Target Information

ENGIE Brasil Energia has achieved an installed capacity of 11 GW and is expanding its transmission presence following its success in the ANEEL Transmission Auction 02/2024, where it acquired Lot 1. This new lot will cover approximately 780 km across the states of Santa Catarina, Paraná, São Paulo, Minas Gerais, and Espírito Santo. During Q3 2024, the company also saw the early commercial operation of 50 wind turbines from the Serra do Assuruá Wind Farm in Bahia, contributing to 27% of its total installed capacity.

In its financial results for Q3 2024, ENGIE Brasil Energia reported an adjusted EBITDA of approximately R$ 1.7 billion, reflecting a decrease of 5.8% compared to the same period last year. The adjusted net income for Q3 2024 was R$ 666 million, down 28.2% from Q3 2023. Key factors influencing these results included a partial divestment in TAG and increased costs for materials and third-party services, although these were mitigated by reduced energy purchase costs and favorable outcomes in short-term market operations.

Industry Overview in Brazil

The Brazilian energy market is prominently characterized by its reliance on renewable resources, particularly hydropower, wind energy, and solar power. With approximately 83% of the country's energy matrix being renewable, it is vital for Brazil to enhance its transmission infrastructure to support growing demand and facilitate the integration of diverse energy sources. Over the past decade, investments in renewable energy have surged, leading to a notable increase in both installed generation capacity and competitiveness in the energy sector.

Despite its strengths, the sector faces challenges such as inadequate transmission infrastructure and regulatory restraints that can hinder the development of new projects. Recent shifts towards more sustainable energy solutions pose both opportunities and risks for investors, with the government and private sector needing to work collaboratively to overcome financing barriers and expediting project execution.

Market trends indicate a strong push for innovation and efficiency, particularly within the free energy market where customers increasingly seek cost-effective and sustainable energy solutions. The competitive landscape is intensifying, driven by the entry of new players and the evolving preferences of consumers for greener options.

As Brazil seeks to bolster its energy security, there remains a critical need for a coherent and comprehensive transmission strategy that not only supports the distribution of renewable energy but also facilitates economic growth across the country. Investments in transmission lines and infrastructure are vital for meeting the nation's ambitious sustainability targets.

Rationale Behind the Deal

ENGIE Brasil Energia's acquisition of the transmission lot is a strategic maneuver aimed at enhancing its presence in a sector that is crucial for addressing Brazil's long-term energy stability and sustainability goals. This investment in transmission infrastructure will enable the company to better connect its renewable energy sources with demand centers, thereby improving efficiency and reliability in energy delivery.

This move aligns with ENGIE's broader strategy of investing in sustainable and innovative solutions, ensuring a balanced growth approach that supports not only shareholder returns but also the socio-economic development of the regions where it operates.

Information About the Investor

ENGIE is a global leader in the energy transition, committed to accelerating the shift toward a carbon-neutral economy. With over 98,000 employees in 30 countries, ENGIE operates across the entire energy value chain, from renewable electricity production and natural gas to infrastructure and sales. In 2024, the company reported revenues of €73.8 billion, thereby affirming its robust financial position and sustainable growth trajectory.

In Brazil, ENGIE stands out as the leading provider of 100% renewable energy, with an installed capacity of 12.5 GW from renewable sources. The company is distinguished not only by its generation capabilities but also by its extensive natural gas transportation network, essential to the nation’s energy reliability and diversification initiatives.

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This deal represents a significant opportunity for ENGIE Brasil Energia to solidify its position within the Brazilian energy market. By acquiring new transmission assets, the company is well-poised to enhance its operational efficiency and meet the increasing demands of consumers for reliable electricity supply derived from renewable sources.

Moreover, with ongoing investments in both generation and transmission projects, ENGIE is strategically aligning itself with Brazil's energy evolution. The firm’s focus on sustainability, paired with its vast operational expertise, not only enhances its competitiveness but more importantly, contributes positively to the local economy and society.

The anticipated growth in the renewable energy sector, alongside heightened demand for sustainable solutions, suggests a favorable landscape for ENGIE's investments. However, the company must remain vigilant regarding regulatory hurdles and the need for expedited infrastructural development to avoid potential constraints on its operations and revenue growth.

Given these factors, this investment can be considered a sound decision within ENGIE's broader corporate strategy. By strengthening its transmission capabilities, ENGIE will not only deliver valuable returns to shareholders but also support Brazil in achieving its ambitious renewable energy objectives.

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