ISA Energía Brasil (ISAE4) Q2 2025 earnings summary

Executive summary

• Regulatory clarity on RBSE was achieved, reducing uncertainties and securing a R$3.8 billion payment, with ANEEL maintaining the existing methodology and splitting payments into non-controversial and controversial flows, reducing annual receipts over the next three tariff cycles to $1.27 billion.

• Investments surged 72.2% year-over-year to R$1.1 billion in 2Q25, focused on reinforcement, improvement, and greenfield projects, with five projects under construction totaling R$7.3 billion expected to generate over R$1 billion in additional revenue once energized.

• Energization of Água Vermelha project was completed 16 months ahead of schedule, adding R$8.5 million to RAP and achieving a 90% EBITDA margin.

• Net profit for 2Q25 was R$232.3 million, down 57.8% year-over-year, mainly due to a sharp drop in remuneration of concession assets following regulatory changes.

• The company operates 23,000 km of transmission lines, 136 substations, and manages 35 concession contracts, transmitting about 30% of Brazil's electricity and 95% in São Paulo.

Financial highlights

• Net revenue for 2Q25 was R$1,028.6 million, down 7.5% year-over-year, and R$2,160.5 million for 1H25, down 2.7%, mainly due to non-recurring RBSE adjustments.

• EBITDA for 2Q25 was R$789.5 million, with a margin of 76.8%, and for 1H25 was R$1,712.8 million, down 4.2% year-over-year.

• Net income for 1H25 was R$593.0 million, down 29.0% from 1H24, impacted by regulatory decisions and higher financial expenses.

• PMSO costs decreased 7% for the quarter, with efficiency ratio (PMSO/net revenue ex-RBSE) improving to 30%.

• CapEx (excluding M&A) for 1H25 reached R$2,210.1 million, up 49.8% year-over-year.

Outlook and guidance

• RAP for the 2025/2026 cycle set at R$6,398.5 million, with 56% from renewed contracts and 44% from auctioned or acquired projects.

• Five greenfield projects under construction with remaining ANEEL investment of R$7.3 billion and expected RAP of R$1,022.3 million.

• Leverage is expected to rise until 2027 as projects are completed, then decline as new assets contribute to earnings.

• Dividend payout policy of at least 75% of regulatory net income will be maintained.