By Brazil Stock Guide – Auren Energia (AURE3.SA) reported a net loss of R$403.7 million in the third quarter of 2025, reversing a profit from a year earlier, as severe curtailment and lower hydropower offsets (GSF) hit generation volumes and margins. Adjusted EBITDA fell 10.4% to R$772.7 million, reflecting the combined effects of weaker system demand, operational restrictions, and higher financing costs after the AES Brasil integration.
Sector strain and portfolio resilience
The quarter brought some of the harshest operational conditions in recent years. In Brazil’s power system, curtailment refers to the forced reduction of renewable generation — mainly wind and solar — when the national grid cannot absorb all the electricity produced due to technical or transmission constraints. This phenomenon reached record levels, cutting 20.7% of wind and 33.1% of solar output in Auren’s portfolio.
At the same time, the GSF (Generation Scaling Factor), a key metric in Brazil’s hydropower market, fell to 65%. The GSF measures how much hydro plants actually generate compared to their “assured energy” levels used in long-term contracts — when it drops, companies must buy energy in the spot market to fulfill commitments, eroding margins.
Combined, these two factors had a negative impact of R$196 million on Auren’s quarterly results, compared with R$96 million in the prior quarter. Still, the company’s diversified portfolio provided a cushion, with R$66 million in modulation gains, supported by volatile short-term prices — the average PLD, Brazil’s spot price benchmark, rose to R$252/MWh in the Southeast/Central-West submarket.
Integration completed, CESP indemnity approved
Less than a year after acquiring AES Brasil, Auren completed the full operational and financial integration, shutting down legacy systems and fully repaying the acquisition finance. Efficiency gains continue to accrue: PMSO synergies reached R$212 million, including R$58 million in savings during the third quarter alone.
On the regulatory front, Brazil’s power regulator ANEEL approved a R$498.8 million indemnity for CESP, related to prudent investments made in its hydropower plants Jupiá, Ilha Solteira, Paraibuna, and Jaguari. Net leverage ended the quarter at 4.9x EBITDA, reflecting higher debt levels following the acquisition, partly offset by leaner cost structures.
Corporate reorganization on the horizon
CEO Fábio Zanfelice and CFO Mateus Ferreira said the company has started preparatory steps for a corporate reorganization planned for 2027, aiming to consolidate all hydro assets under CESP, reduce the number of listed entities, and improve cash and liability management. The move is expected to unlock further synergies and simplify the company’s capital structure.
Structural outlook remains positive
Despite short-term losses, Auren remains upbeat about the long-term fundamentals of Brazil’s power sector. “Energy prices should converge toward the marginal cost of expansion as oversupply declines,” management said in its quarterly letter.
The company noted that long-term PPAs have been signed at higher prices, signaling early signs of normalization in the market. With 8.8 GW of installed capacity across hydro, wind, and solar sources, Auren reaffirmed its commitment to sustainable value creation for shareholders and to modernizing Brazil’s energy infrastructure amid rising operational and regulatory complexity.