Summary. About the Report - 10 Significant Matters - 14 Day by day Sustainability in Prizes and Awards 21

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1 Sustainability Report 2012

2 Summary Cesp - Companhia Energética de São Paulo - 4 Presentation - 5 Location of Power Plants and Implementation and Development Units - 6 Main results in Message from Management 8 About the Report - 10 Significant Matters - 14 Day by day Sustainability in Prizes and Awards 21 Strategy and Management - 22 Mission, Vision, Principles and Values - 22 Strategical Planning - 23 Objects and Targets - 24 Quality Management - 27 Risks Management 27 Commitments - 28 Relationship with concerned parties - 28 Ombudsman - 34 Commitments to third parties 35 Corporate Governance - 36 Transparency and Disclosure of Results - 36 Governance Structure - 36 Ethical Conduct - 38 CESP Internal Policies - 41 Economic and Financial Performance - 56 Highlights of the Year 56 Distribution of Added Value - 57 Income -57 EBIT and EBITDA - 60 Financial Outcome 60 Net Profit 61 Financial Debt 61 Capital Market - 63 Social Performance- 64 Internal Relationship - 64 Employees Profiles - 64 Remuneration - 66 Benefits - 69 Professional Performance- 69 Professional Apprenticeship Program - 71 Carrier Perfomance and Development - 72 Retirement and Pension Plans - 73 Labor Health and Safety - 74 Diversity Appreciation - 76 External relationship - 78 Financial Compensation for the Water Resources Utilization CFURH CFURH - 78 Asset Management in Reservoirs Borders - 78 Population Management - 79 Relationship with the Community - 79 Support to Projects and Institutions 81 Environmental Performance - 84 Environment - Financial Balance Sheets - 86 Environmental Permit - 86 Climate Change - 86 Waste Management - 89 Water Sources - 91 Social and Environemntal Programs - 92 Protected or Restored Habitats 95 Biodiversity Impact Management 98 Operational Performance 42 Regulatory Issues - 42 Hydrological Aspects - 44 Electric Energy Generation - 45 Energy Trade - 45 CESP Electric System - 46 Flood Control - 48 Energy Rewable Sources - 50 Investments in Research and Development - 53 GRI Index -102 Limited Assurance Report of Independent Accountants Social Balance IBASE ANEEL Tables NBC T15 - Environmental and Social Information Contacts C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 3

3 CESP - Companhia Energética de São Paulo Presentation CESP Companhia Energética de Sao Paulo is a listed company, controlled by the State of Sao Paulo Government, whose headquarters are in the city of Sao Paulo. (GRI 2.1; 2.4; 2.6) CESP is the largest hydro generating company in the State of Sao Paulo and the fourth in Brazil, in terms of installed capacity, and is responsible for about 8% of the electric energy effectively generated in the country. CESP operates in Brazil only. (GRI 2.5, 2.7) It has an exclusively hydro generating park, which is a 100% renewable. It is formed by six hydro power plants in two hydrographic basins, the Paraná river basin, in the West of the State of São Paulo and the Paraiba do Sul river basin, in the East of the State of São Paulo, totaling 57 generating units that have an installed capacity of 7,455 MW and a physical energy of 3,916 MW average. In 2012, the Company generated 4,822 MW average (23% over its physical energy). (GRI EU1, EU2; 2.8). The Company s main activities are: the planning, construction and operation of generation and trading systems of electric energy. It keeps further operational activities, such as: forestation, reforestation, fish farming, as means to protect the environment affected by the construction of its reservoirs and facilities. (GRI 2.2) CESP trades energy at the following markets: Regulated Contracting Market ACR thru contracts in the Energy Trading Agreement in the Regulated Market (CCEAR s) signed with distributors and Electric Energy Purchase Agreements (CCE s) and distributors of capacities lower than 500 GWh/year. To the Free Contracting Market - ACL by means of Electric Energy Purchase and Sale Agreements CCVEE s in the short, medium and long run, traded with trading companies and free consumers. Furthermore, the differences among generated, physical and contracted energy are accounted for and settled by the Electric Energy Trading Chamber (CCEE). What most impacted CESP and the energy industry in 2012 was the disclosure of Provisional Measure nº 579, dated September 11, 2012, (later converted to Law nº 12,783, of January 14, 2013). By using this Provisional Measure the Federal Government, as the Granting Power, offered CESP the anticipation for January 2013 the renewal of concessions of Ilha Solteira and Jupiá Power Plants, to be due in 2015, if some conditions of energy trade from these plants were fulfilled. Furthermore, the same conditions were offered to Três Irmãos Power Plant, which first concession period was expired in November (GRI 1.2) CESP shareholders during a General Shareholder s Meeting held on December 3, 2012 decided for the non-renewal of concessions as proposed by that Provisional Measure (PM). By taking this decision, CESP will continue to operate the Power Plants of Ilha Solteira and Jupiá till their concessions expire in July Três Irmãos Plant, which operation is joined with Ilha Solteira, will be operated by CESP till the Granting Power s decision. The Power Plants of Porto Primavera (which concession expire in May 2028), Paraibuna (March 2021) and Jaguari (May 2020) were not coverd by PM nº 579 and will normally be operated by CESP. (GRI 1.2) Main data from the Company s Power Plants (GRI EU1) Hydro Power Plants Date of Generating Dam length Reservoir area Installed Capacity Physical Energy Completion Units (km) (km2) (MW) (MW average) Ilha Solteira 07/18/ , (1) Três Irmãos 11/28/ , Jupiá 04/14/ , Porto Primavera 01/23/ , Paraibuna 04/20/ , Jaguari 05/05/ , Total 57 26, (1) Physical energy of Ilha Solteira and Três Irmãos HPPs 4 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 5

4 Location of Power Plants, Implementation Units and Environmental Development (GRI 2.3) Main Results in 2012 (GRI 2.8) Main shareholder: State of São Paulo Generation: 100% from hydro source (the 4th largest generator in Brazil) Energy generation in 2012: 4,822 MW average (about 12.5% in the South East region and 8.2% in Brazil) Customers: 85 Employees: 1,283 Installed Capacity: 7,455 MW Net Income: R$ 147,982 thousand Generated Energy: 4,822 GW Average Physical Guarantee: 3,916 MW average Assets: R$ 16.8 billion Net Equity: R$ 9.9 billion EBITDA: R$ 1.7 billion (last 12 months) Debt / EBITDA: 1.5x 6 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 7

5 Message from Management (GRI 1.1, 1.2) CESP disclosures its Sustainability Report with information regarding the year base We believe that in disclosing our social and environmental performance, together with financial reports, we are contributing to our employees, shareholders, regulating agents, clients, suppliers, non-governmental agencies and the press, to better understand our company in a way to manage their expectations about us. The report, that was compiled according to international standards and GRI - Global Report Initiative s methodology, is an addition to our effords to generate electric energy in a responsible way and helps to generate benefits to the society. Some highlights during the year: Credit ratings upgrade In August 2012, Standard & Poor s raised CESP s credit rating to BB, in the global scale, and braa- in the Brazilian scale, because its improvement in financial profile with stable outlook. At the same time, it raised the individual credit profile (SACP) of CESP, from b- to bb. According to S&P s report, the change in outlook reflects the continuous ability to present strong financial metrics, thus consistently reducing debt levels with favorable cash flows. CESP was kept in ISE portfolio Recognizing CESP as a sustainable company is also due to several social and environmental program it participates, which aim is to preserve the environment and reduce the effects on the population affected by our reservoirs. Such a posture reflected the repeted inclusion of CESP in the Corporate Sustainability Index - ISE in the São Paulo Stock Exchange for the period from January to December Biodiversity Protection CESP developed along its hystory five conservation units in the States of São Paulo and Mato Grosso do Sul, as a compensation for the construction of the Power Plants Eng. Sérgio Motta (Porto Primavera) and Três Irmãos. There are three State Parks and two Private Reserves of Natural Heritage (RPPN). We also want to criate one more RPPN that is RPPN Cisalpina, with 6, ha. We are negotiating with the Environment Secretary of the State of Mato Grosso do Sul. Valuing Diversity The Company has a very significant value, as valuing diversity, that was the recognition by its activities developed during 2012, from the São Paulo State government by maintaining São Paulo Diversity Seal. We render homage to our employees and other partners and thank them for the reliability and support to our management. 8 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 9

6 About the Report For the fifth consecutive year, CESP Companhia Energética de Sao Paulo divulges its Sustainability Report, annually disclosed, reinforcing its commitment with the transparency in showing the accounts to the society. This report also plays the role of a dialogue instrument with different audiences interested in CESP s performance. It is annually disclosed and the previous edition, regarding 2011 activities was disclosed in June (GRI 3.2, 3.3) It is availabe at our webpage: This report follows the guidelines of version G3 of the guidelines proposed by GRI Global Reporting Initiative and also responds to indicators of the sector supplement of the energy industry (acronym EU). This report also follows the guidelines of the Preparation Guide of the Annual Report of Social and Environmental Responsibilities of Electric Energy Companies of ANEEL, Brazilian Electricity Regulatory Agency and presents the Social Balance proposed by IBASE Brazilian Institute of Social and Economic Analysis. (GRI 3.9) Data and information on the Company s economic, social and environmental performance correspond to the period as from January 1 to December 31, It covers CESP s whole structure, including the power plant facilities and the administrative headquarters. The Company has no subsidiaries or joint ventures. (GRI 3.1; 3.6; 3.7; 3.8) CESP s operations are focused in Brazil and there were no relevant structural or operational changes, as well as stock control within the period reported. (GRI 2.5; 2.9) CESP s Financial Statements has been following the IFRS International Financial Reporting Standards since last year, which resulted in the review of the 2009 financial statements, so as to allow the comparison among 2010, 2011 and 2012 data. Financial data were audited by Ernst & Young Terco Independent Auditors. CESP follows ISO 9001 guidelines and we enhance that every process in production units were certified again in 2012 by Bureau Veritas Certification Brasil. It also follows the measuring models for atmospheric emissions of GHG Protocol and Brazilian rules for labor relations. (GRI 3.9, 3.10, 3.11) External verification of Social Balance/IBASE In the Sustainability Report 2012, as well as in that of 2011, CESP disclosed every data from the Social Balance / IBASE, regarding internal social indicators, external social and environmental data on the staff and relevant information on the corporate citizenship behavior to the previous verification held by Ernst & Young Terco independent accountants. (GRI 3.13) The Company has a corporate auditing system and data disclosed may be periodically internally audited. Data regarding technical electric operational quality are monitored by regulating bodies the Brazilian Electricity Regulatory Agency ANEEL and the operation of CESP s plants is totally made according to the National Operator of the Electric System ONS. (GRI 3.13) Ways of Indicators Management The management ways for the group of indicators are described in each dimension of the Report and specifically in Strategy and Management. In the table below, we point out the main items: Continuous Improvement of CESP s practices In 2012, some points shall be highlighted such as the economic-financial performance, the adoption of policies on Information Security and Supplies, preparation and dissemination of the Supplier s Manual, risk management implemented by the Company and independent audit in the Social Balance C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 11

7 Form manegement indicators Operational Environment Human Rights Labor Practices and Decent Labor Community Responsibility on the Product Economic In the social aspect, the best performance is related to the promotion and dissemination of CESP s commitments made in its Corporate Social Policy and Code of Conduct. Among these actions are, the renewal of São Paulo Diversity Seal for the second consecutive year, the realization of the Internal Week of Diversity (Sidi), addressing disability issues, the role of CIPA, with lectures focused on quality of life and safety at work, and the inclusion of the disabled youth in the Professional Learning program. In the corporate governance aspect, the improvement occurred in the Code of Conduct which disclosed the requirement for the explicit accordance by employees whenever any change in its content occurs. The significant breakthrough in the environmental aspect was the inclusion of the Social and Environmental Manual, which includes procedures related to environmental issues adopted by CESP during the rainy season, mainly due to high flow rates, as part of the manuals SOSEm, System Operation Emergency Situation. This manual addresses the security of businesses, employees and the communities surrounding the plants. CESP was kept for the seventh time in the portfolio of ISE - Corporate Sustainability System to Support the Decision (pg. 25) Electric Energy Generation (pg. 45) Energy Trade (pg. 45) Flood Control (pg. 48) Research and Development (pg. 53) Residues Disposal (pg. 89) Water Resources (pg. 91) Protected or Restored Habitats (pg. 95) Conservation Units (pg. 96) Impacts Control on Biodiversity (pg. 98) Suppliers Selection (pg. 30) Social and Environmental Responsibility Clauses (pg. 30) Contracts Management (pg. 31) Ethical Conduct (pg. 39) Professional Development (pg. 69) Social and Corporate Policy (pg. 64) Diversity Valorization (pg. 76) Commitees to Support CESP s Management (pg. 25) Relationship with Concerned Parties (pg. 28) Population Resetlement (pg. 79) Clients (pg. 28) Ombudsman (pg. 34) Economic and Financial Performance (pg. 56) Index of BM & F Bovespa which is a benchmark for socially responsible investments. The human resources area developed a supervisors development program toward improving behavioral skills, such as the authority to mediate conflicts, assertive communication and leadership in teamwork. It also conducted an extensive process of internal awareness with the online course at Fundação Getulio Vargas - FGV on Sustainability in everyday life for all employees. This training was one of the factors that influenced the improvement in the application of the GRI guidelines and resulted in the maintenance of all indicators reported in the 2011 version, with the addition of four new performance indicators, one indicator of which supplemented the energy sector, totaling 60 Essential indicators. (GRI 3.8) It is also present at the end of this report, the requested data in the tables of social and environmental responsibility indicators of ANEEL, mandatorily divulged for power companies in Brazil, as well as the Social / IBASE Balance and information requested on NBC T 15. Further information and questions concerning this report can be found on the company s website ( or by (inform@cesp.com.br and ricesp@cesp. com.br). (GRI 3.4) In the index at the end of this report, we present the indicators reported by CESP, indicating the pages they are located. The report was prepared with the involvement of the various areas of the Company in the collection of quantitative data and qualitative information. Numerous professionals of CESP worked in its preparation and we hope that it meets the expectations of our partners. In the 2012 version, CESP declares itself in the B+ level in applying the guidelines, having contemplated all items of G3 profile, presenting information about management approach and the results of indicators of economic performance, environmental, human rights, labor practices, society and product responsibility. 12 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 13

8 Significant Issues and Concerns (GRI 3.5, 4.15) Every Day Sustainability in 2012 The Sustainability Report 2012 looks for approaching, in an enhanced way, issues that were significant to internal and external audiences over the preparation of the Significance Matrix of CESP. A significance analysis was conducted in November 2011 with the support of the independent consulting firm. Further information about consultations and results may be found at materialidade.pdf The most significant issues mentioned in the report are appointed as below: (GRI 4.17) Operational Income - Indices (GRI 2.8, EU1, EU2, EU6) Renewable Energy Sources (GRI EU1, EU2) Risk Management (GRI 1.2, 4.11, EC2, EU21) Strategical Planning Economic and Financial Performance (GRI 2.8, EC1) Regulatory Matters Governance Structure (GRI 4.1, 4.2, 4.3, 4.4) Transparency and Disclosure of Results (GRI EC1) January 1st Global Forum on Sustainability CEO Mauro Arce attended the 1st Global Forum on Sustainability in Madrid on 19 and 20 January. At the plenary session Sustainability and Crisis, the CEO presented the Brazilian energy matrix highlighting the specific characteristics of the Brazilian model, such as the large hydroelectric base and the integration of practically the entire electric power system in Brazil. ISO: external audit recommends keeping all certifications The certification under ISO 9.001:2008 was maintained for all processes of the company by Bureau Veritas Certification (BVC). The recommendation was made after external audit conducted by BVC was completed. February CESP invests in social inclusion and wins TOP award in Human Resources The Company s investment in social inclusion of apprentices effected with the Apprenticeship program was recognized by the Brazilian Association of Sales and Marketing Managers (ADVB) with the granting of the TOP Award for CESP. About 90% of young people get a job after the training in the company. Dubravka Suto, the human resources manager points out that there are numerous successful stories, many are working in large companies and we have had apprentices who have international careers today. CESP prepares not only good professionals, but mostly, better citizens for Brazil. Ethical Conduct (GRI 4.8) Qualification and Training (GRI HR3, HR8, EU14, EU18, LA10, LA12) Customer Relationship (GRI 2.7, 4.14, 4.15, 4.16, PR5, PR8 Environmental Management (GRI EN26, EN30) 14 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 15

9 March April May June Porto Primavera: six years with no accidents with absences from work The Production Unit of Porto Primavera completed, on 04/04/2012, six years with no accidents with absences. The achievement is the result of the performance of employees in various areas and of Specialized Safety Engineering and Occupational Medicine and of the Internal Commission for Accident Prevention. Women s Day honored with a fashion show As part of the program of Valuing Diversity, CESP congratulated all employees and promoted a lecture by the expert in Fashion History, Prof. João Braga, in the auditorium of the headquarters. CESP presents results in conference call CESP s results for the year 2011 were discussed in a conference call on March 28, 2012, with the participation of CEO Mauro Arce and the directors. At the event, operational, commercial and financial data, including the proposed distribution of dividends to shareholders were presented to the market and the press. March 21: International Day against Racial Discrimination All employees received an message about the importance of equal treatment and opportunities for everyone. The also mentioned a video produced by UNICEF about the same matter. The Generation Director of CESP is also the vice president of Abrage Generation Director Mituo Hirota, was elected vice president of the Brazilian Association of Electric Energy Generation Companies (Abrage) on 29 March, for a one year term. Jupiá is two years with no accidents with absences from work The two year term with no accidents with absences from work in Jupiá was reached on May 04, 2012, with the blessing of a Catholic priest and an evangelical pastor for the employees of the plant during a event organized by CIPA. International Week of Diversity (Sidi): tips for the day by day with the disabled After addressing a racial discrimination lecture in 2010, homophobia in 2011, Sidi 2012 approached the issue: Disabled: people who overcome. Carolina Ignarra and Tabata Contri, wheelchair users and speakers on the subject, toured all business units in order to contribute to the deconstruction of prejudice, in a positive and illustrated way with examples from life, work, autonomy, accessibility and productivity. 5th Brazilian Seminar on Environmental and Social Responsibility in the Electricity Sector (Smars) under the coordination of CESP This edition of the seminar, which has broad participation of technical and industry experts, was held in São Paulo and had the full support of CESP. The challenges to produce clean and efficient energy without affecting the environment and at the same time generating profits for business and progress to Brazil were issues raised in the 5th SMARS. Association of the Blind and their Friends (Adeva) distributes braille book for free Adeva distributed two thousand copies of the book Rodrigo na Era Digital in braille, written by Markiano Charan Filho, employee of CESP and CEO of the association. Maurren Maggi inaugurates Child Citizen Institute (ICC) project The Generation 2016 project, which had the presence of the Olympic long jump champion, Maureen Maggi, aims at expanding and diversifying sports practices at ICC units, shaping citizens and Olympic athletes. CESP founded and supports the ICC. Employees elect representatives for the Management Committee of Investments and Pensions Those elected are Luiz Paulo Gomes (effective) and Eduardo Mendes Sgroi (alternate) to represent the employees from Remuneration Policy for 2011 Results payment on 6/12/2012 CESP s Board informed that the sums that refer to the Remuneration Policy for 2011 Results were paid in accordance with the economicfinancial indicators, service quality and strategic and operational planning for the period from January to December Challenge Day included a walk at the head offices CESP participated in the Challenge Day, a global initiative aimed at encouraging the regular practice of physical activities to benefit health. Head office employees were invited to make a twenty minute walk at the Interaction Space. 16 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 17

10 July August September October Investor Relations has a new website The Investor Relations area of CESP website has a new look. The new website provides users with better navigation with modern tools like graphics and dynamic interactive stock performance, interactive worksheets of the financial results, a basket of downloads, accessibility, calendar of events, among others. The content is fully compatible with cell phones and tablets. Energy and Sanitation Foundation conducts exhibition about the 1932 Revolution The Energy and Sanitation Foundation, which has CESP among its sponsors, disclosed to the public the contents of its assets related to the 1932 constitutional movement. The exhibition was held to celebrate the 80th anniversary of the 1932 Revolution. CESP s Learning Program will include young people with disabilities The inclusion of people with disabilities in the labor market, an issue of the International Week of Diversity, was adopted by the Company in its Professional Learning Program from the next group of learners. Suppliers: manual on the site The Suppliers Manual of CESP is at the website. The document establishes values, principles and guidelines that govern the relationship with suppliers. It discloses the Supplies Policy of CESP and other corporate business policies. Education for Sustainability gathers apprentices and trainees at the headquarters Apprentices and trainees working in the headquarters received guidance on waste sorting and recycling. Visits were made to the recycling cooperative Miguel Yunes that processes the collected material in the headquarters. CIPA Capital: debut of the electronic voting Employees located in the headquarters elected by electronic voting the new members of CIPA Capital. There are six representatives and five alternates to fulfill the mandate until Energy auctions are successfully conducted The auction of energy carried by CESP in the months of August and September brought very positive results for the Company. The events were coordinated by the Department of Marketing and Regulatory Affairs with the participation of the free energy market agents. Winter Campaign 2012: donations reached 29,479 pieces of clothes CESP has supported and actively participated in the Winter Campaign promoted every year by the Social Solidarity Fund of the State of São Paulo. In all locations CESP reached the collection of 29,479 pieces of clothes. The pieces gathered in the capital were divided among four charity entities: The Rescue Group of São Paulo, the nursing home Raiar, the Diocesan Pastoral Mitra Santo Amaro and the Association Resplendor. Sipats begin to shake the Company The internal weeks for accidents prevention at work occurred in all units of CESP and shaked the Company. In the capital city among the lectures, donations of blood to the blood bank of Hospital Sírio Libanês and other activities totalled 1,855 participations from September 24 to 28. Education for Sustainability: online course at FGV All employees were able to participate by taking the online course at FGV - Fundação Getulio Vargas, Every Day Sustainability: Guidelines for the Citizen. The course was free and could be done in company or at home, encouraging the family participation. CESP was highlighted in a report on climate change The Company was appointed as one of the ten Brazilian companies most concerned about climate change on the planet in the Carbon Disclosure Project Brazil 2012 report. The report was released in October at Bovespa. Environmental Education of CESP is presented in Mato Grosso do Sul Forum CESP presented six papers in a workshop and in a round table it participated and showed a play called Teatro do Cervo during the Forum for Environmental Education of Mato Grosso do Sul, held at Dom Bosco Catholic University, in the city of Campo Grande. The meeting was the opportunity to CESP disclose the actions it performs in Mato Grosso do Sul, in areas of influence of the reservoir of Ilha Solteira, Jupiá and Porto Primavera. Research and Development: Reversible Hydroelectric Plants It was a workshop, held in October, in the Universidade Federal de Itajubá which discussed the issue Technologies of Reversible Hydroelectric Plants. The project, developed by CESP, proposes to recapture the concept of efficiency of Reversible Plants in the Brazilian electric sector. Research and Development presents river level scanning system The R & D work presented to the employees in the auditorium of the headquarters, showed a system scan and mathematical modeling of limnigraphic data. The project has CESP as proposer and was developed in partnership with Lactec. 18 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 19

