Earnings call transcript: Neoenergia Q3 2025 reveals mixed results

Neoenergia S.A. reported its third-quarter 2025 earnings, revealing a mixed performance with a revenue beat but an earnings per share (EPS) miss. The company’s revenue reached 10.42 billion BRL, surpassing forecasts of 10.02 billion BRL, while EPS fell short at 0.4115 BRL against an expected 0.4542 BRL. The stock saw a slight drop of 0.28% following the earnings announcement. According to InvestingPro data, Neoenergia trades at an attractive P/E ratio of 7.85x, suggesting a relatively low earnings multiple compared to industry peers. The company has maintained dividend payments for 22 consecutive years, demonstrating consistent shareholder returns.

Key Takeaways

• Revenue exceeded expectations by 3.99%, reaching 10.42 billion BRL.
• EPS fell short of forecasts by 9.4%, impacting investor sentiment.
• Stock price declined by 0.28% post-announcement.
• Strong growth in cash EBITDA and net income.
• Operational expansion with increased stake in Curamba plant.

Company Performance

Neoenergia showcased robust company performance in Q3 2025, highlighted by a 13% growth in cash EBITDA to 2.8 billion BRL and a 10% increase in net income to 924 million BRL. The company also reported a 10% rise in gross margin, reaching 4.556 billion BRL. These results underscore Neoenergia’s continued market leadership in energy distribution and transmission. InvestingPro analysis reveals impressive year-to-date returns of 58.37% and strong financial health metrics, with an overall rating of "GREAT." The company maintains healthy liquidity with a current ratio of 1.17, indicating sufficient assets to cover short-term obligations.

Financial Highlights

• Revenue: 10.42 billion BRL, up 3.99% from forecasts.
• Earnings per share: 0.4115 BRL, down 9.4% from forecasts.
• Gross Margin: Increased by 10% to 4.556 billion BRL.
• Operating Expenses: Grew by 5.6%, consistent with inflation.

Earnings vs. Forecast

Neoenergia’s Q3 2025 earnings revealed an EPS of 0.4115 BRL, missing the forecasted 0.4542 BRL by 9.4%. However, the company’s revenue of 10.42 billion BRL outperformed expectations by 3.99%, showcasing its ability to generate higher-than-anticipated sales despite the EPS shortfall.

Market Reaction

Following the earnings announcement, Neoenergia’s stock price decreased by 0.28% to 28.32 BRL. This decline reflects investor concerns over the EPS miss, despite the positive revenue surprise. The stock remains within its 52-week range, with a high of 29.63 BRL and a low of 17.9 BRL. InvestingPro subscribers have access to 10+ additional exclusive insights about Neoenergia, including detailed Fair Value analysis and comprehensive financial health scores. The company’s strong momentum is evidenced by its 57.99% return over the past year, with revenue growth of 14.36% in the last twelve months.

Outlook & Guidance

Neoenergia is focusing on completing its transmission investment cycle by the end of 2025, with expectations to operationalize 2 billion BRL in transmission assets. The company is also considering a potential dividend policy review in 2026 and aims to concentrate future investments solely on distribution.

Executive Commentary

CEO Eduardo Capellassegui emphasized the company’s commitment to deleveraging and operational efficiency, stating, "We are remaining focused on deleveraging and on the important leverages, effectiveness, and safety in our operations." He also highlighted Neoenergia’s confidence in Brazil’s regulatory environment, saying, "We firmly believe in the regulatory robustness of Brazil."

Risks and Challenges

• Potential regulatory changes impacting the energy sector.
• Inflationary pressures affecting operating expenses.
• Market competition in energy distribution and transmission.
• Macroeconomic factors influencing consumer energy consumption.

Q&A

During the Q&A session, analysts inquired about the progress of transmission line projects and potential impacts from curtailment. Neoenergia confirmed that construction is on track and that curtailment has had a limited financial impact of 70 million BRL year-to-date. Additionally, the company clarified its decision not to participate in the upcoming transmission auction, focusing instead on current projects and strategic partnerships.

