CLSC4

Centrais Elétricas de Santa Catarina S.A. – CELESC, issuer of CLSC3 and CLSC4 shares traded on B3, was created on December 9, 1955 by the government of Santa Catarina to organize and integrate the state’s power system. Until then, service had been provided by small and medium-sized private companies operating in regionalized systems without unified planning, which proved insufficient in the face of urbanization and industrial expansion, especially within the development-focused context of the Juscelino Kubitschek administration. Federal authorization to operate came in 1956, and early in its operations Celesc enabled Santa Catarina to join the South-Southeast Interconnected Power System, ensuring a more suitable power supply for the state’s industrial base. In its early years, the company acted as the planning body for the state’s power system and then assumed the role of a holding company, initiating a cycle of acquisitions of regional power companies that led it to cover virtually the entire territory of Santa Catarina and establish itself as the state’s main government-owned company in the sector.

Throughout the 1960s and 1970s, Celesc expanded its operations by acquiring control of several regional power distributors such as Elfa, Empresul, Videluz, Cosel, ForçaLuz, among others, incorporating their assets in exchange for shares and reorganizing the Santa Catarina power sector under centralized management. In 1973, it was registered as a publicly traded company and its shares were listed on the stock exchange. Over time, it carried out stock bonuses, reverse stock splits and bylaw adjustments to comply with corporate legislation. Following the new regulatory framework for the Brazilian power sector between 2003 and 2004, Celesc underwent an unbundling process that resulted, in 2006, in its current configuration as a pure holding company with two wholly owned subsidiaries: Celesc Distribuição S.A. and Celesc Geração S.A. In parallel, it became a shareholder in generation and transmission ventures such as Dona Francisca Energética (DFESA) and Empresa Catarinense de Transmissão de Energia (ECTE), and later also entered the natural gas distribution segment by acquiring control of Companhia de Gás de Santa Catarina (SCGÁS).

Today, the Celesc group operates in three main areas: electric power distribution, electric power generation and natural gas distribution. The corporate structure is headed by the holding company Celesc S.A., controlled by the State of Santa Catarina, which holds 50.18% of the common shares, equivalent to 20.20% of total capital. Other relevant shareholders include EDP – Energias do Brasil S.A., with a significant stake in both common and preferred shares, based on market transactions carried out between 2017 and 2018. The company’s shares, represented mainly by the tickers CLSC3 (common) and CLSC4 (preferred), have high free float, which supports liquidity on B3. The holding company also holds equity stakes in power and sanitation companies such as DFESA, ECTE and CASAN, as well as in special purpose entities focused on hydropower generation projects in partnership with private investors.

The subsidiary Celesc Distribuição S.A. concentrates most of the group’s revenue and holds the power distribution concession that serves, in whole or in part, 285 municipalities, covering 3,465,509 consumer units, mainly in Santa Catarina and, to a lesser extent, in Paraná. Of the total municipalities served, 264 are covered by the concession contract – 263 in Santa Catarina and one in Rio Negro, Paraná – while 21 are served on a precarious basis, for technical and economic convenience, in areas originally granted to other distributors. Celesc Distribuição also supplies power to four concessionaires and 20 permit holders that operate in municipalities in Santa Catarina outside its direct service area. In 2024, it distributed 29,468 GWh and posted gross revenue of R$ 16.2 billion, ranking as the 6th largest public power distribution service provider in Brazil. Its business model is heavily regulated by ANEEL and is based on remuneration for the service of power transportation and commercialization within its concession area, with tariffs set under a price cap regime and returns mainly associated with the volume of investments recognized in the tariff base.

Celesc Distribuição’s customer base is diversified, including residential, industrial, commercial, rural, government, public lighting, public service companies, self-consumption and other power companies, including cooperatives. Service is provided through an extensive high- and low-voltage network, with around 5 thousand kilometers of 138 kV and 69 kV lines and approximately 318 power transformers, totaling 7.8 thousand MVA of capacity. The distribution concession, originally established under ANEEL contract no. 56/1999, was extended for another 30 years through an addendum signed in December 2015, setting targets for service quality and economic-financial sustainability. Operations are subject to regulatory requirements such as affordable tariffs, universal access and the advance contracting of power to meet demand growth, as well as rules on tariff and system loading seasonality, which particularly affect high-voltage consumers and coastal regions with strong load variation in the summer.

Celesc Geração S.A. is the subsidiary engaged in power generation, trading and, to a lesser extent, transmission. Its own portfolio consists of thirteen hydropower plants – twelve in operation and one in the process of reactivation – all located in Santa Catarina, plus five solar photovoltaic plants under a remote distributed generation model. As of December 31, 2024, installed capacity in commercial operation totaled 136.51 MW, of which 125.27 MW in own plants and 11.24 MW proportional to minority stakes in six hydropower generation ventures developed in SPEs with private investors. The company also holds a minority interest in a power transmission project in partnership with EDP, with 230 kV and 525 kV lines and an associated substation, although it has approval to divest this stake. Since January 2024, Celesc Geração has been authorized to operate as a retail trader, enabling it to serve eligible consumers in the Free Contracting Environment (ACL), where prices and conditions are freely negotiated among generators, traders and customers.

A third pillar of the group is Companhia de Gás de Santa Catarina – SCGÁS, a mixed-capital company created in 1994, in which Celesc holds a majority interest in voting capital. SCGÁS holds the exclusive concession for piped natural gas distribution throughout the State of Santa Catarina, under a 50-year contract signed in 1994. Supply is mainly via the Bolivia-Brazil Gas Pipeline, with guaranteed supply under contract for at least 20 years, and the gas is directed to industrial, commercial and residential customers and for vehicular use. Although SCGÁS’s results are recognized by Celesc under the equity method – and not as a separate operating segment in the consolidated financial statements – its activities strengthen the group’s presence in regulated public utility services beyond electricity.

Celesc’s operations are heavily shaped by the regulatory environment. In the power sector, the company is subject to federal concession legislation, specific rules under the sector model, oversight by the Brazilian Electricity Regulatory Agency (ANEEL) and the frameworks that promoted the unbundling of generation, transmission and distribution activities. The restructuring into a holding company and wholly owned subsidiaries in 2006 complied with the requirements of Federal Law No. 10,848/2004 and specific state legislation, with ANEEL’s approval. In addition, Celesc joined the Level 2 Corporate Governance segment of the then BM&FBovespa in 2002, adopting governance practices aimed at protecting shareholders and other stakeholders. Its recent history includes the implementation of long-term strategic planning, such as the “Celesc 2030” plan, and initiatives to optimize resources between the holding and its subsidiaries, subject to regulator approval. For investors tracking CLSC3 and CLSC4 shares on B3, Celesc presents itself as a public-utility holding company primarily focused on power distribution, complemented by generation, stakes in transmission and natural gas distribution, in a highly regulated environment with long-term contracts.