Good morning, everyone, and thank you for waiting. Welcome to ISA Energia Brasil earnings conference call of the second quarter. This teleconference is being recorded, and the replay can be found at the website of the company at ri.isacteep.com.br, where you also can find the presentation.
I would like to highlight that if you need simultaneous translation, this functionality is available on the platform through the interpretation button on the small globe on the bottom of the screen. You just need to select the language, Portuguese or English, and you have access to that. All participants will be only attending the presentation. In the end, we will have a Q&A session. The questions must be sent through the Q&A icon on the bottom of the screen.
We ask you to identify yourself when you send the questions, and they are going to be read out loud by the operator. Before we continue, we would like to reinforce that the declarations contained in this report about business perspectives, forecast for growth, and projections reflect the estimates of the administration and are subject to risks and uncertainties because they depend on market conditions, on economic performance, and other factors that may result in relevant changes.
Therefore, future declarations depend on circumstances that can or cannot happen. Investors, analysts, and journalists need to understand that market conditions and other factors can affect the future performance of ISA Energia and conduct to a result that is different from those that were forecast.
Today, we have the presence of the executive Rui Chammas, Chief Executive Officer of the company, together with Silvia Wada, Chief Financial, Investor Relations, and Business Development Officer, and the other executives of the company. With that, I'll give the floor to Rui Chammas for him to start this presentation. Please, Rui Chammas.
Good morning, and thank you for participating of the earnings result conference call of the Q2 of ISA Energia Brasil. I'm Rui Chammas, together with Silvia Wada, our CFO, I nvestor Relations, and Business Development Officer . Today, we will present the results released yesterday to provide an update of the results of the quarter and the strategic process. Let's go to slide three. I will begin highlighting the important progress of the company and the strategy and financial highlights and the commitment to sustainable value creation. I would like to highlight two subsequent events that took place in July.
The primary public offering of preferred share results in a capital increase of BRL 1.2 billion and an increase in the company free float with allocations made predominantly to long-only investors, strengthening the company's capital structure and supporting its future growth cycle.
Another important milestone was the completion of the unwinding and cross-shareholdings with AXIA Energia, announced in March in a transaction involving a cash adjustment of payment of BRL 1.2 billion to AXIA. As a result, as of August, we fully consolidated the Interligação, and we no longer have a stake in the Interligação Elétrica Garanhuns asset. Therefore, the ARR adjustment for 2026/ 2027 will show an increase by 11% growing inflation, thanks to the successful execution of the strategy that have been consistently communicated to all of you.
From an operational perspective, the quarter marked by the initialization of a final block at Piraquê Project and Jacarandá Project, which together represented an ARR of BRL 376 million. These deliveries reinforce the company's history of excellence in executing complex infrastructure projects as demonstrated in our track record.
With the initialization of these projects, together with the companies in other projects delivered in the second half of 2025, we recorded a 4.4% decrease in the amount invested during this period, totaling BRL 1 billion in the quarter, despite the 17% increase in investment in retrofitting improvements. The company's financial results reflect this operational evolution. We record net revenue of BRL 1.2 billion, up to 20.9%, EBITDA of BRL 967 million, an advancement of 22.6% and an EBITDA margin of 77.8%.
Net income totaled BRL 174 million, a decrease of 32% compared to the same period of the previous year, reflecting the higher leverage that supports the growth that I have just mentioned. I would like to invite now Silvia, our CFO, to provide further details on subsequent events highlighted, and let's go to slide four.
As you have seen, we carried a subsequent primary public offering preferred shares. The base offer was BRL 22.2 million, and due to the strong demand received by investors, we executed not only the base offering, but also the entire offering. As a result, we raised BRL 1.2 billion through the issuance of 44 million new preferred shares at a price of BRL 27 per share.
Although the offer was targeted to professional investors, all of them, more than 300 shareholders, had the opportunity to participate and exercise their priority rights according to their ownership interest. The offer also included the participation of reference investors with significant foreign investor participation, and 74% of the allocation directed to long-only investors, reinforcing the quality of our shareholders' base.
The proceeds from the offering were partially allocated to the payment made to AXIA upon closing the asset unwinding transaction, while the remaining portion will be allocated to accelerating investments in retrofitting and improvements, which already grown substantially in the recent years and continue to receive increasingly significant authorization for the execution of new projects.
