Earnings Release 1Q18. ENGIE Brasil Energia announces first quarter 2018 results: Ebitda and Net Income grow by 18.2% and 8.

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1 Earnings Release 1Q18 ENGIE Brasil Energia announces first quarter 2018 results: Ebitda and Net Income grow by 18.2% and 8.6%, respectively Florianópolis, Brazil, April 19, ENGIE Brasil Energia S.A. ( ENGIE Brasil Energia, EBE or Company ) B3: EGIE3, ADR: EGIEY - announces earnings for the First Quarter (1Q18). The information in this release is shown on a consolidated basis and in accordance with Brazilian accounting principles and practices. The values are expressed in Brazilian Reais (R$), except where otherwise indicated. Highlights ENGIE Brasil Energia reported an accumulated net income of R$ million in 1Q18 (R$ /share), value 8.6% (R$ 38.6 million) more than recorded in the first quarter of 2017 (1Q17). Ebitda 1 was R$ 1,046.6 million in 1Q18, an increase of 18.2% (R$ million) compared with 1Q17. The Ebitda margin was 56.0% in 1Q18, a growth of 0.9 p.p. in relation to 1Q17. Net operating revenue amounted to R$ 1,868.9 million in 1Q18, an increase of 16.4% (R$ million) compared with this same item in 1Q17. The average contracted energy sales price, net of exports and revenue taxes was R$ /MWh in 1Q18, 1.1% less than recorded in 1Q17. The amount of energy sold in 1Q18 was 9,016 GWh (4,174 average MW), a volume 3.7% higher than sold in 1Q17. In 1Q18, EBE assured the sale under the Free Contracting Environment (ACL) of volumes of approximately 300 average MW for delivery in each one of the years from 2020 to 2022, this in line with the gradual medium and long-term energy contracting strategy. The Jaguara and Miranda HPP, for the first time, contributed in full to Company revenues in 1Q18. The revenue from the Regulated Contracting Environment (ACR) of both plants totaled R$ million, having also benefited from the allocation of 30% of the assured energy under the ACL. In the light of the downgrading of Brazil sovereign rating to BB- in February, Fitch Ratings lowered the Company s Long Term International Rating for currency to BB with stable outlook, still therefore one notch above sovereign rating. In March, the rating was reaffirmed together with the Long Term National Rating at AAA(bra) with a stable outlook. On March 8, the concession contract was signed with respect to the Transmission Auction 02/2017, at which EBE bid successfully for Lot 1 located in the state of Paraná (PR). Subsequent Events At the Annual General Meeting held on April 11, approval was given to the distribution of complementary dividends relative to the fiscal year ending December 31, 2017 in the amount of R$ million, corresponding to R$ per share. The shares will trade ex-dividends as from April 24 and payout will take place on June 28, On April 10, the Company announced that negotiations for the sale of the Jorge Lacerda Thermoelectric Complex and the Pampa Sul Thermoelectric Power Plant with ContourGlobal had not transpired satisfactorily. EBE will seek alternatives in order to continue the decarbonization of its portfolio. The Board of Directors authorized the Company to submit a proposal for the acquisition of the 50% of remaining shares of ENGIE Geração Solar Distribuída s shares. The acquisition is expected to be concluded during For Immediate Release Additional information: Carlos Freitas Chief Finance and Investor Relations Officer carlos.freitas@engie.com Rafael Bósio IR Manager rafael.bosio@engie.com Phone: NEW! ri.brenergia@engie.com Conference call and webcast: On 4/20/2018 at 10:00 a.m. (EDT): in Portuguese (simultaneous translation into English). Further details on Upcoming Events section, available on page 23. Visit our website Summary of Financial and Operational Indicators ENGIE Brasil Energia - Consolidated (In millions of R$) 1Q18 1Q17 Chg. Net Operating Revenue (NOR) 1, , % Results from Operations (EBIT) % Ebitda (1) 1, % Ebitda / NRS - (%) (1) p.p. Net Income % Return On Equity (ROE) (2) p.p. Return On Invested Capital (ROIC) (3) p.p. Net Debt (4) 5, , % Gross Power Production (avg MW) (5) 4,630 4, % Energy Sold (avg MW) (6) 4,174 4, % Average Net Sales Price (R$/MWh) (7) % Number of Employees - Total 1,166 1, % EBE Employees 1,117 1, % Employees on Under Construction Plants % (1) Ebitda: net income + income tax and social contribution + financial result + depreciation and amortization. (2) ROE: net average equity for the past 4 quarters /shareholders equity. (3) ROIC: effective tax rate x EBIT / invested capital (invested capital: debt - cash and cash equivalents - deposits earmarked for debt servicing + SE). (4) Adjusted amount, net of gains from hedge operations. (5) Total gross electricity output from the plants operated by ENGIE Brasil Energia. (6) Disregarding sales for quota regime (Jaguara and Miranda HPPs). (7) Net of taxes and exports. 1

