Engie (EGIE3.SA): Offering settled, Jirau onboard; Neutral maintained

Research evidence excerpt

Engie (EGIE3.SA): Offering settled, Jirau onboard; Neutral maintained

more on the volatile spot market, which would affect profitability and

earnings stability.

(ii) Power pricing and economic sensitivity. Long-term power prices and demand are sensitive to Brazil’s economic trajectory. A

weaker-than-expected economic recovery would likely dampen power demand and pressure long-term pricing, which could

reduce Engie’s revenue and cash flow.

(iii) Capital allocation and growth optionalities. Engie’s conservative approach may limit its ability to capture new growth

opportunities. Additionally, should the company pursue brownfield or greenfield acquisitions at low returns, this could

dampen overall returns and reduce investor confidence.

AXIA ENERGIA

(AXIA3.SA; R$51.27; 1; 27 Jul 26; 18:00)

Valuation

We set our target price at R$67.0/share for AXIA3 based on a sum-of-the-parts analysis of its businesses. Generation and

transmission are valued through an FCFF methodology, which entails a real WACC (in R$) of 6.0%. The main minority stakes in

listed companies are valued at Citi’s target prices for covered companies (and at market prices otherwise). Other stakes are

valued at 1.0x book value. Liabilities and other obligation payments, as well as potential tax credits / judicial deposits related

to such payments, are valued through an FCFE methodology, entailing a real Ke (in R$) of 8.5%.

Risks

The main risks to our investment thesis and target price for AXIA3 include: (1) Power Price Volatility. AXIA3 is exposed to the

inherent volatility of power prices, a risk intensified by Brazil’s increasing reliance on renewable energy sources. Given the high

variability of uncontracted prices, effective power trading will be crucial for AXIA3 in the coming years. As such, the company