Companhia Paranaense de Energia Q3 FY2024 earnings call

• Divestments: Closing of divestment at Compagas and UEGA with BRL170 million recognition, and sale of Copel G&T's real estate for BRL286 million, adding BRL175 million to net income.
• Dividends: Declared dividends of BRL485 million to be paid on November 29, equivalent to 50% of the payout based on first half results.
• Personnel: Completed exit of 1,258 employees on August 14 with quality service maintained through process mapping and knowledge transfer; personnel costs reduced by 11.2% when isolating inflation.
• Talent: Retained and attracted top talent, including new Vice Presidents in various roles.
• Energy Trading: Executed energy sales strategy excellently, with intensified sales leading to margin increase and significant contracts closed; managed credit risk by maintaining restrictive credit policy with large counterparties.
• Concessions: Set to sign new concession contracts for three largest hydroelectric plants, strengthening position and ensuring sustainable operations.

In the third quarter of 2024, Copel's adjusted EBITDA was BRL1.2 billion. Copel G&T and Copel Com contributed 52% of the adjusted EBITDA, while Copel Distribution contributed 48%. Copel Distribution generated an EBITDA of BRL607 million in the third quarter of 2024, which was 8.7% better than the same period last year. Copel G&T had an adjusted EBITDA of BRL649 million, which was 10.9% lower than the third quarter of 2023 due to factors like a reduction in average energy price and curtailment effects on wind farms.

• Expect to sign new concession contracts for three largest hydroelectric plants, which account for 64% of Copel's installed capacity, and pay a grant bonus of about BRL4 billion.
• Anticipate the full effect of the voluntary severance program in the fourth quarter.
• Expectations regarding curtailment levels for Q4 2024 and early 2025, with improvements expected due to entry of transmission lines.

• Macroeconomic and industry uncertainties affecting results.
• Curtailment effects on wind assets and decoupling of energy prices between submarkets impacting Copel G&T and COM.
• Credit risk in the market with rumors of financial difficulties for other energy traders.
• Disengagement risks in energy trading if not managed properly.

Q: Congratulations on the earnings. With the divestments, Copel will come strongly in the '25, '26 season in transmission auctions. Is there a possibility for Copel to invest in the free market?

A: Hello, Reynaldo, good morning. We don't have any expected investments in transmission auctions, at least not for 2025. We participated in the last auction this year but otherwise, it's not in our focus or priorities for 2025 or 2026.

Q: Even with the payment of the grant bonus with the renewal of the concessions, your leverage will remain at a level that seems very comfortable. It's 1.5 times today, maybe 2.2 times after the payment of the grant bonus. So, the question is whether you understand this as the right level or if there's room to leverage the company increasing the dividend payout.

A: Bruno, excellent point, especially considering the market scenario with the level of discounts and prices, how Copel is going to be positioned. So, we'll break it down into two parts, okay, talking a little bit about the current policy that already expects this level of leverage that you mentioned in this range from 1.5 to 2.7 with a minimum payout of 50% and extraordinary events as the sales and the sale of real estate, for example, we treated that in an extraordinary manner, and that's what we intend to submit to the Board at the right time. As for the optimum capital structure, Felipe is running this work, so I'll ask him to give you more details.

Q: Could you please comment on the strategy for energy trading of energy that has not yet been contracted and the uncertainty of the hydrology impact in the short-term prices?

A: Rodolfo, I'll give you this question to make some of the comments and Bertol, if you want to talk as well about GSF or hydrology. So please, Rodolfo, share our strategy and how we've executed and making the most of the opportunities in terms of price volatility.

Q: Could you please comment about the company's expectation for the curtailment levels for the fourth quarter of '24 and the beginning of '25, considering the changes in the methodology and the investment and the entry of transmission lines in the Northeast?

A: That's an excellent point. The curtailment is something that's been very sensitive for the entire sector. But first, I'd like to put it into context. What is the size of these impacts in the Copel environment? First, I know you keep track. And I think one of Copel's biggest strengths is being an integrated company where you have the distribution company with about 50% of our earnings in the quarter coming from distribution with an excellent performance from Vilas and the team. Then generation and transmission, we have a share of more than BRL1 billion per year on the RAP that are immune. And when you go into the generation portfolio, we have 81% of our generation from a hydro source that gives stability to the system. And this will, in our view, have characteristics to be valued and priced in the best way possible in coming years. So, in this context, 19% in an area that responds to less than 20% of the company, we've been seeing complex situations. You can see that at Copel, curtailment represented about more than 20%. So, we have a very critical period for -- and has been very restricted, and there was a delay in some important lines and the flow of more than 2 gigs. And with the entry and it's already normalized, so the energy available now at this point is smaller. But it's an inherent issue that has to have the regulatory, technical and even indemnity aspects for the different generators.