Good morning and thank you for waiting. Welcome to ISA Energía Brasil Third Quarter 2026 Earnings Conference Call. This conference is being recorded and it can be accessed on the websites of the company on ri.isaenergiabrasil.com.br, where is also available the presentation for download. I highlight that those that need simultaneous translation, it is available on the platform through the interpretation button located on the bottom of the screen. All you need to do is select the language you prefer, Portuguese or English. We inform that all participants will be only attending the conference during the presentation, and in the end, we are going to have a Q&A session. The questions can be sent through the Q&A tab on the bottom of your screen. We ask you to identify yourself when you send the questions that will be read out loud by the operator.
Before we continue, I reinforce that the declarations contained in this report about projections and perspectives of growth of ISA Energía are based on the expectations of the advisory board and are subject to risks and uncertainties. Such expectations depend on market conditions, economic performance, and other things that may impact. Therefore, future declarations do not ensure a guarantee of performance. Investors, analysts, and journalists need to understand that general conditions, economic conditions, market conditions, and other operational issues can impact on the future of ISA Energía Brasil and lead to results that differ substantially from these future expectations. Currently, today we count on the presence of the executive, Rui Chammas, Executive Director of the company, together with Silvia Wada, CFO, and along with other people from the executive team. Now I will give the floor to Rui Chammas to start the presentation. Please, you can start.
Good morning. Thank you for joining ISA Energía Brasil Third Quarter 2026 Earnings Conference Call. I am Rui Chammas, the company CEO, and I am joined by Silvia Wada, our CFO and Investor Relations and New Business Director, along with other members of the company. Today, we will present the results released yesterday and talk about the strategies of ISA Energía Brasil. Please, let us go on to slide three. I start the presentation highlighting the advancements of the company executing its strategy that in thesis reinforce our capacity of growth and our commitment with the tariffs. In addition to the inflation-based tariffs, the quarter was marked by the completion of two major strategic moves, our primary follow-on public offer of preferred shares and the asset swap with AXIA Energia. We also announced the distribution of BRL 398.7 million in interest in equity, further demonstrating our commitment with generating value.
Regarding financial highlights, we made investments totaling BRL 1.1 billion, with a notable focus in reinforces and improvements, which grew 32% compared to the third quarter of 2025 and now account for 52% of the total amount. In results, net revenue reached BRL 1.5 billion. The EBITDA for the quarter stood at BRL 3.2 billion. Beyond the strong operational growth evidenced by the revenue, we recorded a non-recurring accounting effect of the third quarter of 2026 related to assets uncrossing. Given the nature, this impacted our EBITDA, impacted in BRL 1.9 billion. It is important to note that this will not be included in the base of 2026. Excluding this effect, this non-recurring accounting effect, the pro forma EBITDA grew by 41% and pro forma net income increased by 14%. The primary offer resulted in the issuance of 44.4 million and increased our capital in BRL 1.2 billion.
In addition to bolstering our strategy, it continued to make it profitable and made our actions, our shareholder base, with the free floats increasing 40% of the total share capital. Another significant income were also the increase in average daily liquidity, which rose from BRL 51 million to BRL 85 million now in 2026. With the completion of the asset unwinding on July 31st, we began to consolidate 100% IE Madeira as of August, and we concluded the integrated operations in our transitions operations sector. Furthermore, we divested our stake in IE Garanhuns and simplified our corporate operational structure and increased our permitted annual revenue by BRL 306.1 million. The transaction generated an effect related to the value of the company. We also have the positive vote of IE Madeira, as well as the results from the disposal of Garanhuns. This impact is now 100% detained by AXIA.
This impacted our EBITDA in BRL 1.9 billion and our net income by BRL 1.3 billion. I emphasize that, in addition to not being non-recurring, this will be discontinued for the calculation of adjustments related to the company. This unwinding can be recorded within 12 months of the transaction crossing date. Should this occur, they will also be excluded from the calculation of earnings distribution, as they have no cash impact. Slide five. Investments in greenfield projects totaled BRL 525 million in the third quarter, 32% compared to Q3 2025, reflecting the reduction of the projects under construction following the three energizations completed over the last 12 months. Currently, we continue with Serra Dourada and Itatiaia, both remaining in execution. These projects have a combined remaining CapEx of approximately BRL 4.1 billion to be deployed between October 2026 and 2028.
