Highlights:

• In the quarter, the final stretch of the Gralha Azul Transmission System was energized, and the implementation and energization of the Novo Estado Transmission System were concluded, both projects reaching full operational levels with 100% RAP.
• On March 23, the first generator unit of the Santo Agostinho Wind Complex in the state of Rio Grande do Norte began commercial operations. And on April 19 and 21, the second and third wind turbines at Santo Agostino entered into commercial operations,
• The Annual General Meeting of April 26 approved the distribution of complementary dividends for the fiscal year 2022 in the amount of R$ 1.45 billion, equivalent to 100% of the adjusted net income for 2022.

ENGIE Brasil Energia (EGIE3) reported a 1Q23 net profit of R$ 882 million, 36.7% (R$ 237 million) more than posted for 1Q22.  Ebitda in 1Q23 was R$ 2.1 billion, an increase of 9.1% (R$ 173 million) compared with the same period in 2022, while Ebitda margin was 70.9%, a year-on-year increase of 9.1 p.p.

The average price of energy sales agreements, net of taxes on revenues and trading operations, was R$ 229.4/MWh, 3.1% higher than recorded in 1Q22. The elevation is the result of monetary restatement of existing agreements as well as the acquisition of the Paracatu and Floresta photovoltaic plants, the latter assets with contracted energy at higher prices than the average for the remainder of the portfolio. The effect was offset by the impact of a lower Differences Settlement Price on short-term transactions. The quantity of energy sold in 1Q23, excluding trading operations, was 9,380 GWh (4,343 average MW), a volume 1.0% up on commercialization business in 1Q22.

In the quarter, the net result from short-term transactions — especially those transacted across the CCEE (Electric Energy Trade Board) — was positive at R$ 81 million. The variation of R$ 37 million in relation to the preceding year was largely the consequence of the reduction in free energy due to the strategy of seasonal allocations, attenuated by the positive variation in the PLD; by the positive impact of the MRE Adjustment Factor (GSF); and surplus energy exports, that is, energy not used to supply the National Interconnected System (SIN), and which would be otherwise wasted, were directed to a new commercial transaction with neighboring countries.

With approximately 65% of total revenues from energy linked to business in the regulated environment (ACR) and 35% to the free market (ACL), the Company maintained a conservative contracting strategy with diversification and average term of about 16 years in ACR and 4 years in the ACL.

“Our management of the portfolio, which has a significant and diversified asset base, ensured a high level of contracting, this feeding through to stability and predictability of results in periods of greater volatility. We also continue alert to changes in the regulatory environment which may open up significant opportunities for the electric energy sector, such as the new possibility that has arisen for exporting electric energy from the hydropower plants and strengthening energy integration in South America”, comments Eduardo Sattamini, Chief Executive and Investor Relation Officer of ENGIE Brasil Energia.

Transmission segment

In the quarter, R$ 69 million of investments were concentrated on the Novo Estado Transmissora de Energia project with 3,634 transmission line towers installed along a length of 1,800 kilometers between the states of Tocantins and Pará, work on which was concluded in February; and R$ 2 million for finalizing work on the Gralha Azul Transmission System with a further 900 kilometers of transmission line located in the state of Paraná. Both projects have been completed ahead of the deadline established by the National Electric Energy Agency (Aneel), and both now operating at high uptime levels (99.99%).

“The conclusion of these systems consolidates our position of asset diversification, establishing us as a platform for investments in infrastructure and energy in Brazil. Additionally, such investments are an indication of the commitment to our purpose of acting in order to accelerate the energy transition in a fair and accessible manner, permitting the offtake of clean energy safely and efficiently. We are now operating lines which in addition to transmitting energy, bring with them further stimulus to the development of important regions in Brazil”, Sattamini points out.

Clean Energy

The period was characterized by the beginning of commercial operations of the first generator unit at the Santo Agostinho Wind Complex under construction in the municipalities of Lajes and Pedro Avelino (RN). By May 4, eight wind generators had been authorized to operate on a test basis and three for commercial operations. During the quarter, R$ 254 million was invested in the project. The overall progress of the project is 52.1% completed while BoP (Balance of Plant, that is the entire scope of the project excluding the wind turbines) progress had reached 100%.

In generation, the Serra do Assuruá Wind Complex in Gentio do Ouro (BA), received investments worth R$ 48 million, and the Assú Sol Photovoltaic Plant in Assú (RN), R$ 34 million. The three projects currently under construction represent for ENGIE Brasil Energia more than 2 GW of installed capacity to come on stream over the next few years, the Company’s generator park then to surpass the 10 GW mark in clean energy.

A further R$ 2 million were invested in Gavião Real Transmissora de Energia and R$ 45 million to generator park maintenance and revitalization and R$ 11 million to the modernization of the Salto Osório Hydropower Plant, the project for which was finalized in February.

Corporate Governance

The risk classification agency, Fitch Ratings reaffirmed the rating of the foreign currency denominated Long Term IDRs (Issuer Default Ratings) as ‘BB’ (one notch above sovereign rating) and its Long-Term National Scale Rating at ‘AAA (bra)’ for the Company and its unsecured senior debenture issues. All ratings have been revised with stable outlook.

“We always deliver consistent results with due transparency which has given us the benefit of an AAA rating for 11 consecutive years, driving healthy and sustainable growth on the back of the financial perspectives”, Sattamini commemorates.

“Control of the debt, active management of debt costs and assertive investment decisions ensure a low Net Debt/Ebitda ratio at 2.1x. This competitive cost is also guaranteed by the quality of the credit we have achieved as a result of the recognition of our financial solidity based on a conservative and disciplined profile”, Sattamini adds.

On March 31, 2023, total consolidated gross debt, largely in the form of loans, financing, debentures and redeemable preferred shares, net of the effects of hedging operations, totaled R$ 18.4 billion, with an average maturity of 7.2 years. Total net debt is R$ 15.2 billion.

 Positive share performance

ENGIE Brasil Energia shares recorded an appreciation of 6.1% in 1Q23, against a depreciation of 4.9% and 7.2% in the Electric Energy Stock Index (IEEX) and the Ibovespa, respectively. Average daily volume was R$ 73.1 million in 1Q23, 38.3% more than reported in 1Q22, when trading volumes averaged R$ 55,0 million.

On the last business day of March 2023, the Company’s shares closed at R$ 40.17/share, equivalent to a market cap of R$ 32.7 billion.