Investor Relations

Risk Factors

1. Objective

This document defines the Financial Risk Management Policy (“PGRM” or “Policy”) of Energisa S.A. (“Company”) and its direct and/or indirect subsidiaries in line with the best international practices and the Company’s strategic objectives. The policy uses consolidated limits to gauge the overall risks associated with the Company and its subsidiaries (collectively referred to as “Energisa Group”).

The PGRM is available on the Company’s website for viewing by stakeholders (creditors, investors and rating agencies).

This document is the eleventh version of the PGRM since its initial disclosure in May 2009, which has now been adapted to the new consolidated liquidity and debt position, while preserving the underlying guidelines of transparency and demonstrating the prudence and predictability of Energisa Group’s financial management

This document sets out a Financial Market-Derived Risk Management Policy (“PGRM” or “Policy”) for Energisa S.A. (“Company”) and its direct and/or indirect subsidiaries, in accordance with international best practices, in line with strategic objectives, and addressing limits on a consolidated basis, in order to measure the sum of the risks associated with the Company and its subsidiaries (jointly referred to as “Energisa Group” or “Group”).

The Policy will be available on the Company’s website, allowing broad access to stakeholders (commercial, credit and investment counterparties and rating agencies).

This document is the twelfth version of the Policy since its first release in May 2009. Once again, the Policy is adapted to the macroeconomic and sectoral context, preserving the main guideline of transparency, demonstrating prudence and predictability of the financial management of the Energisa Group.

Energisa’s Group must have a risk management policy (separate from PGRM) for Energisa Comercializadora to be approved by the Company’s management, conducted by a committee of experts appointed by the management and with review and follow-up to be determined by the audit and risk committee of the board of directors.

2. Validity

This policy will be valid until May 31, 2024, and may be revised at any time in case of improvements that ensure its purpose.

3. Management Finacial Risks

Briefly, the Energisa Group’s financial market risk management can be characterized as follows:

a) Focus:

  • Risks arising from the financial market in general.

b) Fundamentals:

  • Risk management is a process and not an isolated event. Therefore, the risk management shall involve several areas of the company (legal, financial and risk control);
  • The implementation of risk management should be discussed, ratified and reviewed from time to time by the Board of Directors, as suggested by the Financial Vice Presidency;
  • Risk management requires the disclosure of the risk culture, the pursuit for best practices and the continued participation of staff;
  • The Company has a Corporate Risk Management Advisory, created to monitor the risks that may adversely affect the Energisa Group.​

c) Components of the financial market risk management policy:

  • Definition of decision-making instances in relation to Energisa Group’s transactions;
  • Definition of responsibilities of each hierarchical level, as well as respective powers;
  • Definition of Energisa Group’s acceptable risk limits, consistent with its shareholders’ willingness to support them, and in order to optimize the risk-return ratio, to be approved by the Board of Directors;
  • Implementation of the risk management process: risk policy, identification, prioritization and measurement of the extent and probability of risks, control activities, information, communication and monitoring.

d) Management process:

The main steps of the risk management process are as follows:

  • Measurement of risks and results and the likelihood of occurrence;
  • Preliminary analysis of the evaluation of alternatives;
  • Policy definition;
  • EExecution, information and communication, aiming at risk prevention and mitigation;
  • Monitoring and control.

e) Market risk management organization:

The financial risk management process should be handled by the vice presidency of finances, while periodically consulting the Financial Risk Management Committee (“Committee”), which has to evaluate operations, processes and procedures and put forward the best alternatives. This committee can recommend operations to the Vice Presidency of Finances for evaluation and possible endorsement by the Board of Directors.

The Financial Risk Management Committee shall meet at least every quarter, and may hold extraordinary meetings if necessary. The committee will consist of the following, minimum members:

  • Financial Vice-President of Energisa;
  • Chief Controlling and Finance Officer of Energisa;
  • External consultant specializing in risk management, in particular, cash and debt risks.

The Committee shall obtain, from time to time, independent support from macroeconomic and financial market specialists. The External Consultant shall be responsible for validating the Quarterly Monitoring Report of the “Financial Market Risk Management Policy” (“Quarterly Monitoring Report”), which shall certify compliance with the Policy, any waivers that might be necessary or current and the recommendation for adjustment, if necessary. Once validated, this Report shall be forwarded to the members of the Risk Management Committee.

f) Financial risk management model

The Office of the Financial Vice-President, supported by the Committee, the daily reports received that are prepared by independent consultants, and the Quarterly Monitoring Report, will be responsible for managing Energisa Group’s risk exposure, deciding on the execution of financial transactions. Such transactions shall always comply with the parameters defined in this policy and the authority limits set in the Board of Executive Officers’ Statutes and Internal Regulations. At least once a year, such report shall be reviewed by the Audit and Risk Committee of the Board of Directors. The Internal Audit will continuously oversee the group’s compliance with the policy.

