Engie Brasil Energia S A : Earning results video conference - 2Q23

ENGIE BRASIL ENERGIA S.A.

VIDEO CONFERENCE SCRIPT

RESULT FOR THE SECOND QUARTER 2023

AUGUST 9, 2023 - 11:00 A.M. (BRASÍLIA TIME)

ADRIANA WAGNER: Hi and a good morning to all. We are now beginning the video conference for the second quarter of 2023 of ENGIE Brasil Energia. My name is Adriana Wagner, an Investor Relations Analyst at the Company and I would like to make a few announcements before beginning the call.

Currently, those who are connected are in listening mode only. Later, when we open the questions and answers session to participants, you may submit your questions via the Zoom Q&A tool. Please note that this video conference is being recorded.

We have also made available in our website www.engie.com.br/investidoresthe files for the Presentation and Results Release as well as the ITR and other documents filed yesterday at the CVM and where more detailed analysis of the financial statements, operational results, ESG indicators and progress on the implementation of new projects, among other important events in the period.

Before proceeding further, I would like to clarify that any statements that may be made during this video conference with respect to the business outlook for the Company, should be treated as forecasts contingent on the economic scenario for the country, performance, and electric sector regulations as well as other variables and are therefore subject to change.

We would remind you that journalists wishing to ask questions should do so via e-mail,

sending their questions to the Company's Press Relations office.

With us today to discuss ENGIE Brasil Energia's second quarter 2023 performance are Eduardo Takamori, Chief Financial Officer and Rafael Bósio, Investor Relations Manager at the Company.

Now, I would like to give the floor to Takamori to begin the presentation. Takamori, please go ahead.

EDUARDO TAKAMORI: Good morning. Can you hear me? Perfect. Good morning everyone. First of all, thanks to you all for being here. It is a great pleasure to be here with you today. This will be the first time I shall be speaking to you officially as CFO at ENGIE Brasil Energia, in succession to Marcelo Malta, who was responsible here up to the previous quarter. Moving directly on to the slide of highlights, I think that first it is worth noting that this quarter was a very exciting one here at ENGIE Brasil Energia with some very significant events during the period, many of them of a non-cash nature. Highlighting Ebitda here, it is worth noting that we reported an adjusted Ebitda of R$

1.8 bi, compared with R$ 1.9 bi in the second quarter last year, equivalent to a decrease of 5.2%. But here an initial caveat is worthy of note, namely that this Ebitda is adjusted for the accounting treatment of the transmission asset, which increased by more than 10%, an increase of 10.9%, as we shall see in the final slides, of the financial segment. And when we look at semi-annual results, the six months of 2022 against the six months for 2023, we can see that there was an improvement of 2.3% in the Ebitda between periods.

As to the key drivers, as I have already indicated here, many of them were of a non-cash nature, and indeed the three main drivers for this quarter are non-cash. The first of them, a positive effect of R$ 239 million, reflects the recognition of fair value of the Estreito plant. This was a process that ENGIE begun some time ago but which came to fruition in the second quarter now with the delivery of this recognition. In short, the Estreito concession will be extended for a further two years and four months more or less, with recognition of the waiver for the liability relative to the delay in the period while the plant was under construction.

As to negative impacts, summing up, the IPCA index had an important effect for this second quarter compared with the IPCA for the same period in 2022. This naturally means that you have lower remuneration both in respect to the financial asset of the Jaguara and Miranda generation plants - the regulated part of which is booked under IFRS rules in the financial asset -ؙ and also lower remuneration from contractual assets, namely the transmission assets.

And besides this, naturally we were subject to a periodic tariff revision of the transmission assets, this having a negative impact of R$ 64 million, but also with no cash effect. The revision occurred at the very end of the semester, but also due to an accounting practice, we had to recognize this effect on future values.

The good part of all this is that when we come to the adjusted net income between quarters, we had a very significant increase - this can be found in the slide on the right

• very significant, from R$ 514 million to R$ 806 million, an increase of 57% approximately, basically due to the same effect, that of the IPCA. There is also a benefit which arises when the IPCA falls. It means we have much lower financial costs as

well. We will look at this more closely later on, but it does represent a very positive net financial result for Engie, with a reduction in financial cost between compared quarters. When we compare semester with semester, we reported an increase in adjusted net income from R$ 1.15 bi to R$ 1.69 bi, a very significant increase of nearly 50%.

I am now going to hand over to Rafael, to continue with our highlights. Rafael, good morning.

RAFAEL BÓSIO: Good morning and thanks, Takamori. Good morning to all and thanks to the audience and the interest shown in ENGIE Brasil Energia.

Here in slide 6, we continue with the non-operational highlights. As Takamori has said, this was a particularly special quarter, one including various important events, I think I shall begin here with the success we had in the ANEEL transmission auction, held on June 30, where we made the winning bid for Lot 5. This is a project which we are already developing and implementing. It is a project which involves about one thousand kilometers of transmission line crossing the states of Bahia, Minas Gerais and Espírito Santo, for assisting in the offtake of energy generated in the Northeast for delivery to the main consuming hub in the Southeast. A bit later on we will show a further slide on the project and give a little more detail.