11 November December CESP in Corporate Sustainability Index (ISE) for the 7th time For the seventh year, CESP will integrate the equity portfolio of the Corporate Sustainability Index (ISE) of BM & FBovespa, from January to December Acknoledgement, Awards and Certifications 2012 (GRI 2.10) The Company integrates for the seventh time, the portfolio of the Corporate Sustainability Index (ISE) of BM & FBovespa, in effect from January 2 to December 31, SOSEm: safety of community, employee and plant Through the Operation System in Emergency Situation (SOSEm), CESP ensures that the operation of the reservoirs is safe, even during the rainy season, from November to April each year. It is a set of standards and procedures for operation and maintenance designed for extreme situations, but it also includes preventive and corrective actions to prevent the occurrence of accidents. The last update of the manuals that comprise the system was held this year and now includes the Environmental Manual. Indoor units receive 23,692 visits from September to December CESP received 23,692 visitors in its units located in the countryside during the last four months of ,021 visits were received in September, 6,649 in October, 5,498 in November and 4,524 in December. Award Dra. Theodosina Ribeiro Our colleague Maria Aparecida Pinto received the award in the Legislative Assembly of the State of São Paulo for her contribution to the defense of women human rights and their community, in March Dam builders are honored with an exhibition in Ilha Solteira The exhibition I m a dam builder, the Brazilian Energy with historical images of the construction of hydro electric power plants Eng. Souza Dias, Ilha Solteira and Três Irmãos of CESP and the town of Ilha Solteira counted on the support of CESP and remained at the Cultural Foundation of Ilha Solteira for display with free entry. Annual meeting with investors tackles overview of the sector The traditional annual public meeting with analysts and investors was held in the auditorium of the headquarters and was attended by 50 people. The CEO Mauro Arce addressed the process of renewal of concessions and the future direction of the company in the new industry model. International Award for Quality CQE Granted in 2012 by the Business Initiative Directions - BID, it is an international recognition for its achievements in the field of quality culture, covering the areas of customer satisfaction, ISO 9000 certification and production processes, among others. São Paulo Diversity Seal, the fourth consecutive year in the category Full, awarded by the state Department of Employment and Labor Relations in São Paulo. Carbon Disclosure Project - CDP CESP in 2012 was ranked among the top 10 Brazilian companies in Performance Carbon - Climate Governance, by putting in place processes and actions for managing impacts related to climate change. 20 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 21

12 Strategy and Management The Mission, Vision and Values are the pillars that guide the operations of CESP. We highlight the importance of operating at maximum efficiency, while respecting the environment, the best human relationship, the appreciation of the workforce and the satisfaction of customers and shareholders. (GRI 4.8) Mission To serve with excellence in the energy sector by adopting practices that reflect a commitment to sustainability. To act in the energy sector: in preparing studies, planning, design, construction, operation, maintenance and trading energy from its generation systems. Excellence: quality, reliability, technical expertise and management. Corporate sustainability: is to achieve excellence in supplying energy, obtaining the best economic results, and the social and environmental compliance without compromising the needs of future generations. Vision Being a leader in the operation area with excellence and sustainability. Principles and Values The Code of Conduct, in force since 2009, establishes our Values: Integrity - Respect the laws of the country, as citizens and professionals, as well as the internal rules governing the activities of our Company. Transparency - the concept contemplated by the corporate governance, according to the criteria of relevance, by disclosing information, whether or not required by laws or regulations, that are really important to the public. Solidarity - the highest level of human relationship by having as ultimate goal everybody s benefit. Valuing the Human Asset - The Company recognizes that its success depends on the degree of the customer s satisfaction and the level of motivation of its staff. Respect for the Environment - in line with the principle of sustainability, the Company must protect the environment and help the society to create a culture of respect for it. Commitment to the company - managers and employees must be committed to the improvement of the company s results, taking into account the economic nature. Constructive Relationships - relationships are important both internal and external ones, given the role that companies play in modern society. Responsible Leadership - under the ethics point of view, the power-authority gives way to the power-responsibility. Leaders are responsible for the success of their team, whether at home, at school, in government, in different organizations and mainly in companies. Strategical Planning Strategical planning of CESP was structured for the period 2009/2012. The recommendations resulting from this process, approved by the Board of Directors, have been deployed by the management team on strategic objectives, indicators, targets and macroprojects. All areas of the Company participated in this process, facilitating the deployment of strategies in initiatives and action plans feasible for implementation. The planning cycle has defined three strategic issues: regulatory issues, operational efficiency and sustainability. Regulatory aspects - to comply with the legislation to which it is subjected to and optimize relationships with stakeholders Operational Efficiency - to seek out the best ways of managing the provision of their services Sustainability - to achieve excellence in energy supply, by obtaining the best economic, social and environmental results without compromising the compliance with the needs of future generations. The Vision, Mission, Principles and Guidelines of the Code of Conduct are the drivers of the Company s business. As from the next year until 2015, when 22 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 23

13 Table: Objectives and Goals 2012 (GRI 1.2) Learning and Growth Economic and Financial Results and Sustainability Objectives / Indicators Maximize the value to shareholders Earnings per paid share Reduce debt Ratio net financial debt / EBITDA Target 2012 R$ 1.48 Result R$ 1.18 The profit obtained in 2012 was affected by the dispatch from thermal plants given the unfavorable hydrological conditions of the system which occurred in the country, especially in the last quarter, totaling R$ million Objetives / Indicators Provide integrated information Index implementation of integrated systems Develop programs for new technologies Investment in R & D / Obligation FNDCT - MME Target % % Result 86.66% The implementation of embedded systems is in final stage % Target met. Met all legal requirements relating to payments and FNDCT MME and continued execution of R & D projects. Optimize results Adjusted EBITDA Maintain sustainability Compose ISE portfolio 1.84 R$ million % 1.52 Target met. All commitments due in 2012 were settled R$ 2,072 million Target met. Adjusted EBITDA increased due to the increase in Operating Revenues and reduction of Manageable Expenses versus planned one % Target met. CESP integrates ISE portfolio 2013 Having trained and appropriate employees to the missions and goals Average training hours per employee 25.00hs 27.50hs Target met. An online training on Every day Sustainability: guidelines for the citizen was held by Fundação Getulio Vargas and was offered to all employees and their families, with information from simple actions that can be applied in everyday life, but that make a difference to the environment, health and quality of life. We also point out the Program Development of Management Skills for supervisors and leaders. Market and Stakeholders Objetivos / Indicadores Sell energy to optimize results Increase evenue Internal Processes Objectives / Indicators Monetize non-operating assets Percentage of sales of non-operating assets Reduce lawsuits Number of processes reduced Obtain / renew environmental permits to operate rojects Index of compliance with licensing arrangements Target 2012 R$ 3,376 million Target % 1, % Result R$ 3,650 million Target met. Increased sales due to trading management, considering the excess energy, negotiation of existing contracts and auctions, and optimization of opportunities offered by high PLD Result 7.00% 15 properties were sold, generating revenue of R$ 769, The reduction provided for the Company a saving of approximately R$ 786 million % Target met. CESP will face a strong reduction in cash and generating capacity because the expiry of concessions of the plants Ilha Solteira and Jupiá, it will not be feasible to design long term scenarios. Thus, the strategic guidelines for the planning cycle 2009/2012 will be held until In 2012, the monitoring results of the Company s strategic planning, are presented in the table on the left. Management Tools Balanced Scorecard - BSC to only one direction: the decision making process. In addition to supporting the decision making area, the SSD permeates all areas of the company that have some relationship or related responsibilities. This process creates conditions so that critical actions necessary to obtain the relevant information in a timely way. Another assumption considered in the construction and permanent improvement of SSD is to maintain the memory of the plant operation, programmed and verified, which memory is fundamental for all employees, whether they be current or future employees. Index of compliance with license conditions and prevailing environmental permits Ensure the safety, availability and economicity of production assets Index of periodic preventive maintenance (PPM) of generating units Index of anomaly analysis Index fo automation tools Rate of automated generating units - TUGa 87.80% 89.00% 92.50% 6.00% 33.90% 86.90% Factors related to initiatives outside the scope of action of CESP decisively affected the definition of the target not to be 100%. The index had achieved improvements in performance, despite not having achieved the goal % The index reached was adequate and allowed the availability and reliability required for the generation units 87.50% Target partially achieved. This indicator will assess the actions of preventive and corrective maintenance, because of the routine inspections of structures and instrumentation of generation facilities soudings 4.80% The readings automation program of the dams sounding instruments aim to automate the acquisition of information from instruments that monitor our structures. We expect to automate 10% of the instruments, representing approximately 500 instruments % Target met. The process was completed in HPPs Jaguari and Porto Primavera CESP has adopted the Balanced Scorecard (BSC) to manage its strategy and monitor the results, which cover objectives, indicators, targets and macro-projects, from all areas of the Company, included in its strategy map. Decision Support System - SSD In CESP Production and Planning area, not different from every other strategic area of the Company, information must be obtained, controlled and used at the time of the decision making and, in some way, facilitate and enable the decision making process. This process is supported by a DSS - Decision Support System which usually includes several computational tools, in that they all converge Committees to Support CESP s Management CESP established Supporting Committees that are responsible for monitoring the strategy and management of the Company, divided into: Sustainability Committee In order to integrate and align social and environmental practices in processes and key economic and financial decisions of the Company, contemplating the good corporate governance practices, it created the Sustainability Committee. The Committee promotes the actions and measures aimed at continuous improvement of the Company s performance in the economic, social, environmental, governance and climate change aspects. (GRI 4.1) 24 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 25

14 . Training and development System of CESP s employees ;. Civil engineering monitoring of CESP s generation facilities ;. Electromechanical maintenance of CESP s Generation Units. Risk Management The structure of corporate risk management consists of the Risk Committee, Coordinator of Risk Management and Decentralized Risk Manager. Committee for Flood Management CESP has a Flood Management Committee to coordinate the activities of flood control and organize the dissemination of information to the communities living in the municipalities affected by the Company s reservoirs. The relationship with the communities occurs in accordance with the Annual Plan for Flood Prevention, of the Paraná and Paraíba do Sul river basins. The Plan is prepared jointly with the National System Operator - ONS and Generation Agents, with the involvement of the municipalities of Alto Paraná (civil defense, public school teachers, NGOs, and public authorities in general), by holding lectures in order to clarify the population about floods occurring in these rivers. (GRI 4.11 EU21) Operating Committee in Emergency Situations The committee is composed of several areas of CESP. It is an agency of systemic view, which monitors the situation of plants operating at critical moments, which defines priorities between conflicting exploitations. It also determines actions to the operation emergency leader and produces newsletters to the press. (GRI EU21) New Business Committee - CNN CNN has as main objective to explore and evaluate opportunities related to the increasing supply of power generation of CESP, in order to support the senior management in making decisions regarding its participation in possible business and partnerships. Therefore, CNN examines the risks of business and partnerships in the technical, economic and environmental aspects, evaluating the performance possibilities of CESP, under the laws, regulations and formal procedures in force. Erosion Committee in the Reservoir Margins - CEMAR CEMAR aims to establish a forum at CESP to address, in a centralized manner, the issues related to erosion in the reservoir margins, with the participation of the various areas of the company involved with the issue and primarily address the erosion of Porto Primavera. Investor Relations Area CESP has an investor relations area that coordinates the distribution of information to the financial market in general, investors, analysts, financial institutions, regulators and inspectors, through teleconferences of quarterly results, annual public meeting, mailing list, corporate website, ( IR module (Investor), and the ricesp@cesp. com.br. During 2012, there were several private meetings with analysts, fund managers and investors, as well as the participation in events such as the Utilities Day. Quality Management The Quality Management System of CESP is constantly evaluated by the Company s internal auditors and by independent audits to ensure the continuous improvement of its processes, in accordance with the regulatory requirements of ISO 9001:2008. In 2012, the certification company Bureau Veritas Certification Brazil recommended the recertification in the following scopes that were audited:. Electric energy generation at 138 and 440kV at Eng. Souza Dias (Jupiá) HEP ;. Electric energy generation at 14.4kV at Ilha Solteira/Três Irmãos Generating Unit ;. Electric energy generation at 13.8kV at Eng. Sérgio Motta HEP (Porto Primavera) ;. Electric energy generation at 13.8kV thus the regularization of the Paraíba do Sul River flow, by promoting flora and fauna handling, environmental education and crossings in the Paraíba River Production Unit, comprising the Paraibuna and Jaguari HEPs ;. Control of the electric energy generation, ruling and pre-operation of CESP ;. Evaluation of CESP dam s safety ; Risk Committee - Composed by CESP s officers, Managers from the Corporate Management and from the Internal Audit, and the responsible for the Risk Management Board of Coordinators - Internal Audit Department. Coordinated by the President and composed by directors and managers of the Executive Coordination of the Presidency and the Internal Audit Department, the Committee directs the administration in setting guidelines and strategies for the management, in the evaluation and control of risks, in monitoring action plans submitted by managers to the Company, as well as in directing the activities of the Risk Management Coordinator. Coordination of Risk Management It is up to the Coordination to manage the actions to the identification, assessment and monitoring of risks and the periodic communication to the Risk Committee. It is also responsible for guiding the Company s management as to the methodology of control the self-assessment in order to ensure the effectiveness of controls that mitigate the risks mapped, as well as advising the President, the Risk Committee and other stakeholders in matters related to risk management and controls. Decentralized Risk Manager It is composed by representatives appointed by the boards. Decentralized Risk Managers assist managers from different areas of the company in the identification, assessment, control and monitoring of the risks involving the objectives under their responsibilities, considering their execution. It is up to the managers to periodically inform the Board of Coordinators about the Risks and their Boards on risks and controls that are under their responsibility. 26 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 27

15 Commitments Relationship with stakeholders (GRI 4.14, 4.16) In 2012, one of the most used channels of communication between the Company and the society was the official address, cesp.com.br, which answered 5,371 s already disregarding spams and junk mails. CESP appoints below the most signficant stakeholders. (GRI 4.15) Shareholders and Investors CESP is committed to transparency in the administration of the Company and the preparation and dissemination of the financial statements. It has an Investor Relations area and holds public meetings throughout the year. Through a specific link on the website, with versions in Portuguese, Spanish and English, information and tools are available, such as the Company s annual report, corporate documents, information for capital markets analysts and an investor relations channel. In 2012, a page dedicated to investor relations on the Company website (ri.cesp. com.br) has been redesigned to offer users a better navigation with dynamic tools such as interactive graphs of stock performance, interactive spreadsheets of financial results, a download basket, accessibility, calendar of events, questions and alert. The content is compatible with cell phones and tablets. Customers CESP s customers, distributors, traders and free consumers buy energy through long-term contracts in auctions or bids. The Company ended 2012 with 85 clients divided into 37 distribution companies, 20 trading companies, 21 free customers, 4 small distributors, and three generation companies. In 2012, CESP hired a consulting firm in order to identify the main aspects of the Free Contracting Market-ACL of electricity, as well as the needs and desires of their respective agents. Therefore, research was designed in two stages, one qualitative and the other quantitative, questionnaires were sent via web. This research besides addressing the main aspects of the free market also included a satisfaction survey with free agents who buy or bought energy from CESP. Among the various results presented, it is worth noting the final index of customer satisfaction that CESP got that was 8.47, a fact that reflects the best practices experienced with its customers, both end customer and trader. (GRI PR5) Employees CESP seeks the welfare of its employees through its policies of human resources, health and safety, labor relations, relationship with internal, corporate and social entities and Code of Ethics. The internal corporate communication is accomplished by various means, including the Jornal Linha Direta CESP internal mean of communication that discloses the actions of all areas and the participation of CESP in actions and external events. The Clic CESP, available only on the intranet, shows videos of about 30 seconds, publicizing the activities of the areas of the Company and employees; an outdoor newspaper, weekly produced and fixed in all administrative and operational units of the Company, what means 55 sets. In 2012, 10 issues of the newspaper Linha Direta CESP, 171 editions of the newsletter Clic CESP and 50 editions of the newspaper Mural LD were produced. 28 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 29

16 Community CESP maintains a permanent relationship with the community through environmental programs, which it develops in the area of influence of the reservoirs, facing riverside such as potters, fishermen, resettled population and the public in general. This is the case of the environmental education program and the program of Reception of Visitors in Power Plants. In areas administered by CESP, hoping to make them compatible with other multiple uses, in particular, with the social and economic activities that are attracted by the reservoirs, in order to regularize the use, 272 consents were granted in 2012 to the occupants and 339 notifications requesting the eviction of areas were sent. The relationship with the community is more detailed in items Social Performance and Social and Environmental Programs of this report. Suppliers The Supplier Manual was provided by the Company on its website in The document discloses values, principles and guidelines that govern the relationship with suppliers and fixes the Supply Policy of CESP. CESP keeps a register of suppliers divided by market segment. The requirements for registration are within the limits defined in the Bidding Law No /93 and Bidding Law No /02, the initial contact being made through the Company s website, where all information and requirements necessary for registration are available. The Company can not offer advantages in bidding processes for local suppliers. The process is open to any company regardless of its geographic location. (GRI EC6) All contracts include provision on the prohibition of child and forced labor. In 2012, there were no transactions with significant risk of occurrence of child or forced or compulsory labor. (GRI HR6, HR7) Since 2010, contracts include a mandatory inventory clause and account of greenhouse gas (GHG) of services rendered to CESP. CESP makes 100% of its purchases of goods, services and engineering services through electronic auction, which are governed by bidding rules of electronic trading of CESP, published in DOE of 07/19/2007, by Law No /2002, by Decrees State /2002 and /2005, Single Section of Chapter V of the Supplementary Law n 123/2006 and additionally by Federal Law 8.666/1993, with its modifications, performed in public, via Internet, using encryption features to verify the authenticity of users and secure adequate conditions of safety and confidentiality of information at all stages of the event, enabling flexibility in procurement processes, transparency, price reduction, minimizing expenses for the bidders and court costs to the Company. (GRI EU14) Selection of suppliers CESP keeps a register of suppliers divided by market segment. The requirements for the Registration are within the limits defined in the Bidding Law 8.666/93, the initial contact is made through the website of the Company, where all information and requirements necessary for registration are available. The Company has a mandatory requirement in the suppliers register form, as well as a selection criteria in the bidding documents, the presentation of the statement of regularity to the Ministry of Labour in compliance with the prohibitions laid down in Article 7 paragraph XXXIII of the Federal Constitution, namely: prohibition of night, dangerous or unhealthy work for persons under 18 years old and any work to people under 16 y.o. except as apprentices, as from 14 years old. However, in 2012, CESP s suppliers have not been submitted for evaluation on these criteria. (GRI HR1) Social and environmental responsibility clause All service contracts entered into by CESP with its suppliers contain clauses relating to issues of social responsibility, human rights and labor, in which the payment is subject to verification by the supplier contracted on the implementation of its labor obligations. These clauses prohibit the hiring of child, forced and compulsory labor. In 2012, CESP s suppliers have not been submitted for evaluation on these criteria. (GRI HR6, HR7) Regarding the hiring of continuous services such as: monitoring, protection, cleaning and maintenance, motorcycle courier and electronic surveillance, CESP have followed what is indicated in the studies available in the Register of Outsourced Services of the State Government of São Paulo. These studies, carried out by technical groups of Quality and Public Management Committee, are geared toward sustainable bids and contracts, covering the environmental criteria of a procurement of goods, works and services consistent with policies aimed at changing consumption patterns aiming at the sustainability of the development and maintenance of the ecological balance. Due to the adoption of these studies, CESP received on bids and contracts, the Social and Environmental Seal, established by Decree 50,170 of November 4, Contract Management The contract management is the responsibility of the contracting area, which does all the checks necessary for the faithful performance of the terms of social and environmental responsibility. There were no reports of violation of such terms in (GRI HR2, HR4, HR9) Nonprofit Entities and associations in general (GRI 4.13) CESP participates in entities and national and international associations aiming to contribute to the technical development in the areas of engineering and environment and generating and disseminating good practices in the electricity sector. Below, we mention the main entities: BM&F BOVESPA Stock Exchange GVCes da FGV Sustainability Studies Center / Fundação Getúlio Vatgas ABRAGE Brazilian Association of Electric Energy Generation Companies APINE Brazilian Association of Independent Electric Energy Generators 30 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 31

