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CESP was founded in 1966 by the Government of the State of São Paulo, by means of the merger of 11 São Paulo electric companies. Until the end of the 1990s, the Company was vertically integrated, acting in the activities of generation, transmission and distribution of electricity in the State.

In July 1996, State Law 9,361 created the State Plan for Privatization (PED), determining the corporate restructuring of the energy sector of the State of São Paulo, with the sale of the equity interest held by the State Government in the companies controlled by it, including CESP.

In order to serve PED, its assets and distribution operations were merged into a single company, Elektro and Serviços S.A., which was subsequently privatized. The energy transmission assets were transferred to Companhia de Transmissão de Energia Paulista (CTEEP), which was also privatized. The assets and generation operations were divided into three companies: CESP itself, as well as two others that were privatized: a Companhia de Geração de Energia Elétrica Tietê, current AES Tietê S.A., and Companhia de Geração de Energia Elétrica Paranapanema, now owned by China Three Gorges Corporation – CTG Brazil. CESP continued to operate six hydroelectric plants: Ilha Solteira, Jupiá, Porto Primavera, Três Irmãos, Paraibuna and Jaguari.

On November 1, 2000, the State Government issued a notice setting forth the conditions for the sale of its interest in the Company, equivalent to 38.67% of its total share capital, of which 61.62% and 14% are the total common shares and preferred shares, respectively. The divestiture was suspended when none of the six prequalified companies bid.

In May 2001, there was a further privatization attempt, which was subsequently suspended by the State Government prior to the date proposed for the auction, May 16, 2001, due, among other factors, to the uncertainty generated by the impending energy crisis. The State Government then announced that the privatization of CESP was suspended.

On June 28, 2006, the Company concluded the Primary Public Offering of class B preferred shares, in the amount of R$ 3.2 billion, resulting from the market share of R$ 2 billion and the controlling shareholder, Fazenda do Estado de São Paulo, in R$ 1.2 billion, pursuant to the Agreement for the Execution of Subscription and Payment of Shares, celebrated on July 10, 2006.

In July 2006, the Company adhered to Level 1 of the Differentiated Corporate Governance Practices of the São Paulo Stock Exchange (BM & FBOVESPA). In addition, the Company has adopted a set of good corporate governance practices, incorporated into its Bylaws, which include the creation of a new class of preferred shares – the Class B Preferred – which has been granted the right to receive 100% of the value Paid to the common shares in case of sale of the Company’s control (“tag-along”); the adhesion to the BM & FBOVESPA Arbitration Chamber for the resolution of controversies of a corporate nature; the maintenance of at least 20% of the members of the Board of Directors who must be independent.

In February 2008, a further attempt was made to privatize CESP, for which there were no interested parties.

Following the publication of Provisional Measure 579/2011, which was subsequently converted into Law No. 12,783 from January 14, 2013, CESP, not accepting the proposed conditions for the renewal of concessions, is no longer the concessionaire responsible for the operation of the Três Irmãos Plant on 10/10/2014 and Ilha Solteira and Jupiá, both at the end of their concessions, 07/07/2015.

Under the terms of the CESP Concession Agreement, once the concession expires, the Company is entitled to be indemnified for assets not yet amortized. In July 2014, the Company filed a lawsuit against the Federal Government, claiming an indemnification of R$ 6.7 billion referring to the Três Irmãos Plant, including the locks and the Pereira Barreto Channel, considering that for the Granting Authority the Compensation amount is R$ 1.7 billion, having June 2012 as the base. On September 9, 2015, the court approved the production of engineering expertise requested by CESP, and the investigation began on the spot in the second half of April 2017. On February 29, 2016, a decision was favorable to the admission of the State of São Paulo in the case as an interested party, based on art 5, sole paragraph of Law 9,469/97. The Ilha Solteira and Jupiá plants, whose concessions expired on July 7, 2015, remained under the operation and maintenance of CESP, in the quota system, until the assumption of the new concessionaire, occurred on 07/01/2016. In October 2015, CESP filed an indemnification lawsuit against the Federal Government, in order for it to be ordered to pay the Company the amount due as a reversal of the assets and facilities linked to the exploration of the Ilha Solteira and Jupiá HPP concession, not yet depreciated. The Company understands that it is its right to receive the amount recorded in its monetarily updated accounting. The amount claimed for these assets is R$ 1.6 billion. The Federal Government presented its response to the lawsuit on February 16, 2016 and CESP on May 5, 2016 reinforced its claims and rights, besides requesting more detailed accounting, documentary evidence. The designation of expertise is being awaited. On 08/26/2016, the State of São Paulo petitioned for admission as a simple assistant to CESP, with which the Company agreed, however on 02/22/2017, the Union expressed disagreement with the entry of the State of São Paulo to the case, which is still subject to judicial review.

Currently, CESP has three hydroelectric plants, one of which is installed on the Paraná River – Engenheiro Sergio Motta (Primavera Harbor – 1,540 MW), another one on the Paraibuna River – Paraibuna Power Plant (87.02 MW), and the third one on the Jaguari River – Jaguari (27.6 MW), totaling 1,654.6 MW of installed capacity.

With the publication by the Ministry of Mines and Energy of Ordinance No. 258 of December 22, 2016, the physical guarantee of the Primavera Harbor Plant was reduced from 1,017 to 992.6 MW, totaling 1,056.6 average MW, which constitutes the current amount of energy that CESP can trade. The Company filed a legal lawsuit challenging the decision.

On November 5, 2016, a Public Notice for Electronic Auction No. 45/2016 was published in the Official Gazette of the State of São Paulo, which instituted a bidding for the hiring of consultancy services to be provided to the State of São Paulo, by means of the Department of Finance, consistent in the economic and financial evaluation, the proposal for modeling and executing the sale of the real estate assets held by the State, corresponding to shares representing the capital stock of CESP.

The winner of the bidding was Banco Fator S/A, which started the evaluation and modeling work to carry out the operation.

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