Serena Energia (SRNA3) Q2 2024 earnings summary

Executive summary

• EBITDA for H1 2024 reached R$703.1 million, up 22% year-over-year, but below plan due to resource shortfalls, DG connection delays, and lower US energy prices.

• Energy production and gross profit grew significantly, with 2Q24 energy production up 18% sequentially and 39% year-over-year, driven by new assets like Goodnight 1 and Assuruá 5.

• Major long-term PPAs signed with M. Dias Branco, Lundin Mining, and expansion into supplying high-performance computing and AI clients in Brazil and the US.

• Completed a major share exchange, gaining full control of Ventos da Bahia and divesting from Pirapora solar complex.

• Net income remained negative in Q2 2024, reflecting seasonality and higher financial expenses.

Financial highlights

• H1 2024 EBITDA was R$703.1 million, up from R$575.7 million in H1 2023 (+22% year-over-year), but below guidance due to project delays and lower resources.

• Adjusted energy gross profit rose 17% year-over-year to R$506.4 million in 2Q24; unit gross profit fell 16% to R$219.6/MWh.

• Net debt at quarter-end was R$8.68 billion; net debt/EBITDA ratio improved to 4.8x, with operational arm at 2.7x.

• Cash and equivalents plus marketable securities totaled R$1.69 billion at June 30, 2024.

• Net financial result was -R$224.7 million in 2Q24, a 2% improvement year-over-year.

Outlook and guidance

• Annual EBITDA guidance was revised down by 5% to a new center of R$1.821 billion, reflecting weaker resources, DG delays, and lower Texas prices.

• Long-term contracts signed in H1 (130 MWavg, mostly 10 years) are expected to increase EBITDA margin by up to 3 points.

• Management expects positive working capital in 2024 and H1 2025, supported by refinancing and potential asset sales.

• Second half expected to benefit from stronger wind seasonality and completed maintenance, with over 60% of annual production typically in 2H.

• Targeting net debt/EBITDA ratio close to 4.5x by end of 2024 or early 2025.