Good morning. Thank you for standing by, and welcome to the conference call to announce the results of the Q1 of 2024 of ISA ENERGIA BRASIL. If you need simultaneous translation, the tool is available on the platform. To access, click on the interpretation button in the globe icon at the bottom of the screen and choose your preferred language: Portuguese or English. If you are listening to English, you can mute the original audio by clicking on mute the original audio. This conference call is being recorded and will be available at the company's investor relations website, www.ri.isaenergiabrasil.com.br, where you can find the complete earnings release. You can also download the presentation from the chat, even in English. During the company's presentation, all participants will be connected in listen-only mode. We are going to start a question-and-answer session.
After the presentation conducted by the company, we are going to have a questions- and- answers session. Questions must be submitted through the Q&A icon at the bottom of your screen. Please identify yourself when sending the questions that will be read out loud by the operator. Statements contained in this presentation regarding the outlook of ISA ENERGIA BRASIL's business projections and its growth potential are mere forecasts and are based on the management's expectations regarding the company's future. These expectations are highly dependent on changes in the market, in the general economic performance of the country, the sector, and international markets, and therefore they are subject to change. Forward-looking statements are not a guarantee of performance. They involve risks, uncertainties, and assumptions as they refer to future events and therefore depend on circumstances that may or may not occur.
Investors should understand that general economic conditions, market conditions, and other operating factors may affect the future performance of ISA ENERGIA BRASIL and may lead to results that differ materially from those expressed in such forward-looking statements. Today, we have the company's executives here with us, Rui Chammas, CEO, and Silvia Diniz Wada, CFO and IRO, and other executive officers of the company. Now, I would like to give the floor to Mr. Rui Chammas.
Good morning. Thank you for attending ISA ENERGIA BRASIL Q1 2025 results web conference. My name is Rui Chammas. I am CEO of the company, and today we have executive officers here with me to present the results published yesterday and to provide you an update on the main topics of ISA ENERGIA BRASIL. Now, let's move to slide number three. We have started 2025 reinforcing our strategic performance as a company that creates value in a sustainable way and brings Brazil's energy transition to life. We do this in order to achieve three objectives: to be profitable and efficient, creating sustainable shareholders, maintaining reliability, safety, and resilience, thus ensuring corporate longevity of the company, and transmitting clean energy to impact society and the environment in a positive way.
We remain focused on the execution of our strategy, and we made progress in the construction of our portfolio of projects already won and authorized, in addition to keeping the strong pace of our investments. We involved significantly in the construction phase of Piraquê project. For this reason, the investment of Q1 2025 grew 33%, exceeding BRL 1 billion in the quarter. Our investments are financed with operating cash generation of the company and also by raising funds for debt. In March, we raised BRL 1.4 billion with the 18th debenture issued. This was another quarter incentivized at the cost of the IPCA presented a negative spread of 32 basis points. The first series totaled BRL 500 million and matures in September 2033. For the second series of BRL 900 million, we have contracted a swap where we'll be exposed to the CDI minus 0.60%.
The financial highlights are: number one, the net revenue, ex-RBSE, that grew 18% compared to Q1 2024; number two, the EBITDA grew 2.9% with an increase of 0.6 percentage points in the margin, also compared to Q1 2024. The company's net income reached BRL 337 million, had a drop of 17.6%, especially due to higher net financial expenses in the period. These financial highlights will be explained in more detail by our CFO. Now, moving to slide four, I would like to talk a little bit more about the company's performance. I would like to go deeper into the investments made, and I start by talking about our greenfield projects that guarantee the company's longevity because each one of those concessions has a life of 30 years of revenues and an average return of two digits.
Investments in these projects grew 35% compared to Q1 2024, reaching approximately BRL 800 million, which were allocated to our six projects. This growth was driven by the progress in the construction of Piraquê and Riacho Grande projects, and Riacho Grande is in the final phases of construction, which received respectively 67% and 20% of the total amount invested. I would also like to highlight that Riacho Grande and Água Vermelha projects are in advanced stage of execution and should go live in the next 12 months counting from today. Overall, our portfolio has three projects being in execution, a remaining investment of approximately BRL 7.5 billion, and once these projects go live, we are going to have the additional receipt in the form of RAP. Now, moving to slide five. We continue the trend of increasing investments in reinforcements and improvements as we have had in recent years.
