Good morning everyone, thank you for joining TAESA's Q1 2026 earnings release video conference. We have a simultaneous translation available for those who may need it. Just click on the interpretation button, which is the globe icon at the bottom of the screen, and choose the channel. For those listening in English, there's an option to mute the original audio in Portuguese by clicking on Mute Original Audio. We would like to inform you that this video conference is being recorded and will be made available on the company's IR website, where you'll also find the earnings release. It is possible to download the presentation in English using the chat icon. Participants will not be able to turn on their mics during the entire event. To ask questions, click on the Q&A icon at the bottom of your screen and type in your question, which we will actually queue.
Please note that questions can be submitted during the presentation and will be read out live by the IR Officer, Cristiano Rogério, and the IR Coordinator, Juliana Castelli, and then answered by the executive officers during our Q&A session. We emphasize that information contained in this presentation and any statements that may be made during the video conference regarding TAESA's business prospects, projections, and operational and financial targets are the beliefs and assumptions of the company's management and on information currently available. Forward-looking statements are not guarantees of performance since they involve risks, uncertainties, and assumptions, since they refer to future events and therefore depend on circumstances that may or may not occur.
Investors should understand the general economic and market conditions in addition to other operating factors, may affect the future performance of TAESA and lead to results that materially differ from those expressed in such forward-looking statements. We now invite you to watch a video about the company. Juliana Castelli will present the company's Q1 earnings.
[Presentation]
Good morning, everyone. I am Juliana Castelli, the Investor Relations Coordinator at TAESA. Welcome to TAESA's Q1 2026 results presentation. If you have any questions, you may submit them through the Q&A button on the platform during the presentation. We will also have a dedicated Q&A session with the management team at the end of the presentation.
We hope you enjoy the video conference. Starting on slide three, we present the values and purpose that guide our operations. We deliver energy efficiently and with quality, ensuring safety and trust in every relationship while contributing to the sustainable development of people and the planet. This purpose defines how we operate, make decisions, and position ourselves with our stakeholders. The strategic drive is supported by strong values that guide our organizational culture. Safety is our core value and always comes first. We act proactively and responsibly, prioritizing people's wellbeing and the reliability of our assets. We also build relationships based on trust, grounded in transparency, ethics, respect, strengthening long-term and consistent partnerships. Excellence drives our processes and results. We continuously pursue improvement, innovation, and high performance in everything we do.
Lastly, equally important, we genuinely care about people, fostering human development, wellbeing, and a safe and collaborative work environment. All this reflects the cultural transformation carried out over the last year, aimed at ensuring that our foundations are fully aligned with the future we are building together with our employees and you. As you can see, we have preserved our core identity while evolving in a moment that calls for change. On slide four, we reinforce our ongoing focus on efficiency across all areas of the business. This naturally includes financial efficiency. That said, we highlight the key aspects of the company's 21st debenture issuance, which was settled in March. The transaction totaled BRL 800 million and aimed to strengthening our cash position and support working capital needs while maintaining discipline in capital structure management.
It is important to point out that we will have significant expenses in May to amortize the first series of the sixth debenture issuance of the company. This issuance was structured in two tranches of BRL 400 million each, both indexed to CDI with competitive spreads, extended maturities of 7 and 10 years, semiannual interest payments, and among amortization starting in year 6 and 10, respectively. We have Bradesco as the sole bookrunner, delivering an efficient execution fully aligned with our financial strategy. In terms of pricings, we achieved the lowest spread among comparable recent issuances, once again reinforcing market confidence in the company's credit quality and our ability to access funding efficiently.
We decided to bring this transaction forward by one month to ensure the most efficient execution possible, and it proved to be a very good decision given the deterioration in the credit markets, wider spreads and the private credit market conditions. Moving on, slide five, we highlight the key achievements of the quarter. Starting with Q1, we made solid progress across the financial, operational, and institutional fronts. On the financial side, as mentioned on the previous slide, we have successfully completed our 21st debenture issuance, strengthening our capital structure and expanding our debt maturity profile in line with our financial efficiency strategy and disciplined liability management.
