Our subsidiary Elektro is the eighth largest electricity distribution company in Brazil and the third largest in the state of São Paulo. Elektro was created through a spin-off of the power distribution business of Companhia Energética de São Paulo in January 1998 pursuant to a national power sector privatization program. Shares of Elektro not directly owned by AEI are publicly traded on the São Paulo Stock Exchange under the symbols "EKTR3" for its ordinary shares and "EKTR4" for its preferred shares. Elektro is regulated by the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários) and ANEEL.
Elektro holds a 30-year renewable concession from ANEEL covering 223 municipalities in the state of São Paulo, the most highly urbanized and industrialized state in Brazil, and five municipalities in the state of Mato Groso do Sul. Elektro's concession agreement, the first term of which expires in 2028, provides exclusive distribution rights within the concession area. We may seek an extension of the concession agreement for an additional term of 30 years by submitting a written request to ANEEL accompanied by proof of compliance with various fiscal and social obligations required by law.
Tariffs for Brazilian power distribution companies are reviewed by ANEEL periodically. The reviews reset the tariffs to compensate for the company's capital, operational and administrative costs, investments to maintain the existing assets plus a pass-through of non-controllable costs, including energy purchases and sector charges. ANEEL uses a model distribution company as its basis for operational and administrative cost reimbursement. Capital costs and investments are determined based on a regulated asset base calculated at replacement costs of the company's assets. Tariffs are also adjusted annually for inflation of controllable costs and to pass through adjustments to non-controllable costs. Under its concession, Elektro is also entitled to an extraordinary tariff review to restore the economic equilibrium if significant macroeconomic events or changes in law alter its cost and revenue structure.
Contact Elektro:
Elektro Eletricidade e Serviços S.A. R. Ary Antenor de Souza, 321 Jardim Nova América CEP 13053-024 Campinas – S.P. – Brazil www.elektro.com.br 55 19 2122 1000
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