This quarter, we invested BRL 306 million in this category. This means 26% more than in the same period last year. This quarter, we received new authorizations for projects, totaling BRL 300 million investments. In this manner, the portfolio of authorized projects totals approximately BRL 5.5 billion that will be executed until 2029, as shown in the graph on the left. I would also like to remind you that these projects will receive RAP totaling an amount that varies between 12% and 17% of the total investment and will increase the safety and reliability of our network, minimizing risks of equipment failures, reducing maintenance costs, and updating our asset base, thereby assuring the quality of services that we provide to society. It's worth reinforcing that investments in reinforcements and improvements are concentrated in renewed contracts.
That is the case of Concessão Paulista, and the revenue will be received from the time when they go live. These are the major projects. In the other part, there are the smaller projects that will only be booked after our periodical tariff review that will be in 2028 when these projects will be reassessed and shielded in the regulatory compensation base. Now, I would like to give the floor to our CFO, Silvia Wada, who is going to explain the details of the quarter. Silvia, please.
Thank you, Rui. Net revenue for the company grew by 12.1%, reaching BRL 1.1 billion, driven by the ex-RBSE revenue line, which alone grew by 18%. In addition to the update of the RAP by the IPCA of the 2024, 2025 tariff cycle, the ex-RBSE revenue also grew due to the effects of the periodic tariff review of the Concessão São Paulo contract as of July 2024, with an emphasis on the incorporation of the RAP of the small-scale reinforcements and improvements, projects going live between 2018 and 2022, and the resumption of the receipt of the annuity for improvements, which advances part of the revenue associated with the execution of small improvements to the tune of BRL 36 million, with retroactive receipt for the previous tariff cycle due to the postponement of the RTP.
Revenue also grew due to the large R&M projects going live between April 2024 and March 2025, and the start-up of Minuano in Q4 2024, a project with an RAP of BRL 50 million. RBSE revenue decreased by BRL 70 million due to the reduction of the economic component after the movement of the asset base in the RTP for the Concessão Paulista. When analyzing the operating costs and expenses with personnel, materials, services, and others, the so-called PMSO, we can see a reduction of 5.5% in total PMSO. The main reason refers to the private pension costs resulting from the annual reevaluation carried out in December, and the increase in the NTN-B in 2024 impacted the discount rate used to calculate the present value of future obligations, generating a decrease of BRL 9.2 million in the private pension provision for 2025. Other operating costs and expenses decreased by 0.6%.
Although there may be different seasonality between the years, the controlled evolution of the manageable PMSO shows the company's commitment to the continuous search for efficiency and materialization of gains of scale as it advances in the delivery of its project portfolio. In 2025, our efficiency indicator measured by the ratio between PMSO and net revenue, ex-RBSE, grew to 29.2%. We can now move to slide number seven, if you will. In addition to the operating performance presented, the company's results were affected by the increase of BRL 10 million in the cost of deactivation and disposal of assets, reflecting the increasing investment in reinforcements and improvements.
The increase recorded in net revenue linked to the control of operating costs and expenses resulted in a 2.9% growth in the company's consolidated EBITDA, which totalled BRL 923 million in Q1 2025, with a margin of 81.6%, which grew by 63 basis points vis-à-vis Q1 2024. The EBITDA of the joint subsidiaries also continued to grow and advanced 1.8%, reaching BRL 165 million in Q1 2025. In addition to all the effects already discussed, net income was also impacted by the depreciation, which increases as new projects go live. The variation in this item mainly reflects the effects of the RTP of the Concessão Paulista, which recognized the efficiency of the investments made between 2018 and 2023, increasing the regulatory remuneration base, in addition to the going live of Minuano.