The second item which in fact was a landmark event and is the result of work conducted over a long period - namely the conclusion of the disposal of the Pampa Sul Thermoelectric Power Plant. Those who are familiar with the Company a few years back will recall our change of strategy, when the Group decided to exit coal-fired generation in about 2015. We concluded this process now with the sale of the asset on May 31, thus qualifying ENGIE Brasil Energia as the largest company generating exclusively from renewables in Brazil with approximately 8,200 MW of installed capacity.

The third event, I believe Takamori has already covered very well. It concerns the recognition of the values with respect to the right of extending the Estreito concession. Remembering that as Takamori has mentioned, this was something that we had already announced to the market in a Material Fact published in January of this year and the effects of which we are now booking to our account statements.

The fourth item on this slide relates naturally to the sale of the Pampa Sul asset. In the light of this event, we approved at Board of Directors level, the new targets for our climate journey, on which we now embarking for a new phase. Among these targets, we have set a target for reducing by 30% the intensity of emissions by 2025 and by 56% at the end of 2030 in relation to the intensity in 2021; the continuing expansion in renewable energy which we are making with the implementation of new projects; to

have 100% of our assets with climate adaptation plans. We are also aware, and this is something that is worth mentioning, that with the disposal of Pampa Sul, our major challenge becomes the reduction in the intensity of our scope 3 emissions, in other words, those emitted by third parties. For this reason, we have a target, which is to engage all the Company's leading suppliers and define science-aligned targets (SBTi) up to 2030. So this is a further advance in which marks a new phase of our climate journey.

Next slide please, Ivani. That's it. In slide 7, we showcase the signature of the agreement for the modernization of the generator units at Jaguara HPP, an agreement worth about R$ 515 million. By way of a reminder, Jaguara, just as Miranda… these plants were two assets which Engie acquired in 2017, the Jaguara plant beginning operations in 1971; so that is more than 50 years ago. The time has come for plant modernization and we are looking with this work to extend the useful life, the reliability of the plant as well as its uptime ratio. This is a project which is going to take some years for completion, conclusion being forecast for 2028.

Another highlight in the quarter was the increase in our ratings by Fitch Ratings, from

1. to BB+, this the result of an increase in sovereign rating. Thus, we continue with our rating one notch more than sovereign rating and just one notch below investment grade. In other words, if sovereign rating increases one notch further then naturally there will be an opportunity for the Company to be awarded investment grade and for ENGIE Brasil Energia to regain an investment grade rating.

And, finally, our board has approved the distribution of interim dividends worth R$ 767 million, equivalent to a payout of 55%, the shares to trade ex-dividends now on August

22. Here it should be pointed out that this payout respects our dividend policy and is the floor or lower limit of payout and reflects the Company's cash management. It allows us to continue looking for new opportunities, seeking to capture new opportunities which may come to light over the short term, as well as permitting us to carry forward our investment plan, as we shall see later on in the presentation - I shall be presenting our expansion plan -, as well as other commitments which we have agreed.

Let's move on to the next slide, Ivani, please. ESG indicators, which we update quarterly. Many of them of course already reflecting our strategy of exiting coal-fired generation if we compare with 2021 in particular. So as you can observe here, both in terms of total emissions and water withdrawal, we had a significant decrease, largely due to the sale of the Jorge Lacerda Thermoelectric Complex and now the disposal of Pampa Sul as well. These disposals are something that also reflect in the percentage of women in the labor force given the greater concentration of men at our generation assets.

Next slide please. Let's now look at the Energy Commercialization section. I believe that here we are showing good results for the quarter. If you examine the graph on the left hand side, in fact a summary of our energy balance, you are going to find we continue to record a high degree of contracting in the short and medium term and that we continue to reduce decontraction for the years further in the future. We sold on average about 64 MWm from 2023 to 2028 and the good news is that the net average selling price continues at high levels. This is only natural. As I said, we are operating a high level of contracting - approximately one third of our contracting is in the regulated market, with long-term indexed agreements -, thus ensuring stability in revenues, stability in the generation of results and consistency as well. So this is the security which the Company offers in adopting this strategy of gradual energy sales and anticipated sales of energy so that we are not caught out at times such as currently where we are experiencing a lower level of pricing whether due to good hydrology, or excess supply; whatever the reason, we always end up being protected.

Next slide, please. Still on commercialization strategy, some more good news are the results that we have enjoyed in the capture of those consumers migrating from the Regulated Contracting Environment to the Free Market. Our numbers of free consumers have risen 23% in relation to the second quarter of 2022, while the number of consumer units increased 16% and we have succeeded in maintaining our market share at around 9%. So we are moving still further towards retail where we identify a more competitive return, being able also to offer renewable products to our customers at a lower cost than they can find through their distributor.

Next slide and next section, Ivani, please. And now updating the projects which are currently in a process of implementation. We are operating on various work fronts, proof of our delivery capacity. In generation alone, we have three projects which are going to add more than 2 GW of installed capacity over the next few years.

The first of these, and going into operation now in 2023, is the Santo Agostinho Wind Complex. Physical progress of the work on Santo Agostinho is already 73% complete, despite the challenge of some incidents… two incidents in fact with wind turbine rotor blades, on July 4 and the other now last Friday, the assessments which have been made and the result of investigations to date have given us the peace of mind to maintain our forecast for full commercial operations by the year-end, the physical-financial schedule continuing on track. At the end of the second quarter, we had 21 wind turbines in commercial operation and being tested, and by yesterday, we had added a further 6 wind turbines. And the commissioning process continues apace.