Full transcript - NEOENERGIA SA (NEOE3) Q3 2025:

Operator/Moderator: Good morning, everyone. Good morning, and welcome to Neoenergia’s Third Quarter twenty twenty five Earnings Release Call. To hear the simultaneous interpretation, please click on the interpretation globe icon in the platform at the bottom of the screen and choose your preferred language, Portuguese or English. For those listening to the call in English, there is an option to mute the original audio in Portuguese by clicking on mute original audio. We inform you, this call is being recorded and will be made available on the company’s IR website, ri.neonergia.com, where the complete earnings release material is available.

It is also possible to download the presentation using the link sent via chat, including in English. During the company’s presentation, all participants will have their microphones muted. We will later open the Q and A session. And you then must open your microphone to ask your question. We commend that all of your questions are asked.

Together, information contained in this presentation and statements that may be made during the call relating to Neo4jia’s business prospects, projections and operational and financial goals, our beliefs and assumptions of the company’s management as well as information currently available. Future considerations are not guarantees of performance. They involve risks and uncertainties and assumptions as they refer to future events and therefore, on circumstances that may or may not occur. Investors should understand the general economic conditions, market conditions and other operating factors may affect Neandergea’s future performance and lead to results that differ materially from those expressed in such forward looking statements. The presentation will be led by Mr.

Eduardo Capellassegui, CEO of the company and Giordardo Gadellia, CFO of the company. I will now give the floor to Mr. Eduardo Kapilastegui. Thank you very much, operator. Good morning, everyone.

I would like to thank you for joining us today for our earnings call of the third quarter twenty twenty five. I’m Eduardo Capilastogi, CEO of Neue de Gia. And once again, we are very proud of what we will be sharing with you today. Here with me are Salvajo Hebero, Vice President of Regulation, Institutional and Sustainability Ms. Agadella, CFO Giancarlo Bacao, Executive Director of Operations Giuliano Bacanato, Control Asset Control and Planning Officer Renato Rocha, our IR Officer.

I’ll make a brief presentation covering the main highlights of the period, and Leonardo will then present the results in more detail. We will then have a question and answer session and close with our closing remarks. So beginning on Slide three, we have the highlights of the third quarter. Firstly, I would like to highlight results we’ve obtained in the BRAD 2025 award. Reneo Energirina won eight out of 12 awards in which we participated.

Energirina was elected the best distributor in Brazil as the best distributor in the Northeast. Additionally, receiving an honorable mention for health and safety. Energia Electro was elected the best distributor in the Southeast, the best distributor in management quality and innovation management and the best in operating management. Finally, Energia Brasilia was the best in the performance evolution category, recognizing the enormous transformation this distributor has been experiencing since its privatization in 2021. These awards confer once again the leadership of Nordea in the operation of distribution consensions in the country, providing quality service to over Brazilian Brazilian.

Regarding this quarter’s results, the injected energy considering distributed energy performed very well in our concession areas, growing 2.3% over the same period in the previous year. Our operating expenses remain under control, growing 5.6% over the previous year, therefore, in line with inflation. Cash EBITDA reached BRL 2,800,000,000.0 with a 13% growth in the quarter, reflecting the market growth, the distribution market growth, adjustments at the B portion of the under Giacobacazern, excellent tariff review of last April, the role of operating expenses and lastly, the entry to operation of the transmission line. I’d highlight the case of network where the capture EBITDA also grew significant 13%, reaching BRL 2,500,000,000.0 in the third quarter. Net income was BRL $924,000,000 in the quarter, 10% up above the profit.

The net income of the third quarter in twenty twenty four, driven mainly by the increase in EBITDA. CapEx reached BRL 2,600,000,000.0. Which brought our net remuneration base in the distribution companies to BRL 43,000,000,000. On the growth front, we increased our stake in the Curamba plant through an auction going from 70% to 85% with a minimum bid of BRL 92,000,000, which represents an extremely competitive EBITDA ratio of five times. Also in growth, we are moving towards the end of our investment cycle and transmission, delivering the last four lots in the next two months.

