(Convenience Translation into English from the Original Previously Issued in Portuguese)
Neoenergia S.A.
Report on Review of
Interim Financial Information
for the Three-month Period Ended March 31, 2024
Deloitte Touche Tohmatsu Auditores Independentes Ltda.
Deloitte Touche Tohmatsu
Rua São Bento, 18 -
15º e 16º andares
20090-010 - Rio de Janeiro - RJ Brasil
Tel.: + 55 (21) 3981-0500
Fax: + 55 (21) 3981-0600
www.deloitte.com.br
(Convenience Translation into English from the Original Previously Issued in Portuguese)
REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION
To the Shareholders and Management of
Neoenergia S.A.
Introduction
We have reviewed the accompanying individual and consolidated interim financial information of Neoenergia S.A. ("Company"), included in the Interim Financial Information Form (ITR) for the quarter ended March 31, 2024, which comprises the statement of financial position as of March 31, 2024 and the related statements of income, of comprehensive income, of changes in shareholders' equity and of cash flows for the three-month period then ended, including the explanatory notes.
The Company's Management is responsible for the preparation of this individual and consolidated interim financial information in accordance with technical pronouncement CPC 21 (R1) and international standard IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board - IASB, as well as for the presentation of such information in accordance with the standards issued by the Brazilian Securities and Exchange Commission (CVM), applicable to the preparation of Interim Financial Information (ITR). Our responsibility is to express a conclusion on this interim financial information based on our review.
Scope of review
We conducted our review in accordance with Brazilian and international standards on review of interim financial information (NBC TR 2410 and ISRE 2410 ‐ Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the standards on auditing and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion on the individual and consolidated interim financial information
Based on our review, nothing has come to our attention that causes us to believe that the accompanying individual and consolidated interim financial information included in the ITR referred to above was not prepared, in all material respects, in accordance with technical pronouncement CPC 21 (R1) and international standard IAS 34, applicable to the preparation of ITR, and presented in accordance with the standards issued by the CVM.
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© 2024. For information, contact Deloitte Global.
Other matters
Statements of added value
The interim financial information referred to above includes the individual and consolidated statements of added value (DVA) for the three-month period ended March 31, 2024, prepared under the responsibility of the Company's Management and presented as supplemental information for international standard IAS 34 purposes. These statements were subject to the review procedures performed together with the review of the ITR to reach a conclusion on whether they are reconciled with the interim financial information and the accounting records, as applicable, and if their form and content are consistent with the criteria set forth in technical pronouncement CPC 09 (R1) - Statement of Added Value. Based on our review, nothing has come to our attention that causes us to believe that these statements of added value were not prepared, in all material respects, in accordance with technical pronouncement CPC 09 (R1) and consistently with the accompanying individual and consolidated interim financial information taken as a whole.
Convenience translation
The accompanying individual and consolidated interim financial information has been translated into English for the convenience of readers outside Brazil.
Rio de Janeiro, April 23, 2024
DELOITTE TOUCHE TOHMATSU | Jônatas José Medeiros de Barcelos |
Auditores Independentes Ltda. | Engagement Partner |
2024SA032211 | |
© 2024. For information, contact Deloitte Global. | 2 |
Rio de Janeiro, April 23rd, 2024 - Neoenergia discloses on this date its results for the first quarter of 2024 (1Q24).
HIGHLIGHTS (R$ MM) | 1Q24 | 1Q23 | ∆ % |
1Q24 | |||
Net Operating Revenue | 11,020 | 11,107 | (1%) |
Gross Margin | 4,657 | 4,760 | (2%) |
Operating Expenses | (1,033) | (970) | 6% |
EBITDA | 3,507 | 3,620 | (3%) |
Financial Income (Loss) | (1,293) | (1,272) | 2% |
Profit assigned to controlling shareholders | 1,127 | 1,215 | (7%) |
Financial Asset (Concession) | 418 | 649 | (36%) |
IFRS 15 | 269 | 362 | (26%) |
Adjusted EBITDA | 2,820 | 2,609 | 8% |
OPERATING INDICATORS | |||
Total Inject Energy (GWh) (SIN + Isolated Systems + DG) | 22,102 | 20,433 | 8.2% |
Total Distributed Energy (captive + free market + DG) | 18,918 | 17,438 | 8.5% |
Number of Customers (thousand) | 16,418 | 16,111 | 2% |
Financial Debt Indicators | 1Q24 | 2023 | Variation |
Net Debt(1)/ EBITDA(2) | 3.28 | 3.17 | 0.11 |
Corporate Rating (S&P) | AAA | AAA | - |
- Net Debt of cash and cash equivalents,short-term investments and securities.
