Equatorial Energia S/Adr

Good afternoon, everyone, and welcome to Grupo Equatorial's conference call to discuss the results for the first quarter. 2026, joining us today are the company's CEO, Mr. Augusto Miranda, Vice President Leonardo Lucas, Director of Regulation, Mr. Cristiano Logrado, Director of Financial Strategy and IR, Ms. Tatiana Bacchus, and Mr. Liu Aquino, President of Econasia, who will be available at the end of the call to answer any questions. Please note that the simultaneous interpretation feature is available on the platform. To access it, simply click the interpretation button at the bottom of your screen. This conference is being recorded and will be available on the company's investor relations website, ri.ecuatorialenergia.com, along with the presentation shown here. Please note that all participants will be in listen-only mode during the presentation. Ensuing this, we will begin the question and answer session when further instructions will be provided. Before we proceed, please bear in mind that forward-looking statements are based on the beliefs and assumptions of Grupo Equatorial's management and on information currently available to the company. These statements may involve risks and uncertainties as they relate to future events and depend on circumstances that may or may not occur. Investors, analysts, and journalists should consider that events related to the macroeconomic environment, the industry, and other factors may cause actual results to differ materially from those expressed in the forward-looking statements. We will now begin the presentation, giving the floor to Mr. Augusto Miranda. You may proceed, Mr. Miranda. Good afternoon to all of you. Thank you for your attendance in our earnings call. Before we begin to speak about this quarter, the figures presented and the comparisons with the year 2025 do not include the transaction sector because they refer to discontinued operations. Beginning in 2026, we show the expenses related to the removal or withdrawal of assets. In this quarter, we reached 2.9 billion BRLs in adjusted EBITDA an increase of 11.3% versus first quarter 25. This refers increases in the distribution center and the equity funds from SABESPI. We continue to move forward with investments reaching 2.6 billion BRLs in the quarter, 12.2% higher than in the first quarter 25, with projects focused on distribution, where we work better with tariffs. We had an early buyback of Class A and B preferred stock from Banco Itaú amounting to 607 million BRLs. We only have Class C stock available now. The redemption conditions were renegotiated to allow for the buyback of 100%. Now, we ended the period with $11.6 billion in cash, 2.5 times the short-term debt. And this is important liquidity to face the year 2026. Referring to Covidence net debt over EBITDA, there was a reduction to 2.7 times in the first quarter, 2026. reflecting the positive impact of the accounting of the sale of transition assets. Now, we will continue with this speaking about accumulated EBITDA. The indicator would be 3.0 times representing a reduction when compared to the first quarter of 25. When it comes to quality compensations, we had a reduction of 23.4%. Because of our focus on continuous improvement of the quality of services on the operational part, we had advances and expressive growth in the wire B market, 3.8%, thanks to our concessions in Maranão, Pará, Alagoas, and Piauí. Additionally, the losses are maintained below regulatory levels in the consolidated version with a difference of 0.9% vis-a-vis the threshold. Regarding the quality indicators, we see advances in DEC and SEC as well. We had DEC and all of the distributors in the group. We also ended the quarter with five out of seven concessions with a reduction in tech, with a reduction of six hours, five hours, and in Alagoas, four-hour reduction. This performance shows the commitment of Equatorial with quality, efficiency, and a consistent enhancement of the service sustained with discipline. I would like to inform you that we have renegotiated the goals going to 58%, reinforcing the confidence of the regulator that we're setting forth our best efforts to continue working with the concession. We'll now speak about the process for the renewal of concessions. After five years of work, along with the Ministry of Energy, we were able to work with our first distribution concessions, extending the term of concession of Pará until 2058 and Maranho until 2060. This is not only the renewal of contracts, but also shows a discipline and consistent enhancement and a new cycle in innovation and commitment with the quality of service reinforcing our role in sustainable development in the regions where we work. Another good news is that we have 911 million of liabilities dating back to 2022, which we have resolved by joining the Acordo Gaúcho with a 75% discount on interest and penalties equivalent to 357 million reais, also payable through court-ordered receivables. I will now give the floor to Leonardo, who will speak about a consolidated financial performance. Thank you, Augusto, and a good afternoon to all of you. I'm going to speak very quickly about our economic and financial performance for the group. Through a consolidated and adjusted vision, our consolidated gross margin grew 13%, given thrust by the performance of the distribution sector, mainly a market advance and an improvement in the wire beach area. had a growth of 11.3%, reflecting not only the evolution of distributors, but also the contribution of the sanitation segment with a highlight for the sub-SP equity income. Net income remained aligned considering the transmission gains in the first quarter of first quarter 25 that are now classified as discontinued operations. As mentioned by Augusto, we continue with the leverage rate at a comfortable lever. That debt EBITDA stood at 2.7 times with the recognition of capital gains after the conclusion of the transmission asset sale. In this quarter, we continue working strongly in the capital market, focusing on an improvement of our debt profiles to an increase of the medium term and the spreads of debt based on CDI. At present, they're at CDI plus 51%. We remind you that up to the moment, we have already raised 4.9 billion, 3.2 billion up to March and 1.7 billion in April, maintaining an average cost of debt below the accumulated CDI in the last 12 months. Because of a more volatile political scenario, we decided to anticipate our fundraising, preserving our financial capacity and capturing more competitive conditions. Finally, we highlight the investments carried out in the quarter. They add up to 2.6 billion, a growth of 12.2% vis-à-vis the same quarter the previous year. We're speaking about Pará, Amapá and Piauí that were coming very close to their tariff revision processes. Additionally, we also had growth in our line of special obligations because of the higher investments in the program. Now, let us now move on to slide number seven, where we show you an overview of our operational and commercial performance of our distributors, besides, of course, the financial highlights for the quarter. To the left, we present to you very briefly the consolidated performance of our energy distributing companies, with a growth of 4.2% growth injected energy and 3.8% in the YRB market. Even with a scenario based on the market, the company maintained a trajectory for a reduction of 0.2% for losses vis-a-vis the previous quarter. This quarter, we also had 97.2% for BDE, and 1.64% PDI aligned with last year. Despite that scenario of reduction of losses and a growth of the market, considerable growth regarding the quality indicators, we began the year with four of the seven distributors on the regulatory limit. Now, Rio Grande do Sul had a regulatory debt We made advances in the negotiation for 2026, reducing the percentage of 71% to 52%. Additionally, GOIAS is important for the DEC indicator. In fact, all of the distributors are at the regulatory limits. And a reflection of this operational evolution and the enhancement in the quality of service, we had a reduction of 23.4% in the level of compensations in the comparison between quarters. To the right of the slide, we have a growth of gross margin of 13.5% for the quarter, mainly reflecting a higher wire B tariff for the whole market. The P&S adjusted for the consumer for the distributors in the last 12 months had a growth of 4.5% vis-a-vis the first quarter 25. In an adjusted vision for compensations, the growth was of only 1.4% below the inflation of the period, reflecting the strides in operational quality and a reduction in number of compensations related to the quality. It represented a reduction of 110 million in the last 12 months, 28% reduction for the year. The growth of adjusted EBITDA was 13.7%, influenced mainly by an increase in growth margin. Now the cost of removal is being considered in both quarters in this presentation. We will now move on to slide number nine to look at the other segments of the group. The sanitation segment shows results in showing an increase in the average tariff of 3.5 to 5.05 reais. We have an EBITDA of 6 million, an increase of 62.5% vis-a-vis the first quarter, 25. And we make strides in the coverage of water vis-a-vis the previous quarter. In the renewable sector, we had an increase of 144.7 million, 7.3% lower for the period, mainly reflecting the effects of impairment and lower generation. We also bring you a vision of impairment based on energy and lack of availability, and the financial impact since 2023. Law 15269 refers to containment, reliability, and external unavailability. And we're positively contributing to resolve these issues. I would now like to give the floor to the operators so that we can go on to the question and answer session. We will now begin the question and answer session. Should you wish to pose a question, please click on the Q&A icon at the bottom of your screen and type in your question. To ask questions using the microphone, please click on Raise Hand. Our first question comes from Ricardo Nascimento from Safra. Good afternoon, everybody. In truth, I have two questions. I would like to know a bit more about provisions with an increase this quarter and if this is a one-time effect, if there's a recurring effect here, but which is the level that we should expect this year considering a challenging macro scenario? My second question is about losses. You have had an improvement quarter on quarter. which are the activities that you carried out in concessions to reduce the indicator, and if you could explain how this was done by each concession. Well, good afternoon, Ricardo. Thank you for the question. When it comes to provisions, yes, we indeed had an increase, and this reflects the movements of provisions with a highlight for goyas that had a higher impairment because of the wire B. Now, this is because of a balance of the processes that were accounted for at the end of last year regarding losses. If you take a look, we have been improving constantly quarter on quarter. In all of the companies and in all of the concessions, We have carried out activities and we have replicated the good experiences we have collected in the history of Equatorial and we have a reduction in all of the companies. Now, it means a great deal of commitment using the management model of Equatorial working shoulder on shoulder with a team this is what has offered good results and we're simply enhancing these results thank you thank you very much the next question comes from lucas guimarães from itaubba good afternoon congratulations for your results i have two questions first the Acordo Causo, the conditions, can they be extended to the remaining balance of your liabilities? We saw a very robust balance, not only in your cash position, but with a good focus on leverage. If you do not acquire any asset in the near future, if you continue being well leveraged, which would be the ideal capital structure, and which would be your movements? Would you increase the leverage above the minimum you announced in the fourth quarter, or do you prefer to maintain a more robust cash position?