17 Fundação COGE COGE Foundation IBDE Brazilian Institute of Energy Legal Rights ABRINQ ABRINQ Foundation PNUMA United Nations Environmental Program IBGC Brazilian Corporate Governance Institute CME Worldwide Energy Committee ABRAGET Brazilian Association of Thermal Generators ABRACE Brazilian Association of Large Industrial Energy Consumers and Free Consumers ABRATE Brazilian Association of Large Companies of Electric Energy Transmission ABRADEE Brazilian Association of Electric Energy Distributors BRACIER National Brazilian Committee of the Regional Energy Integration Commission CIGRÉ Brasil National Brazilian Committee of Electric Energy Generation and Transmission ABRACEEL Brazilian Association of Electric Energy Trading Agents COGEN Energy Cogeneration Industry Association ABCE Brazilian Association of Electric Energy Concessionaires Government CESP maintains a constant dialogue with government authorities to share information and that their views are considered and included in the formulation of public policies. The activity of power generation, especially hydropower, has influence on the collective interest and undergoes regional prosecutor s intervention, through State and Federal Prosecutors. CESP s relationship with government officials is guided by the Code of Ethics and the search for a constructive dialogue. (GRI SO5) Relationship Channels (GRI 4.4, 4.16) Part interested Shareholders and investors Customers Employees Community / society Description Shareholders with common and preferred shares Potential investors and market analysts 37 distributors 20 trading companies 21 free consumers 4 small distributors 3 generators 1,283 employees 21 trainees 55 young apprentices- Municipalities and communities in the area of influence of CESP s reservoirs Communication Channels Corporate Website Portal of Investor Relations Earnings Release Quarterly Financial Information Sustainability Report Reference Form Corporate website Sustainability Report Intranet Corporate Website Linha Direta Newspaper Clic CESP Paycheck Internal campaigns Bulletin Board Corporate website Explanatory folders Paper on Floods Paper on Environmental Education Newsletter on Flows Direct Dial Free - DDG - TELECHEIA CESP Website - icon TELECHEIA Sustainability Report Participation Channels Meeting of the Board of Directors Shareholders Meeting Meetings of the Audit Committee Investor Relations Area ricesp@cesp.com.br Contact Us: inform@cesp.com.br Visit to large customers Ombudsman: access at the Corporate Website Contact Us: inform@cesp.com.br Energy trading comercializacao@cesp.com.br inform@cesp.com.br Talk to HR rh@cesp.com.br On-line Research Committee of Ethical Conduct Code Ethical Conduct Channel: access at Corporate Website Usual relationship channels with resettled population, potters and fishermen. School Boat - Água Vermelha for environmental education. Environmental Division Ombudsman: access at the corporate website Flood Management Committee. comitedegestaodecheias@cesp.com.br SOSEm - Operation System in Emergency Stiuation Reception of visitors at plants. Contact Us: inform@cesp.com.br Suppliers Suppliers of goods and service renderers Corporate website Electronic bidding for purchases of goods and service rendering Annual Sustainability Report Supply Area Corporate Website Portal for suppliers: registration and other services licitacoes@cesp.com.br Ethical Conduct Channel in corporate website Contact Us: inform@cesp.com.br Government Direct and indirect administration bodies in the federal, state and municipal scopes and including regulators of the electricity sector (ANEEL, ONS, CCEE, EPE and RSESP and environmental agencies (Departments of Environment, IBAMA, Cetesb) Corporate website Quarterly Financial Information Newsletter on Flows Direct Dial Free - DDG - TELECHEIA CESP Website CESP - icon TELECHEIA. Area of Regulatory Affairs Environmental Division Meetings of managers with government representatives TELECHEIA phone Partnerships and participation in Watershed Committees, Committee on Waterways Tietê-Paraná Contact Us: inform@cesp.com.br Business associations and national and international organizations Several entities already listed Corporate Website Meetings with associations Participation in working groups Participation in events Contact Us: inform@cesp.com.br Press News channels on the Internet Radios Newspapers Magazines Television Corporate Website Press Conference Releases Sustainability Annual Report Broadly divulged telephone numbers Communication area Contato us: inform@cesp.com.br 32 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 33

18 Public policies (GRI 4:13, SO5) CESP collaborates with discussions to formulate public policies promoted by the Ministry of Mines and Energy, the Energy Agency (ANEEL) and the Commercialization Chamber (CCEE). It also operates in conjunction with different non-profit business entities, such as the Brazilian Association of Independent Power Producers (APINE), the Brazilian Association of Electric Energy Generation Companies (ABRAGE), the Brazilian Association of Electric Energy Companies (ABCE), for the improvement of laws and regulations of the industry through the research, studies and debates among its members. CESP together with ABRAGE participated in the preparation of the Federal Law No , of 09/20/10, which deals with the National Dam Safety by determining the procedures and obligations of generation agents with respect to structural safety and operating their ventures. Together with APINE, CESP participated in the preparation of the text of the New Forest Code in matters pertaining to the electricity sector. In 2012, CESP s Generation Officer Mr. Mituo Hirota was elected vice-president of the Brazilian Association of Electric Energy Generation Companies (Abrage) on March 29, for a one year term. Press CESP has a team of specialized professionals to meet daily demands in a quick an responsible way, whether they be received by regional, national or international media. The relationship with the press is also one of the items covered by CESP s Code of Conduct. Regarding the activities of marketing and advertising, the Company follows the rules formulated by the State Government of São Paulo, which coordinates these activities to all companies controlled by it. CESP has not hired an external advertising agency, does not make marketing or marketing communications. (GRI PR6, PR7) Ombudsman CESP by joining the ombudsman system of the State of São Paulo offers in its website a relationship channel in order to receive, clarify and answer any querry from the employee. It acts as the final instance in its defense, causing internal transformation actions aimed at improving the quality of services provided by the Company. Among the major complaints received in 2012, we enhance the guidelines and clarification of questions concerning human resources issues, such as requests for documents by former employees seeking guidance on benefits of Fundação CESP, job search and internship. There were also requests for clarifications on matters relating to the area of Shareholders of the Company, as a real estate deed, interest in houses built by CESP and matters concerning the use and occupation of the edges of reservoirs. Some events classified as Complaint, which are repeated offenders, relate to dissatisfaction with Electricity Distribution companies, such as oscillation and power outage and burning appliances. In these cases the ombudsman informs what is the business of CESP, ie Power Generation and directs citizens for distribution utilities. Commitments to external initiatives (GRI 4.12) ISE - Corporate Sustainability Index CESP continues in the ISE portfolio for the period 2012/2013. For the seventh time since its first edition in 2005, the permanence of CESP portfolio confirms Company s commitment to environmental and social issues and demonstrates its commitment to sustainability. See details on ISE at the address below. br/ indices/resumoindice. aspx?indice=ise&opcao=0&idioma=pt-b PNUMA - United Nations Program for the Environment CESP is a signatory to the International Declaration on a Cleaner Production, part of the United Nations Program for the Environment (PNUMA). The Company presented a Preliminary Implementation Plan specifying the actions that it develops to make concrete the principles of the Declaration, the principle of Leadership, Awareness, Education and Training, Integration, Research and Development and Transparency. See details on PNUMA: org.br CDP Carbon Disclosure Project Since 2007, CESP has been answering the Carbon Disclosure Project (CDP), what has been contributing to the debate on climate change in the Company. The Program for Climate Change and Carbon Sequestration was then structured with the publication s annual inventory of greenhouse gas (GHG) reduction targets and voluntary emissions by 10% between 2007 and 2011, as well as 100% neutralization of emissions of solid waste. See details on the CDP: 34 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 35

19 Corporate Governance Transparency and Earnings CESP is committed to transparency in its administration and the preparation and dissemination of financial statements. The Company has processes and controls what are subject to ongoing evaluation by managers of corporate areas, and they are also periodically examined and audited by internal and independent audits, Court of State, and control and evaluation of the Treasury Department. It also has channels for receiving representations, such as those set forth in the Code of Conduct and even the Ombudsman, which ensures the administration greater coverage against possible situations that may give rise to inconsistent events that characterize acts of corruption. The Code of Conduct, widespread and generally known by all officers and employees of CESP establishes the legal and ethical practices that should be adopted as it occurs. (GRI SO2) Level 1 of BM&F Bovespa and Other Different Practices CESP joined in 2006 the differentiated practices of Corporate Governance of BM & F Bovespa corresponding to Level 1, which constitutes a set of rules that governs the relationship between the controlling shareholder, the Board of Directors, the Executive Board, other shareholders and, in particular, the financial market. The Company also adopted additional practices in its bylaws that reflect its commitment to quality, speed and transparency of information directed to its various stakeholders. Among the practices in addition to Level 1 of Corporate Governance of Bovespa, CESP voluntarily was also included in the Arbitration Chamber and provided integral Tag Along to Class B preferred shares (CESP6) and 20% of the Board of Directors is composed of independent members. As from 2010, CESP has been publishing its financial statements, management report and explanatory notes, observing international standards (IFRS), a fact that results in the convergence of a common and comparable standard. See website for details: Governance Structure (GRI 4.1) CESP has a corporate governance structure responsible for creating and disseminating policies, rules, responsibilities and processes, and direct it to achieve its objectives and goals. Best practices adopted and the governance structure of the Company has increased the value to society, as well as the continuity of its business. The Board of Directors and CESP is responsible for regularly evaluating the Company s performance. The main results are quarterly reviewed by the Board and are made public in accordance with what is establed in the international accounting standards (IFRS). The Board meets at least twice a month to evaluate the performance of the Company. (GRI 4.9) The remuneration policy for directors and officers of the Company is established in accordance with the guidelines set by the controller through CODEC - State Capital Defense Council, based on the performance, market competitiveness and technical knowledge of the company s activities, being subject to approval by shareholders at the AGM - Annual General Meeting. The remuneration of the Board of Directors was set at percentages on the remuneration of directors of the Company, being 30% for members of the board of directors and 20% for the fiscal council members conditioning their participation to at least one meeting per month. The annual remuneration policy of directors, members of the Board of Directors and Audit Committee has remained unchanged since January (GRI 4.5) General Meeting of Shareholders At the General Meeting the administrators account for the last fiscal year and examine, discuss and vote on the financial statements, accompanied by the opinion of the Audit Committee and the Independent Auditors; decide on the allocation of net income for the year and distribution of dividends; elect when applicable, the members of the Board of Directors; elect members of the Fiscal Council, and their alternates; tax the fees of the members of the Fiscal Council, Board of Directors and the Executive Board. (GRI 4.4) Board of Directors The Board of Directors is responsible for setting the overall direction of the business plans and budgets of the Company, as well as to remove the Board and oversee its management. It comprises up to 15 members, with a minimum of 20% of members independent of the controlling shareholder. Independent directors are expressly identified as such in the General Shareholders Meeting to elect them. The CEO of CESP is on the Board of Directors, but does not accumulate the position of 36 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 37

20 Board of Directors (GRI 4.1, 4.3) José Aníbal Peres de Pontes Mauro Guilherme Jardim Arce Andrea Sandro Calabi Ricardo Achilles Fernando Carvalho Braga Marcos Antonio Albuquerque Flávio de Souza Loureiro Filho João Bosco Tosta Marcelo Souza Monteiro Carlos Pedro Jens Chairman Member (elected by controlling shareholder) Member (elected by controlling shareholder) Member (elected by controlling shareholder) Member (elected by controlling shareholder) Member (elected by controlling shareholder) Member (elected by controlling shareholder) Member Representing Employees (elected by controlling shareholder) Independent Member (elected by preferred shareholders) Independent Member (elected by controlling shareholder) Fiscal Council (GRI 4.1, 4.3) Fábio Alonso José Rubens Gozzo Pereira Emilia Ticami Hélio Pilnik Amancio Acúrcio Gouveia Enio Marrano Lopes Carlos Eduardo Esposel João Paulo de Jesus Lopes Paulo Roberto Fares Manuel Jeremias Leite Caldas Executive Committee Mauro Guilherme Jardim Arce Almir Fernando Martins Mituo Hirota Armando Shalders Neto Chairman of the Board. The Chairman of the Board of Directors is appointed by the General Shareholders Meeting as provided in the Bylaws of CESP. (GRI 4.2) CESP has no formalized process of selfassessment of performance of the Board of Directors. (GRI 4.10) There are no mechanisms or rules for identifying and managing conflicts within the Board of Directors. (GRI 4.6) The appointment of members of the Board of Directors is made considering the choice of executives with established knowledge about the Electricity Sector, in public administration, in the financial and capital markets, with an unblemished reputation and moral standing. (GRI 4.7) Effective (elected by controlling shareholder) Effective (elected by controlling shareholder) Effective (elected by controlling shareholder) Effective (elected by controlling shareholder) Effective (elected by preferred shareholders) Alternate (elected by controlling shareholder) Alternate (elected by controlling shareholder) Alternate (elected by controlling shareholder) Alternate (elected by controlling shareholder) Alternate (elected by preferred shareholders) CEO, accounting for the Engineering and Construction Directorate CFO and Investor Relations Officer Generation Director Administrative Director Fiscal Council CESP has a fiscal council permanently installed, consisting of five members and an equal number of alternates, elected by the General Meeting for a term of one year. One member of the fiscal council and his alternate are elected by holders of common shares, minority shareholders and another one by holders of preferred shares. The primary responsibility of the fiscal council, which is independent and not related to the independent auditors and is appointed by the board of directors, is to review the financial statements and advise the shareholders as to its contents. The Fiscal Council also reports to shareholders on matters relating to budget, changes in capitalization, dividends and reorganizations. The fiscal council is responsible for overseeing management s activities and keeping the shareholders informed of its findings. Executive Committee CESP s executive committee shall be composed of 5 members, shareholders or not, they are responsible for managing the overall business and practice all acts necessary or convenient to the company, as well as for implementing the resolutions adopted by the board of directors. The directors of the Company have individual responsibilities established by its board of directors and bylaws, occupying their positions for a term of two years, their reelection being permitted, and shall remain in office until the election and investiture of their successors. The board meetings are convened by the CEO or by request of a majority of the board members, and only be installed in the presence of the majority of its members. The resolutions of CESP s board shall be taken by majority vote of those present. Internal Audit CESP has an internal audit team whose mission is to provide reviews of the adequacy and effectiveness of control systems, the accuracy of the operations, the legitimacy of the acts practiced and the performance quality regarding policies, plans and set goals. The audit coordinates the activities of the Risk Management Committee and Corporate Conduct. Independent Audit The financial statements and the Social Balance/ IBASE are audited by Ernst & Young Terco. The Ernst & Young Terco does not provide any other service to the Company, ensuring the principle of independence. Regulators of the Electric Sector As an electric utility, CESP is linked to a set of regulatory agencies, including the National Agency of Electric Energy - ANEEL, the National Electric System Operator - ONS, the Electric Energy Trading Chamber - CCEE, and Energy Research Company - EPE. It is also linked to the Regulatory Agency of Sanitation and Energy of the State of São Paulo - ARSESP. Ethical Conduct The Code of Conduct of CESP was created in 2009 with the objective of disseminating the principles and values of CESP to all employees, in addition to direct relationships with its stakeholders. All employees received a copy of the Code of Conduct and signed its receipt, which is filed in the employee handbook, the Division of Human Resources - PHA. Periodically the Code s principles are reinforced in internal information Linha Direta CESP. (GRI SO3) As from 2012 whenever there is any change in its content there is the requirement to confirm the employees accordance to the Code. The Code is available in Netcesp - CESP Portal (intranet) and on the website of CESP: www. cesp.com.br. It is also available by at codigodeconduta@cesp.com.br for those who are interested in making representations. (GRI 4.8) Code of Conduct Committee The Code of Conduct Committee has been created in order to monitor the compliance with the code, to guide and advise on ethics and conduct, receive representations about alleged violation of the code as well as carry out their investigation and assessment as provided in the Internal Code of Conduct. It comprises permanent members representing the Legal Department, Human Resources and Internal Audit. Other members are chosen by the CEO of the Company in accordance with the nature of the event in question. In 2012, according to the terms of the Internal Rules of the Code of Conduct Committee, the renewal of its members for a term of two years as from 1st of October 2012 was held. The Code of Conduct Committee evaluates the alleged violations of the Code, they are registered in those representations and gives opinion on their origins and existence, their significance, subjecting the decision to the administration. In 2012, there was no representation concerning any corruption event or discrimination in the Company. (GRI 4.1, SO4, HR4) 38 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 39

21 Organization Chart (GRI 4.1) CESP Internal Policies (GRI 4.8) Policy Social and Corporate Description It makes explicit CESP commitments by guaranteeing human rights, appreciating the diversity, prohibiting child labor and showing the corporate social responsibility. Environment Code of Conduct Quality Disclosure Dividends It sets out the principles that guide CESP s activities regarding environmental conservation. It highlights the values and principles of CESP s culture and, based on them, it guides the decisions and choices of all employees, ensuring the preservation of the Company in all aspects. It establishes the commitment of CESP to generate power with excellence and the continuous improvement of the effectiveness of management systems. It establishes the rules that are followed by CESP regarding the disclosure of material information and the maintenance of confidentiality of material information that has not been disclosed to the public. Detailed in the Bylaws of CESP, it establishes the criteria for distribution and payment of dividends to shareholders and the minimum guarantees for preferred shares. Safety and Health Labor Relations Relationship with Internal Entities Supplies Risk Management Negotiation Information Security CESP bases management of Health and Safety on the ongoing search for the well- -being of employees and service providers, in compliance with the relevant legislation and in the pursuit of continuous improvement of production processes, through prevention, control and elimination of risks associated with the work and the promotion of health and quality of life. It recognizes unions as legitimate representatives of employees on issues of working relationship. It stipulates that relations should be guided by mutual respect and balance between the interests of the Company and its shareholders, employees and society in general. CESP recognizes and respects the right of its employees to be affiliated and act on internal entities legally established. The Company receives and considers proposals of employee s associations. It aims to meet the demand for goods and services in a planned, integrated, efficient and transparent way. Moreover, it is guided by principles including sustainable development and respect for the law. CESP prioritizes the competitiveness, transparency and legality in the procurement of goods and services. It aims to manage corporate risks, by identifying them by aligning management actions to the Strategic Plan of the Company, spreading the culture of risk management and leading to the improvement of internal processes and controls. It establishes rules for trading securities issued by CESP, in a transparent and organized way in order to avoid inappropriate use of relevant information before they become public. It aims to ensure information privacy and protect them from previously unauthorized use. Guides all employees on the use of technology only for purposes approved by CESP. 40 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 41

22 Operational Performance Regulatory Aspects Energy security is increasingly becoming a priority factor in the political agenda of countries, because energy plays a prominent role in society, with a strong interaction with the economy, technology, environment and social environment. The activities of the electric energy concessionaires are subject to strict regulation and supervision by the National Agency of Electric Energy (ANEEL), an agency established by Law No. 9,427, of December 26, 1996, which has the power to regulate and supervise the generation, transmission and trade of electricity, meeting the Policies and Guidelines of the Federal Government. The Agency is under the Ministry of Mines and Energy (MME), which has under its responsibility the areas of energy, hydroelectric plants and electricity, among others (Law No , of May 28, 2003). The failure to comply with the obligations established in the concession contract, and with the operating and trading procedures determined by the regulator, will result in severe penalties to the offender (Normative Resolution No. 63, of May 12, 2004), including the extinction of the permission granted (Law No. 8,987 of May 13, 1995, and; Law 12,767 of December 27, 2012). Since the promulgation of the Constitution in 1988, in which, Article 175, provided for a structuring of the Brazilian electricity sector based on bids for concessions and private sector participation, the sector has undergone major changes, with a significant change in the regulatory framework. Total power generation per plant (GRI EU2) HEP MWh MWh average MWh MWh average MWh MWh average Ilha Solteira Jupiá Três Irmãos Porto Primavera Jaguari Paraibuna Total The Provisional Measure 579, of September 11, 2012 (converted into Law No /2013) deals with the concessions of electric energy generation, transmission and distribution. This Provisional Measure offered CESP the anticipation, for January 2013, the renewal of the concessions of the Ilha Solteira and Jupiá plants, maturing in 2015, and additionally, the same treatment was given to the Três Irmãos Plant, which first period of concession was expired in November The Granting Power, through PM 579 and ordinances, established specific conditions for anticipating these renewals. These conditions refered to the new revenues to be practiced by these plants, and to indemnification amounts for assets not yet amortized related to the basic design. It also established that plants whose renewals were not accepted would be auctioned. In a meeting held on December 3, 2012 the shareholders of CESP - Companhia Energetica de Sao Paulo decided not to renew the HPPs of Ilha Solteira, Jupiá and Três Irmãos. By this decision, CESP will continue to normally operate the Plants of Ilha Solteira and Jupiá until the final period of the concession that will be in July The Três Irmãos Plant, which has a joint operation with the Ilha Solteira, will be operated by CESP until the government decision. The plants of Porto Primavera (concession to be due in May 2028), Paraibuna (concession to be due in March 2021) and Jaguari (concession to be due in May 2020) were not 42 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 43