- EBITDA 12 months
Adjusted EBITDA: R$ 2.8 billion in the 1Q24 (+8.1% vs. 1Q23).
- Growth of +8.2% in injected energy, including DG in the 1Q24;
- Controlled operating expenses: +6% in the 1Q24. Normalizing new assets and corporate operations, expenses grew by 4.6% vs. 1Q23;
- Profit of R$ 1,127 million in the 1Q24;
- CAPEX of R$ 1.9 billion in the 1Q24, of which R$ 1.1 billion used in distribution;
- Net Debt/EBITDA of 3.28x in the 1Q24, vs. 3.17x in the 4Q23;
- Tariff adjustment for Neoenergia Coelba and Cosern with an average effect for the consumer of 1.53%
and 7.84%, respectively, as of April 22, 2024.
1Q24 TELECONFERENCE
Wednesday, April 24th, 2024
Time: 9:30 (BRT) | 8:30 (ET)
(with simultaneous translation into English)
Access to Webcast:https://tenmeetings.com.br/ten-events/#/webinar?evento=NEOENERGIA1T24_445
NEOENERGIA S.A. DISCLOSES THE RESULTS FOR THE FIRST QUARTER OF 2024 (1Q24) BASED ON MANAGEMENT ANALYSES THAT THE BOARD OF DIRECTORS UNDERSTANDS TO TRANSLATE THE COMPANY'S BUSINESS IN THE BEST MANNER AND RECONCILED WITH THE INTERNATIONAL FINANCIAL REPORTING STANDARDS - IFRS.
SUMMARY | |||
1.3. | Generation and Customers | 10 | |
2. | EBITDA | 13 | |
3. | FINANCIAL RESULT | 13 | |
4. | INVESTMENTS | 14 | |
4.1. | Networks | 14 | |
4.2. | Generation and Customers | 15 | |
5. | INDEBTEDNESS | 16 | |
5.1. Debt situation and financial leverage | 16 | ||
5.2. | Debt amortization schedule | 16 | |
5.3. | Debt Profile | 17 | |
6. | RECONCILIATION NOTE | 18 | |
6.1. | Managerial Result Reconciliation | 19 | |
6.2. Reconciliation of Generation Business and Customers (Note 5.1) | 20 |
Results as of March 31, 2024
Disclosed on April 23, 2024
1. ECONOMIC-FINANCIAL PERFORMANCE
1.1. Consolidated
CONSOLIDATED STATEMENT OF INCOME(R$ MN) | 1Q24 | 1Q23 | Variation | |
R$ | % | |||
Net Operating Revenue (1) | 11,020 | 11,107 | (87) | (1%) |
Costs with Energy (2) | (6,781) | (6,996) | 215 | (3%) |
Gross Margin w/ out Concession Financial Assets | 4,239 | 4,111 | 128 | 3% |
Concession Financial Assets (VNR) | 418 | 649 | (231) | (36%) |
GROSS MARGIN | 4,657 | 4,760 | (103) | (2%) |
Operating Expenses | (1,033) | (970) | (63) | 6% |
Provisions for Delinquency (PECLD) | (158) | (176) | 18 | (10%) |
(+) Equity Income / Corporate Operations | 41 | 6 | 35 | 583% |
EBITDA | 3,507 | 3,620 | (113) | (3%) |
Depreciation | (684) | (609) | (75) | 12% |
Financial Income (Loss) | (1,293) | (1,272) | (21) | 2% |
IR/ CS | (384) | (505) | 121 | (24%) |
Minority shareholdings | (19) | (19) | - | - |
NET INCOME | 1,127 | 1,215 | (88) | (7%) |
(1) Considers Construction Revenue | ||||
(2) Considers Construction Costs |
As expressed in Technical Guidance OCPC 08, the recognition and measurement of variations between non-manageable costs actually incurred in relation to approved tariffs are always classified in the Operating Revenue line as Amounts Receivable/Returnable from Parcel A and Other Financial Items. Considering that a large part of Parcel A is recorded as energy costs, the isolated analysis of revenue and cost variations can lead to distortions in the interpretation of the results for the period. Therefore, the Company believes it is more appropriate to explain the variations in results based on the Gross Margin.
