Equatorial Energia S/Adr

for the second quarter of 2025. Joining us today are our CEO, Mr. Augusto Miranda, Vice President Leonardo Lucas, Regulation Director, Mr. Cristiano Logrado, Financial Strategy and IR Director, Ms. Tatiana Vasquez, and Mr. Liu Aquino, CEO of Ecoenergia. They'll be available at the end to take your questions. Before we begin i'd like to remind you that simultaneous interpretation is available to use it simply click the interpretation button at the bottom of the screen and select your preferred language. This call is being recorded and will be available at our ir website www.ri.equatorialenergy.com.br the presentation will be showing today will also be available there. All participants will be in listen-only mode during the presentation. Then we'll have a Q&A session at which time further instructions will be given. Before moving on, we'd like to remind everyone that any forward-looking statements made here are based on management's current beliefs and assumptions and on information available to the company at this time. Such statements are subject to risks and uncertainties as they refer to future events and therefore depend on circumstances that may or may not occur. investors analysts and journalists should keep in mind the factors related to the macro economic environment, the industry and others could cause actual results to differ materially from those indicated in these forward looking statements. will now begin the presentation and hand the call over to Mr Augusto Miranda, please go ahead, Mr Miranda. Good afternoon, thanks for joining us on our earnings call we delivered strong operating results in Q2 25. Looking at our consolidated distribution portfolio even against the tough comparison basis from last year was to grew. build and compensated violence by 4% on top of that, we had the best Q2 in our history. A generation driven by the solid performance of our wind assets. Adjusted EBITDA came in at 3.2 billion this quarter, up 32.4% from Q2 24. and adjusted net income reached 614 million rails, these results were fueled by margin expansion and distribution and the equity pickup from sub SP which totaled 312 million rails. With this performance, our net debt to EBITDA ratio improved to 3.1 times down point one times from cute 125. continuing to deleverage even with the highest investment levels we've had in recent quarters, reflecting the company's EBITDA growth. CapEx totaled 2.7 billion reals in the quarter, up 32.4% year over year, with the bulk going to distribution. We're already seeing returns from these investments in the form of better service quality across our companies this quarter we brought CED within regulatory FEC limits and with that all of our distribution companies are now in compliance. We also reduced DC across all distributors compared to Q2 24. Standout improvements at Equatorial POE, minus 7.6 hours. Equatorial Goyais, I'm sorry, minus 5.3 hours. And CED, minus 5.2 hours. And finally, CEA, minus 3.9. Versus Q1, four of our seven distribution concessions improved by more than one hour. Lastly. The concession renewal processes are moving forward this quarter and Neil approved the renewals of Mario and para. which are now under review at the me and in the case of Mario also under the TCU we expect to sign the contract amendments between October and November. And i'll hand it over to Leo on slide five to walk you through the group's consolidated financial and operating performance over to you low thanks Augusto good afternoon everyone. i'll give you a quick overview of the group's financial performance on a consolidated and adjusted basis this quarter we posted strong growth in both margins and EBITDA. Gross margin for the quarter was boosted by the solid performance in distribution. With higher volumes, increased POB tariffs and lower losses. EBITDA also benefited from the equity pickup from SABESP. We deliver these results with strict cost discipline. Adjusted PMSO grew in line with inflation. showcasing one of our core strengths as an efficient operator. On the non-recurring side, we booked a $444 million gain, mostly from the reversal of contingency recorded in the PPA for the Equatorial Goiás acquisition. thanks to case closures and settlements led by our legal team as part of the due diligence process. As a result, adjusted net income for the quarter came in at $614 million, more than double the figure from a year ago. This quarter, we once again reduced net debt to EBITDA to 3.1 times driven by EBITDA growth. Finally, capex for the quarter totaled 2.7 billion reals, with most of it going to distribution. Moving on to slide seven, here's an overview of the operational and commercial performance of our distributors, along with key highlights for the quarter. On the left hand side, you can see strong growth in build plus compensated distributed generation volumes, even of a high base from recent years. And despite that scenario, we have been able to keep cutting losses while maintaining solid collections and PECLD levels. As Augusta mentioned, All of our distribution companies are now within regulatory FEC limits, underscoring our commitment to service quality. We also delivered solid improvements in DEC across all distributors compared to Q2 of last year. Gross margin for the distribution segment rose 14%. mainly on higher FOB tariffs, increased volumes, and lower losses. Adjusted PMSO for the distributors was up 6.1% in the quarter, but on a per customer basis over the last 12 months, the increase was just 0.8%. These factors drove an 18.7% increase in adjusted distribution EBITDA, Excluding distributed generation costs in Q224, growth would have been 20.8%. On to slide 9. Let's take a look at the group's other businesses. In transmission, regulatory EBITDA was 248 million, down 11.4%, due mainly to the deconsolidation of SP7. EBITDA margin and transmission remained strong at 93%. And sanitation results continue to reflect progress in water metering, EBITDA came to 7.3 million this quarter. CSA's IAR reached 72.1% in the quarter, 6.1 percentage points above the EVTE, and 13.4 pp higher than last year. In renewables, EBITDA came in at 177 million, up 35% year over year, driven by the startup of solar farms And record output from our wind portfolio which excluding curtailment would have matched P 44 levels. i'll now turn the call back to the operator to open the Q amp a session. Thank you. Will now begin the Q amp a session if you'd like to ask a question, please click on the Q amp a out icon at the bottom of your screen and type it in to ask your question live click raise hand. is Louise can do it from it to be asks the first question. Thank you for taking my question. My question is about the thesis of the century. And the di case that discuss the return of excluding sales tax from the PIS coffees taxes and also the prescription. or the deadline for those credits, I believe that they're discussing that today, we would like to hear your take on this matter. As to the deadline of the credits and potential gains the company would have if the 10 year thesis or the five year thesis were to be approved what what's your take on it, thank you.