Serra Dourada has reached 64% of the physical completion, evolving 15 percentage points compared to Q2 2026. Itatiaia, which is in the license phase, has reached 35% completion. These projects have combined an annual permitted revenue of approximately BRL 600 million for 2026, 2027. Let's go to slide six. We continue to make consistent progress in executing reinforcements and improvement projects, which form the basis of our organic growth vector. We invested BRL 578 million during the quarter, an increase of 32% compared to Q3 2025. Investments in the accumulated reached BRL 1.4 billion, an increase of 24%. Even after accounting for the quarter's execution, new authorizations brought the authorized pipeline of BRL 7.6 billion, a 5% increase compared to June. In the first nine months of 2026, we energized reinforcement improvement projects totaling BRL 950 million.
These deliveries modernize the grid, enhance system reliability, and create economic value through the regulatory remuneration and efficiency gains operationally. Now let's go to slide number seven. I would like to highlight the consistency of our investment trajectory, with visibility of long-term growth cycle already secured. This was executed with discipline in the capital allocation and focus on profitability. Combined greenfield projects with reinforcements and improvements, we have approximately BRL 12 billion in investments authorized through September 30, 2026. As shown on the chart, investments in reinforcement and improvement have been growing, and our authorized projects continue to this offer continues to grow, expanding opportunities. These projects are essential to ensure the quality and reliability of our transmission services. We expect to continue allowing modernization so that the current needs of the grid continue growing, and this will happen to a standard of investment that will go beyond 2031.
We are confident that the combination of execution capability in the long- term will continue to set ISA Energía Brasil apart in the transmission sector. Now I will give the floor to Silvia Wada to comment on the financial impacts of the company.
Thank you, Rui. Let's move to slide eight. Net revenue reached BRL 1.5 billion in the third quarter, an increase of BRL 438 million, or 41% compared to Q3 2025. The growth is driven by the following factors: the adjustment of the RAP for the 2026-2027 of 4.72%, effective from July, full consolidation of IE Madeira starting in August after completion of the asset unwinding with AXIA, the recognition of revenue from large scale of reinforcement and improvement projects energized in the last 12 months, the qualification of BRL 479 million in RAP from Riacho Grande, Jacarandá, and Piraquê, energized in the last 12 months, and also the contabilization accounting for the adjustment component in the amount of BRL 150 million related to the tariff adjustment of 2026-2027. Net operating revenue, excluding RBSE, grew 71% compared to the third quarter of 25, reaching BRL 1 billion.
For the nine-month period, this revenue reached BRL 2.6 billion, an increase of 49%. This performance highlights the growing contribution of the expanded asset base to the company results. Let's go to the next slide. Operating costs and expenses measured by PMSO total BRL 235 million for the quarter, an increase of 26% compared to Q3 2025. This variance was primarily driven by non-recurring expenses related to the advisors for the asset uncrossing, totaling BRL 15.5 million. In addition, we had the consolidation of IE Madeira and higher expenses after the collective agreement between clearing and maintenance. Nevertheless, the revenue growth outpaced the rise in expenses. As a result, operation of PMSO to net operating revenue improved 24% for the nine-month period, compared to 32 in the same period of the previous year.
As Rui has already mentioned, the asset uncrossing process resulted in the recognition of a non-recurring effect, stemming to the fair value remeasurement of the previously held equity stake and the purchase gain related to IE Madeira and the divestment in IE Garanhuns, totaling BRL 1.9 billion, which positively impacted our EBITDA. This one-off accounting effect combined the gains in operational efficiency with revenue growth driven by the initiation of the project, outpaced the increase in PMSO and resulted in an EBITDA of BRL 3.2 billion. Excluding this one-off accounting effect provides a clear view of the recurring performance, which still reflects a 41% increase compared to the third quarter of the pro forma EBITDA BRL 1.3 billion. Let's go to slide 10. Reported net income totaled BRL 1.9 for the third quarter, a 246 increase compared to the third quarter.
Driven primarily by the non-recurring accounting effect for the asset uncrossing process. As it is a non-cash accounting effect, it is excluded from the pro forma regulatory net income baseline used for the distribution of dividends and earnings payout. Excluding this non-cash accounting effect, pro forma net income reached BRL 625 million, a 14% increase over the same period in the previous year, reflecting improved operational results and efficiency gains achieved during the period. Other smaller scale variations included an increase in depreciation recorded following energization of projects over the last 12 months, and the financial expenses driven by a large average debt and by the cessation of equity accounting of IE Madeira and IE Garanhuns projects as of August 2026. We closed September with a [gross debt of BRL 9.8 billion and a net debt of BRL 17 billion.]
