Light : Dados Econômico-Financeiros

Message from the Management

In 2021, we start building the pillars of a new Light. We have implemented a new management model for a profound transformation of the whole Company. We have gathered a highly qualified, challenge-driven team very experienced in turnaround processes, focused on this change process. Their work is not focused only on the operational aspects but on the organizational culture as well.

From the moment we assumed the challenge of managing the Company, we knew the path towards transportation would be long, with no shortcuts. We have just begun this journey, but we know there is so much to be done. However, we can say that we have reached many milestones in 2021, which shows our development towards the correct path.

We have invested more than R$ 460 million to fight electricity theft and improve the payment collection, an increase of about 60% in relation to 2020. We will keep investing as much in 2022 as such investments are crucial to our strategy - we want to obtain an upgrade of our equipments, shield our network and training our field teams.

During 2021, we progressed replacing the obsolete meters - more than 63 thousand equipment were changed. The shielding strategy also kept expanding, reaching more than 40.5 thousand normalization, 5.8 thousand of which only in the last quarter of 2021. The same period also saw a decrease of 209 GWh in total losses (12 months), keeping the indicator of total losses over the wire load steady since the beginning of the year, despite all challenges faced by our area of concession and implementation of team training and new measurement units.

Despite the complexity and the economic challenges in Light's concession area, the collection increased 1.4 p.p. in 2021, closing the year in 96.4%.

As to the supply quality, the EODi and EOFi indicators achieved their best results in 20 years, matching those of the best concessions in Brazil (respectively 6.34h and 3.44x), with Light becoming one of the five best distributors of Brazil, reaching more than one million customers. According to ANEEL, Light was the distributor with the best development in 2021 in the Electricity supply continuity ranking, having improved 10 positions.

It is also worth mentioning the success of "Light nas Comunidades" Program, already undergoing in eight places with the purpose of reestablishing Light's service in said areas as well as to improve the relationship between the Company and the surrounding communities. We count with the local support from the neighborhood associations and community leaders to achieve this social transformation.

The community relationship management has been already working actively in these areas through its relationship channels and providing support to the technical team to achieve a balance between fighting the losses and improving the payment collection and provision of services to these people.

Regarding Generation, Light also showed major efficiency and significant results in its strategy to ensure its revenue despite the market risks. A preventive approach allowed us to understand which events could impact the market, such as the Water Crisis in the end of the first semester of 2021, which made the prices very volatile and reduced the GSF to historical lower values. This risk management ensured our Generator's 2021 results, avoiding potential risks related to the Water Crisis.

We were also successful in very financial operations undertaken in 2021. The follow-on in January was very well-received by the market, which reasserted its trust on our plan to improve operations and revenue generation. At the time, we were able to collect R$ 1.34 billion in new resources. Regarding liability management, we issued debts in the national and international markets that amounted to more than R$ 5.5 billion, improving the cost and reducing the indebtedness term. We ended 2021 with a strong cash-fund position that could cover our liabilities in 2022.

Last year we also reinforced our focus on transparency, accountability, equity and constant dialogue with our stakeholders.

We were chosen to become part of B3's 17th Corporate Sustainability Index portfolio (ISE B3) as well as B3's Carbon Efficient Index portfolio (ICO2 B3), both valid for 2022. We must highlight Light is in the ISE B3 for the 15th consecutive year and for the second one in ICO2 B3.

We have updated our Materiality Matrix to assess the topics most important to Light according to the Company's and our stakeholders' approach to them. This process had been coordinated by ESG+ Committee, related to the Management Board.

With this new Matrix, we chose the top 10 themes to be treated as priority to conduct our ESG strategy for 2022: Service Quality and Operational Efficiency, Relationship with the Communities, Health and Safety, Personnel Management, Financial Solidity and Capital Markets, Improving Experience with the Customer, New Business Models, Losses and Default, Innovation & Technology, and Climate Change.

Finally, we also have to mention we finished the Periodical Review on the Distributor's Tariffs. This review was important for Light as it provided the Company with the benefits of a new regulatory model to address the challenges with complex concessions, as is the case with Light.

As a result of this review, the sum of Portion B, Irrecoverable Revenues and Losses with provide a positive result to the Distributor's EBITDA and cash position of about R$ 770 million, with R$ 542 million only in 2022. The gains from a five-year cycle Tariff Review are equivalent to a net present value of R$ 2.8 billion.

The good result with the Tariff Review provides Light with the necessary security to keep operating, implementing our management model focused on achieving a sustainable result in the distribution segment that would give us the balance to consolidate the business.

Firmino Sampaio

Chairman of the Board of Directors

Nonato Castro

CEO

Corporate Profile

Light can be found in 31 cities of the State of Rio de Janeiro, a region with about eleven million people. The Company ended 2021 with about four million and three hundred customers. Headquartered in the city of Rio de Janeiro, the Light Group is comprised by its holding, Light S.A., its direct subsidiaries - Light Serviços de Eletricidade S.A. (distribution of energy), Light Energia S.A. (generation of energy), Lightcom Comercializadora de Energia S.A. (commercialization of energy), Light Conecta Ltda. (energy generation and services), Light Soluções em Eletricidade Ltda. (services) and Instituto Light (institutional) - and the following jointly controlled entities: Lightger S.A. (in charge of Paracambi PCH), Amazônia Energia Participações S.A. (involved in the Belo Monte UHE project), Axxiom Soluções Tecnológicas S.A. (IT services) and Guanhães Energia S.A (in charge of Guanhães PCH).

Energy Distribution

Tariffs

Light SESA's tariffs are set according to the Concession Agreement, the regulations and decisions of the Brazilian Agency of Electric Energy (ANEEL), which exercises its discretion towards regulatory activities. The concession agreements with the distributors and the Brazilian legislation set a tariff cap mechanism that allows for three types of tariff adjustments: (1) periodical adjustment, every year; (2) periodical review, every five years; and (3) extraordinary review.

Tariff Adjustment

On March 9, ANEEL approved a tariff adjustment index for Light SESA in an average value of 6.75%.

The new tariffs came into force on March 15, 2021.

Residential consumers had their bills increased in 4.60% as shown in the table below, which also shows the impacts noticed by other classes of customers and voltage levels.

Average Perception to the Consumer by Class and Voltage Level

BT

FREE + CAPTIVE	AVERAGE EFFECT
A2 (88 to 138kV)	18.76%
A4 (2,3 to 25 kV)	8.15%
AS (Underground)	6.53%
B1 (Residential)	4.60%
B2 (Rural)	12.33%
B3 (Commercial)	4.74%
B4 (Public Lightning)	4.66%
Group A	11.83%
BT	4.67%
Group A+BT	6.75%

The annual tariff adjustment consists in the repass to consumers of non-manageable costs of the concession (such as purchase of energy, sector charges and transmission charges, that, jointly, represents Portion A), and update of manageable costs (Portion B) by the IPC-A variation adjusted by the items of the X Factor, which passes on to consumers the annual variation productivity gains of the concessionaire, the adjustments in operating costs defined in the last tariff review, and incorporates mechanisms of incentives to improvement of quality.