Another point worth mentioning and which impacted negatively our net income for 2025 Q1 was the higher net financial expense as a result of the higher level of debt due to the funding made in the last 12 months to support the company's growth and the advance observed in debt indexes, namely CDI and IPCA. These effects were partially offset by the lower tax expenditure due to the reduction in the tax base. As a result, net income for the quarter decreased by 17.6%, reaching the level of BRL 337.74 million. Next slide, please. We closed Q1 2025 with a gross debt of BRL 15 billion and a net debt of BRL 12 billion.
In this quarter, we made the fourth disbursement with BNDES in the amount of BRL 82 million and concluded the 18th issue of deb entures, in which we raised BRL 1.4 billion in two series with a cost of IPCA plus 7.41%. It should be noted that we have contracted an index swap for the second series, which has the amount of BRL 900 million, changing its cost from IPCA plus 7.1% to CDI minus 0.60%, thus enabling a potential reduction in the real cost of debt in a scenario of future reduction of the SELIC rate. On 31 March , 59% of our debt was indexed to the IPCA and 36% to the CDI, resulting in an average real cost of 7.2%. The company's leverage ratio measured by the net debt over EBITDA ratio ended the year at a level of 3.16 times.
Currently, only the financing with BNDES, which totals BRL 715 million, has financial covenants that are measured by leverage with a limit of three times in the net debt EBITDA ratio. It should be noted that the measurements of the covenants by BNDES are annual and executed with the financial information of December 31st, and diligently, we have already started negotiations with the bank to obtain a waiver. Ultimately, we could prepay this debt before the measurement of December 31st 2025, to avoid non-compliance with the covenant, but we do not foresee difficulties in obtaining such waiver.
The increase noted in leverage was already foreseen and is in line with our long-term planning, reflecting the pace of investments associated with the very close management of costs and physical progress of projects, in order to ensure the delivery of planned profitability and seek to overcome them with good risk and opportunity management. This is what we call responsible and profitable growth with financial discipline to coexist with the practice of distributing at the very least 75% of regulatory net income. I end the presentation here and turn the floor back over to Mr. Chammas. Over to you, Rui.
Thank you, Silvia. Let's move on to the next slide, please. Before closing the presentation, I'd like to comment on our progress in the sustainability agenda. The year-to-date result shows a 52% reduction in SF6 gas losses.
In the same period, we recorded an increase in both energy and water consumption. In addition to the reduction in SF6 gas loss, the highlight of the period is in the opening of our second solar plant for self-consumption at the end of February. This plant is located in the city of Assis, in São Paulo, and has 214 kW-peak of installed power, which is enough to serve nine consumer units ISA ENERGIA BRASIL in the region, and will contribute to an estimated annual reduction of 17 tons of CO2. Both the SF6 monitoring, energy consumption, water consumption, and initiatives such as those for those plants have the objective of allowing the company to reduce its CO2 footprint, which we have been doing in a very disciplined and diligent way, seeking to reduce our environmental impact.
On slide 10, we summarized the capabilities of ISA ENERGIA BRASIL that were corroborated by the topics addressed during the presentation, which aims to maximize the generation of sustainable value for all our shareholders and stakeholders, and they link to all the other metrics we have shown throughout the presentation. ISA ENERGIA BRASIL's business is based on a resilient business model with predictable revenue hedged against inflation and closely linked to the transmission sector regulations in Brazil. In addition, as we move towards a transition in energy, we'll have opportunities to grow organically because there will be a need to reinforce existing lines, and we'll need to update and modernize those transmission lines, which are already at work.
We also offer competitive advantages, which have been attracting profitable investments, as shown by the company's track record, based again on a very strict financial discipline to support such growth and the disciplined payout of our regulatory net income, combined with a long-term view that seeks to have the company grow in a sustainable manner, not only across the economic items here seen, but also creating a positive social impact. This is what I had today. Thank you all for your interest, your attendance today to hear our earnings results, and we remain available, our whole IR team, at your disposal to clear any doubts or questions you may still have about data, numbers, metrics, and the numbers just shown. Thank you again. Have a nice day and see you next time.
