Serena Energia (SRNA3) Q3 2024 earnings summary

Executive summary

• Energy production increased 19% year-over-year in 3Q24, driven by new assets like Assuruá 5 and Goodnight 1, though same-asset production declined due to weaker resources and curtailment impacts.

• EBITDA for the first nine months of 2024 reached R$1.19 billion, up 12% year-over-year, with 3Q24 EBITDA at R$491 million, flat versus 3Q23, but below expectations due to operational challenges.

• Net income turned positive at R$70 million for the nine months ended September 30, 2024, reversing a prior year loss, though 3Q24 net income fell 55% year-over-year due to higher depreciation, financial expenses, and lower energy prices in Texas.

• The company maintains a highly contracted portfolio, with 94% of 10-year assured energy output locked at R$223.2/MWh and 97% of Brazil's utility-scale portfolio contracted for 2024-33.

• Distributed Generation (DG) projects are progressing, with most assets expected to be fully connected by 2025 despite current delays.

Financial highlights

• Net revenues in 3Q24 were R$1,060.1 million, up 22% year-over-year; gross profit for the nine months was R$769 million, up from R$639 million year-over-year.

• 3Q24 energy gross profit was R$676.3 million (+6% YoY), but unit gross profit fell 11% to R$223.6/MWh due to lower prices and curtailment.

• 9M24 cash earnings totaled R$317 million, representing an annualized 8% earnings yield.

• EBITDA to free cash flow conversion was around 72%, with recurring adjusted free cash flow at R$356.6 million in 3Q24.

• Net financial expenses increased to R$731 million from R$583 million year-over-year.

Outlook and guidance

• 2024 adjusted EBITDA guidance is maintained at R$1,821 million (range: R$1,721–1,920 million), with Q4 expected to be the strongest quarter.

• Curtailment impacts are expected to decrease in 2025 due to grid expansions and improved generation profiles.

• Management is evaluating alternatives to address negative working capital and upcoming bond maturities, including refinancing and asset sales.

• Long-term, EBITDA is projected to grow up to 4.5% annually over the next decade, supported by new offtake agreements and optimization initiatives.

• DG connection delays anticipated to be resolved in 2025, enabling full business plan delivery.