EKTR3 Elektro Redes

Neoenergia Elektro S.A., which operates its distribution business under the trade name Elektro Redes, is an electric power utility with shares traded on B3 under the tickers EKTR3 and EKTR4. The company was incorporated in 1998 following a restructuring of CESP, when power distribution assets were contributed to the new company and its employees were transferred to the new operating structure. In August 1998, the Federal Government granted the company, through a concession agreement, the right to operate public distribution and generation services in specific municipalities. The company’s capital was initially widely held, but its corporate history went through significant changes, including a transfer of control and a public tender offer for its shares.

The most significant change in its ownership structure occurred in 2011, when the then indirect controlling shareholder AEI sold to Iberdrola Energia do Brasil Ltda. all the shares it held in the company, a transaction involving approximately 99.68% of total capital and 99.97% of voting capital. This transaction, approved by the Brazilian Electricity Regulatory Agency (ANEEL), marked the effective entry of the Spanish group Iberdrola into the control of the utility, with the goal of expanding its presence in the Brazilian power market. As a result of this transaction, a public tender offer was launched for the outstanding common shares, in accordance with Article 254-A of the Brazilian Corporations Law and CVM regulations, further reducing the free float of EKTR3 and EKTR4 shares. Subsequently, in 2016, the company adopted the corporate name Neoenergia Elektro S.A., aligning itself with the corporate brand of its current parent company, Neoenergia S.A., which merged the former Elektro Holding S.A. in 2017.

Elektro Redes’ business model is fully focused on power distribution, a segment that accounted for 100% of the company’s net revenue and profit in recent fiscal years and in the first half of 2025. As a distributor, the company does not generate the energy it sells: it receives energy from the National Interconnected System (SIN) at high voltage through border metering points, steps down the voltage to commercial levels, and delivers it to end consumers in its concession area. Its compensation comes mainly from supplying energy to the captive market and from revenue for the use of the distribution system by free consumers, who purchase energy from generators or traders but continue to use the utility’s grid. Tariff regulation and the pass-through of non-manageable costs, such as energy purchases and sector charges, shape the formation of the distributor’s revenues and margins, in line with Brazil’s power sector regulatory framework.

Neoenergia Elektro’s concession area covers about 120,000 km² and includes 228 municipalities, 223 in the State of São Paulo and 5 in Mato Grosso do Sul. Its customer base has been growing steadily, reaching approximately 2.98 million consumer units in 2024, with distributed energy of 20,829 GWh in the same year, considering captive, free, and distributed generation markets. The power infrastructure under the company’s responsibility includes medium- and low-voltage distribution networks, high-voltage distribution lines, substations, transformers, poles, and a significant fleet of operations and maintenance vehicles. In June 2025, the company operated 121.4 thousand kilometers of distribution network, around 2.6 thousand kilometers of high-voltage lines, 162 substations and more than 200 thousand distribution transformers, reflecting a business that is capital-intensive in regulated assets.

The market served by Elektro Redes is diversified across customer classes, which influences demand dynamics and revenue composition. The main consumer categories include residential, industrial, commercial, rural and other classes such as public services, government, public lighting and self-consumption. In the first half of 2025, energy delivered grew 2.1% compared to the same period in 2024, with expansion in segments such as residential, industrial and commercial, driven by factors such as rising income, improved economic indicators and the advance of distributed micro and mini-generation. The industrial class reported growth associated, among other factors, with the performance of sectors such as non-metallic minerals and food and beverages, while the rural class showed a decline in the period, highlighting distinct behaviors by consumer segment.

Neoenergia Elektro’s competitive environment is characterized by a natural monopoly within its concession area, where there is no direct competition in the provision of power distribution services. Even so, part of its consumers can migrate to the free energy market, contracting supply from generators or traders, although the use of the distribution network continues to be remunerated via grid usage tariffs. Ongoing regulatory changes, such as those set out in Provisional Measure No. 1,300/2025, are expected to gradually alter the energy contracting structure, expanding access to the free market and creating new roles such as the Supplier of Last Resort (SUI). These changes, however, preserve the role of distributors in operating local networks, maintaining the relevance of the distribution business within the power value chain.

Neoenergia Elektro’s operations are heavily conditioned by power sector regulation, with ANEEL playing a central role in setting tariffs, quality targets, criteria for tariff reviews, and in supervising the concession. The Ministry of Mines and Energy sets energy policy guidelines, while entities such as the National Energy Policy Council, the Power Sector Monitoring Committee, the National System Operator (ONS), the Electric Energy Trading Chamber (CCEE) and the Energy Research Company (EPE) are part of the sector’s institutional architecture. The utility is subject to supply continuity indicators such as DEC (equivalent outage duration) and FEC (equivalent outage frequency), whose results influence the perceived quality of service and may have economic impacts, including through penalty or incentive mechanisms defined by the regulator.

In terms of customer relations and operational efficiency, Elektro Redes has been expanding the use of digital channels and remote service solutions. The company offers a 24-hour call center, service via WhatsApp, a smartphone app on major app stores, a web branch and an active presence on social networks, concentrating a large volume of requests through digital means. The gradual migration of services to these channels aims to increase problem resolution and reduce service effort, while adjusting the structure of in-person and accredited service channels. The geographic dispersion and socioeconomic diversity of the service area result in heterogeneous consumption profiles, with seasonality associated with climatic factors, industrial cycles, agricultural harvests and demand variations in coastal regions.

In the environmental, social and governance field, Neoenergia Elektro is part of the Neoenergia group’s corporate sustainability strategy. ESG performance is disclosed annually in a sustainability report published since 2004, which uses as reference standards such as GRI, SASB for the power sector, recommendations aligned with the former TCFD and current ISSB standards (IFRS S1 and S2), as well as meeting Aneel’s guidelines for social and environmental reports. The document undergoes internal audit review and independent assurance, and was most recently reviewed by Deloitte Touche Tohmatsu Auditores Independentes Ltda. It incorporates a materiality matrix based on environmental, social and governance topics, in line with international benchmarks and with the UN Sustainable Development Goals. All of the company’s revenue is generated in Brazil, with no exposure to operating revenue in other countries, which underscores the domestic nature of its asset base and regulatory environment.