Material Fact - Exchange Rate: Independente Committee's Conclusion

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, in continuity with the Material Facts disclosed by the Company on October 18th, 2021, October 21st, 2021, November 24th, 2021, December 10th, 2021, and January 3rd, 2022, concerning the corporate reorganization (the "Reorganization") which aims to consolidate certain energy assets of the Company's indirect controlling shareholders, Votorantim S.A. ("VSA") and Canada Pension Plan Investment Board ("CPPIB" and, together with VSA, the "Controlling Shareholders"), hereby announce the following:

Agreement on the Exchange Ratio

The Company's Special Independent Committee (the "Independent Committee"), constituted in compliance with CVM Guidance Opinion No. 35, with the purpose of negotiating the conditions of the merger of shares (the "Merger of Shares") of the Company by VTRM Energia Participações S.A. (CNPJ: 28.594.234/0001-23) ("VTRM"), concluded with VTRM's management the negotiations of the exchange ratio of shares issued by the Company for shares issued by VTRM in the scope of the Merger of Shares (the "Exchange Ratio"), and submitted on January 7th, 2022 to the Company's Board of Directors the recommendation, unanimously agreed, by the members of the Independent Committee for the Exchange Ratio.

The Exchange Ratio was freely negotiated between VTRM's management and the Independent Committee and included the following assumptions:

1. the equity value assigned to Votorantim Geração de Energia S.A. ("VGE") assets to be contributed in VTRM under the VTRM Transaction (as defined below), - excluding the value of the equity stake held by VGE in VTRM - was approximately BRL 2.8 billion;
2. the cash contribution by CPPIB in VTRM under the VTRM Transaction in the total amount of BRL1.5 billion;

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1. the equity value attributed to VTRM - without considering the equity stake held by VTRM in the Company and the effects of the VTRM Transaction - was approximately BRL 4.5 billion;
2. the equity value attributed to the Company was approximately BRL 9.1 billion, equivalent to approximately BRL 27.93 per share (regardless of class or type and disregarding treasury shares);
3. to determine the equity value indicated above, the base date of December 31st, 2021, was considered using a discounted cash flow methodology; and
4. the redemption value of the redeemable preferred shares under the Merger of Shares, at a value of BRL 0.40 per Company's share and in the total amount of approximately BRL 78.5 million, considers the estimate of the taxes to be withheld, by VTRM, from the non-resident investors due to the transaction.

The Company's Board of Directors, on January 7th, 2022, following the recommendations made by the Independent Committee, unanimously approved the Exchange Ratio.

Exchange Ratio

Taking into account the assumptions above and considering the Exchange Ratio approved by the Independent Committee and by the Board of Directors, on the effective date of the Merger of Shares, the Company's shareholders - excluding the Controlling Shareholders - will receive, for each 1 share issued by the Company that they own, regardless of type or class:

1. 6.567904669174 new common shares, registered, book-entry and with no par value, issued by VTRM; and
2. 0.095425888495 new preferred shares, registered, book-entry and with no par value, compulsorily redeemable, issued by VTRM (the "Redeemable Preferred Shares").

Final Corporate Structure

If the structure of the Merger of Shares did not involve the delivery of redeemable preferred shares to the Company's shareholders, excluding the Controlling Shareholders, the final equity stake of the above-mentioned shareholders would be 30.63% of VTRM's total and voting capital stock and that of the Controlling Shareholders would be 69.37%.

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Considering that the Reorganization includes the delivery to the Company's shareholders of preferred shares compulsorily redeemable from VTRM, based on the Exchange Ratio and considering the referred total amount of approximately BRL 78.5 million, VTRM final corporate structure will be the following:

Shareholders	Shares	Equity Stake
VSA	1,605,422,350	37.74%
CPPIB	1,358,350,459	31.94%
Other shareholders	1,289,736,569	30.32%
Total	4,253,509,378	100.00%

The Exchange Ratio may be proportionally adjusted in the event of a change in the number of shares in the capital stock of VTRM and CESP, including any splits, groupings and bonuses of VTRM's or CESP's shares, as applicable, and revenues (including dividends and interest on equity) that may be declared by VTRM or CESP.

Next Steps for the Conclusion of the Reorganization

As previously disclosed, the Reorganization includes the following steps: (i) the contributions of assets and the cash by the Controlling Shareholders to VTRM, the Company's direct controlling company (the "VTRM Transaction"); and (ii) the Merger of Shares, so that the Company will become a wholly-owned subsidiary of VTRM, by the delivery to the Company's shareholders , in substitution for the merged shares issued by the Company held by them, of new compulsorily redeemable preferred shares and common shares issued by VTRM that will be listed on the B3's Novo Mercado (the "CESP Transaction").

Subject to the compliance with certain conditions, the Controlling Shareholders expect to conclude the VTRM Transaction by early February.

Considering that the proposed Exchange Ratio has already been defined, once the negotiations of the Private Instrument of Protocol and Justification of the Merger of Shares (Instrumento Particular de Protocolo e Justificação de Incorporação de Ações da CESP) are completed, an extraordinary general meeting of the Company shall be called to resolve on the Merger of Shares. Subject to the satisfaction of certain conditions that are usual in transactions of this nature, the expectation is to conclude the CESP Transaction by the end of April 2022.

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The information and documents related to the Merger of Shares will be timely disclosed to shareholders, in accordance with the terms and deadlines of the applicable legislation.

São Paulo, January 10, 2022.

Mario Bertoncini

Chief Executive and Investor Relations Officer

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