Currently, we have 5 legacy contracts, all with a 20-year term and 100% indexed to the IGPM with adjustments in December of each year. They are:
On December 31, 2025, the first NTS Legacy Contract – the Malhas SE Contract – will expire, initiating the 1st Regulatory Cycle of NTS. During this cycle, the Regulator will define the Maximum Allowed Revenue based on the valuation of the Regulatory Asset Base, remuneration rate, CAPEX projection, OPEX, and capacity scenario for the period 2026-2030.
With the Gas Law approved in 2021, NTS’s assets began to operate under an authorization regime and for an indefinite period.
The gas transportation network in Brazil is segmented by zone of influence. Therefore, expansion projects within NTS’s zone of influence (mainly RJ, SP, and MG) will be primarily directed to NTS, as the regulatory body aims to leverage economies of scale and scope. Projects outside NTS’s zone of influence are initially subject to the entry of new agents, although there is a natural barrier to entry in the sector.
The risk of default by our clients is very low. Petrobras, our main client, has a AAA rating in the local market by Fitch Rating. Additionally, their payments to NTS are guaranteed by a receivables account from a group of gas distributors who are Petrobras clients, managed by a top-tier bank, with a minimum balance equivalent to 120% of the monthly amount to be received by NTS. Furthermore, we have a surety bond issued by a top-tier bank with an amount equivalent to 90 days of continuous billing.
For other contracts, which represent less than 3% of our revenue, we require the presentation of bank guarantees issued by top-tier banks, security deposits, prepayment for the contracted transportation, or surety insurance, depending on the counterparty’s credit risk.
The legacy contracts and the Entry and Exit contracts stipulate that in the event of unilateral termination by the shipper, the amount to be paid is the outstanding balance contracted from the moment of contractual termination until the contract’s expiration.
Our contracts include penalties for non-compliance and the provision of contractual guarantees with top-tier banks to ensure payment compliance.
Our commercial contracts are 100% in reais and indexed to inflation, specifically the IGPM index. Foreign currency loans were contracted, but these contracts were 100% converted to reais and exposed to the CDI at the time of resource internalization, completely mitigating the exchange rate risk of these maturities.
NTS sells transportation capacity, not transported volume. Thus, nearly 100% of the company’s ordinary revenue is linked to the firm capacity contract (known as ship-or-pay) and is currently supported by the existing legacy contracts with Petrobras. Additionally, based on asset availability, NTS offers transportation services in the following modalities: i. Firm, with daily, monthly, quarterly, or annual duration; ii. Interruptible, offered when the firm modality is 100% contracted at a specific point in the Transportation Network, based on idle capacity.
Most of the revenue earned from Firm and Interruptible contracts, which represents less than 5% of the company’s annual revenue in 2023, is deducted from the Revenue owed by Petrobras under the Legacy Contracts.
The company has two investment agendas. The first is related to the execution of maintenance Capex, focusing on integrity activities, including pipeline repair and maintenance, lease class adjustment, and geotechnical repairs. Additionally, the company focuses on operational continuity activities, including maintenance of industrial assets and overhaul of our gas turbines.
The second agenda is related to system expansion, where the company has completed several projects such as the construction of the Guapimirim receiving point, the Itaboraí receiving point, and the GASIG pipeline. Furthermore, investments were made in market opening initiatives, such as the adjustment of fiscal meters and the acquisition of packing gas (Linepack), as well as the expansion of the LNG receiving point in Guanabara Bay and the Cabiúnas Interconnection project.
The activity presents a certain degree of complexity; however, there are a series of procedures and policies that govern the operation of our assets. Additionally, we have a very active internal controls and risk system in identifying and mitigating existing risks. Finally, the company has insurance policies for environmental risks, civil liability, cybersecurity, revenue loss due to accidents, bad faith crimes, and decision-makers (D&O).
