CESP Companhia Energetica de São Paulo : Material Fact - Reorganization

CESP - COMPANHIA ENERGÉTICA DE SÃO PAULO

Publicly Listed Company

Taxpayer Identification Number CNPJ 60.933.603/0001-78

NIRE 35300011996 | CVM (Brazilian Securities & Exchange Commission) 2577

MATERIAL FACT

CESP - COMPANHIA ENERGÉTICA DE SÃO PAULO ("CESP" or "Company"), pursuant to article 157, paragraph 4, of Law 6.404/76 ("Corporation Law") and CVM Resolution 44/21, hereby announces to its shareholders and to the market in general that the Company received, on the date hereof, from its indirect controlling shareholders Votorantim S.A. ("VSA") and Canada Pension Plan Investment Board ("CPP Investments " and, together with VSA, the "Controlling Shareholders") a proposal to consummate a corporate reorganization ("Proposal"), pursuant to the terms described hereunder.

The Controlling Shareholders informed the Company that they have entered into

1. memorandum of understanding on October 18, 2021 ("Memorandum"), whereby they initiated a corporate reorganization to consolidate certain investments in the energy sector, including their investments in the Company, into a vehicle which shares shall be admitted to trading on the Novo Mercado special listing segment of B3 S.A. - Brasil, Bolsa, Balcão ("Novo Mercado" and "B3") (the "Reorganization").

Under the terms of the Memorandum, the Controlling Shareholders agreed that the Reorganization will comprise the following steps:

1. the contribution of assets and cash by the Controlling Shareholders to VTRM Energia Participações S.A. ("VTRM"), the Company's direct controlling company (the "VTRM Transaction"), namely:
2. 1. the contribution of assets through the merger of Votorantim Geração de Energia S.A. ("VGE"), a subsidiary of VSA, by VTRM, so that VTRM shall then hold the Assets (as defined in item III.1), which were valued, for purposes of said merger, in the amount of BRL 2.5 billion; and
   2. the cash contribution by means of an increase in the capital stock of VTRM, to be subscribed and paid in Brazilian currency by CPP Investments, in the total amount of BRL 1.5 billion;

After the implementation of the VTRM Transaction, VSA and CPP Investments will hold interests of approximately 54.2% and 45.8% in the capital stock of VTRM, respectively.

1. the Merger of Shares (as defined below), the redemption of VTRM's preferred shares and the listing of VTRM (the "CESP Transaction"), as follows:

1. 1. the merger of the shares issued by the Company into VTRM, so that the Company shall become a wholly-owned subsidiary of VTRM (the "Merger of Shares"), by delivering to the Company's shareholders new common shares and redeemable preferred shares (see details about the preferred redeemable shares in item III.2.C below) issued by VTRM in replacement of the merged shares issued by the Company that they hold; and
   2. the listing of VTRM in B3's Novo Mercado; and
2. the incorporation of a private investment vehicle to be held by VSA and CPP Investments focused on energy transition in Brazil, with the objective of investing in energy projects in early stage of maturity, including new solutions and technologies aiming at the decarbonization of the energy matrix (the "JV" and the "JV Transaction").

The implementation of the VTRM Transaction does not depend on the implementation of the steps described in items (ii) and (iii). However, the implementation of steps (ii) and (iii) above shall take place simultaneously and are subject to the prior implementation of the VTRM Transaction.

Attached to the Proposal, the Controlling Shareholders provided a presentation entitled "Creating a Leading Renewable Energy Platform in Brazil (Criação de uma Plataforma Líder em Energia Renovável no Brasil)" ("Presentation"), which includes details on the merits of the Reorganization, its main steps, the assets involved and their size and the intended scope of activity for VTRM. The Proposal and the Presentation are available on the Company's investor relations website (https://ri.cesp.com.br/), the CVM (www.gov.br/cvm/pr-br) and B3 (www.b3.com.br).

The Company further informs to its shareholders and the market in general that on October 19, 2021, at 09:00 hours (08:00 EST), a conference call will be held open to the market in general, that may be accessed through the following link http://www.nossaenergiaparaofuturo.com.br/, with the participation of representatives of the Controlling Shareholders.

1. SIMPLIFIED CORPORATE STRUCTURE

The following corporate organization charts illustrate, in a simplified way, the current corporate structure and the corporate structures intended in the context of the Reorganization, pursuant to the Memorandum.

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Current simplified corporate structure:

Simplified corporate structure after the VTRM Transaction:

Simplified corporate structure intended after implementation of VTRM Transaction and CESP Transaction:

1. RATIONALE FOR THE REORGANIZATION, AS PER THE CONTROLLING
   SHAREHOLDERS' PROPOSAL

Pursuant to the Proposal by the Controlling Shareholders, the Reorganization has the merits described below.

