Axia Energia’s Earnings Call: Energy Trading Shifts and Price Forecast Discrepancies Clash

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Date of Call: Aug 6, 2026

Guidance:

• Target investment in resilience/reinforcement program of BRL 5-5.5 billion for 2026.
• Expect lower short-term energy prices in Q3 2026 compared to 2025, but anticipate more resources than last year due to higher load.
• Expect price recovery starting October 2026 following short-term downward pressure from El Niño-related rainfall.
• Plan to continue increasing investments in assets, driven by resilience needs and regulatory returns.
• Intend to execute BRL 7.7 billion in shareholder returns in coming months, with a current redemption test of BRL 2 billion.

Business Commentary:

Investment Growth and Operational Resilience:

• AXIA Energia reported a 50% year-over-year increase in investments, reaching BRL 3 billion in the quarter.
• The investments focused on modernizing equipment and increasing operational resilience, reflecting a strategic prioritization of asset longevity and performance.

Generation Segment Contribution and EBITDA Improvement:

• The company's EBITDA rose to BRL 6.7 billion, up 21.5%, primarily due to a stronger contribution from the generation segment.
• This improvement was driven by a better unit generation margin, influenced by favorable market price mix and increased operational efficiency.

Capital Allocation and Shareholder Returns:

• AXIA Energia declared an additional BRL 3.7 billion in capital allocation in the first half of the year, totaling BRL 7.7 billion.
• This increase was supported by a reduction in contingencies and a focus on shareholder returns, highlighted by the redemption of preferred shares and the consolidation of minority stakes.

Climate Risk Adaptation and Resilience Planning:

• The company has implemented 60% of its climate adaptation plans, with a focus on enhancing resilience against extreme weather events.
• AXIA Energia's proactive approach includes the establishment of a climate event monitoring center and the integration of climate considerations into investment assessments.

Energy Trading and Market Strategy:

• AXIA Energia observed favorable conditions in the energy trading segment, with improved prices in the Northeast and Southeast sub-markets.
• The strategic focus on sales to end clients, particularly in the Northeast, contributed to the company's overall sales performance and market positioning.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted strong EBITDA growth (21.5% YOY), significant investment increases (50% YOY), and successful capital allocation (BRL 7.7 billion declared for shareholder returns). They emphasized operational resilience, regulatory alignment, and successful execution of strategic initiatives like auction participation and governance upgrades (migration to Novo Mercado).

Q&A:

• Question from Felipe Andrade (Itaú BBA): Two topics: 1) Expectation to reach BRL 5 billion in investments for reinforcements and improvements this year. 2) View on El Niño's effects on energy prices and portfolio dynamics through at least Q1 2027.
  Response: Target BRL 5-5.5 billion for resilience investments in 2026. El Niño is expected to drive short-term price declines in South (July-Sept) and potential volatility; strategy is to expand sales in North/Northeast where energy availability is stronger.

• Question from Bruno Amorim (Goldman Sachs): Motivation behind increasing investments in resilience—driven more by financial returns or operational risk mitigation?
  Response: Both factors are important: operational resilience is critical, and financial returns are supported by regulatory alignment and adequate returns, with confidence in Brazil's regulatory framework to attract long-term investment.

• Question from Arthur Pereira (JP Morgan): Confidence in allocable capital similar to Q1 despite lower energy prices; purpose of the BRL 2 billion redemption test.
  Response: Confidence stems from improved models and de-risking efforts; allocable capital methodology uses a conservative 5-year price forecast. The BRL 2 billion redemption is a test to validate the process with more shareholders before proceeding to regular redemptions.

• Question from Daniel Travitsky (Banco Safra): Two questions: 1) Energy allocation and sales performance in Q3. 2) Dividend policy and how it complements PNC redemptions.
  Response: Q3 energy allocation is smaller due to lower GSF but expects more resources than 2025; sales accelerated in the Northeast. Dividend policy prioritizes redemptions over dividends (minimum 25% dividend if share price rises irrationally); overall capital allocation is focused on returning BRL 7.7 billion to shareholders.