On the operational front, we advanced with the partial energization of the Tangará project in early March, adding about BRL 35.1 million in RAP, equivalent to about 33% of the project's total RAP related to the Santa Luzia III substation and the Açailândia-Miranda II transmission line sectioning. It's worth noting that Tangará is a highly relevant project for the company with an ANEEL-referenced investment of about BRL 1.1 billion, annual RAP of about BRL 108 million in this cycle, and a regulatory deadline through March 2028. Still in early March, we delivered the ATE III reinforcement, adding about BRL 6.7 million in RAP to the company. Another important highlight in the quarter was our selective participation in ANEEL transmission auction number 1 of 2026 held at the end of March.
Once again, we maintain strict capital allocation discipline. Although we did not win the lot we were closely monitoring, our participation was competitive and fully aligned with our operator profile, as well as with our return and risk criteria in line with our business needs. On the ESG and transparency front, we published our 2025 sustainability report alongside our Q4 2025 results release, once again bringing this disclosure forward. This initiative reinforces our commitment to transparency, predictability, and high-quality communication with investors and stakeholders, while also highlighting the consistent evolution of our ESG agenda. We also maintain an active presence in strategic events throughout the period, strengthening the company's institutional positioning. These included the 7th ANEFAC Women in Leadership Meeting, the 2nd Women in Energy hosted by CIGRÉ-Brasil, and participation in the podcast Temporada de Balanços that is hosted by Estadão's E-Investidor platform.
Looking ahead to the beginning of the Q2, we continued to make progress in the execution of our Greenfield projects with additional relevant milestones. We energized a new stage of Tangará, representing about 21% of the project, adding about BRL 23 million in RAP, and then bringing to completion about 54% of the project we delivered through roughly 23 months ahead of the regulatory deadline. We also advanced with the partial energization of Saíra, a strategic project in the southern region of Brazil with interconnection with Argentina. In this phase, we completed the retrofit of the Garabi 1 converter, adding about BRL 23 million in RAP, accounting for about 12% of the project's total RAP. This early stage of project energization reinforced our execution capabilities, operational discipline, and commitment to value creation.
Lastly, we highlight the annual shareholders meeting that was held last week and which approved the company's results for the year, in addition to dividend distribution, in addition to other items. Moving on to slide six. We present the main highlights for the period. First, we highlight the evolution of EBITDA margins, reflecting the growth in regulatory net revenue, driven by several project deliveries and energizations that positively impacted transmission revenue, as well as improvements in the variable portion in line with higher operational efficiency. As a result, regulatory EBITDA was up 10.3% in Q1, while EBITDA margin was up 0.5 percentage points on a consolidated basis and 0.6 percentage points on a proportional basis, reaching levels close to 85% and 88% respectively. This performance, once again, reinforces the company's strong ability to convert revenue into operating results.
It also reflects how we are increasing the margin. It also reflects well-controlled PMSO expenses, which grows only slightly above inflation, even in a quarter marked by some specific cost pressures, particularly in personal expenses. Another important highlight was the stronger operating cash generation, up 24% year-over-year, which continues to support the execution of our strategy while reserving financial balance throughout the investment cycle. In terms of investments, we deployed about BRL 312 million in the quarter, up 16% versus Q1 2025, reflecting progress across our project portfolio. On the financial side, as mentioned earlier, we successfully completed our 21st debenture issuance with a very efficient execution despite a still challenging credit environment.
In terms of results, our regulatory net income totaled BRL 192.6 million in the quarter, maintaining a growth trajectory supported by operational expansion, efficiency gains, and disciplined financial management. We also highlight the announcement of dividend distribution equivalent to 100% of regulatory net income, reinforcing our commitment to shareholder value creation. We will move to the next slide to further detail each of these points. On slide seven, we see our regulatory net income, which was up 10% in Q1 2026, totaling BRL 655.5 million. Our RAP increased significantly by about BRL 56 million, driven by tariff adjustments linked to IPCA and IGPM, as well as the contribution from fifth RTP and reinforcements from Novatrans, TSN and São Pedro, which entered into operation at the end of 2025.
