ISA Energía Brasil (ISAE4) Q2 2025 earnings summary

Executive summary

• ANEEL resolved RBSE uncertainties, maintaining the payment methodology and securing a R$3.8 billion payment, splitting flows into non-controversial and controversial, reducing annual receipts over the next three tariff cycles to $1.27 billion.

• Investments surged 72% year-over-year to R$1.1 billion in 2Q25, with over $1 billion allocated to reinforcement, improvement, and greenfield projects; five projects under construction totaling R$7.3 billion are expected to generate over $1 billion in additional revenue once energized.

• Energization of Água Vermelha project occurred 16 months ahead of schedule, adding R$8.5 million to RAP and achieving a 90% EBITDA margin.

• Annual permitted revenue (RAP) for 2025-26 increased by 1.3% to R$6.4 billion, driven by inflation adjustments and new project operations, offsetting a nominal 10% RBSE reduction and the expiration of the Eversea concession.

• Net revenue for 2Q25 was R$1,028.6 million, down 7.5% year-over-year, and R$2,160.5 million for 1H25, down 2.7%, mainly due to non-recurring RBSE adjustments.

Financial highlights

• Net income for 2Q25 was R$255.6 million, a 39.9% decrease year-over-year, impacted by ANEEL's RBSE decision and higher financial expenses.

• EBITDA for 2Q25 reached R$789.5 million, with a margin of 76.8%, and operational net revenue (ex-RBSE) increased 31.5% year-over-year.

• PMSO costs decreased 7% for the quarter, with efficiency ratio (PMSO/net revenue ex-RBSE) improving to 30%.

• Net income was partially offset by non-recurring income tax credits of $77 million.

• CapEx (excluding M&A) for 1H25 reached R$2,210.1 million, up 49.8% year-over-year.

Outlook and guidance

• Five greenfield projects under construction with remaining ANEEL investment of R$7.3 billion and expected RAP of R$1,022.3 million, with major completions expected by 2029.

• Total amount to be received from RBSE between June 2025 and 2033 is R$7.4 billion, supporting long-term cash flow.

• Leverage is expected to rise until 2027 as projects are completed, then decline as new assets contribute to earnings.

• Dividend payout policy of at least 75% of regulatory net income will be maintained.

• Recent tariff reviews resulted in a 1.3% increase in RAP for the new cycle.