Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the first Conference Call for the First Quarter of 2024 of ISA CTEEP. If you need simultaneous interpretation, it is available on a platform. To access interpretation, click on the Interpretation button with the icon of the globe on the lower bottom of your screen, and then choose English. For those listening to the conference call in English, if you can mute the floor by clicking on Mute Original Audio. This conference call is being recorded and will be available at the company's investor relations website at www.isacteep.com.br/ri, where you can see all the materials of our financial release. You can also click on the chat to ask questions even in English. During the company's presentation, all participants will be in listen-only mode.
Then we are going to start a questions-and-answer session when you'll be able to answer your questions. The questions should be sent through the Q&A icon at the bottom of your screen. Please identify yourselves when you send your question. They are going to be read by the operator out loud. The statements on this conference call relative to ISA CTEEP's business prospects and its growth prospects are just forecasts and are based on the expectations of the management regarding the future of the company. These expectations depend on the market, on the overall economic performance of the country, on the industry, and international markets that are subject to change. Forward-looking statements are not a guarantee of performance because 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 operating factors may affect the future performance of ISA CTEEP and may lead to results that will be materially different from those expressed in such forward-looking statements. Today, we have the presence of the company's executive officers, Rui Chammas, Chief Executive Officer, and Carisa Cristal, who is the CFO. Now, I would like to give the floor to Rui Chammas, the CEO.
Good morning, and thank you for participating in ISA CTEEP's First Quarter 2024 Earnings Call. I'm Rui Chammas, Chief Executive Officer of the company, and today we have the executive officers to present the results published yesterday and to give you an update on the main themes of ISA CTEEP. Please move to slide number three.
We started 2024 by reaffirming a successful strategy of generating sustainable value that is based on the pillars that guide the decisions of the company's management: create positive social and environmental impact, ensure the company's longevity, and generate sustainable shareholder value. As one of the results of the strategy, I highlight the return of our preferred share, TRPL4, to Ibovespa's, B3's main index since January 2024. Currently, we are part of other important B3 indices such as IBrX 100, ISE, and ICO2. In addition, our stock is now part of the new IBSD portfolio that was created at B3's for companies that pay out dividends. I would like to highlight the efficient debt management, a topic that will be addressed in greater detail by our CFO, Carisa Cristal. We have completed the settlement of the fifth debenture issue in February, our last issue of financial covenants.
As a result, no other issuance of the company has financial covenants, which demonstrates the solidity, value, and credibility that ISA CTEEP has in the capital market. In addition, we made the 15th issuance amounting to BRL 1.3 million. The highlights in the financials are net revenue growth of 24.3%, the company's consolidated EBITDA grew 21.4%, and net income grew 33.7% to BRL 409 million. The investments have been an important part of our commitment in value creation, grew 53% in a period reaching the record amount of BRL 835 million, which is a record for one quarter in our company. Now, let's move to the next slide, where I'm going to go deeper into each point. So, to start talking about our reinforcements and improvements projects, we've received an investment of BRL 243 million in Q1 2024, a growth of almost 20% compared to the same quarter in 2023.
In a period, the company replaced 449 pieces of equipment compared to 191 in the same period last year, which represents a growth of 135%. As you can see on the graph on the left, the volume invested in these projects has been increasing in recent years, and between 2021 and 2023, it grew 82%. Currently, our portfolio of projects totals approximately BRL 5 billion that are going to be executed over the next five years. These projects have an RAP over Capex ratio ranging between 12%-17%. It's worth remembering that demands for investing reinforcements and improvements are more concentrated in renewed contracts, and today this is part of the concession of ISA with the government of São Paulo. Investments in greenfield projects ensure the company's longevity, with double-digit rates on the chart on the route.
The amount invested grew again, especially due to the advance in the construction of Minuano and Riacho Grande projects and the preparation for the Piraquê project, which we won in June 2022. Overall, we have seven projects under construction, with a remaining investment around BRL 10 million, which, when energized, will enable the revenue of BRL 972 in additional RAP. It's worth remembering that our historical average efficiency in relation to annual is 35%, and we could anticipate the energization or projects could go live in advance by seven months. So, we had BRL 5 billion in projects of reinforcement and BRL 10 billion in projects that I have just mentioned that are connected.