The increase of the debt compared to December is linked to the financing of our investment cycle in the consolidation of IE Madeira and the offset the inflow of the proceeds of the follow-on. The company's leverage ratio measured by Net Debt/EBITDA stood at 3.68 x at the end of the quarter. The calculation of this indicator follows the methodology of the BNDES and considers EBITDA of the last month of the consolidated company. This way, although the consolidation of IE Madeira has happened as of August 2026, its EBITDA is calculated in the indicator based on the last 12 months, avoiding distortions, and the profile of the debt is the same as the nature of long-term of the assets and are concentrated as of 2030, with an average timeline of 30 years.
The average real cost of the debt was of IPCA + 7.27%, a reduction of 29 basis points compared to December 2025, reflecting, among other factors, to the liability management transaction carried out in the first half of the year. in Q3 2026, we concluded our 23rd debenture issuance, totaling BRL 1.5 billion, and secured our 24th issuance, totaling BRL 10 billion, both priced at the CDI rate. It's worth mentioning that the rate for [any] is forecast is expected by February 2027, and until then, it is not included in our total debt balance. Nevertheless, our debt structure remains predominantly indexed by IPCA, which is the same index used to adjust our revenues. We maintain financial discipline to support this execution plan of our growth with a competitive cost of capital and preserving our capacity to distribute earnings to shareholders. Let's go to slide 12.
On September 29, the board of directors approved the distribution of BRL 398.7 million in interest on equity, equivalent to approximately BRL 0.57 per share. The announcement stated that the three installments will be paid on December 7, 2026, in accordance with the ex-rights dates shown on the table on the left-hand side of the slide. Reinforcing the point made earlier, the basis for calculation at 2026 earnings will be the pro forma regulatory net income, which excludes the non-recurring, non-cash accounting effect resulting from the asset unwinding. This action is consistent with our practice of distributing at least 75% of the regulatory net income, subject to necessary corporate approvals, while maintaining the balance between growth, financial discipline, and shareholder remuneration. I will conclude my presentation here and give the floor back to Rui.
Thank you very much, Silvia, and all of you that followed our presentation so far. I'm sure that you could observe our developments, our evolution, and the growth in EBITDA and the projects that create value, and at the same time that we have been distributing earnings on equity that is being materialized importantly. ISA Energía Brasil continues to be committed to looking for an efficient operation for society, profitable growth in all its projects, and the best capital allocation associated to a financial discipline that ensures that the company is capable of continuing to be competitive in search of resources in the national market and sharing 75% of the liquid profit as practiced to its shareholders.
All of that in a long-term view, a company that continues looking for results also within the long range, and with that being scale and competitive advantage due to its size and to its history of success in its projects, that helps remaining with the value for all the shareholders. Now I will give the floor to the Operator so that we can start a Q&A session so that you can explore more any points or bring your insights that will be very welcome. Thank you.
We will start now the Q&A session for investors and analysts. If you have a question, please send it through the Q&A icon on the bottom of the screen. These questions will be read by the operator out loud. Our first question comes from Guilherme da Rocha. With the consolidation of IE Madeira, the liquid debt of the company went to BRL 17 billion. How do you evaluate the level of leverage currently, 3x by the BNDES method, and what is the leverage goal for the next three months?
Hello. Thank you for your question. We concluded this quarter with this level of 3.5, presenting a reduction compared to December of last year, very much due to the consolidation of IE Madeira, reminding that IE Madeira also brings debt, but also brings an EBITDA that is also in this leverage accounting. We consider that a healthy leverage standard for a stable business with predictable revenues, like ours, is around 4x. This is an estimate from our rating agency, and we estimate that until 2028, we will have an increase of leverage around this standard, because 2028 is the year where we have the tariff revision. So when they start to acknowledge a lot of reinforcements and improvements that we have done in the previous five years, and till then, we have two projects that are ongoing and that will start operating.
Both of them together, Serra Dourada and Itatiaia, have a RAP of approximately BRL 600 million. So today we started a building stage, so we are only having debt. As of the time they start operations, they will prove this leverage indicator.
Our next question comes from Giuliano. With regard to reinforcements and improvement per year, the portfolio of BRL 7.6 billion will addition in relation to 2028, in relation to ATC regarding 2028, can we predict that this revision will be accountable for all, will move on regardless of the bad macro scenario?
