Good morning, ladies and gentlemen. Welcome to Auren's conference call to discuss the results for the first quarter of 2026. This conference is being recorded, and the replay will be available on the company's investor relations website, ri.aurenenergia.com.br. The presentation is also available for download. We would like to inform all participants that following the presentation, we will begin the question and answer session. Further instructions will be provided at the start of the Q&A. Before proceeding, we would like to emphasize that the forward-looking statements are based on Auren's management beliefs and assumptions, as well as on information currently available in the company. These statements may involve risks and uncertainties as they relate to future events, and therefore depend on circumstances that may or not occur.
Investors, analysts, and journalists should consider that events related to the macroeconomic environment, the industry, or other factors may cause actual results to differ materially from those expressed in such forward-looking statements. Joining us today are Mr. Fabio Rogério Zanfelice, CEO of Auren Energia, and Mr. Mateus Ferreira, CFO and Investor Relations Officer. The investor relations team is also with us. I would like to pass the floor to Mr. Fabio Rogério Zanfelice. Please, Fabio, go ahead.
Thank you. Good morning, ladies and gentlemen. I would like to thank you all for your attendance in this results call with regards to the first quarter of 2026. Now the highlights for this quarter. First, we are dealing with the company's portfolio. For the first time, we were able, through the modulation, to more than compensate and offset the impact of curtailment in our wind and solar portfolios.
We had BRL 86 million against BRL 97 million in modulation gains and BRL 87 million of curtailment. 11 million rise in the effect of the company's portfolio diversification. Another highlight for this quarter is that we advance with our reorganization. We approved the first phase of our corporate reorganization. The main focus here is to consolidate all assets in a single entity, especially hydropower, as a way to simplify the company's corporate structure and also to improve cash and debt management. With regards to the company costs, the costs have grown in this quarter with regards to the first quarter in 2025 and 3.8% against an accumulated inflation of 4.2%, which shows the company's discipline, not only in capturing synergy and integration with AES, which was our objective last year, but also to continue presenting actual gains and cost reduction.
With regards to the adjusted EBITDA, we have closed with BRL 926 million in the first quarter, 23% lower than the 2025 first quarter, mainly due to a lower commercialization results, reduced wind and solar resources we observed in the first quarter of 2025, and also the hydroelectric generation, given that the hydro scenario in this quarter was worse than what we observed on the first quarter of 2025. With regards to financial discipline, the BRL 135 net debt reduction, closing the quarter with a net debt adjusted EBITDA of 5.2 x. We are deleveraging. Trajectory remains on track with expected stabilization in 2026. As we have said, in 2027, we will have a expressive reduction in this leveraging.
On the expansion side for the company, we have the Cajuína III project with almost 70% of its physical progress fulfilled with the expected operation in December this year within the expected chronogram and also with our financial planning. Let's get into the energy market. This quarter is very atypical. We have started the period of 2025 a bit apprehensive because we saw at the end of last year, there was a ENA of against of 90% of LTA in the first quarter of 2024. Even though 2025 have closed with a 45%, as we see here in the right side. This hydro recession that we saw in the end of 2025 and the beginning of January, it was one of the worst years in history.
This caused a little bit of apprehension to understand how the quarter would close. Fortunately, in February, there was a change, a complete change in the scenario, therefore, our ENA has increased, reaching the quarter with 79% of LTA below the first quarter of 2025. It was enough for us to reach the level of reservoir of 79% by the end of March really aligned with the same levels we had at the end of March in 2025. Even though we started with a gap of eight percentage points in the closing of 2025 against 2024, there was a important recovery throughout this quarter, which gives us a greater, a better scenario for the next quarters. On the next slide, we have what we had in terms of energy mix evolution and energy source.