Following the follow-on offer, we concluded on Friday, July 31st, an unwinding cross-shareholdings with AXIA Energia, which involved the acquisition of AXIA's stake in IE Madeira, and the divestment of the company interest in IE Garanhuns. As a net consideration, we made a cash payment of BRL 1.2 billion upon closing the transaction.
In addition to increasing our ARR by BRL 306 million for the 2026/ 2027 tariff cycle, the transaction also contributes to portfolio optimization and simplification of our corporate governance structure. With the completion of the transaction beginning in August, we started fully consolidating Madeira and ceased to recognize our interest in Garanhuns through the equity method. This is yet another example of our role of activity managers of a concessional portfolio consisting seeking to allocate capital and the opportunities in the long term.
On slide six, we see how the company's diversified portfolio continues to drive expansion of value creation of ARR. Our quotation of ARR for the 2026/ 2027 tariff increased 11%, reaching approximately BRL 7.1 billion, including the impact of the asset unwinding transaction.
The increase of approximately BRL 709 million compared to the previous cycle was primarily driven by the inflation adjustment of concession contracts, the asset unwinding transactions, and the continued growth of the retrofitting and improvements investment.
It's important to highlight, more than half of our ARR continues to come from the Paulista Concession, our flagship asset, while auction concessions already in operation and projects currently under construction continue to increase their contribution. This unique combination of concessions managed by ISA Energia Brasil, which includes a renewed concession of Paulista Concession with significant retrofitting and improvements opportunities.
New concessions can be secured through ANEEL with the opportunity through M&A transactions that provide a unique growth. This business model allows us to continue delivering an essential service to society and advancing in value creation in what is an extremely resilient business, the fundamental characteristics underpinning the company's long-term performance. Let's go on to slide seven.
Continuing our growth plan, investments in our greenfield projects continue to advance steadily. Following the energization of our four projects over the last 12 months, Água Vermelha, Riacho Grande, Piraquê, and Jacarandá, investments in greenfield projects declined by 60% during this period, exactly as expected. The quarter's opening performance was driven by two highly relevant milestones. The first was the energization of Block 3, the final block of the Piraquê Project.
This project represents one of the most important transmission corridors for the flow of renewable energy between northern Minas Gerais, Espírito Santo, and the State of São Paulo. With its completion, we begin receiving 100% of the project ARR, totaling approximately BRL 359 million. The second milestone was Projeto Jacarandá, or Jacarandá Project, which entered commercial operation in early April and added approximately BRL 17 million in ARR to our portfolio.
Combined, these energizations enabled to receive approximately BRL 376 million in ARR and reinforce our strong execution track record. Since 2019, projects have been energized on average 11 months ahead of the schedule with an approximately 23% CapEx efficiency compared to ANEEL's reference CapEx. We currently have two greenfield projects under execution with approximately BRL 4.6 billion, and these projects, Serra Dourada and Itatiaia, represent approximately BRL 600 million in ARR, which we will begin receiving once the projects are energized.
The two projects are at different stages of development. Serra Dourada is currently under construction and has reached approximately 49% physical progress, while Itatiaia is advancing through its developing and licensing stage. Both projects remain on schedule. These projects will extend the longevity of the company's portfolio and are directly linked to the expansion of the infrastructure required to support the growth of renewable energy sources in Brazil, which are an important component of the country's energy transition journey.
In addition to the concessions, we continue to make strong progress in retrofitting and improvements. We invested BRL 445 million in this category during the quarter, representing an increase of 17% compared to the same period last year. Only through June 2026, we had already energized 35 projects with approximately BRL 475 million in investment, with roughly 70% of this amount allocated to small projects.
Despite the strong place investments we authorized, R&I project pipeline remained stable at approximately BRL 7.2 billion. It's important to remember that these investments have a double relevance, because they are fundamental to ensure the great service provision that has been provided. In addition, both to remuneratory and through the low maintenance costs, as newer assets generally require less maintenance than existing assets.
Let's go to slide number nine. I would like to highlight the consistency of our investment trajectory. We remain convinced that the combination of our financial discipline, execution capacities, and long-term vision will continue to differentiate ISA Energia Brasil within the transmission sector. Now I'll give it back to Silvia Wada so she can comment the financial results.
