prices. So it is indeed going to be a year with good sales opportunities, but in the longer run, the prices have already been affected by these events and will depend on consumption in the next few years and also on methodology. Okay, so let's move on. A question by João Vitor Fagundes, an analyst of Badesco BBA. It is related to sales, and he asks if the sales volume for 2028 is related to the opening of the free market to smaller clients, or is it related to the rolling of existing client contracts? Well, it is more related to prices, really, because when prices improve, we use this opportunity and higher. The market opening has some volume, but it's very small. We have many very small clients, which do not make a lot of difference in our total volume. We understand that this market is going to increase and it's going to become more relevant, but we still have the main sales drivers based on our large corporate clients. Perfect. Thank you very much, Satanino. Another question by Victor Cunha from Itaú BBA. He asks us if we have any news on the auction for capacity reserve. Is the public consultation going to be open in the first quarter? And is Angie going to participate in the auction with the Jaguar and Santiago plants? Yes, we intend to do so, but we need to put this possibility according to the characteristics of the auction. I think the anticipated date was April, but it will probably be delayed a little bit. This is somehow good so that we can prepare and discuss the participation of hydroelectric plants in this area. Perfect. Thank you, Saturnino. Next question. Rafael Rato, our investor and shareholder, physical person. He commented that on TAG's relevant event, we mentioned there is a synergism between generation and transmission. So he asks if we can conclude that the focus of Angie Brazil will be on the expansion of antigeneration as well as increasing its participation and becoming more relevant in the energy transmission segment. Well, I think he captured the idea really well. Our main business is electric energy. We've seen the opportunity of gas as an opportunity to participate in energy transition to replace the more polluting fossil fuels. but this is based on the group's expertise for the operation of gas pipelines. So here we have a company of the group which participates in TAG and has a higher participation than ours now that we decided to divest. So there is a trend towards focusing on the growth of the sectors that are related to electric energy. Thank you, Satyanini. I had a question from Lucas Xavier, an investor, and he asked us if we're going to participate in the transmission auction, and the answer is yes. Correct. We are analyzing some lots, studying them so that we have a strong technical basis, optimize engineering, so that we have a competitive and profitable environment. Competition does not mean that we're going to give up having a return. Also, we have to optimize the performance of our assets. Perfect, Sato. You actually already addressed the second part of this question. Thank you very much. Next question. Takamori has already mentioned it, but I think it's good for us to restate when we're going to disseminate X data or payment of dividends Well, we have to wait for the confirmation of the dividends in our assembly on April 24th. After that, we will inform about this date. The main thing is to guarantee the correct amount so that we can communicate it, and that's after April 24th. Thank you, Takamori. We have another question from Safra. Actually, two questions in one about tax participation. Can we expect the remaining sales in the short term and How will the Giral participation be part of the scope of this rotation of assets? Well, it could happen, but I do not see a need or an interest to do it right now. Regarding Giral, Giral is an asset that is part of our report. 70% is contracted. we can generate a value by means of commercialization. So at some point in time, it will be part of our scope. This hasn't happened yet because of the decision of the controller. The controller understood that we had to really round up our results. before we do that, and then we will analyze how this asset will be brought into our scope. Is it going to be through sales funded by the controller? Are we going to have any shared transactions? We haven't started discussing this yet, but this is probably what we're going to discuss with the committee. What we can say is that we anticipate that this will happen. We have a constituted governance to guarantee the best governance possible in equal conditions as well. Well, thank you very much, Satamini. Next question by Ilan. Arbitrum Investments. How do you see the current leverage in 2.1 times? Are you going to issue new debentures? Definitely, Ilan. This is a very comfortable level. We have an opportunity to leverage more and this is going to be our strategy for this year. So, Unless we have any transformational event here, which requires other capital structures that are a little bit more differentiated, we will have to control it to meet our capital needs. I'd like to remind you that we've done part of our homework. We issued debentures last year. that reduces our needs for this year. But we see it with optimism. Let's leverage. Well, thank you very much. Daniel from Safra asked if we see any liquidity in the market because of the recent context. Yes, it is increasing, and this is good because consumers tend to benefit from it in the short run. But when we start having this volatility because of the complexity of the market, we can see that consumers understand that's not their expertise and transfers risk for longer-term contracts. So we have seen a higher liquidity and a higher interest of consumers to make things more consistent. And Thank you very much, Takamori. We have a question from João Pimentel, analyst. It is more specific about TAG, so I will try to answer it. He asks if we can explain the reason for the TAG revenue in the fourth quarter, and also he wants details of the provision for the return of penalties that had an impact on Antida. This has to do with the return of the penalties that were provisioned, and they will be returned throughout 24 and 25. But I'd like to remind you that the impact was more significant because all of the penalties for 22 and 23 had an impact on the fourth quarter alone. And we're moving towards the end of our Q&A. Vinicius Santini, our shareholder, asks if we have any news on green hydrogen projects. You're muted, Sato. Okay, let's move on. We have tried to do it. The industry is still in the early stages. We still do not have regulations that will encourage this activity. We have congress associations and how we can make this industry start operating because it's very positive for generation. It is a consumer of energy, but we still need to have a regulatory framework that will facilitate our business. And this is the main barrier for the development of green hydrogen. But we have worked with some industrial projects which may be economically feasible as long as we have a valuation of a carbon decrease. And the cost of carbon is an element that will enable the creation of this industry. These are ongoing activities. They move very slowly, but we're discussing them. And it is possible that we have some kind of evolution in 24. We're working to do that. Well, thank you very much. Next question from Antonio Araújo, a shareholder, and he asks if we are interested in does not use its privilege. Well, we're not looking at that. I cannot comment. We do not have a position today, so I can't tell you. We're not participating in that process. One last question. Mateus Caetano, our shareholder, he wants to know what the perspectives for this sector are and how the company sees the feasibility of new energy actions when compared to others. Well, new energy, there's no demand. If you do not have demand, it won't have happened. And if we have excess offers, a lot of clients are being lost to the free market, and so we will probably have an involuntary exposure, leading to increased fees for our consumers. So this is a situation where they go to the free market to leave their accounts for those who stay, Things become more and more expensive. This is the craziness we're going through now, and it is stimulated by the incentive for distributed generation. This is a message we've given. The government has to stop and evaluate because the population Poorer consumers, the ones who have less resources, will end up having to pay for those who are richer and smarter. This is the message we share with everyone in the Congress, with the government. It's been difficult, and we hope that they soon understand it and the government starts doing something which is very important for the health of the sector. Wonderful, Seth. We're now definitely moving on to the last question so that we do not leave any questions without an answer. And that's in line with the last answer you gave. Do we have an interest on the AESB assets in Brazil? Well, we're always interested in generation assets. We look at them, we participate in the process, and at some point in time, those things might come true or not. I'm not saying that we will participate in the auction or not, but generation and transmission assets, if they have a good return, if they make sense, if they add value to our portfolio, We will analyze them, and this is undoubtedly an interesting asset. We're talking about two plants in the southeast, and so I think that within this process, we will have some interest. Satanini and Takamori, since we do not have any more questions, I now turn over for final considerations. Well, once again, thank you all very much. We hope that in 2024 we evolve in regulatory terms for the electric sector. And as you know, we navigate very well any type of oceans. We have the best team possible, and we count on the support of our investors. And this interaction with you is very positive for us. So I thank you very much and wish you all a good day.