We can see here that the demand in Brazil and consumption the first quarter was close at the same consumption we had in 2023, 86 GW average. These are more better temperatures with regard to 2023. Given the hydro scenario or backdrop that we observed last year, we had a generation of 5 percentage points lower this quarter, and also we had an impact in the wind generation. Even though it was aligned with the first percentage of last year, it was in absolute values, it was lower in this quarter. Given also the growth of micro and mini generation and a greater availability of thermal production, 4 percentage points above what we saw in the first quarter 2023, given a higher PLD.
Given the hydro profile, prices were higher. Also they addressed a greater share in this period. The conclusion of all this is that GSF that was observed and that was overcome 100% on the first quarter of 2025 closed the quarter at 91%. We have two explanations. The first one has to do with what I said, the backdrop of the hydro generation that was 4 GW average below what we observed in the first quarter of 2025. Also another impact is that the seasonality of the physical guarantee of hydro plants was, in this fourth quarter of 2026, above the seasonality we observed in the first quarter of 2025.
The first quarter of 2026 we had the 57 GW average of allocated physical guarantee against 52 GW average in the first quarter of 2025. When we look into the gap of GSF reducing 170 to 91, half of this value practically is due to the lower generation, hydro generation, and the other part is different in the physical guarantee. On the next slide, we maintain the different sources then to show you what happened with PLD. For this quarter, it was an average of 308 GW against 162 MW in 2025. Another important characteristic was the higher volatility since the standard deviation was at 19% in the first quarter of 2025.
This will have an impact both in terms of modulation, as we heard, and we will talk a little bit more about this result, as well as an impact on the difference of prices in the market. The market price difference for this quarter in 2026, since it has a high PLD in all regions, it was BRL 21 a MWh , the difference between North, Northeast and South, Southeast, while against BRL 103 in 2025. The first quarter of 2025, North and Northeast had very, had lower values than the South and Southeast. In this last quarter, 26, or the first quarter of 2026, this assessment was different. This is explained, of course, by a greater thermal dispatch, therefore a higher price in all markets.
On the next slide, GSF. Again, we have No, not GSF, it's curtailment now. The curtailment for this quarter was basically in absolute values very close to the curtailment we observed in the first quarter of 2025. It is important to highlight in the first quarter of 2025 we had a high impact of thermal availability for transmission lines of the Xingu system, this made the curtailment for this quarter higher, especially with power availability. We also, what we see is a characteristic between the quarters is an increase in curtailment, this was 53% of the total, the energy-based curtailment against 20% what was observed in 2025.
This is already characteristics of the evolution of curtailment motivated by the growth of micro and mini generation, which makes the curtailment more severe due to energy availability. Here in the total of, we have the curtailment of wind was 15%, and solar was 16%. Operational performance. As we said, the generation performance was lower in all different sources. However, the availability of the wind power is still very high given the figures that we had before the integration with AES Brasil closing the quarter with 94%, and wind power was generation 85% of the percentile of the, with a park diversification. However, the potential when we add was 97% of P90. The curtailment, as we heard, was for the wind was 14.9%.
In our case here, for even with the same comp, comparation or comparative, we have 14.8% of the curtailment. Excluding the compensation of curtailment for availability, we closed the quarter with a curtailment of 13.4% for a wind power. For solar source, the total generation was 79% of the P90, and if we add here the curtailment, we would reach 98% of P90, and the curtailment in Brazil was 16.2%, and we presented a curtailment a little bit above. It was 16.4% with regards to SIN, and the equivalent net time of availability was of around 16.2%, so very close to the curtailment, the gross curtailment. On the next slide, we have our commercial performance, and we start to present a bit of a change in our characteristics in this quarter. What we see here are four charts.
The two, higher, about above ones are the curtailment repurchase value, plus the cost of purchasing of energy to compensate or offset the curtailment in the market. Consistently, we have seen that this purchase is below the PLD prices due to the curtailment features for energy reasons that happen mainly on weekends and in the middle of the day when you have a smaller price. The most important feature here is that we have observed a greater gap in these last quarter, especially in the month of March. You can see here that we have much higher prices in this quarter. However, the cost of purchasing of this curtailment here, especially for solar sources, was below PLD.
