Q2 2026 Energisa Mato Grosso Distribuidora de Energia SA Earnings Call
Speaker #1: In the morning, everyone. And welcome to Into Jesus, Q2 2026 earnings conference call. We inform you that this video conference is being recorded and will be made available on the company's IR website via the corresponding presentation is also available.
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Speaker #1: Which could affect response times. Especially during the Q&A session. We appreciate your understanding. We would like to emphasize. Information content this presentation and any statements that may be made during the video conference regarding Into Jesus business outlook, projections, and operational and financial targets are based on the beliefs and assumptions of the company's management.
Speaker #1: As well as on information currently available. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties, and assumptions. As they relate to future events and therefore depend on circumstances that may or may not occur.
Speaker #1: Investors should understand that general economic conditions mark conditions and other operating factors may affect Into Jesus' future performance. And lead to results that defer materially from those expressed in such forward-looking statements.
Speaker #1: I would like now to turn the floor over to Mauricio Botelho, CFO of the company. So we can begin our presentation. Mauricio, go ahead.
Speaker #1: Thank you, operator. Good morning, everyone. I'd like to thank you all for joining this results presentation for the Q2 of '26. Joining with me are our CEO, Hikaru Botelho, our vice presidents, executive officers, and the investor relations team.
Speaker #1: On the next slide here, please review the legal disclaimers at the beginning of the presentation. Please check them before making any investment decisions. Next slide, please.
Speaker #1: This quarter, I want to highlight two highly relevant non-recurring events that are positive for Into Jesus' strategy and business conduct. Compared to previous events, prior periods, they deserve special attention for this quarter results.
Speaker #1: First was the judicial settlement reached between Into Jesus Hondoña and the state of Hondoña. Which enabled the regularization of historical liabilities and the settlement of the debt owed by the state sanitation company Caiahe.
Speaker #1: As well as the elimination of contingent tax liabilities. This is a matter that has been pending since the company's privatization in August 2018. At the time, the privatization notice and financial statements included a letter from the state of Hondoña.
Speaker #1: The controlling shareholder of Ceron, now Into Jesus Hondoña, for acceleration accounts between the state of Hondoña, Ceron, and Caiahe. Aimed at ending the legal disputes over the same as tax on consumed fuel oil and the collection of overdue energy bills from Caiahe.
Speaker #1: The legal instruments did not move for almost 8 years and during the spirit of Caiahe remained in the fold on its energy bill obligations.
Speaker #1: While Into Jesus Hondoña was forced to make judicial deposits related to the tax contingency disputes. The agreement now signed and settled ended nearly 20 years off Caiahe's default.
Speaker #1: It also allowed state-owned company to be classified as financially dependent on the state. And since January of this year, it has been current on its monthly energy consumption payments.
Speaker #1: On the liability side, the agreement reduced the contingency balance by 60%. The transaction generated a positive EBITDA impact of $189 million and net income of $94 million.
Speaker #1: As detailed in the earnings release. With the settlement finalized, we expect to withdraw the judicial deposit in the coming months. The difference that was paid on July 30 and the withdrawal deposits exceeds $200 million.
Speaker #1: In summary, we turned a decades-long dispute into a negotiated solution where everyone wins. Predictability wins, legal certainty wins, investment capacity wins, and the society wins with better quality service.
Speaker #1: The second relevant model requiring attention and adjustments to the results relates to the sales of transmission assets announced a few months ago. Under EFAS criteria, once assets sale agreements are signed, the company must reclassify the assets in question as held for sale.
Speaker #1: You may say. And as you may know, under the EFAS methodology, applicable to transmission assets, accounting results are recognized on assets under construction. That is, before operation.
Speaker #1: This raising the accounting and tax base of the assets we saw in this case the impact of $596 million was recognized in the consolidated results.
Speaker #1: This is a purely accounting effect with no cash impact. Restricted to the corporate financial statements and with deposits signed on March 18, capital gains tax effects.
Speaker #1: Summarizing the results after this extraordinary events mentioned, once we exclude these effects, we can see that recurring adjusted EBITDA already including an organized equity income reached $1.99 billion.
