CEED4

Companhia Estadual de Distribuição de Energia Elétrica – CEEE-D is a public utility concessionaire for electric power distribution operating exclusively in the State of Rio Grande do Sul, with shares traded on B3 under the tickers CEED3 and CEED4. The company was created in 2006 through the partial spin-off of the former Companhia Estadual de Energia Elétrica (CEEE), in the context of adapting to the new model for the Brazilian power sector defined by Federal Law No. 10,848/2004, which mandated the segregation of generation, transmission, and distribution activities. As part of the same restructuring, CEEE was renamed Companhia Estadual de Geração e Transmissão de Energia Elétrica – CEEE-GT, while the newly created CEEE-D assumed the distribution concession. Control came to be exercised by Companhia Estadual de Energia Elétrica Participações – CEEE-Par, a holding company created by the State of Rio Grande do Sul in October 2006 to concentrate its equity stakes in the power group.

CEEE-D’s corporate trajectory was marked by strong influence from the state government until the privatization process. In July 2019, State Law No. 15,298 authorized the privatization of the distributor, and in August of the same year a contract was signed with the Brazilian Development Bank (BNDES) to structure the sale of control. On March 31, 2021, B3 hosted the auction for the sale of the State’s shares in CEEE-D, in which Equatorial Participações e Investimentos S.A. emerged as the winner. With settlement of the transaction in July 2021, Equatorial acquired approximately 95.12% of CEEE-D’s total share capital, becoming its direct controlling shareholder and adding the distributor to the portfolio of Grupo Equatorial Energia, which operates in several regional power distribution markets in the country.

CEEE-D’s business model is fully based on the distribution concession, formalized by Concession Contract No. 81/1999 signed with the Brazilian Electricity Regulatory Agency (ANEEL), which represents the Federal Government as grantor. The company does not generate energy; its core activity consists of purchasing energy in regulated environments, using the transmission grid, and operating the distribution network up to the end consumer in its concession area. In 2021, through the Fifth Amendment to the Concession Contract, the term of the concession was extended for another 30 years, ensuring the company’s right to operate the public distribution service until 2045, with the possibility of further extension at ANEEL’s discretion. The contract also establishes obligations related to quality, continuity, safety, and tariff affordability, and provides for penalties in the event of non-compliance.

From an operational standpoint, CEEE-D operates in a single segment: electric power distribution, which accounts for 100% of net operating revenue, totaling approximately R$ 5.34 billion in fiscal year 2024. The company serves 1.958 million consumer units in 72 municipalities in Rio Grande do Sul, in a concession area of 73,249 km² in the south-southeast region of the state, representing about 1% of Brazil’s territory, 2.1% of total customers, and 1.7% of the volume of energy distributed in the country, according to ANEEL data as of December 2024. The electric system operated by the company includes high-, medium-, and low-voltage grids, predominantly overhead, with underground networks in specific areas, forming an extensive and branched infrastructure connecting residential, commercial, industrial, and public-service consumers.

CEEE-D’s energy supply chain reflects the regulatory design of the Brazilian power sector. The distributor acquires virtually all required energy through regulated energy auctions held by ANEEL, via Power Purchase Agreements in the Regulated Market (CCEAR), complemented by Itaipu quotas, Proinfa contracts, supply from Eletronuclear, physical guarantee quotas from hydropower generators, and purchases in the short-term market. As of December 31, 2024, 58% of the contracted electricity volume came from CCEAR and 42% from structural programs and contracts such as PROINFA, Eletronuclear, Itaipu, and quotas. The supply matrix was composed of 46.6% hydropower, 26.5% energy from fossil fuels, and 26.9% from alternative sources, including wind and solar. The company maintained 446 CCEAR contracts with 344 suppliers, evidencing a broad and diversified base of regulated supply.

In market terms, CEEE-D operates as a natural distribution monopoly within its concession area, under strong economic and technical regulation by ANEEL and the State Agency for the Regulation of Delegated Public Services of Rio Grande do Sul (AGERGS). Distribution tariffs follow a “price-cap” model, under which ANEEL sets the maximum tariff level, with a tariff structure broken down into Parcel A, which covers generation, transmission, and sector charges, and Parcel B, which aggregates operating costs under the concessionaire’s management. Tariffs are adjusted and reviewed periodically, with mechanisms designed to preserve the economic and financial balance of the concession, considering inflation (IGP-M or IPCA), the X efficiency factor, and the recomposition of regulatory costs. This structure, combined with the obligation to provide an adequate service, strongly shapes the company’s revenue formation and profitability.

CEEE-D’s consumption base is predominantly captive residential and commercial, with a smaller share from the industrial segment. In 2024, total volume distributed to captive and free markets reached 8,791 GWh, a 3.0% increase versus 2023. The captive market accounted for 6,613 GWh, up 0.6% year over year. The residential class, responsible for 56.9% of captive consumption, grew 5.3% in 2024, while captive industrial consumption, with a 2.8% share of the captive market, declined 23.2%, reflecting, among other factors, customer migration to the free market and sector-specific economic dynamics. Captive commercial consumption, which represents 22.1% of the captive market, fell 5.1% in the period, although total commercial consumption, combining captive and free, grew 2.1% compared to 2023. The customer base is highly fragmented, with no significant concentration: no individual customer accounted for more than 10% of net revenue in 2024.

The activities of Companhia Estadual de Distribuição de Energia Elétrica – CEEE-D are fully subject to the legal framework for public service concessions in Brazil, especially the Federal Constitution, the General Concessions Law, and sector-specific electricity legislation. Acting through ANEEL, the grantor holds prerogatives such as oversight, sanctions, intervention, and, in specific situations, repossession (encampação) or forfeiture (caducidade), always observing the rules for indemnification of investments in reversible assets that have not yet been amortized. Changes in the controlling interest of distribution concessionaires require ANEEL’s prior approval, as occurred during the process of transferring control to Equatorial Participações in 2021. The concessionaire is also strictly liable for damages arising from service provision, may use public assets, and may request expropriation of areas needed for network expansion, bearing the respective indemnities.

In environmental, social, and governance (ESG) matters, CEEE-D is part of Grupo Equatorial and follows its Sustainability Policy, which seeks to incorporate social, environmental, and governance criteria into business management. The group publishes an annual Sustainability Report, prepared based on GRI and SASB methodologies and on sector indicators reported to ANEEL, and subject to independent assurance, which includes CEEE-D’s data. The company has been a signatory to the UN Global Compact since 2021 and highlights as priority Sustainable Development Goals quality education, affordable and clean energy, and climate action. In line with these guidelines, the company conducted a greenhouse gas emissions inventory covering scopes 1, 2, and 3, with independent audit, and Grupo Equatorial is conducting a diagnostic process to align with IFRS S1 and S2 standards, which are expected to serve as the basis for future alignment with TCFD recommendations, enhancing transparency on climate-related risks and opportunities associated with power distribution.

As an issuer with CEED3 and CEED4 shares listed on B3, CEEE-D is part of the public utilities segment of the Brazilian capital market, offering specific exposure to the distribution link in the electric power chain. Its economic and financial dynamics are shaped by long-term concession contracts, regulated tariff rules, quality targets, ongoing grid investments, and the governance and transparency discipline required both by power-sector regulatory authorities and by the stock market environment in which it operates.