[Foreign language]
[Translator]: The English version here. Good afternoon, and welcome to Equatorial Energia's Q1 2025 earnings call. We're here with the company's CEO, Mr. Augusto Miranda, the Vice President, Leonardo Lucas, the Regulations Director, Mr. Cristiano Logrado, Director of Financial Strategy and Investor Relations, Tatiana Quiroga Vasquez, and Liu Aquino, Head of EcoEnergia, who will be available to answer any questions at the end. The simultaneous translation tool is available on this platform. In order to hear it, just click on the Interpretation button at the bottom of the screen and choose your preferred language. This conference is being recorded and will be available on the company's Investor Relations website, ri.equatorialenergia.com.br, as will the presentation shown here. Please be advised that all participants will be in listen-only mode during the company's presentation, and then we will begin the question-and-answer session when further instructions will be given.
[Translator]: The English version here. Before we continue, we take this opportunity to emphasize that forward-looking statements are based on the company's beliefs and assumptions, and this is based on current information available to the company. These statements may involve risks and uncertainties as they relate to future events and therefore depend on circumstances that may or may not come to pass. Investors, analysts, and journalists should take into account that events related to the macroeconomic scenario, the industry, and other factors could cause results to be materially different from those expressed in these forward-looking statements. We will begin the presentation by giving the floor to Mr. Augusto Miranda. Please, Mr. Augusto, go ahead.
[Foreign language] Boa tarde a todos, e obrigado pela presença no nosso.
[Translator]: The English version here. Good afternoon, and thank you for being here for our earnings call. This quarter, we reached BRL 2.9 billion in adjusted EBITDA, a performance 14.5% higher than the previous quarter. A result that reflects the consolidation of Sabesp's equity, the reduction in costs that we presented in the period, and the higher fee-obeyed tariff of our distributors. We remain committed to cost discipline, which has led us to reduce our adjusted PMSO in the quarter by almost 4%. We invested around BRL 2.3 billion in the quarter, 34% more than in the first quarter of 2024, with investments focused on the distribution segment. We closed the quarter with a net debt-to-EBITDA ratio of 3.2 times, which is 0.1 times lower than in Q4 2024. A recent event was the announcement of the sale of the group's transmission assets, a transaction that will help the company's deleveraging trajectory.
[Translator]: The English version here. From an operational perspective, we are below regulatory losses for the sixth quarter in a row on a consolidated basis. Concerning quality, we saw progress in all distributors, both in DEC and FEC, with Equatorial Piauí achieving the regulatory DEC with a reduction of 5.4 hours versus Q1 2024, as well as significant improvements in the group's most recent assets, such as Goiás and Rio Grande do Sul, which saw reductions of 5.8 hours and 3.2 hours, respectively. Still, with regards to Rio Grande do Sul, we would like to point out that the company began the year with the biggest reductions in both indicators, setting a positive path for 2025. These moves reinforce our commitment to the quality of the operation and the turnaround process of our distributors. Finally, we're pleased to announce that in this year's ISC portfolio, Equatorial was ranked 23rd in the index.
[Translator]: The English version here. I'll now hand over to Leo on slide 5, and we'll begin with a consolidated view of the group's economic and financial performance.
[Foreign language]
[Translator]: The English version here. Thank you, Augusto, and good afternoon, everyone. I'm going to talk briefly about the group's economic and financial performance in a consolidated and adjusted view. Our consolidated gross margin grew by 2.9%, mainly due to the distributor's fee-obeyed tariff. It was partially offset by the consolidation of SPE7 and Intesa. It's worth noting that in a view where we adjust for the accounting of liabilities from distributed generation in Q1 2024, we would have grown by 4.1% between these quarters. We posted a 3.9% reduction in the company's adjusted PMSO, with a reduction in all segments, reflecting one of the strongest qualities of our DNA. With these results, we achieved an adjusted EBITDA for the quarter of BRL 2.9 billion, 14.5% higher than the same period last year.
[Translator]: The English version here. This was a result of the effects mentioned above and the consolidation of Sabesp's equity. In a view adjusted for the accounting of distributed generation in Q1 2024, adjusted EBITDA would have grown 16.7%. We continue on a path of well-behaved leverage. The net debt-to-EBITDA ratio fell to 3.2 times due to EBITDA growth. Finally, we highlight the investments made in the quarter, which totaled BRL 2.3 billion, mostly in the distribution segment. We'll now turn to slide 7, where we have an overview of the operational and commercial performance of our distributors, as well as the highlights for the quarter. On the left, we briefly present the consolidated performance of our energy distributors, where we highlight the reduction in losses in the quarter, which, for the sixth consecutive quarter, were below the regulatory loss level in the consolidated figures.
