Companhia Paranaense de Energia Q3 FY2025 earnings call

• Financial performance: Recurring EBITDA BRL 1.3 billion (+8% y/y), recurring net income BRL 375 million. CapEx: BRL 981 million in Q3, total BRL 2.6 billion YTD. - Divestments: 4 photovoltaic solar plants divested for BRL 78 million, Mashigua Sue HPP divested, leverage ratio 2.8x. - Operations: Almost 5 gigawatts sold, build market of DISCO grew 1.7%. Generation: GSF ~65%, curtailment ~35%, PLD spot market up ~50% y/y. - Consolidation: Mata de Santa Genebra transmission company results consolidated. - Migration to Novo Mercado: Steps completed, expecting completion by year-end. - COPEL Day: Scheduled for November 19, online broadcast. - Culture/strategy: Revisited strategic planning for COPEL 2035, culture as competitive differential.

Recurring EBITDA consolidated grew 7.8% over Q3 '2024, reaching BRL 1.3 billion. COPEL Genco's recurring EBITDA grew 11% y/y, driven by better asset performance and strategic asset consolidation. Transmission saw EBITDA increase by BRL 119.4 million with consolidation of Mata de Santa Genebra and a 2.2% average increase in RAP. Distribution's recurring EBITDA was up 7.2%,受益于1.7%的build market增长。Trading had a recurring EBITDA drop due to legacy contracts and higher PMSO expenses, but sales volume for 2026-2030 grew 96.2% compared to Q2 '2025, adding 431 megawatts sold. Recurring net income was BRL 374.8 million, down 36.5% y/y due to increased negative financial results from robust investment cycle.

Migration to Novo Mercado expected to complete by year-end. Expect to announce dividends for the first event as per policy. Cost reduction efforts continue with focus on efficiencies and disciplined capital allocation. Tariff review in 2026 is a key event.

Macroeconomic and regulatory uncertainties in energy sector. Curtailment issues impacting generation results. Taxation environment changes affecting dividends. Regulatory framework changes affecting tariff review and operations.

Q: First, I believe it has been partly addressed in the presentation about the migration to Novo Mercado. I just want to clarify, I'd like to confirm if the expectation of completion remains at the end of December? Or can you tell us when this is expected to happen? And in that regard, what is the company thinking about dividend payout -- are you expecting an announcement for this year after you complete the migration process? Or can we expect something before? That's the first question. Secondly, I'd like you to elaborate on the cost efficiency agenda. In this quarter, we saw again manageable costs dropping year-on-year. So I would like to understand if for next year, the company still sees room to reduce costs. And if so, the extent of these cuts.

A: Well, I'll answer part of your question, and then Felipe will speak about efficiency gains. It is exactly as you -- and then as we said, our idea is on Monday, the 17th, if we get approval by the preferred shareholders, our expectation is that we will complete the operation -- the migration by year-end. It will be towards the end of the year because if we have approval on the 17th, we have 30 days of recess as determined by law. And then the operational time line, the notary public [indiscernible] and our expectation is to end to complete the migration still this year, but more towards the last week of December, but still in 2025. And then we have a commitment regardless of the -- regardless but linked to the migration, which is our base scenario, we expect to announce dividends, dividends payment for the first event of the year as set forth in our policy with a minimum of 2 events. So it will be the first year consolidating the result of the first half and according to our financial analysis of the company. So we're quite excited, and we are working hard. The process to obtain the waiver with several debentures being very polarized. It was very hard work led by Felipe and the whole team. By the way, I'd like to publicly thank them for the efficiency. We have the support of many financial institutions, which helped us access the huge amount of shareholders. So this is moving on, moving forward smoothly, and it's all conditioned to next Monday. Thank you, Daniel. As regards to the process of cost reduction, we continue in an attempt to capture more efficiencies. Please remember that our goal is compared to 2023 annualized until 2026. So there is an effort to reduce costs in 2026 with an important move concentrated in some business units as status quo, but also there are other moves which are more geared by supply, the shared services center. So there are a number of initiatives and the value creation levers that are actionable expected in 2026. We'll give you more on that at COPEL Day. And just to add to that, Guilherme and everyone, we are completing this phase of structuring efficiencies and operating excellence in cost reduction. As Felipe mentioned, during COPEL Day, we'll give you more detail of the 10 promises that we took on at the follow-on time by Novo Mercado, we need 3. So we have also the tariff review in mid next year and the completion of this phase of structuring efficiency gains. And then we'll speak a lot about this at COPEL Day. Then we'll turn the page. You've heard me tell you over and over that no company creates value sustainably in the long term, just cutting costs and selling assets. We have to finalize the cycle throughout 2026 and then turn the page, change the chapter and focus on efficiencies, profitability indicators. And Felipe will have a session dedicated to this in his presentation on November 19, COPEL Day.