23 covered by the MP 579 and will continue to be normally operated by CESP. Hydrological Aspects (GRI 1.2, 4.11) Four major CESP s hydroelectric plants, which represent 98.59% of the assured energy for sale, are concentrated in the area of influence of the Paraná River basin, northwestern region of São Paulo. The plants of Ilha Solteira and Três Irmãos operate with accumulation dams, while the reservoirs of Jupiá and Porto Primavera are run of river. The geographical location is considered favorable, because the Paraná River is formed by the confluence of two major rivers, the Paranaíba, which descends from the mid-west region of the country, and the Grande River, on the border of the state of Minas Gerais. Besides them, the Tietê river is a tributary of the Paraná River, upstream of the Jupiá plant. The Company has built the Pereira Barreto canal with 9.6 km long, connecting the plant reservoirs of Três Irmãos and Ilha Solteira, which allows its integrated operation. The Company s power plants, in the area of influence of the Paraná River basin, are located downstream other existing hydroelectric plants located upstream, so that they benefit from being near the end of the cascade, having only Itaipu plant located downstream. The region is tropical, with high rate of rainfall. Risks of water shortages due to rainfall conditions are cyclical and difficult to occur. In critical situations, the Granting Power will act to balance economic and financial agents. Unfavorable hydrological situations, usually of short duration, are covered by the Energy Reallocation Mechanism - ERM, a financial instrument sharing hydrological risks that the Brazilian Electric Sector offers and allows ONS to seek for optimization of hydropower resources through dispatch by plant, so that temporary shortages of each generator agent system are covered by additional generation from other generators, an Optimization Tariff - TEO of R$ 9.58 per MWh (ANEEL Resolution No. 1246, of December 13, 2011, effective from January 1, 2012). For TEO is U.S.$ Generation Operational efficiency is the basis on which the Company maintains its strategy to become increasingly competitive and efficient, and thus maximizing the creation of value for its shareholders. Accordingly, CESP intends to continue investing in the maintenance of facilities and training of employees in order to maintain and eventually reach new records in production of electricity, high availability of generating units and low failure rate. Generation of Electricity CESP has a generating park which energy is 100% renewable, being exclusively from hydro origin and is formed by six hydroelectric plants: Ilha Solteira, Eng. Souza Dias (Jupiá), Eng. Sérgio Motta (Porto Primavera), Três Irmãos, Paraibuna and Jaguari, totaling 7,455 MW of installed capacity. The generating park of CESP corresponds to 8% of the installed hydraulic capacity in the country. (GRI EU1) The electric power generation from CESP s plants is programmed and implemented in accordance with the Grid Procedures and coordinated by ONS - National Electric System, ensuring the preservation of its assets and compliance with its social and environmental obligations. CESP is authorized to sell 3,916 MW during the year, which equates to approximately 34,304 GWh, or 7.2% of the physical guarantee of the country from hydro source. The quest for efficiency in production is based on the association of key resources availability, water resources allocation and production opportunities in the National Interconnected System (SIN). In 2012, CESP produced 4,822 MW (23% above its physical guarantee) which accounted for approximately 12.5% of the electricity generated in the Southeast (38,692 MW) and 8.2% of the electricity generated in Brazil (58,494 MW). The production in 2012 was 3.2% higher than last year. (GRI EU2) Energy Trading In terms of marketing, physical guarantee is the amount of energy that the plant, a participant in the Energy Reallocation Mechanism, can trade in contracts. CESP seeks to diversify its portfolio of customers to improve its results. On the other hand, sales in the Regulated Market - ACR demonstrate more predictable results because they are less affected by market volatility and contractual conditions pre-established by the regulator. In this context, CESP sells its energy in the following ways: The Regulated Market - ACR: by Energy Trading Agreements in the Regulated Market (CCEARs) celebrated with 37 distributing companies and Power Purchase Agreements (CCEs) with 4 distributing companies with own markets of less than 500 GWh / year. The Free Market - ACL: by the Electricity Purchase and Sale Agreements in the short, medium and long terms (CCVEEs), negotiated with 20 trading companies, 21 free customers and 3 generation companies. Electric Energy Trading Chamber - CCEE: where the differences between the energy produced, physical guarantee and contracted energy are accounted for and settled. In 2012, the physical guarantee of CESP (3,916 MW), after deducting the domestic consumption of plants and losses till the center of gravity of the system, resulted in a net physical guarantee of 3,817 MW average. (GRI EU1) Regulated Contracting Market - ACR In 2012, CESP allocated to electricity distributors the amount of 2,427 MW, representing a stake of 64.1% of total contracts traded in the year. This amount includes 78 MW average sold to distributing companies with own markets with less than 500 GWh / year. For the year 2011, there was a reduction in sales in the Regulated Contracted Market Currently, 36% of the Company s energy is sold to free consumers and traders located in several states in the country. Contracting these types of clients means more flexibility in hiring and pricing. Number of conumers per contracting market (GRI EU3) Type ACR - CCEARs - Distributing Companies ACR - CCEs - Small Dist. Cos ACL - Trading Cos ACL - Generating Cos. 3 ND ND ACL - Free Consumers Total C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 45

24 - ACR of 2.2%, influenced by the amounts and reseasonality of amounts and impacted by returns from distributing companies via Compensation Mechanism of Surpluses and Deficits - MCSD plus the negative variation presented by distributing companies with own market less than 500 GWh / year supplied by CESP. Free Contracting Market - ACL In this market segment, in 2012, the share of energy regarding energy sales contracts in the short, medium and long terms amounted to 1,339 MW average, representing a stake of 35.9% of the total amount traded in contracts in the year. Compared to 2011, there was an increase in sales in the Free Contracting Market - ACL of 2.9% due to the influence of PLDs relatively high. Results of Energy Trading In 2012, CESP sold on contracts 3,787 MW average, considering the criteria measured, which represented a decrease of 0.4% compared to To meet SIN - National Interconnected System, it settled surpluses and secondary energy in the CCEE equivalent to 329 MW average of energy in the shortterm market at the Differences Settlement Price - PLD, and supplied 575 MW average of power to the Energy Reallocation Mechanism - MRE at the price of Optimization Energy Tariff - TEO. The comparative chart of energies traded in MW average is shown at the end of this page. Billing CESP s Revenues from energy sale was R $ 3,816 million, in that R $ 3,472 million in bilateral contracts in the regulated and free contracted markets, and R$ 344 million in the Energy Trading Chamber - CCEE. This result from sale of energy represented an increase of 13.0% over the R $ 3,375 million recorded in Additionally, there was R$ 3.6 million in revenue from contracts of services. Electrical System of CESP Management to ensure availability and reliability of supply CESP has been assuring the performance of its commercial commitments, by combining it to regulatory requirements of availability (Resolution ANEEL No. 688/2003) and systemic demands (generation needs to meet systemic demand), following the economy principles. The efficiency of SIN plants is calculated by ONS through the Availability Index (ID), calculated by the Equivalent Forced Outage Rate verified (TEIFa) and Equivalent Scheduled Outage Rate (TEIP), defined by ANEEL. Energy sold in the ACR and ACL, CCEE, Net Physical Guarantee and Generation at the Center of Gravity CESP has surpassed the benchmarks set by ANEEL for its plants, which weighted average for the ID (determined on the basis of physical guarantee) is In 2012 the value calculated was (GRI EU30) Regarding Equivalent Forced Outage Rate verified (TEIFa), which expresses the operational reliability, the weighted average of the benchmarks set by ANEEL for the plants is and CESP has also surpassed the benchmarks. In 2012, the value calculated was Improvements in Plants facilities and equipment (GRI EU6) Modernization and Automation of CESP s Power Plants The Automation Plan of CESP s Plants involves the four plants that still have the analog conventional technology, with the replacement by the digital system of supervision and control, which has been gradually implemented so as not to affect energy production. During 2012, CESP has completed the design and implementation of automation services in HPP Jaguari. The next table shows the amounts invested by plant in Operational safety of plants CESP, together with other agent members of ABRAGE-Brazilian Association of Electric Energy Generating Companies is present in discussions of the regulation of some articles of Law No. 12,334/2010 that deals with the National Dam Safety Policy, together with ANA and CNRH. Average Availability Factor (GRI EU30) Value ANEEL Availability Index - ID 0,896 0,925 0,929 0,934 0,929 Equivalent Unavailability Rate Forced Rate Verified - TEIFa 0,0252 0,0095 0,0068 0,0063 0,0059 Availability Rate - AR Forced Non-Availability Equivalence Rate determined - TEIFa Preventive, corrective and contractual maintenance programs in Plants Ilha Solteira Plant Completed in 2012, the program replaced 66 units of ascarel excitation transformers by dry type transformers. Repair of generators of Generating Units No. 06 and No. 10. Investments made in automation and modernization of CESP s power plants in 2012 (amount in R$ thousand) (GRI EU6) Power Plant Ilha Solteira 28,539 54,444 Três Irmãos Jupiá 12,298 20,659 Porto Primavera ,874 Paraibuna 2,583 1,291 Jaguari 5,094 8,556 Total 53,653 89,4 46 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 47

25 Completed in 2012, the modernization program of 440 kv circuit breakers of the generating units of Ilha Solteira Plant. Completed in 2012, the modernization program of the 440 kv current transformers of the generating units of Ilha Solteira Plant. Três Irmãos Plant Maintenance performed on generating units No. 04 and No. 05. Jupiá Plant Completion of the general restoration of generating unit No. 11 Repair of a booster transformer following the Repairing Plan of this plant equipment. Porto Primavera Plant Maintenance performed on generating units n. 01, 07, 09, 11 and 12. Jaguari Plant Completion of the general repair of the generating unit No. 02 and implementation of plant automation. Flood Control (GRI 4.11) The rainy season in the Southeast region, region where the reservoirs of CESP are located, is typically from November to April of the following year. Annually, prior to the rainy season, many corrective and preventive actions such as inspections of discharges (spillways), training of staff and other procedures are performed in order to ensure greater reliability of the system. To systematize the operation of the reservoirs, CESP has the Operating System in Emergency Situations (SOSEm) which is a set of Standards and Procedures of operation and maintenance that involves technical, organizational and administrative aspects. The main objective is to ensure the safe operation of hydro reservoirs. In 2012 it was incorporated into the SOSEm system, the Environmental Manual which incorporates the procedures related to environmental issues adopted by CESP during the rainy season, mainly due to the rising flows by defining the actions to be taken during the rainy season for the safety of plants and communities. CESP has a Communication Plan with communities run by BIV - a Newsletter on Flows, by which are disclosed information on flows and the levels performed, programmed and planned for the reservoirs. BIV is sent to the agencies connected to the Civil Defense, the National Water Agency (ANA), the Fire Department, police stations and municipal governments and river authorities. On the site, CESP offers an icon - Operation of reservoirs - TELECHEIA, which contains real-time and historical information about its plants and actitivities. Free Direct Dialing (DDG) TELECHEIA ( ) is a free service, which provides information about water levels and flows of CESP projects, throughout the year, without interruption, to individuals or legal entities. In order to coordinate activities and organize the dissemination of information to the communities who live in the cities, in the areas affected by the reservoirs of the company, CESP created the Committee for Flood Management - CGC. Technical decisions are dealt with the Committee of Operation in Emergency Situations - COEm, which is a body with systemic view that accompanies the operational status of the plants and sets priorities for actions to be taken by CESP. With respect to the operation of flood control, unlike the previous period, the 2011/2012 cycle recorded the average rainfall below the hystorical average for the Tietê and Paraná river basins and the operation of the system of the reservoirs of Paraná River basin held only by control levels. Because the occurrence of La Niña and very low rainfall, at the end of the rainy season the complete refilling of some reservoirs in the Southeast system was not possible, being among them some reservoirs of CESP. The entire operation was conducted in the period in accordance with the ONS Grid Procedures - National System Operator and the studies of flood prevention of the Paraná River basin, established in the Annual Plan of Flood Prevention. The operation of the CESP s reservoirs, located in the Paraíba do Sul basin were also influenced by La Niña and low rainfall, resulting in low inflows for the rainy season not showing the need for the flood control operation. The reservoirs of Paraibuna and Jaguari Plants, because their design features contribute to the damping of flood waves, attenuating its effects to areas and municipalities located downstream. During the rainy season, CESP maintains the Energy Secretariat informed about the daily operation in these reservoirs, through the issue of the Daily Bulletin of Plants with data about inflows, outflows, levels and forecasts of rainfall for the basin, thus collaborating with the prevention of a risky situation and alerting the civil defense of the city. 48 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 49

26 Renewable Energy Sources Share of renewable energy sources in the energy matrix in the world, Brazil and state of São Paulo. Source: (1) - International Energy Agency IEA (2) - National Energy Balance BEN Base Year 2010 (3) - Energy Balance of the State of São Paulo BEESP Base Year 2010 Share of renewables in electricity generation in the state of São Paulo As the Executive Summary Energy Matrix of the State of São Paulo (March 2011), of the Secretary of Energy of the State of São Paulo - SEESP, a considerable development of renewable sources in the state of São Paulo, from 10,892 average MW in 2010 to 17,854 average MW in 2020 and 28,012 average MW in 2035, representing an average growth of 3.8% per year is foreseen. However, a significant growth also occur in thermal generation and cogeneration NG in the State, from 1,047 MW average in 2010 to 3,009 MW average in 2020 and 4,443 MW average in 2035, with an average growth of 6% per year. The tables and charts, below, show the evolution of the main potential energy for the State of São Paulo (baseline scenario), by source, in the period , on MW average, highlighting the marked growth of Bioelectricity from sugar cane. Evolution of the Electricity Offer Potential for ESP (Estimated values in MW average) Energy Sources Bioelectricity - sugarcane Forest Residues Urban Solid Waste Biogas from Landfill Wind Hydro Sub Total -Renewable sources Cogeneration with natural gas Termal plants with natural gas Sub Total-non renewable sources Total Source: Energy Matrix of São Paulo State 2035 March 2011 page 36 Note: it was not considered in the estimate, the impact of the State Policy on Climate Change PEMC Evolution of Electric Energy Offer Potential (Average MW) for the ESP ) One may see in the charts that until 2010 the participation of renewable energy sources in the energy matrix of the State of São Paulo (55.1%) (3) and in Brazil (45.5%) (2) are extremely higher than that found Worldwide (12.5%) (1): Internal Offer of Renewable Energy Future prospects of renewable sources Energy matrix designed for the State of São Paulo The Energy Plan of the state of São Paulo designs for the year 2020 a renewability of the São Paulo State Energy Matrix of 69% of the total, characterized, among others, by a greater share of ethanol and biodiesel in replacement of fossil fuel vehicle fleet in the state, and the largest share of electricity in the expansion of rail transport in the Metropolitan Region of São Paulo, as provided by the Department of Metropolitan Transport. These projections, restricted by the assumptions of the State Plan on Climate Change - PEMC 2020, should reach 69% of renewable energy in the State of São Paulo, according to the chart shown below: 50 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 51

27 Evolution of the Electricity Offer Potential for ESP (estimated in %) Energy Sources Bioelectricity - sugarcane 21,5% 41,5% 53,1% Forest Residues 4,9% 4,2% 4,4% Urban Solid Waste 0,0% 0,4% 1,2% Biogas from Landfill 0,5% 0,4% 0,5% Wind 0,0% 0,7% 1,4% Hydro 64,3% 38,3% 25,7% Sub Total -Renewable sources 91,3% 85,6% 86,3% Cogeneration with natural gas 2,3% 4,6% 5,8% Termal plants with natural gas 6,4% 9,8% 7,9% Sub Total-non renewable sources 8,7% 14,4% 13,7% Total geral 100,0% 100,0% 100,0% Source: Energy Matrix of São Paulo State 2035 March 2011 Electric Energy Offer Potential for ESP in 2020 (in %) In percentage it appears that the share of renewable sources in electricity generation, although slightly decreasing, remains significant: it was 91.3% in 2010, expected to be 85.6% in 2020 and 86.3 % in 2035, as indicated in the table. The estimate of the evolution of the share of renewable energy sources in electricity generation in the state of São Paulo, for the years 2010, 2020 and 2035 is shown in percentage in the charts. Electric Energy Offer Potential for ESP in 2035 (in %) Research and Development Highlight: We invested R$ 5.5 million in R & D (GRI EU8) CESP allocate 1% (one percent) of its net operating revenue for investment in research and development. This compulsory nature fund was established by Federal Law 9,991, of 07/24/2000, and established the Research and Technological Development Program of the Power Sector (R & D). The guidelines governing the preparation of R & D projects are established by ANEEL, by means of the Electric Energy Sector Research and Development Program Manual. The investment includes: Own Projects Completed in Investigations Relating to Alkali-Aggregate Reaction in Concrete Structures (code ANEEL /2006) - Formation of a germplasm bank of endangered fish species in the basin of the Paraíba do Sul River (code ANEEL /2006) - Study of protection alternatives for the erosion control on the banks of the Reservoir HEP Eng. Sergio Motta-Porto Primavera (code ANEEL /2006) - Study of occurrence, distribution, density and growth of aquatic plants in Porto Primavera Reservoir (code ANEEL /2006) - Methodology for the Strategic Evaluation of Contrating Electric Power: Price, Risk and Portfolio of Contacts (code ANEEL /2006) - Monitoring System of Reservoirs and Dam Borders by using Unmanned Aerial Vehicles (UAV) and Databases (code ANEEL /2007) - Electro-Energy Planning - An interface between Operation to Individualized Plants and Basic Network (code ANEEL /2007) - Methodology and Supporting Tools to Decision making of the Company to Implement Energy Seasonal Generation Projects, by Contemplating the Mitigation of Market Risks and Portfolio Analysis (code ANEEL PD /2010) CESP s participation in the generation of electricity in the state of São Paulo CESP has contributed to the clean and renewable energy picture in the State of São Paulo with its generating park which is a 100% based on hydro power. The hydro installed capacity which was 7,455 MW by December 2012, it will change to 6,648 MW with the enactment of Law of 01/11/ MP 579, which also give the company the fifth place among the generators of the country and the title of the largest power generator in the state of São Paulo. (GRI EU1, EU2) Currently the Company is directing its investments in R & D - Research and Development in renewable sources of energy generation: Solar - Photovoltaic and Reversible Power Plants. 52 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 53

28 Started in 2012 Combat to retraction to prevent cracking of high performance concrete and cementbased materials used in the construction and repair of structures (code ANEEL PD /2010) - Development of a national system for monitoring wildlife with GPS collars for ecological studies and mitigation of impacts of hydroelectric projects (code ANEEL PD /2010) - Model of a genetic algorithm for a dynamic dispatch of hydroelectric units considering individual efficiency curves (code ANEEL PD /2010) - Temporal and Spatial Evolution of Morphological and sedimentological processes in the Region Direct Influenced by the hydroelectric power plants reservoirs (code ANEEL PD /2010) - Methodology for the Integrated Assessment of the Installed Capacity Expansion of Hydroelectric Plants: Systemic and Business Approaches (code ANEEL PD /2011) - Development of low-cost sensors for triortogonal instruments, rod extensometer and direct and inverted pendulums (code ANEEL PD /2011) - Dissemination of information about the operation of plants to the civil society on the Internet, Social Media and Messaging Services, contemplating communication of Events, Preevents and Extreme Events, including Disasters (code ANEEL PD /2011) - Take back of the Concept of Efficiency in Reversible Power Plants in the Brazilian Electric Sector (code ANEEL PD /2011) - Methodology and Tools to Forecast Inflow Energies and Pricing of Contracts Applied to the Definition of Optimal Strategy for Contracting Generating Companies, including existing Energy and New Ventures (code ANEEL PD /2011) - Development of Computational Techniques for the Evaluation of Components in the Operation of Hydrogenerators (code ANEEL PD /2011) Strategic Projects Completed in Optimization Model of Hydrothermal Dispatch - PDE and PDDE (Equivalent Systems), Model of Apportionment of Hydraulic Block via Nonlinear Programming and Synthetic Scenario Generation of Flows and Energy (code ANEEL PE /2008) - Participation as Cooperative Company. - Optimization Model of Hydrothermal Dispatch (code ANEEL PE /2009) - Participation as a Cooperative Company. - Model of Hydrothermal Dispatch Optimal for the National Interconnected System (code ANEEL PE /2009) - Participation as Applicant Company. - Computational Platform for the Calculation of the Optimal Policy of Generation in the Medium Term of the National Interconnected System (code ANEEL PE /2009) - Participation as a Cooperative Company. - Optimization of hydrothermal dispatch using hybrid algorithms with high performance computing system (code ANEEL PE /2009) - Participation as a Cooperative Company. - Methodology for Cost Allocation of Transmission System (code ANEEL PE /2009) - Participation as a Cooperative Company. Started in 2012 Skills development and evaluation of technical and commercial arrangements in generation distributed with photovoltaic systems connected to the network (code ANEEL PD /2011) - Participation as a Cooperative Company. Technical and commercial arrangements for insertion of solar photovoltaic generation in the Brazilian energy matrix - (Code ANEEL PD /2012) - Participation as a Cooperative Company. Development and pilot installation of photovoltaic generation in the Strategic Model of Technological, Regulatory, Economic and Commercial Reference including this energy in the national energy matrix (code ANEEL PE /2011) - - Participation as a Cooperative Company. Other relevant aspects Workshop on technologies of reversible hydroelectric plants held in October/2012, in the Federal University of Itajubá - UNIFEI (MG). Closing workshop and presentation of results of the project Methodology and supporting tools to the corporate decision making by considering the mitigation of market risks and portfolio analysis - ventures for the seasonal generation of energy held in August/2012, on CESP s premises. As a result of the professional training, the dissertation Study of wave propagation in floodplains for the development of an emergency action plan for dams - HPP Três Irmãos case study, which conferred the master degree for an employee of CESP working for the R & D project started in December C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 55