[Translator]: The English version here. This quarter, we had a collection rate of 97.9% and a PECLD to ROB ratio of 1.66%, reflecting an improvement in both indicators compared to Q1 2024. We would like to point out that in this quarter, we had an excellent performance in quality, with Equatorial Piauí being included in the regulatory DEC, as well as a reduction of 3.1 hours at Companhia Estadual de Distribuição de Energia Elétrica compared to the fourth quarter of 2024. With this result, we now have four of our seven distributors within the regulatory levels. The distributors' gross margin grew by 5.1% in the quarter, mainly reflecting the higher fee-obeyed tariff in the period. We would like to point out that part of the improvement in Equatorial Goiás' margin is due to the significant reduction of BRL 33 million in offsets for quality indicators, which reflects the improvement in quality between these periods.
[Translator]: The English version here. Adjusting for the accounting of distributed generation in Q1 2024, the margin would have grown by 6.6%. Looking at the adjusted PMSO of the distributors in the quarter, we had a reduction of 1.9%, which reflects our ability to manage operating costs even in a scenario of significant improvement in quality indicators. These movements resulted in an increase in distribution-adjusted EBITDA of 8.9% and 11.3% in the distributed generation adjusted view. Moving on to slide 9, here we will look at the group's other segments. In transmission, we posted a regulatory EBITDA of BRL 247 million, down 13.3%, mainly due to the deconsolidation of SPE7 and the greater impact of PA and PV in the period. Even with these effects, we achieved an EBITDA margin of 93% in the three months. The sanitation segment's results are beginning to reflect the progress made with Hydrometering.
[Translator]: The English version here. This quarter, we posted an EBITDA of BRL 3.7 million, as well as an average tariff increase of 7.6% between the quarters. In the renewable segment, we posted an EBITDA of BRL 134 million, an increase of 14%, reflecting the startup of the solar parks. I will now turn the floor over to Augusto. Continuing with slide 11, thank you, Leo. We would like to point out that the group's sustainability report for 2024 is now available on the Investor Relations website. We also came 23rd in the ISC ranking, which comprises a portfolio of 82 companies. This recognition reaffirms our commitment to ethical, transparent, and sustainable action, reflecting our continuous progress on the environmental, social, and governance fronts. Continuing with slide 12, we ended a positive quarter with a solid financial and operational performance. We know, however, that our commitment goes further than that.
[Translator]: The English version here. It is essential to maintain this trajectory of sustainable growth and continually strengthen value generation for our employees, clients, investors, and for society. In 2025, we will have the closing of the transmission asset sales by the end of the year, and we will continue with procedures linked to the periodic tariff review in Maranhão. About this, we have already delivered the report for recognizing the company's asset base on April 30. We will maintain our commitment to operating cost discipline, and we will continue to actively manage the revenue cycle. With quality indicators, we will continue to focus on strengthening the network and improving the operational quality of our assets. Finally, we will continue to evaluate possible future opportunities for capital allocation and value creation. I will now hand it over to the operator, who will continue with the question-and-answer session. Thank you.
[Foreign language]
[Translator]: The English version here. We will now begin the questions-and-answer session. If you would like to ask a question, please click on the Q&A button at the bottom of your screen. If you would like to ask your questions here, you may raise your hand. The first question was asked by Luiza Candiota from Itaú BBA.
{Foreign language]
[Translator]: The English version here. She says, "We saw a solid PMSO cost performance in the distribution segment, especially in the concessions acquired in the last few years, such as Goiás and Rio Grande do Sul, which are posting yearly drops. Given the higher challenge and quality in these two concessions, if we look at the subgroups, what are the company's perspectives for costs in the future?
[Foreign language] brigado, Luiza.
[Translator]: The English version here. Thank you, Luiza.
[Translator]: The English version here. We've been making an effort, especially in Goiás. This has been made since the business plan, and the biggest issue with that concession was quality. The business plan already foresaw a different investment level. We had to align our PMSO with quality. Looking at the concession, many things are doing well, and we've been able to progress with quality and with PMSO, despite this concession still having a high PMSO for consumers in comparison to other concessions, except for Amapá. In Rio Grande do Sul, events have required a very strong recovery plan. We can see that as we stop having these events, you know, we were well trained for these events, but when you start not having the events, of course, quality reaches an inflection.