Well, I am going to answer the first part of the question, then I go to the next, and I go to our regulatory director to answer the rest. This pipeline of BRL 7.6 billion, in fact, is not the part that goes into the revenue of 2028, because it is not what we have authorized for the future. But in terms of revenue for 2028, we have BRL 3.9 billion, out of which BRL 225 million were already accounted for in the nine months of 2026, and this BRL 950 million, 84% is of RAP, which is the part in which we receive cash only after our [RTP] 2028. So this project energized this year was of large size, and we started to receive RAP and the cash as if they started to be energized.
In relation to RAP, so it's probably in the, if it's going to be in the [RTP], it will depend on several factors. It will depend on efficiency, how much we estimate to energize up to BRL 5 billion, around BRL 5 billion, to submit to be evaluated. And we work with those intervals of 12%-17% in relation to RAB, CapEx, of how much of the CapEx would turn into RAB. Now I will let pass to Cláudio Domingorena to complement with regard to the regulatory part.
Good morning, Giuliano. The regulatory is not very relevant, but like Silvia mentioned, we have this efficiency, and it's a topic that we work very well. We have a very good efficiency history in regulatory terms, and this, when with regard to the profitability of the investments. In 2027, we will probably have to take a step towards this direction. Regulatory is a topic that we're going to act on, and together with the association, we're going to make this contribution, and so it's going to continue reflecting this positive financing conditions of our investments.
[Foreign language] Our next question comes from [Pedro Moraes from Banco Safra]. After the term of ANEEL on battery auctions, is the company interested in going into this auction? After the uncrossing asset with AXIA, does the company have any strategy to diminish leverage or any position that you find interesting as an opportunity?
Hello, Pedro. With regard to the battery auction, we are interested in the business model due to the proximity with what transmission does to build assets and operate and maintain available. But we see very carefully the capacity auction. I think that with some competition, we have some regulatory uncertainties, also regarding to the distribution of the market that will change the scenario. At the same time, we have some laws that are to be approved urgently at the chamber. So the law that regulates the generators could be changed.
In addition to if it would be possible to have a different tariff in the transmission, if it still makes sense, considering that this makes feasible the participation of this kind of player diminish competition. With regard to asset uncrossing and other kinds of movements like sales and acquisitions, we are always looking, considering to see opportunities that generate value. So we don't have anything concrete, but we're always watching, you know?
[Foreign language] Remind you that to ask questions, you can click on the Q&A icon on the bottom of the screen and write your question on the chat, okay? [Foreign language] Our next question comes from Rose. Good morning. How is the distribution of earnings for the fiscal year, 75% of profit?
Hello, Rose. Yes, 75% of the profit pro forma, like we commented on the presentation, because we had a recurring non-cash impact that comes from the remeasuring the participation that we had in Madeira, adjusting the value to fair value to attend to the acquisition. This is going to be disregarded on the basis. The net profits of the quarter, that is BRL 1.95 billion, it would be of [BRL 75 million] in this pro forma, and this is really the base for earnings. This is what our practice of 75% comes from.
Our next question comes from Olivia Rodriguez. ISA Energía Brasil has been more selected in the current recent auction. Does it represent a change in the strategy of the company? How do you evaluate the opportunity of growth through new auctions as of now?
Good morning, Olivia. Thank you for the question. ISA Energía Brasil focuses its strategy on a pillar based on operational excellence. We try to have the effort of providing the best service to society, and as of now, the optimal allocation to ensure service and maximize the profitability as we distribute 75% of the net profit. Having said that, we always try to do the best capital allocation among the opportunities of improvements and reinforcements, auctions and concessions, with auctions of capacity reserve. This is what we do to try to create as much value as possible as we develop this very good, this great service to society, which is to transmit energy with dependability and resilience, but also always considering our shareholders. Thank you for your question once again.
The Q&A session is finished. We will give the floor to Rui Chammas to make his final considerations, please.
To all of you that followed this meeting, and have been following the execution of the company's strategy, in a strategy of creating value as of execution that aims to create the best results to society and create value to its shareholders. I hope you all have a great day, and we will have our investor relations team available should you have any questions or any doubts. Thank you very much.
The ISA Energía Brasil teleconference is finished. We'd like to remind you that the investor relations department is available to answer other questions and further explanations. We thank you everybody and have you all a great day.