In Q 1, 2026, we recorded a partial energization of Tangará at eight AT-. We also saw immense improvement in variable portion. I will detail that. On slide 8, we present the company's operational performance. In the quarter, our availability rate reached 99.995%, above the average of the past 10 years, reinforcing the consistency of our operations and optimization of our asset performance. The variable portion over our RAP also showed a significant improvement compared to the prior year. This performance, on one hand, reflects a more pressured comparison base in Q 1, 2025, when we had higher impact events, particularly Saíra, due to outages related to the retrofit implementation, as well as ATE III, as previously discussed.
In practical terms, this means increasingly targeted actions, reducing the need for outages, mitigating operational risks, and allocating maintenance CapEx more efficiently, with a focus on previously identified critical assets. These initiatives reinforce our ongoing operational efficiency with direct impacts on risk and cost reduction, as well as great effectiveness in asset management and operations. On slide nine, we see the evolution of regulatory EBITDA, which continues to show consistent growth. As you can see, regulatory EBITDA totaled BRL 562.1 million in Q1 2026, up 10.3% quarter-over-quarter. This performance was mainly driven by three factors. First, RAP growth, with an increase of nearly BRL 56 million. Second, the improvement in the variable portion, reflecting the operational performance.
The third, OpEx was up 5.8%, slightly above inflation for the period, mainly explained by higher personal costs, particularly due to profit-sharing payments in Q1 2026, and the effects of the annual collective bargaining agreement. Even with this temporary cost pressure, we were able to capture margin expansion. EBITDA margin reached 85.8% in the quarter, improving versus Q1 2025. On a proportional basis, including affiliates, this margin approaches a very strong level of nearly 88%. Closing the explanations of the regulatory result, presenting the 1st trimester results. Overall, this result once again reinforces the company is continually growing. On slide 10, we see that the regulatory net income totaled BRL 192.6 million in Q1 2026, up 2.3% versus Q1 2025.
In addition to the effects already discussed, it's worth highlighting the main impacts across the remaining lines. Equity income dropped in the quarter, mainly reflecting the impact of initial demands for issuances of Aimorés and Paraguaçu, in addition to issuances at TDE, which affect the results of our affiliates. We also recorded higher depreciation and amortization expenses, primarily driven by projects entered into operation and asset unitization process. Net financial expenses were up by BRL 35.9 million year-over-year, reflecting more efficient cash management and lower monetary variation in the period, even in a still challenging macroeconomic environment with higher net debt.
Income and social contribution expenses showed a negative variation in the quarter, mainly due to one-off adjustments that had benefited Q1 2024, as well as the tax regime change at São Pedro due to the actual profit method. Despite some pressures affecting the comparison, we delivered regulatory earnings very impressive. Moving on to slide 11, we present IFRS net income. It's important to note that this is an accounting measure and therefore does not directly reflect cash generation. It is based on the concession contract asset in accordance with CPC 47 accounting standards. Regulatory net income, on the other hand, is more closely aligned with cash generation and as we mentioned earlier, showed solid growth in the quarter and quarter-over-quarter and year-over-year. IFRS net income was down 3.2%, totaling BRL 353.6 million.
Some of the effects discussed in the regulatory results, such as the changes in variable portion and financial expenses, also impacted IFRS net income. The main drivers were a BRL 140 million drop in inflation adjustment revenue from the concession assets, mainly due to the contraction of IGPM, which recorded -0.33% in Q1 2026 versus 2.29% in Q1 2025. It's worth noting that this index is applying with a 1-month lag. A BRL 60 million drop in equity income impacted by the contraction of IGPM, which also negatively affected inflation adjustment revenue of affiliates, as well as interest expenses from finances at Aimorés, Paraguaçu and TDE.
On the positive side, our infrastructure implementation margin was up BRL 123 million, mainly driven by higher investments in Ananaí, Tangará and the phase 2 of Saíra, in line with the progress that will be detailed later, as well as reinforcements at ATE and São Pedro. We had higher net financial expenses of about BRL 36 million, also explaining regulatory results. On slide 12, we present the progress of our projects under construction. As mentioned earlier, we delivered milestones this year for the Tangará and Saíra projects, as well as the ATE III reinforcement. As shown on the right side, our major Greenfield projects are approaching final delivery, with some already partially operational. Saíra, for example, has reached about 86% of total RAP following the delivery of Garabi 1 converter in April.
