What does Taesa do?
Transmissora Aliança de Energia Elétrica SA (TAESA) is a leading company in the electrical energy transmission sector in Brazil . With an extensive network of transmission lines that covers several regions of the country, TAESA plays a fundamental role in the national electrical infrastructure, ensuring the safe and efficient transport of energy between generation sources and consumption centers. Recognized for its operational excellence, the company stands out for its commitment to quality, safety and innovation in its operations. Furthermore, TAESA maintains a constant focus on sustainability, seeking to contribute to the socioeconomic development of the communities where it operates.
How does TAESA make money?
Transmission companies are remunerated by the Permitted Annual Revenue (RAP) . Refers to the maximum revenue that an energy transmission company is authorized to receive in a given period, generally defined in concession contracts with regulatory bodies. RAP is calculated based on investments made in the construction, operation and maintenance of transmission facilities, as well as a regulated rate of return.
How is RAP defined?
The National Electric Energy Agency (ANEEL) is responsible for determining the RAP of each transmission company. To achieve this, ANEEL takes into account several technical and economic criteria, such as:
- Investment in the construction and maintenance of transmission lines: companies need to have a return on the capital they invest in transmission infrastructure.
- Operating costs: RAP needs to cover companies' costs to operate and maintain transmission lines, including personnel, materials and energy.
- Business risks: the electricity sector presents risks, such as consumer default and changes in market conditions. RAP needs to take these risks into account to ensure the attractiveness of investment in transmission.
Why does the RAP drop by 50% in some concessions?
The transmission concession contracts tendered between 1999 and 2006 (Category II) consider a 50% reduction in RAP (Basic Network) from the 16th year of commercial operation of the facilities.
What is the tax regime for energy transmission companies?
Before 2010, TAESA recorded its results in accordance with the current regulatory standard established by ANEEL. However, in 2010, Brazilian companies listed on B3 were required by law to account for their data according to the international standard IFRS . Since then, there has been a change in the way fixed assets are accounted for, as, according to IFRS , all infrastructure built by the operator is not recorded as the operator's own fixed assets, since the concession contract does not transfer ownership from the Union to the company . In other words, everything that TAESA builds in electrical lines, according to IFRS, cannot be considered fixed assets and must be accounted for as a financial asset. Therefore, when we look at accounting numbers from the perspective of IFRS, which amortizes and corrects financial assets according to inflationary data such as IPCA and IGP-M, we have different results from those of the regulatory standard. This article uses regulatory data as a basis for study, but there is no right or wrong, better or worse between regulatory and IFRS.
Evaluating Taesa Concessions.
It is crucial to understand that it is through the Allowed Annual Revenue (RAP) that the company generates its revenue. Therefore, understanding the current and future behavior of RAP is vitally important to understanding the company's potential for appreciation.
Image: Taesa transmission lines. Source: https://ri.taesa.com.br/sobre-a-taesa/concessoes/
" TAESA currently holds 43 transmission concessions: (i) 14 concessions that make up the holding company (TSN, Novatrans, ETEO, GTESA, PATESA, Munirah, NTE, STE, ATE, ATE II, ATE III, Miracema, Saíra and Sant 'Ana); (ii) 10 full investments (Brasnorte, São Gotardo, Mariana, Janaúba, São João, São Pedro, Lagoa Nova, Ananaí, Pitiguari and Tangará and (iii) 19 participations (ETAU, Transmineiras and the AIE Groups); and TBE). Of the concessions mentioned above, 5 are under construction. They are: Ivaí, Sant'Ana, Ananaí, Pitiguari and Tangará " Text taken from the company's website.
What will Taesa's Allowed Annual Revenue (RAP) be like?
This study aims to exclusively evaluate the existing lines currently in its portfolio. Assuming the absence of new acquisitions of transmission lines in the coming years, it is possible to observe an annual increase of 8% in Allowed Annual Revenue (RAP) until the year 2030 . However, after 2030, if there are no new acquisitions of transmission lines, a 28% drop in RAP is expected in 2031.
However, it is common knowledge that TAESA has an active participation in ANEEL transmission auctions and is involved in several inorganic acquisitions, in addition to closely monitoring the secondary market in search of possible new acquisitions. Therefore, it is likely that, given the scenario of a drop in RAP in 2031, the company is already actively planning a recovery of RAP.
What is the Average Term of TAESA's RAP?
We calculate that the weighted average term of TAESA 's RAP is 13.2 years. This value is derived by multiplying the RAP by the time elapsed to date and dividing by the total projected RAP.
What is Taesa's debt level?
Considering that the company has an idealized debt level of 3.7 times EBITDA, it is crucial to note that the company's leverage limit has been reached. Therefore, to participate in new ventures and continue to expand RAP, which is threatened beyond 7 years, the company is expected to take one of the following measures: (i) reduce the level of dividends to replenish cash . (ii) Carry out a capital call to increase cash. (iii) Reassess upwards the leverage limit established at 3.7 by the finance department . One of these three measures, or a combination of them, together with the increase in EBITDA in the coming years, will enable the company to increase the number of power transmission line concessions
Image: Amortization of Taesa’s debt.
Image: Debt/EBITDA . Source: https://ri.taesa.com.br/informacoes-financeiras/endividamento/
How can Taesa deliver shareholder value?
Normally, the concession period for a transmission line is 30 years. Therefore, with a weighted average term of 13.2 years, we can infer that Taesa 's assets are halfway through this journey, with the additional complication of a projected loss of 28% in the RAP forecast for 2031 in the annual comparison with 2030. This It forces the company, which previously focused on distributing dividends, to direct resources towards improvements and recomposition of the RAP, as building km of transmission line takes time and anticipation is the key to this business. Once again, it is important to highlight that the company remains open to new mergers and acquisitions (M&A) opportunities and participation in auctions held by ANEEL. Although the RAP presented in this article does not necessarily represent what will happen in the future, this assessment exercise is useful as it helps us understand the company's possible strategies and how we can position ourselves as shareholders.