The same thing applies for the purchasing of energy for the wind and solar parks that are also deployed in the Northeast region. This is an important feature to highlight when we have curtailment. Curtailment really will bring about a reduction in revenue for the companies, but with an increase of energy curtailment, this cost with regards to PLD ends up being inferior than the market curve. We look forward to the future curve, market curve. As this chart shows, the cost of curtailment for the company, especially for assets that we see in the market, have a lower value than the average market curve. On the two lower charts we see here on the slide, we have an average, a daily average of prices for January to 2025 against April, January 2026.
Just to show you the difference in the features of these two quarters, the first difference is a difference in the market. We see a more active market and slower now in 2026 given the change of the price level that is connected to the hydro availability. Also this explains the impact of the modulation results. Modulation changed given the change in the profile that we can see in 2026 that really increased our modulation gain in this quarter. On the next slide, we will talk about the systemic effects on the portfolio, the modulation gains. We have this measurement in time of the actual value of megawatt-hour of the gain of modulation for each one of our assets. You can see here, if you, the gain without a curtailment, and on the full line, that was a dotted line.
On the full line, we have the impact with curtailment. We have an interesting impact because curtailment, as we said, it changes in the middle of the day. This brings in the wind power a gain in modulation and also for solar, an improvement, but still solar will have a modulation gain that is negative. For hydro, it is a slightly positive, and we can also see that there is a consistency in terms of modulation and time, and that is recent. With a change of a profile, with a change of the price profile, as we saw in the last slide, the trend is that the hydro will advance in modulation gains. Here we can see on the chart to the right how we see the evolution of curtailment and modulation in time.
We are able therefore to show for the first time on this quarter that the modulation gains went above the impact of curtailment in our company's in the company's portfolio. On the next slide, now we are referring to generation energy balance and we have a 55 MW average here in terms of sales. This is the greatest production between the different quarters. This production was not a fixed price. It is linked to the long-term market rates and also the market curve and plus this spread. This is a different model of production, and this is the greater production associated to the long-term market price curve.
This is the trend, as we can see, is, this price will go down in time, and the sales will be also advantageous because it will follow the spread of BRL 58 per MWh , showing that in the long term we are uncontracted, and the company is well-positioned to also benefit from an eventual increase of market prices in the longer term. On the next slide, we will talk about the financial performance, and I will pass the floor to Mateus to talk about our financial results. Thank you.
Thank you, Fabio. Good morning, everyone. Now the financial performance reinforces what we talked about in the beginning of the presentation. We had a result that was a bit weaker compared to the first quarter of 2025.
Because of lower operational, because of resources, both wind and solar, as well as hydro. The three sources had a performance operationally worse than what we performed in the first quarter of 2026. Not only that, we had a result for the commercial side a little bit weaker. In 2025, we had a very strong result, especially because of the supermarket prices, which did not happen in the first in the same intensity this year. On a positive side, also, as Fabio said, we had important gains in modulation and also, maintenance of our control on costs of our company. As Fabio said in the beginning, we had a growth in expenses in a percentage lower to the period's inflation rate.
Also important to highlight that on this page, but it is in the company's release, this is the first quarter where we open our EBITDA. We start opening our EBITDA generation a bit per source. We did a long work after the transaction with AES Brasil in order to have an adequate separation with the different portfolios of the company, and in this first quarter, we go back to opening the results in EBITDA for the company, not only per generation and trade, but also breaking it through different sources and generation. On the next slide, we see the financial performance. This is the disciplined capital structure management. We have 5.2, so marginally above what we had in December, which was 4.8. In line with what we had already communicated into the market, 2026 will be a plateau year.