Good afternoon Louisa Thank you for your question.

I think it started out back in my young a long time ago, but we have been closely monitoring it all we have to do now is to keep on monitoring and sit and wait I wouldn't like to discuss this issue in further detail at this time.

Thank you, no problem.

Daniel Travitsky from SAFRA asks the next question.

Please go ahead, sir.

Your mic has been unmuted.

You can ask your question now.

Mr Bruno a marine from Goldman Sachs is asking the next question. Good afternoon, and thank you for taking my question. If possible, could you please elaborate on recent auctions in the water and sewage treatments, the company was not part of it, even in states where you have a strong operation. Do you believe the auctions were not attractive enough because of the model? Or were the premises that were not appropriate? If you could please explain why you are not that active in recent auctions. Is that indication that the company is more prone or less prone to take part in future auctions I think it's good to estimate future capital allocation, thank you for your question Bruno. As we have been saying in recent calls calls, this is a focus for equatorial. One of our. Basic principles is the fact that we have been disciplined in allocation. Despite the model, we may prefer this or that model, especially in sanitation. However, if the asset or the auction provides good returns, there are no problems with that. But we could not Understand we did not understand that these auctions would provide the returns, we were expecting that's why we chose not to take part.

All right, thank you.

Maria Carolina carnita from safra asks the next question good afternoon I actually have two questions number one. Can you give us more color and also remind us of the Goyas PPA impacts that ended up impacting your results? Can you describe what the balance is, how much you have dispersed? Question number two. We've noticed that despite this high containment for this quarter, you also managed to increase availability. We'd like to better understand this quote unquote turnaround in the eco energy investments you've made so that we can understand what will happen in the coming quarters. What's your take about possible solutions at the government level for the curtailment and for the industry as a whole? What have you been discussing? What is the outlook to maybe bring down these impacts in the coming quarters? Thank you, Carol, for your question. I'll turn it over to Leo to address the CPA Goyas and then we'll address the curtailment question. Over to Leo. Hi, Carol. Good afternoon. PPA contingencies. I believe we started out at 2.5, 2.4 billion at the very start. There was that reversal of 500. So the remainder is a billion, a billion something. And I'm referring only to the PPA. I'm not including that remainder that we see that in the balance sheet for the company in Goiás. Well, things are moving along quite nicely. We have been successful. Because of the effort of our legal team. And results have been very positive. I'll turn now over to Leo to address the other part of your question. Hi, Carol. How are you? Let me address your first question. What helped us in the quarter was the wind availability. Wind resources, we were at P 44 above P 50. In terms of wind resources that offset partially upset those cuts that were a little above those of Q1 the overall technical availability is has improved because we have more wind resources and. It also has more availability. As far as the curtailment goes, we are working on several fronts in the industry things that are currently underway, let me mention a few we do have a monitoring committee for the. Energy industry, trying to reduce technical impacts from cuts from shortages. That includes removing some system banks, shifting the models. We work with the energy authorities to provide them more specific models to help the agency to better understand how the machines operate. And once these systems are implemented, It will improve the agency's capacity to accept the energy system. We're still adapting the regulation. And there's also a legal case with Biolica and B-Solar. These are cases that are currently underway. These are the main drivers behind that. All right, thank you. There's a question in writing by Mr Daniel travis key we've seen lower delinquency rates, the quarter, what are the main drivers behind it, is it a better micro economic environment or were those results from the company's initiatives, what is the outlook down the road.

Good afternoon, thank you for your question.

Well, our piece CLD was a slight. decreased. quarter on quarter and the ir also but at a very interesting level. We do have different scenarios, depending on the asset. But as far as improvements go. Those that provide the most improvement were, number one, Rio Grande do Sul, that has the best improvement in the previous quarter, almost one point. Last quarter, we had that event over there. It was hurt the most. So the reduction came in mostly from that region. But also Maranhão and Goiás provided more interesting improvements. POE improved a little bit. Para, Alagoas, and Amapá had an upward trend. Maintaining these collection levels, we'll see that level be remaining around those same figures. Let me remind you that to ask a question, please click the Q&A icon at the bottom of your screen and type it in. To ask your question live, click the raise hand button. Please hold while we collect some more questions. This concludes the Q amp a session i'll turn the call over to Mr Augusto Miranda for his closing remarks. Thank you. To wrap up, I want to reaffirm our commitment to consistently creating value for our shareholders. by delivering solid results across all of our businesses, supported by this disciplined financial management, something that's ingrained in Equatorial's culture. And as always, our IR team is available to answer any follow-up questions after the call. Thanks again. This concludes today's call. Thank you all for joining us and have a great afternoon.