Good morning. Thank you very much for holding. Welcome to the earnings release call of the Q2 of 2024 for ISA CTEEP. For those who need simultaneous translation, the tool is available in our platform. Click on "Interpretation" through the globe on the lower portion of the screen and select your language of option: Portuguese or English. For those listening to us in English, you can mute the original audio in Portuguese. We would like to let you know that we are being recorded and it will be provided in the RI company www.isacteep.com.br/ri, where you can find the complete material of our earnings release. During the presentation of the company, all participants will be in listen-only mode. Next, we are going to start with the Q&A session. After the presentation that's going to be delivered by the company, we are going to have the Q&A session.
Questions should be submitted through the Q&A option on the lower portion of Zoom. Therefore, we would like you to tell us your name, and the questions will be read by the operator. We would like to clarify that the statements that may be made during this conference call, business prospects, forecasts, operational, and financial goals, are simply predictions based on the beliefs and assumptions of the executive company. These expectations highly depend on market characteristics, general economics, status of the country, the industry, and all international markets, which are subject to changes. Forward-looking statements are no guarantee of performance involved risks, uncertainties, and different assumptions because they refer to future events, therefore depend on circumstances which may or may not occur.
Investors should understand that general economic conditions, market conditions, and other operating factors may affect the future performance of the company and lead to results which may materially differ from those expressed in these forward-looking statements. We have here today with us Rui Chammas, CEO of ISA CTEEP, with Silvia Denise Wada, Investor Relations and CFO, and all the other executive officers of the company. Let me hand it over to Rui Chammas now.
Good morning. Thank you very much for being part of our conference call for the Q2 of 2024. I'm Rui Chammas, CEO of the company, and we have here with me executive officers of the company to present the results published yesterday, giving you an update on the main topics of the company. I have here with me Silvia Wada, our CFO, with whom I'm going to share this presentation.
The end of the first half of 2024, restating our strategy of generating sustainable value based on three pillars that guide the decisions of the company's management: generate sustainable shareholders' value, ensure corporate longevity, and create positive social and environmental impacts. I'd like to address some highlights of the quarter before we go deeper into the economic and financial results. We continue to advance in our investment plan with emphasis on the greenfield projects with new concessions such as Puraquê, Minuano, and Riacho Grande, in addition to the progress recorded in the retrofit portfolio. Our jointly controlled companies, Especially IE Madeira and Garanhuns, presented growing results, boosting our equity revenues. Another factor that has boosted our net results in the quarter was the reduction in the average cost of financing. Together with lower IPCA, it has provided an improvement in our financial results.
I would also like to remind you that in May, we raised BRL 1 billion through our sixteenth issues of the debentures. The operation seeks to support the company's growth and had a cost of CDI plus 0.8% per year, reinforcing our ability to raise funds at competitive costs. Financially speaking, I would like to highlight some indicators that will be addressed later by Silvia, who is going to speak after me. Our net revenue grew 24.7% in the quarter, while EBITDA grew 29.7%, and net income grew 62.9%, reaching 425.6 billion BRL. As I mentioned in the beginning, we also continue with a fast pace of investments with a total of 640 billion BRL, or 69.6% growth. Let me go deeper into the topic of investments in the next slide.
I'll start by talking about retrofitting projects, which received investments of BRL 584 million in the first half of the year, 22.3% growth year-over-year. In this half year, we energized 27 projects out of 241 in our portfolio, out of the total pipeline of BRL 5 billion by 2028. As we can see on the left, the volume invested in these projects has been increasing in recent years. Between 2021 and 2023, it grew 82% per year. It's worth remembering that the demands of investments in retrofitting are concentrated in renewed contracts, such as contract 059. These projects, they add our RAP on amount ranging from 12%-17% on investment made, increase the safety and reliability of the network, and reduce risks of equipment failure. At the same time, it updates our base of assets, which is absolutely essential for our service as transmitters.
Investments in greenfield projects, which ensure a company's longevity, with a target real shareholder return rate of double-digit, are represented in the chart on the right. The amount invested has grown again as a result of the progress of the construction of Puraquê, Minuano, and Riacho Grande. Our current portfolio has seven projects under execution, remaining investments of about BRL 10 billion, and these projects, when energized, will enable RAP of BRL 1 billion to our company. Let me now hand it over to Silvia, our CFO, who is going to provide more details about the financial results of the Q2 2024. Silvia, please.