Speaker #1: Up 1.4% year over year. And the recurring adjusted net income total $88 million in the quarter down 80% compared to the Q2 '25, mainly reflecting a higher financial expenses amid still challenging environment of elevated interest rates.
Speaker #1: We're going to be talking this ahead. And even in this scenario, we maintained operational growth and continue with financial discipline. Aim at a differentiated results.
Speaker #1: It is a combination of growth, diversification, discipline, that sustains our long-term value creation strategy. Next slide, please. And here we can see the Into Jesus Group's net debt reached $32.5 billion at the end of June and I want to highlight the important reduction in the leverage ratio for our financing covenants, which fell from 3.5% times in the first quarter '26 to 3.1 times.
Speaker #1: This reduction reflects the decisive measures adopted during the period to strengthen the capital structure and preserve the group's financial health. And among the main initiatives, I highlighted capitalization transaction represented 2.3 billion.
Speaker #1: Which concluded in the benefits concluded in June, totaling $1.4 billion. And we see coping out of debt profile and the debt term extending 6.7 years.
Speaker #1: And the average lower to the inflation. And we ended the period of blossoming at $13 billion between cash financial investments and this amounts efficient to cover the maturities over the next three years.
Speaker #1: And regarding financial expenses, we saw an increase compared to the previous year. Mainly explained by higher average debt balance during the period and by non-recurring effects.
Speaker #1: Particularly by the Hondoña agreement. And here moving on, I'm going to be talking about our business verticals here. I'm talking about distribution here, the distribution highlights.
Speaker #1: We end the quarter of with a 4% market growth. With the gains across all our distributors and a highlight for Mato Grosso and Mato Grosso who grew close to 6% of the quarter.
Speaker #1: And the main highlight was the residential class with a growth of 7.4% driven by a higher average consumption and expansion on the customer base.
Speaker #1: This result becomes even more significant when we look at our market profile. The residential segment represents 41% of Into Jesus consumption. From Into Jesus and comparing to Brazil, it's 31%.
Speaker #1: And allowing us for a more intense capture of income and households consumptions growth. And I also highlight here the industrial class. We presented a growth mainly by the food chain currently.
Speaker #1: Approximately 44% of Into Jesus industrial market is linked to the food and agribusiness chain, sectors that continue to show strong momentum and sustain energy demand growth.
Speaker #1: In summary, the greatest share of the residential market and the essential industrial sectors they make energy consumption more here from Into Jesus are more stable.
Speaker #1: Reducing the impact of economic fluctuations and providing a greater predictability of results. And cash generation in the long term. And this slide here. We're going to be talking about the PMSO.
Speaker #1: The total $928 million. Up around about 12% compared to Q2 '25. Mainly reflecting spending our greatest residents. Notably this year in preparation for the owning a phenomenon.
Speaker #1: As well as efforts to comply with the regulatory targets of the new concession contract. Mato Grosso and Mato Grosso Sul were the ones that absorbed the most in here.
Speaker #1: Meanwhile, others showed even reduction in here. With these objectives here, regulatory objectives in here. This showed here. This is really good for the year of '26.
Speaker #1: For the climate phenomenons. The investments allocated to energy distribution grew 12% compared to the year last year. Results of here were directed toward network expansion and modernization, automation, service quality improvement, and combating electrical losses.
Speaker #1: And here we check here growth on the market. Electrification of the company. And frequent and intense climate events. They are fundamental to improve the residency of the company.
Speaker #1: And sustain the numbers checked in here. On the next slide here, I'll talk about how proper capital allocation strengthens service quality. Operational efficiency. From our energy distributors.
Speaker #1: First here, speaking of electrical losses, we closed the quarter at 12.28%. Remaining below the consolidated regulatory limit for the fifth consecutive quarter. And the limit was 13.05%.
Speaker #1: And if you're considering the seasonal variation of certain quarter, we maintained a favorable margin of 0.77 percentual points relative to the regulatory limit. And it's important to highlight that seven of the companies, they were below it.
Speaker #1: And about the adapted here. We closed the year with a 0.56% reduction of 0.86 percentage points compared to the same period. This performance wasn't by non-recurring events.
