Neoenergia (NEOE3) Q1 2025 earnings summary

Executive summary

• Net operating revenue rose 4% year-over-year to R$11.4 billion in 1Q25, with EBITDA up 6% to R$3.7 billion and net income down 11% to R$1.0 billion, reflecting higher financial expenses and tariff adjustments.

• Injected energy in the concession area grew 3.6% year-over-year, driven by a larger customer base and higher distributed generation.

• Operating expenses grew 3%, below inflation, reflecting cost discipline despite a larger customer base.

• Asset rotation advanced with the sale of 50% of the Itabapoana transmission line to GIC, supporting deleveraging.

• Early renewal requests for key distribution concessions were submitted, with successful tariff reviews and adjustments achieved.

Financial highlights

• Gross margin increased 6% year-over-year to R$4.942 billion, driven by distributor market growth and positive tariff adjustments.

• Adjusted (cash) EBITDA was R$2.8 billion, stable year-over-year, as negative tariff adjustments and changes in Termopernambuco contracts offset gains.

• Net debt at quarter-end was R$44.4 billion, with a net debt/EBITDA ratio of 3.49x.

• Average debt cost was 11.1% per year, with average maturity of 5.88 years and diversified funding sources.

• Capex totaled R$2.2 billion (+21% YoY), mainly allocated to networks and transmission.

Outlook and guidance

• Investment cycle in transmission to conclude by end of 2025, with focus shifting to organic growth in distribution from 2026.

• No significant new investments expected in renewables or transmission due to market conditions; focus remains on distribution.

• Fast deleveraging anticipated post-2025, with potential review of dividend payout policy as leverage decreases.

• Success in tariff adjustments for Coelba (+8.1% Parcel B), Cosern (+6.6% Parcel B), and Pernambuco (+16.2% Parcel B) effective April 2025.

• Sustainability targets for 2025 and 2030 remain on track, with strong ESG ratings and inclusion in major sustainability indexes.