Q: My question has to do with the Genco, GMT generation and transmission. What we saw this quarter was a portfolio strategy that was very well performed by the company. We can see this at a much lower cost of energy [indiscernible]. So my question is, in terms of the strategy of the trading company, taking one step back to understand the process to build this portfolio hedge strategy for the year. And what is the [indiscernible] for next year in terms of price, market and strategy to continue to maximize the value of the GEN portfolio?

A: Well, excellent question. We have worked to develop an internal expertise with Rodolfo and the whole team to add this competitive edge, this market intelligence and this trading strategy. So Rodolfo, perhaps you can share with Raul and the investors our macro strategy, -- remembering that our competitors also join our calls. And then that's why, you can add whatever you want. So Rodolfo? Rodolfo Lima: Excellent. So let's divide this into 2. Let's speak about the hedge strategy for this year, and then I'll speak about the market currently. In the mid-2024, we had some windows of good opportunities of low prices. Before materializing the need of power with the increasing price in September, we had good windows to purchase energy. And that's when we purchased most of the energy. And coupled with that, we had a lot of swaps. We know the need for electricity in Q3 and have some excess at the end. So much of advantage of this moment to have this kind of swap using these more competitive prices in Q3. And that's why we were successful in our strategy vis-a-vis the spot market. Now speaking about the market currently, the market is at very high levels. We understand that there's still a lot of room to increase. And what matters is with a lot of liquidity. We have high demand in the market. We are weighing our speed of sale. You could see that we have good sales, but quite contained compared to the amount we have available. So overall, I believe these are the 2 main insights regarding our strategy for short term, Q3 and mid- and long-term thinking about the future electricity prices. Brittol, any comment? Unknown Executive: Yes. Good morning, everyone. Well, I think Rodolfo spoke well about the strategies. The strategies are executed by the TradeCo, but it's all discussed with COPEL generation and transmissions led by Daniel, and we execute the strategy. We posted good results this year given the opportunities mentioned by Rodolfo for the price window for energy purchases. And during this period, we had a strong result regarding modulation of the hydropower plants, which accounted for quite a lot of our results. So this is a solid articulated strategy executed by the TradeCo based on the analysis of COPEL Genco. I can just to final comments, Raul and everyone. Brittol mentioned an important point about the benefit of hydro modulation and the role it has played and how it has been better priced here in this environment. Given the role it has to sustain the hydroelectric system, in addition, [ AMP304, SMP304 ] that is to be approved to bring some positive elements in our view in terms of ancillary operational services. And coupled with all that is the fact that the bulk of our portfolio, especially our hydro plants are in the South region, and we see an appreciation of price. I guess this reinforces the unique characteristic of COPEL's portfolio. In broader terms, what have we seen? And this is our strategic approach. Firstly, we see pricing structures that are much better than 2, 3 years ago, but still below the price potential that we envision, particularly if we consider marginal cost of expansion for 2028, '29 and 2030 and beyond. So we'll see and you will see that we have some room here regarding prices. So what is our strategy? We don't want to put all eggs in one single basket. So strategically, we sell some small blocks along A plus 2, A plus 3 so that we can ensure an average price. But clearly, with the price volatility we have seen hourly prices and also with the need that the system has for power, and we are going to talk a lot about that at COPEL Day. So we will need to work with more uncontracted energy, plus 1, plus 2, so that we can capture these better energy prices greater than BRL 250, BRL 280, which is what we have seen. This is the fact that COPEL has 64% stress, 64% of its EBITDA linked to the grid distribution and transmission grids. This gives us comfort in our balance sheet to be able to execute these strategies quite easily in trying to capture better price opportunities.