Engie Brasil Ene Sa S/Adr

I am Adriana Wagner. I would like to make a few announcements before we start the video conference. At this moment, those connected are in listener mode only. Later, when we open the Q&A session, participants will be able to send them through the Zoom Q&A option. I would also like to remind you that this video conference is being recorded. We made it available on our website, www.engie.com.br, Investidores, and the earnings and financial statements and other documents filed at CVM. where analysis of financial statements, operational results, ESG indicators and progress of implementation of new projects are disclosed in detail. And before proceeding, I would like to clarify that all statements that may be made during this video conference regarding the business outlook of the company should be treated as forecast regardless of the country's macroeconomics condition and of the performance and the regulation of the electric sector, in addition to other variables. Therefore, they may be changed. We would also like to remind that journalists who wish to ask questions can do so by email, sending them to the company's press office. The present Engie Brazil Energia's performance in the third quarter of 24, we have here Mr. Eduardo Capitanori, and it's my pleasure to invite him to start his presentation. Good morning, everyone. It is a pleasure to be here with you. I thank you for the interest in being here with us. There are over 120 people connected right now. So I'm going to move on directly to the highlights. I'm very happy to let you know that we won annuals bid. We purchased lot one with a 780 kilometers length to be implemented. And this is a very strategic connecting lines that we already operate with in the state of Paraná, also in the state of Santa Catarina where our headquarters is located. Another relevant event was that during the third quarter 24, 50 wind turbines at Serra do Asuara wind complex began its early commercial operation, and we already have the equivalent of 27% of the projects totally installed right now. We have unfavorable hydrology this far, and this anticipation is very much welcome. The third highlight is that on October 24, we had the first plant of the ASUSO photovoltaic complex operating. It is all operational. We already have 50 megawatts out of the total of 755 available. In the next slide, we have the 12 issuance of debentures worth 2 billion BRLs, which is part of what we're doing to be able to comply with our CAPEX for 24. Other highlights, the awards. Any Effect Transparency Trophy was awarded to the company for the 14th time. We are acknowledged as having excellent financial statements of practices. We're also awarded by the Melhores e Maiores magazine ranking as the best energy company in the country. This will be made available in our website.

Passing to the quantitative part,

Moving on to the highlights, our adjusted ETRA had a negative variation, as you can see on the left-hand side, in the order of 7%, going from 1.707 billion to 1.65. We would like to highlight three main elements in the segment of generation and trading. also the transmission segment with 16 million BRLs. But the main impact here was the lower participation of TAG. I would like to remind you that in the beginning of the year, we recycled our capital and reduced our participation in TAG so that this, in fact, led to to significant impact in the first quarter. It was part of the funding for the CAPEX we need for the year. But when we evaluate for the accumulated, we went to 6.8 billion BRLs. We went from 5.4 to 6.8. You can also see in the gray part our increase. When we analyzed the adjusted net income, we had a more significant reduction of about 30% of our net profit. We went from 867 to 658 this quarter. of the lower ETDA contribution, but also 160 million additional in financial cuts with higher IPCA, and also because of the... which we will share with you later in this presentation, because we have a lower generation. We also pay less tax. From the accumulated point of view in the last nine months, the results are very similar. We had an increase from 2.5 to 3.3 billion BRLs, but we also have to take into account tax contribution in the first quarter. In the next slide, we can see the ESG indicators. We're very happy to show that our emissions have gone down, and they have gone dramatically since we started making our last thermoelectric plant.