Contradiction Point 1

Energy Trading Position and Strategy

Shift from maintaining a balanced position to aggressively selling energy in a specific sub-market.

Daniel Travitsky (Banco Safra) - Daniel Travitsky (Banco Safra)

2026Q2: The smaller price differentials between sub-markets led to an acceleration of energy sales in the Northeast, where AXIA has significant volume. - [Ítalo Freitas](Vice President of Commercialization and Energy Solutions)

Can you comment on energy allocation in Q3 and energy sales performance in Q2? - Maria Carolina (Banco Safra)

2026Q1: The company focuses on selling energy in the Southeast market, which has higher liquidity, though efforts are ongoing to expand sales in the North/Northeast. - [Rodrigo Lippi](Executive Vice President)

Contradiction Point 2

Short-Term Price Forecast

Contradiction on near-term price trend driven by weather forecasts.

Felipe Andrade (Itaú BBA) - Felipe Andrade (Itaú BBA)

2026Q2: El Niño has already brought higher rainfall in the South, pressuring short-term prices downward (especially July–September). - [Rodrigo Limp](Vice President of Regulation, Institutional and Markets)

What is AXIA’s view on the short-term effects of the stronger El Niño on available energy and price dynamics in the North by the end of Q1 2027, and how does this relate to the high volume of purchases seen in Q2? - Maria Carolina (Banco Safra)

2026Q1: Recent price projections show a short-term decline due to increased rain forecasts in the South... - [Rodrigo Lippi](Executive Vice President)

Contradiction Point 3

Capital Allocation Methodology and Forward Price Assumptions

Contradiction on whether capital allocation is based on specific, near-term price forecasts or a broader, conservative modeling approach.

Arthur Pereira (JP Morgan) - Arthur Pereira (JP Morgan)

2026Q2: The capital allocation methodology looks at a five-year forward window and uses conservative price assumptions. - [Fernanda](Executive, Finance/Capital Allocation)

What gives confidence in the BRL 3.7 billion allocable capital—confidence in the 2027 price curve or a review of conservative price assumptions? - Daniel Travitzky (J. Safra Corretora de Valores e Cambio Ltda)

2025Q4: The income from tax asset activation is a long-term constructive view but does not drive short-term dividend or buyback decisions. - [Eduardo Haiama](CFO)

Contradiction Point 4

Auction Participation Strategy for 2026

Contradiction on the level of specificity and preparedness regarding auction participation plans for the upcoming year.

Daniel Travitsky (Banco Safra) - Daniel Travitsky (Banco Safra)

2026Q2: The company has a strong track record... For 2026, they anticipate participating in at least 3-5 auctions... - [Elio de Meirelles Wolff](EVP of Strategy & Business Development)

How does the company view the 2026 auction pipeline (generation, battery, transmission)? - Raul Cavendish (XP Investimentos Corretora de Câmbio, Títulos e Valores Mobiliários S.A.)

2025Q4: It is too early to finalize a position on the battery auction. The company has been working with suppliers for 1-2 years... - [Elio de Meirelles Wolff](EVP of Strategy & Business Development)

Contradiction Point 5

Primary Driver for Increased Investments in Resilience

Contradiction on whether investment driver is operational need or financial returns.

Bruno Amorim (Goldman Sachs) - Bruno Amorim (Goldman Sachs)

2026Q2: The primary driver is operational resilience—these are mandatory investments for asset longevity. - [Eduardo Haiama](Vice President of Finance and Investor Relations) and [Ivan Monteiro](President)

How much of the investment in reinforcement and improvements is driven by positive financial returns versus operational risk mitigation needs? - Bruno Amorim (Goldman Sachs Group, Inc.)

2025Q3: The investment focus remains on transmission reinforcements, improvements, and auctions. - [Elio de Meirelles Wolff](Executive VP of Strategy & Business Development)

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