We are now going to start our questions and answers session. We kindly request you to identify yourselves and to ask all your questions at once, waiting for the company to answer them. As a reminder, if you want to ask your question, click on the Q&A icon at the lower menu in your Zoom screen. To ask a question, please click on the Q&A icon at the bottom of your Zoom screen so that you are in the line. Our first question comes from Ruy Cunha, a buy-side analyst.
Could you please give us an update of the projects in execution? Will any of them go still into 2025?
Good morning. It's a pleasure. I am the project's director ISA ENERGIA BRASIL. thank you so much for your question. Yes, as mentioned before, right now we are executing six greenfield projects.
Of the six projects, there are four projects new to in licensing that are evolving as scheduled. Of the four projects that are under construction, we are well advanced in Riacho Grande and in Água Vermelha, and we estimate that they are going to go live still this year. Jacarandá project is still under construction. We're having very much in the beginning of the project, working with the land, and all our projects are going as planned. Additionally, these projects are the greenfield projects. We'll have in the next years, and they mean BRL 7.5 billion. We also have projects of reinforcements and improvements that are also evolving as planned. We have approximately 70 works going on, which represents approximately half of everything that we are doing. We also have about 10,000 people working on different projects with maximum security and safety as we have defined. Thank you.
Our next question comes from João Pedro Herrero.
Good morning, everyone. How are you? I am João Pedro, a sell-side analyst at Santander. Thank you very much for taking my questions. I have two questions to ask. Could you give us a little bit more detail about PMSO? Can we expect this level of cost in future quarters about leverage? Could you give us more details of how far this number could go and how long this would take, and whether this would affect your dividend payout policy?
Hello, this is Silvia Wada answering your question about PMSO. The main variation that we had was because of private pension. It's a non-cash effect reflecting the macroeconomic scenario in the last year.
Naturally, with this increase in a discount rate, when we bring our actuarial liabilities to the present value, the actuarial liability is lower, so we have a small expense in terms of what we had last year. This is the main component. Other than that, there is some stability with a slight drop, but very close in terms of operational expenses, our PMSO, as compared to last year. There are two main components. Number one, we have been having quite strong cost control and even a cultural movement in the company to strengthen this culture of seeking efficiency, but also there are a few cases of potential seasonality that may differ between years.
Maybe some types of services will have different volumes as we compare year-to-year, as we continue on our efficiency trajectory evolving year- on- year, and as projects go live, we materialize the scale gains that we have, meaning that for every project that goes live, we are diluting fixed costs of our corporate structure and the whole team that we already have. There is not an increase that is proportional to the additional revenues. The trend is to improve from now on in terms of costs as to leverage. Until 2027, we have BRL 13 million to be invested until 2028, especially. Over this period, we will need to raise funds to be able to make all this investment. It should be expected an increase in leverage during this period since we bid in the auctions and then we take on these commitments.
I think that a good reference in terms of leverage would be the Fitch report, which is the qualifying agency that assigns credit ratings to our debt, and we have a range between four and five for net debt over EBITDA. This is temporary, considering strong growth, considering that very soon these projects are going to go live, and from then on, the leverage ratio will go back down. Will that impact our payout or dividend policy? No. We do not have a dividend policy. We have dividend practice, and it will remain the same. We are not planning to change our policy of paying out at least 75% of the regulatory net income.
Our next question is Daniel, the sell-side analyst of Safra.
Can you tell me how you see the investment trajectory of the company in future years, considering contracted investments and what we can expect in terms of payout during the period? Number two, according to these projects, there's a discussion about an auction in capacity focusing on batteries. How do you see this opportunity?
Hi, Daniel. I think the first question has just been addressed in the previous questions, so I'll move to the second question about new projects. We are still waiting for an auction on capacity reserve, but the first auction to be held will be geared towards hydroelectric power plants and thermal power plants. It should happen later in the year, this year.
