CTEEP - Companhia de Transmissão de Energia Elétrica Paulista S.A. (CTPTY) Q3 2025 Earnings Call Transcript

ISA Energía Brasil (CTEEP) reported a 9% decrease in net revenue and 7% in EBITDA for Q3 2025, primarily due to a higher comparative base from the prior year's tariff adjustment, though net income grew 27% driven by lower depreciation and interest on equity declarations. The company's Annual Permitted Revenue (RAP) increased 1.3% to BRL 6.4 billion for the 2025-2026 cycle, underpinned by BRL 1.2 billion in Q3 investments, including significant progress on projects like Serra Dourada which are expected to add over BRL 1 billion in future revenue. ISA Energía Brasil announced a BRL 445 million interest on equity distribution (75% of regulatory net income) and completed a BRL 2 billion debenture issuance, while maintaining a net debt/EBITDA ratio of 3.44x. Strategically, the company opted not to participate in an upcoming transmission auction, prioritizing financial discipline and its existing BRL 5.7 billion investment portfolio, but remains focused on future growth opportunities, network modernization, and a net-zero by 2050 sustainability goal.

Analysis

ISA Energía Brasil reported a 9% decrease in net revenue and a 2.5% reduction in consolidated EBITDA for Q3 2025, primarily attributed to a strong comparative base from Q3 2024, which included a significant tariff adjustment effect. Despite this, net income grew 27% year-over-year, driven by lower depreciation and the declaration of interest on equity, indicating effective cost and tax management. The company's Annual Permitted Revenue (RAP) for the 2025-2026 cycle increased 1.3% to BRL 6.4 billion, with new projects and inflation updates offsetting reductions in the financial component of RBSE.

The company demonstrated significant investment activity, totaling BRL 1.2 billion in Q3 2025, with a 56% increase in investments in projects under construction, notably Serra Dourada. These five projects under construction are expected to generate over BRL 1 billion in future annual revenue upon energization. ISA Energía Brasil strategically opted not to participate in an upcoming transmission auction, prioritizing financial discipline and focusing on its existing BRL 5.7 billion investment portfolio and future capacity reserve opportunities.

Financially, the net debt-to-EBITDA ratio stood at 3.44x, an increase that the company states was expected and aligns with long-term planning, supported by a recent BRL 2 billion debenture issuance at competitive rates. The company reaffirmed its commitment to shareholder remuneration, announcing a BRL 445 million distribution in interest on equity, representing 75% of regulatory net income for the first half of 2025. Furthermore, ISA Energía Brasil is actively pursuing a net-zero emissions goal by 2050, emphasizing sustainability and innovation in grid modernization.

Key Decisions for Investors

• Investors should monitor the successful energization and revenue contribution of the BRL 5.7 billion project pipeline, as these are key drivers for future growth and offset current revenue base effects.
• Evaluate the company's financial discipline, particularly the management of its 3.44x net debt-to-EBITDA ratio and ongoing negotiations for debt covenant waivers, to ensure sustainable leverage.
• Consider the consistency of the company's dividend policy, which aims to distribute at least 75% of regulatory net income, and its implications for total shareholder returns, especially given potential tax legislation changes.