CEED4: quote, dividends and indicators for Companhia Estadual de Distribuição de Energia Elétrica - CEEE-D

Companhia Estadual de Distribuição de Energia Elétrica – CEEE-D is a public electricity distribution utility with an exclusive concession area 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 following the partial spin-off of the former Companhia Estadual de Energia Elétrica (CEEE), in the context of adapting to the new Brazilian power sector model defined by Federal Law No. 10,848/2004, which mandated the segregation of generation, transmission, and distribution activities. Under the same restructuring, CEEE was renamed Companhia Estadual de Geração e Transmissão de Energia Elétrica – CEEE-GT, while the newly created CEEE-D took over 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 consolidate its interests in the power group.

The corporate trajectory of CEEE-D 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 the settlement of the auction in July 2021, Equatorial acquired approximately 95.12% of CEEE-D’s total capital stock, becoming its direct controlling shareholder and adding the distributor to the portfolio of Grupo Equatorial Energia, which operates in various regional distribution markets in the country.

CEEE-D’s business model is entirely based on exploiting its electricity 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 markets, using the transmission network, and operating the distribution grid 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 a further 30 years, securing the company’s right to provide public distribution services until 2045, with the possibility of further renewal at ANEEL’s discretion. The contract also establishes obligations related to quality, continuity, safety and tariff affordability, and sets out penalties in the event of non-compliance.

From an operational standpoint, CEEE-D operates in a single segment: electricity 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 electrical system operated by the company encompasses high-, medium- and low-voltage networks, predominantly overhead, with underground networks also present in specific areas, forming an extensive and branched infrastructure to connect 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 practically all the energy it needs through regulated energy auctions conducted by ANEEL, via Regulated Market Energy Trading Contracts (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% hydroelectric, 26.5% fossil fuel-based energy and 26.9% 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 monopoly in electricity distribution within its concession area, under strict 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 a maximum limit to be applied, with a tariff structure divided into Parcel A, which includes generation, transmission and sector charges, and Parcel B, which comprises the operating costs under the concessionaire’s management. Tariffs are periodically adjusted and reviewed with mechanisms designed to preserve the economic-financial balance of the concession, considering inflation (IGP-M or IPCA), the X efficiency factor, and the recomposition of regulatory costs. This structure, together with the obligation to provide adequate service, strongly shapes the company’s revenue formation and profitability.

CEEE-D’s consumption base is predominantly composed of captive residential and commercial customers, with a smaller share from the industrial segment. In 2024, the total volume distributed to captive and free markets reached 8,791 GWh, an increase of 3.0% compared to 2023. The captive market accounted for 6,613 GWh, up 0.6% year-on-year. The residential class, responsible for 56.9% of captive consumption, posted growth of 5.3% in 2024, while captive industrial consumption, which represents 2.8% of the captive market, fell 23.2%, reflecting, among other factors, the migration of consumers to the free market and sectoral economic dynamics. Captive commercial consumption, which accounts for 22.1% of the captive market, declined 5.1% in the period, although total commercial consumption, combining captive and free, grew 2.1% versus 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 governing public service concessions in Brazil, particularly the Federal Constitution, the General Concessions Law, and sector-specific electricity legislation. The grantor, through ANEEL, holds prerogatives such as oversight, application of sanctions, intervention and, in specific situations, repossession or forfeiture of the concession, always in compliance with rules on compensation for investments in reversible assets that have not yet been amortized. Changes in corporate control of distribution concessionaires require ANEEL’s prior consent, as occurred in 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 request expropriation of areas required for network expansion, assuming the corresponding compensation.

In the environmental, social and governance (ESG) sphere, 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 based on the GRI and SASB methodologies and on sector indicators reported to ANEEL, subject to independent assurance, which includes data from CEEE-D. 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 an assessment to align with IFRS S1 and S2 standards, which are expected to underpin 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 belongs to the utilities segment of the Brazilian capital market, offering specific exposure to the distribution link in the electricity value chain. Its economic and financial dynamics are driven by long-term concession contracts, regulated tariff rules, quality targets, ongoing grid investments, and the governance and transparency discipline required both by electricity sector regulators and by the stock market environment in which it operates.