Neoenergia ended the 1Q24 with Gross Margin without VNR of R$ 4,239 million (+3% vs. 1Q23), impacted by the effects of: (i) increase in the customer base, (ii) higher volumes; (iii) Tariff Revisions for Neoenergia Coelba and Neoenergia Cosern in April 2023, variation in parcel B +2.5% and +0.25%, respectively; (iv) Neoenergia Brasília's 2023 Tariff Adjustment, effective from October/23 (variation in parcel B: +7.14%); (v) better result of Termopernambuco, and (vi) consolidation of Dardanelos from September 2023. These effects were mitigated by the lower Transmission margin, due to the non-consolidation of the 8 assets of the operation with GIC, which started to be accounted for as equity income from the 4Q23 and wind, due to lower generation, in addition to the Neoenergia Elektro Tariff Review in August 2023, with a variation in parcel B of -3.9% and the Neoenergia Pernambuco Tariff Adjustment in May 2023, which did not show variation in parcel B. The gross margin was R$ 4,657 million in the 1Q24 (-2% vs. 1Q23). It is worth remembering that in the 1Q23 VNR was positively impacted by a one-off of R$ 105 million at Neoenergia Coelba and R$ 40 million at Neoenergia Cosern connected with tariff reviews.
Operating expenses totaled R$ 1,033 million in the 1Q24 (+6% vs. 1Q23). Normalizing new assets and corporate operations, expenses grew by 4.6% vs. 1Q23, confirming cost discipline.
PECLD was R$ 158 million in the 1Q24, 10% lower than in the 1Q23, due to better collection performance.
Under Equity Income/Corporate Operations, in the 1Q24, R$ 41 million were recorded, of which R$ 37 million referred to the equity income of transmission assets in partnership with GIC and R$ 4 million to the result of the Corumbá plant through equivalence.
NEOENERGIA S.A. | 1Q24 INCOME STATEMENT
3
Results as of March 31, 2024
Disclosed on April 23, 2024
As a result of the effects shown, EBITDA was R$ 3,507 million in the 1Q24, -3% vs. 1Q23. Adjusted EBITDA, without VNR and IFRS, was R$ 2,820 million in the 1Q24 (+8% vs. 1Q23).
The Consolidated Financial Result was -R$ 1,293 million in the 1Q24, in line with the 1Q23.
Net income ended the quarter at R$ 1,127 million (-7% vs. 1Q23).
1.2. Networks
The result of the Networks business includes the performance of both distributors and transmission assets.
NETWORKS STATEMENT OF INCOME(R$ MN) | 1Q24 | 1Q23 | Variation | |
R$ | % | |||
Net Revenue | 10,689 | 10,760 | (71) | (1%) |
Costs with energy | (6,991) | (7,171) | 180 | (3%) |
Gross Margin w/ out Concession Financial Assets | 3,698 | 3,589 | 109 | 3% |
Concession Financial Assets (VNR) | 418 | 649 | (231) | (36%) |
Gross Margin | 4,116 | 4,238 | (122) | (3%) |
Operating Expenses | (844) | (808) | (36) | 4% |
Provisions for Delinquency (PECLD) | (158) | (176) | 18 | (10%) |
(+) Equity Income / Corporate Operations | 37 | - | 37 | - |
EBITDA | 3,151 | 3,254 | (103) | (3%) |
Depreciation | (502) | (471) | (31) | 7% |
Financial Income (Loss) | (1,162) | (1,102) | (60) | 5% |
IR CS | (327) | (446) | 119 | (27%) |
NET INCOME | 1,160 | 1,235 | (75) | (6%) |
The Networks business ended the 1Q24 with Gross Margin without VNR of R$ 3,698 million (+3% vs. 1Q23), impacted by the effects of: (i) increase in the customer base, (ii) higher volumes; (iii) Tariff Reviews for Neoenergia Coelba and Neoenergia Cosern in April 2023, variation in parcel B +2.5% and +0.25%, respectively; and, (iv) Neoenergia Brasília's 2023 Tariff Adjustment, effective from October/23 (variation in parcel B: +7.14%). These effects were mitigated by the lower Transmission margin, due to the non-consolidation of assets in partnership with GIC, which began to be recorded as equity income from the 4Q23, in addition to the Neoenergia Elektro Tariff Review in August 2023, with variation in parcel B of -3.9% and the Neoenergia Pernambuco Tariff Adjustment in May 2023, which did not present a variation in parcel B. The gross margin was R$ 4,116 million in the 1Q24 (-3% vs. 1Q23). It is worth remembering that in the 1Q23 VNR was positively impacted by a one-off of R$ 105 million at Neoenergia Coelba and R$ 40 million at Neoenergia Cosern in the 1Q23 related to tariff reviews.
