Highlights:

• Net operating revenue was R$ 3.1 billion in the period, 16.6% up on 2Q20.
• Ebitda adjusted for non-recurring effects reached R$ 1.5 billion.
• Net income amounted to R$ 319 million in the quarter, negatively impacted largely by the restatement at the IGP-M of concessions payable and by non-recurring effects.
• Production of electric energy at the plants operated by the Company was 7,242 GWh in 2Q21, 51.4% greater than 2Q20.
• The Board of Directors approved a dividend payout equivalent to 100% of the adjusted net income in the first half of 2021.
• Negotiations for the sale of the Jorge Lacerda Thermoelectric Complex proceeded positively in the period and in parallel, the Company is examining opportunities for a transaction with related parties to replace thermal with renewable generation capacity.

ENGIE Brasil Energia (EGIE3) recorded a net operating revenue of R$ 3.1 billion in the second quarter of 2021, a result R$ 446 million (16.6%) more than in the same period in 2020. The transmission segment contributed R$ 342 million to total revenue. Consolidated Ebitda reached R$ 1.4 billion, a year-on-year decline of 4.4% (R$ 63 million). Eliminating non-recurring effects, the negative variation would have become positive in R$ 252 million (a 19.7% increase), despite  the challenging hydrological situation.

Net income amounted to R$ 319 million in the quarter (-58.4% compared with 2Q20) and R$ 848 million in the first half (-33.6% compared to 1H20). “The decrease in net income was  largely a reflection of the impact of the IGP-M inflation index on concessions payable as well as  impairment on investment at the Jorge Lacerda Thermoelectric Complex and booked in the quarter. Excluding non-recurring effects, net income fell 28.0% compared with the same quarter 2020, and 13.5% comparing the first six months of consecutive years”, Marcelo Malta, Chief Financial Officer of ENGIE Brasil Energia observed.

However, the same acceleration in inflation driving the restatement of concessions payable, is also generating a matching increase in average energy selling price, with a corresponding increase in revenues from energy sold. In 2Q21, the average selling price of energy reached R$ 205.35/MWh, 4.9% higher than prevailing in 2Q20. Energy volume sold under agreements reported virtual stability between compared periods, albeit with a  slight reduction of 0.4%.

In 2Q21, the plants operated by ENGIE Brasil Energia  reached an uptime ratio of 97.3%, excluding scheduled shutdowns, 99.9% in the case of the hydroelectric plants, 85.8% for the thermoelectrics  and 92.1% in the case of plants driven by complementary sources — SHPs, biomass, wind and photovoltaic.

Electric energy output from Company-operated plants was 7,242 GWh in 2Q21, 51.4% higher than for the same period in 2Q20. Of the total generated, the hydroelectric plants accounted for 4,464 GWh; the thermoelectric plants for 1,466 GWh; and the complementary sourced operations, 1,312 GWh. These results represent respectively increases of 59.5%, 64.5% and 19.9% in generation from hydro, thermal and complementary powered operations compared to 2Q20.

“We continue to evolve in operational performance despite the most challenging hydrological scenario in the last 91 years. Advances made in commercial operations at Campo Largo II, combined with high wind densities in the Northeast of Brazil, contributed to increased wind generation in the period”, says Eduardo Sattamini, Chief Executive Officer. “Not only this, but we are collaborating with the decarbonization of the Brazilian electricity matrix with the entry into operations of the Gralha Azul and Novo Estado transmission lines ahead of schedule in relation to the deadline set in the concession agreement, and ensuring the delivery of energy generated from renewable sources to their respective consumer markets”, the executive adds.

The cash position remains comfortable at around R$ 5.1 billion and the net debt/Ebitda ratio continues at a reduced level of 1.9x. Planned investments for the year remain on track at R$ 3.7 billion.

The Company’s Board of Directors has approved the distribution of additional interim dividends of R$ 789.5 million (R$ 0.9676321449/share), equivalent to 100% of net adjusted income for first half 2021.

Sale of coal assets and replacement of thermal by renewable capacity

In line with ENGIE Group’s global strategy for portfolio decarbonization with the aim of directing investments to renewable energy and infrastructure, ENGIE Brasil Energia’s negotiations for the sale of its Brazilian coal-fired assets have advanced.

During the period, significant progress was made in the negotiations for the sale of the Jorge Lacerda Thermoelectric Complex to FRAM Capital, the proposal of which should transform into  the signature of a sale agreement by the end of August 2021, although still subject to the execution of conditions precedent. Additionally, the process for sale of the Pampa Sul Thermoelectric Plant continues according to program with conclusion expected before the year-end.

A Special Independent Committee for Transactions with Related Parties has been installed by the Board of Directors for administering the gradual replacement of thermoelectric capacity with generation from renewable sources. The Committee’s specific responsibility is to evaluate the acquisition of Paracatu (MG) and Floresta (RN) photovoltaic plants, with a total joint installed capacity of 259.8 MWp. The assets were acquired for a 20-year term at the 2^nd Renewable Energy Auction in 2015 by Solaire Direct, a company which the ENGIE Group acquired in that year.

Increased generation from wind sources

 The Campo Largo II Wind Complex reached 68.6% of its total potential installed capacity, contributing 168 MW to the Company’s generator park in the second quarter 2021. Currently 8 of the 11 wind farms have already begun commercial operations, The current outlook is for the  project to go into full commercial operations before the end of August 2021.

This increase in wind generation capacity combined with the high level of wind densities in the Northeast region of Brazil were factors in the Company breaking an all-time record on July 22 , when it registered average power output of 1,105.19 MW, translating into a 89.2% capacity factor considering all 411 wind turbines at its wind farms in operation.

Start of work on Santo Agostinho

 In the past few months progress has been made in the installation of the Santo Agostinho Wind Complex. In addition to the issue of all the installation licenses together with seven brush clearance authorizations enabling a start to be made on some activities, in July, the project received  authorization for the installation of the construction works patio. At an investment worth R$ 2.3 billion, Santo Agostinho will have an installed capacity of 434 MW, incorporating 70 wind turbines with operations expected to begin by March 2023.

 Energy transmission segment

 At the end of 2Q21, the installation of the Gralha Azul Transmission System had reached 89% completion overall with entry of the  230kV – Ponta Grossa – São Mateus do Sul Transmission Line (TL) section into commercial operation slated for August 2021, and therefore ensuring  anticipation of the deadline enshrined in the concession agreement. Authorized by the National System Operator, test runs began on July 18.

At the Novo Estado Project, in the state of Pará, where a workforce of more than 8,500 has been mobilized for its construction,  regrettably we have to report the occurrence on July 16, of an accident with seven fatal victims. All were employees of Sigdo Koppers Ingeniería y Construcción (SKIC), one of the leaders in South America in the execution of heavy duty industrial and assembly projects, and engaged by Novo Estado Transmissora de Energia S.A. for work on the project’s northern section.

In this context, the Company has made it mandatory that all transmission tower foundations be inspected and tested to ensure best safety practices are in place  as a precautionary measure fir guarding against future accidents. In the immediate aftermath of the incident, work was resumed gradually on those activities not involving high level working or greater risks. Once this phase is complete, it will also be possible to verify any eventual impacts on the work delivery schedule. By the end of 2Q21, implementation was 84.5% complete.