Speaker #1: And mainly the agreement reached between the Hondoña and Caihege. And as well as at OE Telecom as well. At OE Billings on the situation.
Speaker #1: Excluding these extraordinary effects, the default rate would be 1.37%. Still below the prior year. Demonstrated continuous improvement and this indicator. And even amid a still challenging macroeconomic environment.
Speaker #1: And talk about that in fact. All the groups remaining remained within the regulatory limits. And in some concessions we were already operating at levels representing the best results in their historical series.
Speaker #1: As highlighted in this slide. And talk about the natural gas. It's a little bit important milestone at Into Jesus. A moody potentiality and growth.
Speaker #1: It's the ESGI's third anniversary within the group. When made this investment we saw a unique opportunity to create value in the market. With enormous expansion potential.
Speaker #1: And the results already demonstrate the accuracy of that vision. And just three years ESGI has expanded its customer base by 28%. Reaching 100,000 customers.
Speaker #1: And expanded the distribution network from less than 500 kilometers to 664 kilometers. Making six largest pipe gas distributors in Brazil. More important than the numbers achieved so far, is the potential we still have ahead.
Speaker #1: Speaking to about 94% of the population it's still not connected to the gas network. Highlighted significant room for organic growth and expansion for our related asset base.
Speaker #1: Looking ahead. We have a robust investment plan of the ESGI according to the tariff process. It talked recently. By 2030, ESGI expansion invests approximately $900 million.
Speaker #1: Expanding the network by another 480 kilometer. Connecting 93,000 new customers. And helping avoid around 900,000 tons of CO per year in the state. So we celebrate these three years.
Speaker #1: We're not just celebrating a successful acquisition. We're celebrating the construction of a new roof avenue for Into Jesus based on market expansion, regulatory predictability, and value creation.
Speaker #1: And now moving to the combined performance of our gas distributors. The segment continues to increase its contribution to the group's results. As a strategic growth vertical for Into Jesus.
Speaker #1: Talking about the holding company. Embedded reached 58 million in the quarter. Up 86% year over year. Driven by market expansion. Customer-based growth. And operational efficiency gains.
Speaker #1: And now guys. Results also maintain a positive trajectory. Considering both business. Embedded adjusted for actually home income reaching 96 million up 80% quarter over year.
Speaker #1: Combined gross margin grew 28%. So totally 243 million. We also made progress on import operational and regulatory initiatives. Notably the implementation of OGI's new tariff cycle.
Speaker #1: The expansion of CGI service. And 11% growth in OGI's combined customer base. In the quarter we invested 69 million in expansion natural gas distribution infrastructure.
Speaker #1: Moving into the energy transmission segment. I'd like to highlight one of the quarter's most significant transactions. The signing of the sale of five operational transmission assets to Caihege.
Speaker #1: This was already talked here. This is an important milestone in executing our portfolio. Management and capital allocation strategy. It has a value of 2.3 billion.
Speaker #1: And an equity of 1.5 billion. Like approximately 10 times the bid and 8.3 times wrap. These moves are above the average for the company's stock trading.
Speaker #1: This demonstrates the company's ability to develop, operate, and monetize its assets. Capturing value for our shareholders. They represent about 25% of the total wrap.
Speaker #1: This would be robust. The about like 737 million. The portfolio remains growth. Important growth optionally. Optionality. With projects in Amazonas and Maranhão. Currently under implementation.
Speaker #1: Which will add significant revenue in the coming years. And also highlight the physical progress of Amazonas and Amazonas 2. Above 85%. In conclusion. Reducing execution risks and increasing the predictability entering operation ahead of schedule.
Speaker #1: On the situation. And I'll turn to Into Jesus. After a significant cycle of distributor generation expansion. Into Jesus entering a new phase. Of asset maturation.
Speaker #1: Converting the investments made into revenue growth. EBITDA and value creation and generation. Trading and energy service businesses. The EBITDA accounting everything reached 49 million in the quarter.
Speaker #1: Up 147% over year over year. Year to date. The vertical's EBITDA reached 113 million. An increase of more than 100 million compared to the first half of 25.
Speaker #1: In distributor generation. We reached 476 megawatt peak on the solid capacity with 125 solar plants operation across 9 states. While the customer base grew 26.5% over the past 12 months.