We have

which are based on our new projects. We are watching the results carefully. Our pillar and our goal is to move on with the energy transition. On the upper part of the slide, we are happy to share with you that we had improvement in health and safety with a frequency rate which is even lower than the same quarter last year. And this is the number of accidents per million of hours of exposure to risk. We have millions of hours, and therefore this is very challenging. It's a license for us to operate, and we're very proud to share with you such good indicators. On the right-hand side, we can see the evolution of the percentage of women in the workforce and in leadership positions. We had advancement in leadership positions from 26% to 30%, a significant increase year over year, and also quarter over quarter. We also went from 28.8% to 31.4%. In terms of innovation, we basically had the same level of investment quarter over quarter, with a reduction from 45% to 33%. In the second quarter last year, we can see the impacts and the differences Social responsibility investments, they continue growing and are strongly influenced by the sales of TAG in the first quarter. Engaged people, we have a constant increase. It shows our ability to engage with the community and our activities. And now here, In the next session, we have included a new area with operational highlights. The first one of them, we share a panorama of the gross power generation. We have different impacts of the climate change. We show our consolidated results for hydroelectric generation, and this was one of our worst years in terms of hydropower. And you can see we went to 5.1, 4.7 to 5.1. And also the accumulated results When we compare nine months last year to nine months this year, we had an increase of 40%, even in a year with very poor hydrology. We know that actually in the first quarter in the south of the country, we had a lot of rain and floods and destruction. And now, because of a different operation, We had expressive generation in Jaguara, Tocantins, our hydroelectric power plants in the northern region of Brazil. And this helped us offset the effects we had in the beginning of the year. And now talking a little bit more in detail on the right-hand side, we have the generation by complementary source. This is a new graph, and I will guide you over it. Here we can see generation in megawatts in wind energy, biomass, and solar energy, which complement our electric power plants. or hydroelectric power plants. And you can compare the results to the previous quarter, or the quarter year over year, and quarter over quarter. And they include the assets that we purchased in the beginning of the year. So we went from 43%, we increased of 43%, quarter over quarter, and you will see that what is outside the dotted lines had a decrease, and we will later explain this to you. And now in the next slide, And this is perhaps the most relevant item, which is evaluated by all of you.

Curtainment, which is also known as constrained off.

It refers to the request for restriction of generation in wind and photovoltaic plants by the national electric system operator.

We have been saying this for a long time.

The third quarter is always the most challenging quarter because it is an intersection of more intense wind generation. It is the quarter where we generate the most when compared to solar energy. which is concentrated in the middle of the day. And therefore, we already expected this would happen, not as significantly as it did. The curtailment level was very high in the third quarter. When we compared for wind, you can see the results and compare them to solar. And our levels is above the average in Brazil. And, of course, we expect that the fourth quarter will be better than in the third quarter and perhaps a little bit worse than the second quarter. But we know that... a very important line started its operation and it reduces curtailment effects and we will be positively impacted by that. We also have a better expectation for the third quarter, for the fourth quarter when compared to the third quarter. Now, curtailment per asset. You can see the level of curtailment per region the north is by far the region that has suffered the most significant impact. On our side, wind energy, Santo Agostino, which was just implemented, is the site with the highest level of containment, 30% for the third quarter and 23% for the accumulated in the last nine months. Also, We have 35% accumulated for the last nine months. This is our total portfolio, and this is offset by the additional generation of our hydroelectric power plants, which helped us neutralize these effects. to protect our portfolio. The most important message here for the quarter is to show our resilience. Even with such high containment levels, we were able to deliver results that are similar to last year. Over to you now. Yes, thank you very much, Taka. Good morning, everyone. This is our traditional slide for the update on energy commercial strategy. And if you look at the gradual sale, you will see that in the third quarter, we started selling energy again, and the average and long-term prices reacted at the end of the second quarter, enabling us to close contracts. We sold, on average, 70 megawatts, with a higher concentration in 27-28, where we've sold over 20 mega for delivery in these two years. And we will have more resources available for delivery. This is totally aligned to our strategy with a gradual sale, enabling us to deliver resilient results. We can develop a portfolio where the average price is stable if you compare. And also the energy balance, you can see the prices here for 24, 25, 26. So this is all the result of our commercial strategy. In the next slide, slide number 15, we have an update of the evolution of free customers. The objective is to evaluate our strategy in face of the market opening. We have intense growth. When we compare it to the third quarter of last year, it was 55%. We have clients who are moving to the free market.

We are also beginning to open our market, and we have more energy to sell.

