[Foreign language] .
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When announced, a request to open your microphone will appear on your screen. You will then open your microphone to ask your question. Please make all of your questions. When you open your microphone, the information contained in this presentation and statements that may be made during the call relating to Neoenergia's business prospects, projections in operating and financial goals of Neoenergia, our beliefs and assumptions of the company's management, as well as information currently available. Future and forward-looking considerations are no guarantees of performance.
They involve risks, uncertainties, and assumptions as they refer to future events and, therefore, may depend on circumstances that may or may not occur. Investors should bear in mind that general economic conditions, market conditions, and other operating factors may affect Neoenergia's future performance and lead to results that differ materially from those expressed in such forward-looking statements. The presentation will be led by Mr. Eduardo Capelastegui, CEO of the company, and Leonardo Gadelha, CFO of the company. I will now give the floor to Mr. Eduardo Capelastegui.
Thank you very much, operator. Good morning. I would like to thank all of you for joining our 1Q24 earnings call. I am Eduardo Capelastegui, CEO of Neoenergia, and today I'm accompanied by Solange Ribeiro, Regulatory, Institutional and Sustainability VP, Leonardo Gadelha, CFO, Giancarlo Vassan, COO, Giuliano Panzanato, Asset Control and Planning Officer, Fúlvio Machado, Networks Officer, and Renato Rocha, our IR officer. I will make a brief presentation going through the main highlights of the period, and then Leonardo will present the results in more detail. Finally, we will move on to the Q&A session, followed by my closing remarks. Starting on Slide 3, we have our highlights of the results for the first quarter of the year.
Injected energy, considering distributed generation, performed very well in our concession areas, growing 8.2% in the quarter compared to last year, mainly due to higher temperatures and the economic development. Our cash EBITDA reached BRL 2.8 billion, up by 8% in the quarter. Reflecting the dynamics of the larger, the greater market, the tariff revisions and adjustments of our distributors, continued cost discipline, and sound operating asset management, our OpEx, normalizing growth through new generation and transmission assets, had a 4.6% increase year-on-year, once again indicating our focus on efficiency and cost control. Net income in the quarter amounted to BRL 1.1 billion, indicating the continuity of our results. On the growth front, this is worth highlighting our execution capacity reflected in our realized CapEx of around BRL 2 billion in the quarter.
We continue to accelerate the deliveries of the transmission projects on track to reach BRL 1.2 billion of RAP released by the end of the year. As already shared with the market, I should also highlight our discipline in capital allocation, as shown in the March transmission auction, where we studied in depth 5 lots and submitted proposals for 4 of them. But we were unable to win since the discounts of the winning bids did not allow us to generate the value we consider reasonable for our shareholders. We are perfectly aligned with our GIC partner in this regard. We are focusing on profitability rather than just more kilometers of lines. Finally, I should focus on the quality, the operating quality of our assets. This was another quarter where we will serve by Neoenergia to our customers. We have robust deliveries in this first quarter 2024.
On Slide 4 , we can see the evolution of our projects. In transmission, we are progressing with our lots from December 2018, Itabapoana, with almost BRL 100 million in RAP, 100% completed and delivery, awaiting for the final release of the operating license by IBAMA, which is still on strike. Guanabara Lot will have a full release of its RAP, of roughly BRL 150 million this year, 2024. We already have one of the two sections completed, also awaiting the operating permit. Vale do Itajaí, where we already have BRL 23 million of released RAP, approved RAP, we have other approvals throughout 2024 and will conclude all the lots in the first quarter of 2025 when we will reach around BRL 200 million of RAP, fully integrated.
In Morro do Chapéu lot, from December 2020 auction, with a total RAP of approximately BRL 180 million, construction works are progressing at a good pace. We have already released BRL 33 million RAP in 2023 and have completed in the first Q1 2024, the third trench with another BRL 53 million of RAP, and the remainder with approximately BRL 100 million additional in RAP, which will come throughout 2024. According to the business plan that was approved at the time of the auction for this lot in [Estreito Lot], from the 2021 auction with a total of BRL 40 million RAP, it's scheduled to be delivered by the end of the first half this year, according to the business plan.