2 MESSAGE FROM THE MANAGEMENT Following a 2017 of major challenges overcome, new objectives assumed and consistent performance, we began 2018 with the same ambitions of pursuing the creation of maximum value in accordance with ENGIE Group s global guidelines of decarbononization, decentralization and digitization throughout the world. Our projects for expanding the renewable energy matrix are proceeding at full speed. In 1Q18, the Jaguara and Miranda Hydroelectric Power Plants contributed in full to Company revenue. The construction of the Umburanas Wind Complex in Bahia has proceeded a pace with the opening of the accesses to the wind farms advancing. In March, work was started on the concreting of the foundations to the wind turbines, with 13 of the 144 foundations concluded. Important progress was also made at the Campo Largo Wind Complex where 97% of the excavations for the installment of the network structures and 19% of the wind turbine towers was finalized. All these projects are proceeding according to schedule and preestablished budgets. We saw similar progress in distributed generation, since 2016, one of the Company s priority segments. In the first quarter of 2018, ENGIE Geração Solar Distribuída installed 260 systems, the aggregate since inception now totaling 1,788 systems installed with a total 9,744 kwp capacity. Board of Directors meeting, has been approved the Company submit a proposal for the acquisition of the 50% of remaining shares of ENGIE Geração Solar Distribuída s shares. The acquisition is expected to be concluded during The results reported for 1Q18 are testament to our convictions and we remain confident in pursuing our chosen strategy. In line with our policy of transparency which characterizes all our actions and communications and further to what we have been reporting in previous periods, we would mention that negotiations for the sale of the Jorge Lacerda Thermoelectric Complex and the Pampa Sul Thermoelectric Power Plant have not evolved satisfactorily. The Company has therefore decided to examine alternatives as part of the continuing process of portfolio decarbonization. We begin 2018 with the same focus and discipline in following and fulfilling our strategy based on the allocation of capital focused on positive returns and a conservative approach to risk management. The results reported in 1Q18 are testament to our convictions and we continue confident in pursuing this line of action. Compared with 1Q17, our Net Operating Revenue rose by 16.4%, reaching R$ 1,868.9 million, our Ebitda by 18.2% to R$ 1,046.6 million and our Ebitda Margin posting an increase of 56.0%, 0.9 p.p. greater than registered in the same period in In the light of this, we were able to report a first quarter Net Income of R$ million. Finally, worthy of mention and in addition to the results already achieved, there will be future additional benefits arising from our activities: in 1Q18, the Company sold about 300 average MW for delivery in each one of the years from 2020 to 2022, a significant amount which will feed through to future results. Eduardo Antonio Gori Sattamini Chief Executive Officer Carlos Freitas Chief Financial and Investor Relations Officer 2

3 OPERATING PERFORMANCE Generating Complex ENGIE Brasil Energia is part of the largest independent power producer group in the country and has 7,678.1 MW of installed capacity and operates a generating complex with 9,398.8 MW, comprises 30 plants (11 hydro, three thermal and 16 complementary energy source plants - biomass, SHP, wind powered and solar), 26 of which are wholly owned by the Company and four (the Itá, Machadinho and Estreito Hydro Power Plants and the biomass-fired Ibitiúva Bioenergética co-generation plant) jointly-owned through consortia with other companies. ENGIE Brasil Energia's Generating Complex Installed Capacity (MW) Assured energy Concession/ Power Plants Source Location (amw) Company's Company's Authorization original Share 4 Total Share term expiration date Itá Hydro Uruguai River (SC and RS) 1, ,126.9 Oct/ Salto Santiago Hydro Iguaçu River (PR) 1, ,420.0 Sep/ Machadinho Hydro Uruguai River (SC and RS) 1, Jul/ Estreito Hydro Tocantins River (TO/MA) 1, Nov/ Salto Osório Hydro Iguaçu River (PR) 1, ,078.0 Sep/ Cana Brava Hydro Tocantins River (GO) Aug/ Jaguara Hydro Grande River (MG) Dec/ Miranda Hydro Araguari River (MG) Dec/ São Salvador Hydro Tocantins River (TO) Apr/ Passo Fundo Hydro Passo Fundo River (RS) Sep/ Ponte de Pedra Hydro Correntes River (MT) Sep/ Total - Hydro 8, , ,417.7 Jorge Lacerda Complex 1 Thermal Capivari de Baixo (SC) Sep/ Total - Thermal Trairi Complex 2 Wind Farm Trairi (CE) Sep/ Santa Mônica Complex 2 Wind Farm Trairi (CE) Jan/ Ferrari Biomass Pirassununga (SP) Jun/ Ibitiúva Bioenergética Biomass Pitangueiras (SP) Apr/ Assú V Solar Assú (RN) Jun/ Lages Biomass Lages (SC) Oct/ Rondonópolis SHP Ribeirão Ponte de Pedra (MT) Dec/ José Gelazio da Rocha SHP Ribeirão Ponte de Pedra (MT) Dec/ Cidade Azul Solar Tubarão (SC) not applicable Tubarão P&D Wind Farm Tubarão (SC) not applicable Total - Complementary Total 9, , , Complex comprised of three power plants. 2 Complex comprised of four power plants. 3 For generating plants with installed capacity lower than or equal to 5 MW the legal instrument applicable is the record. 4 Considers a review of the assured energy effective as of January

4 Expansion Jirau. Energia Sustentável do Brasil (ESBR), is responsible for the construction, maintenance, operation and sale of energy generated by the Jirau Hydroelectric Power Plant, located in the Madeira River, in the city of Porto Velho, state of Rondônia. ESBR - Estrutura Societária ESBR submitted the winning bid at the 35-year concession auction 20% organized by Brazilian Electricity Regulatory Agency (Aneel) (A- 40% 5/2008 Auction) on May 19, 2008, offering the most competitive proposal for 70% of the energy to be produced by the Plant, at the 20% time, based on a total of 44 generating units, for captive customers 20% supplied by distribution companies. At the energy auction held on August 17, 2011 (A-3/2011 Auction), ESBR sold a further average MW for delivery in 2014 over a 30-year period, the result of increased expansion of the initial project to 50 generating units. The Ministry of Mines and Energy (MME) confirmed Jirau HPP s new commercial capacity in Ordinance 337 of November 10, 2015 with an increase from 2,184.3 average MW to 2,205.1 average MW as from publication date. The 20.5 average MW increase represents the result of a review of the plant s hydraulic losses and as a consequence, ESBR was able to sell an additional 18 average MW at the A-1 Energy Auction held on December 13, ESBR PPA s Portfolio Average MW On December 26, 2012, the Plant became eligible for the sale of carbon credits following United Nations Organization (UNO) registration. Jirau now enjoys the right to trade approximately 6 million tons of CO2/year. Since November 2016, Jirau HPP has 50 generating units in operation, representing a total installed capacity of 3,750 MW. The plant was unveiled on December 16, In 1Q18, the plant generated 2,863.2 average MW, 16.0% above the 2,468.3 average MW for 1Q17, while the National Electrical System Operator Uptime Ratio (FID) was 99.5% (data subject to final Electric Energy Trade Board (CCEE) booking). In May 2017, ENGIE Brasil Participações (EBP) announced the engagement of Banco Itaú BBA S.A. to provide financial advisory services for an economic-financial study for the preparation of a proposal for the eventual transfer to ENGIE Brasil Energia (EBE) of EBP s stakes of 40% in ESBR Participações S.A. (ESBRpar) - holder of 100% of the capital stock of ESBR - and the 100% participation in Geramamoré Participações e Comercializadora de Energia Ltda. 4