29 Economic and Financial Performance Highlights of the year Net Operating Revenue of R $ 3.4 billion, 13.4% increase compared to Financial Result of R $ million negative, 15.4% less than in Adjusted EBITDA of R $ 2,072.3 million, 18.6% higher than in 2011, with a margin of 61.8%. Net income of R $ million, 36.3% higher than in Proposed dividend of R $ million (R$ 115 million already paid as interest on own capital). Operational and Financial Highlights (R$ thousand) Chg% Net Operational Revenue 3,354,005 2,957, % Operational Expenses (2,223,347) (1,771,291) 25.5% Income from Service 1,130,658 1,186, % EBITDA 1,730,115 1,701, % Adjusted EBITDA 2,072,317 1,746, % Adjusted EBITDA Margin 61,8% 59,1% 2.7 p,p, Financial Result (576,633) (681,537) -15.4% Net Profit (Loss) 147, , % With regard to performance and management of the Company, this year the Net Operating Revenue increased by 13.4% over the previous year (R $ 3,354.0 million in 2012 from R $ 2,957.5 million in 2011), which led to a cash generation, measured by an adjusted EBITDA of R $ 2,072 million in 2012, 18.6% higher than in Revenues in the Regulated Market, represented by electricity distributors (which concentrates 64% of the volume of electricity traded in contracts by CESP), increased by 3.9% over Already revenues in the Free Market, mostly represented by large consumers (approximately 36% of the volumes traded in contracts) increased 16.4%, driven by demand for more energy, in view of the relatively higher prices charged in the Electric Energy Trading Chamber - CCEE. The income from short-term market, both to meet the Energy Reallocation Mechanism - ERM, to settle the differences, increased by 32.4% compared to the previous year. Operating expenses (unmanageable) were affected as of October 2012, depending on the dispatch of thermal plants to supply the insufficiency of national hydro power, due to the low level of the reservoirs of hydroelectric plants. Total financial debt at the end of 2012, consisting of Loans and Financings, Investment Fund Receivables and Payables to Eletrobras and the Pension Fund, amounted to R $ 3,745 million, having been reduced by 10.6%, bringing the Financial Debt / Adjusted EBITDA to 1.8 times (2.1 times in 2011). Value Added Distribution (GRI EC1) Revenues In 2012 the Energy Sales Revenues reached R $ 3,816.3 million, 13.1% higher than in In 2012, 5,025 GWh were directed to MRE - Energy Reallocation Mechanism. Revenue Distribution In 2012, from the revenue from sales of electricity, 57.6% were originated in the Regulated Contracting Market (ACR), 33.4% in the Free Market (ACL) and 9.0% in the Energy Trading Market (CCEE), with strongest growth in ACL and CCEE. Regulated Contracting Market- ACR In 2012 sales in the ACR reached R$ 2,199.8 million, in that R$ 2,123.3 million in contracts with distributors and R$ 76.5 million for distributors with markets with less than 500 GWh / year. Quarter sales in the ACR was R$ million, divided into R$ million in contracts with distributors and R$ 22.4 million for distribution to markets with less than 500 GWh / year. 56 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 57

30 Value Added Statement for the year ended December 31, 2012 (R$ Thousand) (GRI EC1) GENERATION OF ADDED VALUE Operating Revenues Provision for estimated loss of credits (24.587) (1.200) Menos: Inputs Charges for use of the transmission system / system services Purchases energy Outsourced services Materials Other operational costs GROSS ADDED VALUE Retentions Deppreciation NET ADDED VALUE GENERATED TRANSFERS Financial Result Net exchange variations ( ) ( ) Pension Fund of employees - CPC 33/IAS 19 ( ) (45.924) Deferred Income Tax and Social Contribution ( ) (19.345) OTHERS Provision for legal risks (97.188) ( ) RTE LAW 2517/2010-ANEEL _ (9.606) Other (expenses)/net income (92.722) (42.168) ( ) ( ) ADDED VALUE TO DISTRIBUTE ADDED VALUE TO BE DISTRIBUTED Personnel: Work remmuneration (not including INSS) Officers remmuneration Pension Fund of employees - contribution to the plan Funders and rent: Interest and debt charges Exchange variations Rent Intrasectorial - Regulatory Charges: Compensation for the use of water sources Global Reversion Reserve - RGR Research and Development - P&D Inspection Fee - ANEEL/other fees Taxes and social contributions: Federal INSS COFINS PIS (-) Credit COFINS/PIS s/ Charges for the use of the transmission syst / energy (31.715) (30.658) Income tax Social Contribution Municipal ISS Shareholders: Net income for the year TOTAL Free Contracting Market - ACL In 2012, the share of the total amount sold in the ACL was 28.4%. In this environment, total revenues in 2012 amounted to R$ 1,272.5 million in bilateral contracts. Spot Market The revenue reached by the company in CCEE totaled R$ million in 12 months of 2012, including MRE - Energy Reallocation Mechanism and the Short Term Market - PLD. In 2012 the average price of PLD was R$ , compared to R$ in Energy Sales Breakdown Deductions from Revenue In 2012, Deductions from Revenue represented 12.2% of Gross Operating Revenues (12.5% in 2011) and recorded R$ million, 10.5% higher than in Operating Expenses Although CESP has reduced all its manageable expenses, total operating expenses in 2012 totaled R $ 2,223.3 million, 25.5% higher than in 2011, representing 66.3% of net revenue, an increase of 6.4 % over the previous year. MWh R$ thousand Var Var. Free Contracting Market - ACL ,8% ,8% Regulated Contracting Market - ACR ,2% ,8% Sport Market - PLD ,6% ,8% Spot Market - MRE ,7% ,0% Total ,8% ,1% Economic and Financial Indicators Economic and Financial Indicators Var. General Average Price - R$ por MWh 92,29 84,73 8,9% Operational Margin 33,7% 40,1% -6,4 p.p. Dollar exchange rate variation 8,9% 12,6% -3,6 p.p. IGPM 7,8% 5,1% 2,7 p.p. IPCA 5,8% 6,5% -0,7 p.p. Present liquidity 0,60 0,61 58 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 59

31 We should point out the 4th quarter of 2012 where operating expenses increased by 88.4%, mainly due to two factors: (i) the heading Employee Pension Fund - CPC 33/IAS 19, which resulted in the provision of R$ million, against R$ 45.9 million in 2011, mainly due to the reduction to 3.75% in 2012 (5.5% in 2011), of the rate of return of future securities of the National Treasury (NTN-B), used in accounting calculations (CPC 33) to determine the present value of the actuarial liability to be recognized and (ii) costs of R$ 142 million in the CCEE due to its share in the distribution of costs by insufficient generation of electricity by the system, with the need to the dispatch of thermal plants, which share will be recorded as expense under Purchased Power. EBITDA EBITDA in 2012, calculated by the new rules established by CVM Instruction 527/2012, reached R $ 1,730.1 million, 1.7% higher than in Financial Results Financial result totaled R $ 46.3 million in the year, 7.0% less than in The total of Financial Expenses, including Debt Charges and Other Financial Expenses recorded R $ million in The Net Monetary Variations resulted in R$ million loss in Already the Net Foreign Exchange Variations reached R $ million loss in Net monetary and exchange variations were primarily responsible for the reduction of negative financial result, with a decrease of approximately 27.9% over Thus, the financial result in 2012 was R$ million loss, 15.4% below the same period in Net Profit In 2012, the Profit before Taxes totaled R$ million and expenses with Income Tax and Social Contribution totaled R$ million. Thus, Net Income recorded R $ million, 36.3% higher than in Proposed allocation of profits and distribution of dividends To be submitted to the Shareholders Meeting scheduled for April 24, The proposal of the Board of Directors to the Shareholders Meeting provides for the payment of the balance by November 30, Adjusted EBITDA reached R $ 2,072.3 in 2012, so 18.6% higher than the 12 months of 2011 (R $ 1,746.9 million). The adjusted EBITDA margin was 61.8% in 2012 against 59.1% in EBIT/EBITDA EBIT / EBITDA R$ thousand Var. Net Profit (loss) ,3% Income Tax and Social Contribution ,1% Financial Outcome ,4% EBIT ,9% Depreciation ,8% EBITDA ,7% Pension Fund CPC 33 / IAS ,1% EBITDA Adjusted ,6% Adjusted EBITDA margin 61,8% 59,1% 2,7 p.p. Deductions from Revenue R$ thousand Deductions from Revenue R$ thousand Var. Quota for Global Reversion Reserve - RGR ( ) (87.962) 14,0% Research and Development - P&D (33.504) (29.953) 11,9% Tax on services - ISS (100) (116) -13,8% COFINS on operating revenues ( ) ( ) 9,4% PIS on operating revenues (59.217) (54.201) 9,3% Total ( ) ( ) 10,5% % of Gross Revenue 12,2% 12,5% -0,3 p.p Financial Debt In January 2012 CESP settled the 2nd Issue of Promissory Notes, issued in January 2011, with the payment of R$ million. The total financial debt, composed of Loans and Financing, FDIC, and Payables to Eletrobras and to the Pension Fund totaled R$ 3,745.3 million, having been reduced by approximately R$ million (10.6%) and is now represented by 66% in local currency and 34% in foreign currency. At the end of the year, Cash was R$ million, and there was R$ 65.8 million corresponding to U.S. $ 32.2 million to settle commitments due in January and February 2013 regarding the Bonus series 7 and 8, resulting in net debt of R$ 3,166.0 million. In August 2012, Standard & Poor s upgraded the credit ratings of CESP to BB global scale to positive and braa- the Brazil national scale, for improved financial profile with stable outlook. At the same time, increased the individual credit profile (SACP, its acronym in English) of CESP, b- to BB. Second report from S & P, the change in outlook reflects the continued ability of the Company to present strong financial metrics, consistently reducing debt levels and with favorable cash flows. 60 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 61

32 Shares of CESP The effects of the Provisional Measure No. 579 of September 11, 2012, were felt on the stock market, reflected on CESP s share prices, among other electric companies. The most traded shares of CESP, the Class B Preferred Share (CESP6) representing 64% of Proposal for the Allocation of Outcome and Distribution of Dividends (R$ thousand) 2012 Net Income of the Year Destinations: Legal Reseve (7.399) Performing assets valuation adjustment Realization of reserve for unrealized profits Balance for distribution of dividends Interest on own capital already distributed ( ) Balance to be distributed as dividends ( ) the total capital, suffered a decline of 41.3% in 2012 and was listed on 12/28/2012, for R$ The Common Shares (CESP3), representing 33% of the capital ended the year with a devaluation of 39.6% at R$ The Class A Preferred Shares, representing 3% of the capital, fell by 44.8% and were traded at R$ 18.57, on the last day of the year. The IEE - Electric Energy Index had high volatility during 2012, ending the year with a decline of -11.7%. On the other hand, the Bovespa Index increased by 7.3%, partially reversing the sharp decline of -18.1% posted in The table to the right shows the closing prices and the market value of CESP in the last trading day of December 2012, as well as the total score of the Bovespa Index and IEE on the same dates. Debt Position Debt Position (in R$ thousand) 12/31/ /31/2011 Charges Current Noncurrent Total Total Var. % Foreign currency ,6% Financial Institutions ,4% BNDES ,2% Medium Term Notes ,6% Other Institutions ,9% Domestic currency ,1% Financial Institutions ,3% Medium Term Notes ,8% ELETROBRÁS ,7% Other Debts ,2% Values to be paid ,0% FIDC ,1% Pension plan for employees * ,2% Total Financial Debt (1) ,6% Funds (2) ,1% Availabilities ,0% Guarantees and Linked Deposits TOTAL NET (1) - (2) ,7% * Considers only debt contracts with CESP Foundation Capital Market Share/ Index Closing Closing Variation Number of Value in Market Dec./2012 Dec./2011 % Shares (thousand) (R$ thousand) Dec./2012 CESP3 - ON 16,49 27,30-39,6% CESP5 - PNA 18,57 33,65-44,8% CESP6 - PNB 19,39 33,05-41,3% Total CESP IBOV ,4% IEE ,7% Operating Expenses Operating Expenses R$ thousand Var. Personnel ( ) ( ) -5,9% Pension Fund - Contribution to plan (8.877) (9.546) -7,0% Pension Fund - CPC 33 / IAS 19 ( ) (45.924) 645,1% Materials (10.907) (16.428) -33,6% Outsourced services ( ) ( ) -5,6% Compensation for water sources use ( ) ( ) 10,0% Energy purchased ( ) Charges for the transmission system/system services use ( ) ( ) 8,1% Rates of the electricity sector (17.637) (16.605) 6,2% COFINS/PIS on charges for use of the transmission system use credits ,4% Depreciation ( ) ( ) -0,5% Provision for estimated credit loss (28.411) (1.200) 2.267,6% Operating Provisions (11.713) (32.337) -63,8% RTE Law nº 2517/2010 ANEEL (9.606) Other Charges (15.829) (16.201) -2,3% Total ( ) ( ) 25,5% % of Net Income 66,3% 59,9% 6,4 p.p 62 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 63

33 Social Performance CESP has a Corporate Social Policy which presents the principles and guidelines that are the basis of the Company s relationships with its stakeholders: shareholders, creditors, customers, employees, partners, community, government and society. The Policy addresses human rights practices and work, and relationship with suppliers and the community, such as: not hiring child labor or slave labor; no discrimination; encourage diversity among employees, promote health and safety of employees and others; support educational activities for young people in local communities; narrow channels of internal and external communication, among others. (GRI EU16) The Company also has a Code of Conduct, which applies to all employees, at all levels, and is inspired by ethical principles. Both documents can be viewed on the Company s website at the following addresses: Corporate Social Policy: nsf/v03.01/politica_social_port/$file/politica_ social_port.pdf?openelement&filename=poli tica_social_port.pdf Code of Conduct: asp The information we hold about our customers, officers and employees are confidential and may only be given to third parties with the express consent of those involved, except for the cases provided by law. The Company takes all reasonable care to disclose any information involving third parties or which have been given to it in confidence as a result of a business relationship (commitment established in the Code of Conduct). There was, in 2012, no cases of complaint alleging breach of customer privacy and losses of customer data. (GRI PR8) Internal Relationship Profile of employees Late 2012, CESP had 1,283 employees, 21 trainees and 55 apprentices. Of its 1,283 employees, 189 are women and 13 are disabled. In the same year, the turnover rate of employees was 5.35%. (GRI LA2) The Company hires companies to carry out the following services: general maintenance and cleaning, security and surveillance/ transport; coffee services, maintenance of power plants (generators) and maintenance and repair projects for reforestation and farming. In these contracts, the outsourced companies are the responsible ones to manage the number and profile of professionals involved. The Company does not have available the number of employees. (GRI LA1, EU17) In 2012 there was, in the Company, dismissal, suspension or warning of any employee due to corruption, discrimination or violation of indigenous peoples rights. (GRI SO4, HR4, HR9) Due to the legal nature of CESP, that is a publicly traded company, specific constraints are imposed, among them the competitive context for the composition and recomposition of workforce. The call for a public contest consists in the adoption of the procedure, which ensures equal opportunities of access to public offices and positions to all interested parties. Therefore, any practices that favor or hinder the selection of employees based on race, color, age, gender, disability, nationality or domicile is inadmissible. The admission of staff in companies whose capital belongs in its majority to the state, must be approved in the selection process through a public context, previously authorized by the Governor of the State, as established by the Constitution of (GRI EC7) In CESP, there is no wage gap between men and women in the same position during the same period of time. Any differences that can be observed derive from the fact that there are different levels within a category and the time in that career. As an example of these differences, we emphasize that the women managers have an average salary of 8% above the average salary of men managers, the same occurs with women employees who occupy 64 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 65

34 technical / administrative positions and women trainees (1% more than the opposite gender). Upon admission, via public context, any wage differentiation according to gender is forbidden. The tables below show the diversity present in the Company. Remuneration The Company has a Plan for Jobs and Salaries since 1990, consisting of families of job of operational, technical / administrative and university levels. Employees who make up the management team are in the senior college level. A bonus equivalent to 20% of the higher value of the wage scale in effect for the functions of Director, Assistant and Department Manager and 15% to Division Manager and Unit Manager are granted. The lower remuneration proportion of CESP compared to the national minimum wage in force on 12/31/2012 is 2.3 times. (GRI EC5) Variation between the Company s lowest remuneration compared to the lowest remuneration paid by the State (SP) and Federal governments (GRI EC5) Lowest Company s Remuneration (R$) Lowest Federal Remuneration (R$) Difference Lowest State Remuneration/ SP (R$) Difference Ratio of basic salary among men and women by position (GRI LA14) Professional Level % Officers ---(*) Managers -8% University level 10% Technical/Administrative -14% Operational 12% Trainees 5% Apprentices 0% (*) all officers are man Fixed remuneration policy As to a clause in the Collective Bargaining Agreement, CESP will provide funding for the implementation of the Plan for Jobs and Salaries The rules for transfer of personnel established by the Department of Human Resources and approved by the Executive Committee include career advancement, salary progression and bonus award. The proposed move will be based on work performance of employees measured by performance evaluations conducted by their own areas. Remuneration policy for results (GRI 4.5) For many years, the Remuneration Policy according to the Company s Results of CESP has been using practices that aim to reward productivity and commitment of its employees in obtaining results that improve the overall performance of the Company. The indicators used to measure and calculate these results reflect the real goals that are set, presented and discussed at the beginning of each year, by the management of the Company to the employees. Over the years, the application of the concept of profit sharing has been evolving and improving, linking up more and more to business performance. The indicators and targets are discussed with the unions representing the employees of the CESP and meet the regulatory standards of government agencies. Annual parameters for upper and lower performance of each indicator are established, in order to achieve the maximum reward when the target and proportionately when the partial fulfillment of the calculation period. For the year 2012, we used four types of indicators: Economic Financial, Service Quality, Strategic Planning and Operations, which are detailed in their description, goals and weights in table on page 68. The results for 2012 are being verified and will be forwarded in due time to the Council for the Defense of the State Capital for awareness and authorization of payment. Number of workers per functional category, gender and location (GRI LA1) Capital Countryside Total Professional Level M F Total M F Total M F Total Officers Managers University Level Technical/Administrative Operational Total CESP Outsourced nd nd nd nd nd nd nd nd nd Statutory Directors Board Management and Fiscal Intern Apprentices Total Number of admissions and dismissals, by age group, location and (GRI LA2) Capital Countryside Total Admissions Dismissals Admissions Dismissals Admissions Dismissals Age M F Tot. M F Tot. M F Tot. M F Tot. M F Tot. M F Tot. Younger than 18 y.o From 18 to 35 y.o From 36 to 60 y.o Older than 60 y.o Total Number of workers by education attainment, gender and (GRI LA13) Capital Countryside Total Education Level M F Tot. M F Tot. M F Tot. Post-graduation College Techncial High School Elementary School Analfabeto Total Number of workers by race, gender and functional category (GRI LA13) White Black Brown Yellow Indigenous Not declared Total Professional Level M F Tot M F Tot M F Tot M F Tot M F Tot M F Tot M F Tot Officers Managers University level Technical/Administrative Operational Total CESP Statutory Officers Board Management Fiscal Council Trainees Apprentices Total Number of workers with special needs by location and gender (GRI LA13) M F Total Capital Interior Total C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 67

35 Outcome-based Remmuneration Policy 2012 Description IEF Economic and Financial Index: real growth of Operational Profit, achieved in the Financial Statements as of December 31, 2011, a percentage higher than IPCA divulged by IBGE for Service Quality Indicators Strategic Planning Indicator Operational Indicators TEIFa-2012 Equivalent Compulsory Outage Rate 2012: it indicates the reliability rate of the generating plants within the 12 months of 2012, showing the total time the generating units were unavailable due to compulsory outage. NPP Warning with Payment of a Fee to the Electric Energy Trading Board: it expresses the adequacy of the company to fulfill its energy trading agreements and reliability of daily information on generation to regulating bodies. ORJ Remote Control of Jaguari HEP: implementation of a digital system of supervision and control which enables the remote operation of the power plant. TS Safety Rate: it shows the percentage of employees who had noaccidents over the year, being absent or not. Goal Higher parameter: real growth of 3% when compared to IPCA. Lower parameter: growth equal to IPCA. Higher parameter: 0.540%. Lower parameter: 0.630%. Target: 0 penalties Goal: implement the remote control of Jaguari HEP Higher parameter: 99.60%. Lower parameter: 98.60%. Result In result determination conclusion phase In result determination conclusion phase In result determination conclusion phase In result determination conclusion phase In result determination conclusion phase Achievement Obs.: the initial proposal for the PRR/2012 presented to CODEC in 2011 was amended in accordance with recommendations from that entity, which were discussed with the Company and representatives of the Salary Policy Commission. Remuneration by Results Policy PRR 2013 In face of the impact caused by Law no of 1/14/2013 (conversion of PM 579), at CESP, the PRR 2013 proposal will still be forwarded for approval by the Government. 40% 35% 5% 10% 10% Benefits CESP has a number of benefits that provides assistance to employees in various situations. The benefits are granted to employees regardless of gender and hierarchical level. (GRI LA3) Among them we point out: Health care plan Provided by the system of Accreditation and Reimbursement of part of expenses with physicians / hospitals, laboratory, psychiatrist, psychotherapy, speech therapy, physiotherapy and occupational therapy. In the accreditation system, the employee participates of expenditures when using the services used by him and his dependents, ranging from 10% to 50% of the participation table, according to his salary, limited to 15% of his remmuneration. The amount that exceeds the manimum amount is allocated among all employees, according to the quota system. The average cost of the Company is around 70%. The employee will be reimbursed from 50% to 90% of the CESP Foundation top table value in the system of reimbursement. Dental Care Plan Provided by the accreditation and reimbursement system of part of the expenses incurred. In the accreditation system the employee and his dependents participate with 50% of the costs, when using dental services, while at the reimbursement system the employee will be reimbursed for 50% of the top table of CESP Foundation, when using dental srvices himself and his dependents. Food and morning snack allowance The program is part of the Collective Bargaining Agreement and is monthly granted as a card, it is a money supply in the amount of R$ , plus the morning snack allowance of R$ / month. The two benefits totals R$ / month and the employee pays a share of $ 0.01 and from 3% to 13%, according to the nominal wage. The total cost of CESP with food allowance in 2012 was U.S.$ 8.53 million. Childcare assistance CESP provides reimbursement of total expenditures with child care for children under six months of age, in accordance with Ordinance No /86 of the Ministry of Labour. For children of women employees aged seven months to seven years, exclusive. There was an adjustment in top values of reimbursement to R$ as of 06/01/2011, according to the Collective Agreement In 2012, CESP reimbursements totaled R$ 46,000. Professional development (GRI EU14, LA10) In 2012, CESP has invested R$ 718,000 in training and development activities, involving 3,770 participations, totaling 35,297 hours of training giving an average of 27.5 hours of training per employee. See table below. CESP s policy to empower, upgrade and develop its employees through the facilitation of training related to their activity, and the starting point for the identification of training needs and development reported by the area in which the employee is working. Events of short duration are covered, with or without costs, and they are promoted by entities outside the Company, which seats are offered on the market and held in any place in Brazil, they are related to: Courses, Seminars, Symposia, Meetings, Conferences, Lectures, Debates, Congress and others. (GRI EU14) Average training hours by employee/by position (GRI LA10) Professional Level Manpower / hour /training Average Manpower / hour / training Manpower / hour /training Average Manpower / hour / training Officers / Managers ND ND 3, University Level 9, , Technical 12, , Administrative Operational 12, , Total 35, C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 69

