Equatorial Energia S.A

What it is

Equatorial buys, fixes and runs electricity networks that others gave up on – the wires and poles that carry power to homes across seven Brazilian states. It grew out of one distributor in Maranhão and now reaches well over ten million customers.

Equatorial Energia owns power distribution companies in seven states, as well as a sanitation concession in Amapá. It has since added wind and solar generation, electricity transmission lines, and now water.

Who owns it

This is the unusual part: nobody controls it. Since 2012, Equatorial does not have a controlling shareholder, since there is no shareholder owning more than 50% of its total and voting capital stock, nor is there any shareholders’ agreement.

Instead, professional investment funds hold the stock between them – names like Squadra, Opportunity, Capital Research and Singapore’s GIC. Every share carries one vote, a rule of B3’s strict “Novo Mercado” governance tier, which the structured data confirms is held almost entirely by institutions.

Who runs it

The chief executive is Augusto Miranda da Paz Júnior, a long-serving insider who is Chief Executive Officer at Equatorial SA. The chairman of the board is Eduardo Parente, a former chief executive of education group Yduqs.

The finance chief is Leonardo Lucas, who joined the Equatorial Group in 2005 as an intern. The whole board is independent of any single owner.

The money, in plain words

Sales are growing fast. Revenue rose from R$43.2bn (US$8.4 bn) to R$52.1bn (US$10.1 bn) between 2024 and 2025, a jump of about 21% (our calculation).

But profit is thin for a utility this size. The company keeps under 3 centavos of profit on each real of sales – a net margin of 2.9% – and earns about 7 reais a year for every 100 owners put in, a return on equity of 6.9%.

The reason sits on the balance sheet: heavy borrowing. Against R$0.9bn (US$175 mn) of cash it carries R$54.6bn (US$10.6 bn) of debt, so net debt is roughly R$53.6bn, about US$10.4bn (our calculation) – the cost of buying and rebuilding networks.

Investors still pay up: the shares trade at about 39 times yearly earnings – a price-to-earnings ratio of 39.4 – betting that profit grows into the price. They are paid to wait through a dividend worth 4.3% of the share price a year.

What it is doing now

Its boldest move is into water. In 2024 Equatorial bought 15% of Sabesp, São Paulo’s giant water company, and became its anchor owner – a 15% stake acquired on 25 June for R$6.9bn (US$1.2bn).

It was the only firm bidder, and São Paulo reduced its stake from 50.3% to 18.3%, while Equatorial Energia acquired 15% of Sabesp’s shares and became the new reference shareholder. Its job is to bring Equatorial’s turnaround playbook to Brazil’s biggest water utility.

What to watch

Watch the debt. The Sabesp deal was part-funded by a short-term bridge loan, and the next test is whether rising profit and asset sales bring borrowing down without cutting the dividend.

Watch Sabesp too. The role of reference shareholder lasts until 2029, though the shareholders’ agreement can be renewed – so the payoff from this bet will become clear over the next few years.

This is news, not investment advice.