Regarding the lots that we won in the June 2022 auction, the Alto Paranaíba Lot, the largest of the two, we have partially completed licensing works, and works have started in substation in two of the three transmission lines. Therefore, this project is underway. The second lot from this auction is the Paraíso Lot. The construction works have been concluded. The project has been concluded, will be delivered in this first half of 2024, therefore releasing BRL 40 million in RAP. In this case, Lot de Paraíso, Paraíso Lot, we're anticipating our business plan. Well, this set of deliveries, which I've just mentioned, will allow Neoenergia to reach the end of this year, 2024, with BRL 1.2 billion in released RAP. We will conclude the cycle of high investments in transmission by the year 2025 when we will reach BRL 1.7 billion of our total RAP in operation.
I will now give the floor to our CFO, Leonardo Gadelha, who will provide more details on our results for the first quarter in 2024. Over to you, Leonardo.
Thank you, Eduardo. Good morning, everyone. I will begin the analysis of our results on Slide 6, where we will see our consolidated results. On the left-hand side, we have the gross margin in this half, without considering IFRS 15 VNR. It was 6% over the first quarter 2023, reaching around BRL 4 billion. This growth was driven by a strong demand in the larger customer base, tariff reviews, and adjustments, making up for lower wind levels in the quarter. We are maintaining our good cost discipline with the 4% growth this semester, including the new projects and the operations. Does align with inflation. Our cash EBITDA reached BRL 2.8 billion in the quarter.
This is showing an 8% growth, reflecting the higher gross margin and control of expenses. Our net income at Neoenergia in the quarter was BRL 1.1 billion, in line with the first quarter in 2023, considering last year we had a positive impact of one-offs in the VNR due to the tariff revisions of Coelba and Cosern. On the next slide, moving on to CapEx on Slide 7, in the quarter, we reached a total of BRL 1.9 billion, in line with the plan for the year, which is BRL 9 billion. The chart indicates the CapEx was mainly all in networks, and this is the ongoing profile of our CapEx going forward. Highlights were BRL 1.1 billion in distribution, expansion, and improvement of the networks, BRL 7 million in progress of transmission works.
On Slide 9, we will look at the network business and the operating performance in the segment with the variation in injected energy in five distributors. As disclosed, they had a strong growth in the first quarter, mainly driven by higher temperatures. This growth was driven mainly in the residential household segment with higher rates and with a more positive impact on our mix. Consolidated growth was 8.2% compared to 1Q23. The total number of consumers reached 16.4 million, an increase of 307,000 customers in the last 12 months. Now moving on to loss performance. On Slide 10, we had a quarter with a controlled loss ratio on all of our distributors despite high temperatures, especially in the case of Coelba. The technical losses were impacted by the high temperatures, and this effect is also made up by a better mix, which I just mentioned.
With lower temperatures, we should once again continue with 4 of our 5 distributors within the regulatory limit. In regards to default, well, on Slide 11, we see in the first quarter where we reached BRL 157 million with our PCLD, with a reduction compared to 1Q23, in line with our normal levels, which we have maintained over the past quarters. We will make important progress in collections from all of our distributors this quarter. On Slide 10, now looking at our quality indicators, DEC and FEC indicators in our distributors, which are also maintaining a downward trajectory in line with our regulatory levels. On Slide 3, we will look at the results of our networks business. In the first quarter, we had an evolution of 6% in gross margin cash, driven by better market revisions, readjustments, and larger customer base.
Operating expenses in the quarter grew by only 3%, normalizing the new business and operation, and the EBITDA cash in networks grew 10%. Had a 10% increase in 1Q24, totaling BRL 2.46 billion, reflecting higher margins and well-controlled expenses. Cash EBITDA from the distribution distributors reached BRL 2.4 billion in the quarter, an expressive growth of 13%. This is the chart at the bottom left. The cash review, hadn't it been for GIC, would have been around BRL 131 million with a 36% growth in the quarter. On Slide 16, you will know that starting this year, we will consolidate the results of the renewables and liberalized segments, and they will be called generation of customer, customer generation. In the first quarter, the results of the segment was BRL 428 million, which compares to BRL 426 million in the same quarter last year.
