ISAE3

ISA Energia Brasil S.A. is a Brazilian publicly traded company in the electric power sector, with shares listed on B3 under the tickers ISAE3 and ISAE4. The company originated from a partial spin-off of Companhia Energética de São Paulo (CESP) and began its commercial operations on April 1, 1999, focusing on electricity transmission. Over the course of its history, it has consolidated itself as a public transmission service concessionaire, operating under the regulation and supervision of the Brazilian Electricity Regulatory Agency (ANEEL). A major milestone in its history was the 2006 privatization auction, in which the government of the State of São Paulo sold its controlling stake to the Colombian group Interconexión Eléctrica S.A. E.S.P. (ISA), reinforcing its private profile and integrating the company into a Latin American conglomerate with decades of experience in transmission.

ISA Energia’s growth trajectory has been driven by acquisitions and recurring participation in ANEEL’s transmission concession auctions. Among the key corporate moves are the 2001 merger of Empresa Paulista de Transmissão de Energia Elétrica (EPTE), created from the spin-off of Eletropaulo, and the formation of several special-purpose entities to develop new concessions. Examples include Interligação Elétrica de Minas Gerais (IEMG), created in 2006 to operate a 500 kV line in Minas Gerais; Interligação Elétrica Norte e Nordeste (IENNE), formed in 2007 after an auction that interconnected Tocantins, Maranhão and Piauí; and vehicles such as IE Pinheiros, IE Sul, IE Madeira, Serra do Japi and IE Garanhuns, among others. The company has also used acquisitions to expand its asset base, such as Evrecy, acquired in 2012, and Piratininga Bandeirantes Transmissora de Energia (PBTE), announced in 2020. With these moves, the company expanded its portfolio of concessions, the average term of its contracts and the length of its transmission network.

ISA Energia’s business model is based exclusively on electricity transmission, a segment that accounted for 100% of the company’s net operating revenue and consolidated profit in the 2022, 2023 and 2024 fiscal years. The company operates within the National Interconnected System (SIN) through concession contracts and the Transmission Service Agreement (CPST) signed with the National Electric System Operator (ONS). Compensation occurs primarily through the Allowed Annual Revenue (RAP), defined and approved by ANEEL, calculated based on the availability of facilities and not on the volume of energy actually transmitted. This characteristic provides predictable cash flow linked to operating efficiency and management of outages, with negative adjustments to RAP in the event of asset unavailability.

The company’s operational structure combines own assets with equity interests in subsidiaries and affiliates dedicated to specific transmission projects in different regions. As of December 31, 2024, ISA Energia owned infrastructure of approximately 23,000 kilometers of transmission lines and 32,000 kilometers of circuits, with 139 substations (136 owned) and a transformation capacity of around 85,000 MVA. This network connects major hydroelectric plants on the Paraná, Tietê, Pardo and Paranapanema rivers to important load centers served by various distributors. Its counterparties include distribution concessionaires such as Enel, Elektro, EDP and Companhia Paulista de Força e Luz (CPFL), as well as generators, other transmission companies and free consumers that use the system. Operations are centrally coordinated from the Transmission Operation Center (COT), located in Jundiaí (SP), which monitors operational and maintenance interventions and conditions 24 hours a day.

ISA Energia has a broad geographic presence within the SIN, operating in states in the Southeast, South, Center-West, Northeast and part of the North regions. The company is present in Alagoas, Bahia, Espírito Santo, Goiás, Maranhão, Mato Grosso, Mato Grosso do Sul, Minas Gerais, Paraíba, Paraná, Pernambuco, Piauí, Rio de Janeiro, Rio Grande do Sul, Rondônia, Santa Catarina, São Paulo and Tocantins, which gives it strong integration into the Brazilian transmission grid. This capillarity translates into responsibility for transporting about 30% of the electricity produced in the country and approximately 95% of the energy transmitted in the state of São Paulo. The company has no revenues abroad, concentrating all operations and revenue in Brazil, although it is part of the ISA economic group, which has a significant presence in other Latin American countries.

From a market standpoint, ISA Energia accounts for about 11.2% of the Brazilian transmission market, measured in terms of total RAP authorized by ANEEL for the 2024/2025 tariff cycle, considering the adjusted share in subsidiaries. The Paulista Concession, governed by Concession Contract No. 059/01, is the main asset and concentrates a significant share of the company’s operating RAP. This contract, originally set to expire in 2015, was extended to 2042/2043 under Law No. 12,783/2013, including recognition of revenues associated with the Existing System Basic Grid (RBSE). The Paulista Concession’s RAP grew from R$ 582 million in the 2013/2014 cycle to R$ 1.495 billion in 2024/2025 (ex-RBSE), with an increasing share of operation and maintenance (O&M) and reinforcement and improvement (R&M) revenue. Including the RBSE portion, the concession accounts for more than two-thirds of the company’s annual operating revenue in the 2024/2025 cycle.

ISA Energia’s activities are heavily regulated by the legal framework governing the Brazilian electricity sector. Concessions are granted by the government based on the Concessions Law (Law No. 8,987/1995) and other sector regulations, with typical terms of 30 years for transmission and the possibility of discretionary renewal. ANEEL and the Ministry of Mines and Energy (MME) play a central role in authorizing new projects, auctioning lots in public tenders, defining RAP, and managing and supervising concession contracts. The company is subject to obligations to provide adequate service, continuity and safety standards, strict liability for damages, requirements for property and liability insurance, and oversight of changes in corporate control. Competitive dynamics are essentially concentrated at the time of auctions for new transmission lots, since once a concession is granted, there is no direct competition over the use of the same infrastructure during the contractual term.

On the technological and operational front, ISA Energia has been incorporating solutions aimed at operational efficiency and risk mitigation. The company was a pioneer in using drones to inspect lines, rights-of-way and substations, reducing physical travel, increasing crew safety and helping to reduce the need for vegetation intervention. It also developed a specific drone to burn off objects that fall onto lines, such as balloons and kites, preventing supply interruptions. In 2024, it received ANEEL authorization to install the first FACTS system of the Smart Valves type in the national electric system, initially at the Ribeirão Preto (SP) substation, with plans for subsequent relocation to Votuporanga and São José do Rio Preto, with the aim of increasing power flow flexibility and postponing investments in new lines. Additionally, the company seeks to monetize real estate assets related to line rights-of-way, as shown by the sale of areas in São José dos Campos in 2020.

With regard to environmental, social and governance (ESG) practices, ISA Energia publishes an Annual Sustainability Report in which it presents its performance and management approach on topics relevant to its stakeholders. This report is prepared in accordance with Global Reporting Initiative (GRI) standards, aligned with CPC Technical Guidance 09 and the reporting framework guidelines of the IFRS Foundation, and is also subject to independent external assurance. The company develops specific plans for emergencies on transmission lines, environmental emergencies at substations and lines, and physical asset contingency, integrating aspects of operational risk management and environmental impacts. These initiatives reinforce the company’s positioning in a public utility sector that is infrastructure-intensive, in which operational stability, regulatory compliance and a structured sustainability approach are core components of the ISAE3 and ISAE4 stock business on B3.