Approved the distribution of R$ 767.2 million (R$0.94027879765/share) as interim dividends equivalent to 55% of distributable net income in the first half of 2023.
Financial Highlights:
• The Company’s net operating revenue reached R$ 2,610 million in 2Q23, 12.9% (R$ 386 million) lower than the amount posted for 2Q22.
• The adjusted Ebitda was R$ 1,798 million, a decrease of 5.2% (R$ 99 million) compared with 2Q22. Ebitda adjusted based on transmission assets effects (excluding non-cash effects) was R$1,907 million, an increase of 10.9% compared to the same period of the previous year. Adjusted Ebitda margin was 68.9%, an increase of 5.6 p.p. compared with the second quarter of 2022.
• The net adjusted income in the period was R$ 806 million, 56.8% greater than 2Q22, mainly due to the decrease in financial expenses as a result of the inflation indexes reduction.
• Recognition of R$ 243 million with respect to the right to the extension of the Estreito Hydropower Plant concession by exclusion of liability.
• Approved the investment agreement with the subscription of R$ 1 billion in preferred shares representing 12.34% of the capital stock by Itaú Unibanco in the indirect subsidiary Maracanã Geração de Energia (Serra do Assuruá Wind Complex).
Other Highlights:
• With the conclusion of the disposal of Pampa Sul Thermoelectric Plant on May 31, the last plant in the coal-fired portfolio, the Company became the largest 100% renewable electric energy generator in Brazil.
• The Company made the winning bid for Lot 5, a transmission line approximately 1,000 kilometers long in the states of Bahia, Minas Gerais and Espírito Santo in the recent Aneel Transmission Auction.
• Consolidated the acceleration of the Journey for the Climate with the establishment of targets and clear and measurable commitments encompassing scopes 1, 2 and 3.
ENGIE Brasil Energia (EGIE3) reported an adjusted net income of R$ 806 million in the second quarter of 2023, a year-on-year increase of 56.8%. Net operating revenue was R$ 2.6 billion, 12.9% lower than 2Q22, a reflection of the conclusion of work on the Gralha Azul and Novo Estado transmission systems. Adjusted Ebitda fell 5.2% to R$ 1.8 billion in the period but maintaining an increase in adjusted Ebitda margin of 5.6 percentage points, this indicator posting 68.9%.
The registered reduction in the amount of energy sold was motivated by the availability of a smaller volume destined to free consumers, as well as to distributors, in this case due to the sale of the subsidiary Pampa Sul TPP. In addition, lower revenue was verified from the remuneration on contractual assets together with the effects of the periodic tariff review of transmission projects negatively impacted Ebitda.
The foregoing effects also impacted the adjusted net income in addition to the combination of a reduction in net financial expenses with growth in IR (Income Tax) and CSLL (Social Contribution on Net Income) due to the increase of profit between the periods under review.
“Our financial responsibility, comprising above all the efficient allocation of capital, anticipatory commercial strategy, active management of costs and solid cash generation represent our license to grow. We are following the market movements and conscious that this discipline, combined with successful investment decisions for diversifying assets, are the main guarantee of the Company’s economic sustainability”, said Eduardo Sattamini, ENGIE Brasil Energia’s Chief Executive and Investor Relations Officer.
“We continue committed to the prosperity of the businesses, respect for people and to the environment, systematically maximizing the positive impacts of our activities”, Sattamini adds.
Generator of 100% renewable energy
In 2Q23, with the exit from coal-fired operations, ENGIE Brasil Energia became the largest company generating 100% renewable electricity in Brazil. “This is a reflection of the strategy introduced in 2015. Rigorously planned and executed over the last six years, we have invested more than R$ 20 billion in the energy transition including investments in clean energy and the implementation of transmission lines in the period”, Sattamini added.
The significant reduction in greenhouse gas emissions originating in Scope 1 (operations) and 2 (energy consumption), combined with investments in renewable energy, have been significantly reducing the intensity of CO2 emissions by more than 86% when comparing 2023 to 2021 indicators and, therefore, ENGIE Brasil Energia’s climate strategy has entered a new phase. Now the focus of the Journey for the Climate program has shifted to indirect activities, that is Scope 3, involving procurement of materials, transportation and other services and now accounting for almost the total of the emissions of greenhouse gases registered this year. “This work will demand profound understanding and engagement of the supply chain – and we are concentrated on making this happen in a responsible manner”, Sattamini points out.