Now, in the next slide, we will talk about our expansion, and you can see the implementation status of the next projects. Takamura already mentioned mentioned it briefly during his presentation. We have Serra do Açorua. It is the good news and the highlights for this quarter. Not only with an anticipated start of the operations, but we're also anticipating our estimate for the total operation of the complex because we anticipated we would have full operation at the end of last year, and it will happen in the beginning of the year. And also, as Takamori highlighted, this is very important because an anticipated generation has helped us mitigate the impacts of the containment, which was intensified in the third quarter. This is a victory for our project development team. And now, moving on with this session, the next project for implementation is the photovoltaic project. Another good news, confirming our expectation to start operations in the fourth quarter of 24. They started operating on October 24th. 15 megawatts on average, as Takamori mentioned, and we will now have a ramp-up to reach full operations by the end of next year, which also helps us with additional generation to help us mitigate containment in other assets. I would like to add a comment here. If you look at this picture in the middle, that green area in the middle of the graph is a large bus. Just for you to have an idea of how big it is. So it is very challenging. Over 1.5 million solar mounts and therefore the scale is amazing, but it's all according to plan, especially in terms of the quality required to operate the site for over 20 years, 20 to 30 years. Good remark, Taka, especially taking into account other projects that are being implemented simultaneously. and other projects that are being implemented, such as Asa Branca. We're also evolving with this project. We have started construction as scheduled, and despite all the challenges we had with strikes, but we will still be able to start operating with at least an anticipation, a COD anticipation of at least 24 months. We now have another project, as Taka mentioned in the beginning of his presentation, one of the transmission auction we had this year, which we named Grauna Transmissora de Energia. It is a project that will benefit from synergisms. It will be implemented and connected to a substation of another asset, Gralha Azul, in the state of Paraná. And we also have segments in Santa Carina where our headquarters are located. but we also have Espírito Santo with a CAPEX of 3 billion BRLs. In the first year, the CAPEX is not as relevant, but we're focusing on signing contracts with providers, recruitment of the basic project, obtaining environmental licenses, so that we can start construction, as it is happening in Asa Branca. So this is another project that will be part of our portfolio in the upcoming years. Now, next slide. We have an update on the operation of the Giral Plant, We have another 20%. The plant has very good operational performance. It has been kept at very healthy levels for many quarters. It is an asset that we can eventually offer for transfer and acquisition by Brazil Energia, which will evaluated by means of a committee, which will discuss it with minority shareholders, and whenever we have any news, we will inform the market. This is our last slide for this session. We summarize the expansion and the novelty here on the left side. We have projects under construction, including Graúna, We will have the ramp-up for Serra do Açorua and Açorção, keeping our portfolio for projects under construction, which will be prepared when we identify that we can have the minimum expected results to generate value to our shareholders. I now return to Taka. Thank you, Rafa. We now start our pizza graph on the right side. We can see that over the years, we have also invested more in transmission and in diversifying our portfolio. But of course, it was very difficult to develop energy generation projects at the time, and we had to identify value. And even with a partial investment, we remain with more than 20% of contribution in the network. The macro number here is... 20% is for the transmission segment. On the left side of the graph, perhaps the most relevant part of the graph is to show that even with all of the turbulences and when we had a transition in our investments where we had game picks of 10 billion BRLs, you can see that our Our OE is 26%, showing that even with the impacts we had on our Etida, our results are effective. As you can see, our OE went from a higher level, 21%. It went down to about 70% in 24. But this is to be expected for the ROIC. Now you can see or net operating revenue. You can see the results quarter over quarter. Last year, we went from 2.5 to 2.5. And if you look at the details of our portfolio, basically, the impacts have been neutral. We have better financial assets. We also price and sales volume, more volume than price. We also purchased new ones and the position of the CC is a little bit lower, but basically it is stable and this is good. in an adverse scenario as we have.

And we had a lower acquisition cost, which offsets the results in the quarter.

And now we have the contribution of transmission But this is an increase of the construction revenue, which explains this amount.

In the next slide, we have the result of WAKERI income.