Hydraulic EBITDA in the first quarter amounted to BRL 146 million, a 30% growth compared to 1Q23. This variation is explained by the consolidation of Dardanelos as of September 2023. Wind EBITDA in the first quarter was BRL 111 million, a 26% decline due to lower wind power, wind levels in the period across the country. Solar EBITDA in the first quarter was BRL 11 million, an increase of 10%. Termopernambuco EBITDA was BRL 153 million, a 6% growth. On the other hand, the customer business in the quarter for the EBITDA amounted to BRL 6 million. In our capital structure, on Slide 17, we can see that we ended the first quarter with a net debt of BRL 40.1 billion. Therefore, BRL 1 billion above the previous quarter last year, which is explained by the CapEx evolution.
Our net debt EBITDA ratio closed at 3.28 in the quarter, which was a level that was expected for this year, the last year with the high CapEx cycle resulting from investments in distribution and the completion of transmission works. Our debt structure remains comfortable, with an average maturity of 5.7 years. It is also widely diversified in terms of sources and indexes and has competitive costs. The credit market remains very with high liquidity, and we continue to accelerate our funding plan for the year. So far, we have secured around BRL 7 billion in new funding. Now I will give the floor back to the operator, who will open our Q&A.
We will now open the Q&A session. To ask a question, please click on the Q&A icon at the bottom of your screen to join the queue.
Once your name is announced, you will see a request to open your microphone. When you will, please open your microphone and ask all of your questions at the same time. Our first question is by Guilherme Lima, by Santander, sell-side analyst. You may open your microphone, Guilherme.
Good morning, everyone. I would like to ask you one question about your forecast in terms of renewals of concessions for the distributors. What is the plan and the risk of political interference from the Congress or municipalities, mayors, governors? We've seen the pressure going on in São Paulo and potential changes in regards to the original plan. Thank you.
Right, Guilherme. Thank you very much for your question. Well, it is, yes, an important topic. We have been, of course, looking closely at all of these aspects. We have a communication channel, an open communication channel with the ministry.
That is the regulatory agency that provides us the concessions, the grants. Therefore, this is the first point I would like to share. We have an open communication channel with the ministry, and we are working very closely with the ministry. Our expectations, we are in the last stages of the processes of the process when this executive order will be submitted to the House, to the president's office, from the ministry to the president's office. It will all depend on the minister and the ministry operations. As far as the content, we are all familiar. We know what the ministry submitted to the TCU last year, the accounts court of the union. The ministry will focus on quality and investments, of course.
So we relate to that since an important concern we all share is that the contracts we have today, the, well, we have the contract for 27 years now. It's a contract that was signed when, in a different scenario. A network was completely different. It must be updated, and quality and investments are two priorities, key priorities that are very relevant for us and for the ministry as well. We need to, of course, see how this will turn out in terms of goals and quality. The executive order, the decree will not analyze, of course, the overall contract. It will be a case-by-case situation. But yes, we believe we will be able to deliver despite the challenges. And this is more or less the current scenario and what we expect to see going forward over the next weeks and the next months. So we have a positive outlook.
We firmly believe that concessions, the current concessions, well, will still go on three or four years ahead. In our case, Pernambuco will go on until 2030, and we will keep ourselves very busy over the next three, four years. Last year, we had two important releases in Brasília and Salvador to approved notices informing our investments approved for the next year, the following year. In the case of Coelba and Bahia, Neoenergia Coelba and Bahia, we announced investments totaling over BRL 30 billion over the next four years. Therefore, we are looking at a record amount here for that state, an increase of 40% over the investments in the past four years.
So we have a clear focus on developing the networks, on growth, on quality, and therefore, as such, well, this decree, this executive order will give us more predictability, which is important, very important, because we have long-term investments. When we have this tranquility, this more assurance in regards to the agreements and the regulatory aspects, that really makes a difference. And yes, we want to execute our investments plan, which is ambitious, challenging, with all the assurance, the due assurance. And so, in answering your questions, we have a positive outlook. We believe we should have concrete actions over the next weeks. And this will be a modern, up-to-date agreement with high quality, with solid investments. And we're looking also at sustainability and continuity. These will also be part of our decree. And this is our plan going forward, our forecast as well.