In 2Q23, the Board of Directors approved the Company’s targets and commitments, including the engagement of 100% of the main Scope 3 suppliers in order to define science-based targets out to 2030. The Company has also committed to reducing the intensity of greenhouse gas emissions by 30% in 2025 and 56% before the end of 2030 (measured in tCO2e/MWh). In addition, climate adaptation plans are afoot covering 100% of the assets by 2030 and for the regular training twice annually of employees, officers on the executive board and statutory directors.
Expansion in renewable energy
The expansion plan for renewable energy continues to be implemented with three projects in the Northeast Region. “Looking to the future and totaling the investments planned between 2023 and 2025, R$ 14,5 billion are to be expended on our growth strategy, of which R$ 10,5 billion will be allocated to renewable generation”, explains Sattamini.
This total investment in renewable generation includes the Santo Agostinho Wind Complex in the state of Rio Grande do Norte, 73% of the general work on the project having been completed at the end of the second quarter. In all, 12 generator units are in commercial operation and a further 15 authorized to undergo the test trial phase. The project is expected to be fully complete by the fourth quarter of 2023. Once concluded, Santo Agostino will add a further 434 MW to ENGIE Brasil Energia’s installed capacity.
Again, in the state of Rio Grande do Norte, the Company is planning to implement the 750 MW capacity Assú Sol Photovoltaic Plant. With the issuance of the installation licenses in the quarter, work has begun on the project including test trials, exploratory drilling, and preliminary studies.
Finally, work is underway at the site of the Serra do Assuruá in the municipality of Gentio do Ouro in the state of Bahia, consisting of 24 wind farms to be installed in a single phase, representing a capacity of 846 MW. In the case of this project, approval was given to an investment agreement involving subscription by Itaú Unibanco of R$ 1 billion in preferred shares and representing 12.34% of the capital stock.
Transmission segment
ENGIE made the successful bid for Lot 5 of Aneel’s Transmission Auction 01/2023 covering the concession for the implementation and operation of more than a thousand kilometers of transmission line traversing the states of Bahia, Minas Gerais, and Espírito Santo, for meeting the demand for the offtake of energy generated in the Northeast and destined for the Southeast.
“We won our fourth transmission asset in an intensely disputed contest where we were able to show our competitiveness with discipline, maintaining a focus on capacity of delivery, quality, safety and diligence in relation to duration and return on investment”, Sattamini explains.
The transmission lines and substations at Gralha Azul and Novo Estado continue delivering high levels of uptime (99.97%). Meanwhile, the Company is moving forward with work on the implementation of the Gavião Real project, involving the expansion of the Itacaiúnas Substation for meeting the requirements of the energy distribution network in the state of Pará, and to be integrated into the Novo Estado transmission system.
Energy Sales
The average price of energy sales agreements net of revenue taxes and of trading operations was R$ 219.80/MWh in 2Q23, 1.5% higher than in 2Q22. The increased price was driven by the monetary restatement of current agreements and the increase in the minimum Settlement Price of Differences (PLD).
Energy volume sold in 2Q23, excluding trading operations, was 9,289 GWh (4,253 average MW), 4.1% down on sales registered in 2Q22. The reduction reflects the provision of reduced volumes for free consumers and the decrease in sales volume to distributors following the sale of the Pampa Sul subsidiary.
In line with the opening of the Free Energy Market, in 2Q23 the number of free consumers increased by 23.1% compared with the same quarter in 2023. The Company continues to strengthen its penetration of businesses of different sizes, offering from the simplest solutions for migration to the free market with the supply of renewable energy to solutions for decarbonization of clients’ operations.
And in the belief that innovation is a key element in this carbon transition journey, ENGIE Brasil Energia has signed its first investment contract with a startup according to the venture capital model through the Descarbonize structure. This is a digital platform for measuring greenhouse gas emissions, tracking and offsetting of carbon, customized for small and middle-market companies in the voluntary carbon market.
Share performance
ENGIE Brasil Energia’s shares reported growth of 18.6% in the period compared to an appreciation of 21.7% and 15.9% in the Electric Energy Stock Index (IEEX) and the Ibovespa, respectively. The average daily traded volume of EGIE3 was R$ 71.0 million in the quarter, 7.3% more than registered for the same period in the preceding year when traded volume was R$ 66.1 million.
Dividend payout
The Board of Directors approved the distribution of R$ 767.2 million (R$ 0.94027879765/share) in the form of interim dividends, equivalent to 55% of the distributable net income for the first half of 2023. The shares will trade ex-dividend as from August 22, 2023 with payout date established by the Executive Board in due course. The reduction of the payout respects its indicative dividend policy and aims to maintain a robust capital structure, allowing the capture of short-term opportunities, as well as meeting the investment plan and other commitments.
