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History

CESP was incorporated in 1966 by the government of the State of São Paulo, upon the merger of 11 state electricity companies. Until the end of the 1990s, the Company was vertically integrated, handling the generation, transmission and distribution of electricity in the state.

At the end of the 1990s, its assets were reorganized in line with the State’s Privatization Program. The distribution assets and operations were combined in a single company, Elektro e Serviços S.A., which was subsequently privatized. The electricity transmission assets were transferred to Companhia de Transmissão de Energia Paulista (CTEEP), which was also privatized. The generation assets and operations were divided between three companies: CESP itself and two others, which were also privatized: Companhia de Geração de Energia Elétrica Tietê, now called AES Tietê S.A., and Companhia de Geração de Energia Elétrica Paranapanema, now Duke Energy International – Geração Paranapanema. CESP continued as the concessionaire for six hydroelectric power plants: Ilha Solteira, Jupiá, Porto Primavera, Três Irmãos, Paraibuna and Jaguari.

On November 1, 2000, the State Government issued an invitation to bid, setting the terms for the sale of its interest in the Company, amounting to 38.67% of the total capital stock (61.62% of the common shares and 14% of the preferred shares). The sale was suspended when none of the six pre-qualified companies submitted a bid.

In May 2001 there was another attempt at privatization, but it was subsequently suspended by the State Government before the proposed auction date, May 16, 2001, because of uncertainty due to the imminent energy crisis, and for other reasons. The State Government then announced that the privatization of CESP was suspended.

On June 28, 2006, the Company completed a Primary Public Offering of Class B preferred shares, in the amount of R$3.2 billion, with an investment by the market of R$2 billion and a further R$1.2 billion from the controlling shareholder, the Treasury of the State of São Paulo, under an Agreement for the Subscription and Payment of Shares dated July 10, 2006.

In July 2006, the Company joined Level 1 of the Differentiated Practices of Corporate Governance of Brasil, Bolsa, Balcão S.A. (B3 S.A.). In addition, the company committed to a set of good corporate governance practices, which it included in its bylaws, also creating a new class of preferred shares – Class B – with the right to receive 100% of the sum paid to the common shares in the event of disposal of control of the Company, under a “tag-along” agreement; it subscribed to the B3 S.A. Arbitration Chamber for the resolution of disputes of a corporate nature; and it determined that 20% of the members of the Board of Directors should be independent.

In February 2008, a further attempt was made to privatize CESP, but no interest was shown.

Provisional Measure 579, of September 11, 2012 (converted into Law No. 12.783/2013), provided for electrical energy generation, transmission and distribution concessions. This Provisional Measure made an offer to CESP for the renewal of the concessions for the Ilha Solteira and Jupiá plants, which were to expire on July 7, 2015, to be brought forward to January 2013. The same treatment was given to the Três Irmãos plant, whose first concession period had expired in November 2011. This plant was transferred to Tijoá Participações e Investimentos S.A. in September 2014, the winner of an auction arranged by the Granting Authority.

The terms of the agreement defined new revenues to be earned by the Company for operating these plants, and indemnity amounts for unamortized assets relating to the basic project. It was also established that the plants for which early renewal had not been accepted would be subject to bidding at the end of the concessions. At a shareholders’ meeting held on December 3, 2012, it was decided not to renew the concessions in advance. Having so decided, CESP continued to operate the Ilha Solteira and Jupiá plants normally until the end of the concession, on July 7, 2015.

On January 29, 2018, after the publication of Federal Decree No. 9.271/18, allowing generation concessions to be extended for up to 30 years in the event of privatization, the CDPED resolved to resume the process of transferring its controlling interest in CESP. On July 6, 2018, the CDPED approved the general terms for the notice of sale of shareholder control of CESP.

On October 19, 2018, the Company shares were auctioned, and the winner was Consórcio São Paulo Energia, consisting of VTRM Energia Participações S.A. (“VTRM”) and SF Ninety Two Participações Societárias S.A. (“SF 92”), each of whom held a fifty percent (50%) share in the consortium.

On December 10, 2018, a Share Purchase and Agreement was executed by VTRM and SF 92, as purchasers, on the one part, and the State of São Paulo and its subsidiaries which held shares in the Company, on the other part.

On December 11, 2018, the First Tranche of Auction Shares was settled, for an adjusted total of one billion seven hundred and twenty-one million four hundred and thirty-eight thousand six hundred and fifty-five Reais and forty-nine cents (R$1,721,438,655.49), at a price of fourteen Reais and seventy-eight cents (R$14.78) per share (“Acquisition Price”). Accordingly, on December 11, 2018, shareholder control of the Company was effectively transferred to the Consortium.

With the acquisition of control, VTRM became the holder of 46.76% of the common shares and 6.86% of the class B preferred shares, and SF 92 became the holder of 46.76% of the common shares and 6.86% of the class B preferred shares. These shares represent approximately 40% of the total capital stock of the Company.