On the regulatory front, in the quarter, we had the signing of the extension of the Neonergia Pertambuco concession, the first distributor in the country to have its concession extended in advance. We expect the signing of other three distributors in the coming months, Neonergio Coilba, Neonergio Coilba Neonergio Electra. Additionally, we had in the quarter the tower of transmit for Neonergio Electra, Neonergio Brasilia, which had increases to the B parcels of 1.38.3% respectively, as well as the pass through tariffs of the increase in subsidies recently approved by the government. Moving to Slide four, we can see the progress of our transmission projects, which as mentioned are entering the final stages of construction. We’ll start with the lots from December 2018.

The Guanabara lot with 98 physical progress already has one section completed contract of 69,000,000. The other one is under construction with a wrap of BRL 98,000,000 expected by the end of this year. The Vale Do Tajai lot, we had already BRL 142,000,000 or 51% of the released ramp with operation. And we are at 95% physical progress, also completing the project by the 2025. When we will release another million amounting to almost BRL280 million lot.

In the Moro De Chappeo lot from the 2020 action, physical progress already reached 99%. We already have BRL 166,000,000 released, meaning 76% of the rest. The remainder, BRL 52,000,000 was expected to be released over the next weeks. Regarding the lots won in the June, we’re still to be delivered, the largest of all. Lot Number 2 Of Alto Partaiba, which has been 95% completed.

This lot, have BRL 104,000,000 wrap already released and the remaining BRL $328,000,000 will be delivered over the next two months. Therefore, we have already released in 2025 around BRL 300,000,000 in Europe and will release an additional BRL 600,000,000 in the coming two months, amounting to R900 million dollars in Europe in 2025 released. In this way, by the end of this year, we will reach a significant milestone of R2 billion dollars fully operational, including our investment cycle and transmission. That began in 2017. It is worth remembering that the partnership established with GIC in 2023 remains strong and very active.

And ever since GIC has acquired 50% of nine transmission lots built by Neon de Rishi, the last of which, as you’re aware, was Itabapoada acquired by them earlier this year and also participated with us in the recent transmission auctions. And as you know, they have the right of first offer for another seven lots, still 100% owned by Nueva Gia, including these four lots under construction that I have just mentioned that will be completed in the next two months. I will now give the floor our CFO, Leonardo, who will share more details about our results in the 2025. Thank you, Leonardo. Thank you, Eduardo.

Good morning, everyone. I will begin with the analysis of the Energia’s consolidated results on Slide six. The evolution of the gross margin in the quarter was 10% compared to the third quarter twenty twenty reaching BRL 4.556 For the quarter, This increase is mainly explained by the positive effect of the tariff adjustments and revisions at the April of the distributors in the Northeast, Electro August. We have maintained a good cost associated with a growth of 5.6 in the quarter, close to the quarter at BRL 1,082,000.000. The result, the EBITDA showed a 14% growth in the quarter and cash EBITDA 13% growth reaching BRL 2,804,000,000.000, reflecting the improved margin of the distributors and good cost control.

The net worth EBITDA represented 89% of the consolidated EBITDA at the generation of clients, 11%. Energia’s net income in the quarter was BRL $924,000,000, therefore a 10% increase compared to 3Q twenty four. On the next slide, we have our CapEx in the quarter. We invested a total of BRL 2,600,000,000.0. Therefore, at the pace of the last quarters and in accordance with the plan, the total year to date amount is BRL 7,600,000,000.0.

As usual, CapEx was mainly all in networks representing 98%. In the quarter, the highlights were BRL 1,800,000,000.0 in distribution, the expansion and improvement of the network, BRL $730,000,000 in the progress and transmission works related to the completion of the last four projects, as Eduardo mentioned. On operating performance and networks, on Slide nine, we see the variation of Ejected Energy and our five distribution companies, which was already disclosed to the market, showed a growth of 2.3% compared to 3Q ’twenty four. Therefore, it rose equal to the previous quarter and also due to the milder temperatures. The total number of consumers reached 16,900,000, representing an increase of three and forty two thousand new customers in the last twelve months.