We, of course, hope the regulatory framework will remain stable as it has over the past 26 years and that we can operate our concession, well, despite all the challenges, knowing that our investments will have high returns and resting assured that we will have efficiency in our distribution, in our operations, and promoting the economic development of those states where we operate.
Excellent. Thank you, Eduardo.
And our next question is by [Daniel Travitzky], sell-side analyst from [Patria]. You may open your microphone, Daniel. Thank you, Daniel.
Good morning, everyone. Thank you. I have a follow-up question, actually, on the renewal of concessions in regards to quality. Looking at how you read what the decree can bring on, what requirements in relation to quality, and looking at the other challenges other distributors have been facing in this respect.
I would ask if you have been preparing in some way in terms of OpEx, CapEx, looking at improving the quality indexes, the KPIs. And you've presented important reductions in DEC and FEC. And so I would ask what you expect in relation to the operations and if the investments you have planned going forward for the upcoming years, also in CapEx investments focusing on improving the quality of services provided. Thank you.
Thank you very much, Daniel, for your question. To the quality part of the question, this will clearly be the key point in the new contracts, and it should be so. It cannot be any different from that. How is Neoenergia preparing for that? Well, I've heard some of my colleagues talk about higher OpEx, and I have also heard some people talk about prioritization. You know we've been doing this since 2017.
We've hired almost 7,000 electricians and technicians. We are insourcing rather than outsourcing. Why did we start doing that in 2017? We realized the quality of the contractors did not meet our standards in terms of safety, productivity, standards. We took a bold decision at the time, and we opted to insource. It was a gradual process, beginning with our core processes today. Except for the line constructions, we have our own personnel working for us, which brings more flexibility, great flexibility to our operation to respond to emergency situations in terms of climate. A response in Bahia, for example, last January, we had 3,000, 4,000 electricians from Coelba. They were deployed to different sites. We have this flexibility, greater flexibility. I would encourage my peers to follow the same path because this will be positive for the sector by and large to overcome our quality issues.
In Neoenergia, we have already set up this structure. We expect to grow in line with the inflation. There might be one-off incidents and climate incidents. There might be an OpEx peak at a given month, but it's not going to really be far above the inflation as we expect. In terms of CapEx, that's a different story. We all agree that our networks should be reinforced. In Neoenergia, our CapEx QRR ratio is 2.5x-3 x. In some distributors, it could be 3x. And QRR is BRL 1 billion. I will invest BRL 3 billion, as announced last week, per year. Others less because they require lower investment in growth. However, 1.5x, 1.6x would be QRR. CapEx is a driver that all of the groups agree upon that it should be 1. Of course, we need to focus on quality and growth.
In our new agreements, we are, of course, talking to the ministry, to the regulator, to ANEEL to have a model that will, of course, bring returns to our investments on the following year. It's not just about growing in demand. We need to grow our resilience. And if our deals can bring us these improvements, it will be very positive because it will drive more investments, something the country needs. So the opportunities, the new deal will bring us to actually have the updated contract. In terms of OpEx, we are already structured, and I do not foresee, well, we do not plan to grow above the inflation in the upcoming years. And CapEx, well, yes, we're going to grow our CapEx, and that's our business. Whatever we identify an opportunity to invest, to grow, we will be investing in our future.
As Leo mentioned, we are doing well in all of our distributors, in DEC and FEC indicators. We started, we began 2023 with all of our distributors above the numbers of all of the sets. In Coelba, we're 1 point below, but that's also a one-off. In Neoenergia, we have a solid structure for this new phase that is starting now where we're focusing on quality. So this is our plan going forward, Daniel. And I believe the whole industry shares my views, our views.
Thank you. Excellent.
Our next question is from Marcelo Sá, sell-side analyst from Itaú. You may open your microphone, Marcelo. Please proceed.
Hello, everyone. Thank you for this earnings call. I would like to get a better understanding of the Termopernambuco contract. If you can anticipate the contract in 1-year capacity, I remember there was a discussion around that.