Okay, let's go to slide 10. Thank you, Rui. The company's revenue reached BRL 1.2 billion in the second quarter, a growth of 21% compared to the previous year. Net operating revenue, excluding RBSE, increased 52%, evidencing growth contribution of operating assets to the company results. In addition to the adjustments of ARR by IPCA, this performance was driven by the energization of large-scale retrofitting and improvements projects for greenfield projects, like Água Vermelha, Riacho Grande, Piraquê and Jacarandá, which together have an ARR of BRL 488 million.
This amount also reflects temporary differences related to the charges of the adjustment portions with the amortization of the key portion of the RBSE and with the retroactive receipt of improvement annuity. Despite the reduction of RBSE, financial component of ANEEL, the growth of the operating revenues was more than sufficient to offset this effect and support the expansion of the company results. Let's go to the next slide. The discipline in the management of operating costs and expenses remains one of the pillars of our strategy.
PMSO totaled BRL 211 million in the quarter, representing 13% due to higher personnel expenses resulting in salary increases, success fees following a favorable decision in proceeding related RBSE before Tribunal de Contas da União, and higher property tax expenses following the reassessment of the taxable value of the real estates.
Even so, the increase in PMSO was lower than expected. This was allowed to continue improving our operating efficiency indicating, which reached 25% of the accumulated results for the first half. As a result, EBITDA reached BRL 967 million, an increase of 22.5% with a margin of 77.8%. Despite the growth recorded in operating results, the net profit decreased 32% and totaled BRL 174 million.
This reduction was due to the financial result of the period, which recorded an increase of BRL 287 million in net financial expenses, mainly driven by monetary variation expenses, interest, and charges on debt as a result of the higher IPCA on the second quarter of 2026 versus 2025, which showed an increase of an 89 basis points in the period. As well as the gross debt balance followed in the 19th, 20th, and 22nd debentures carried over the last 12 months.
It is also worth remembering that the company recognized BRL 51 million in other financial income in Q2 2025, mainly related to the update of extemporaneous tax credits. Let's advance to slide 12 to talk about our leverage. Our debt profile remains predominantly indexed by IPCA with an average of 8.7 years and more than 90% of maturities concentrated as of 2030.
We ended the quarter with a gross debt of BRL 17.7 billion and net debt of approximately BRL 16.3 billion as of June 3rd. The company's leverage ratio, measured by net debt to EBITDA, ended the quarter at 3.78x . The average real cost consolidated debt as of June 30th is of 7.1% a year compared to 7.56% per year as of December 2025.
The reduction of the average cost was mainly driven by the reliability management transaction carried out through the 21st debenture issuance in the first quarter of 2026. During the second quarter, we concluded our 22nd debenture issues with a spread of 87 basis points below NTN-B. Subsequently, we completed an additional institutional fundraising transactions under very competitive conditions. With that, I conclude my presentation and give the floor back to Rui.
Thank you very much, Silvia, and I would like to thank you for joining our call today. I would like to use this final slide to reinforce our investment thesis and explain why invest in ISA Energia Brasil. Our company operates as a pure electricity transmission company, which represents an extremely resilient business model in Brazil. The transmission business is characterized by predictable revenues that are protected against inflation.
Within this model, we have been able to capture growth opportunities driven by energy transition and by the need of the strengthening in the existing transmission network. This is particularly relevant here in the state of São Paulo, where we have a demand growth and the characteristics of a national interconnected system with an increasing share of renewable energy, require the use of technology, additional assets capable of addressing this challenge, while maintaining a high quality of service.
This is a moment in which we can put in practice all our competitive advantages, whether through competitive operating costs, access to debt financing in the market, or through the consistent demonstration that we are capable of delivering projects ahead of schedule and at optimized costs, generating significant returns to the company.
All of this is anchored by a fundamental financial pillar with financial discipline, which allows us to continue accessing competitive debt financing in Brazil, while also maintaining our dividend distribution practice of paying 75% of our regulatory net income.
Anchored on these four pillars, a resilient business growth driven by market opportunities, competitive advantages, and a strong financial discipline, we firmly believe that we are pursuing a long-term value creation strategy, while also generating positive social impacts. Once again, I would like to thank all of you for your attention, I will give the floor for the operations so that we can start our Q&A session. Thank you very much.
We will now start our Q&A session for investors and analysts. If you would like to ask a question, we please would like to ask you to send it through the Q&A button on the bottom of your screen. Please identify yourself before sending your question, and they will be read out loud by the operator. Our first question comes from Ricardo Bello from Safra. Can we wait for the anticipation of any project for the next quarter? What are the measures that you are using for cost control? Second question. Now with the registration for the batteries option, could you please explore more the topic and the perspectives?