Moving to last four months, we had another quarter with a good performance at Piedex. We continue with three out of our five distributors within the regulatory limit. Brazil and Pertambuco are not within the limit, but distance to the regulatory compliance is smaller than in the previous quarters. Besides the new regulatory levels defined for both, educate, we are getting to very close levels to compliance. Slide 11, we see in third quarter BCLD, the loans and loss provision reached R116 million dollars improvement compared to previous quarters.

In the chart below, we see that the collection rates generally indicate a sound trajectory compared to the previous quarters. On the next slide, we move to the quality indicators, DCFEC, FX. In our distributors, they continue on a downward trend, all of them in line with the regulatory standards. We also like to highlight the charts with the current percentages of appliance that’s per distributor, underscoring the good quality performance. Now on the network results on Slide 13, you can see that in the third quarter, we had 11% growth in gross margin, mainly explained by the tariff adjustments and provisions of the Northeastern distributors in April and Electrov more recently.

Operating expenses in the quarter grew by 9%. Therefore, we see a one off pressure in the quarter due to increased maintenance focused on quality on increasing collection actions to improve revenue collection in the market. Even so, net worth EBITDA grew by 16% and net worth cash EBITDA 13%, reaching R2.45 billion dollars in the quarter. We also see the breakdown between distribution and transmission, cash EBITDA grew 11% in distribution and in transmission, 47% with the entry of new projects. The regulatory EBITDA of transmission assets was BRL $252,000,000, BRL 140,000,000 from 100% new energy assets, 112,000,000 from the JV with GIC, which we account for using our equity method.

On Slide 15, we see the generation and clients. Business moving here to Slide 15. We see the generation and clients business, which consolidates renewables and liberalized segments. In quarter EBITDA, the segment was $394,000,000, a 2% growth compared to the same quarter twenty twenty four. However, year to date result is still negatively impacted by Tecnoprazabroco, which the previous contract had a higher margin.

On the right hand side, we see the breakdown by business line. The EBITDA in HPP in the third quarter was 95,000,000, a decrease compared to Q3 twenty twenty due to the effect of the deconsolidation of the Baixo Guasul plant. Wind power, $269,000,000 EBITDA, 3% reduction due to lower wind speeds in the quarter. Solar EBITDA was EUR 8,000,000, in line with Q3 ’twenty four. And the Tempur Pena Burcu EBITDA was EUR 6,000,000 due to the new contract with no dispatch in the quarter.

Finally, in the client business, our EBITDA in the quarter was EUR 17,000,000, a 6,000,000 growth compared to the third quarter in twenty twenty four. Now moving to Slide 17 and in concluding, we have our capital structure. And we see we closed the third quarter with a net debt of BRL47 therefore higher than the second quarter due to the pace of CapEx and the greater effect of the tariff variations as a consequence of the Executive Order 1,300, which brought the tariff for low income consumers to zero. In the case consumption went up to 80 kilowatt per month, and this significantly increased the tariff asset of our distributors before the approval of the Executive Order. This is a temporary effect, and then we will have it going back to what it was.

We our net debt ratio closed at 3.52 times. But just regarding the additional tariff effect, it would have been 3.47 in line with the second quarter in ’twenty five. The structure of our debt remains very comfortable, well distributed with an average term of BRL five point seven years and our competitive average cost. We’re still benefiting from a credit market that is at high demand with a AAA rated bond. And to conclude our to ensure our CapEx plan for the year as we can see in the chart here.

Having said that, I will now hand the floor to our operator to open the Q and A. We will now open the Q and A session. Bear in mind that if you wish to ask a question, you should click on the Q and A icon at the bottom of your screen to join the queue. When you hear your name, you will receive a notification to open your microphone. You should then open your microphone to ask your question.