The financial transactions will be carried out in accordance with Energisa Group’s internal procedures, which will establish the minimum number of financial institutions to be quoted (when applicable), the authority limits for contracts and the relevant formalization.

4. Origens of risks

This chapter will detail the sources of financial risks to be addressed.

4.1 Indebtedness
The indebtedness includes all Energisa Group’s loan and financing transactions, such as debt issued in the local and foreign financial markets, as well as installments and contingent liabilities.

4.2 Financial Investments
Energisa Group’s financial investments include all financial investments, including short, medium- and long-term transactions. Examples of financial investments include investments in investment funds, federal government securities and securities issued by financial institutions or public and private companies in domestic and foreign markets.

4.3 Derivatives
In order to eliminate specific exposures to indexes subject to adverse variations, controlling the volatility of the result, Energisa Group may design different derivative strategies.

The structuring of derivative transactions may also be carried out by seeking to adopt directional positions for the applications: assets/liabilities with pre- or post-fixed rates (inflation, interests.

Energisa’s Group must have a hedge management policy, to be approved by the Company’s management, for the acquisition of materials and services denominated in other currencies, to be conducted by specialists appointed by the management.

4.4 Financial guarantees granted
The financial guarantees granted aim to ensure the defense in lawsuits (labor, civil, tax, environmental, etc.), as well as increase the attractiveness and improve conditions agreed with suppliers, financiers and investors in transactions with the Energisa Group.

Based on the sound risk profile of the companies that are part of the Energisa Group, which are seen in their rating grades, we should avoid the provision of guarantees. In the limit, Energisa S/A can guarantee the transactions of its subsidiaries. Any guarantees to be provided must be formally approved, by email, by the Director of the requesting area and by the Director of Corporate Finance, except (i) for the guarantees requested by the contracts signed by the legal representatives and in force, (ii) for the guarantees requested in contracts of regulatory origin; (iii) for Energisa Comercializadora’s guarantees that fall within the aforementioned company’s Credit Policy.

If the use of guarantees in Energisa Group’s transactions cannot be avoided, we should prioritize the following, according to this exact order: (i) collateral by Energisa S/A, (ii) guarantee insurance (Seguro-garantia), (iii) bank guarantee, (iv) escrow deposit, (v) other possible guarantees.

4.5 Checking account resources
The amounts used by the treasury of the companies of the Group to make payments and receipts in general, may be transferred to the financial institution that acts as Banking as a Service (Baas) of companies of the Energisa’s Group, provided that such financial institution is previously approved by the of Risk Management arising from the Financial Market.

It is forbidden to maintain a balance in the Baas credited before the closing time of the Treasury operations of the companies of the Group.

5. Monitoring and Management

This topic refers to the monitoring of the financial risks considered. The forms of control suggested by this Policy will be detailed, as well as the specificities considered for each type of risk.

5.1 Indebtedness
The Energisa Group will seek to control its indebtedness by its quantity, average term (“term”), cost, guarantees and selection of creditors (subject to quality and concentration).

Despite the benefit of debt in a capital structure, limiting the amount of indebtedness is necessary to avoid excessive leverage of the project/company, besides reducing the risk of exceeding financial restraints (covenants) in most countries, which exists in financial contracts. Besides, the indebtedness limitation aims to reduce refinancing risk by making said risk compatible with the project/company’s cash generation, avoiding a negative perception by the capital market of the associated risk, thus preserving credit quality.

The distribution of debt per lender will also be monitored. Energisa Group, as far as possible, and in view of the high degree of concentration in the Brazilian market, may set indebtedness limits per lender, seeking not to concentrate positions (facilitating access to credit by higher number of possibilities), seeking alternatives that offer lower costs, longer terms and lower financial and operating restrictions (covenants).

The contracting of any indebtedness shall comply with: (i) adherence to the approved budget, (ii) the Internal Regulations of the Board of Executive Officers, which establishes the powers of the Company’s officers to contract transactions, (iii) the specific approvals of the Board of Directors, when necessary, already indicating the main conditions of the contracts to be executed, and (iv) the approvals of regulatory agencies, when necessary in connection with the connection of the guarantee of the concession.