As we have already said, we will close the year around the same leveraging, and then we will have a de-leveraging in 2027. We have no dues in any year in these next few years, as you can see in the lower part of this chart. We have already imported in 2026 around BRL 1 billion, and then we have another BRL 500 million till the end of the year. We will do in one single funding. We already have a generation, cash generation and cash what we have today is already more than enough to make the payments of these BRL 500 million in 2026. We will only do some kind of funding if we see a good market opportunity. The debt market, as you know, in these past few months, has been a bit more stressed.
The chances of us not having any kind of going to the market is very big. We paid from December till now, as said, BRL 1 billion. We can see in the chart on the upper part of the slide. With a gross debt of BRL 23.7 billion, with an average cost that is quite competitive, which is CDI - 2.9%, and we remain therefore with a AAA according to Fitch and Moody's. If we follow, now we're going to talk about our corporate reorganization. This is a well-known topic we already announced in the previous quarter. What was a company plan to do what we did. It was the beginning of the execution.
We have approved in the different governance entities and both in the board as well as in our assembly, the execution of what we call phase 1. Phase 1 was the incorporation by Auren Operações of Auren Participações, and therefore we eliminate holding open capital holding, and we will then go into phase 2, which is a final phase, where we will incorporate Auren Operações by CESP and therefore reach our objective of concentrating all the hydro assets in one single company that will be CESP. We hope to conclude phase 1 in the first quarter, and our expectation is to conclude phase 2 at the end of 2026, beginning of 2027. There I would like to pass the floor to Fabio to conclude the presentation.
Just a 2026 outlook. After great effort by our team in integrating our AES assets in 2025, the company now has a focus on the operational efficiency topic and to have a continuous improvement. The company will be working throughout 2026 and the implementation of zero-based budgeting or ZBB. We also have an intense work and introduction and the use of artificial intelligence in all areas of the company, and we'll continue with the operations team working and the availability of the assets with work still to do and the work. With regards to the positioning for the company in the future, we have today a portfolio with an energy balance that is well contracted of 130% until 2030.
This will increase throughout the year. The companies also have a price increase in the longer term, which is already what we can see in the operations observed beyond 2027. With regards to the deleveraging, as Mateus said, this is a year in which we will maintain this leveraging stable, as we presented in this material. With a consistent expectation starting 2027. With regards to the regulatory topics, we will continue to publish the company's result in the Ministry of Mines and Energy with regards to the correction of the CESP investments. ANEEL has approved BRL 500 million, and this value has to be corrected in time since 2015. Also the 2010 public hearing.
Also, the commitment of the company to see how we will address the other topics with regards to curtailment, which today is the main topic for the sector. As Mateus said, with regards to corporate reorganization, this is ongoing. We will concentrate all our hydro assets in CESP, and then after 30 years, they will go back to the original company. CESP, when it was privatized, gave origin to AES and AES Tietê, and then CESP Paraná are now part of this. Everything will be concentrated in a single company. The purpose is to have a better cash management and company indebtedness. This will become a single asset, and this will have an important impact for all of us in our daily operation. Very well, we conclude here our presentation.
We will now go into the Q&A session. We will now start the Q&A session. If you would like to ask a question, please press raise hand button. If your question has been answered, you may leave the queue by clicking lower hand. Is from Banco Safra. Danielle, go ahead, ask the question.
Hello. Can everyone hear me?
Yes, we can.
Well, I have two questions here. The first question is about the balance of energy. Does Auren still have a short position consolidated here? I'd like to understand the perspective of how this position advances during the year of 2026 and the next years. What is the strategy of the company? Could you please talk a bit about this? The second point, when we talk about leveraging, this quarter, it went up to 5.2, I'd like to understand how you're dealing with the issues of debts related to covenants, related to this high leverage level.
Well, first of all, I'm going to answer the last question, then I'll go to the first question. Well, thank you for the question.
The company today has three debts in operations which has some type of covenant related to the EBITDA, net debt. It also has a waiver process. One of the topics was to remove this covenant. Once the incorporation is done by CESP, we'll no longer have any more debt related to the EBITDA. We only have three debts that have this type of covenant. They are in operations, which today has a leverage lower than 2x , which doesn't concern. The limit is 4x, in fact, 4x . In the consolidated energy Auren, where we have 5.2, we don't have any type of covenant.