Thank you, Rui. Good morning, everyone. I'll begin my presentation on slide five. The company's net revenue grew 24.7% in the Q2 2024, reaching BRL 1.1 billion. Cumulative growth in the semester was 24.5%, going to BRL 2.2 billion.
This growth was led by the recomposition of payments of the financial component of RBSE as of July 2023. In addition, other positive highlights were the update of RAP between Cycles and the startup of greenfield projects, Itaúnas, which started to receive 100% of RAP as of November 2023, and Triângulo Mineiro in August 2023, as well as retrofitting projects energized in the past 12 months. In the Q2 2024, net revenue, considering the joint subsidiaries, grew BRL 250 million, or 23.6%, compared to the same period of the previous year, totaling BRL 1.3 billion. We may highlight a reversion of variable portion in Madeira and the energization of some retrofit that also improved our revenues from Garenhus. Next slide.
In addition to the growth observed in revenue, our consolidated EBITDA was also positively impacted by the update of some government debts to be received for the sale of land carried out in 2020. As a result, the company's consolidated EBITDA grew 29.7%, totaling BRL 891 million, while the EBITDA margin advanced three percentage points to 80% in the quarter. The EBITDA of our jointly controlled companies grew 17%, totaling BRL 182 million. In the first half of the year, consolidated EBITDA increased by BRL 362 million, an increase of 25.4%, and the EBITDA of the jointly controlled companies grew by 11%.
In addition to the advance in operating income, the company's net income also increased due to movements observed in the items below EBITDA. The equity result grew by BRL 17 million in the Q2 , especially because of Madeira and Garenhus, due to all the facts that we've already mentioned.
Our financial result has also improved because of lower IPCA and CDI in the Q2 of 2024 over the same period of the previous year. As a result, the net margin advanced nine percentage points to 38.3% in the quarter. The next slide. I'll bring you a snapshot of the company's indebtedness level. We ended the Q2 2024 with a gross debt of BRL 11.5 billion and a net debt of BRL 9.3 billion, according to the calculation methodology developed by BNDES. Compared to December 2023, this increase means new capital raised to fund the investments of the company, such as the fifteenth and sixteenth issuance of the debentures. In the Q2 of 2022, I highlight the sixteenth issuance of the debentures amounting to BRL 1 billion, with a 7-year maturity term and rate of CDI + 0.8% per year.
With that, our leverage index measured by net debt over EBITDA closed at 2.46x. The average nominal cost of our debt is 10.5% IPCA + 6.3% per year. I would also like to highlight that in July, Fitch reaffirmed our corporate rating triple A on a local scale with a stable outlook, highlighting, among other things, predictability and confidence of our cash generation with inflation-protected revenues. We maintain a balance between sustainable growth, financial discipline to preserve our credit rating, which provides raising funds at competitive costs, and our practice of distributing at least 75% of our regulatory net income in the form of dividends. With that, I close my presentation, and I hand it back to Rui.
Thank you, Silvia. Let's move on to the next slide, please. We couldn't help but address three important subsequent events that have been reported and happened last month.
As you could all see, Eletrobras, which is a major shareholder of ISA CTEEP, carried out a secondary public offering of shares in which it sold 93 million preferred shares issued by ISA CTEEP. With this move, it now holds it used to hold 35.8%, and now it goes down to 21.6% of our total share capital. I would like to reinforce that this corporate movement does not impact our governance or our strategy. We expect to have an impact on liquidity of our preferred shares, which had been growing since 2022 and can grow about 50% if the same current turnover is maintained. If this increase in liquidity materializes, we should also observe a rebalancing of our shares in the indices, which may increase the passive demand for the stocks. The second highlight is the Puraquê project that we won in the auction held in June 2022.
We've got the previous licenses of installation and operation in Minas Gerais. The project includes the construction of 938 kilometers of line and two new substations. In addition to Minas Gerais, it also goes through the state of Espírito Santo. Once the project is completed, we will be entitled to receive its RAP, which for the cycle 2025 is BRL 326 million. The periodic tariff review, or RTP, and the contract 059 that was renewed earlier in 2012 that includes the transmission assets in the state of São Paulo. In the past year, we were able to follow the evolution of the tariff review that started off with public consultations and was concluded in July 2024 with the approval of the result. The tariff review is a process that takes place every five years in which the parameters of the contracts are reviewed.
