Copel Q1 2025 Earnings Call - Execution and Discipline Drive EBITDA Amid Hydrological Uncertainty
Summary
Copel delivered a robust first quarter, posting net income 10.7% higher than the prior year, driven by disciplined commercial management and strong operational execution. The company navigated challenging hydrological conditions, including elevated wind curtailment and higher purchased energy costs, by leveraging active portfolio optimization, modulation benefits, and strict cost controls. Recurring EBITDA in distribution grew 10% year-over-year, while generation and transmission benefited from positive modulation results and favorable submarket price variations. Management emphasized a structured approach to risk mitigation and capital allocation, maintaining a comfortable net debt-to-EBITDA ratio of 2.8x while expanding the hedged portfolio to 53% by 2030.
Looking ahead, Copel is positioning itself for potential El Niño impacts in the second half of the year, with active management strategies ready to capitalize on price volatility and hydrological shifts. The company is also focusing on operational efficiency initiatives, including workforce optimization and supplier base consolidation, to maintain profitability standards. With a strong credit profile and disciplined risk management, Copel remains well-positioned to convert trading opportunities into sustainable cash generation despite macroeconomic and weather-related uncertainties.
Key Takeaways
- Net income rose 10.7% year-over-year, reflecting robust operational performance partially offset by higher financial expenses.
- Recurring EBITDA in distribution grew 10% compared to Q1 2025, supported by grid market volume growth of 2.1% and annual tariff adjustments.
- Generation and transmission EBITDA benefited from positive modulation results, contributing BRL 267 million more than Q1 2025 due to higher average PLD in southern submarkets.
- Active portfolio management captured approximately BRL 140 million in additional results, with BRL 70 million from submarket activities and BRL 70 million from hour pool effects.
- Wind curtailment increased significantly to 20.7% in Q1 2026 from 8.8% in Q1 2025, highlighting operational challenges but also the value of disciplined commercial strategies.
- Capital expenditure reached BRL 581 million, with 75% allocated to distribution, targeting service quality and long-term sustainability.
- Net debt-to-EBITDA ratio stood at 2.8x, aligning with the company's optimal capital structure, with debt indexed 63% to CDI, 34% to IPCA, and 3% to long-term rates.
- The hedged portfolio is expanding from 16% in 2026 to 53% by 2029-2030, ensuring price capture across various scenarios and mitigating hydrological risks.
- Management anticipates a strong El Niño in H2 2025, particularly impacting the South, and is prepared to adjust exposures and capitalize on potential price spikes.
- Cost management initiatives include optimizing supplier bases, workforce dimensioning, and reducing commercial costs, while maintaining service standards through dedicated structures like Copel Agro.
Full Transcript
Daniel, Management/Executive, Copel: [Non-English content]
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Felipe, Management/Executive, Copel: [Non-English content]
The highlight here is the positive result of modulation and the difference of price in submarkets, in addition to gains in the free market with growth in volume and higher price. Copel Disco also contributes significantly with EBITDA above 10% compared to the first quarter of 2025, sustained by the great market result growth and the variation of costs being under control. Moving on to the Genco results, generation and transmission EBITDA was driven mostly by the result of modulation, totaling BRL 267 million more than the reported in the first quarter of 2025 due to the increase of average PLD in the southern submarket. The increase of BRL 99.2 million in revenue and bilateral contracts resulted from a combination of higher volume and price of sale. Volume grew 11.7% and price 4.7%.
Greater revenue with the availability, with the result of 93 million BRL with the consolidation of Mata de Santa Genebra in the results of June 2025. In the pressures, we had a higher cost of purchased energy for resale due to higher PLD and GSF of 90%, in addition to the wind generation deviation and the higher impact of curtailment that totaled 20.7% in the first quarter of 2026 compared to 8.8% in the first quarter of 2025. Even with this scenario, the message here is execution, active commercial management, and capturing of opportunities with cost control, including the decrease of the MSO in the segment. In distribution, recurring EBITDA was 10% above the first quarter of 2025, reinforcing the original result.
I’d like to stress here the growth of 2.1% in the grid market, reflecting the greater economic activity in concession area and the growth of customer base in the period and the annual tariff adjustment in June 2025, with an average of 1.3% in the big parts that we also captured in the comparative periods. The trading strategy is now on the next slide. We continue to evolve consistently, supported in three well-defined pillars: optimization of portfolio, the offer of flexibility and modulation to end customers, as well as continuous and disciplined activity in risk mitigation.
In the quarter, the active management of the portfolio enabled the capturing of relevant opportunities, with the activity on submarkets contributing to about 70 million BRL, in addition to positive effect on the hour pools that added another 70 million BRL to the result approximately. These effects reflect the decisions made based on technical criteria, disciplined reading of the market, and adherence to established grid limits. Another relevant factor was hydrology risk. We closed the period with GSF of 92% and wind curtailment levels much higher than what we observed in the same period of last year, reinforcing the importance of a structured, active, and consistent commercial strategy, especially in more challenging scenarios in operational view as we are experiencing.
In energy balance, we have a gradual balance expansion of the availability of portfolio, starting at 16% in 2026 and reaching 53% in the horizon from 2029-2030, which is in line with our strategy of capturing attractive prices in different scenarios to sustain the results. As for the hydrology risk exposure, we maintain a comfortable long position in hydro, 19% in 2026. Complementing our quality performance, I highlight our strict credit management, maintaining sound governance in the selection of counterparts, which guarantees an extremely resilient portfolio with very low levels of delinquency, which allows us to operate safely in ACL, guaranteeing that profitability captured in trading converts effectively into cash generation. We continue maintaining flexibility, discipline, and sophistication in portfolio management with hedging operations and customized solutions to clients, consolidating trading as an important driver of results.