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The Brazilian energy market has become increasingly dynamic. Current trends based on the energy transition, increased competitiveness and addition of renewable sources and the market opening process, with the consequent migration of customers from the captive market to the free energy market, provide important avenues for growth and new opportunities for the Company.

In this context, the consolidation of certain energy assets of the Controlling Shareholders into a listed vehicle - the "New VTRM" - which will follow the highest governance standards of the Novo Mercado, will give rise to a new company, with a robust structure and fundamental and necessary competencies to start a new cycle of growth and value creation for VSA, CPP Investments and CESP's minority shareholders.

Once the Reorganization is completed, the New VTRM will be one of the main publicly held companies in the Brazilian electricity sector, with a diversified portfolio of 100% renewable energy generation, totaling 3.3 GW of installed capacity under management, of which 2.3 GW in hydro source and approximately 1.0 GW in wind source (composed of 0.6 GW of assets in operation and 0.4 GW of projects in advanced stage of construction and operation estimated to start between May and November of 2022). New VTRM will also be one of the largest energy traders in the country, with more than 2.6 average GW sold in 2020.

The Company's shareholders will have access to new and clear growth opportunities, such as the development and acquisition of ready-to-build renewable generation projects and in the acquisition of already operational companies. New VTRM will be conceived with a robust pipeline of projects that include hydro and solar assets, as well as hybrid solutions, totaling 1.9 GW.

The energy trading business will also play an essential role in the platform's growth. With a portfolio of over 400 customers, Votener (as defined below) will act as the market intelligence center and will be responsible for supporting and maximizing the value of existing assets and new generation projects through energy management and PPA origination, in addition to developing a diversified product portfolio to serve its broad customer base.

The performance of New VTRM's strategy will be carried out by a team with vast experience in the sector. This team will constantly seek to build a unique portfolio of renewable assets, aiming at optimizing returns and minimizing risks for the company.

According to the Controlling Shareholders, the Reorganization will create a unique platform in the sector, which will have the following strategic advantages:

• Large platform with long duration assets: New VTRM will have an aggregate capacity of 3.3 GW (approximately double the size of CESP) and assets which permits and concessions will expire, on average, only in 2050;
• Diversified base of generation assets with 100% renewable sources: portfolio composed by 70% hydraulic (10 UHEs), 30% wind (31 wind farms);

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1. • Important growth avenues: both organic, represented by the 1.9GW pipeline under development by the New VTRM, and inorganic, becoming a natural consolidator of the sector;
   • Leadership position in the energy trading segment: one of the largest trading companies in Brazil, with over 400 clients in its portfolio and an average 2.6GW of energy commercialized in 2020;
   • Solid financial capacity: BRL 5.8 billion in annual revenues in 2020, with Adjusted EBITDA of BRL 1.4 billion in 2020 and a net debt to Adjusted EBITDA ratio of 0.7 times, considering the cash contribution of BRL 1.5 billion by CPP Investments; and
   • ESG Best Practices: 100% renewable portfolio, according to trends in decarbonization and mitigation of climate change impacts, development and execution of recognized social programs and initiatives, in addition to the highest level of corporate governance (Novo Mercado).
2. PROPOSED REORGANIZATION MAIN STEPS

III.1. VTRM Transaction

a) VGE Merger

The VTRM Transaction will comprise the merger of VGE into VTRM ("VGE Merger"). VGE will consist, at the time of the VGE Merger, of the following assets ("Assets"):

1. Equity stake of 50% in Pinheiro Machado Participações S.A. ("Pinheiro Machado"), which generation assets include the UHE Machadinho (Consórcio Machadinho), corresponding to 100% of its issued and outstanding preferred shares;
2. Equity stake of 66,6667% in CBA Energia Participações S.A. ("CBA Energia"), which generation assets include UHE Campos Novos and UHE Barra Grande, corresponding to 100% of its issued and outstanding preferred shares;
3. Equity stake of 66,6667% in Pollarix S.A. ("Pollarix"), which generation assets include UHE Amador Aguiar I and II (Consórcio Capim Branco), UHE Picada, UHE Igarapava (Consórcio Igarapava) and UHE Campos Novos, corresponding to 100% of its issued and outstanding preferred shares;
4. Equity stake of 100% in Votener - Votorantim Comercializadora de Energia Ltda. ("Votener"), corresponding to 16,438,442 issued and outstanding quotas; and

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