Tangará in Maranhão has more than half of its total RAP already enabled with the latest delivery. Ananaí, our largest standalone Greenfield project currently under construction, continues to progress well. Juruá, an important substation project with line section in the state of São Paulo, is also advancing in line with the schedule. This progress is naturally reflected in the CapEx deployed during the period, with a relevant portion of this year's planned CapEx already executed. It's worth recalling that we updated our expected CapEx curve for the upcoming years to incorporate recent authorizations related to reinforcements. As a reminder, this CapEx curve reflects our current best estimate for contracted projects and does not include new projects, and may therefore be subject to future revisions. On the reinforcement front, we added ATE III to the growing list of delivered projects. 5 reinforcements recently in 4 concessions.
We also highlighted those currently under execution, including São Pedro's ATE and TDEs through EATE and NTE, as well as the reinforcement and improvements authorized under the POTEE program at the end of 2025, totaling about BRL 542 million in CapEx to be deployed over the next three years. On slide 13, we present the company's current indebtedness profile. The chart on the left shows evolution of net debt and our leverage level measured by net debt to regulatory EBITDA on a proportional consolidation basis. At the end of Q1 2026, our total net debt was BRL 12.8 billion, considering all our participation or our shareholdings. With leverage at 4.2 times, slightly above the previous quarter, in line with our expectations, particularly due to the progress of projects under construction and the planned investment schedule.
The average real cost of debt stood at 5.75%, mainly reflecting higher CDI levels during the period. The average maturity closed the quarter at 5.4 years, higher than a year ago, reflecting our liability extension strategy, supported primarily by the 20th and 21st debenture issuances, with tenors of 15 and 7-10 years respectively. In terms of debt profile, we maintain a structure well aligned with the characteristics of the business, with 50% of debt indexed to IPCA, 41% to CDI, and 2% to IGPM. Lastly, it is worth highlighting that the company's corporate credit rating on national scale, assigned by Moody's and Fitch, remains at the highest level, AAA. Moving on to slide 14 before we conclude the presentation. Yesterday, we announced the distribution date on the quarter's regulatory results.
The board of directors approved the distribution of BRL 192.6 million in Interest on Equity with a record date of May eleventh. This corresponds to BRL 0.66 per unit. Including other dividends declared and paid in 2025, total distributions to date amount to BRL 2.40 per unit or BRL 829 million. It is worth noting that BRL 313 million was approved last week at the shareholders meeting, with payment scheduled for the end of May, in three weeks. We conclude our presentation. We will now open the floor for the Q&A session. Thank you, everyone.
Good morning, everyone. Thank you for joining our Q1 2026 earnings call. I first would like to present everyone who's here. We have Rinaldo Pecchio, our CEO, Catia Pereira, our Chief of IR.
We have Luis Alessandro Alves, our Technical Officer, Juliana Castelli, our IR coordinator. I'll turn over to Juliana to start the questions.
Hello, everyone. We have a question here from an individual investor, João Pedro. We'll ask Rinaldo Pecchio this question. He asks, "The company has participated of one lot in the last auction in market, was not successful. What is your take on the result of the auction and what are your strategy?"
Thank you, Juliana. Good question. An auction is a moment when the company submits to a bidding process based on the assessment it makes and the offer it puts forward. When we bid, we bid according to our financial discipline strategy. It has to be according to what we have planned. Yes, we have participated. We have bid it, but we did not win.
When that happens, we end up discussing what went well or not. Maybe what our competitors saw and we did not. It may be related to cost of capital, opportunity, looking at assets and different timelines. There are different aspects to be considered. On our end, the study that was assessed was a really good study. We do believe that our bidding was at the limit to create value for our shareholders. If we did not win, we are of course, trying to learn to see what others did to win. In this case, I can say that our bidding proposal was really good considering the technology that had to be implemented, the deadline. We've considered each and every aspect, and this is always going to be the way that TAESA's going to work in these auctions.
We will study, we'll assess the entire situations by always considering financial discipline and return to shareholders. It is frustrating not to have won, on the other end, it wasn't worth it for us once we had established a threshold. For the other auctions, we'll do what we've done. Having an analysis, we'll participate other auctions, winning and losing has to do also with, you know, other players' strategies.
