ALUP11 Alupar

Alupar Investimento S.A., traded on B3 under the tickers ALUP3, ALUP4, and ALUP11, is a publicly traded company focused on electric power infrastructure, operating predominantly in the transmission segment and with a relevant presence in generation from renewable sources. The company was incorporated in 2006 as an investment vehicle of the controlling shareholder to consolidate interests in several transmission and generation projects. Its origin dates back to Companhia Técnica de Engenharia Elétrica, which began transmission operations in 2000 after winning ANEEL’s Auction 11/1999 for the ECTE concession, responsible for 252.5 km of transmission lines. Between 2007 and 2008, Alupar underwent a corporate restructuring process, incorporating into its structure several transmission concessionaires and hydroelectric generation assets, establishing the foundation of a long-term portfolio in the power sector.

Starting in 2007, Alupar expanded its generation platform with the acquisition of the Foz do Rio Claro Energia S.A. and Ijuí Energia S.A. hydroelectric power plants, as well as stakes in holding companies of Small Hydroelectric Power Plants (PCHs), such as Queluz and Lavrinhas. Over the following years, the company obtained new transmission concessions, such as EBTE, ESDE, ETEM, ETVG, TME, TNE, and ETSE, in addition to the Ferreira Gomes hydroelectric plant and the Energia dos Ventos wind complex. In 2013, already as a category A publicly held company, it carried out a public offering of units to finance its expansion plan, which allowed it to increase its share capital and shareholder base. The company also began to operate generation and transmission projects in other Latin American countries, such as Peru, Colombia, and Chile, reinforcing its profile as a regional electric infrastructure group.

Alupar’s business model is based on the exploitation of long-term electric power transmission concessions and generation from hydro, wind, and, to a lesser extent, solar sources. In the transmission segment, which accounted for 80.5% of total gross revenue in 2024 and 84.7% of consolidated net operating revenue (before eliminations), revenue comes from concession contracts structured as Allowed Annual Revenue (RAP), defined in the bidding notices and contracts with the granting authority. This revenue is adjusted annually for inflation (linked to indices such as IGP-M, IPCA, and PPI, depending on each concession) and depends on the availability of the lines rather than the volume of energy transported, which provides greater cash flow visibility. In generation, the company operates hydroelectric plants, PCHs, wind farms, and photovoltaic projects, with energy sales contracts mostly long-term, both in the regulated market and the free market, many of them with terms extending into the 2040s and beyond.

At the end of 2024, Alupar held 42 transmission concessions, totaling 9,578 km of lines in operation and under construction, spread across Brazil, Colombia, Peru, and Chile. Of this total, 27 concessions were operational in Brazil and 15 were under construction, five in Brazil, two in Colombia, five in Peru, and three in Chile. In Brazil, the transmission system under the group’s responsibility totaled 8,955.5 km of lines, equivalent to about 5.22% of the National Interconnected System (SIN) grid. Among the main expansion projects, Transnorte Energia (TNE) stands out, responsible for the Manaus–Boa Vista Transmission Line, which will connect the state of Roraima to the SIN via a 500 kV double-circuit line, approximately 715 km long, with three associated substations. Other assets under construction, such as ELTE, TECP, TPC, and TAP in Brazil, and TCE, TCN, TES, SED, TER, TEP, TSA, and TEL in Latin America, reinforce the strategy of organic growth through participation in public concession auctions.

In generation, Alupar concentrates its activities on renewable sources in Brazil, Peru, and Colombia. As of December 31, 2024, installed capacity in operation reached 798.5 MW, of which 575.1 MW came from hydroelectric plants and PCHs and 161.7 MW from seven wind farms. The Foz do Rio Claro, Ijuí, and Ferreira Gomes hydroelectric plants have energy sales contracts with distributors valid until 2044, while the Queluz and Lavrinhas PCHs have contracts until 2025. The Verde 08 PCH has a contract in the regulated market until 2052, and the wind farms of the Energia dos Ventos complex have contracted energy until 2035. The portfolio also includes the Morro Azul PCH in Colombia, with contracts until 2026, the AW São João (EAP I) wind farm in Rio Grande do Norte, with contracted energy starting in 2027 for 15 years, and the AW Santa Régia (EAP II) wind farm, dedicated to self-production for WEG S.A.’s operations until 2041. Most of the hydroelectric plants and PCHs in Brazil participate in the Energy Reallocation Mechanism (MRE), which redistributes assured energy among the plants in the system, helping to mitigate hydrological risk and smooth generation volatility.

In terms of markets served, Alupar’s revenues come mainly from contracts with energy distribution companies and the granting authority, as well as bilateral contracts with large consumers and self-producers, always on a long-term basis and with low credit risk. In 2024, there was no individual customer accounting for more than 10% of total net operating revenue, which reduces counterparty concentration. The transmission activity is remunerated via RAP paid by players in the power sector, according to rules established by ANEEL and the National System Operator (ONS). The energy generated is sold both in the Regulated Contracting Environment, through public auctions, and in the Free Contracting Environment, via supply contracts for companies and special consumers, including self-production structures.

Alupar’s activities are heavily influenced by power sector regulation in the countries where it operates. In Brazil, its generation and transmission concessions and authorizations are granted and supervised by the Brazilian Electricity Regulatory Agency (ANEEL), in coordination with the Ministry of Mines and Energy (MME) and ONS, which manages the Basic Grid and the operation of the SIN. The rules for RAP adjustments, periodic tariff reviews, quality standards, and penalties for unavailability are defined in concession contracts and specific regulations. In the other countries, the company is subject to authorities such as the Comisión Nacional de Energía and the Superintendencia de Electricidad y Combustibles in Colombia, the Ministerio de Energía y Minas in Peru, and the Coordinador Eléctrico Nacional in Chile. Expansion of the power systems in these markets follows long-term planning guidelines, such as Brazil’s Ten-Year Energy Expansion Plan, which guide the offering of new projects in public auctions.

From an operational and economic standpoint, Alupar has a capital-intensive business profile, with high investment in the construction phase of transmission lines and plants, followed by relatively lower maintenance needs in operation. In 2024, consolidated net operating revenue was R$ 4.0 billion, with EBITDA of R$ 3.07 billion and an EBITDA margin of 76.7%. The transmission segment accounted for R$ 5.54 billion in revenue, equivalent to 84.7% of the total before eliminations, while generation contributed R$ 850 million, or 13%. Net income attributable to controlling shareholders reached R$ 1.09 billion in 2024, with total assets of R$ 30.69 billion and gross debt of R$ 12.68 billion. The company also maintains complementary activities in energy trading and operation and maintenance services, which, although smaller in revenue terms, reinforce its integrated role in managing electric infrastructure assets.

Alupar’s common and preferred shares, traded under the tickers ALUP3, ALUP4, and the units ALUP11, provide exposure to a portfolio of transmission and generation concessions distributed across different regions of Brazil and neighboring countries. The combination of long-term regulated contracts indexed to inflation, participation in mechanisms such as the MRE, and diversification between mature operating assets and projects under construction defines the company’s economic profile. The growth strategy has been based on recurring participation in transmission and generation auctions, the selective acquisition of equity stakes in greenfield projects, and the pursuit of operational efficiency to maintain low unavailability rates and controlled costs, in line with the regulatory requirements of the markets in which it operates.