It's worth noting that this RTP, which is the periodic tariff review, should have been held in June 2023, which was postponed in one year and leads to a few additional adjustments. The main components that went through the RTP were, first of all, the review of the RAP of operation and maintenance, and we still remained as the benchmark. That means that we're the most efficient in the industry, receiving a premium of 18% on the cost of operation and maintenance. Second, incorporation of projects of retrofitting improvements energized between 2018 and 2022, whose historical accounting investment was 89% more efficient than the prices that is updated by the agency ANEEL. The update of the net regulatory remuneration basis that achieved BRL 6.6 billion, growing 2% when compared to 2018.
After moving the shielded asset base and inclusion of the incremental asset base, that means we were able to replenish our assets, meaning that the base grew and increasing the RAP that's connected to compensation of assets. And the last was the regulatory WACC that for 2024 and 2025 is defined at 7.26%. On slide nine, I'd like to show more aspects of the RAP contract 059. So I'll analyze the effects separately in RBSE RAP, the effects on revenues of new investments and the revenues on operation and maintenance. I'll start off by analyzing the top part of the chart that shows the movements caused by RTP to RAP or revenues of contract 059. The RAP of the cycle 2023-24 had two negative impacts. First, caused by the depreciation of the shielded regulatory remuneration base of the last RTP.
Second, decrease of O&M maintenance revenues that considered a new average cost per in the industry, where, as I mentioned, we are more efficient, so leading to a reduction. The O&M revenues is also adjusted by the X factor, which is a reducer that encourages sector efficiency. The positive impacts are a result of the update of the RAP and the incremental asset base created by the retrofitting and improvement projects energized between 2018 and 2023. So the RTP is a process that has inertia and brought in adjustment portions to correct the specific mismatches between the accrual and cash analysis and impacted positively the RAP by BRL 189 million. And also the retroactivity after a year of smaller projects between 2018 and 2023, and now we'll receive the revenues.
In addition, we are now receiving the advance annuity for performing small improvements in the amount of BRL 36 million that will be paid on an annual basis and offset by the RTP in 2028. With all these adjustments, the revenue went on to BRL 1.6 billion. And here I'd like to highlight that the asset incremental base from the investment projects added BRL 367 million to our RAP, and as of the cycle 2024-25, will be part of the new shielded base.
Now, looking into the second part of this chart, we can see that the contract went through a cycle adjustment that updated the revenues by the IPCA from the period and determined a new portion of the adjustment referring to the advances that we received in industry charges from the new cycle. And they have already been provisioned by the company and should not impact the cycle results.
As a result, RAP x RBSE in contract 059 grew 23.4% or BRL 303.7 million for the cycle of 2024-2025. When we analyze RTP regarding the RBSE assets in the chart on the bottom, we can see a reduction of BRL 349 million in the current cycle up to the 2027-2028 cycle. This decrease is expected by the movement of the asset base of the RBSE. That decrease is given the effects of depreciation and write-off of assets that cannot be incremented with new investments. In addition, in the cycle 2024-2025 alone, RBSE will receive a negative adjustment of the portion of BRL 360 million related to the postponement of the RTP.
On the chart on the right, as a summary, we can see that the total RAP of contract 059 goes from BRL 3.7 billion to BRL 3.3 billion, a reduction of 9% given the decrease of the economic component of the RBSE that I just mentioned. The next RTP should take place in 2028, and we should expect that RAP should move based on the energizing the retrofit with the prior RAP and monetary correction according to the IPCA and reduction of RAP from O&M as defined in this RTP. This is the update of our RAP cycle for 2024-2025, so I'll start off with the middle of the chart. We discount the adjustment portions or PAs that are positive or negative adjustments that take place, such as when there is a postponement or delay of the RTP.
In the middle, the company has an impact given the RBSE that I mentioned before, in addition to the correction from inflation and the revenues for new investments that are already taking effect for the 2028 cycle. We have to mention the RTPCs that were part of tenders and other events. According to this analysis, we have good news. The company is coming from an RAP revenue from 2023, moves on to 2024 and 2025 with stable results, even though we have significant reduction of the RBSE confirming our strategy to create value and investments and longer duration assets that replace the cash flow of and offset the assets of the RBSE. Having the complete information with the PAs, we have a reduction of 4.5% in the cycle RAP, which is a one-off and shouldn't take place in the upcoming cycles.