Well, the first thing that we would like to clarify, we have taken the decision when we acquired AES to work more and to remove anything that has to do with the market prices, any interference.
Of course, the price went up. If there were more contractors, the company could benefit itself. If we had had a more favorable period, we were discussing another topic, if we had energy left over. As per the design, the two, three years, 2025, 2026 and 2027, working with contract and what originated our deficit in 2020 in the margin, we sell energy in the Northeast. This was a strategy of the company positioning itself short in the Northeast, reduce our position in the Northeast, we have assets in the Northeast, to not have a market risk as we saw in the prior years. Another topic is the TMPC. We're managing to see how it evolves, and the GSF in the margin also has a small impact.
These are the effects that we observe in the energy balancing. We're looking the Northeast in the last days, 50, 60 MWh. Today, net short North and Northeast and long in the Southeast. We have here a benefit of this first decision. The curtailment we also showed that the cost of the curtailment bill is much lower. This is a variable, and we're gonna manage this with time, and if the price is high, perhaps it could be lower with a positive impact. The GSF impacts the margin, hardly impacts the margin. What was our strategy for 2026? The first quarter we left the position short for the third and fourth quarter because we had a perspective of improvement. From now on, we have the expectation.
If we look at the configuration of the system today, the subsystem Southeast, North and Northeast reservoirs full. What is pressuring the price is the Southern system with lower reservoirs. We also need good rains in the South to recover this. Looking again at our position, we have a favorable position of this short position now as from the second quarter because of these characteristics and how the composition of this exposure is, as I mentioned, as depending on the hydrological scenario.
Perfect. Thank you very much for the explanation.
Next question is from João Pimentel. He comes from Citibank.
Hello? Thank you. I'd just like to take the cue from Danielle's question about this expectation. The NOAA agency says that now the expectation of the second semester is 62%.
The difficulty is to forecast the intensity of the El Niño, but we are still looking at the prices or the tariffs because of the scarcity in the South, very high. In the second semester of 2026, we see BRL 280, BRL 300, BRL 330 for the tariffs. I would like to understand from you, what do you, what base scenario are you working on for this PLD scenario the second semester, and also to understand how this affects these gains of, modulation gains that you or that we saw that are present here in the first quarter. What are you expecting from these modulation gains for the rest of the year? That is my question. Thank you very much.
You, you painted the correct scenario. The price, the tariffs are more pressured, in relation to the expectation of the hydraulic.
There's liquidity that cannot be discarded. The model rounds has a spread of liquidity. The market has not turned around a lot. We can explain this in several different ways, but I think all the forms what we look are, well, there's liquidity in one company, in another, or today we have a bit more aversion to risk and to closing deals. We could discuss hours here what's the origin of this lack of liquidity. The fact is that there is a liquidity premium, and this solves itself with time when the hydrological scenario configures itself. That's one reason that we understand that why the price is above our expectation. The second topic, which is modulation. Modulation is a behavior that we've seen here increasing the modulation due to the insertion of the micro-distributed energy.
This is gonna continue pressuring the price, and it's gonna pressure even more at the end of the day. We really can see a change that has been happening with time, and this benefits those who have the vertical portfolio, not only hydroelectric, but wind profiles as well. We can see a continuity of this modulation profile during the year. Thank you.
Thank you.
The questions and answers has ended. We'll now give the floor to Mr. Fabio for his final considerations.
Thank you very much for your availability. Thank you for participating in this call of results. Your presence is very important. If you have any questions and that were not clarified, our team is totally available to answer any questions you might have.
We count on you, to publicize the results of the second semester of 2026. Good morning. Thank you very much.
Auren's conference has ended. We thank you all for your participation. We wish you a wonderful day.