5 ENGIE Geração Solar Distribuída. Since 2016, the Company has been operating in the distributed generation market through ENGIE Geração Solar Distribuída S.A., in which it has a 50% stake in the capital. This initiative is a response to the challenges of a dynamic energy matrix and closer to the end consumer. On February 23, the Federation of the Industries of the State of Santa Catarina (Fiesc), in partnership with ENGIE Geração Solar Distribuída and WEG S.A., announced the launch of the second phase of the Solar Industry Program. This phase comes after the success of the first phase consisting of a pilot project which offered special conditions to the employees of ENGIE Brasil Energia, WEG, Fiesc, Serviço Social da Indústria (Sesi/SC), the National Industrial Apprenticeship Service (Senai/SC), Instituto Euvaldo Lodi (IEL) and Centrais Elétricas de Santa Catarina (Celesc). The second phase of the program extends the offer to the industries of Santa Catarina and their employees. The first phase began on November 20, 2017 and up to the end of 1Q18, had totaled 1,906 enrollments while the second phase is already reporting 548 industries signing up to the program. During 1Q18, 260 systems with a capacity of 1,219 kwp were installed, a growth of 25.9% compared with 1Q17 when installed capacity was 968 kwp comprising 56 systems. Since the start to its operations, ENGIE Geração Solar Distribuída has installed a total of 1,788 systems in 16 states with 9,744 kwp of capacity. Number of units and installed capacity Q17 1, Q18 Number of Installations Installed Capacity (kwp) Gralha Azul Transmission System. On December 15, 2017, the Company made a successful bid for Lot 1 of Aneel Transmission Auction 02 for a stretch of 1,050 kilometers in the State of Paraná (PR), marking EBE s debut into the energy transmission sector in Brazil. The project also includes the installation of five new substations. The concession term for the public utility transmission service, including the licensing, the construction, assembly and the operation and maintenance of the transmission line installations will be 30 years as from signature date of the concession agreement. The final date for the transmission line to become fully operational is March 9, 2023, but EBE expects it can abbreviate this term as well as reduce the initial Aneel forecasted investments. The concession agreement was signed on March 8, 2018 at the headquarters of Aneel in Brasília. Part of the Annual Allowed Revenue (RAP) (%) Investment forecast by Contracted RAP Lot Location Aneel (RS million) (R$ million) 1 Paraná (PR) ,017.0 Total ,

6 Projects under Construction Power plants Source Location Installed Capacity (MW) Concession/ Assured energy Authorization original Company's (amw) Company's term expiration date Total Share Share Umburanas Complex - Phase I Wind Farm Umburanas (BA) From Aug/49 to Aug/ Pampa Sul Thermal Candiota (RS) Mar/ Campo Largo Complex - Phase I Wind Farm Umburanas and Sento Sé (BA) From Jul/50 to May/ Total 1, , Umburanas Wind Complex Bahia (Phase I). Located in the Municipality of Umburanas (BA), the Complex has a total installed capacity of 605 MW to be harnessed in two phases. The installed capacity under Phase I is 360 MW, of which MW will be sold on the free market while MW has been commercialized via the A- 5/2014 Reserve Energy Auction at the average price of R$ 168.1/MWh, restated up to March 31, The first phase of the Complex will involve an investment of about R$ 1.8 billion. The remaining 245 MW will be harnessed during Phase II. The project will be developed adjacent to the Campo Largo Wind Complex, thereby capturing synergies both during installation as well as subsequently when commercial operations begin. Umburanas Wind Farm concreting of the first foundation The agreements for executing the transmission line and the Ourolância Substation bay and for the electro-mechanical content (230kV substation, unit substations and medium voltage network) were signed in February Work is currently being executed on the accesses to the wind farms with 42% of brush clearance, 29% of earth movement and 4% of paving completed. In March, concreting operations began on the foundations to the wind turbines, 13 of the 144 foundations having been concluded. Commercial operations are expected to begin in January Pampa Sul Thermoelectric Power Plant Rio Grande do Sul. The Pampa Sul TPP is to be sited in the Municipality of Candiota, state of Rio Grande do Sul with an installed capacity of 345 MW. The plant will use thermal coal as fuel from a seam also located in Candiota and will be linked to the SIN through a 525 kv transmission line to the Candiota II substation, to be built by the Company. The plant s average MW of commercial capacity was sold for a 25-year term at the A-5 Auction held on November 28, 2014 at a price of R$ 235.7/MWh, restated up to March 31, The investment approved for the construction of the Pampa Sul TPP cooling tower Plant was approximately R$ 1.8 billion (as of November 2014). Also in November 2014, the Company protected the investment portion in foreign currencies against the exchange rate variation effects through hedging operations. In 1Q18, work on the Untreated Water Capture Plant was completed permitting the pumping of water into the plant once reservoir levels have reached meters. The electro-mechanical assembly of the conveyer belt and the coal yard covering have both been completed. Work continues on the plant with boiler hydrostatic testing imminent and scheduled for the second quarter The other systems are progressing well with commissioning of the water systems expected shortly. The physical work on the plant was 82% complete at the end of 1Q18. Start of commercial operations is scheduled for the first quarter of