Thank you. Well, thank you, Lucas.

about leverage, we do like to take a look and adjust it by the capital gain effect. We would be at 3.1 times, which is an interesting position. We have a forecast going forward of a tariff review and expansion of this EBITDA going forward. In fact, through time, we will become ever more comfortable as we move on. This is an interesting position in this environment of very high interest rates and volatility. Now, when it comes to the Acordo Gaúcho, this is a program of the government of Rio Grande do Sul. It began in April. We joined this movement, a very interesting movement, of course, if there is continuity in April or if this continues for the long term with a similar program, we are interested in moving ahead with this program that truly is very interesting and it has a natural gain in the point that it was conceived. Now, if a similar situation Yes, we will move on with it as we took advantage of the opportunity that we had and this represents two-thirds of all of our movements in this program launched by the state government and we hope there will be a similar program in the long term. We would like to remind you that should you wish to pose a question, please type in your text to the Q&A icon or use your microphone and use the raise hand icon. The question and answer session ends here. We would like to return the floor to the company's CEO, Fredo. closing remarks. Well, to close, I would like to reinforce our commitment taken among the investors sustained by a consistent delivery of results in the different segments that we act in and with a very disciplined financial management. Once again, our IR team is at the full disposal of all investors who offer you support. Thank you so much for attending our conference call, and have a very good afternoon. The conference ends here. We would like to thank all of you for your attendance. Have a good afternoon.