As a result, our responsible and disciplined stance in the allocation of capital guided the decision, and what happened in March this year at B3's headquarters - a move that may have surprised some of you - but is absolutely coherent with everything that we have been doing and saying to the market. Now, I would like to give the floor to Carisa, our CFO, who's going to give you details about our financial results in the first quarter of 2024. Carisa, please.
Thank you, Rui. Good morning, everyone. I'll start my presentation on slide number five. The company's total net revenue grew 24.3% in Q1 2024 to BRL 1,108 million. This growth was led by the recovered RBSE's revenues and by operational events such as the startup of greenfield projects and reinforcements and improvements. We had approximately 68 projects going live, as well as the adjustment of inflation for the period.
In Q1 2024, net revenue, considering our subsidiaries together, was BRL 225 million higher than the same period in the previous year, totaling BRL 1.2 billion. The revenue growth of the joint subsidiaries was led by the gradual energization of the Ivaí project, which began at the end of 2022. Now, moving to slide six, please. Total costs and expenses with personnel, maintenance services, and others, the so-called PMSO, grew 10.7% in Q1 2024. This is mainly due to the increase in the number of employees and higher maintenance expenses to support the company's growth. Additionally, we also had the collective agreement signed in the second half of 2023. Excluding the non-cash events from PMSO amounting to BRL 900 million in the provision for actuarial liabilities, the variation would have been approximately 6%.
As a result, the company's operating margin, measured by PMSO over net revenue excluding RBSE, reached 34.7% in the first quarter of 2024. In this quarter, the consolidated EBITDA grew 21.4%, totaling BRL 897 million. The EBITDA of our joint-controlled companies grew 5.1%, totaling BRL 162 million. In this manner, the company's net income grew 33%, totaling BRL 409 million, which was explained especially by the increase in net revenue and the greater representativeness of equity, considering that part of the operations of our joint subsidiaries have gone live. On the next slide, you can see a snapshot of the company's debt. We ended Q1 2024 with a gross debt of BRL 10.4 billion and a net debt of BRL 8.1 billion. As a result, the company's leverage ratio, measured by the net debt over EBITDA ratio, ended the period at 2.29x .
Some events marked the first quarter of 2024 and highlight the settlement of the fifth debenture, the capital market that still had some financial covenants. As Rui said, the end of the covenants demonstrates the value and effectiveness that the company has to have access to the capital market and to raise new debt. In this manner, the company has financial covenants just from funding with a BNDES that today totaled BRL 592 million. We also issued the 15th issue of debentures in the amount of BRL 1.3 million. This issuance had an over-demand in terms of the initial offer. The company has been reducing the nominal average cost of the debt, which in the first quarter was 10.51%. With the 15th issuance, we rebalanced our debt, which is mostly indexed to the IPCA. Currently, the IPCA is the index of approximately 60% of our debt.
I remind you that ISA CTEEP constantly reevaluates its capital structure and opportunities for growth with the objective of maximizing the generation of value for shareholders. To end my presentation, let's go to slide eight, please. As Rui mentioned at the beginning of our presentation, we are back to Ibovespa index portfolio in January 2024. We increased the weight of our stock in the index. As you know, Ibovespa is the main B3's index and is composed or formed by the most liquid stock in the market, so that being back to this portfolio is an achievement for ISA CTEEP. The chart at the top shows the advance and liquidity of our preferred shares since Q1 2023, reaching an ADTV or the average daily trading volume of BRL 54.2 million in Q1 2024.
In this manner, our tradability index calculated by B3 advanced 15 positions in the last 12 months, and we are the 75th most traded stock in B3 in March 2024. To end my presentation, I highlight our commitment to balancing the company's investments, our growth, with a good level of dividend payout to generate value for our shareholders. It's worth noting that in December, we announced the distribution of BRL 1.4 billion interest on equity, which was fully paid in April 2024. The dividends distributed, together with the appreciation of the shares, resulted in a total return to shareholders of 25% per year. I would also highlight that we keep our practice of the payout of dividends amounting to at least 75% of our regulatory net income. I end my presentation. I give it back to Rui.