The Indebtedness management should seek compliance with the following limits:

Leverage limit
  • The leverage limit will be defined by the indicator Total Net Debt/Adjusted EBITDA for the last 12 months (“Net Debt Limit”), as described in the most recent debt to market issue. In the case of acquisitions of assets/companies, or even the discontinuity of assets/companies, the construction of Debts and EBITDA pro forma should be pursued, in order to see a fairer relationship in this calculation;
  • Consolidated Net Debt Limit: For the term of this review (until May 2022), the limit should reflect maximum leverage of 4.0x and should remain close to 3.5x. This limit can only be exceeded at specific times of acquisition of assets or significant investments in projects, preceded by the Board of Directors’ approval, adopting, in this case, a grace period of up to 36 months;
  • Additionally, Energisa should strive to adhere to the minimum corporate rating limits equivalent to BB- (Fitch, Moody’s and/or S&P) global scale and AA- (Fitch, Moody’s and/or S&P) on national scale, or the equivalent of a notch below the Brazil sovereign rating, whichever is lower; e
  • The above limits should always comply with the covenants signed in the debt and debt financing agreements in the domestic and foreign markets.

The Office of the Financial Vice-President shall comply with the leverage limit of the electricity distribution companies controlled by the Company, so as not to distance them from the regulatory leverage and the commitments entered into with the Regulatory Agency.

Minimum average time pursued (Term)
  • Try to preserve an average consolidated net debt maturity of more than 4 (four) years, which will depend on market conditions for new issues. Transactions characterized as bridge loans may be contracted for future placement on better terms, subject to leverage limits.
Creditors Concentration Limit
  • To pursue maximum leverage with domestic development banks and financiers, such as: Banco do Nordeste, Eletrobrás and BNDES, seeking a better average capital cost and suitable duration for companies operating with electricity infrastructure;
  • Development banks operate, under normal market conditions, with maximum exposure limits equivalent to 30% of the Total Assets of the financed companies and/or economic groups, to rating levels equivalent to the Company’s, which we will pursue, subject to the Leverage and the conditions offered by the respective development banks;
  • Energisa Group should favor capital market operations over direct financing with commercial banks. The Company should pursue the most extensive spread of its debts (avoiding exposure concentration). Priority should be given to transactions without guarantees (“clean”), especially avoiding the granting of receivables as collateral. Assignment of receivables as collateral may be used as a means of reducing the cost of financing or even its feasibility in times of scarce and expensive credit. Unless we have differentiated conditions or even a requirement from the lender for these transactions with funding financial institutions, the lowest possible exposure should be sought, while maintaining at least 30% of receivables free of any burden;
  • Personal guarantees of officers or shareholders should not be required, aiming at the operational and financial independence of the companies;
  • Energisa S/A may provide guarantees for the financial operations of its subsidiaries; e
  • Energisa Group’s presence in all capital markets, including international, is essential; however, their exposure to foreign currencies should be limited to 25% (twenty-five percent) of the total amount of debt. Any noncompliance with this limit should be adjusted within 120 days, either by reducing the stock of debt denominated in foreign currencies or by contracting derivative financial instruments to offset the effects of adverse currency transactions. Foreign currency transactions with plain vanilla swap are not considered foreign exchange exposure transactions and should seek “hedge account” or “fair value hedge” to limit balance sheet volatility.


5.2 Financial Investments
The control of Energisa Group’s financial investments seeks to mitigate counterparties’ risk, that is, the risk associated with the possibility of the entity not meeting its payment commitments.

The limits set forth below shall be complied with by both direct investments and private investment funds in which Energisa Group invests, and are considered on a consolidated basis. ENERGISA continuously monitors the composition of the exclusive and non-exclusive investment funds that make up the resource allocation portfolio. By becoming a shareholder of a non-exclusive investment fund, ENERGISA assigns the management of the investment portfolio, respecting the manager’s discretion (subject to the restrictions and investment policy of the fund). Occasionally, some investments carried out by non-exclusive fund managers may differ on the limits and rules set forth in this Investment Policy, and ENERGISA shall evaluate, in its monitoring, the actions and procedures for redemption or maintenance of the investment.