The detail, the breakdown of the potential RAP on the bottom of the slide shows our revenues with the reduction of the RBSE and a significant increase in operating income in contract 059 of company revenues. I hope I have enlightened the periodic tariff updates. So now I'll talk about our commitment to our strategy of growth that was clearly presented and our commitment, permanent commitment to the social and environmental agendas. Here, I'll talk about the reduction loss of SF6 gas that has a high impact on greenhouse effect gases. At the same time, we have a loss in eco efficiency in energy consumption that's partially offset with lower water consumption. So that data shows our management and commitment to pursue sustainability of the business, balancing financial results with the environmental results as well as the social results that are also part of our agenda.
I'll conclude my presentation on the next slide before going on to the Q&A session with a summary of our strategy, where we talk about our discipline and CapEx execution as one of the pillars and elements of the strategy and the sustainable growth without forgetting our financial discipline, pursuing leverage that would enable the company to contribute to capture funds in a competitive way. Very well known by the market. By doing that, pursuing CapEx, profitability, and operating efficiency in everything that we do to ensure strong cash flow generation that enables us to continue growth and guarantee our dividend practice of a minimum payout of 75%. [Foreign language] . We'll open for the Q&A session, so you can ask any questions to me or my colleagues from the management.
Now, we will begin the Q&A session. Please inform your name and ask all your questions at once. To ask a question, click on the Q&A icon on the bottom of your screen and submit your question. [Foreign language] . Our first question is João Pedro and from Gabriel.
Does the company have any positioning in participating in the September transmission auction? Is there any of your concession contracts? Will they be a part of the auction? How do you see the concession renewal project?
Good morning. For the September auction, we've already decided that we will not take part in that auction given the financial discipline. We have a significant pipeline of BRL 15 million to execute, so we are focused on delivering that and materializing that pipeline. In terms of concession renewal, I hand over to Regulatory Affairs Director Officer Claudio. Thank you.
In renewing the concessions, we're discussing that topic in terms of regulations of renewing concessions. That's open. So we're still discussing that. And the current case is small. It's a concession that would account for just 0.5% of our revenues at ISA CTEEP in a new lot. So for that case, there's not much of an impact on regulation, but we believe that ANEEL should evolve in what would be the best process in terms of tariff for consumers in the upcoming year. [Foreign language] .
Thank you for your answers. Next question is from Fernando. First, he's congratulating you on excellent results. And the question is, I'd like to know the financial impact for the upcoming years without RBSE. [Foreign language] . We also have other questions about the same matter, about the financial impact of RBSE.
Well, as of 2029, that would be the end of the financial RBSE. That's already expected and included in the company financial management. We're already considering that and we're getting ready so that today we have seven developments that have been through auction tenders. As the lots start up, we should have an RAP of BRL 1 billion. We would decrease the dependence and concentration of revenues of the renewed contract, which is 059, with an increase in the share of the concessions that have been received. We also have retrofitting and improvement investments that was a total of BRL 800 million in the past years and CapEx reduction from 12%-14%. For the upcoming years, we have BRL 5 billion of investment that has already been approved by ANEEL to be executed in 2024 through 2028.
So we can calculate an estimated RAP that would come in that same period, meaning when we add all of that, we'll have an expectation even of a marginal increase compared to what we have today. [Foreign language] .
Thank you for your answers. Next question is from Mario from Safra Bank. His question is, could you give us an update on the process to include the batteries of the capacity reserve auction and company's perspectives regarding when the auction would take place?
[Foreign language] . Concerning the capacity reserve auction, which was expected to happen in August this year, [Foreign language] has not been published yet. We are waiting for the schedule, though. If it still happens this year, it's probably going to be in the end of the year.
