TAEE3

Transmissora Aliança de Energia Elétrica S.A. (Taesa), traded on B3 under the tickers TAEE3, TAEE4, and TAEE11, is a Brazilian publicly traded company dedicated exclusively to the high-voltage electric power transmission segment. Originally incorporated in January 2006 as Donnery Holdings S.A., it changed its corporate name to Terna Participações S.A. later in 2006, as part of a move to concentrate in Brazil the transmission assets of Italian company Terna S.p.A. In the same year, it took over control of transmission companies TSN – Transmissora Sudeste Nordeste S.A. and Novatrans Energia S.A., with prior approval from the Brazilian Electricity Regulatory Agency (ANEEL). The initial public offering took place in October 2006, when its shares began trading on the then BM&FBOVESPA, now B3, with adhesion to Level 2 of Corporate Governance. In 2009, after the sale of Terna S.p.A.’s stake, the company adopted its current name, Taesa, consolidating itself as a holding company for transmission assets under a new controlling block led by Brazilian investors.

Taesa’s trajectory is marked by successive acquisitions and mergers of electric power transmission concessions, expanding its asset base and diversifying its geographic footprint. TSN was originally incorporated in 2000 to operate the concession for the Southeast–Northeast interconnection, encompassing around 1,139 km of transmission lines between Goiás and Bahia, at voltages of 500 kV and 230 kV, with stakes in several substations. Novatrans, also created in 2000, operates the North–South II interconnection, with approximately 1,278 km of 500 kV lines connecting Maranhão to the Federal District. Over the years, Taesa came to control other transmission companies such as Munirah, GTESA, PATESA, ETEO, ETAU, and Brasnorte, among others, through equity acquisitions and mergers, expanding its portfolio of concessions in different regions of the country and reinforcing its position as one of Brazil’s largest pure-play power transmission companies.

Taesa’s business model is based on operating public service concessions for electric power transmission, focusing on the implementation, construction, operation, and maintenance of transmission lines and substations that make up the Basic Network of the National Interconnected System (SIN) and Other Transmission Facilities (DIT). The company operates at voltages equal to or above 230 kV, transporting energy from generating plants to major load centers and connection points with distributors and large consumers. Taesa’s revenue comes predominantly from the Allowed Annual Revenue (RAP), a compensation set in auctions and concession contracts approved by ANEEL. This revenue is tied to the availability of the facilities and not to the volume of energy actually transmitted, which provides greater predictability for cash generation, subject to rules for annual adjustment by inflation indices (IGP-M or IPCA) and periodic tariff reviews defined by the regulator.

Taesa’s revenue structure also involves its relationship with the National Electric System Operator (ONS), through the Transmission Service Agreement (CPST). This agreement sets the terms for ONS’s administration and coordination of transmission services provided to users of the Basic Network. Based on this agreement, ONS enters into Transmission System Use Agreements (CUST) directly with generators, distributors, free consumers, and other agents, defining the transmission system usage charge (EUST) owed by each user. Thus, Taesa and its subsidiaries do not determine who uses their lines or how much each agent pays; their remuneration is received via the RAP embedded in the charges collected by ONS, reinforcing the regulated and indirect nature of their commercial relationship with the network’s end users.

From an operational standpoint, Taesa carries out activities of construction and assembly of facilities, availability, operation, and maintenance of lines and substations spread across several regions of Brazil. The group’s transmission system totals more than 15 thousand kilometers of lines in operation and under construction, distributed across projects such as the North–South II and Southeast–Northeast interconnections, in addition to important regional stretches in states such as São Paulo, Bahia, Rio Grande do Norte, Paraíba, Pernambuco, Mato Grosso, Tocantins, Maranhão, Rio Grande do Sul, and Santa Catarina. These facilities include 230 kV, 440 kV, 500 kV, and 525 kV lines, connecting strategic substations and strengthening the SIN’s transmission grid. The company is subject to operational risks typical of power infrastructure, such as equipment failures, severe weather events, and other contingencies, and it adopts property and liability insurance to mitigate potential losses associated with incidents affecting assets under its responsibility.

Taesa operates in a highly regulated and concentrated market, in which ANEEL plays a central role in granting, regulating, and overseeing power services. Transmission concessions are obtained through public auctions or privatization processes, and throughout the term of the contract there is no direct competition in the area covered by the concession. Competition essentially takes place in the bidding processes for new concessions, in which other transmission companies, generators, and private agents may participate, except for power distributors, which are prohibited from operating in this link of the chain. Legislation also prevents transmission companies from engaging in distribution activities to end consumers, maintaining separation among the generation, transmission, and distribution segments in the Brazilian power sector. In terms of physical participation in the grid, Taesa holds a relevant share of the total transmission lines in operation and under construction in the country, within a universe of just under 200 thousand kilometers of lines with voltage equal to or greater than 230 kV.

Regarding economic regulation, part of Taesa’s concession contracts provides for a 50% reduction in RAP starting from the 16th year of commercial operation of the facilities, in accordance with parameters established by ANEEL. This rule affects older concessions, such as Novatrans, TSN, ETEO, Munirah, GTESA, PATESA, ETAU, and stakes in transmission companies such as ATE, ATE II, ATE III, EATE, ECTE, ETEP, ENTE, NTE, STE, ERTE, and others, in different proportions and on different dates. On the other hand, new contracts signed as of 2008 follow a different logic, with periodic tariff reviews in five-year cycles and, in some cases, without RAP reduction in the second half of the concession term, as is the case with projects such as Brasnorte, Miracema, Janaúba, and several more recent SPEs. ANEEL has also introduced mechanisms to capture “business efficiency gains” in tariff reviews, associated with reductions in financial and operating costs, although the capture rate for auctioned transmission companies is currently set at 0%.

Taesa is influenced by public policies for regional development and benefits from tax incentives in certain concessions located in the areas covered by the Superintendence for the Development of the Amazon (SUDAM) and the Superintendence for the Development of the Northeast (SUDENE). These incentives, granted for projects in states such as Bahia, Maranhão, Tocantins, Rio Grande do Norte, Paraíba, Pernambuco, and others, generally consist of a 75% reduction in Income Tax due on the operation of the transmission concessions, subject to specific obligations such as the creation of a tax incentive reserve and the use of these funds in activities related to production in the incentivized region. This tax structure, combined with long-term contracts and the sectoral regulatory framework, shapes the company’s cash generation and economic-financial structure.

From a corporate governance standpoint, Taesa is listed on B3’s Level 2, which entails transparency practices, shareholder rights, and corporate rules that go beyond the minimum legal requirements of the traditional market. The company operates exclusively in Brazil and in a segment that is capital intensive, with strong oversight by entities such as ANEEL and ONS. Although the form describes operational, regulatory, and economic aspects in detail, there is no emphasis on specific environmental, social, and governance (ESG) initiatives in the excerpt presented, other than the regulatory structure itself, operational safety, and insurance, which are typical of power infrastructure companies. In this context, TAEE3, TAEE4, and TAEE11 shares represent an ownership stake in a public utility company specialized in power transmission, with predominantly regulated revenues based on the availability of an extensive network of lines and substations spread across several Brazilian states, with no involvement in power generation or distribution to end consumers.