In summary, we show how TAG has contributed to our result. TAG has a net profit of $1 billion in this quarter, with our new participation of 17.5% in TAG, resulting in the contribution of $182 million via record income to the company's ETF. And this is perhaps the most challenging graph, but also the most interesting. You can look at the extremity bars. We go from our accounting etc. We go from 1.7 billion

But then we look at the adjusted editor.

We also had a variation of 100 billion BRLs. And when we make all of the adjustments, of the Jaguar and Miranda effects and the transmission effects, we move on to the central bars where we show you our ETEDA adjusted by the transmission quota. So we had a variation of a little bit more than 100 billion BRLs. And then when we analyze more carefully We can basically add the first three bars, which show the effect of our new portfolio, of the new company design. We have the assets we purchased in the first quarter. We have the operation of new assets in wind energy, which result in lower energy purchase for our portfolio. We remain as an expense as Rafael mentioned, but we need to buy less energy because we have also expanded our portfolio in an accelerated manner. And the hydroelectric power plants, you can see their results here. We had a positive variation. And naturally, when you have more assets, you have more connection taxes, and because you have generated more hydroelectric, you have to pay more royalties. So this is to be expected.

And, of course, we also need more staff with generated this...

So for material and services, we had significant increases and other lower readjustments, but it's all according to plan and there's nothing significant to be highlighted here. Transmission. had a similar performance to the same quarter last year. Equity income has a lower contribution now because we have reduced our shares in the company, and this was one of the main variation drivers of our ETF. And then you can see that this results in the adjusted ETIDA of 1.6 billion BRLs. Now the net income change. The shape is very similar. We have a net income 867 going to 658, a significant decrease. And then for the adjusted net income, we went from 928 to 666, another significant reduction. Part of it is explained by the variation in scope because of tax, and it was even higher than the 3 million score. we were able to offset TAGs loss with work transmission and generation. And as we had already mentioned in the opening slide, we had more financial impact.

And now,

You can see the impact on our financial results. We also paid less taxes, of course. Next slide.

Balanced debt.

As we had already anticipated, we went from a deleveraged position, the green areas in this slide, We went from 2.1, we were at 2.4 in the second quarter, and now we are 2.7 times our et cetera, which is very comfortable. And we are naturally going to increase this because of our investment commitments in generation and transmission projects. Our gross debt today is 20.5 billion. This is all according to plan. Our cash has decreased a little, but not significantly, resulting in debt of 19 billion BRLs.

We can still leverage more

so that we can pay dividends and that we always strive to keep this at a level of 55%.

Profile and composition.

We make debts in a very competitive way because of our AAA rating and robust cash generation. I do not have any highlights for profile. However, we had a variation in the composition of our debts and the indices. we had a scale of 80 or 80 plus of our debts, which was indexed to IPCA, and this generated some concern for us to protect ourselves in case of more significant variations in inflation rates.

With that, the more recent issuances

have used CDI so that the weight of IPCA has reduced, and it is now in the order of 75%. This is part of the company's strategy to diversify our investments.

Next slide. Investment plan.