However, we don't expect to have batteries in this first auction that is expected to happen this year. We've heard from the Ministry of Mines and Energy that there would be a bidding process in 2025 in which batteries would also be included. [Foreign language] . Thank you for the answer. We would like to remind you that to ask a question, please go to the Q&A icon, write down your question, which is going to be read by our operator, and then the company will answer the question. The next question comes from Amadeo. A ISA CTEEP [Foreign language] . ISA CTEEP has a number of concessions and CapEx already hired, as we've seen in the presentation. For the next 10 years, what are the company's growth targets? Is it going to be part of more auctions?
Is it going to increase its portfolio of concessions, or does it intend just to maintain what it already has? Thank you for the question. We have 35 concessions with Evrecy, which is a concession that's going to end in the beginning of next year. Participation in auction, there will be 34. The renewed concession of the state of São Paulo. All the others are new bidding processes. We call them two and three type concession. Our strategy is anchored or based on three points: profitable growth, respecting two other conditions. One, which is in addition to profitable growth, financial discipline. The third condition is paying dividends to our shareholders.
Looking ahead, we have a BRL 15 billion portfolio to be executed within the next five years, and we expect after five years to look for new concessions that would come into auctions or look for sustainable growth of our portfolio of retrofit and improvement in our renewed contract in São Paulo. We want to keep on growing beyond what we've already announced, always respecting those three elements: financial discipline, profitable growth. It's not simply growing. We want profitability in our projects. Always have that as a key goal. And finally, paying dividends to our shareholders. It's a company that has maintained its growth, its plan of growing, and having a positive impact on society.
Thank you for the answer. We would like to remind you that to ask questions, please use the Q&A icon, which is on the lower portion of the screen. Write down your question. The operator is going to read all questions, and the company will answer them. The next question comes from Vanessa Martins. [Foreign language] . She says congratulations on the good results. Is there any estimate of dividends to be distributed in 2024?
Thank you for the question. [Foreign language] . No, we don't have any periodicity of dividend sharing, but we estimate to maintain our practice of dividend sharing, of distributing at least 75% of regulatory net income, maximizing through the company's interests and shareholders' interest value.
Thank you. [Foreign language] , let me remind you once again that you should use the Q&A icon to ask a question. The next question comes from Guilherme Botelho. Could you please talk about the price adjustments in July? Was it expected, or is it going to impact the capital structure of the company to fund the projects which are under execution?
Thank you for the question, Guilherme. Yes. It is a process. We were expecting to have a tariff cycle update, and it's been fully also considered. Concerning the impact on capital structure, it had been within the lines that we were expecting. It's not going to impact our capital structure nor future capital raising. [Foreign language] .
Thank you for the answers. [Foreign language] , to ask questions, please use the Q&A icon, which is on the lower portion of the screen. Write down your question to be answered. Our operator is going to read them aloud, waiting for the answers by the company. A [Foreign language] . The next question was asked by Victor Cunha. [Foreign language] . Good morning. Thank you for the call.
About the process that deals with the financial component of RBSE, what is your vision about the future? Do you think that it's going to be aligned with the technical note 85? And now the director believes that she has made a mistake in the initial indemnification and then correcting it would mean reducing the total value of indemnification.
If I may make a correction. It's not just what Agnes thinks. There is an ongoing regulation that's saying that values have to be paid by 2028. It's a determination. I still cannot see anything different from that. There has been a claim that had been analyzed by the ANEEL's counselors. One has already given his opinion, others haven't yet. I think ANEEL plays a very important role to ensure stability of contracts and regulatory robustness, which is really important.
The electrical sector is really an example in Brazil, having very clear rules and appropriate investments. But we are going to wait for their final decision before we give our own. I believe they are going to make decisions as part of their board, and then we will give our take on it.
Our Q&A session is closed now. I would like to hand it over to Rui Chamas, who is going to make his closing remarks.
Thank you all very much for being part of this earnings call, special one, because we've presented the results of the quarter, and we've talked about some subsequent events, especially the tariff cycle update that confirmed the strategy that we have been showing to you in the past quarters.
But I hope I have shed some light about this very complex topic of the tariff cycle review and hope you can see how well we have performed considering the tariff cycle update. Our investors' relations office and all our executive and officers are available to answer your questions, maintaining a very open, transparent dialogue with all investors. Thank you all very much. Have a great day.
Thank you. The conference call of the Q2 of 2024 of ISA CTEEP is closed now. We would like to remind you that the investors' relations office is available to answer any other questions you might have. Thank you all for participating. Have a great day. Thank you.