Renova Energia S.A. (RNEW3) Earnings Call Transcript

[Foreign Language] second quarter of 2024. Also present with us, we have Vitor Hugo da Silva, our CFO and RI; Ricardo [ Martinez ], RI Manager. Before starting, we would like to inform that this event is being recorded and will be made available on the RI site of the company, just like the material for promotion. We will start with the presentation, and then we will have a Q&A session. We would like to remind that the information contained in this presentation, any statements that may be made during the video call that is regarding Renova's business prospects, projections and operational and financial targets are based on the beliefs and assumptions of the company's management, as well as on information currently available. Forward-looking statements are not guarantees of performance. They involve risks and uncertainties that may not occur. Investors must be aware that general economic conditions, market conditions and other operating factors may affect Renova's future performance and lead to results that differ materially from those expressed in such forward-looking statements. Now I would like to hand all to Vitor for his initial considerations. And at the end, we will have the Q&A session. Vitor?

Good morning to each one of you. It's a pleasure to be here this morning with all of you. Before starting our presentation, I would like to mention the communication to the market done on July 17. According to B3 negotiations, the shares will have the price below BRL 1. When the price is before that, in 3 trading sessions, we have to reframe the program, which was the case of Renova. On 17 July 2024, we received a mail by B3 informing that as of June 3, 2024, the shares are before BRL 1. And so we need -- the deadline for reframing is until January 20, 2025. So the company believes that all the efforts that have been done in the judicial recovery will be enough to reframe the share over BRL 1. In case it doesn't happen, the company will ask the regrouping of the shares. Now this slide about the Sertão III Phase A contract is one of the 10 biggest in Latin America. With over BRL 2.5 billion, it's the main asset of the company and started being commercialized in December '22. We started in February '22 and the last part began -- was concluded in December 2022. It has 26 parks and a capacity of 432 megahertz. It has solar complex, which is near our Alto Sertão park. We have news related to this project. We managed some signatures from the distributor to build a transmission line. We bought the necessary things. And the construction, we hired a construction company. We believe that this will be ready by December. The initial -- according to the distributor, we are finishing -- we are beginning the construction of the transmission line, which is needed for the park to become operational. Now I will be speaking about the highlights we had in the quarter. And then I will give you more details throughout the presentation. So in the production, in the operation, the production of energy was 267 gigawatts hour, with an increase of 107 gigawatt hours or 67% compared to the previous quarter. Compared to the same period of 2023, we had a reduction of 13 gigawatts or 48%. The net revenue was BRL 56 million compared to the same period last year, which was BRL 53.6 million (sic) [ BRL 56.9 million ]. The result of the energy, the operational margin was BRL 48.7 million versus the BRL 50.5 million of last year. EBITDA adjusted of the company in this quarter is EUR 21.9 million versus BRL 17 million of the second quarter of 2023. The net profit in the quarter was BRL 13.8 million. And in the last quarter, we had a loss of BRL 42.7 million. The cash balance was BRL 78.2 million. Other events, the communication to the market, as I mentioned in the first slide, which was communicated by B3 about the Penny stock, which is the shares below BRL 1. Concerning the Judicial Recovery Plan we continue in the dealings to recover the judicial -- with the creditors Class II. And the time line of payment, about the payment to the creditors, they are done according to the plan, Judicial Recovery Plan. Additionally, in February '24, we did the payments to the creditors level 3 of BRL 10 million. Now speaking about the context of energy market in Brazil, as presented in the left graph, the consumption of energy in Brazil increased 7%. It represents 9.3 megawatts of average of energy, compared to the same period of 2023. The increase -- this increase is a reflection of the heat in great part of the activities. Highlights to the industry with an increase of 4% concerning the last quarter, quarter of 2023. Now the right graph, the PLD average was BRL 62.8, an increase of 2.9% based on the regulatory floor, which was BRL 61.07 established by Aneel. Now speaking about the production of energy, starting about the wind of the company. Moving to the graph on the left, some production energy data. In the first graph on the left, the frequency of wind, the curve of potency of capacity the machines generate, as of [ 4 megahertz ] per second and increases to 5.4 -- compared to 2023 or 2024, 2023 in gray and '24 in blue, it's possible to verify that the frequency of wind kept in line. Looking at the second quarter of 2024, it's possible to observe that they're practically in line with the same period of last year, a little below compared to the certification. The comparative of loss concerning net energy, which is the restriction, electric [indiscernible] is the curtailment. We can -- it can visualize the loss we had in the generation for curtailment