36 Operators Training and Development CESP has a specific instruction that defines the development required for system and facilities operators, encouraging training and learning following the concept OJT - On Job Training. Trainings are developed by observing levels of maturity, performance evaluation in function and pre-requirements for each course. Levels of knowledge necessary for the execution of the functions are annually evaluated by TREINOP and every three years by the Operator Certification according to criteria established by ANEEL. Assessments of TREINOP and Certification are made with digital media in the Integrated Training and Certification and the reports are available for online queries in the system. It is annually provided to operators besides regular instruction courses, retraining in areas that are critical like instruction of specific operations and SOSEm (Operation System in Emergencies). In 2012 we had 741 participations in training courses with a total of 9,390 hours, an average of man/hour. Development Program Supervisors The demand for the creation of a Supervisor s Development Program emerged from the process of psychological assessments in occupational safety, conducted between 2011 and 2012, in parallel, it provided information on the organizational atmosphere. One concluded that employees who occupy positions / leadership positions, people that are key to productivity, resolution to conflicts and balance in the production units of CESP, could benefit from the accomplishment of an improved job of behavioral skills such as, competence of conflict mediation, assertive communication and leadership in teamwork. And, therefore, the work teams and the company as a whole would also greatly benefit. The objectives of the program were: to strengthen the leadership role, developing learning skills in leading changing processes in a more efficient way, through the presentation and application of techniques and tools, besides the introduction of concepts of systemic vision, situational leadership, multiplication didactics, teamwork, communication, conflict mediation and time management. Thirty-two people attended the Training course, including 29 supervisors / team leaders of all CESP s plants and 3 representatives of Functional Monitoring of Production Units. The program consisted of four face meetings every six hours and additional activities conducted between meetings, with a total of 40 hours. The results pointed to supervisors position to exercise more quality leadership skills in the workplace and more instrumental to the implementation of changes, which would result in improved operating results. Online training: Day by Day Sustainability: guidelines for the citizen October to December 2012 all employees were encouraged through handouts, banners and s to take the course Day by Day Sustainability: guidelines for the citizen, available from Fundação Getúlio Vargas (FGV). With a workload of 7 hours, about simple actions that can be applied in everyday life, but that make that make the difference to the environment, health and quality of life are presented in this course. Until December 2012, 141 employees took the course and received certificates from FGV. (GRI HR3) Graduate Course The postgraduate and specialization courses and MBA performed by employees of CESP can have up to 40% coverage for the registration fee and tuition, as long as the area in which the employee is working indicate the need and the course program meet the needs of the area. In 2012, six employees were benefited by this policy. Scholarship granting program The Scholarship Granting Program aims to facilitate, through subsidies, the schooling of employees who attend paid courses for elementary, middle or all courses equivalent technical and higher education, approved by the Ministry of Education, evidencing approval in that school year. In 2012, the amount of R$ 206,000 for this purpose was approved, and there are 42 employees enrolled in the program. Payment of Scholarships will be held in 2013, if the above conditions are met upon proof. Training foreign language CESP subsidizes 50% of the tuition and fees for employees who undertake training in foreign language whose domain is essential for the development of projects and / or routine activities of the Company. In 2012 there was no demand for this subsidy. Professional learning program The program is aimed at social inclusion of young people. This way, young people are trained for the job market, to adulthood and, ultimately, are prepared to accomplish their life goals. Since 2005 more than 350 young people have attended this program. The Apprenticeship Program is part of CESP s actions of the Corporate Social Responsibility and has won several awards: winner for two consecutive years of the Lenart Levi Prize (2008 and 2009) and of the ESARH 2010 premium and the TOP RH ADVB / SP. The program is anchored in the Charter of Principles and Values of the Company, pursuant to the Code of Conduct, which sets out some principles as basic and essential. Among them we have: solidarity, development of human resources, commitment to the Company, constructive relationships and responsible leadership. These principles allow the establishment of values as: Ethics, Sustainability, Diversity, Integrity and Selfdevelopment in human relations. 70 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 71

37 Position and/or salary changes Currently, CESP has hired 55 apprentices in its units, as follows: in the Capital 50 apprentices, and in the Production Unit of Porto Primavera 5 apprentices. The other production units of the company are in the process of hiring apprentices. The program includes, in addition to hiring and evaluating the performance, integrated management aiming at articulating in a systemic way the various employees that participated in the professional learning. This involves actions with families of learners, ongoing training for tutors to develop skills relevant to the role of mentoring, and actions for apprentices, as the cycle of Vocational Guidance. The goal is that the learner develops skills to make a career choice that is assertive and conscious, being one of the key differentials of the Professional Learning Program of CESP. Furthermore, the skills to be developed favor the inclusion in the labor market because they are consistent with the current requirements of it. At the headquarters, the apprentices are employed through a contract with the following nonprofit entities: CAMP Caxingui - Center for Learning and Professional Monitoring Caxingui - and NURAP - Rotary Club for Professional Learning. In the countryside, apprentices are from the following entities: APROMEP - Association Pro-Under Age from Primavera - Salesiana Mission from Mato Grosso. The period they stay in the Company is two years, according to the regulations of the Young Apprentice Program of the Ministry of Labour and Employment. Seeking to start the process of inclusion of the youth with disabilities in 2012 two apprentices with disabilities were hired in the capital. Actions coordinated with the Department of Environment has allowed to approach the theme Sustainability with learners and their Salary Increase 31,39% 38,76% 44,30% Position Promotion 4,45% 6,77% 8,50% Bonus 15,12% 14,73% 12,80% Total 50,96% 60,26% 65,60% families. Training conducted with apprentices on 28 and 29 of August 2012 involved 29 young. They participated in workshops on the importance of selective collection and recycling and visited the cooperative Miguel Yunes, that receives recyclable waste collected at the headquarters. Lecture with the parents of trainees was developed with this same theme, during the meeting of Parents of Apprentices held on 12/03/2012. The goal is to educate the group about the importance of individual actions for the environment. Paid internship program The paid internship program coordinated by FUNDAP is based on Resolution SGP-3, of February 27, 2008, Law of 09/25/08 and what determines the Decree No. 52,756 of February 27, 2008, which standards are common to all trainees, as well as specific rules for each category of stages of São Paulo State. In 2012, CESP filled 25 vacancies for paid traineeship aimed at university level students and technical level, in order to supplement school education and specialization through contact with professional practice and familiarity with technical and scientific, social and cultural problems provided during the internship. Students counted with Supplementary Educational Scholarship, food allowance and medical, hospital and laboratory assistance. Performance and career development The realization of the Job and Salary Plan is annual and is foreseen in the Collective Agreement covering all employees of CESP and provides: 1. A bonus award in order to recognize the participation of employees who have significantly contributed to achieve or exceede individual or sectoral targets. The percentage of bonus granted can vary from a minimum of 15% up to a maximum of 80% of the nominal wage, applying multiples of 5%. The value is not incorporated into the employee s salary. 2. Movements to change position and / or salary - promotions and career progressions salary - whose observance by the Executive Committee is essential to the functional adequacy of the Company s structure. The career s promotion is characterized by the professional maturity, based on training, experience and ability to self-management activities, allowing the displacement of the current level to the next higher. The salary progression aims to reward the employee with a salary increase, in the same position, since he has proven to be better in the exercise of his functions. The immediate supervisor must keep the employees informed about the evaluation criteria and results, regardless the concession or not of any alteration in the position and/or salary or bonus. (GRI LA12) Retirement plans and pension CESP (GRI EC3) CESP sponsors benefit plans and retirement pension plan for its employees and former employees and their beneficiaries, in order to supplement the benefits provided by the official social security. CESP Foundation is the entity responsible for the administration of benefit plans sponsored by CESP, offered to 96% of employees. CESP, through negotiations with the unions representing the category, reformulated the plan in Since then the main feature has been a mixed model composed of 70% of the actual contribution salary as defined benefit and 30% of the actual contribution salary as defined contribution. This change was intended to solve the actuarial technical deficit and reduce risk of future deficits. The cost of the plan for the defined benefit is equally divided between the Company and its employees. The portion established as defined contribution is equally divided between the Company and the employees based on the percentage freely chosen by the participant to the extent of 2.5%. Funding rates are periodically reviewed by an independent actuary. The Proportional Supplementary Settled Benefit - BSPS is guaranteed to employees participating in the supplementary plan who joined the new model implemented from 1 January 1998, even if they leave the company before they retire. This benefit ensures the proportional supplementation relating to the period of service prior to the change of the new plan of supplementation. The benefit will be paid as from the date the participant completes the minimum grace period provided for in the new plan rules. Number of workers by age group and functional category (GRI LA13) Professional Level Unders 18 years From 18 to 35 years From 36 to 60 years More than 60 years Total Officers Managers University Level Technical / Administrative Operational Total CESP Percentage of workers with the right to retirement in the next 5 to 10 years, by functional category and location (GRI EU15) up to 5 years between 6 and 10 years Professional Level Capital Interior Total Capital Interior Total Officers / Managers 2,10% 0,62% 2,73% 1,09% 0,31% 1,40% University Level 9,66% 6,47% 16,13% 4,13% 1,64% 5,77% Technical / Administrative 6,08% 18,94% 25,02% 1,95% 5,14% 7,09% Operational 1,40% 4,60% 6,00% 0,16% 1,25% 1,40% Total 19,25% 30,63% 49,88% 7,33% 8,34% 15,67% 72 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 73

38 In 2012, CESP invested R$ million in supplementary pension and 80 employees were benefited from the program of preparation for retirement in partnership with Fundação CESP. Occupational safety and health CESP, in line with the commitment to strive for excellence in power generation, considers respect for life, the protection of health and safety at work of its employees and contractors, essential components of business performance and fundamental responsibility of management at all levels. CESP based management of Health and Safety in the ongoing search for well-being of employees and contractors, in compliance with relevant legislation and continuous improvement of production processes, Rate of lesions, occupational diseases, lost days, absenteeism and deaths related to work (GRI LA7, EU25) Type UM Accidents causing death of Employees and / or third-parties number 0 0 Lesion Rate - TL (including deaths) index 0,03 3,96 Occupational Desease Rate - TOD index 0 0 Absenteeism Rate - TA index 4 2 Lost Days Rate - TDD index 2,73 0,01 Number of Days Lost number through prevention, control and elimination of risks associated with the work and the promotion of health and quality of life. Focused on the prevention of accidents and the welfare of employees and service providers, the staff of Work Safety has developed activities for the routine inspections in CESP with preparation of technical reports. With emphasis on the following activities: Cataloging of bibliographic material standards; Scanning and control of reports to 1998 (File Osasco) and archive; Regularization as to control of delivery of PPE to employees in the Headquarters. Implementation of Inventory Control of PPE in Work Safety Headquarters; Supervision as to the quality and supply of PPE through the contract with CESP; Monitoring, analysis and documentation control of contractors; Annual Report of Accident Statistics 2011; Preparation of Statistics for DRT - Tables III to VI of NR04, and COGE Foundation; Formulation of a new proposal for Security Fee; Election Process and CIPA Course in Capital; Brigade in the Headquarters - recycling and training new firefighters; Brigade in Paraibuna and Jaguarí - renovation, travel, simulate, etc; Organization of SIPAT together with CIPA in the Headquarters - preparation of illustrative booklet distributed to employees during the SIPAT; Organization of SIPAT together with CIPA Paraibuna; Organization and follow-up course on NR13 - Vessel Under Pressure - in units of CESP; Organization and follow-up courses on defensive driving in units CESP; Technical reports and reports of occupational accidents; Administrative routine activities in the Headquarters. Ex: sending data to prepare the PPP, control and registration of occupational accidents of the company, control of documents relating to safety, such as meeting minutes, technical reports, etc.; Preparation of PPRA / LTCAT of all units of CESP; Integration of Security in units of CESP; Safety inspections - checking compliance of the items of NR10 plants and substations of Paraibuna and Jaguarí; Participation in forums about the implementation of NR35 - Working at Height; Activities developed in the behavioral area: Completion, together with the area of training, of the psychological assessments in HPP Ilha Solteira; Psychological revaluation of employees who were restrained in 2011; Presentation of technical / scientific work about the psychological assessments for hazardous work in the V Brazilian Congress of Psychology and Social Work, Rio de Janeiro; Participation in the preparation of Manual NR35; Completion of R & D Project Development of methodology for the assessment and prediction of noise levels at hydro plants targeting the safety, health and comfort of workers ; Training for the use of simulation software in acoustic behavior linked to the R & D project mentioned above; Course of basic principles of acoustics, in partnership with UNESP Ilha Solteira linked to the R & D project mentioned above; Training in behavioral defensive driving course; Presentation at the National Forum on Work at Height; Support to the organization of the event Commemorating Six Years without Accidents in HPP Primavera; Promotion, together with the training area, of the Supervisors Development Program, which was developed because of the need identified during the process of psychological assessments. As a result of the initiatives implemented in daily activities in CESP s units, throughout the year, there were no reports of deaths in operations. However, there were 18 accidents with employees and 2 with outsourced / contracted employees; 5 employees and 2 contractors needed temporary absence due to accidents. There was no injury or other damage to the physical integrity of employees and / or contractors with permanent removal from work. The system of rules applied in the recording and reporting of accident statistics is the NBR Registration of Workers Compensation (Procedure and Classification) - ABNT. 100% of the employees are represented by the Commission for the Prevention of Accidents (CIPA). CESP also has representatives in various Committees of Safety and Health at Work (FUNCOGE; ABCE; Tripartite Group of the Ministry of Labour and ABNT). (GRI LA6) In the Company s operations risk of forced or compulsory labor was not identified. All outsourced workers underwent training in relevant health and safety practices. (GRI HR7, EU18) 74 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 75

39 In 2012, there was no training to security personnel in policies or procedures concerning aspects of human rights that are relevant to operations. (GRI HR8) Health CESP s attention to the health of employees is evidenced by its performance that exceeds compliance with the legal requirements in both affirmative action in health campaigns and programs, such as in establishing the profile of complementary medical examinations, which also go beyond legal requirements. Actions carried out in 2012 include: campaign against dengue ; blood donation campaign, control of hypertension and vaccination campaign + trivalent influenza H1N1. Moreover, the area of Social Work develops, in partnership with the area of Occupational Medicine, activities and programs of preventive and corrective health promotion and quality of life. Some of the actions were: activities of health and physical well-being, social and psychological activities to the employees; individual assistance, guidance and forwarding of claims (funeral, health insurance, home and hospital visits, financial guidance, etc.); functional following up to solve conflicts between managers and employees and work groups, job retraining, changing areas, consultations and follow up of employees dependents. (GRI LA8) With regard to outsourced workers in 2012 was adopted the protocol of complementary medical examinations by type of function to be required for these workers. In October 2012, the new procedure has undergone review and is under review. (GRI EU16) Quality of life Program In order to formulate an appropriate program of quality of life at work in 2010, CESP conducted a research involving executive members of the Corporate Sustainability Committee and employees whose data contributed to the formulation of the program implemented in 2011 and is still in course in The goal of the program is to encourage and provide opportunities for employees to adopt a healthier lifestyle, promoting their quality of life and generate strategies and environments to change habits. The program consists of integrated actions and gym classes, groups of Weight Watchers, Control of Hypertension Program, Financial Education Program and Social Security and lectures on issues related to health, safety and quality of life in CIPA meetings. The Quality of Life Program conducts joint actions with the Internal Accident Prevention (CIPA) particularly informative lectures. Among the topics covered in lectures and meetings of CIPA and SIPAT in 2012, there were eating disorders, hearing and vocal disorders, liver and respiratory diseases, cancer, methods to stop smoking, emotions and relationships, sexuality and maturity, domestic violence, defensive driving and safe housing. Other activities of quality of life were held in conjunction with CIPA s capital during the Week for the Prevention of Accidents (SIPAT 2012): chair massage, relaxation workshops, campaigns, blood donation, blood pressure cheking, dermatological check ups to identify skin cancer, physical activity, fitness classes, pilates, fitness and hiking techniques. Valuing diversity In CESP, the respect for diversity is a fundamental principle expressed in its Corporate Social Policy and Code of Conduct. The Company does not accept discrimination on the basis of ethnicity, origin, gender, sexual orientation, religious belief, union affiliation, political and ideological conviction, social class, marital status, age or disability. In 2012, CESP had renewed its São Paulo Diversity Seal - Full Category, awarded by the Government of the State of São Paulo. During the year, the Company carried out various activities to divulge its commitment among all employees, using the means of internal communication and live events to engage them in the subject. Interventions on specific dates (Indian Day, Women s Day, the Elderly, International Day of Persons with Disabilities, International Day against Racial Discrimination, among others) occurred in We point out the III Week for Internal Diversity (SIDI), held in the capital units, Porto Primavera, Ilha Solteira/Três Irmãos, Jupiá and Paraibuna and jaguari, from 21 to 24 May, which was attended by 215 employees, 16.76% of the staff. In 2012, there were no cases of discrimination forwarded to the communication means regarding the Code of Conduct. (GRI HR3, HR4) Seeking to start the process of inclusion of the youth with disabilities in 2012 two apprentices with disabilities were hired in the capital. Site accessible to visually impaired CESP has a feature that allows the access to its corporate website, including the module Investor Relations, to those visually impaired who have the screen reader software on their computers and want to know the Company or use any page as a tool for a job. Policy of non-recruitment of child labor CESP explains in its Corporate Social Policy its concern with the future of children, by emphasizing its position of total rejection of child labor ( nsf/v03.01/politica_social_port/$file/politica_ social_port.pdf?openelement&filename=poli tica_social_port.pdf). The items considered, both for internal contracting relations and outsourced contracts, propose to seal the use of any form of hiring child labor, wether directly or indirectly, in the Company s premises. The selection and recruitment of young people respect the rules and procedures of existing human resources area in accordance with the Apprenticeship Law and the Statute of the Child and the Adolescent. (GRI HR6) Relationship with unions CESP recognizes the Electricity Workers Union of São Paulo (it represents the basis of the Capital city and the Paraíba Valley), the Electricity Workers Union of Campinas (it represents the countryside of the State of São Paulo) and the Union of Engineers in the State of São Paulo (for the specific category of Engineers) as the legitimate representatives of the employees. The Company s relationship with these entities is based on mutual respect, is regulated by a specific provision of the Collective Bargaining Agreement and by a Labor Relations Politics, and constitutes an ongoing process carried out in the everyday activities, and in the formalization of collective agreements as an important step in this dynamics. The Collective Bargaining Agreement provides for various items of benefits and mechanisms to protect and promote health and safety. Among them we can mention: supplementary pension aid in case of sick leave or accident at work, job retraining motivated by illness or accident, joint committee formed by CESP and unions for analysis and discussion of issues as to health and safety of work. There is no minimum notice period for operational changes, but the Collective Bargaining Agreement contains the Company s commitment to enable Vocational Rehabilitation programs for employees affected by such changes. (GRI LA5, LA9) CESP has employees represented by the Union of Workers in the Electric Power Industry of São Paulo, Engineering Union of the State of São Paulo and the Union of Workers in the Electric Power Industry of Campinas. All employees are covered by collective bargaining agreements between the company and these entities. Permanent and sporadic absence leaves for managers and union representatives are foreseen and allowed union activities and the procedure to be held at the premises of the Company, among other issues are also foreseen. Union activities within the premises of the Company, Employees distributed by region São Paulo 37.34% 36.47% 36.40% Campinas 49.18% 49.32% 49.70% Engineers 13.48% 14.21% 13.90% Total % % % 76 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 77