Thank you, Pecchio. I have a question here from Reinaldo Veríssimo, an individual investor. He says that considering the possibility of a larger period with higher Selic, wouldn't it be better to reduce dividend distribution to instead of reducing leverage level?
Thank you for the question. Well, just explain what we've been doing according to our planning. We had already a higher Selic rate.
Of course, that with the market situation, it will continue a bit higher than expected. We plan ourselves, we have our budget, and we found that the foundation is our financial discipline. What we did in 2025, and we continue doing in 2026, is that we have a contracted deleveraging. We saw an increase in the leverage levels due to the investment cycle. The cycle is coming to an end. Most of the deliveries of the largest projects are going to be completed here in the first half of the year. The leverage levels should be below 4. The plan we have outlined and what we have been doing in terms of dividend distribution is aligned with our financial capacity, with our financial strength. In addition, we increased by 24% our cash generation.
Yes, we are gaining efficiency, but we are also with a more positive cash flow. We are continuously monitoring the market to keep a close eye on the levels of return based on the Selic interest rate. It is according to what we had planned.
Thank you, Catia. We do have a few questions regarding operational performance and improvement in our variable portion. I will ask Luis, our technical chief implementation officer. Luis, would you mention if this is a long-term effect and what is attributed to that?
This is a good question. First of all, we need to understand the dimensions we are discussing. TAESA is present in 18 states, 15,000 kilometers of line, plus many substations. We have logistics and infrastructure to really distribute energy according to the variable portion we have today.
To sum up, we have six regional officers, 10 coordination teams, we have different implementation teams that allow our logistics to be strategically located for a better energy distribution and transmission. We also revise all our maintenance procedures, focusing on the predictive and corrective maintenance and monitoring. That said, we also have an emergency plan that supports our operation so that we are ready to face any and all situations for us to continue with availability rates as high as it is possible at the variable portion also. We use technology focused on predictive and preventive maintenance, logistics that is ready for any and all types of events.
We always say that we are located on across Brazil, we may suffer with, you know, weather conditions, and we need to be fully prepared from a technical standpoint to be ready to serve the community from a logistical standpoint. The goal is to keep the best availability indexes and the lowest variable portion index and be ready to really support our operations to reduce potential impacts whenever we are faced with adverse events.
Excellent, Luis. To add to that, while we're at it, Dimar Carlos. Does TAESA intend to invest in solar and wind power? What are the plans of TAESA for the future?
Well, thank you so much for this question. I think it's really important to understand the segment line of business.
When we say that TAESA is a transmitter, when we talk about transmission, our main responsibility is to maintain the availability of the asset. We do not control the energy that is transported by our assets. When we talk about solar power, this is generation, in the generation segment. We are a transmission company in the transmission segment. We don't intend, according to our strategic planning, to engage in the energy market. Our goal is to have specialized technical teams and operational teams so that we can increasingly offer the best support to our lines and substations. No, we don't intend to engage into the solar and wind power. Nevertheless, we are always focused on innovation. Innovation is a key pillar of the company. This is a driving force of our operations. We have used over the last years Innovation as a pillar to continuously improve our indicators.
For example, use of drones, monitoring and having cameras on the monitoring and with automatic diagnosis, in addition to other innovations that support our operations and help with preventive and predictive maintenance, so that we can keep our availability indexes and variable portions according to our plan. Yes, innovation is a core pillar that will continue to support our operation and the company's strategy overall.
Thank you, Luis. We have a few questions from Ricardo Bello, sell side of Safra. He has two questions. The first I'll ask Joel. He asks, "What is your take on the discussions on the regulation of the battery market?"
Okay. Good morning, everyone. With regard to batteries, this is a technology that will probably be implemented. We do have some systemic regulations in Brazil. TAESA is keeping a close eye on the evolution involving the use of this technology.
Also from a regulation standpoint, we do understand that yes, we've seen some progress. There are still some discussions in place. There is no definition yet. There are issues to be addressed, but we are keeping a close eye on these discussions. From a technology standpoint, we are preparing to implement the best solutions available in the market that could benefit the system and TAESA as a result.