Good morning, Ricardo. It's a pleasure to have you here. I am going to answer the first question. Ricardo, after the adjustments conducted over the 12 months, the project, Riacho Grande, Piraquê, the other projects continue under execution. Serra Dourada, we are at the stage of construction. The project of Itatiaia, we are, at the moment, at the licensing stage.
About the cost control of these projects, I can let you know that the company has been very strict with cost control, and everything starts with a very strict planning, rigorous planning. ISA Energia has a dynamic, the pre-signature of the contracts before the auctions, which contributes very much for the control of these costs. All of that at the execution stage, we control systematically the cost control of all projects. Thank you very much, Ricardo, for your question.
Hello, Silvia speaking here. I'm going to complement with relation to the second part of the question about the capacity reserve option. Well, there was a deadline to register the projects, and we did that to not to have optionality for a possible participation. With regard to the perspective, we continue conducting our disciplined analysis, conducting the analysis of the bidding minute that is at public consultation.
We will participate, as we believe it makes sense for our moment and for the profitability that is necessary for the profile of the project. With regard to the environment, everything makes us believe that it's going to be a very competitive environment. We don't have an obligation to win or a market share goal with that regard. We're doing our work diligently to have a very good participation, but that makes sense in the end of the year.
Our next question comes from Ricardo Nascimento from Safra. Regarding costs, we saw an increase in the cost line due to demobilization, due to the investments in R&I . Could you comment the dynamic of how these costs evolve?
Thank you, Ricardo, for the question. As you put, the increase is linked to the increase for R&I , and the replacement of assets. Here, it's important to highlight that when you need a reinforcement, these costs are recognized in the tariffs subsequently. In 2028, everything that corresponds to these costs and asset costs that were not depreciated, but that are regarded with the tariff, will return in form of RAP.
Our next question comes from Andre Sampaio. The company surprised us positively in the amount of R& I in this quarter, even so, you were capable to keep the future pipeline of projects. Could we consider this level of investment as something recurring for the future?
Okay, Carvalho will answer, okay? Feel free to complement if you want to.
With regard to the investments of R&I , we have been increasing them over the past years, we do not forecast a reduction in that, also due to the level of new authorizations that we've been getting. On the contrary, part of what we mentioned in the presentation in the follow-up, part of the use for these resources will be destined to the acceleration of the Reinforcements and Improvements. We should expect an increase in this curve. Now when this is going to happen is something that we are still structuring internally.
When we talk about the total CapEx, it is possible to expect a reduction of the total CapEx, both under bidding or for R&I due to the delivery of the greenfield pipeline project. We had a peak of BRL 5.1 billion invested, and probably next year, it is going to be a little less because this is a trend.
Reminding you that to ask questions, you can just click on the Q&A icon on the bottom of your screen and type your question on the Q&A to wait in line, okay? Please wait until we collect more questions. If you want to ask a question, all you need to do is click on the icon at the bottom of your screen, at the Q&A icon on the bottom of your screen. Write your question and wait for your turn. Please wait until we collect more questions. Our next question comes from Rafael Dias from Banco do Brasil.
Good morning. I am Rafael Dias from Banco do Brasil. Congratulations on the results presented with the conclusion of the Piraquê Project. I would like to learn if the conclusion of the Piraquê Project can bring some cost reductions for the next quarter, and what is the reason for the higher cost of the disablement of assets in operational costs.
Rafael, thank you for the question. The last part of your question, I think, can be answered by our regulatory CSO because they are about the non-depreciated assets. They are categories that go into the cost. With regard to the cost of the company, I think it is worth exploring something because it is an important point of our strategy. Our projects, then I can mention some here.
They have an EBITDA margin of 95%, higher than the one at the company. Although they have a cost that in the margin, they have a higher EBITDA margin, which makes the overall EBITDA margin to increase. About the improvements you have been following, the company has been growing. We reached BRL 1.7 billion last year.
With regard to costs, our perspectives are very interesting. First, because the profitability of a project like that is of a margin of 100%, which is included in 100% of EBITDA margin as a consequence. In addition, we have been able to reduce the maintenance cost, which also improves the margins of this project, which in my opinion ends up in more than 100%.
While the de-crossings do not reduce our cost but increase the EBITDA margin, and they allow for a cost reduction and an increase for the company EBITDA margin. Like I said, we need to keep in mind that the cost is divided by the cost of the company RBSE permanently.