7 Campo Largo Wind Complex Bahia (Phase I). The Campo Largo Wind Complex (CECL) is made up of a series of wind generation operations to be developed in stages. The Complex has a potential for harnessing MW, Phase I amounting to MW and Phase II, 330 MW of installed capacity, all located in the municipalities of Umburanas and Sento Sé, about 420 km from the city of Salvador in the state of Bahia. At the A-5 Auction on November 28, 2014, ENGIE Brasil Energia sold 82.6 average MW for a 20-year term at a price of R$ 172.5/MWh, restated up to March 31, 2018, to be generated from six wind farms with an installed capacity of MW. Campo Largo Wind Farm Nacelle lifting A further five wind farms in the Complex with a total installed capacity of MW (75.2 average MW) are being developed at this stage of the project. In this case, the energy has already been sold to the Free Contracting Environment (ACL). The investment approved for the 11 wind farms was of approximately R$ 1.7 billion (as of June 2014). The investment portion denominated in foreign currencies was protected against the exchange rate variation effects through hedging operations. In 1Q18, work on the assembling of the wind turbine towers was begun, with 19% of the total completed by the end of the quarter. Electromechanical assembly of the wind turbines proceeds with 9 nacelles, 9 hubs and 15 blades already assembled. The excavation stage for installing the structures for medium voltage network structures was completed with 97% of the work overall concluded. Excavation and concreting of the foundations of the structures for the Campo Largo Substation were concluded with the installation of the supports and the equipment both for the 230 kv as well as the 34.5 kv yards. The assembling of the electro-mechanical equipment is progressing, in the case of the 230 kv yard, 97% complete and the 34.5 kv yard 37% concluded. The electro-mechanical assembly of the Ourolândia II Substation bay equipment has been concluded and commissioning underway. The transmission line is already in place and the lightening cables/optical Ground Wire (OPGW) and the conductor cables are being erected while the 230 kv transmission line connecting the Campo Largo Substation to the Ourolândia II Substation connection bay is at the commissioning stage. Initial commercial operations, with the commissioning of three wind farms, are scheduled for the second quarter Projects under Development Installed Capacity (MW) Power plants Source Location Company's Total Share Santo Agostinho Complex Wind Farm Lajes and Pedro Avelino (RN) Norte Catarinense Thermal Garuva (SC) Campo Largo Complex - Phase II Wind Farm Umburanas and Sento Sé (BA) Umburanas Complex - Phase II Wind Farm Umburanas (BA) Assú - Plants I, II, III e IV Solar Assú (RN) Alvorada Solar Bom Jesus da Lapa (BA) Total 2, ,011.8 Santo Agostinho Wind Complex Rio Grande do Norte. The Complex is made up of 24 Specific Purpose Companies (SPEs), each one responsible for the development of a wind generation project, representing a total development capacity of 600 MW. All the projects will be located in the municipalities of Lajes and Pedro Avelino, about 120 km from the city of Natal, the capital of the state of Rio Grande do Norte. In June 2016, the state of Rio Grande do Norte s environmental protection agency, the Environmental and Sustainable Development Institute (Idema), declared the project to be environmentally viable. The project is eligible to take part in the energy auctions. 7

8 Norte Catarinense Thermoelectric Power Plant Santa Catarina. The Company is developing a project for the construction of a natural gas-fired combined cycle thermoelectric power plant in the city of Garuva, in the north of the state of Santa Catarina. The Norte Catarinense TPP will have an installed capacity of approximately 600 MW. In March 2016, the Preliminary License was issued, allowing the Plant to take part in future new energy auctions. Campo Largo Wind Complex Bahia (Phase II). The Company intends to add about 330 MW of installed capacity to the Complex with the implementation of its second phase, for sale of energy to the free and regulated markets. Just as in the case of the Santo Agostinho Wind Complex, Phase II of Campo Largo is now eligible to take part in the energy auctions, the Company s intention being to register the project for the next A-6 auction. Umburanas Wind Complex Bahia (Phase II). With an installed capacity of 245 MW, the environmental licensing for the Second Phase has been issued with energy under this second phase to be harnessed by EBE in due course alongside the Campo Largo Wind Complex, thus maximizing synergies during implementation and subsequent commercial operations. Assú Photovoltaic Complex. Located in the Municipality of Assú, State of Rio Grande do Norte, the Complex will have a total installed capacity of approximately 183 MWp, consisting of five projects, among them Assú V. Assú V went into commercial operations in December The remaining projects are at the stage of evaluating solar radiation, with Preliminary License already issued, and qualified to take part in future new energy auctions. Besides the abovementioned projects, the Company is also examining the potential for photovoltaic solar energy generation in areas where it is installing its wind farms. In addition, it is also analyzing partnerships which could accelerate the development of this energy source in line with the process of energy transition which is taking place at world level. Alvorada Photovoltaic Complex. ENGIE Brasil Energia has acquired a site in the State of Bahia, - a region with potential for generating solar energy - for the development of three projects comprising the Alvorada Photovoltaic Complex. The projects, which will have a total installed capacity of 90 MWp. All projects are at the stage of raising solar irradiance data and received their Preliminary License in August 2016, qualifying them to take part in new energy auctions. Uptime Operating The plants operated by ENGIE Brasil Energia reported uptime working of 98.2% in 1Q18, ignoring scheduled stoppages: 99.6% for the hydroelectric plants, 87.3% for the thermoelectric plants and 93.0% with respect to the plants fired from complementary energy sources, namely SHPs, biomass, wind and photovoltaics. If all scheduled shutdowns are taken into account, the aggregate uptime in the first quarter 2018 was 94.0%: 97.9% for the hydroelectric plants, 69.0% for the thermoelectrics and 71.4% for plants operating with complementary energy sources. Uptime Operating Not considering scheduled shutdowns +2.2 p.p. 97.4% 99.6% +6.1 p.p. 87.3% 81.2% +0.1 p.p. 92.9% 93.0% +3.0 p.p. 95.2% 98.2% Hydroelectric power plant uptime in the quarter was affected mainly by programmed maintenance stoppages at the Itá and Passo Fundo hydro plants in addition to corrective maintenance at the Jaguara Plant. Complementary Additionally, on March 21 there was a major power failure which substantially affected the National Interconnected System (SIN), automatically disconnecting Estreito Hydroelectric Power Plant s 8 Generating Units. While the National System Operator classified this event as external, downtime hours not being considered, all 8 Generating Units were damaged. The repairs are scheduled for completion by the end of May. Hydro Thermal 1Q17 1Q18 Consolidated 8