as presented. In [ June '24 ], the generation was 267 gigawatts, representing a drop of 17% or 54 gigawatt hour comparing to the same period of last year. This drop can be attributed especially to the curtailment, which presented 21% or 58.7 generation expected. When we look at the graph of the of the left side, the important things was 14.4 gigawatt hour in 2024 was 58.5. There was an increase and substantial increase curtailment since August last year, and the ONS changed the operational restriction of the system. Looking at the results. Starting with the net revenue of the group. When we compare the second quarter of '23 to the second quarter of '24, we had an increase of 4% in the revenue of the group, BRL 53.9 million to BRL 56 million. When we look at the semester, in 2023, there was a revenue of BRL 119 million. And in 2024, we had a revenue of BRL 98.6 million. You have to remember that the first quarter of the year, we had a drop of wind. We had a little wind that impacted revenue in the operating company. When you look at EBITDA, the EBITDA, we had an increase of 211% from BRL 23.9 million to BRL 74.5 million in 2024. The biggest impact is a nonrecurring tax which is an earnout of [ Alto Sertão ]. We sold out Alto Sertão in 2017, and now we receive the earnouts, concerning the additional earn that we received in this period. And EBITDA accumulated, there is an increase of 50% from BRL 44.8 million to BRL 67 million. When we go to the adjusted EBITDA, taking out the effect of earnout, which is the last graph on the right, we can see in the second semester of 28.5% from BRL 17 million to BRL 22 million. And the accumulated of semester, we had a reduction of 30% when we compare it to 2023. 2023, we had an EBITDA of BRL 38 million, and now we have an EBITDA of BRL 26.6 million. Looking at the net losses and profit. In 2022, we had a loss of BRL 42.7 million. And now on the second quarter, we had BRL 13.8 million. This is a reflection of EBITDA, especially the EBITDA in the profit. When we look at the net result profit, loss from -- in 2024, we had a loss of BRL 48.1 million compared to BRL 87.2 million in 2023. Now adjusted loss, did you know that we had a loss -- adjusted loss in the second of '23 of BRL 49.6 million. And for second quarter of '24, a loss of BRL 51.7 million, a worsening of BRL 2.2 million. In the semester in 2023, we had a loss of BRL 94 million. In 2024, the loss was BRL 113 million. It was worsening practically of BRL 20 million compared to the first half of '23. The cash balance, we have a significant increase in the final balance of the -- in the 31/12/2023, we had BRL 17.6 million, and now we are closing with BRL 60.6 million. BRL 43 million increase and PRJ payment of BRL 10 million, and an investment in our park of BRL 8.4 million, and updates of provisions of BRL 36 million, which are values that this year have not discounted for the company. So these are redemption payments that we will discount in the future. With that, we end up BRL 78 million in cash flow. Now judicial recovery. In February, as I mentioned before, we paid BRL 10.3 million to the Class III creditors. And we are concluding the new management to the recovery plan with creditors of Class II of [ revenue guarantee ] to reflect the agreements between the company and the creditors for the new expansion of deadline and payment conditions without any impact of the creditors of the company. Just to inform you, we were informed at the beginning of this month that Bradesco sold its debt to the -- to our funds, represented by [indiscernible], which for the company does not make any change -- does not make changes besides the holder of the title. So we changed. Bradesco sold its debt to [indiscernible]. But for the company, we continue having with the same amount. There was no reduction or a change in the time line of payment. Now let's start the question and answer session. [ Ricardo ] is going to read the questions.

Thank you, Vitor. Good morning, everyone. [Operator Instructions] The first question [indiscernible], It's about what you just mentioned related to the judicial recovery. What's the stage? And is there any prediction to leave this judicial recovery to solve this?

We are discussing with banks, and we always work with expectation that things to be brief as possible. But it doesn't depend on the company. It depends on the creditors, the judge. So we have no estimate of the deadline for this judicial estimate.

Another question comes from [indiscernible]. He wants to know a little bit about our project, Caetité. Once materials were bought, do you have any estimate to start production?

As I mentioned in the Caetité solar slide, we estimate to start operations by the end of the year. By December it should be in operation. We started the work now and we should finish the line. As soon as it is ready, you start operating. By the end of the year, Caetité solar should be operating.

Another question coming from [ Eduardo ]. He wants to know about our operational efficiency. He wants to know how we are reducing operational costs and our search for productivity.

The company has been making an effort to reduce costs, both with personnel and expenditure of the corporation and the cost of machines. The machines are, in the first year of operation -- normally, we have more expenses in the first year when the problems happen. And once they are fixed, we understand that cost should be lower, should drop for the next years.

Excellent. Another question, last question coming from [ Eduardo ]. He wants to know what is the prediction for the company to start profiting?