Basically, we have an estimated 10 billion for 2024. We have invested 7.5 billion. This is very linear. In this 9.9 billion, we had the equity for investments in the solar complex, Serra do Suruá. is something that started this year, and as of next year, we have about 4 billion allocated for transmission projects. We will also conclude Serra da Suruá investments and Asusol with a more significant participation of transmission in the next couple of years. As to the dividends, moving on to the last part of our slides, you can see our dividend distribution record. Whenever possible, we distribute 100% of the dividends and adjusted dividends. But naturally, because we're going through a very challenging time in the market and also because of our expansion, we made a decision to keep on paying at least 55%, which is the company's commitment, and it will not change this year or next year. We have concluded our presentation, and now move on to the Q&A session. Perfect. We're now going to start the Q&A session, and I would like to remind you that to ask questions, you should submit them through the Zoom Q&A tool. We have a question by Marcelo Gonçalves. He asks, you have some large solar and wind energy projects to start operating next year. What do you expect in terms of constrained offer for these assets annually? Well, we expect an equivalent level or in the same scale as this year, even though we imagine that we will have new lines operating, and they have already started operating this month. Eventually, we will have the effect of the system operator, and that helps. But at the end of the day, we still have a significant generation. But we expect that containment levels will remain high next year. It depends on demand. It depends also on the aversion to risk by INS. It depends on different factors also. on new assets and on how efficient we will be in getting off GD, for example, so that GD can contribute with these results and therefore will have curtailment divided among other segments as well, which would be reasonable since because of the levels of centralized generation. It's hard to guess what the level of curtailment is going to be. It depends on different factors. But we are prepared, and our advantage is that we have a diversified portfolio, we have technology, a significant participation in hydroelectric energy, and that will help us with the undesirable cut of wind and solar energy. Thank you, Taka. Our next question is from Sergio Miranda, an investor. He asked two questions. What is the company's expectations for the two auctions anticipated for 25, in March and September? And he also asked what is the optimal participation of the transmission sector in the companies. Paulo, I was under the impression that we only have one auction for next year. But anyway, we will continue analyzing every auction. We do not have a cap for transmission. We are always striving to obtain return for our shareholders. We are going to analyze and develop transmission projects, and naturally, when one auction is over, the team will try to guarantee the execution of contracts, and also another part of the team will start evaluating future auctions so that we can participate to reinforce This comment, we do not have a target participation or any specific goals. If the project is good, we'll go for it. Thank you, Taka. The next question is by Yuri Santana, by Side Analyst of Triga. He asks what the expectation is for anticipated results. delivery when compared to ANEL's deadline for the Grauna Transmission Project. We consider an anticipation that is going to be significant and better than the deadlines established in the invitation to bid. Thank you, Taka. The next question is also from Sergio. He would like to know if, according to the company's current expectation, what is the expected payout return of 100%. This is a good question, but it's also difficult to answer. The payout return will happen when we do not have other Greenfield and M&A projects. And so this is difficult to anticipate. But as soon as possible, we will go back to 100% because we do not wish to deleverage very quickly.

We will increase it as soon as possible.

Next question by Victor Alves. He would like to talk a little bit about the expectations and planning for the relationship with TAG, since the company has a very high margin and could further contribute with Engie's results. TAG was an opportunistic investment we made about five years ago. We thought that in the beginning of the year, it made sense to deleverage and recycle our capital. Capital recycling was significant, and it made a lot of sense for us to deal with the CAPEX. we had for this year. And this is something that had been planned for a long time.

TAG is not our core business.

We are an energy generation and transmission company. It made sense at the time. It was a part of our participation with the controller so that we could keep on having a majority participation there, but it's not our core business, and I don't see any reason for us to increase our shares there. We will continue investing in generation and transmission. Thank you, Taka. The next question is by Vinicius Santini, a physical person investor. He wants to know if we already have an established date to pay dividends in August this year, as announced in August this year. Well, we're waiting for the cash flow results, also taking into account our commitments for this year and next year. The date will be defined and we will inform you. I would like to remind that the payment of dividends has to do with our cash flow and our commitments The money is here with us. It is not with the shareholder. But while it's here, it's also generating value. Moving on with the other questions, we had one from Daniel Travici, Safra's analyst. He would like us to comment a little bit more on the dynamics of energy commercialization, looking at the fourth quarter. Were you able to close higher contracts? How do you see the scenario from now on? I will answer. What we've seen is a better hydrology from the third to the fourth quarter than the rainy season has, right? We had a lot of expectation because we had very little rain throughout 24, and this is something that we have been discussing since the beginning of the year. It was one of the worst years in our historic series, and therefore we were very uncertain about the rainy season. It has arrived, and it's behaving this far. Things can change, but it's behaving according to the average, and naturally that will have an impact on prices. We had an impact forcing prices which reduces our appetite for sales. We will continue with our strategy to sell always, but this will be done gradually. We do not want to have contracts with very low prices, with that eliminating the possibility of energy in our portfolio.