9 Thermoelectric downtime was affected by programmed maintenance at Generating Unit 3 and by corrective maintenance work on Generating Unit 2, both at the Jorge Lacerda Thermoelectric Plant. Production Generation Average MW 4, % 113 4, Electricity output from plants operated by ENGIE Brasil Energia was 10,001 GWh (4,630 average MW) in 1Q18. This result is 2.8% lower than production for 1Q17. Total output breaks down as follows: hydroelectric plants, 8,842 GWh (4,093 average MW), thermoelectric plants 905 GWh (419 average MW) and the complementary sourced units 255 GWh (118 average MW). Results point to, respectively, reductions of 2.5% and 6.9% on the hydro and termoelectric energy sources and increase of 4.4% in complementary energy sources, in relation to 1Q17. 4,199 1Q17 Hydro Thermal 4,093 1Q18 Complementary While the Jaguara and Miranda Hidroelectric Power Plants have been incorporated into the Company s generating complex, there was a year-on-year reduction in the Company s hydro generation - largely due to less favorable hydrological conditions in 1Q18 in the hydrological basins where the company s plants are located. Complementary to this, the effect of load stabilization of the National Interconnected System (SIN) is worthy of mention with growth of just 0.1% in relation to 1Q17. This is linked to a combination of entry into operation of new plants making up the North subsystem and the related need to restrict generation from SIN s existing hydraulic complex to make way for the hydro generation coming on stream from the plants recently incorporated into the system. On the other hand, the reduction in thermal generation is due principally to lower generation from the Jorge Lacerda Thermoelectric Complex due to restrictions on attending system requirements as well as controlled management of coal inventory. Increased generation from the complementary plants is a reflection of the startup in commercial operations of the Ouro Verde Wind Farm and the Assú V Photovoltaic Plant, this despite the sale of the Beberibe and Pedra do Sal wind farms and the Areia Branca Small Hydroelectric Plant. In this context, it is worth pointing out that an increase in the Company s hydroelectric generation does not necessarily reflect an improvement in economic-financial performance. Conversely, a reduction in this type of generation does not inevitably imply a deterioration in economicfinancial performance due to the adoption of the Energy Reallocation Mechanism (MRE), which defrays the risks of hydro generation among its participants. Generation by Complementary Source Average MW As to the Company s thermal generation, its increase might reduce (as a function of the Company s level of contracting) exposure to the Price for the Settlement of Differences (PLD), the opposite being the case when there is a decrease, all other variables being equal. Wind Q17 SHP +4.4% Q18 Biomass Solar 9

10 Clients In 1Q18, the free consumer share of the Company s portfolio was 49.9% of total physical sales and 44.9% of the total net operating revenue (except CCEE and other revenues), decreases of 3.4 p.p. and 4.0 p.p., respectively in relation to the same quarter in The reduction in the participation of free consumers reflects both a decline in the consumption of industrial clients as well as lower prices for new agreements. Breakdown of Customers by Physical Sales (%) Breakdown of Customers in Contracted Sales Comprising Net Operating (%) Q17 1Q18 1Q17 1Q18 Distribution Companies Free Customers Trading Companies Export 1 1 Energy exports as a share of physical sales was 0.02% in the 1Q17 and of net operating revenue (except CCEE and other revenues) was 0.04% in the 1Q17. 10

11 Commercial Strategy The Company pursues a commercial strategy of gradual sales of future energy availability for any given year as a means of mitigate the risk of exposure to spot prices (Price for Settlement of Differences - PLD) for that particular year. Electric energy sales are made during windows of opportunity that open when the market shows a greater buying propensity. ENGIE Brasil Energia s energy balance based on proprietary commercial capacity and power purchasing agreements outstanding as at March 31, 2018 is as follows: Energy Balance (Average MW) 1 XXXX-YY-WWW-ZZ, where: XXXX year of auction YY EE = existing energy or NE = new energy WWWW year of delivery start ZZ supply contract duration (in years) 2 Sales price is net of ICMS and taxes over revenue (PIS/Cofins, R&D), i.e. future inflation is not considered. 3 Desconsidering sales for quota regime (Jaguara and Miranda HPPs). 4 Purchase net price, considering benefits from PIS/Cofins credits, i.e. future inflation is not considered Auction Reference Gross Price Own Resources 4,092 4,628 4,716 4,725 4,738 4,736 Gross Price Date Adjusted + Purchases for Resale 1, (R$/MWh) (R$/MWh) = Total Resources (A) 5,336 5,496 5,208 5,092 5,094 5,019 Government Auction Sales 1 1,638 1,997 2,013 2,013 2,013 2, NE Dec NE Jun NE Nov NE Oct EE May Proinfa Jun st Reserve Energy Auction Aug Auction Mix (New Energy / Reserve / DG) NE Mar NE Nov NE Nov NE Aug th Reserve Energy Auction Nov EN Nov Government Auction - Quotas regime Quotas (UHJA) Jul Quotas (UHMI) Jul Bilateral Sales 3,089 2,823 2,666 2,078 1, = Total Sales (B) 4,727 4,820 4,679 4,091 3,555 2,997 Balance (A - B) ,001 1,539 2,022 Sales av erage net price (R$/MWh) 2, 3 : Purchases av erage net price (R$/MWh) 4 : Notes: - The balance refers to the settlement point (net of losses of internal consumption of the plant). - The average prices are considered simply estimates and are based on financial planning revisions, not capturing volume changes, which are updated quarterly. - Aneel agreed to the renegotiation of the hydrological risk with respect to the Company s agreements negotiated through the Regulated Contracting 11