40 provided that the request is made are guaranteed, by forwarding an explanatory memorandum and agenda in advance to the Department of Human Resources, in the Capital city, and to the managers of the units involved, in the countryside. (GRI LA4, HR5) External Relations Compensation for the use of water sources - CFURH (GRI SO1) In 2012, CESP transferred U.S.$ million by way of compensation for municipalities, states and the Union. The main objective of compensation is to compensate the municipalities affected by the use of natural resources and thus ensure funds for the improvement of local conditions and the mitigate negative impacts arising from the implementation and operation of the hydroelectric plant. Financial Compensation for Use of Water Sources for the Purpose of Generating Electricity - CFURH was established by the Federal Constitution of 1988 and it is a percentage of hydroelectric utilities pay for the use of water sources. The National Agency of Electric Energy (ANEEL) manages the collection and distribution of funds among the beneficiaries: states, municipalities and governmental agencies of the Union. As established by Law No. 8,001, of March 13, 1990, with modifications given by Law 9.433/97, n º 9.984/00 and No /00, 45% of the funds are allocated to the municipalities affected by the reservoirs of hydroelectric power plants while States have the right to the other 45%. The Union gets 10% of the total. Concessionaires pay 6.75% of the energy produced in the form of financial compensation. The total amount to be paid is calculated according to a standard formula: FC = 6.75% x power generated in the month x rate Updated Reference. Asset management in reservoir banks of CESP The georeferencing process is still being developed by CESP. This enables the curve materialization of the reservoirs expropriation, of expropriated and/or acquired properties, of parks, of reforested areas and environmental programs. 100% of services in the area of the Plant Reservoir of Eng. Sérgio Motta, 100% of the services in the area of the Plant Reservoir of Eng. Souza Dias, and 100% in the reservoir area of the Plant Ilha Solteira were concluded. In compliance with Law No /2001, which regulates the registration of rural properties in the registries of property, CESP during 2012 analyzed and granted approval in 110 cases of respectability to the area bordering its reservoirs. It also produced 1,349 Property Valuation Reports aimed at their regularization and disposal. In 2012, the program was continued through the Asset Monitoring Program SIG - Geographic Information System, which uses satellite images based on ArcGIS platform for training and managing the database that includes information on assets, environment and legal, and includes data from all Financial compensation - Municipalities benefited (GRI SO1) SP MG MS GO DF União TOTAL HPP R$ (000) Nº of Mun. R$ (000) Nº of Mun. R$ (000) Nº of Mun. R$ (000) Nº of Mun R$(000) Nº of Mun R$ (000) R$ (000) Nº of Mun Ilha Solteira 22, ,136, , , , Jaguari , Jupiá 11, ,229, , , , Paraibuna 1, , , Porto Primavera 8, , , , , , Três Irmãos 13, , , TOTAL (*) 59, , , , ,664,6 208, (*) Absolute number of municipalities minus those municipalities that receive from more than one CESP HEP. reservoirs. The most updated information, refer to the reservoir of HPP Eng. Sérgio Motta, and advances are scheduled for other reservoirs in this next year. Beyond legal obligations to which the Company is enrolled, this work also aims to make compatible the areas administered by CESP, with other multiple uses, particularly social and economic activities attracted by the reservoirs. In 2012, 272 permits were granted to occupiers, to regularize the use and 339 notifications were sent to request evictions of areas. Ongoing donation processes to transfer 1,400 properties for the city governments of Ilha Solteira (64 properties), Teodoro Sampaio (43 properties) and Rosana (1,293 properties) following the program to reduce the default of the Estate Portfolio of CESP were delivered. These processes are waiting for approval of external agencies (CPI and ANEEL). Relocation of populations Expenditures in 2012 were U.S.$ 1,953,200 with the emancipation of resettlements. Since the beginning of operation of the reservoirs, CESP shifted and offset the total of 1,649 households (1,046 rural and 573 urban) with the actions of the Population Resettlement projects (GRI EU20) Projects Buritis/Paulicéia/SP Farm Aruanda/Anaurilância/MS Farm Santo Antônio/Caiuá/SP Farm Santa Ana/Anaurilândia/MS Farm Lagoinha/Caiuá/SP Farm Piaba/Três Lagoas/MS Farm Pedra Bonita/Brasilândia/MS Farm Oleiro Cerâmico Resettlement Port João André/Brasilândia/MS Nossa Senhora de Fátima/Pereira Barreto/SP Farm Hortifrutigranjeiro/Pereira Barreto/SP Farm Resettlement Program. (GRI EU20, EU22) The current situation of emancipation of these projects is presented below. Relations with the Community In 2012, CESP invested R$ 9 million in projects and social institutions. We should enhance the R$ 2.6 million donated to the Institute Child Citizen - ICC, R$ 3.9 million to fund cultural projects through the Rouanet Law and Audiovisual Law and R$ 1 million to the Heritage Foundation of Energy and Sanitation. (GRI EC8) In the event of new developments and / or new infrastructure projects, the requirements are met by the environmental licensing agencies that include mechanisms for public consultation. Public hearings allow the manifestation of the general public and government officials, which can express their concerns regarding the Company s operations. (GRI PR1, EU19) Even after the completion of the implementation and early operation of hydroelectric plants, the concern with the social issue remains. Some programs were created especially for this service to the public in the areas of influence of the reservoirs of CESP. Present Situation Plant in the perimeter of the area certified by INCRA / SP and recorded at the Registry of Real Estate (CRI) of Tupi Paulista / SP. Emancipation completed. Plant in the perimeter of the area certified by INCRA / SP and recorded at CRI President Epitácio / SP. Emancipation completed. Perimeter in the area filed with INCRA / SP for certification. Plant in the perimeter of the area certified and endorsed by INCRA in CRI of Três Lagoas. Rural allotment approved by INCRA and registered with CRI of Três Irmãos. Enrollment of beneficiaries with INCRA and the IRS. Scripture dation drawn and sent to CRI of Três Lagoas. Deed of Legal Reserve area drawn up and signed by the recipient and forwarded to CRI of Três Lagoas. Emancipation completed. City govrenment transforms the areas of Rural Resettlement in Urban Allotment. Presented to INCRA the application to change the purpose and destination of areas. Unified and noted areas on CRI of Brasilândia the change to urban perimeter. Plants and descriptive memorials of allotment prepared. City government of Brasilândia approves the allotment. Plant in the perimeter of the area certified and endorsed by INCRA in CRI of Pereira Barreto. Land subdivision filed for approval with INCRA. Plant in the perimeter of the area certified by INCRA. Required the cancellation of Legal Reserve areas of CETESB in Jales. Collected documentation of beneficiaries. 78 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 79

41 Citizenship actions in resettlement Health actions CESP develops the Health Programme in the Field with the goal of improving the quality of life for residents of Rural Resettlements, in regard to preventive health. (They are given lectures and eventually organized campaigns for preventive exams for breast, uterus, prostate, and vaccination campaigns.) Training and professional associations (GRI EC9) Professional training courses with the communities impacted by the projects and surrounding residents of Conservation Units of CESP are developed. This program seeks to offer alternatives for increasing the income generation, aiming to add value to raw products harvested in batches and improve the recycling of various materials. In 2012, there were lectures on Women s Health and Sexually Transmitted Diseases to 71 residents of Resettlement Santo Antônio do Rio do Peixe, Our Lady of Fatima and Port João André. Orientation to social welfare and rural workers The Social Security Education Program, a result from partnerships between CESP and regional offices of Social Security, was created in order to inform workers from rural resettlements of CESP and rural communities in its vicinity about their social rights and duties. Among the activities are: lectures delivered to farmers, and Course of Social Security Information Disseminators, offered to regional leaders (farmers, associations, unions). In 2012, there were 270 lectures and courses to farmers in Ilha Solteira and Paraibuna and Resettlement of Santa Ana and Santo Antonio of Rio do Peixe. In 2012, several courses of crafts and food utilization (Corn Husk, Biscuit, Crochet, Patchwork, decoupage and Utilization of Pumpkin) to 145 residents surrounding the Private Reserve of Natural Heritage - Foz PRNP Aguapeí, Resettlement of Santo Antônio do Rio do Peixe, Port João André, Our Lady of Fatima and the Settlement Timboré, Castilho- SP were developed. Festivals of Friendship in resettlement projects In December 2012, CESP along with the involvement and participation of the communities, held parties in resettlement projects Our Lady of Fatima and Port João André. Activities such as these depend on the cooperation of CESP and the residents of the settlements to be performed, approaching them and improving the relationship between the parties. Donations of Seedlings to the Community (GRI EC8) CESP has donated samplings to the local governments of cities surrounding its reservoirs, research institutes of various Universities of São Paulo, State Secretariat for the Environment, Environmental Police, among others, for the use in environmental programs and actions of citizenship to the population. In 2012, 13,260 units of seedlings were donated and produced in the three seedling nurseries of CESP s plants located in the HPPs of Eng. Sergio Motta, Eng. Souza Dias and Paraibuna. Program of Visits to the Plants CESP received 69,996 visitors in its units installed in the countryside during This number exceeds by 3.5% the record of visitors in 2011, which was 67,628 people. This is a job that allows students, technicians, and Brazilian experts coming from abroad and those of society in general to have the opportunity to closely know the activities of CESP, both operational and technical ones that are geared towards environmental issues and social responsibility. The Company opens the doors of its plants to visitors, aware offering visits to its facilities encourage the development of tourism in the region and school and academic pursuits. Support to Projects and Institutions Rouanet Law and Audiovisual Law Within the State of São Paulo scope, the cultural incentives (Rouanet Law and Audiovisual and Mendonça Law) are governed by State Decree 42,992, of 04/01/98, which states that funds should be invested in projects previously defined by the State Secretariat of Culture. In 2012, CESP has invested R$ 3.9 million in projects such as cinema, theatre, literature, history, arts, among others. (GRI EC8) Sports By meeting the request of the State Department of Sport, Recreation and Youth, CESP provides financial support to the technical team of Maureen Maggi athlete who competes in the long jump mode. The Olympic champion in the long jump Maureen Maggi is the first South American woman to win an Olympic gold medal in the individual modality. Maureen won the gold medal at the Olympic Games in Guadalajara in 2011, as a three times champion. 80 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 81

42 Institute Child Citizen-ICC CESP has continued its participation as sponsor company and founder of the Institute Child Citizen - ICC, contributing to the operation of 15 educational units of that institution. In addition to the financial support, there is also the volunteer work given by employees who assist the institution with administrative and technical guidance. As in previous years, the ICC, educational entity that has the history of its projects initiated by CESP in 1987, presented in 2012, major actions and achievements, that allowed the renewal of the recognition of the entity as a Federal, State and Municipal Public Utility. In 2012, more than 6,000 people, including children, youth and adults, all residents of the poor communities located in the regions east, south and west of the capital city and in the municipality of Guarulhos benefited by the four projects of the institution: Transmitting Citizenship, Generating Talent, Fountain of Production and Our Community. The ICC ensures balanced diet, supervised by a nutritionist; support to the full development of a child, developed by a multidisciplinary team of health; basic child education, art education and education for work offered by educators, coordinators and directors of education, and activities aimed at sport and recreation, community development and income generation. Energy and Sanitation Foundation Private, non-profit organization, with the mission of preserving, researching and disseminating the historical and cultural heritage of the energy and environmental sanitation sectors based on education and culture projects. In 2012, it had CESP, AES Eletropaulo and Sabesp as maintainers, with CESP as founder-maintainer, setting aside financial resources totaling R$ 1 million in Since its creation, the Foundation has acted to democratize access to this heritage, articulating relevant achievements for culture and education. Committed to its social function, it presented the following important results in 2012: Public access to museums and collections and actions for the preservation and dissemination of heritage, with an expansion of free service - 77% of the public was attended free of charge; Expansion of collection databases; Energy generation at four historical SHPs (small hydroelectric plants) that have been preserved and are open to the public; Educational action network, including the Museum of Energy and the Documentation and Research Nucleus units, underscoring the partnership with the Education Development Foundation (FDE) in the Culture is Curriculum program; Five cultural and scientific exhibits in 2012 that circulated about the Museum of Energy Network units, as well as at Subway and CPTM stations. The Documentation and Research Nucleus, responsible for direct actions with the collection, registered: A 15% increase in the researching public; General collection registration review and conservation actions; Treatment of the collection, underscoring the CESP fund s photographic collection; Donation of the sanitation service photo album (1955). The Museum of Energy Network, which operates in five cities in the state of São Paulo (Itu, Jundiaí, Rio Claro, Salesópolis and São Paulo), conducted cultural and educational projects and programs aimed at strengthening the concept for the responsible use of natural resources and preservation of cultural heritage. In 2012, more than 63 thousand visitors were attended to at Network units. When considering the itinerant exhibits, the public reached exceeded 500 thousand people in the year. Other stand-out actions in 2012: Mapping and identification of more than 25 thousand documents and objects of the collection produced by Companhia Paulista de Força e Luz Paulista and holding of 10 heritage education lectures; Management of the Gas Memory, with more than 4.5 thousand visitors, holding of 6 workshops and production of educational material distributed to 85 visiting schools; Installation of a Cultural Center in the city of Salto Grande; Management of Paths of the Sea Ecotourism; Continuity of the Waters Space installation project; Covenant with the State Secretary of Energy for actions in the Rio Claro Museum of Energy; Plant of Memories holding of 50 interviews on video, with a focus on the history of the Henry Borden Plant, to be released through electronic catalog Urban transformations in the city of São Paulo at the start of the 20th Century book with a predominance of photos from the Energy and Sanitation Foundation collection, which deal with public sanitation services and electric energy and natural gas production and distribution, and their impacts on everyday life and on the city s growth; Sabesp Memory Collection - research, organization and conservation actions from the Sabesp Memory collection. CESP s Choir Keeping CESP s Choir, formed by employees, retired employees and people from the society, is a significant social atitude and integration means among the Company s employees. The Choir completed 22 years in July and has 4 CDs recorded. The CD Cantando Adoniran Barbosa was recorded in 2008; Cantando a Nação, in Cantando o Natal, in 2001 and Cantando o Brasil, in In 2012, CESP s Choir held 11 presentations in the city of São Paulo, including: Cancer Institute of the State of São Paulo, São Bento Monastery, Vesper Oriented Study School, V Brazilian Seminar on the Environment (SMARS). The choir also put on a presentation at Canta Brasil 2012 in Caxambu (MG), at the Antonio do Valongo Sanctuary in Santos and at the 6th Meeting of Choirs of Piracicaba. 82 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 83

43 Environmental Performance With the priority use of water as a basic input for hydroelectric operations, an attempt has been made to make the generation of electricity compatible with the multiple use of reservoirs, such as a habitat for various species of fauna and flora, navigation, irrigation, water supply and leisure, seeking harmony between electric energy production, the environment and the quality of life of the population. Thus, management of the environment s commitment as a business strategy and the accumulated experience in environmental areas, working in an already installed infrastructure, permit the continuity of environmental actions needed for an energy generation company, minimizing the impacts caused by the construction and operation of its hydroelectric plants. Most CESP plants have been installed and in operation for several decades. The last one to start operations was the Eng. Sergio Motta Plant in Thus, the main impacts associated with the formation of reservoirs occurred during the installation of the enterprises. CESP currently carries out programs for the conservation of ecosystems and biodiversity in the regions surrounding its reservoirs and it monitors the results of impact minimization measures implemented during the works phase and after its conclusion. It is especially work highlighting those related to the involuntary displacement of populations. On page 87 we present synthetic charts with the main impacts caused by each of the reservoirs and the social and environmental programs in development, coordinated by the Company s environment area. Commitments To ensure that environmental preservation commitments are followed throughout the steps of the work, CESP created in 1996 the Environmental Policy that was reviewed and updated in Aiming at putting its activities in harmony with the Environmental Management System, the Policy consists of fi ve principles that dictate the Company s actions and its relationship with employees, contractors, partners and suppliers: 1. To incorporate environmental variables to the companies policies and guidelines; 2. To develop its activities by taking into Investment and Expenses with the Environment (R$ thousand) (GRI EN30) Reforestation - Três Irmãos ,514.0 Reforestation - Primavera 2, , ,825.9 Conservation Unit 4, , ,469.5 Resettlement Emancipation 1, , ,011.9 Fish Farming Jupiá , Fish Farming Paraibuna Aviary Jupiá 1, , ,541.0 Aviary Primavera 1, , Seedlings Nursery Paraibuna Marsh Deer Conservation Center Promissão Wild Birds Conservation Center Paraibuna Wild Birds Conservation Center Ilha Solteira 1, , Environmental Education Total 16, , , C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 85

44 Period After 1986 Before 1986 consideration the environmental legislation compliance; 3. To optimize the use of natural resources, searching for reducing the pollutants resulting from its activities; 4. To search for the continuous improvement of the Company s processes as to the environmental aspects; 5. To create and keep programs in order to promote the sustainable development, in the search of ensuring present and future generations the right of a healthy relationship with nature. (GRI EN14) Environmental Investment and Expenses CESP invests in environmental programs that aim at preserving the environment. CESP presently develops programs of Fauna and Forest Handling, Wild Fauna Project, Fish Handling, Environmental Education and Population Resettlement, Conservation Units, among others. In 2012, the value invested in environmental programs and projects totaled R$ 16.3 million, according to the following chart: (GRI EN30) Environmental Licenses Environmental Licenses of CESP s HPPs Two of the six power plants presently under CESP s concession, four were established before the environmental laws were enacted in CESP meets the requirements and terms established according to the legislation in force, especially Resolution CONAMA Nº 237 of 12/19/1997, which safeguards the right to continue the operation service during Power Plant UHE Engº Sérgio Motta (Porto Primavera) UHE Três Irmãos UHE Ilha Solteira UHE Engº Souza Dias (Jupiá) UHE Paraibuna UHE Jaguari the period under analysis and deliberation by licensing authorities. The following chart express the present situation of the licensing issues of CESP s plants. Climate Changes CESP has been annually divulging the Climate Change and Carbon Sequestration Program about the greenhouse gases effect inventory (GHG). It was the pioneer Company within the energy industry to divulge the complete inventory of GHG basing on the GHG Protocol. The Company integrates the National Group of the GHG Brazilian Protocol Program as founding member since July 22, 2008 (please refer to: ghgprotocolbrasil.com.br/) In 2012, CESP was awarded in the performance category as one of the ten most concerned companies in Brazil with climate change. This prize is awarded within the ambit of the Carbon Disclosure Project Brazil 2012 by PricewaterhouseCoopers, which used 2011 data as a basis. The report was released in October, at Bovespa, and release of the full document occurred in December CESP is completing the fifth inventory on greenhouse gases, base year 2012, registering the number of 10,517 tons of carbon equivalent (tco2), as from the diverse use of fuels, of acquired electric energy, organic waste (grass preservation, dam slopes, aquatic macrophytes, among others), sewage, use of fertilizers and escape of súlfur hexafluoride (SF6). Status of Licensing Process Operational License IBAMA nº 121/00, of 05/03/2002. Extended till the disclosure of Operational License, according to resolution CONAMA Nº 237 of 12/19/1997. Operational License CETESB nº 2027 of 12/02/2011 CESP concluded and forwarded to IBAMA/DF all documents required aiming at the environmental regularization of the plant. After IBAMA s approval a public consultation will be held for a later issue of the Operational License. CESP concluded and forwarded to IBAMA/DF all documents required aiming at the environmental regularization of the plant. After IBAMA s approval a public consultation will be held for a later issue of the Operational License.. Opinion issued by SMA/DAIA in 1999, which deliberates about the plant regularity. Emission of greenhouse gases (GRI EN16, EN17) Scope Fossil Fuels 2,129 5,496 3,501 Sulfur Hexafluoride (SF6) 2, ,579 Fertilizers Sewer Organic waste Total 5,386 6,888 18,119 Scope Electric Power 1, Total 1, Scope Fossil Fuels Fossil Fuels- Employees transportation Taxi and bus Employees Home x Worksite 2,753 2,292 1,500 Air travels Sewer Organic waste Total 3,545 3,143 3,513 Biomass Renewable Fuels 894, ,419 Fire in bushes and grass 0, Total 894 1,101 1,462 Inventory 2012 is available on CESP website ( and in the public record for emissions ( registropublicodeemissoes.com.br). This theme concerns CESP, because in a situation of water scarcity in the entire hydroelectric system as a result of global warming, the capacity for electric energy generation will be limited and could have a negative impact on results and on the financial health, as well as on the generation of future cash flows. (GRI EC2) Concerning water availability to generate energy, CESP participates in a broad research and development program of ANEEL (Brazilian Electricity Regulatory Agency) in partnership with other companies of the electric industry, universities and research centers of climatology in Brazil, which evaluates climate changes according to hydrological status of hydrographic basins and guaranteed power output from hydroelectric plants in order to predict possible problems. (GRI 4.11, 4.13) We are developing a research and development of a project of ANEEL about carbon sequestration, modeling and identificating carbon credit opportunities and neutralizing our GHG emissions, with the biological storage of carbon in native reforestation held on the borders (borders riparian) of hydroelectric dams. Energy Consumption (GRI EN4) Location MW GJ MW GJ MW GJ Administrative - São Paulo 2,458 8,849 2,458 8,849 2,458 8,849 Commercialization 4,631 16,672 nd nd nd nd Jupiá Engineering nd nd nd nd Porto Primavera Engineering nd nd nd nd Presidente Epitácio Engineering 961 3, , ,251 São Paulo Engineering (Headquarter I and II) nd nd nd nd 1 4 Laboratório Ilha Solteira Enviroment - Ilha Solteira Enviroment - Jupiá Enviroment - Porto Primavera Enviroment - Promissão JupiáEquity 7 25 nd nd 8 29 Porto Primavera Equity Power Plant Ilha Solteira and Três Irmãos Power Plant Jupiá 13,828 49, ,519 9,068 Power Plant Paraibuna and Jaguari , TOTAL 22,746 81,886 4,598 16,553 7,001 25,204 The electricity used by CESP is purchased from distribution companies linked to the national grid system - SIN. Thus it is not possible to determine the source. 86 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 87