Speaker #1: With a decline in the folks and a stable churn. And the free markets. We traded more than 2,000 average megawatts in the quarter. And reached 1,686 consumer earners units under management.
Speaker #1: Representing 35% growth compared to the second quarter 25. Reinforcing our position in a strategic segment for the group. And finally here. I'd like to highlight the evolution of votes.
Speaker #1: Which continues to advance its strategy. Consolidating itself. As a financial product and service platform. Within the utilities environment. And the quarter here. Talking about runability and cash flow and net altogether.
Speaker #1: And cash generation reached 18 million. Up 62% year over year. And net income reached 19 million. Up 66%. After a cycle of structuring investment.
Speaker #1: Votes now combined growth. With consistent cash generation and return on capital. This is evident in the evolution of profitability indicators. With a HOA of 36%.
Speaker #1: And HOIC of 37% over the past 12 months. Both as positive levels. These results reinforce Into Jesus strategy of developing new growth platforms. Expanding revenue diversification.
Speaker #1: And strengthening the contribution of unregulated businesses. To the group's value creation. That concludes the main highlights of the quarter. And operator, please go ahead for the Q&A.
Speaker #1: Now we're going to be starting the Q&A session. We kindly ask that everyone make all your questions at once. While waiting for the answer of the company.
Speaker #1: And remembering. Make the questions we advise you to send in via the Q&A icon located at the bottom area of your screen. And then by dynamics your names will then be announced.
Speaker #1: So that you can ask your question live. And then this request to enable your microphone will appear on your screen. Please wait while we collect questions.
Speaker #1: And remembering to ask some questions. We advise you to send them via the Q&A. Icon located on the bottom area of your screen. And then by dynamics your names will then be announced.
Speaker #1: So that you can ask your question live. Please wait while we are collecting our first question. And remembering to make some questions. We kindly advise you to send them via the Q&A icon located at the bottom area of your screen.
Speaker #1: And then by dynamics your names will then be announced. So that you can ask your question live. Please wait while we are collecting our first question.
Speaker #1: Our first question. Comes from Lucas Guimarães. From Itaú. We're going to be opening your microphone so that you can ask your question live. Lucas.
Speaker #1: Please go ahead. Hi guys. Good morning. How's everything? Two points I would like to ask here. First about the PMSO of the quarter. Which would be the normal level.
Speaker #1: If we didn't have the maintenance for El Niño. And why did you guys change this via the PMSO not via CAPEX. And the second question is a little bit about leverage.
Speaker #1: I'll talk about how you see the unleveraging. Year ahead. And which will be the effect. On the reduction of the VNR on the renewed concessions.
Speaker #1: Okay Lucas. Just to be clear here. We are checking this on the rainy from. So we check all the things and the weather in here.
Speaker #1: So this increase on the PMSO on the distributors on the second quarter. They reflect. On the strategic areas on the company to anticipate these changes on the regulatory points.
Speaker #1: And this without altering. Our compromise with discipline and the cost and efficiency in here. You probably noticed here. All distributors. Are performing well on the quality indicators.
Speaker #1: And some of them on a specific points of. Of a group of electric points. We have to reach the 80%. And this is for the ending.
Speaker #1: Of the year of 26. So we're still like moving on on this line like line of work. Anticipating some of the actions. As I talked in here on the call.
Speaker #1: Talking about the El Niño and everything. That's a conjunctual area here on this year of 26. Talking about. And obviously this is just reinforced that El Niño.
Speaker #1: It also means an increase of the marketing here and. Production and consumption. So it's going to be showing up ahead. And about VNR that you asked in here.
Speaker #1: It has an interview effected here. Starting on the third quarter. Of 26 in here. So it's talking about the leveraging. On the business here.
Speaker #1: That they're going to be happening here soon. We are expecting that it could happen even like on this month. This quarter we are going to be selling the transmission.
Speaker #1: Concluded. Perfect then. Thank you so much. What do you guys understand that the PMSO should. Keep this maintain this level or are we seeing a level non-recurring month.
Speaker #1: So the phenomenal climatic event that we have in here. It's like working for the full summer. And as I said. We want to have sure that we're going to be like.