[Translator]: The English version here. When we compare the fourth quarter to the first, that was the highest FEC and DEC inflection in the group. That shows that recovery very clearly. This is the third PMSO in the group, which shows that in the long term, as these things get organized, we have higher potential. On one side, Goiás is under the regulatory levels, and Rio Grande do Sul is still above the regulatory levels, considering the recovery we have been making with this asset, with the support of the local and corporate teams. Thank you for your question.
[Foreign language]
[Translator]: The English version here. As a reminder, if you'd like to ask a question, please click on the Q&A button at the bottom part of your screen. If you'd like to ask any questions through the microphone, click on the raise hand button. Please hold while we collect questions.
[Foreign language] Nossa próxima pergunta vem do senhor André Sampaio.
[Translator]: The English version here. The next question will be asked by Mr. Andre Sampaio from Santander Bank. Go ahead, sir.
[Foreign language] Desculpa, o pessoal demorou aqui para abrir o áudio. Rapidamente aqui, fazer uma pergunta sobre.
[Translator]: The English version here. Hi everyone. I have a quick question about growth in sanitation. We've seen a competitive environment in the last few bid tenders, so I'd like to hear the company's expectations for the next steps in sanitation. If you are deciding to focus on Sabesp, if you could tell us about that.
[Foreign language]
[Translator]: The English version here. Hi Andre, thank you for that question. We've announced that our plan sees in this segment a big opportunity, so we're firm on that. We really have a team looking at these opportunities in sanitation and in other industries, and naturally, if we have a good understanding with Sabesp, that makes sense. We have a team looking at that, and we're paying attention to the opportunities.
[Foreign language] Perfeito, obrigado.
[Translator]: The English version here. Thank you.
[Foreign language] Nossa próxima pergunta vem do senhor Gustavo Faria, do Bank of America. Por favor. The next question will be asked by Mr. Gustavo Faria from Bank of America. Go ahead, sir.
[Foreign language] Tudo bem, obrigado pela oportunidade.
[Translator]: The English version here. Hi everyone, thank you for taking my question. I'm going to ask a question about capital allocation, similar to André. With the proceeds from the transmission sales, we expect leverage to go down. What is your target leverage for the next years? With the proceeds from that transmission sale, is there still room to expand your CapEx with distribution companies beyond the levels that you're currently at? Also, do you expect to advance in other segments that are not in your scope right now, other infrastructure segments? Thank you.
[Foreign language]
[Translator]: The English version here. Thank you, Gustavo. The use of the proceeds from the transmission sales is still under discussion. There are many possibilities, such as reducing our debt listed in CDI, any M&A possibilities, share buybacks, or even dividends. We expect to close by the fourth quarter. We were able to deleverage in this quarter before this transaction concluded.
[Translator]: The English version here. Looking at the long-term perspectives, I think we will have two important events, which will be the conclusion of the tariff review in Rio Grande do Sul and Goiás, where we should see some more robust, some stronger movements in deleveraging the group. Considering our target leverage, we are probably at a peak in interest rates, so we are paying attention to that. This transaction, of course, gives us an advantage, so we are trying to target leverage around three or below, depending on the interest rates, of course. We will need to monitor this because it is during peak times that interesting opportunities appear. We have a lot of space, and that gives us a lot of room to maneuver so that we can do things in the best way possible and look at the scenario responsibly, as we always do. Thank you.
[Foreign language] Obrigado.
[Translator]: The English version here. Thank you.
[Foreign language]
[Translator]: The English version here. As a reminder, if you'd like to ask a question, please click on the Q&A button at the bottom of your screen and type in your question. If you would like to use the microphone, click on the raise hand button. Please hold.
[Foreing language] Novamente, para fazer uma pergunta, por favor, clique no ícone de Q&A que aparece na parte.
[Translator]: The English version here. Again, if you would like to ask a question, please click on the Q&A button. Or if you would like to use the microphone, please click on the raise hand button.
[Foreign language] Por favor, aguarde enquanto coletamos as perguntas.
[Translator]: The English version here. Please hold.
[Foreign language] Nossa próxima pergunta vem da senhora Luiza Cangiota, do.
[Translator]: The English version here. Next question will be asked by Luiza Candiota from Itaú BBA. Go ahead, ma'am.
[Foreign language] Por favor, senhora Luiza, seu microfone já está liberado.
[Translator]: The English version here. You may ask your question, Ms. Luiza.
[Foreign language] Por favor, senhora Luiza, seu microfone já está liberado.
[Translator]: The English version here. Go ahead, Ms. Luiza.
[Foreign language] Boa tarde, pessoal. Eu tenho uma pergunta.