Our first question is by Ricardo Bell from Safra Bank. Ricardo, we will open your microphone. You may proceed, Ricardo. Ricardo, you may proceed, please. So we will move to our next question by Enrique Simoes from UBS.

We will open your microphone now, Enrique, and you may ask your question. Hello. Good morning, everyone. Just a brief question. How do you see the conclusion of the transmission lines?

And what about the negotiations with JIC? How are they going? You. Thank you, Enrique, for the question. As regards to transmission line construction works, as mentioned previously, have four or five sections to be concluded.

We are making good progress above 95% execution, and we are expecting to conclude by the end of the year. Between November, December, we expect to deliver 100% to have completed 100% of the lots that are still under construction. Starting January next year, January 1, all of them will be in operation BRL 2,000,000,000 approximately in operation starting 01/01/2026. As regards to GIC, yes, partnership remains strong, solid in regards to the auctions. And also now, when we deliver through the lots, the remaining lots, we will proceed as we did with the previous lots.

Our GIC will evaluate our lots. We’re talking about seven lots now this time around. Approximately BRL 1,000,002 in wrap, a significant amount. And now GIC is conducting the assessment of the assets. It will submit a proposal November.

They’re not we’re not obliged to sell. They’re not obliged to acquire, but it is a solid partnership, and we believe we will continue evolving in this direction. It will submit a proposal according to its criteria. We will then, of course, have meetings, conduct discussion. It’s an interesting proposal.

As in the past, we will move to the 50% investments as you are aware. In summary, this agreement is holding strong and solid. This is an important phase now. These assets will be the objects of the new transaction as in the operations phase as well. We are concluding the constructions and entering into the operation phase.

Everything according to the plan, no surprises. And we have been engaging in conversation with GIC about these semi lots as mentioned, which represent a significant volume, CapEx and ramp as well. You. Our next question is from Riccardo Vello from Safra. You may open your microphone, Riccardo.

You may proceed, Ricardo. We have one more question from Raul, sales analyst from XP. We will now open your microphone. Raul, you may ask your question now. Good morning, everyone.

How are you? Thank you for this call. I’ve got a question related to 3304 and the curtailment discussions, I’d like to know what role Enel has played in this these conversations as an an interested stakeholder in the process. So give could you give us an overview of the role Enel has had in these discussion? And if you can tell us what can be expected, what the reports will contain?

There’s been conflicted clashing information about maybe something broader, broader information. And afterwards, we’ve heard something different. We’d like to hear from you how where we’re standing with regards to 13 b o four and curtailment. Thank you, Raul. So as regards curtailment for Neonetschia, as you’re aware, the impact is quite limited on us.

To give you some figures, in the third quarter, it was a 40,000,000 impact in the first nine months of the year, 70,000,000, of course, it’s 70,000,000. But compared to other players in the industry, our impact is much lower, which does not mean to say we’re not playing an active role in the discussions with the sector, with the regulator. This is a big discussion in the Executive Order thirteen thirteen oh oh four, four, now Nigeria is contributing to find a structured solution to tackle this issue going forward and also looking at the past year to date in the sector, we have, of course, billions. It amounts to billions. Therefore, yes, we are taking part in this process, and we firmly believe that this executive order, the MP thirteen zero four will include interesting proposal in this regard.

Excellent. Thank you. Next question is by Daniel Slavixi from Safra. We will open your microphone now, Daniel. You may ask your question.

Hello, Toal. Good morning. Thank you. I have two questions. One, regarding to cost, an interesting cost management in this quarter.

By now, I’d like to know if this will be a recurring level going forward, how you see this will evolve on the coming quarters. I have one question about the opportunity in transmission. There will be an auction this Friday now. Are you considering to participate in this auction? And if so, how would you actually be involved in this opportunity?

Thank you. Thank you, Daniel. Well, this third quarter, we’ve had extraordinary effects in some distributors, mainly the Giacobelba, where we had BRL 20,000,000, 25,000,000 in assets. We’re making relevant investments in yes, so we had an impact, but it’s not a recurring effect. We do not expect it to happen again.

