COCE6

Enel Distribuição Ceará, formerly known as Coelce, is the concessionaire responsible for distributing electric power throughout the State of Ceará. The company was created in 1971 through the merger of four state distributors – Cenorte, Celca, Cerne and Conefor – under State Law No. 9,477. Authorization to provide the public electric power service was granted in the same year by Decree No. 69,469, consolidating its role as the central player in Ceará’s power infrastructure. Originally, its capital was mostly held by municipal governments in the state, by Eletrobras and by the state government, reflecting the predominantly state-owned model that prevailed in the Brazilian power sector at the time.

The company’s ownership structure underwent significant changes with its IPO and the privatization process. In 1995, it was registered as a publicly traded company with the CVM, and its shares began trading on B3 under the tickers COCE3, COCE5 and COCE6. In 1998, control was privatized through an auction on the then Rio de Janeiro Stock Exchange, and acquired by the Distriluz consortium, formed by Enersis, Chilectra and CERJ (now Ampla Energia). Subsequently, there was a corporate restructuring within the controlling group, culminating in the centralization of control in Enel Brasil S.A., a holding company that came to hold a majority stake. In 2017, after a capital increase subscribed by Enel Américas S.A. and the subsequent transfer of the shares to Enel Brasil, the latter came to control around 74% of the distributor’s total capital, consolidating its integration into the Enel group.

Enel Distribuição Ceará’s main activity is power distribution, the only operating segment reported in its financial statements. The concessionaire operates under Public Power Distribution Service Concession Agreement No. 001/1998, entered into with the Federal Government, through the Brazilian Electricity Regulatory Agency (ANEEL), with the current term running until May 13, 2028 and the possibility of a 30-year extension, in accordance with sector legislation. The regulatory rules in force prevent the distributor from engaging in generation, transmission, direct power sales to free consumers or holding equity interests in other companies unrelated to the concession. Its business model is based on purchasing energy through regulated auctions and contracts, quotas from specific projects and programs such as PROINFA, for subsequent supply to captive consumers and making the grid available to free consumers in exchange for a distribution system use tariff.

The company’s operating base covers approximately 4.4 million consumer units across 184 municipalities in Ceará, in an area of around 149 thousand km², which is home to an estimated population of 8.8 million inhabitants. As of December 31, 2024, the concession area accounted for 4.8% of the total number of power consumers in Brazil and 2.4% of the volume of energy distributed in the country. Enel Distribuição Ceará’s grid consists of approximately 159 thousand kilometers of distribution lines, 5.6 thousand kilometers of transmission lines and 128 substations, a structure that allows energy to be transported from the interconnection points with the basic network and other systems to end consumers at low and medium voltage. The company does not generate the energy it sells, acquiring it from generators, from quotas of plants such as Itaipu and Angra 1 and 2, and from alternative sources, following criteria defined by sector regulatory standards.

From an economic and financial standpoint, Enel Distribuição Ceará’s net operating revenue totaled R$ 8.44 billion in the year ended December 31, 2024, with a slight decline compared to the previous year. The distributor supplied and distributed around 13,656 GWh of energy (including short term), with growth in aggregate consumption compared to 2023. In terms of demand profile, 2024 consumption was distributed among residential, commercial, industrial, free consumers and other categories (including resale and self-consumption). The residential class accounted for the largest share of consumption, while free consumers showed significant expansion, even though the actual energy sales to these agents are carried out by other market participants, with the company generating revenue from the Distribution System Use Tariff (TUSD). The company does not have any individual customers that account for more than 10% of total net revenue, which indicates a diversified billing base.

Enel Distribuição Ceará’s operations are fully concentrated in the domestic market, with 100% of its activities in the State of Ceará and no revenue from abroad. The concession agreement grants exclusivity for providing the public distribution service in the concession area, characterizing a regulated natural monopoly in the grid segment. Competition in the sector takes place indirectly through economic regulation, periodic tariff reviews, efficiency incentives and service quality indicators monitored by ANEEL. The company is required to comply with continuity and quality of supply parameters, such as the frequency and duration of interruptions, and to pay financial compensation to consumers in case the regulatory limits are not met. In 2024, total losses in the distributed grid were around 17.8%, and the company recorded average indices of 4.19 interruptions and 9.68 hours of annual outage per customer.

The Brazilian power sector’s regulatory environment has a direct impact on Enel Distribuição Ceará’s operations and results. ANEEL and the Ministry of Mines and Energy define the rules for energy purchase tenders, criteria for passing costs through to consumers, tariff reviews and adjustments, sector charges and conditions for concession renewals. Legislation also establishes ownership and operational restrictions, such as the prohibition of self-dealing in energy supply contracts between related parties, except for specific exemptions, as well as limits on market concentration, in accordance with ANEEL resolutions. The free choice of supplier by large consumers is governed by rules for free and special consumers, who may contract energy from generators and traders while still using the distributor’s grid upon payment of TUSD and TUST, which changes the revenue profile between energy sales and grid use revenue.

The company adopts sustainability practices aligned with the guidelines of the Enel group in Brazil, integrating environmental, social and governance aspects into its corporate strategy. Each year, it publishes ESG reports prepared according to Global Reporting Initiative (GRI) methodologies and referenced to the UN Sustainable Development Goals. Enel Brasil consolidates in a sustainability report data from its subsidiaries, including targets and performance indicators in areas such as safety, environmental impacts, community relations, service quality and corporate ethics. Enel Distribuição Ceará maintains a Sustainability Plan with goals monitored by the board of directors, and the double materiality analysis – conducted through a proprietary platform – identifies risks, opportunities and impacts that are relevant to the business and to society, guiding the concessionaire’s investment and management priorities.

Shares COCE3, COCE5 and COCE6, issued by Enel Distribuição Ceará, remain listed on B3, reflecting its status as a publicly traded company with a dispersed shareholder base, albeit with control concentrated in Enel Brasil S.A. Trading on the exchange exposes the company to the corporate governance practices required by the Brazilian capital markets, including the disclosure of periodic information, communication of material facts and transparency regarding strategic decisions such as potential changes of control, concession renewal and capital structure. In this context, the sector’s regulatory evolution, the operating performance of the distribution grid in Ceará, the energy consumption dynamics of different customer classes and ESG risk management are key variables for tracking the company in the Brazilian stock market.