By Brazil Stock Guide — Axia Energia (AXIA3, AXIA7), the company formerly known as Eletrobras, has taken the first practical step toward unwinding a special class of shares created as part of its broader capital simplification plan.

The company’s board approved the redemption of 576,923 Class C preferred shares, known as PNCs, in a transaction worth R$30 million. The amount represents just 0.0951% of the PNC share class, with the redemption price set at R$52 per share, matching the closing price of Axia’s common shares on June 12.

The size is small by design. Axia said the first redemption or conversion would be carried out in a reduced amount because the mechanism is unprecedented for the company and needs to be tested before larger transactions are executed.

The PNCs were created at an extraordinary shareholders’ meeting on December 19, 2025, and distributed to shareholders at a ratio of 0.2628378881074 PNC share for each common, preferred A1 or preferred B1 share held. According to the company’s presentation, the PNCs are redeemable and/or convertible into common shares, carry voting rights on a one-share, one-vote basis, receive dividends on equal terms with common shares and have 100% tag-along rights. They are expected to be redeemed or converted by 2031.

The key feature is that redemption is the default option. Shareholders who do nothing will have their PNCs automatically redeemed in cash. Those who want to remain exposed to Axia’s equity must elect to convert the affected PNCs into common shares, at a 1:1 ratio.

That is what makes the transaction relevant for the government. As of June 2026, the so-called Government Group held 237.9 million PNCs, or 39.21% of that share class. The group includes the federal government, BNDES/BNDESPAR, FND, FGHAB, Banco do Nordeste, BB Asset, Caixa Asset, Petros and Previ — meaning the figure is broader than the direct federal government stake alone. (Axia | RI)

At the current redemption price of R$ 52 per PNC, that Government Group holding would be worth about R$ 12.4 billion. This does not mean that amount will be paid now. The current transaction totals only R$30 million. But it shows the scale of the instrument that Axia has started to activate.

If the current redemption were applied proportionally to the Government Group’s PNC stake, the corresponding amount would be roughly R$ 11.8 million. Financially, that is immaterial for the public sector. Strategically, however, it matters because it begins a recurring choice: receive cash or convert into common shares and preserve equity exposure.

The timetable is short. The B3 record date is June 18. The PNCs will trade ex-rights from June 19. Shareholders will be able to elect conversion between June 23 and June 29. Conversion into common shares is scheduled for July 1, while the cash redemption payment is due on July 7.

ADR holders will be treated differently. Investors holding ADRs backed by PNCs will not have the right to elect conversion into common shares. Their underlying PNCs will be mandatorily redeemed, with Citibank N.A., the depositary, receiving the proceeds and passing them on to ADR holders.

The tax treatment also reinforces that this is not being handled simply as a conventional dividend payment. Axia said that gains realized by Brazilian resident investors may be subject to income tax and other taxes, depending on each investor’s situation. For non-resident investors, the company may withhold income tax at source on any capital gain, with rates of 15%, 15% to 22.5%, or 25% for investors based in favorable-tax jurisdictions.

The first redemption will not change Axia’s balance sheet or ownership structure in any meaningful way. But it starts the engine. The PNCs were created as a bridge between accumulated profit reserves and an eventual transfer of value to shareholders. Now that bridge is beginning to move — either toward cash, or toward common shares.