12 ECONOMIC-FINANCIAL PERFORMANCE Net Operating Revenue In 1Q18, net operating revenue reported an increase of 16.4%, (R$ million), compared with 1Q17, from R$ 1,605.9 million to R$ 1,868.9 million. The key factors underlying this variation were: (i) R$ million, due to recognition of revenue from operations at the Jaguara and Miranda Hydroelectric Power Plants in the Regulated Contracting Environment (ACR), the plants acquired via Aneel s Non-Renewed Concessions Auction of which R$ 84.8 million corresponds to the remuneration of the financial asset and R$ 27.8 million to Generation Assets Management revenue (GAG) to cover the costs of operation, maintenance and improvements; (ii) R$ million growth in revenue due to transaction in the short-term market, more especially those transacted through the Electric Energy Trade Board (CCEE); and (iii) R$ 40.0 million, reflecting the larger volume of energy sold, partially attenuated by a slight reduction in average sales price for free consumers. Net Operating Revenue R$ million 1, % 1, Q17 1Q18 Net Operating Revenue Change R$ million Net Average Selling Price* R$/MWh % Net Average Selling Price The average energy selling price, net of exports and taxes on revenue reached R$ /MWh in 1Q18, 1.1% lower than 1Q17, the value of which was R$ /MWh. Price reductions were essentially a reflection of new energy sales contracts for industrial clients at prices less than existing or expiring agreements. 1Q17 1Q18 (*) Net of taxes and exports. 12

13 Sales Volume Average MW 4, % 4,174 Sales Volume The amount of energy sold increased from 8,694 GWh (4,025 average MW) in 1Q17 to 9,016 GWh (4.174 average MW) in 1Q18, an increase of 322 GWh (149 average MW) between compared periods. These variations largely reflect the combination of growth in sales to trading companies, including trading operations, partially offset by the reduction in sales to distributors due to the Surplus and Deficits Compensation Mechanism (MCSD) and the decline in consumption on the part of industrial clients. 1Q17 1Q18 Comments on Variation in Net Operating Revenue Revenue from Sale of Electric Energy - Distribution Companies Revenue from sales to distribution reached R$ million in 1Q18, 0.6% higher than the R$ million reported in 1Q17. This variation reflects the following factors: (i) R$ 14.0 million an increase of 2.1% in the net average selling price; and (ii) R$ 9.6 million a reduction of 44 GWh (21 average MW) in volumes sold. The decrease in sales volume between periods under review was principally due to reductions of the MCSD, partially attenuated by the entry into operation of the Assú V Photovoltaic Plant. Growth in net average selling price is mainly due to the monetary restatement of existing contracts. Revenue from Sale of Electric Energy - Trading Companies In 1Q18, net operating revenue to trading companies was R$ million, 71.5% higher than the revenue recorded in 1Q17, which was R$ million. This improved showing was due to the following factors: (i) R$ 43.1 million an increase of 313 GWh (145 average MW) in energy volume sold; (ii) R$ 37.1 million with respect to selling agreements for trading operations (89 average MW); and (iii) R$ 1.7 million growth of 1.5% in net average selling prices. The variation in volume in the quarter was mainly due to new sales agreements with trading companies, including trading operations. The increase in price largely reflects new agreements at prices higher than the average for existing and expiring contracts. Revenue from Sale of Electric Energy - Free Consumers Revenue from sale to free consumers fell 6.0% between the quarters under analysis from R$ million in 1Q17 to R$ million in 1Q18. The following events contributed to this variation: (i) R$ 23.8 million decrease of 3.1% in the average net selling price of energy. The decline in prices was largely due to new agreements at lower prices than the average for existing and expiring agreements; and (ii) R$ 21.9 million a reduction of 137 GWh (63 average MW) in the amount of energy sold, basically a reflection of lower consumption by the industrial sectors. The portfolio of free consumers increased from 280 in 1Q17 to 326 in 1Q18, a rise of 16.4%. Export of Electric Energy In the quarter under analysis, energy exports were zero. In 1Q17, the Company exported 2 GWh (0.23 average MW) of electricity to Argentina, resulting in net revenue of R$ 0.6 million. Transactions in the short term market especially those conducted through the Electric Energy Trade Board (CCEE) In 1Q18, revenue generated in the short-term market, especially within the scope of the CCEE, was R$ million, while in 1Q17, the amount was R$ 36.5 million, representing an increase of R$ million when comparing the same quarters for successive years. A more detailed explanation of these variations is to be found in the item below Details of Short-Term Operations - especially Transactions conducted through the Electric Energy Trade Board (CCEE). 13

