CEGR3 CEG

Companhia Distribuidora de Gás do Rio de Janeiro – CEG, ticker CEGR3 on B3, was created in 1969 through decree-law No. 29, originally as Companhia Estadual de Gás do Rio de Janeiro, with the mandate to operate piped gas services in the city of Rio de Janeiro. The political-administrative reconfiguration of the state in 1975 led to decree-law No. 39, which expanded both the corporate purpose and the company’s operating area to the entire metropolitan region. In 1990, with State Complementary Law No. 64, CEG consolidated its role as a gas distributor in the municipalities that form the Metropolitan Region of the State of Rio de Janeiro, reinforcing its role as a concessionaire of an essential public service. In 1996, the company was included in the State Privatization Program, and in 1997, 65.41% of its share capital was sold in an auction held at the former Rio de Janeiro Stock Exchange, marking the transition to private control and the signing of a 30-year piped gas distribution concession contract, renewable for an equal period. Also in 1997, the company was registered as a public company with the CVM, and its shares began trading in the Brazilian capital markets.

The ownership structure and corporate name were updated in 1998, when its corporate name was formally changed to COMPANHIA DISTRIBUIDORA DE GÁS DO RIO DE JANEIRO – CEG. Since then, the company has focused on expanding its customer base, extending the distribution network, and carrying out the technological transition of its supply matrix, especially converting the old manufactured gas to natural gas throughout the city of Rio de Janeiro, a process completed in mid-2007. As a state public service concessionaire, CEG operates under a concession contract signed with the State of Rio de Janeiro, which sets out rights, obligations, expansion targets and quality standards for the provision of piped gas distribution services. The regulated nature of the business and the contractual framework give the company a long-term revenue profile that depends on regulatory milestones defined at the state level.

CEG’s business model is focused on the distribution of piped natural gas in the metropolitan region of Rio de Janeiro, with exclusivity in its concession area. The company has exclusive rights to distribute piped gas, compressed natural gas (CNG) and liquefied natural gas (LNG) and their by-products, and may also produce, import, trade and distribute products related to its core activity, as well as gas-related household products. The company operates in various consumption segments, including the residential, commercial, industrial, automotive (CNG) and thermoelectric power generation markets, in addition to providing services associated with gas infrastructure, such as maintenance, studies, research and technical consulting. Natural gas is the main input for the business, and the company has no subsidiaries, maintaining a direct operational focus on the state concession.

From the revenue mix perspective, natural gas supply accounts for almost all of CEG’s net revenue, exceeding 90% over recent years, while LPG has a residual share and services add around a single-digit percentage to revenue generation. In 2024, the consumption segments with the greatest weight in net revenue were automotive, with approximately 42.8% of revenue, residential, with around 22.2%, and industrial, with 21.9%. The commercial segment accounted for a smaller but still relevant share of revenue, while services related to the gas network and associated activities represented just over 6% of net revenue. The customer base is highly diversified: in the residential segment the company serves hundreds of thousands of consumer units, and there are no individual customers responsible for more than 10% of total net revenue; even the largest industrial and commercial customers together account for just over 8% of annual revenue.

CEG’s concession area covers the metropolitan region of the State of Rio de Janeiro, including municipalities such as Rio de Janeiro, Niterói, São Gonçalo, Duque de Caxias, Nova Iguaçu, Belford Roxo, São João de Meriti, Nilópolis, Mesquita, Magé, Itaboraí, Guapimirim, Queimados, Paracambi, Itaguaí, Seropédica and Tanguá. Some municipalities, such as Mangaratiba and Maricá, are supplied by CNG systems, suitable for locations without a conventional gas pipeline network. The company operates exclusively within Brazil and does not earn revenue from customers located abroad, being fully exposed to Brazilian economic and regulatory dynamics. Its position as exclusive concessionaire in the metropolitan region of Rio de Janeiro eliminates direct competition in piped gas distribution, although natural gas faces indirect competition from other energy sources, such as LPG, electricity, biomass, diesel and fuel oil, in specific applications in its consumption segments.

The markets served by CEG have distinct characteristics in terms of consumption profile and share of gas demand. In the residential segment, use is predominantly for water heating and cooking, with natural gas competing mainly with electricity and LPG. In the commercial segment, the company supplies hospitals, hotels, restaurants, laundries and other small and medium-sized establishments, with applications similar to those in the residential segment, as well as air conditioning and use in industrial kitchens. In the automotive segment, compressed natural gas (CNG) is used as fuel for taxis, ride-hailing vehicles and, increasingly, for urban transport fleets and cargo trucks, benefitting from INMETRO technical regulations and the adoption of bi-fuel vehicles by automakers. Industrial demand uses gas mainly for heat generation in production processes, with emphasis on supply security and lower emission levels compared with other fossil fuels. In the thermoelectric segment, gas is an input for power generation at thermal plants dispatched by the National Electric System Operator (ONS), a market subject to hydrological seasonality and national energy policy decisions.

From a regulatory standpoint, CEG’s operations are strongly conditioned by the Federal Constitution, which grants states the right to directly operate or grant concessions for piped gas services, and by state legislation that governs the concession contract with the State of Rio de Janeiro. The company is supervised and regulated by the Energy and Basic Sanitation Regulatory Agency of the State of Rio de Janeiro (AGENERSA), which is responsible for defining, approving and reviewing natural gas tariffs. Tariff reviews take place in five-year cycles, and distribution margins are updated annually by the IGP-M index. The tariff model provides for the full pass-through of gas costs to the end consumer, which reduces CEG’s exposure to volatility in input prices. To carry out construction, expansion and network maintenance works in public thoroughfares, the company depends on permits from municipal governments and, in the case of pipelines that require environmental licensing, on licenses issued by agencies such as INEA and state or municipal environment departments.

In terms of environmental, social and governance practices, CEG, as part of the Naturgy group in Brazil, adopts structured sustainability and environmental management policies. The company holds ISO 14001 certification, reflecting the implementation of an environmental management system focused on legal compliance, control of environmental aspects and impacts, and continuous improvement. Recurring actions include maintaining operating licenses, preparing greenhouse gas inventories, monitoring emissions from diesel vehicles, analyzing effluents at operating facilities, assessing noise levels at distribution assets, remediating historical environmental liabilities, conducting annual legal environmental audits, and replacing old cast-iron networks with polyethylene pipelines, which reduces fugitive emissions. The company also keeps regular federal technical registrations with IBAMA for potentially polluting activities.

In terms of governance and transparency, CEG publishes an annual report and a corporate responsibility report, both audited, with the sustainability report prepared in accordance with Global Reporting Initiative (GRI) guidelines. These documents include a materiality matrix based on a double materiality model and key environmental, social and governance performance indicators aligned with the material topics defined for the business, such as ethics and compliance, people management, health and safety, relationships with customers and the community, diversity and inclusion, environmental management, climate change, energy transition and technological innovation. The company states that it is aligned with the UN Sustainable Development Goals, with a more direct contribution to SDGs related to affordable and clean energy, sustainable cities and climate action. Communication on ESG topics is intensified through internal and external campaigns, corporate communication channels and specific content on social media, reinforcing the integration of social and environmental aspects into the business strategy of the natural gas distributor.