Thank you, Carisa. Before concluding the presentation, I would like to talk about our ESG agenda. So, let's go to slide number nine. I start our conversation about ESG, reinforcing the message that safety is a non-negotiable value for us. The company continuously carries out a series of structured actions with continuous evolution planning, aiming at improving performance and safety. I would also like to highlight the following achievements in ESG: two important certifications, ISO 14001 in substations, which establishes international standards for environmental management systems, and ISO 55001, which attests to the company's compliance with integration of asset management operations. The bylaws were amended to adapt them to the best corporate governance practices. The company received a B grade in the CDP Climate Change Questionnaire, and in Equity Indicators, we had the following evolutions: SF6 gas losses grew by 25% compared to Q1 2023.
The company has already carried out actions aimed at eliminating leaks and developing solutions focused on assets that had the highest rate of gas losses. During the period, there was also an 11% increase in energy consumption, justified by the energization of new projects, works and improvements. In relation to water consumption, we reduced it by 29% compared to 1Q23. One of the main initiatives to reduce energy consumption is the construction of the first company-owned solar project in our own substations. This project, to be completed in 2024, estimates a reduction of approximately 900,000 KW per year in consumption. Finally, to conclude the presentation, let's move to the next slide. Slide 10 summarizes the values that support ISA CTEEP's strategy, as well as topics addressed during the presentation, which aims to maximize the generation of sustainable value to our shareholders and other stakeholders.
On innovation, we were the first companies to build and operate a digital substation, a model that is currently part of our projects. Also, pioneered the use of drones to oversee 100% of our towers, and the first company to build and operate a large-scale battery energy storage project. We see new opportunities for innovation and more business opportunities by aiming at reserve capacity auctions, where we see that battery projects can meet the needs of an increasingly complex and renewable system due to its flexibility, feasibility, and competitiveness. As I mentioned at the beginning of the presentation, discipline in capital allocation and commitment to the growth that has already been contracted were the basis for us not to participate in the March auction.
We believe the decision brings security in maintaining our AAA rating on a national scale, which allows us to continue raising funds at a competitive cost and generate value to our shareholders. We also talked about the periodic tariff review of our regional contract, 059, that will take place in June, and among other updates, such as, for example, the O&M compensation, which rewards our efficiency by recognizing us as a benchmark, receiving an award over our peers, and we also recognize the investment in reinforcements and improvements carried out in an efficient and disciplined manner in the last five years. These investments are compensated, and since they do not add cost to our structure, have high profitability with strong cash generation. Thus, I close the presentation and turn the floor back to the operator to start our Q&A session.
We are all going to be here to answer your questions. Thank you very much for joining us and for your interest in ISA CTEEP. We'll now start the Q&A session. Please identify yourselves and ask all your questions at once, waiting for the company's answer. As a reminder, if you have a question, just press Q&A at the bottom part of your screen and send your question.
[Foreign language]
Our first question comes from Mr. Clarivka. Hello, I'm an investor as an individual. Could you talk about the battery storage process? Thank you for taking my question. Congratulations on the results. I'm very happy to be a shareholder. Basically, it seems that it is a very interesting project to us.
[Foreign language]
It is working as planned, and the company is looking into other projects as well, as long as they bring benefits to the company.
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Thank you very much. Our next question comes from Felipe Fabreto, investor. Good morning. Do you have an estimate of how much the RAP is going to increase at the end of the cycle of investments?
Well, when we take a look, we are talking about BRL 10 billion of Capex that would generate about BRL 1 billion of additional RAP, and then we have, for the next five years, reinforcements and improvements that should regenerate a RAP/Cap ratio of 12%-17%, and therefore revenues from BRL 600 million-BRL 850 million. So altogether, BRL 1.6 billion-BRL 1.8 billion at the end of the cycle of investments.
[Foreign language]
Please wait while we collect more questions. We'll come back shortly.
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We probably are going to answer the question from Andrea Varenka, an analyst. Any expectation on resuming the follow-on project?
Thank you for your question, Andrea. This has been a constant question. Indeed, the follow-on we mentioned at the end of last year that could be organized by Eletrobras is something that belongs to Eletrobras. It does not belong to the company. So it is something that you would have to see with them to know what the interest is. I thank you very much for your question, but it is up to them.