Operating expenses totaled R$ 844 million in the 1Q24 (+4% vs. 1Q23), absorbing inflation and an increase in the number of customers. Excluding new assets, expenses grew +3.0% vs. 1Q23.
PECLD was R$ 158 million in the 1Q24 (-10% vs. 1Q23) due to the intensification of disconnection and collection actions, which reflected in higher collections.
The Equity Income/Corporate Operations item in the 1Q24 was R$ 37 million referring to the equity income of transmission assets in partnership with GIC, which began to be accounted for under this item as of 4Q23.
As a result of the effects presented, EBITDA was R$ 3,151 million in the 1Q24 (-3% vs. 1Q23). Adjusted EBITDA, without VNR and IFRS, was R$ 2,464 million in the 1Q24 (+10% vs. 1Q23).
NEOENERGIA S.A. | 1Q24 INCOME STATEMENT
4
Results as of March 31, 2024
Disclosed on April 23, 2024
The Financial Result was -R$ 1,162 million in the 1Q24 (vs. -R$ 1,102 million in the 1Q24), due to the higher average debt balance.
The Networks business had net income of R$ 1,160 million in the 1Q24 (-6% vs. 1Q23).
S/ I TRANSMISSION (R$ MM) | 1Q24 | 1Q23 | Variation | |
R$ | % | |||
Net Revenue | 1,059 | 1,236 | (177) | (14%) |
Cosntruction Costs | (728) | (735) | 7 | (1%) |
Gross Margin | 331 | 501 | (170) | (34%) |
Operating Expenses | (46) | (37) | (9) | 24% |
Provisions for Delinquency (PECLD) | (2) | - | (2) | - |
(+) Equity Income / Corporate Operations | 37 | - | 37 | - |
EBITDA | 320 | 464 | (144) | (31%) |
Depreciation | (1) | (2) | 1 | (50%) |
Financial Income (Loss) | (153) | (128) | (25) | 20% |
IR CS | (37) | (107) | 70 | (65%) |
NET INCOME | 129 | 227 | (98) | (43%) |
IFRS15 | 269 | 362 | (93) | (26%) |
The transmission lines presented a Gross Margin of 331 million in the 1Q24 (-34% vs. 1Q23), impacted by the non-consolidation of assets in partnership with GIC, which began to be accounted for as equity income from the 4Q23.
Operating expenses totaled R$ 46 million in the 1Q24 (+9 million vs. 1Q23) for the same reason mentioned above.
The Equity Income/Corporate Operations item ended the 1Q24 at R$ 37 million, referring to transmission assets in partnership with GIC that began to be accounted for as equity income from the 4Q23.
As a result of the effects presented, transmission EBITDA ended the quarter at R$ 320 million (-31% vs. 1Q23). Adjusted EBITDA (ex-IFRS) for the quarter was R$ 51 million (-50% vs. 1Q23), impacted by the non-consolidation of assets in partnership with GIC.
The transmission business had a profit of R$ 129 million in the 1Q24 (-43% vs. 1Q23).