14 Remuneration of concession financial assets The equivalent to 70% of the physical guarantee of the Jaguara and Miranda Hydroelectric Power Plants, the concession contracts for which became effective on December 29, 2017, will be remunerated through the Grant Bonus Return (RBO) comprising the Generation Annual Revenue (RAG) to be generated by the companies. On the basis of the economic essence of the transaction, the part equivalent to the amount paid for the concession grant is recorded as a financial asset and the remuneration of these assets, recognized as operating financial revenue. The amount of this remuneration recognized in 1Q18 for the Jaguara and Miranda Hydroelectric Power Plants was R$ 52.6 million and R$ 32.2 million, respectively. Revenue from services rendered Still with respect to the Jaguara and Miranda Hydroelectric Power Plants, for energy sold in the ACR, also as part of the RAG, the companies will receive the portion relating to the Generation Assets Management (GAG) for covering the costs with operations and maintenance as well as expenditures with improvements and investments during the term of the concession agreement. The value of the GAG recognized in 1Q18 was R$ 15.4 million and R$ 12.4 million, respectively for the Jaguara and Miranda Hydroelectric Power Plants. Costs of Electric Energy and Services The costs of energy sold and services increased by R$ million or 14.2% between compared quarters, growing from R$ million in 1Q17 to R$ million in 1Q18. Such variations are due essentially to tendencies in the principal components as follows: Electric energy purchased for resale: an increase of R$ 51.0 million (13.5%) in 1Q18 compared with 1Q17, a reflection above all of the following factors: (i) R$ 8.1 million decrease of 49 GWh (23 average MW), a reflection of the reduction in medium and long-term purchases for the management of the Company s portfolio; (ii) R$ 16.0 million an increase of 4.2% in the net average price due to fresh agreements at higher average prices than those of prevailing and expiring agreements; and (iii) R$ 43.1 million purchases of electric energy allocated to trading operations (101 average MW). Additionally, electric energy purchased for trading operations and not sold to trading companies was settled on the CCEE. Transactions in the short-term market - especially those within the scope of the CCEE: comparing the quarters under analysis, the costs of transactions were R$ 32.1 million (120.5%) greater. More details are given in the following specific item. Charges for use of and connection to the electricity grid: an increase of R$ 8.4 million (8.1%) between quarters under analysis due principally to the annual readjustment in transmission tariffs and recognition in 1Q18 of the charges relative to the portion of energy from the Jaguara and Miranda Hydroelectric Power Plants sold in the ACL. Fuels for the generation of electricity: decrease of R$ 6.3 million (22.0%) comparing 1Q18 with the same quarter of 2017 due basically to the stoppage of operations at the William Arjona Thermoelectric Power Plant in the first quarter of 2017, given its economic unviability due to the increase in gas prices. Personnel: an increase of R$ 1.6 million (3.4%) in 1Q18 compared with 1Q17, largely due to the annual readjustment in employee compensation and benefits. Materials and third-party services: an increase of R$ 8.8 million (21.5%) year-on-year due in large part to recognition of the costs of operation and maintenance in 1Q18 of the Jaguara and Miranda Hydroelectric Power Plants and the Santa Mônica Wind Complex, which in 1Q17 saw part of these overheads absorbed by the wind turbine supplier. Depreciation and appreciation: a rise of R$ 19.1 million (13.0%) between quarters year-on-year and largely a reflection of the following items: (i) amortization of an intangible asset with respect to the acquisition of the Jaguara and Miranda Hydroelectric Power Plants; (ii) depreciation of substantial maintenance work carried out on the Unit A of the Jorge Lacerda Thermoelectric Complex in mid-2017; and (iii) the entry into commercial operations of the Assú V Photovoltaic Plant on December 23, Details of Short Term Operations especially Transactions in CCEE Short-term operations are classified as energy purchase or sale operations, the principal objective being the management of exposure on the CCEE. Consequently, the price of these operations is characterized by the linkage with the Price for Settlement of Differences (PLD). This item also includes the transactions conducted through the CCEE, given their volatile and seasonal nature, therefore, short-term, of the results originating from accounting movement in the CCEE. Additionally, the long and short positions are settled at the PLD, thus, similar to the short-term operations described above. 14

15 In relation to the transactions conducted through the CCEE, the various monthly credit or debit entries to the account of a Board agent are summarized in a single billing as a receivable or a payable. This therefore requires an entry to either an income or an expense item. In this context, it is worth pointing out that due to adjustments in the Company s portfolio management strategy, changes have been taking place in the profile of the mentioned billings. Such fluctuations complicate the direct comparison of the elements comprising each billing for the periods being analyzed - the reason for including this specific topic. The strategy allows us to analyze the fluctuations of the principal elements involved in spite of allocation being either to an income or expenses account according to the credit or debit nature of the billing to which they relate. Generically, these elements are revenues or expenses arising, for example, (i) from the application of the Energy Reallocation Mechanism (MRE); (ii) from the Generation Scaling Factor, triggered when generation of plants, part of the MRE, is greater or smaller (Secondary Energy) than the allocated energy; (iii) from the so-called submarket risk ; (iv) dispatch driven by the Risk Aversion Curve (CAR); (v) the application of System Service Charges (ESS), resulting in dispatch which diverges from the thermal plants order of merit; and (vi) naturally, exposure (a short or long position in the monthly accounting) and settled at the PLD. In 1Q18 and in 1Q17, net results (difference between revenues and costs deducted from taxes on revenues and the costs) from short-term transactions particularly those executed on the CCEE, were positive at R$ 88.2 million and R$ 9.9 million, respectively, resulting in an increase of R$ 78.3 million between two periods in question. This variation is essentially a reflection of the combination of the following factors: (i) an increase of the positive effects from secondary energy; (ii) the positive effect of the difference of prices between the North and the Southeast submarkets in 1Q18 and between the Northeast and Southeast submarkets in 1Q17; (iii) the increase in the thermoelectric generation deficit due to a decline in generation from this source; (iv) reduction in MRE revenue due to the decrease in hydroelectric generation in the period; and (v) a reduction in the short position on the CCEE, a result of the strategy for allocating hydric resources during It is worth considering that the increase in average PLD in 2018, as shown below, contributed to the increase in the negative effects of thermoelectric generation and the short position in 1Q18 of the CCEE and conversely, to the increase in the positive effect from secondary energy. In December 2017, Aneel set maximum and minimum limits for the PLD for 2018 at R$ /MWh and R$ 40.16/MWh, respectively. On a quarterly comparison basis, the average PLD for the South and Southeast/Center-West submarkets increased by 25.9%, from R$ /MWh in 1Q17 to R$ /MWh in 1Q18. Additionally, the PLD for the North submarket fell 5.1% from R$ to R$ 75.10, and the average PLD for the Northeast submarket from R$ /MWh in 1Q17 to R$ /MWh in 1Q18, or a decline of 2.3%. Selling, General and Administrative Expenses General and administrative expenses between quarters under review, increased by R$ 3.2 million (7.9%) from R$ 40.7 million in 1Q17 to R$ 43.9 million in 1Q18, by virtue, to a great extent, of additional expenditures with IT services in 1Q18 and a reversal of a provision in 1Q17. Ebitda and Ebitda Margin Set against the background of the effects already discussed, Ebitda for 1Q18 was R$ 1,046.6 million, 18.2% or R$ million over the R$ million in 1Q17. The 1Q18 Ebitda margin was 56.0%, a growth of 0.9 p.p. in relation to the same period in The above increases reflect a combination of the following factors: (i) recognition of R$ 84.8 million in operating financial revenue from the Jaguara and Miranda Hydroelectric Power Plants in 1Q18; (ii) the positive effect of R$ 78.3 million in transactions conducted in the shortterm market particularly those executed within the scope of the CCEE; (iii) the increase of R$ 40.0 million in the combination of price and volume in energy sold under agreements; (iv) recognition of R$ 27.9 million in the cost of Generation Assets Management (GAG) for the operation, maintenance and improvements at the Jaguara and Miranda Hydroelectric Power Plants in 1Q18; (v) the decline of R$ 6.3 million in fuel consumption; (vi) an increase of R$ 51.0 million in energy purchases for trading and portfolio composition; (vii) growth of R$ 8.8 million in the costs of third party materials and services; (viii) increase of R$ 8.4 million in charges for use of the network; (ix) growth of R$ 3.2 million in SG&A expenses; and (x) an increase of R$ 4.8 million in other operational costs and expenses. Ebitda (1) and Ebitda Margin 55.1% Q17 Ebitda Margin 56.0% 1, Q18 Ebitda (R$ Milion) (1) Ebitda: net profit + income tax and social contribution and financial expenses, net + depreciation and amortization. 15

