REDE3 Rede Energia

Rede Energia Participações S.A. (Rede Energia), issuer of REDE3 shares traded on B3, is an electric power holding company with more than a century of history. The group’s roots go back to 1903, with the founding of Empresa Elétrica Bragantina S.A. in Bragança Paulista (SP), followed in 1929 by the creation of Caiuá Serviços de Eletricidade S.A., which would become the corporate core of the current company. Throughout the 1980s and 1990s, the then Grupo Rede consolidated and expanded its activities through the acquisition of regional distribution concessionaires in several states, including São Paulo, Tocantins, Paraná, Mato Grosso and Pará, in line with the privatization and reorganization process of the Brazilian electric power sector. In 2005, after the sector’s unbundling process, Caiuá ceased to operate directly in distribution and generation, becoming exclusively a holding company for energy companies, a move that prepared the ground for Rede Energia’s current structure.

The company has undergone a series of corporate and name changes over the years. In 2006, Caiuá Serviços de Eletricidade S.A. was renamed Rede Empresas de Energia Elétrica S.A., and in 2008 it became Rede Energia S.A. From 2014 onward, the company’s trajectory was marked by its integration into Grupo Energisa, which took direct and indirect control of 21 companies from the former Grupo Rede, including eight distributors then under ANEEL’s intervention. This step was enabled by a court-supervised reorganization plan approved by creditors and by a recovery and operational failure correction plan approved by the regulatory agency. In 2017, the company adopted its current name, Rede Energia Participações S.A., reflecting its primary role as a holding company for equity interests in power distribution companies within Grupo Energisa’s structure.

Rede Energia’s business model is based on holding and managing equity interests in electricity distribution concessionaires, which are the foundation of its revenues and results. According to the Reference Form, the company’s corporate purpose covers the production, transmission, transformation and distribution of electricity; however, in practice, its activities are focused on distribution through its subsidiaries. As of December 31, 2024, the company controlled four distributors: Energisa Mato Grosso (EMT), Energisa Mato Grosso do Sul (EMS), Energisa Sul-Sudeste (ESS) and Energisa Tocantins (ETO), as well as a service company and two non-operational holdings. The economic relevance of distribution is clear: in 2024, Rede Energia recorded net revenue of R$ 17,876.8 million, virtually all of which came from distribution operations, with only R$ 65.2 million classified as holding and other activities revenue.

From an operational standpoint, Rede Energia ended 2024 with a base of approximately 4.4 million captive consumers and 3,153 free customers, spread across 437 municipalities and a concession area of about 1.54 million km², equivalent to roughly 18% of Brazil’s territory. This area serves an estimated population of 9.7 million inhabitants. Consolidated energy consumption in the captive and free markets in 2024 reached 25,689.5 GWh, up 7.7% versus the previous year, driven by growth in the residential, industrial, commercial and rural classes. Regionally, 68.5% of GWh sales took place in the Center-West region, concentrated in Mato Grosso and Mato Grosso do Sul, 19.2% in the South-Southeast region and 12.3% in the North region, reflecting the company’s strong exposure to state economies with expanding agribusiness, agroindustry and service activities.

The distributors controlled by Rede Energia operate under federal public concession regimes and follow the regulatory framework of the electric power sector. Distribution consists of receiving energy purchased in regulated auctions and bilateral contracts and delivering it in a highly dispersed manner to end users, at high and low voltages, with individual metering through meters installed at households and consumer units. The process of purchasing energy by distributors occurs mainly through Energy Trading Contracts in the Regulated Market (CCEAR), executed in auctions organized under ANEEL’s supervision, complemented by quotas from specific projects such as Itaipu, PROINFA, the Angra nuclear plants and distributed mini- and microgeneration contracts. The company also highlights the implementation of preventive and corrective maintenance policies coordinated by engineering departments, aimed at ensuring continuity and quality of supply.

Rede Energia operates in a highly regulated environment, with the Brazilian Electricity Regulatory Agency (ANEEL) and the Ministry of Mines and Energy (MME) playing a central role in setting tariffs, requiring investments, monitoring quality and defining contractual rules. Distribution tariffs are set by ANEEL with the aim of preserving the economic and financial balance of the concessions and are subject to annual adjustments and periodic reviews. The sector’s framework was deeply reshaped starting in the 1990s with the Concessions Law, the creation of the Electric Energy Trading Chamber (CCEE) and the National System Operator (ONS), as well as the 2004 New Electric Power Sector Model Law, which structured the Regulated Contracting Environment (ACR) and the Free Contracting Environment (ACL). The Reference Form notes that the sector is going through a modernization phase, with debates on the gradual opening of the free market to new consumer profiles and on adjustments to subsidies and tariff-setting mechanisms.

From a market perspective, Rede Energia’s revenues are spread across millions of consumers in different classes, without significant concentration in individual customers. In 2024, no customer accounted for more than 10% of net operating revenue, which reduces dependence on large specific contracts. The consumption base covers the residential, industrial, commercial, rural and other segments, with noteworthy growth in industrial and residential consumption in states such as Mato Grosso, Mato Grosso do Sul and Tocantins, influenced by paper, food and mineral chains, as well as the expansion of agribusiness and service activities. All of the company’s net revenue is generated in Brazil, with no exposure to foreign markets, and its operations are fully subject to Brazilian regulation and jurisdiction.

In terms of environmental, social and governance (ESG) practices, Rede Energia is aligned with Grupo Energisa’s guidelines. The group annually prepares a Sustainability Report in accordance with Global Reporting Initiative (GRI) standards and ANEEL’s socio-environmental reporting manual, and also links its reporting to the UN Global Compact’s Communication on Progress and to the Sustainable Development Goals (SDGs). This reporting framework is intended to provide transparency on the environmental, social and governance performance of operations, as well as to support internal management of risks and opportunities related to sustainability. For investors tracking REDE3 on B3, these elements underscore the regulated, infrastructure-intensive and formally governed nature of the electric power distribution business in Brazil.