Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Neoenergia SA (BSP:NEOE3, Financial) reported a robust performance in distributed energy with a 6.2% growth in its concession areas.
- The company achieved a cash EBITDA of almost BRL2.5 billion, with a 4% growth in its distribution segment.
- Neoenergia SA (BSP:NEOE3) successfully anticipated the Termopernambuco capacity reserve contract, bringing it forward to October 2024.
- The company demonstrated strong execution capacity with a realized CapEx of BRL2.6 billion in the quarter.
- Neoenergia SA (BSP:NEOE3) maintained a disciplined cost structure, with operating expenses growing only 3%, below inflation.
Negative Points
- The gross cash margin decreased by 4% compared to the third quarter of 2023, primarily due to the end of the Termopernambuco contract in May.
- EBITDA decreased by 8% in the quarter, reflecting the lower gross margin.
- The company's net income declined by 7% over the third quarter of 2023, adjusted for nonrecurring events.
- Transmission EBITDA showed a reduction of 39% due to the deconsolidation of transmission assets after the sale to GIC.
- Neoenergia SA (BSP:NEOE3) faced challenges with a slightly increased net debt of BRL42.1 billion, attributed to accelerated CapEx.
Q & A Highlights
Q: Could you discuss the renewal process for distributors and the public bid process, particularly regarding regulatory flexibility?
A: The renewal process is progressing as planned, with a positive outlook. The executive order passed in June is now moving to public consultation, which is a positive step. The technical note aligns with the executive order, focusing on sector issues and investment compensation to drive more investments. However, we have concerns about penalty payments and the inclusion of regulated and non-regulated aspects, which we will address in the consultation.
Q: Can you explain the structure of the Termopernambuco contract and any risks associated with the terminal construction?
A: The Termopernambuco contract, effective from October 2024, involves a fixed cost with Eneva for 22 months and a 15-year contract with Shell starting in 2026. The Eneva contract includes fixed and variable costs, with a fixed cost of approximately BRL70 million annually. We are confident in the terminal's timely completion, supported by Shell's sales progress and contractual guarantees.
Q: What is the expected EBITDA from Termopernambuco due to the contract anticipation, and what is the dispatch forecast?
A: Without the contract anticipation, Termopernambuco would have a negative EBITDA of BRL264 million over 22 months. With the contract, EBITDA improves to zero at 0% dispatch, and every 10% dispatch increases EBITDA by BRL100 million. We anticipate a dispatch of 10% to 20%, potentially generating BRL200 million in EBITDA.
Q: Could you clarify the concerns regarding the technical note related to Neoenergia?
A: The technical note includes a provision allowing ANEEL to limit distributors' operations in the free market, which we believe should not be part of the executive order. This issue should be addressed separately, and we are actively contributing to discussions with models from other countries.
Q: What are Neoenergia's strategic priorities moving forward?
A: Neoenergia remains committed to efficient capital allocation, operational quality, and sustainable results. We focus on growing cash EBITDA, investing in distributors, delivering transmission projects, and maintaining profitability. The successful anticipation of the Termopernambuco contract and strategic partnerships underscore our dedication to stakeholder value.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