[Translator]: The English version here. Good afternoon, everyone. I have a question about the concession renewal process. We saw the process with IDP Espírito Santo, and throughout the meetings, there was a proposal to analyze other quality parameters, including purges besides just DEC and FEC. Do you believe that for the next renewals, this might be on the table again? Thank you.
[Foreign language] Luiza, obrigado pela pergunta. Eu passaria.
[Translator]: The English version here. Luiza, thank you for your question. I'll hand it over to Cristiano. I think they can clarify this.
[Foreign language] Luiza, boa tarde, obrigado pela pergunta.
[Translator]: The English version here. Hi, Luiza. Thank you for that question. About that, we did have two directors with different proposals, but at the end of the process, it was concluded that it should be restricted to what is on the decree. Our belief is that this broader discussion has basically been overcome and that the next processes will be simple and will retain themselves to the decree.
[Foreign language] Tá ótimo, obrigada.
[Translator]: The English version here. Great, thank you.
[Foreign language] Nossa próxima pergunta vem do senhor Juliano AGG.
[Translator]: The English version here. The next question will be asked by Giuliano Ajeje . Go ahead, sir.
[Foreign language] Olá, pessoal. É Augusto, Leo, Tinn, Tati.
[Translator]: The English version here. Hi everyone. I have two questions. First, I would like to understand how you're working with losses in a scenario in which we are having subsidies for low-income customers. Do you think companies should accelerate this registration of CADE UNICO to remove these losses just to understand the scenario? My second question is related to SC3E. How are you reducing DEC and FEC to fit into the regulatory levels? Do you think you will have enough time to do it? What would happen if you were not unable to do it in time?
[Foreign language]
[Translator]: The English version here. Hi Juliano, thank you for that question. If you look at the events since we went to sea, we've had many atypical events. Last year, not only the local community, but we also saw globally that these events had a wide repercussion.
[Translator]: The English version here. If you look at the sequence of events, we did not have much time to work on the grid, and that is why if you do not have any changes to the grid, if you have any requests to intervene preventively, then that stops you from generating effects that would affect your indicators. This year, we have been doing well, but after October, it was down to five hours. Since December, it has been going down, and I can say that in May, this reduction trend is also present. When we can work on the grid because of the tradition and the involvement of the operational area with the corporate area and everything that we have been building up every day with the concessions, the results come. This is really a free fall.
[Translator]: The English version here. We've been having very satisfactory results, and this is related to our engagement and the ownership spirit at Equatorial. We are very happy about these results. Yes, I would add, Augusto mentioned what happened in Rio Grande do Sul, so that just underscores what we said. In comparison to the fourth quarter, this was the company that had the highest growth, and this puts us on a similar trajectory. Although we had this devastating year last year, if you were to simulate the 12 months concluded in April, we are reaching the contract numbers for December. We are a bit four months late with these events. E enfim, a continuar a julgar pela continuidade desse bom.
[Translator]: The English version here. Looking at this good environment, if the environment continues to be good, if we do not have any major impacts, if we do not see any weather adversities that are too intensive, this is our capacity. We are very excited about this. Yes, we can make a parallel with Piauí. You can see that in a short span of time, Piauí was under regulatory over three hours. That is our capacity. When we can intervene, then results really do appear. About losses, that is interesting. We do have to wait and see how that goes. Historically, in our recent history, we have been seeing a strong capacity to reduce losses in a consolidated fashion, even in complex environments with higher complexity. We are doing it.
[Translator]: The English version here. Regarding low-income customers, some years ago, there was a ranking that ANEEL even published publicly with the companies that had the highest capacity of reaching their maximum potential of client compliance to, you know, the clients who were eligible for the social tariff. At the time, the top five companies that had reached its highest potential, four were ours. We are very active, although this is asked by consumers, we are very active in doing this. Subsidies can increment outside resources in our concession. I think we have demonstrated our ability to reduce loss and also to register for these subsidies, and that is a strong combination for this new scenario. Excellent, thank you.
[Foreign language] A sessão de perguntas e respostas está encerrada. Gostaríamos de.
[Translator]: The English version here. This concludes the questions and answers session, and we will now give the floor to our executives for their closing remarks.
[Foreign language]
[Translator]: The English version here. Thank you.
[Translator]: The English version here. In closing, I would like to once again reinforce our commitment to the value creation agenda that we seek for our investors, based on the delivery of consistent results in the various segments in which we operate, always guided by disciplined financial management. I would also like to remind you that our investor relations team is available to support you with any questions you may have after this call. Once again, thank you for your interest and for taking part in our results call. Have a good afternoon.
[Foreign language]
[Translator]: The English version here. This concludes this earnings call. Thank you for listening, and have a good afternoon.