By Brazil Stock Guide – Neoenergia S.A. (B3: NEOE3) is nearing the end of a seven-year transmission investment cycle, with all remaining projects set to enter operation by December 2025. “We will start 2026 with about R$2 billion ($370 million) in new transmission revenue from a fully operational portfolio,” CEO Eduardo Capelastegui told analysts during the company’s third-quarter earnings call.
Capelastegui said the partnership with Singapore’s sovereign wealth fund GIC “remains very strong,” and that negotiations are advancing for the sale of up to 50% stakes in seven transmission lots — including Guanabara, Vale do Itajaí, Morro do Chapéu, and Alto Parnaíba. “GIC is completing asset evaluations and should present an offer soon. There is no exclusivity, but mutual interest to move forward,” he said.
MP 1.304 and curtailment
Addressing the impact of Provisional Measure 1.304, which covers low-income tariffs and renewable curtailment losses, the CEO said the exposure for Neoenergia was “very limited.” The financial impact totaled R$40 million ($7 million) in the quarter and R$70 million ($13 million) year-to-date — lower than peers. “We are working closely with Aneel to ensure a structural solution that addresses both retroactive and forward-looking issues,” Capelastegui noted.
Financial discipline and leverage
CFO Leonardo Gadelha said Neoenergia’s leverage remains stable at 3.52× net debt-to-EBITDA, or 3.47× excluding temporary tariff-credit effects from MP 1.304. He added that the average debt maturity is 5.7 years and the cost of capital remains competitive. “Our AAA rating continues to provide very favorable funding conditions,” Gadelha said.
Regulatory environment and new concessions
The company expects to soon complete the early renewal of the Coelba, Cosern, and Elektro concessions, following the Pernambuco extension until 2060 — the first under Brazil’s new regulatory model. “The framework is working; regulation remains a key source of stability,” Capelastegui said.
With transmission investments nearly complete, Neoenergia plans to focus on distribution efficiency and renewable expansion. “We are closing an important chapter and entering another based on regulatory stability and capital discipline,” the CEO added.
Market view
XP reported an adjusted EBITDA of R$2.68 billion ($500 million), 11.7% above its forecast, with operating expenses 15% below estimates. Analysts reiterated a Buy rating and R$42.60 ($7.9) target, emphasizing that the key catalyst now lies in a potential takeover offer (OPA) by Iberdrola, following its purchase of Previ’s 30.29% stake.
BTG Pactual called the quarter “solid and in line”. Strong results at Elektro, Cosern, and CEB offset delays at Morro do Chapéu and Vale do Itajaí. BTG maintained a Buy with a R$40 ($7.5) target, citing 9.1× P/E 2025E and 6.4× EV/EBITDA 2025E.
Citi said Neoenergia delivered “good results”. The bank maintained a Buy rating with a R$34 ($6.4) target, seeing a 19.7% upside, and added that the potential privatization or delisting by Iberdrola represents a “significant upside risk” for investors.