One more question around the provisional measures submitted by the ministry, the government, looking at three years, but it might not pass in the House of Representatives. And it was also looking at onshore wind at the Senate. Do you think it will pass? And if it does, would it make economic sense to consider new generation projects, or will you continue focusing on distribution and the conclusion of the transmission projects that are underway? And I would also like to learn more about the leveraging. Can you give us, provide us guidance of what you expect in our [GRS] without VNR for 2024-2025? What are the EBITDA levels looking at the cash leverage? Thank you.
Okay, Marcelo. Okay, Marcelo, thank you for your questions. I will, well, ask for the leveraging, and I will leave the MP question to Solange for Solange to answer.
Well, as I mentioned earlier on, the Termopernambuco, you know, the contract to sell energy will be due in May, May 15, I believe. And we have already contracted the plant in the availability contract as of June or July 2026. Therefore, well, we've had a two-year period where, in theory, the plant would not be operational. And last year, we started to work on this availability contract with a view to, well, conclude this contract. It will be due in May and to enter into this availability agreement as soon as possible. So in regards to the contract itself, we have the regulatory aspects. It has to go through the ANEEL, IBAMA, the ministry. We are, of course, moving forward as expected, and this is the regular process. In December, January, the plant was not operating.
That happened because we have an important system in operation for the northeastern portion of Brazil. It is an important plant. It's a plan that is making progress, making progress with the regulator and the ministry. The plant must be updated. Now we expect to have these two aspects that will be addressed by the third quarter of this year, not earlier than that because of the gas distribution issues with our partners. We firmly believe that by the third quarter this year, we'll be able to anticipate this contract in one year, nine months capacity. By the third quarter, what can we do? Until then, we are considering looking at this plant in merchant and also to look at spot gas, spot energy exports, and one-offs. Starting in September, we will anticipate the contract and attain contractual stability.
As for leveraging, we also explored this extensively. We expect to end this year with a net debt of around BRL 43 billion. From then, considering 2025, the investments volumes will go down because we will close our investment cycle in transmissions. The debt will become flatter. I think we have 1.3 or 0.4 this year. From then onwards, we expect there will be a decline, a fast decline because we will have investments in transmission in 2025, but not in 2026. We'll focus on distribution rather. Thank you for the question. So starting in 2025, we'll have a flat net debt and begin to see a decline or make a correction there to see an offset. And if we have small wins, we won't see much of a difference in that scenario. Solange, can you help us with the MP, the provisional measure?
Yes.
This executive order extends the deadline, so to speak. Or with the transmission operations, we will have the discount. And none of our wind farms depend directly on that. However, the new wind farms, yes, might so. Because if there's more stability, of course, we will work on them. It will all depend on how things will play out going forward. This will become a law enacted today. It's a mixed condition, as you all know. And sound. The sound is off, apparently. Operator?
Hello, good morning. You may proceed, please.
Okay. Are there more questions? The Q&A session is closed, and we will now give the floor to Mr. Eduardo Capelastegui for his closing remarks.
Okay. Right. Thank you once again, operator. And I would like to once again reaffirm our commitment with all the stakeholders and shareholders of Neoenergia.
We focus on efficiency, value creation, on providing sustainable and quality services to all of our customers. The best way to represent this is the significant growth of our cash EBITDA, which has grown 123%. This is the result of our operating excellence and robust investments in expansion and quality of our networks in five distributors. We have thus provided high-quality services to our 16.5 million customers. Our projects and deliveries are aligned with the business plan, also support these results. We are fully focused on delivering the transmission lines as seen in this presentation. Likewise, we remain attentive to new growth opportunities in the electricity, the energy sector, without renouncing adequate returns, as we have once again shown in the March auction.
Finally, I would like to highlight our confidence in the Brazilian electricity energy sector, our regulatory contractual robust framework, which encourages us to continue investing in the country, in the energy industry. Once again, I would like to thank our shareholders for trusting in us. We are fully committed and engaged to delivering the expected result. Finally, as usual, I would like to conclude by thanking Neoenergia's employees for their deliveries for overcoming challenges, delivering results, and creating value for all of our shareholders. Thank you all so much, and have a nice day.
The Q1 2024 earnings call of Neoenergia is now adjourned. The IR unit will be at your disposal to take additional questions. Thank you and have a great day.