16 Ebitda Change R$ million (1) Considers the combined effect of changes in revenue and expenses. (2) GAG - Generation Assets Management The following table reconciles net income with Ebitda: (In millions of R$) 1Q18 1Q17 Chg. % Net income (+) Income tax and social contribution (+) Net financial result (+) Depreciation and amortization Ebitda 1, (+) Equity loss Adjusted Ebitda 1, Financial Result Financial income: in 1Q18, revenues reached R$ 24.8 million, that is, R$ 38.1 million or 60.6% down on the R$ 62.9 million reported for the same quarter in 2017, and principally due to the following factors: (i) reduction of R$ 35.6 million in income from financial investments due to the lower volumes of invested resources and declining interest rates; and (ii) a decrease of R$ 1.5 million in monetary restatement on court escrow deposits. Financial expenses: expenses in 1Q18 were R$ million or R$ 47.1 million and 35.0% higher than the R$ million recorded in 1Q17. The principal variations were: (i) recognition of R$ 36.0 million of interest on promissory notes issued in November 2017 for payment of part of the concession grant bonus for the acquisition of the Jaguara and Miranda Hydroelectric Power Plants; (ii) an increase of R$ 12.0 million in monetary restatement and R$ 3.5 million in interest on concessions payable; and (iii) a decrease of R$ 5.8 million in interest on monetary restatement on provisions and actuarial liabilities. Income Tax and Social Contribution on Net Income Income Tax and Social Contribution overheads in 1Q18 were R$ million, R$ 17.1 million or 8.1% higher than the value for the same quarter of 2017 of R$ million, reflecting above all the increase of pretax profits. The effective tax rate of IT and CS in 1Q18 was 31.9% against 32.0% in 1Q17. 16

17 Net Income R$ million % Net Income Net income for 1Q18 was R$ million, R$ 38.6 million or 8.6% higher than R$ million registered in 1Q17. The increase is a combination of the following factors: (i) growth of R$ million in Ebitda; (ii) an increase of R$ 85.2 million in net financial expenses; (iii) an increase of R$ 17.1 million in income tax and social contribution; (iv) a growth of R$ 19.4 million in depreciation and amortization; and (v) elevation of the negative result for equity income of R$ 0.8 million. 1Q17 1Q18 Net Income Change R$ million Debt Total Debt R$ million % The Company s total gross consolidated debt as at March 31, 2018, represented mainly by loans, financing, debentures and promissory notes, totaled R$ 6,753.9 million, an increase of 106.9% (R$ 3,489.5 million) compared to the position as at March 31, 2017, net of the hedge operations. 6,753.9 The variation in Company debt is largely related to a combination of the following factors occurring between 1Q17 and 1Q18: (i) drawdowns from the BNDES and its financial agents in the aggregate amount of R$ million for investments in the modernization of the Salto Santiago Hydroelectric 3,264.4 Power Plant and for the construction of Santa Mônica Wind Complex; (ii) issue 3/31/2017 3/31/2018 of promissory notes for payment of the Jaguara and Miranda Hydroelectric Power Plants concessions in the amount of R$ 2,096.1 million; (iii) contracting of loans, protected by swap operations directed principally for the refinancing of debt and the implementation of the Company s business plan largely related to a capital injection in the Jaguara and Miranda controlled companies for payment of the concession bonus in the amount of R$ 1,630.9 million; (iv) R$ million in charges payable together with monetary restatement effects; (v) R$ million in amortization of loans, financing and debentures; and (vi) R$ 13.0 million transfer of financing of subsidiaries and reclassified as assets held for sale. 17

18 Maturity Term Loans R$ million 3,065 1,004 1, from 2024 to 2028 from 2029 to 2033 The average weighted nominal cost of debt at the end of 1Q18 was 7.9% (10.1% at the end of 1Q17). Debt Breakdown On March 31, 2018, the Company s net debt (total debt less result of derivatives operations, deposits earmarked to the guarantee of debt servicing and cash and cash equivalents) was R$ 5,800.3 million, an increase of 375.4% compared with the end of the 1Q17. Net Debt R$ million 03/31/ /31/2017 Chg. % Gross debt 6, , Result of deriv ativ es operations Deposits earmarked for the payment of debt (237.4) (193.0) 23.0 Cash and cash equiv alents (716.1) (1,851.3) Total net debt 5, , Capital Expenditures ENGIE Brasil Energia s total investments in 1Q18 were R$ million, of which: (i) R$ 37.8 million was allocated to generating complex maintenance and revitalization projects; (ii) R$ million was invested in the construction of new projects - R$ million most importantly to the Campo Largo Wind Complex, R$ million was invested in construction work on Pampa Sul TPP, R$ 55.0 million, in the Umburanas Wind Complex, R$ 6.0 million, in the Assú Photovoltaic Plant, R$ 0.4 million in the Gralha Azul Transmission System - ; (iii) R$ 0.9 million was dedicated to modernization: R$ 0.3 million in the Salto Santiago Hydroelectric Power Plant and R$ 0.6 million to the Salto Osório Hydroelectric Power Plant; and (iv) R$ 0.3 million to other investments. 18