With that, we believe that the auction for the battery projects will be postponed to 2026, but we are closely monitoring that dynamic and participating in public consultations and keeping a close eye on all the opportunities. In the meantime, we continue to learn how to operate based on the projects we already have. I'd like to ask Bruno to jump in, our Operations Executive, to share with you his take on the batteries project.
Good morning, everyone. As Silvia said, in terms of energy storage, we are continuously moving forward. We have learned a lot in the period. A good example is that during this year's carnival, we used our battery bank every single day. That reinforced our reliability level, especially on the coast. We're talking about 6 million people. At every step we take, it takes us to a better position as a player in this energy storage scenario.
Once again, to ask a question, you have to click on the Q&A icon to be found on the bottom part of your Zoom screen. Our next question comes from Lilyanna, sell-side analyst from HSBC.
You are issuing debt today. You issued debt with a cost below CDI. I'd like to know when the 75% payout could eventually be reviewed based on the debt level?
Thank you for your question. This is Silvia speaking. We do not see a review of our policies for payout to be something necessary. We're not going to revisit that. That's the short answer.
Next question from Mauro Augusto, Investor.
In terms of dividend payout, does the company intend to maintain the payout for 2026 as it happened in 2025, or is there a quarterly proposal to dividend payout? Hello?
No, there is no guidance as of now in terms of the frequency of the payout. We want to be flexible in terms of stating dividends and also paying out dividends, but as I said, there is no guidance around the frequency of the payout.
Once again, to ask questions, click on the Q&A icon in the bottom part of your Zoom screen and type in your question to get in line. Our next question comes from Ricardo Azevedo, Investor.
The 180-day deadline to settle an agreement with the state government of São Paulo is now over. Do you expect to reach an agreement or a settlement still this year, or do you expect that issue to go to court?
Thank you. This is Carlos Lopes speaking. The good news is that that case was sent to the Judicial Center for Conflict Negotiation of our higher court, which was open actually just on 22nd April , a week ago. We now believe that sooner than later, our case will be heard for an initial settlement meeting. We're going to be having, of course, several meetings so that both parties are able to talk about potential mediation and so on. Whether or not we're going to reach an agreement, that's still open to questions, but we have a clear intention of finding a friendly or non-litigious solution for this case as we attempt to reconcile. I do believe that 180 days starting now would be an adequate timeline for us to start and continue the conversations and find a friendly settlement at the end of the road. Thank you.
Once again, to ask a question, click on the Q&A icon in the bottom part of your Zoom screen. Type in your question and get in line. Our next question is from Felipe Gomez, Investor.
ISA mentioned a project for BRL 30 billion by 2030. EBITDA grew by 2x ` in the period. How ISA ENERGIA BRASIL going to contribute for that plan?
Thank you, Felipe. This is Rui Chammas again. Yes, as I read your question, your question is that ISA in Colombia has an investment plan for BRL 30 billion by 2030. It's not 2030, as you said. This was announced within the context of a 2040 strategy for the next 15 years, with the idea and intention of doubling EBITDA in the period. It is important to understand that those are targets which are more aspirational linked to the 2040 strategy.
There are ways we found to state our mission of growing across profitable projects, always with an eye at the company's leverage level and also with an eye at our dividend payout policy. It is something you already know, something we have been doing in Brazil, continuous search for value creation, but always with an eye on financial discipline and always with an eye on the dividend payout policy. We believe that the transmission energy market, along with the energy transition, brings about several opportunities for which the company is quite well positioned to reap the opportunities as the economies where we operate go more electric.
The Q&A session is now over. I would like to turn the floor back over to Mr. Chammas for his final comments. Over to you, sir.
Thank you, Natalia, for your technical support, and thank you all for your interest in the company, for the very interesting questions you've made, and for your interest in knowing how the company is moving forward. The company continues to, as I said, continues to create value for all shareholders. I wish you all a nice day and a good holiday here in Brazil tomorrow. Thank you.
Earnings call relative to Q1 2025 of ISA ENERGIA BRASIL is now over. The IR department remains available for questions or comments you may still have. Thank you once again, and have a nice day.