Thank you, Joel. Ricardo also asked, and I will ask Catia that, about taxes. Should we expect a more normalized level for this year and so on, even with dividend distribution? What we expect when we look to the results of the Q1, we expect a more effective tax level.
With some variation when we think about Interest on Equity, when we should have of the second half of the year, much more related to the actual rate, much more than what we were seeing in 2025. I think the next question here is related to the regulatory regulation agenda. I'll try to sum up to see if I can summarize that. First of all, we have some concessions that are expiring and how are we considering that in terms of results and the regulatory risks of the transmission agenda.
Thank you for the question. With regards to regulatory risk, there is something that is quite important to be considered. There is an evolution that is regarding indemnification in the end of the concession. There is a discussion regarding the regulatory roadmap.
TAESA, together with other companies and other players, has been discussing with the regulatory body to understand concession indemnification. It has to be preserved and kept within the perspective of when the investment was made. For example, if we look into what happened over the last quarters, what we can expect is that this is a topic in the regulatory agenda. We have tried to work together with other players and body authorities, and I think that now we should see some evolution due to the deadline we have in place. If we have concessions expiring, we need to have concession indemnification or any kind of compensation or a renovation of the concession. We are actively engaged in these discussions, and whenever we can, we are going to announce to the market where we stand. There is nothing official.
There is no final definition of how things are going to play out. Yes, we are actively engaged in the discussions and evaluating the possible scenarios, and we should see some news regarding that over the next quarters. With regards to the company, we've been gearing efforts to continue growing. If we look into the investments made, we have added over BRL 1 billion in revenue. We have geared efforts to increase revenues and produce great results. We will continue paying attention to any and all opportunities that could benefit the company. Opportunities in auctions or in M&A transactions to help the company continue growing according to really what we've done over the last years. Again, profitability is always going to be key.
We can say that we want to continue growing, but this growth has to really be in line with our profitability background and our profitability record. We are a company that is well known by its efficient project management and also by our financial discipline that allows us to continue distributing dividends like we have.
Thank you, Pecchio. We have Prior Regio that is an individual investor. What about the use of AI? Has the company implemented AI tools? Can you comment, Cátia Pereira?
Yes. Well, AI is really a trending topic. There is so much information on the market. Luis, I think he talked about that. When we talk about efficiency and the territory we cover, we need AI. AI is embedded in the sensoring systems we have and the prevention and data analysis that we have.
Last year, we launched tons of ventures posing some challenges to the market and talking to our operational and technical fronts, we see great opportunities. We want to know what startup can accelerate. We've been working together with them, but it's not limited to the technical or extension approach, but fronts. How can we use AI to be more competitive in that, in auctions and also to look into how we can improve our operations. We had our pitch day, we want agents to help us on our everyday operations. Today we see AI in technical areas, extension areas, support teams and back office teams. Again, there is still a lot to be done, especially when we talk about data governance and how we can have insights based on this data collection.
When we look into the sensoring data and how much information we have, it's really interesting to see how many insights can be produced, not only with regards to preventive maintenance, but also with regards to actions that will give us the edge.
Thank you, Catia. I think we have addressed all the questions here. We received many questions. Thank you so much for submitting your questions. We had a great audience. Thank you so much for investors and analysts. We don't have any more questions, I'll turn over to Pecchio for his final remarks.
Thank you, Cristiano. It's always good to have an opportunity to be talking to the market, to be receiving the questions you may have. For you to know a bit more about what the company is doing, about what the different teams are doing.
I think the company has been quite consistent, has been producing positive results. I'd like to thank each and all of employees. We're here representing over 900 employees that work with us. We have third parties that are also contractors in our project. We are very positive at the end of this quarter. We have an important regulatory agenda ahead that is quite important. We have strategic planning also focused on gaining efficiency, like you can see on our results, and also introducing innovation on our operations. I always like to say that I'm optimistic regarding what's to come when we look into the future. I think that we will always be transparent in sharing the results with you from the company's standpoint. We have also our IR channels that are at your disposal.
If you have any other questions, you can just reach out to our team. Thank you so much. We hope to see you soon and share great news next quarter.