Assts and Eligible Groups
  • Investments in Federal Public Securities, CDBs, RDBs, Financial Bills, debentures and investment funds will be permitted (subject to the limits set below). Investment in redeemable shares, subordinated debt (except for Energisa Group’s FIDCs subordinated shares and subordinated CDBs/Financial Bills of top-tier banks rated AAA (S&P/Fitch) or Aaa (Moody’s) will not be permitted, or even those that have the same sovereign rating (Brazil National Scale), subject to the 2-year maximum term) and quasi-equity (preferred shares with fixed dividends as occurs in the US);
  • The Risk Management Committee must approve the acquisition of debentures on a case-by-case basis;
  • Investment in Private Securities of companies directly or indirectly controlled by Energisa will only be permitted subject to the specific regulation of the National Electric Energy Agency (Agência Nacional de Energia Elétrica – “ANEE”) and the prior assessment of the Energisa Group Regulatory Vice-President’s Office. Investments in Private Securities issued by suppliers (drawn risk) and/or consumers are allowed, including in case of refinancing, division in installments, or any other type of debt and/or debt renegotiation with Energisa Group, through the structuring of debt securities or guarantees based existing business positions;
  • Minimum Rating Limit for Banks: A rating equal to A + (Local) or equal to the local sovereign rating, whichever is lower, always subject to the lowest rating when there is more than one hedge. In the case of foreign banks that formally support their Brazilian subsidiaries or branches, they may be considered, provided that they comply with the global A- rating limit for the parent company;
  • Minimum Rating Limit for Companies: AA- or equal to the local sovereign rating, whichever is lower, always observing the lowest rating when there is more than one hedge;
  • As funds usually are unrated, the following should be noted: (i) investment in managers with assets under management of more than R$ 5 billion (ii) financial institutions with recognized experience in the Brazilian market must manage the funds, and (iii) we must have access to the composition of the fund’s portfolio, in order to assess the compliance with this policy; e
  • Only ratings issued by S&P, Moody’s and Fitch should be considered.
Investment limit
  • Maximum Concentration per Bank or Company: R$ 1 billion or up to 30% (thirty percent), whichever is lower, of the total amount invested by the Energisa Group in the case of banks with the same sovereign rating (Brazil National Scale). R$ 200 million or up to 10% (ten percent), whichever is lower, of the total invested in the case of Banks rated one notch below the sovereign rating, subject to the lowest rating and still 15% (fifteen percent) to corporate debt securities, subject to the limits below;
  • Concentration Limit: limit of 5% (five percent) of the Shareholders’ Equity of the financial institution or company, considering the most recent quarterly financial statement. For funds, the concentration limit shall be fifteen percent (15%) of the Fund’s equity, which is complied with at all times, except in the case of private funds created by the Company itself. Alternatively, if the CDB or RDB transaction is a DPGE transaction, a sum up to the guaranteed limit may be invested, which is currently set at R$ 20 million for the sum of investments in this investment model for each Corporate Taxpayer Register (CNPJ), subject to the maximum exposure of 5% concerning the Bank’s Shareholders’ Equity. All formalization procedures ensuring the effectiveness of the National Treasury guarantee for the DPGE form of investment should be observed;
  • Short-term investments with a liquidity unavailability term of more than 2 (two) years shall be specifically approved by the Board of Directors, except in case of federal government securities;
  • The Board of Directors must approve any other concessions to be established; e
  • AFund investments should adhere to the following additional limits:
  • DI Referenced Funds – observing only the concentration limits presented above;
  • Fixed Income Funds – R$500 million or up to 25% (twenty-five percent) of the fund’s equity, whichever is lower, observed at all times, except in the case of exclusive funds constituted by the Company itself;
  • Multimarket Fund – R$ 500 million or up to 20% (twenty percent) of the fund’s equity, whichever is lower, except for exclusive funds constituted by the Company itself;
  • Equity Funds and Foreign Exchange Funds – shall not be used except as a Funds of Funds and Mixed Funds – subject to the above limitations concerning the treatment of original funds.

5.3 Derivatives
The structuring of derivative operations is essential to mitigate the risks of adverse effects associated with the financial market.

Due to the market price, liquidity and counterparty risks, these operations should be monitored daily by independent cash and debt risk advisors. Energisa Group shall engage in independent specialized service, whenever there are debts denominated in foreign currency or positions in derivative financial instruments, and shall comply with the following limits and assumptions:

Transactions notional amount
  • As long as foreign currency financing is available, the Energisa Group should preferentially seek currency hedging or swap arrangements for its indebtedness in plain vanilla transactions. In case they are not available at a reasonable cost, the minimum hedge limit for exchange rate hedge and/or swap transactions shall be 85% of the Foreign Currency Debt Notional Amount, limited to 100% of indebtedness (leverage is not allowed);
  • The maximum amount contracted in interest rate swap operations (fixed rates, CDI, TJLP, among others) must comply with 100% of the Notional Limit of Financial Investments and/or 100% of Notional of Indebtedness in domestic currency (Reais);
  • Any interest rate swap transaction (pre-fixed rates, CDI, TJLP, among others) with a market value representing an immediate or potential loss of more than R$ 10 million shall be submitted to the Risk Management Committee for assessment of early settlement;
  • Also, the Energisa Group may trade non-deliverable forwards (NDFs) for additional balance sheet protection or even arbitrage in periods of greater instability, in this case limited to a total of USD 50 million of these exposures set forth herein;
  • Exposure by financial institution, as measured by its Marked-to-Market liability (MtM), may not exceed the limit of 5% of the financial institution’s Shareholders’ Equity, subject to the most recent published financial statements and the same rating limitation applicable to financial investments. This exposure limit must be observed for any Energisa Group’s derivative transaction, regardless of its structure;
  • Foreign exchange NDF transactions, whose market value represents a loss of more than 15% of their acquisition value, must be settled in advance within 5 (five) business days, or submitted to the Risk Management Committee for a new direction, subject to this deadline.
Eligible instruments for financial derivatives
  • Vanilla Swaps (Forex, Interest and Inflation);
  • European Options (Exchange); e
  • Non-Deliverable Forwards (NDFs) (Foreign Exchange).

NOTE: The issuance of convertible debentures or share warrants is not considered as a financial instrument for the purposes of limiting this policy.

5.4 Financial Guarantees for the Benefit of Energisa
Financial guarantees required by the Energisa Group seek to mitigate counterparties’ risk, i.e. the risk associated with the entity’s ability to default on its payment commitments.

Eligible Guarantees

Financial guarantees required by the Energisa Group seek to mitigate counterparties’ risk, i.e. the risk associated with the entity’s ability to default on its payment commitments:

  • Bank Guarantee: subject to the minimum Rating limit for Banks rated AA (Local) or equal to the local sovereign rating, whichever is lower, always observing the lowest rating existing when there is more than one coverage (S&P, Fitch and Moody’s);
  • Security deposit: Top-tier Bank CDBs (defined by the Rating limit required for Bank Guarantees), Federal Government Securities or Fixed Income Investment Fund Shares or CDI, administered by Top-tier Banks. Deposits must have daily liquidity, so that they can be executed at any time;
  • Guarantee Insurance (Seguro-Garantia): The insurance presented must be contracted with first-rate insurance companies, which are among the top 15 in the SUSEP (National Superintendence of Private Insurance) statistics report, generated according to the step by step below.

Step by step:

1.Enter the website ‘’;
2. Select ‘Authorized Companies’;
3. In the ‘Market Statistics’ field, select ‘SES – SUSEP Statistics System’;
4. In the ‘Operations’ field, select ‘Insurance: Premiums and Claims’ and click on ‘Go to consultation’;
5. In the ‘Research Period’ field, enter the last 12 months available for consultation;
6. In the ‘Ramos’ field, select the type of insurance to be taken out;
7. In the ‘Data grouping’ field, select ‘Group by Company’.
8. After generating the report, export it to excel by selecting the ‘Export to Ms Excel’ button.
9. Sort the information in descending order by ‘Direct Award’;
10. The first 15 insurers on the list are those capable of contracting insurance.

Guarantee Insurance will only be accepted for signed and in force contracts, which were constituted in accordance with the Service Contracting Standard, for the modalities in which the contracting does not fit into said standard must be formally approved by the Director of the requesting area and by the Director of Controllership and Finance.

The guarantees should be prioritized in the following order: (i) bank guarantee, (ii) escrow deposit, (iii) guarantee insurance, (iv) corporate guarantee (depending on the credit analysis) and (v) other guarantees to be previously approved by the Controllership and Finance Board.

The guarantees can only be accepted after they have been reviewed and/or accepted by Grupo Energisa’s Corporate Legal Department.

5.5 Liquidity risk
In order to guarantee the liquidity of the Energisa Group’s commitments, the Office of the Financial Vice-President should maintain minimum resources in cash and cash equivalents, in order to guarantee short-term debt commitments, guarantee deposits, etc.

Minimum Cash Limit equivalent to the highest between:
  • 30 (thirty) days of gross revenue of the previous year; or
  • 50% (fifty) of the Adjusted EBITDA of the previous year; or
  • Sufficient cash equivalents so that the ratio Cash and equivalents / short-term debt is higher than 1.25 (one point two five).

5.6 Revisions of the financial risk management policy
The Board of Directors shall order the revision of the Financial Market Risk Management Policy every two years, or extraordinarily, whenever required.

5.7 Dividend policy
The Energisa Group’s dividend policy is effective pursuant to the Results Distribution Policy approved by the Board of Directors Meeting of Energisa S.A. held on September 12, 2019.