I would like to complement

It's important to note that no news is good news in this case. We have no urgency. We're not desperate in the short term. It's not going to impact our short-term results for the fourth quarter because our exposure is very limited. And so there is no justification for unexpected moves. Naturally, when you ask us about our strategy, it's to sell energy for 26, 27, and 27, 28. We will choose the best moments in the market. We have seen the movements in the market in the short term. Sometimes things happen, prices explode, and then all of a sudden they go way down. We've seen with some attention the market developments, but we will sell in due time. Thank you, Taka. The next question is from Bruno Oliveira. analyst sell side. He asked two questions, taking into account investments and new assets throughout 25. What is the company's leverage level going to be? Second question, just to give you some guidance on our calculations, what profitability interval can we expect for new investments in transmission? Just a reference. would help us. Our rationale here in terms of the restrictions, our restrictions today is 4.5. We have debentures and other fundings, but this is the hard covenant. But we have a soft one, which is to guarantee our AAA rating and this is going to be in the order of 3.5 times the net debt. So we could go to this level without any major concerns and without impacting our ability to have competitive prices.

And it's not going to be difficult for us to reach 3.5.

Based on our investment commitments, we don't think we will have to reach this level. In the fourth quarter, this is going to increase a little bit more, but... It's not remarkable. It's as expected. If you want a more conceptual reference, it would be 3.5, but in practical terms, you can calculate our investments, how much we need, and it's not going to be higher than three times. So this is the reference, three times the net debt, etc. Thank you, Taka. Next question from João Pedro Herrero, Santander Southside analyst. He would like us to talk a little bit about our expectations for the auction next year. We wanted the invitation to bid to come out so that we could share this with you. We have to find out whether we can be more or less competitive. We have two assets that can contribute, Salto Santiago and Jaguaro. But in fact, it depends on the conditions of the invitation to bid. The expectation is for the invitation to bid to come out as soon as possible. The next question is Andrei Regis, physical person, investor, and he asked, because of the complexity of the deficiency solutions in energy transmission, what makes curtailment a persistent effect? And what is the appetite to start new projects? Well, curtailment is not a problem in itself. Whenever you make an investment, You look at capital, CAPEX, the quality of the asset, and how much it will monetize, or what is the price of the energy you will be able to sell for. Curtainment reduces energy, but you still have energy to be sold. and it's not necessarily going to be sold according to fresh prices. But this happens all over the world, not only in Brazil, with this level of excess offer in our market, which does not encourage a clear competition. have a lot of subsidies. This makes it more challenging for us to invest in new projects. But this curtailment is something that happens everywhere, not only here. The problem here in Brazil is that it was attenuated by external factors, the competition, I mean. The next question is from Antonio Moraes, our physical person investor. He asks if it is possible for Engie to sell its participation in TAG. Yes, it is possible. In the future, we can do anything. But I would like to highlight my comment that TAG is not a core investment. asset in an energy transmission and generation company. It can happen. We will not sell it in the short term. It contributes to the company. It has had challenges in terms of tariff reviews, but the company is well managed. There's no reason for us to sell it now. Thank you, Taka. The next question is from Vinicius Santini, a physical person investor. He asks if Angie is interested in participating in auctions for energy battery storage. Yes, we are. We have it in other regions to support the system and also as a standalone to complement solar generation assets, such as in Chile. are operating as a standalone battery as it happens in the US. So we know how to operate, we are familiar with the technology, we will look into that as the government and others inform the clear conditions for the invitation to bid. And of course, when you have the knowledge and the technology available. We've already implemented a significant number of batteries all over the world, and therefore we would participate in invitations to bid as long as they are competitive. Thank you, Taka. We will now end the Q&A session. We thank you all for your participation, and I turn over to Rafael and Takamori for their final considerations. I would just like to highlight that it's always a pleasure to be here with you answering these very challenging and interesting questions. Thank you for your questions. Well, thank you all very much. I think that we still have some questions that were not answered because they were repeated, but we are going to answer them all. And I would also like to let you know that in case you have any other questions Just let us know and we will answer them. Thank you all very much and see you next time. Engie Brazil Energy's conference is now over. We thank you all for your participation and wish you a good afternoon.