This was Quellba, but we also had something at Elektro. It’s not asset, but it’s regarding rescission costs in the quarter. I would say these were the most relevant one offs in regards to the increases in the quarter. And to your question, these are one offs, one offs that we do not believe they will happen again. On the coming quarters, we, of course, are committed to growing above the inflation as we have over the past years.

Bear in mind, we have a primarized operating model. We have strict cost control and productivity that is more assertive, more accurate. We do not really rely on the market evolution in terms of cost. Most operators are proprietary our own. So we firmly believe that we can say we will continue on this growing trend with inflation.

To your second question, transmission line. The past quarter, we mentioned that we will not go to auction now in the transmission auction this Friday. We have analyzed the loss, assessed the loss jointly with our strategic partner, GEIT, and we have not closed. We’ve decided not to go to auction. We’re looking at a two digit loss.

This is what we require to go to transmission auctions or to any other investments we might consider. So with this in mind, we will not be going to auction this Friday, this week. Thank you. Our next question is by Andres Apayo from Santander. And she would like to hear an update on the possibility to see changes in the dividends policy of the company.

Can we expect more dividends with a reduction of leveraging next year? Andre. Thank you, Andre. We have been keeping to what we’ve said over the past quarters, 2025. This is our last year where we’re making massive investments, mainly because we’ve concluded our investment cycle in transmissions.

And therefore, starting next year, we will invest only in distribution to R7 million dollars and together with the cash flow increase resulting from the new assets in our operations, and the GIA will begin the deleveraging process and how fast it will happen, that will depend on the divestment phase with JIC. If we do not divest with JIC, we will also reduce the debt. If we do, it will be more accelerated. Anyhow, say, in 2025, we will reach our cap in regards to that. And of course, throughout 2026, we will most likely by the 2020 we will start considering reviewing our dividend policy since the debt will be declining and the cash will be growing.

And as a manager, of course, we have to submit proposals to our board, and this is one of them. This is one of the alternatives. And, yes, Andre mentioned in the previous quarters, we are thinking that the 2026 and late twenty twenty six, we will get back to this point to this discussion with our Board. Thank you. The Q and A session is now adjourned.

We would like to give the floor to Mr. Eduardo Cabellasseggi for his closing remarks. Thank you once again, operator. I would like to share one final message reaffirming our commitment to all of our stakeholders at Nueva de Sia. We are remaining focused on deleveraging and on the important leverages, effectiveness and safety in our operations.

Of course, also adding value through optimal capital allocation and maintaining sustainable growth with our results. And we better represent this through the expected growth of our EBITDA cash since our IPO has grown over 120%. We firmly believe in the regulatory robustness of Brazil, which once again has proven with the insurer of the approval of the concession of Indonesia Patnabuco, which brings us the safety we need to ensure higher investments and to higher quality to all the citizens in Panabucco. We will now continue with the process to approve the other three concessions. And the proper capital allocation is also key to us, an important lever to improve value for our shareholders together with the JIT progress and transmission.

These are excellent examples of such. Additionally, the network business remains important focus for Nuendo Giai in transmission and progress in transmissions will take us from January 2026 to operate in million dollars in assets with a RAP higher than R2 million dollars annually. In distribution, we are highest when it comes to revenues, investments and number of customers in the industry and overall. So number one, in terms of operations as shown by the Abroadi awards. We’re committed to continue investing in providing quality services and continue to our almost 17,000,000 customers.

For shareholders, I would like to highlight once again that we have strategic clear pathway going forward and the right team that is engaged and fully committed to deliver the results we need. I’d like to conclude as usual by thanking all of the employees of Nanogia who have fulfilled their roles, their past challenges, delivering results and created value to our shareholders. Thank you very much. I wish you all an excellent day. The third quarter twenty twenty five earnings release of Neonatia is now adjourned.

The IR department will be available to entertain remaining questions. Thank you to all of the participants. We wish you an excellent day.

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