Our next question comes from Ricardo Nascimento, Safra. "Do you have a lifeline with BNDES? If I am not mistaken, I think that is the only one with covenant. Do you consider prepaid debt with the resources of the offer? Would it make sense to prepay or, otherwise, are you discussing waiver for discounts in this debt?"
We have a covenant. In fact, it is the first financial covenant that we have with BNDES. In fact, the follow-on was not done with this idea of making prepayments for BNDES. Like we said, the destination of the follow-on course are for the cross-crossing of assets of AXIA and reinforces and improvements. It does not make sense to make these prepayments of the debt due to the conditions that are very attractive. Our strategy is to negotiate a waiver, just like we did last year. In this sense, we have already started some negotiations with the bank.
To ask questions, you can click on the Q&A icon at the bottom of your screen and type your question and wait in line. Please wait until we collect more questions. Our next question comes from Ana Ribeiro. "Could you update the status of the negotiation with SEFAZ-SP? Is there any evolution and discussions with the state of São Paulo? What would be the financial impact for the company with a possible agreement within the short range?"
Hello, good morning. Thank you for your question. This is Carlos Lopes, Diretor, speaking. We have been discussing that in the mediation with the Supreme Court. We have had already several hearings, with very good results and with a lot of goodwill to find a solution, but we are still in this trajectory to try to find this friendly solution.
About financial impacts, what we can say is about the attitudes that we have already taken. They are in our balance sheet. We have all the amounts that the company disburses, that are roughly at BRL 3 billion. This is the amount that we have in this universe where we are facing. Thank you for your question.
Our next question comes from Rafael Dias from Banco do Brasil about the decision that was made on a second appeal that declared null the Decree 116. It implies any behavior from ANEEL resorted to RBSE or the complaint to ANEEL or after appeals in courts that allow change in the receiving flow.
Thank you for the question. Recapping a little bit the topic of our RBSE, which is the amount that the company that receives by the asset non-negotiated, and this delay from 2012 to 2017 generated a financial RBSE. This was in the Decree 120, and this happened in 2017.
It's almost 10 years ago. We had several issues about this interregulatory approach, and the discussion was filed about the RBSE. There are legal issues about several topics. In this case, there were some suits of five consumers that had a wrong calculation about the RBSE in 2017. This is a suit that is against the Ministry of Energy, and ANEEL has already recurred.
It's a topic that is going to continue being legally treated until they have a final judgment and further developments. I believe that the right of the company, once everything was done respecting decisions by the Ministry that were authorized by ANEEL, I think that we have a good right. Even so, we follow attentive to the topic. Thank you for the question.
Our next question comes from Alexandre Lara: "I believe that the assets acquisition is a very good strategy for inorganic growth, even better than the greenfield projects. Is my analysis correct? If so, are you taking into consideration future alternatives?"
Well, we are always evaluating alternatives, but I think it's important to highlight that we have a characteristic, a unique combination, which is the optionality in different growth fronts. In addition to having the transmission options in M&A, we also have the growth potential in-house with R&I . Now, with the LRE caps, we have one more growth avenue.
This gives us the possibility to evaluate better the return relationships according to the risk of each project profile and do very good capital allocation. We always evaluate. We don't have a rule of what we want to invest in each thing, but it is a constant movement and continuous movement to search for the best alternative to allocate our capital.
Our next question comes from Maroni Goncalves: "With regard to dividends distribution of 2027, the company is evaluating the possibility of quarterly distributions, or are you going to remain with the current policy?"
We don't have a policy. What we have is a distribution practice of profits that determine a minimum of 75% of the regulatory without a defined frequency. It has been the preference of shareholders to have more frequent distributions. We have been addressing recently this anxiety, making more frequent declarations and payment events as well, more frequently. We don't have any defined or determined frequency with this regard.
The Q&A session is over now, and we will give the floor to Rui Chammas for his final considerations now.
I would like to thank everybody for the interest in following this earnings conference call of Q2 and reinforce that our investor relation is available to you to respond any questions that you might have. There were some questions that were not answered here, feel free to get in touch with us in this communication channel because it is totally open, and we want to bring to you the best information for you to invest in the company. Thank you very much, everybody.
The teleconference of ISA Energia Brasil is closed. I would like to remind you that the investor relations is available to you to answer possible further questions. Thank you, everybody, and have you all a great day.