1.2.1. NEOENERGIA COELBA
NEOENERGIA S.A. | 1Q24 INCOME STATEMENT
5
Results as of March 31, 2024 | ||||
Disclosed on April 23, 2024 | ||||
STATEMENT OF INCOME(R$ MN) | 1Q24 | 1Q23 | Variation | |
R$ | % | |||
Net Revenue | 3,750 | 3,641 | 109 | 3% |
Costs with Energy | (2,211) | (2,247) | 36 | (2%) |
Gross Margin w/ out Concession Financial Assets | 1,539 | 1,394 | 145 | 10% |
Concession Financial Assets (VNR) | 221 | 368 | (147) | (40%) |
Gross Margin | 1,760 | 1,762 | (2) | (0%) |
Operating Expenses | (372) | (336) | (36) | 11% |
Provisions for Delinquency (PECLD) | (53) | (54) | 1 | (2%) |
EBITDA | 1,335 | 1,372 | (37) | (3%) |
Depreciation | (222) | (204) | (18) | 9% |
Financial Income (Loss) | (459) | (446) | (13) | 3% |
IR CS | (114) | (152) | 38 | (25%) |
NET INCOME | 540 | 570 | (30) | (5%) |
Neoenergia Coelba recorded gross margin without VNR of R$ 1,539 million in the 1Q24 (+10% vs. 1Q23), due to the variation in parcel B of +2.5% in April/23, the increase in the customer base (+ 2.1%) and greater volumes due to higher temperatures. Gross margin was R$ 1,760 million in the 1Q24, in line with the 1Q23, due to a one-off of R$ 105 million in the 1Q23 related to the tariff review.
Operating expenses totaled R$ 372 million in the 1Q24 (+11% vs. 1Q23), mainly due to emergency services resulting from atypical rains in its concession area, which have now been normalized. Excluding this effect, expenses grew by 6.8% vs. 1Q23.
In the quarter, PECLD totaled R$ 53 million, in line with the 1Q23. When we analyzed the default indicator (PECLD/Gross Revenue) in the 1Q24, it ended at 1.28%, below that observed in the 1Q23 of 1.39%.
As a result of the abovementioned variations, EBITDA was R$ 1,335 million in the quarter (-3% vs. 1Q23). Adjusted EBITDA (ex- VNR) in the 1Q24 was R$ 1,114 million (+11% vs. 1Q23), reflecting the increased market and good operational performance.
The Financial Result was -R$ 459 million in the 1Q24 (vs. -R$ 446 million in the 1Q24), due to the higher average debt balance.
Net income was R$ 540 million in the 1Q24, -5% vs. 1Q23.
1.2.2. NEOENERGIA PERNAMBUCO
NEOENERGIA S.A. | 1Q24 INCOME STATEMENT
6
Results as of March 31, 2024 | ||||
Disclosed on April 23, 2024 | ||||
STATEMENT OF INCOME(R$ MN) | 1Q24 | 1Q23 | Variation | |
R$ | % | |||
Net Revenue | 2,076 | 2,072 | 4 | 0% |
Energy costs | (1,479) | (1,525) | 46 | (3%) |
Gross Margin w/ out Concession Financial Assets | 597 | 547 | 50 | 9% |
Concession Financial Assets (VNR) | 74 | 96 | (22) | (23%) |
Gross Margin | 671 | 643 | 28 | 4% |
Operating Expenses | (190) | (169) | (21) | 12% |
Provisions for Delinquency (PECLD) | (53) | (70) | 17 | (24%) |
EBITDA | 428 | 404 | 24 | 6% |
Depreciation | (103) | (97) | (6) | 6% |
Financial Income (Loss) | (251) | (245) | (6) | 2% |
IR CS | (23) | (21) | (2) | 10% |
NET INCOME | 51 | 41 | 10 | 24% |
Neoenergia Pernambuco recorded gross margin without VNR of R$ 597 million in the 1Q24 (+9% vs. 1Q23), impacted by the increase in the customer base (+2.2%) and higher volumes caused by higher temperatures. Gross margin was R$ 671 million in the 1Q24 (+4% vs. 1Q23).
Operating expenses in the 1Q24 were R$ 190 million (+12% vs. 1Q23), explained by inflation, in addition to the occasional increase in the number of disconnections with a positive impact on PECLD.
In the 1Q24, PECLD totaled R$ 53 million, (-24% vs. 1Q23), reflecting the intensification of the disconnection and collection plan.
As a result of the abovementioned variations, EBITDA in the quarter was R$ 428 million (+6% vs. 1Q23). In addition, Adjusted EBITDA (ex-VNR) in the 1Q24 was R$ 354 million (+15% vs. 1Q23).
The Financial Result was -R$ 251 million in the 1Q24 (vs. -R$245 million in the 1Q23), due to the increase in the average debt balance.
Net income was R$ 51 million in the 1Q24 (+24% vs. 1Q23).
1.2.3. NEOENERGIA COSERN
NEOENERGIA S.A. | 1Q24 INCOME STATEMENT
7
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COELBA - Companhia de Eletricidade do Estado da Bahia published this content on 07 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 May 2024 10:04:41 UTC.