We have a question from Daniel Travitzky. The question is, "Good morning. I have two questions. One is how you see the dynamics of companies' indebtedness in the next years considering investments in new projects that you are developing, and how does dividend payout fit the strategy?"
Okay, to answer your question, it's always important to say that the company needs a balancing three pillars: continue with growing investments, balance its turnover, and seek profitability. So today, we see the company has a leverage of 2.3 x net debt over an EBITDA ratio, which is quite comfortable thinking of a company that is capital-intensive, and therefore it can accommodate the investments that we are estimating at about BRL 15 billion. Again, investments that should take place in the coming years. And we also have an expectation of the growth of an EBITDA in the period because of our projects on improvements and reinforcement and others. Therefore, we are going to keep the regular payout policy, which is to pay at least 15% over the regulatory minimum.
Now we have a question from Daniel Travitzky, a sell-side analyst. How do you see the documents that are needed for new projects?
Thanks, Daniel. I'm going to turn to Claudio, our regulatory officer, to answer your question.
Daniel, the technical note brings us a preview of our numbers, but this is an ongoing process. There are several topics that are still under discussion in a public hearing process, and the process of assessing companies' investments is still going on. It's probably going to be completed by the first week of June. Also, the public hearing is going to be closed by then, and then we are going to have final numbers. Numbers are still too preliminary for us to talk about.
You know that we are under the analysis of the tariff review and others, so it is too soon to give you an answer.
Thank you very much. Now we have a question from Eric. Hello, my name is Eric. I am an investor, and I would like to know how ISA is going to position as a company in the increase of the free energy market.
Well, the free energy market does not impact a transmission company such as ISA CTEEP. Regardless of where energy is negotiating, there is always going to be a payment to be made to the transmission company, ensuring revenues on the investments made. But anyhow, thank you very much for your question.
One more question from Vanessa Martins dos Santos, investor. Although you pay out 75% of the regulatory profit, you are now not making announcements as often. Why is that?
Well, today you know that we have a practice of making at least 75% of dividend payout, but we don't have a clear schedule of payments. The company always prioritizes maximizing the payment of interest on equity, which is a way of having tax savings for the company and also something that is good to shareholders. Generally, we optimize things better when we have a single payout, but this is not a rule. We always think of every year what is the best time to compensate shareholders.
Another question, how the company expects to face new auctions in view of this huge consortium that is coming into play?
I'm going to turn the floor to our strategy director.
Well, we have also always to know beforehand what is going on, and we analyze each project on a case-by-case scenario, and we do our homework to try and make sure that we have the best offer that can generate value to us. Of course, we never have a guarantee that we are going to be the winners, but we have to add value to the company. This is our main objective. When competition goes beyond this point, we believe that it is no longer interesting for us to take part in it.
Thank you very much, Silvia. There is another question that I'm going to ask you from Bruno Oliveira, a sell-side analyst, asking if we are going to take part in the next transmission auction.
Bem, as to the transmission auction that is going to take place in September, we have a total of five lots with ANEEL . And as it is, we studied and prepared for that, and we want to make a decision. So we are going to make this decision again closer on, but we should say that lot four, that are existing assets. And this concession that these are relatively good assets.
[Foreign language]
And we have new assets. So part of the assets.
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And it's good because it's services. This is a conversation that we have.
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Excuse me, if you want to ask a question, please press on the Q&A button at the bottom of the screen and send your question in text. Please wait while we collect more questions.
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The questions and answers session has now ended. Now we would like to turn it over to Mr. Rui Chammas for his closing remarks. Please, Mr. Chammas, you may start.
Thank you, everyone. Thank you so much for your interest in being with us in the announcement of the results of the first quarter of 2024. We have defined objectives, and our investor relations team remains available to all of you if you need any other information. Thank you very much for your interest, and I wish you all a very good week. Thank you.
[Foreign language]
The conference call to announce the results of the first quarter of 2024 of ISA CTEEP has now ended. The investor relations department is available to answer any other questions you may have. Thank you all very much, and have a good day.