Now on PMSO, on cost management, we see a positive evolution in discipline of costs over the quarter. The variation rooted reflects distinct movement in the main lines. We had a BRL 10.3 million increase in the others line due mostly to the lease equipment and software focused on operational efficiency and growth of BRL 2.9 million in materials for Genco. On the other hand, this was offset partially by the reductions in manage pools lines with a drop of BRL 26.3 million in third-party expenses. If we isolate the PPD, PLR, and LP, expenses with personnel increased BRL 7.6 million, 0.2% in this quarter as we kept up with the salary adjustments of 5.01% defined in the collective bargaining agreement.
In practice, discounting the inflation, the costs would be stable compared to last year. PMSO management, we reinforce our continued commitment to profitability. This effort and discipline, in contracts with business that are significantly different from previous years, the increase of standards of service requiring adaptation and implying additional cost. Within the rationale of efficiency and customer focus, I highlight initiatives that are relevant like Copel Agro, as Daniel mentioned, where we created a dedicated structure to enhance our relationship model with agribusiness and increase the level of customer experience. Our focus in cost effectiveness this year will be on optimizing the base of suppliers, dimensioning of our workforce, developing long-term contracts, and the reduction of commercial costs and sale of non-strategic real estate.
In net income, we posted a result 10.7% above last year due to the very robust operational results, partially offset by higher financial expenses. Leverage result of a company that operated in a more structured, optimized capital structure, actually, than the first quarter of 29. On CapEx, in the quarter we invested BRL 581 million, 75% of which were invested within the distribution company and the remaining balance on generation and transmission. The priority of this investment, this CapEx, targeted towards operational pillars, service quality, and sustainability of long-term performance. Finally, getting into indebtedness, giving you more color on leverage, we remain in a comfortable position in line to the optimum capital structure, closing the period with 2.8x net debt to EBITDA, which is precisely in line with the optimum point of the capital structure.
Our debt is 63% linked to the CDI, 34% to IPCA, and 3% to the long-term interest rates. We closed the month of March with nominals of the debt of 13.05% a year, equivalent to 89% of the CDI, a result of our active management of liabilities that seek a balance between duration, cost, and profile of indexing. This concludes the presentation. We will move on to the Q&A session. Thank you.
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We will now begin the question and answer session. In order to ask a question, please click on Raise Hand. If your question is answered, you may leave the queue by clicking Lower Hand. In order to ask a question in writing, simply submit it on the Q&A icon, giving your name and company. Please wait while we collect the questions.
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Our first question. Vem do Ricardo Bello da Safra. Ricardo Bello from Safra.
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Ricardo, please, you may go ahead.
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Daniel, Management/Executive, Copel: The question in writing. Good morning, team. Thank you for the opportunity for taking my questions. I have two. First, I would like to ask for more details about the ADA, which led to this increase in the quarter. Apparently, there’s been little energy sale on this quarter in particular. What’s the environment of negotiation and the expectation of PLD with the closing of the public hearing on the CVaR and the ONS/CCEE that they opened? Do you believe this is already impacting the price curve or should impact it significantly? Thank you. [Foreign language] Oi, Ricardo Bello. Bom dia. Vamo lá. [Foreign language] PCLD, começar pelo Felipe, depois o Rodolfo complementa sobre expectativas de alteração na curva com base dentro do CVaR. O Felipe falou.
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Daniel, time, [Foreign language].
Juliano, Analyst, UBS BB: Daniel, team, good morning.
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Juliano, Analyst, UBS BB: [Non-English content] Excellent, thank you.
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Rodolfo, Management/Executive, Copel: [Non-English content]
Excellent, Felipe. First point, really. We already have a strong indication that there will be actual El Niño on the second half. What’s uncertain is how intense it’s going to be and where it’s going to have an actual impact. This trend seems in the South, and we’re seeing the prices in the second half reflecting that. An important point that that’s where the active portfolio management strategy is that during previous windows of price increases, we captured prices higher than what they are today. The first assumption is the base never being ignored. That’s always going to be met. There’s no point having taken a long position to the minimum in a base scenario. If there’s extreme scenario, it’s a possibility.
Always trying to weight this, how to value that number, saving in the short scenarios, but capturing market spikes. We see a lot of probability of a strong El Niño in the second half, which can impact hydrology, especially in the South. In Paraná, we tend to have higher temperatures in the southeast that can offset this a little bit. In this scenario, the prices may slow down, especially in the third quarter. Obviously, there’s an advance of rainy periods. You may have the end of this period of lock forward. What’s an area where the prices start to increase again in December, beginning of next year. That corroborates our strategy. Getting into modulation, I think it’s very important to emphasize that they run in parallel. Irrespective of the contracting strategy, we are not letting go of the benefits of hydro modulation.
We already have the consumption profile of our customers as a flat profile, never selling out this benefit. Even if we have a scenario of 80%, 75% contracted, the benefit of modulation will be our political guarantee. That’s our assumption. That’s, as I mentioned in the previous question, we have the expectation of attribute this more and more. The trend is to maintain that in the Copel’s portfolio. To add, Felipe and everyone, if the El Niño intensity is above expectation and it has an impact in price variation too significant for the second half or going forward in the price perspective, I would say that it may even open opportunities for us to buy more energy, increasing exposures maybe, or closing some quarterly gaps that may come up considering the GSF curve.
Daniel, Management/Executive, Copel: That only reinforces that potential, one-off price adjustments resulting from El Niño may actually be opportunities for the company to purchase some other lots of energy if that does come to happen.
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Felipe, Management/Executive, Copel: Felipe.
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Rodolfo, Management/Executive, Copel: [Non-English content] that’s the timeline that Daniel mentioned.
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Daniel, Management/Executive, Copel: Oi, Pedro. [Non-English content]
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