Speaker #1: Completing fulfilling all the rules the goals that we have in here. So that's a conjunctual group. That have effects working on the year of 26 not like working only on the quarter.
Speaker #1: Remembering that as your questions we kindly ask that you send it via the Q&A icon. Look at it at the bottom area of your screen and then by dynamics.
Speaker #1: Your names will then be announced. So that you can ask your question live. Please wait while we are collecting our next question. Remembering that as to make some questions please send them via the Q&A icon located at the bottom area of your screen.
Speaker #1: And then by dynamics your names will then be announced. So that you can ask your question live. Please wait while we are collecting our next question.
Speaker #1: Remembering that to make some questions we kindly ask. That you send them via the Q&A icon located at the bottom area of your screen.
Speaker #1: And then by names your names will then be announced. So that you can ask your question live. Please wait while we are collecting our next question.
Speaker #1: Our next question comes from. From JP Morgan. We're going to be opening your mic so that you can ask your question live. Please go ahead.
Speaker #1: Good morning everyone. We'd like to make two questions. The first about results and second about mostly about regulations and about results in here. Talking about like a little bit more on the line of Lucas.
Speaker #1: Talk about. And now talking about OPEX but about the roof margin in here. Draw margin. It's like a little bit counterintuitive talking about the growth on the quarter.
Speaker #1: It had like any effect of a negative effect on mix or anything like that's like. Not like in line natural talking about the growth in here and about the losses.
Speaker #1: And they're talking about OPEX. Anything talking about like 26. Anything about resiliency to be asking here to check. And we talk about the review of 28.
Speaker #1: By the regulator they'll be analyzing here. It will be analyzed at 25 26 right. And talking about regulation. To hear a little bit more with it from you guys.
Speaker #1: Talking about the improvement of productivity. Which contributions you guys plan to present. For the company and when you guys expect this discussion to be concluded and the new methodology to be applied.
Speaker #1: We're going to be splitting here the answers. With one of my it works about the regulatory areas and the results. And talking about the cost in here.
Speaker #1: As we talk here on the call and the previous reply. And talking about margin. It's a little bit more on the variation on the non-federated margins in here.
Speaker #1: So that's going to be showing the difference on the margin. And among the other factors. There are a little bit more regulatory so it's going to be answering.
Speaker #1: Yes yes okay. Good morning good morning. First talking about OPEX. Preparing for El Niño. El Niño as Mauricio said it brings more man, more market.
Speaker #1: But it brings more like heat. So we have to change like the transformers. We have to. Cut trees. Change a lot of stuff here in the OPEX and CAPEX as well.
Speaker #1: But they are necessary to avoid that we have any problems and to supply the customers even better. And you're good at talking about the review on 28.
Speaker #1: You're right about this. The window gap is going to be 25 26. And talking about contribution on the X factor. We're still like stipulating the many scenarios to talk about or to check on our contributions.
Speaker #1: But I can't like tell in advance three points in here. We're going to be working with investments real investments each year. From each distributor.
Speaker #1: And not a projected investment on each basis on the history that we have here on the past history. As we observed between the two reviews.
Speaker #1: So this is an improvement point and another point is the window point they're going to be analyzing here on the productivity. And most importantly the separation from big distributors from the small distributors because they have different like realities and numbers.
Speaker #1: And we can make like two clusters on this. Or changing the median on the productivity for sectorial productivity. So which productivity from the Brazilian company generally.
Speaker #1: Talking about the 51 companies. It'll be the three main lines on contribution. And we expect that this a prioritary theme that we talk here to check on the ending of 26.
Speaker #1: Beginning of 27. To check and then improve and apply this methodology. Thank you that's great. Remembering that to make some questions be kindly ask that you send them via the Q&A icon.
Speaker #1: Located at the bottom area of your screen. And then by dynamics. Your names will then be announced. So that you can ask your question live.
Speaker #1: Please wait while we're getting our next question. Without further questions. We're going to be closing the Q&A session. And closing as well the video conference.
Speaker #1: And for the earning conference call from second quarter 26 from when he is in. The IR company is available to help any further doubts in here.
