Cedae profit plunges 78% after Banco Master losses, legal provisions

From an operating standpoint, before financial income, Cedae posted a loss of R$423.9 million in 2025. Earnings before interest, taxes, depreciation, and amortization (EBITDA) were negative R$272.7 million. The weak operating performance was offset by financial income of R$781.4 million, up 53.37% from 2024. The company ended the year with approximately R$2.4 billion in cash, helping drive a 54.1% increase in financial income compared with the previous year and allowing it to post net profit of R$219.39 million.

Cedae’s 2025 financial statements will be published Tuesday (June 23) in the State Official Gazette, more than 50 days after the April 30 deadline applicable to publicly traded companies. Although more than 99% of its capital is owned by the State of Rio de Janeiro, Cedae remains a listed company with 675 minority shareholders.

The delay occurred because Cedae’s new president, career state attorney Rafael Rolim, appointed by acting Governor Ricardo Couto, took office about 60 days ago and conducted a detailed review of the company’s accounts before releasing them. “As I usually say, more than a CEO, I am an intervener at the company,” Rolim told Valor.

Rolim is familiar with Cedae, having served as the company’s general counsel from 2015 to 2019 and later participating, as deputy state attorney general, in the 2021 concession process for Rio de Janeiro’s water and sewage distribution services. Cedae has been facing declining revenue and rising costs and came under scrutiny after investing R$200 million in Banco Master certificates of deposit (CDBs) in 2023. In its 2025 financial statements, the company recognized a loss of R$222.75 million related to those investments.

Rolim said the findings of an internal investigation into the Master investments, made under the company’s former finance department, have been submitted to the Securities and Exchange Commission of Brazil (CVM), state oversight bodies, and Cedae’s board of directors.

The executive added that the board is expected to decide in July on potential legal action against members of the finance department who were in office when the investments were made. “I found a company [within the finance department] that was extremely politicized, which prevented it from acting in the company’s best interests and fulfilling its fiduciary duties,” Rolim said.

According to the CEO, the internal investigation found evidence of a “directing” of investments toward Banco Master, even though Daniel Vorcaro’s bank was considered ineligible under Cedae’s financial investment policy. To circumvent that restriction, the finance department at the time, led by Antônio Carlos dos Santos, altered the investment policy to fit Master’s risk profile, according to the investigation.

Cedae is an unsecured creditor of Banco Master, which was placed into extrajudicial liquidation by Brazil’s Central Bank on Nov. 18, 2025. “We are studying mechanisms to recover these amounts. There are lawsuits underway filed by the State of Rio de Janeiro, and we believe that with the new management model we are implementing, we can prevent this loss [of R$222 million] from affecting our employees,” Rolim said. It remains unclear whether Prece, Cedae’s employee retirement fund, may eventually require recapitalization as a result of the losses related to Banco Master. No assessment has yet been made on the issue.

Antônio Carlos dos Santos, Cedae’s former CFO, who was dismissed by Governor Ricardo Couto on April 17, sent a statement to Valor saying: “The Finance Department’s management was always transparent, complied with all approval procedures, and disclosed its positions to all of the company’s decision-making bodies.”

He added that both the investments in Banco Master and the changes to Cedae’s investment policy were approved by the company’s governing bodies. “All board members, executives, and auditors received monthly reports on all financial investments, which were also available on the company’s website.” He added: “Even without having access to the contents of the investigation, I reaffirm that the technical opinions included in the 2025 financial statements confirm that Cedae’s financial management was always responsible, transparent, and aligned with best market practices.”

Despite those arguments, Cedae’s internal investigation concluded that the board lacked sufficient predictive information to foresee that the changes to the investment policy would be used operationally to direct investments toward Banco Master.

Speaking about governance, Rolim said he sees the “glass half full,” arguing that internal controls prevented the problems associated with Banco Master from becoming even more severe. He acknowledged, however, that the company faces two major challenges: rising costs and what he describes as an “attack” on revenues. On the cost side, expenses with third-party services increased, particularly in information technology.

Since taking office, Rolim has implemented a budget review and eliminated more than 80 political appointments. He estimates annual savings from these measures could range from R$7 million to R$10 million.

The issue that concerns him most, however, is revenue, particularly disputes involving amounts owed to Cedae by concessionaire Águas do Rio. That dispute led Cedae to record a provision of R$871.6 million in its 2025 financial statements.

Rolim said that after Rio’s water distribution services were concessioned, Águas do Rio argued that the contract covering Block 4—which includes 106 neighborhoods in downtown Rio and the city’s North Zone, as well as seven municipalities in the Baixada Fluminense region—had become economically unbalanced. The concessionaire requested a contract rebalance, citing a higher-than-expected share of customers eligible for social tariffs. Pending resolution of the dispute, the company obtained a 22% discount on the price of water purchased from Cedae.

Rolim said that in June 2025 the state government, the concessionaire, and Cedae reached an agreement under which the amount owed by Águas do Rio would be settled through infrastructure works financed by the concessionaire. The agreement established a three-month deadline for defining the projects. One year later, however, the projects have yet to be specified, and no construction work has begun. As a result, Cedae decided to provision the amount due from Águas do Rio.

Águas do Rio CEO Anselmo Leal said the new Cedae administration had “shed light” on an issue that was not clearly reflected in the company’s previous financial statements. Leal said the concession contract assumed that 5% of customers in the service area would qualify for social tariffs, whereas the actual figure in Block 4 is 18%. The alternatives for restoring the contract’s economic balance included raising tariffs, reducing part of the third and final concession payment, or granting a discount on water purchases by the concessionaire. “The state decided to reduce the price of water,” Leal said.

He also noted that the June 2025 agreement requires Águas do Rio to purchase equipment for projects needed by Cedae to improve water intake infrastructure. According to Leal, part of the purchases have already been made, including R$50 million in pumps for projects at the Imunana-Laranjal treatment facility. However, Cedae has not yet delivered the engineering designs needed for construction to begin. There is also an ongoing dispute related to an injunction obtained by Águas do Rio last year that granted the company a 24.13% discount on the water tariff charged by Cedae.