45 Main Impacts Generated by each of the Reservoirs and the Social and Environmental Development Programs (GRI 1.2, EN12) Jupiá HEP (Start-up of Jupiá HEP: 1969) Impact Impact on aquatic fauna and modifications in current art of fishing and equipment used; Impact on the level and evolution of reservoir fishing stocks Impact on the presence of aquatic plants in the reservoir All impacts caused by the undertaking on the physical, biotic and social-economic environments Jaguari and Paraibuna HEPs (Start-up of Jaguari HEP): 1972, and the Paraibuna HEP: 1978) Impact Impact on forest communities Impact on aquatic fauna and modifications in current art of fishing and equipment used; Impact on the level and evolution of reservoir fishing stocks Impact on fauna Ilha Solteira HEP (Start-up of Ilha Solteira HEP: 1973) Impact Impact on aquatic fauna and modifications in current art of fishing and equipment used; Impact on the level and evolution of reservoir fishing stocks All impacts caused by the undertaking on the physical, biotic and social-economic environments Três Irmãos HEP (Start-up of Três Irmãos HEP: 1993) Impact Impact on significant portions of the region s ecosystems, notably the Paraná River lowlands, implying the reduction of species including endangered ones. Impact on forest communities Impact on wild fauna - Pantanal deer Impact on aquatic fauna and modifications in current art of fishing and equipment used; Impact on the level and evolution of reservoir fishing stocks All impacts caused by the undertaking on the physical, biotic and social-economic environments Eng. Sérgio Motta HEP (Start-up of Eng. Sérgio Motta HEP: 1999) Impact Physical impact from exploring borrowed areas for use as job sites Impact on forest communities Impact on wild fauna, large felines and Pantanal deer Impact on significant portions of the region s ecosystems, notably the Paraná River lowlands, implying the reduction of species including endangered ones. Impact on aquatic fauna Impact on existing sand and gravel extraction activities in flooded areas Impact on aquatic fauna and modifications in current art of fishing and equipment used Impact on the population residing in areas needed for implementing the enterprise, in terms of loss of property and economic activity exercised at the time. All impacts caused by the undertaking on the physical, biotic and social-economic environments Impact on areas affected by the instability or potentially unstable processes Impact on physical, chemical and biological characteristics of waters; upstream and downstream from the reservoir Impact on the level and evolution of reservoir fishing stocks Impact on resettled family living conditions Environmental Program Limnological Monitoring Ichthyofauna Monitoring Fishing Production Survey Characterization of Fish Reproduction Areas in Tributaries Repopulation of the Reservoir Fish Salvage Management of Aquatic Plants Integrated Management Plan for Aquatic Plants Environmental Education Environmental Program Reforestation Fishing Management Conservation of Avifauna Environmental Program Fishing Management Fish salvage during interruption of generator units for maintenance Environmental Education Environmental Program Implementation of Protected Areas Implementation of reforestation Implementation of the Promissão Panatanal Deer Conservation Center Fishing Management Fish Salvage Environmental Education Environmental Program Recovery of degraded areas Research and management of flora Research and management of fauna Implementation of Protected Areas Conservation of ichthyofauna Productive reinsertion of the sand and gravel extraction sector Readaptation of fishing activity Remanagement of affected population Environmental education Monitoring of stability of banks Fishing Management Fish salvage during interruption of generator units for maintenance Monitoring and evaluation of population remanagement program Fuel Control As from 2009, CESP has been implementing the fuel supply and control system by means of a magnetic card. Services provided by third parties on the web platform are real time controlled, providing easiness when managing the fl eet, transparency in the supply and full control in fuel consumption and mileage of vehicles, in addition to enable the monitoring of all vehicles and drivers. This system is an important tool for the project of greenhouse gases inventory conducted under the Climate Change and Carbon Sequestration Program. Waste Handling CESP defined a series of environmental practices in its generation units with the purpose of reaching goals to improve practices and procedures for the waste reduction and destination. CESP designs its waste, including industrial and hazardous waste, according to the classification established by legislation and NBR-10,004 of ABNT - Brazilian Association of Technical Standards in force. Industrial and hazardous waste are stored in warehouses according to specifi c legislation and sent to companies specialized in decontamination or incineration, reuse, recycling or disposal in industrial landfi lls. The replacement of pieces of cloth and towels by recycled towels to clean machinery, parts and equipment contributed to reduce the volume of waste to be sent to landfills and to reduce 50% the cost for the acquisition of materials. CESP also started to require from contractors the right destination of waste generated by their activities within the Company s facilities. (GRI EN22) CESP will conclude in 2015 the replacement and disposal of all equipment (transformers, capacitors, insulators, excitation transformers and TPC) using ascarel oil as a coolant in Ilha Solteira HEP, anticipating the terms established in State Law No. 12,288 of , which deadline is foreseen for The ascarel oil had its use banned due to harmful effects to the environment. Fuel Consumption (GRI EN3) Type of Fuel l GJ l GJ Gas 406, , , , Diesel 528, , , , Total 935, , ,695, , Type of Fuel l l Ethanol , ,09 Main hazardous residues (GRI EN22) Towels dirty with oil, grease and paints* Location HEP Ilha Solteira / UHE Três Irmãos 19,600 19,600 HEP Jupiá 25,600 25,600 HEP Porto Primavera 13,300 13,300 HEP Paraibuna / UHE Jaguari 1,260 1,260 Total 59,760 59,760 *This is a rental contract for recyclable industrial towels to replace inputs used in the maintenance, electro-mechanical processes at the CESP Hydroelectric Plants, such as: cotton cloth, rags, residual rags from fabric, which used to be disposed of in public landfills. The Contracted company removes quantities of dirty towels with oil, grease and paints every months, washes them and delivers the same quantity of clean towels. The company obeys all environmental requirements in accordance with legislation and is also authorized by CETESB and the MMA. Medical Waste (kg) Location Ambulatório São Paulo ND Ilha Solteira 7 ND Jupiá 3.4 ND Porto Primavera 8.85 ND Total 49.1 ND Ascarel (PCB) inventory in CESP s HEP (kg)*((gri EN1) Situation Final Destination 14,014 65,340 0 Stored 7,000 1,900 43,060 In Operation ,380 43,560 Total 21,280 86,620 86,620 *This concerns the contracting of specialized services for removing askarel oil (PCB) from the storerooms at the Ilha Solteira and Jupiá Hydroelectric Plants, with the decontamination of metal housing for transformers, fragmentation and incineration of askarel oil loads and documentation (CADRIS) with CETESB for 86,620 kg (GRI EN24). Total disposed of in 2011 and 2012 = 79,354 kg 88 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 89

46 In 2012, CESP spent R$ 2.5 million on the final disposal of 14 tons of askarel oil. The new dry-type transformers are encapsulated in epoxy resin system reinforced with glass fibers that do not propagate flame and do not release toxic gases, factors that preserve the health of employees and contribute to the sustainably environmental aspects. Reduction in the use of contaminant solvents (GRI EN26) By implementing tanks to clean parts and acquiring the biodegradable and nontoxic solvent HL 80, the consumption of solvents derived from petroleum as thinner, gasoline and kerosene is practically extinct. After the residues are reused several times, they are mixed with contaminated oil and forwarded to recycling companies. Elimination of industrial detergents consumption (GRI EN26) The industrial detergent called solupan was replaced by the biodegradable DR10E 1. Such a detergent practically generates no waste, because it is necessary to dry parts and equipment, although disposable towels are used and then collected by the supplier. Waste Management in the Wild Fauna Preservation Center of Ilha Solteira. (GRI EN26) The production of organic waste in the preservation center is estimated in one ton of feces, food leftovers and casual animal carcasses per month. Carcasses were buried in quicklime holes to avoid soil and underwater contamination by slurry. An alternative for the final destination of this material would be the composting, that is a process of controlled aerobic decomposition that results in the transformation of organic waste into an organic fertilizer that can be used for several purposes, also reducing the methane emission (GEE). This process requires proper conditions of temperature, moisture, aeration, acidity and correct ratio of carbon and nitrogen. In 2012, approximately 14,400 m³ of organic waste were sent for composting systems. Waste from hospital is separated by type, such as piercing, cutting, cloth, cotton and histological cloth materials and placed in special packages. Recycling materials (plastic, paper and metal) are placed in selective garbage cans, placed in plastic bags and designed for recycling plants in the city. Water Sources CESP is a pure hydroelectric generator. At this type of plant, electric energy is the product obtained through the transformation of potential hydraulic energy that originates from the uneven terrain created by damming the river, into mechancial energy that activates the turbine and generator, producing electric energy. All the water used returns to its course in the water without altering its physicalchemical characteristics. (GRI EN9) CESP s water sources management is carried out by the National Water Agency (ANA) and Hydrographic Basin Committees, which are represented by the organized civil society, which contributes to reduce conflicts of use, quality, future climate change risks and its adequacy. CESP participates in discussions held by ANA, as well as in committees of the Hydrographic Basins of Lower Tietê, Paraíba do Sul, Pontal do Paranapanema and Aguapeí and Peixe, São Paulo and Ivinhema in Mato Grosso do Sul. Treatment of effluents (GRI EN21) CESP is seeking to improve its organic effluent treatment system with the implementation of new and more efficient treatment units. At the Engenheiro Sergio Motta (Porto Primavera) and Três Irmãos Plants, the treatment stations were cleaned after a report by CETESB qualified the effluent situation as inadequate. The consultancy, contracted at the end of 2011 for evaluating treatment systems for the sanitary sewage produced at these plants verified the need for improving them. The necessary procedure for that improvement has already defined for the Três Irmãos HEP. In the case of Porto Primavera, a project for constructing a new sewage treatment plant will be elaborated during At present, CESP is conducting probes of the terrain in order to define the site for installing it. 90 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 91

47 In Jaguari and Paraibuna HEPs belonging to the Production Unit of the Paraíba River, sewer treatment plants were built to allow the discharge of waste in water streams, under environmental correct conditions. At the Ilha Solteira Plant, connection of the sewage network to the treatment station was finalized and it will be concluded with installation of the Plant sewage pressure pumps until the treatment station. In Jupiá HEP, liquid waste are discharged in the public treatment network, in that the interconnection of the sewer network of the warehouse with the treatment plant of the city of Três Lagoas was concluded in Social and Environmental Programs (GRI EN26) CESP develops programs that aim at mitigating the impact caused by the construction and operation of its plants by promoting the environmental preservation of ecosystems throughout the areas under its direct and indirect influence according to the requirements of environmental legislation in force and licensing environmental bodies. Such activities cover physical, biotic, social and economic and environmental programs, reservoirs monitoring and handling programs, besides research and development of environmental technologies. Among the main environmental programs under way, we point out the following ones: Environmental Education Developed Activities 2012 Activities Participants 2012 Retirement Education Program quantity 270 Health in the Field Program quantity 71 Training Program for Impacted Communities and areas surrounding PAs quantity 145 Environmental Education Program: Pantanal Deer Theater quantity 549 Theater of Clowns: Water and Citizenship quantity 560 Storytelling quantity Arrival of Santa Claus quantity 265 Teacher Training quantity 468 Riparian Reforestation Project quantity Environmental Monitor quantity 51 Best Age quantity 170 Café da Roça (Rural Breakfast) quantity 385 Ecoteam quantity 132 Puupet Show: Animals of Brazil quantity 100 Training in Environment for the Internal Public quantity 575 Training in Environment for the External Public quantity Environmental Education in Protected Areas quantity 456 Visits to the Preservation Center of Wild Fauna of Ilha Solteira quantity Visits to Ilha Solteira s CCFS quantity Regional Memory Program Visits to the Regional Memory Museum of Rosana quantity Itinerant Exhibit of the Afro Brazil Museum quantity 498 Memories of Spring: know your municipality quantity 100 Rosana the paths of history quantity 161 TOTAL Participants Environmental Education CESP s Environmental Education Program is carried out by a multidisciplinary team and aims at encouraging the population to exercise their citizenship rights. It contributes to stimulate new values and behaviors, besides answering the increasing question of the population as to environmental changes caused by large ventures. Generally speaking, we search for the commitment of people inside and outside the Company as to environmental sustainability matters. In 2012, CESP invested R$ 110, in environmental education, and there were 52,362 participants involved in its activities, as described in the chart below: Selective Collection Projects Since 2004, the working group of CESP Environmental Education, created an Ecological Resettlement Patrol in Santo Antônio do Rio do Peixe (Caiuá - SP) and implemented a selective program to collect the waste generated by those families that were relocated. The participants of this project are SEBRAE (holding courses and lectures), UNESP / Presidente Prudente (holding seminars) and CESP (handouts preparation, providing vehicles for selective collection, promoting courses of environmental education and monthly data survey on collections made). The Ecological Patrol is comprised of project beneficiaries who seek to raise environmental issues, giving priority to proper disposal of solid waste generated by the community. Waste of Selective Collection (GRI EN22) Local: Headquarter São Paulo (CESP x EMAE) UN Batteries Kg 80 ND Plastic, paper, metals and glass Kg ND Oil litros 810 ND Source: Environmental Management Division of EMAE Empresa Metropolitana de Águas e Energia Local: Ecotime Jupiá SPH UN Paper Kg Plastic Kg Amount R$ Local: resettlement UN Resettlement Santo Antônio do Rio do Peixe Kg 1,197 1,539 Resettlement Aruanda Kg 720 1, C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 93

48 Removal and Disposal of Aquatic Macrophytes The mechanical control in the reservoir of Engenheiro Souza Dias HEP resulted in the removal of 2,205 m3 of aquatic plants in the power plant water intake which contributed to reduce both the cost of maintenance and the risk of non-planned shutting downs of units. Aquatic macrophytes were removed from the Engenheiro Souza Dias HEP grilles and forwarded for the production of an organic mix used in the composition of a substratum used in the production of native forest seedlings, and as an organic fertilizer for the reforestation of degraded areas. We also point out the significance of handling aquatic plants in Jupiá reservoir by emphasizing the mechanical control and optimization of the operation of the reservoirs of Três Irmãos, Ilha Solteira and Engenheiro Souza Dias HEPs. Protected or restored habitats Reforestation hectares were reforested around the reservoirs of Três Irmãos and Engenheiro Sérgio Motta HPPs. Reforestation is carried out as part of the Flora Management Program that aims at implementing reforested strips around the reservoirs, to be used as shelters, food and passages for the fauna, thus favoring the vegetal regeneration and minimizing erosion and siltation. For the development of this program, CESP counts on three seedling nurseries in Engenheiro Sérgio Motta, Engenheiro Souza Dias and Paraibuna HPPs, with a production capacity of over 3 million seedlings. In 2012, 1, kg of material such as metal, paper, cardboard, iron, aluminum, plastic and plastic bottles were collected. The proceeds from the sale of recyclable materials are reinvested in projects aimed at the leisure of the population. In the Aruanda Resettlement, the recyclable material is collected by the Raposo Tavares rural school. In 2012, 720 kg of waste were sent to recycling plants. In the Urban Pottery Center of João André Port, the collection is made by the Associação de Catadores de Brasilândica (MS) (ASSOBRA a collectors association) every 15 days. Ecoteams The Ecoteams are multidisciplinary groups, comprised of collaborators from various areas, and their purpose is to contribute towards the improvement of some environmental processes found at the Company. In 2012, two new groups were formed at the head offices in São Paulo and at the Porto Primavera unit. With their creation, the administrative head offices, as well as all the production units have their respective Ecoteams. The action of these groups has focused on the following themes: health, especially in combating dengue fever; work and environmental safety; campaigns for reducing energy and water consumption; internal public awareness of selective collection at the units; improvement in the storage structure for recyclable residue and scrap; and the establishment of Ecopoints (collection points for cooking oil used to manufacture homemade soap and to produce biodiesel). This year, the Ecoteam conducted a campaign for collecting used footwear, which were sent to the NGO RECICALCE for recycling and subsequent donation; and a campaign for collecting electronic waste sent to the NGO POLUIÇAO ZERO for recycling. These campaigns had the participation of employees from all the units who brought their footwear and electronics they were not using at home. The selective collection project at the Jupiá plant collected 1, kg of paper and kg of plastic in The sale of these residues resulted in the collection of R$ , for the Spiritist Care Group A Candeia. Protected or recovered habitats - areas reforested by CESP (GRI EN11; EN12; EN13) Own area - Power Plants HEP Accumulated untill 2012 Eng. Sérgio Motta , Três Irmãos , Total , Forest Enhancement Power Plants HEP Accumulated untill 2012 Eng. Sergio Motta 62,01 27, ,23 Três Irmãos, Jupiá and Ilha Solteira 52,75 177, ,04 Paraibuna and Jaguari 27,01 73,98 797,88 Total 141,77 279, ,15 Protected or recovered habitats State Parks (GRI EN13, EU13) Name Area (ha) Decree-law that created the unit Compensated by State Park of Ivinhema river lowlands- MS 73, ,278 of 11/17/1998 UHE Engº Sérgio Motta State Park of Aguapeí 9, ,268 of 07/02/1998 UHE Engº Sérgio Motta State Park of Peixe river 7, ,095 of 09/18/2002 UHE Três Irmãos (*) Expansion of State Park Rio do Peixe 2, Del Consema 12/2006 RPPN Cisalpina - MS 6, Decree for creation required UHE Engº Sérgio Motta RPPN Foz do Aguapeí 8, Res. SMA 117 de 12/09/2010 UHE Três Irmãos Total 107, C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 95

49 Number of species in the Red List of IUCN and in national lists of habitats conservation in áreas affected by operations, listed according to the extinction risk (GRI EN15) Mammals Plantel Vulgar Name Scientific Name IUCN Brazil São Paulo Lobo guará Chrysocyon brachyurus --- VU VU Onça pintada Panthera onca --- VU CR Onça parda Puma concolor --- VU VU Gato do mato pequeno Leopardus tigrinus --- VU VU Jaguatirica Leopardus pardalis --- VU VU Cervo do pantanal Blastocerus dichotomus VU VU CR Tamanduá bandeira Myrmecophaga tridactyla --- VU EN Queixada Tayassu pecari EN Anta Tapirus terrestris VU Bugio Alouatta caraya EN Birds Plantel Vulgar Name Scientific Name IUCN Brazil São Paulo Mutum Crax fasciolata --- EN EN Jacutinga Alburria jacutinga EN EN CR Macuco Tinamus solitarius VU Jaó do sertão Crypturellus undulatus EN Arara-canindé Ara ararauna CR Ema Rhea americana CR Papagaio-do-mangue Amazona amazonica VU Over 150 species of native trees are used in the reservoirs located inside CESP s and contractors lands, as forest upgrading, in respect to the legislation and requirements from environmental bodies. In 2012, CESP invested R$ 6,173.9 thousand in the Flora Management Program, an activity that includes the Sampling Production Nurseries and Reforestation. Conservation Units (GRI EN13, EU13) CESP implemented five conservation units in the States of São Paulo and Mato Grosso do Sul, as a compensation work for the construction of Eng. Sérgio Motta and Três Irmãos HPPs. They are three State Parks and two Natural Heritage Reserves. The implementation of a conservation unit involves feasibility activities in IBAMA, acquisition of lands, environmental zoning, handling program, the construction of a whole infrastructure and a preservation plan. Giving continuity to the elaboration of the PRNH Foz do Rio Aguapeí Management Plan, which began in 2011, besides the partnerships already signed with the Federal University of Mato Grosso do Sul (UFMS), Três Lagoas Campus; Júlio de Mesquita Filho São Paulo State University (UNESP), Dracena, Ilha Solteira, Presidente Prudente and São José do Rio Preto Campuses and the NGO Apoena, three more partners joined the team: Federal University of Mato Grosso do Sul (UFMS), Campo Grande Campus; Júlio de Mesquita Filho São Paulo State University (UNESP), Botucatu Campus and Federal University of Viçosa. In 2012, 38 campaigns were run addressing the following themes: ichthyofauna, flying mammals, avifauna, aquatic macroinvertebrates, native bees, flora, parasitology, water quality, herpetofauna, environmental education and the physical environment. Fish Vulgar Name Scientific Name IUCN Brazil São Paulo Piabanha Brycon insignis --- EN CR Pirapitinga do sul Brycon opalinus EN EN VU Piracanjuba Brycon orbignyanus CR Corimbatá de lagoa Prochilodus vimboides VU Pacu guaçu Piaractus mesopotamicus CR Pintado Piaractus mesopotamicus VU Surubim do Paraíba Stendachneridium parahybae RE Jaú Zungaro jahu EN VU Vulnerable EN Endangered NT Almost threatend LC Little Concern LR/LC Low Risk DD Insuficient Data CR Critical Danger Collections in Wildlife Conservation Centers Place Species Pantanal Deer Conservation Center 43 deer 41 deer 39 deer Center of Wildlife Fauna of Ilha Solteira - Zoo 78 mammals (19 species) 76 mammals (18 species) 76 mammals (18 species) 78 répteis (8 species) 57 répteis (8 species) 48 répteis (oito species) 82 birds (21 species) 88 birds (22 species) 73 birds (22 species) Wild Bird Center - Paraibuna 296 birds (5 species) 328 birds (5 species) 223 birds (five species) Total C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 97

50 Two trails were laid at the PRNH this year - Tapir Trail and Capybara Trail which aim at promoting conservation of the environment through the formation of individuals with social values, knowledge, skills and attitudes geared towards the conservation and sustainable use of the environment. Aimed at the inclusion of people with special needs in activities conducted in natural areas, the works on the Sensory Trail and accessible water sanitation installations in the municipality of Paulicéia, SP, were concluded. These trails were implemented with access infrastructure in compliance with ABNT 9050:2004, reflecting the search for excellence in the quality of services offered visitors. The Environmental Contingency Plan was also implemented at the PRNH. It aims at permitting PRNH employees to identify risks to area conservation and to create action procedures when an environmental emergency is ascertained. In 2012, CESP spent R$ 4,412 thousand with the maintenance of parks. CESP has also been trying to make the Private Natural Heritage Reserve (RPPN) of Cisalpina feasible. It has 6,261.75ha and agreements have been signed with the Environment Secretariat of the State of Mato Grosso do Sul. Active Bank of Germplasm The target of the management plan of the Active Germplasm Bank is to contribute for the ex-situ genetic preservation of tree species from the Western regions of the State of São Paulo and South of Mato Grosso do Sul, by means of the production of good quality seedlings both genetically and physiologically. Species located in the flooding areas of Engenheiro Sérgio Motta reservoir were collected and used for the plantation and recovery of the ancillary forest. This technique protects the species from genetic loss (loss of allele) when fast processes of devastation happen and the resulting isolation of the remaining forest strips restrict the genic flow of populations. In two areas, CESP implemented the Active Bank of Germplasm with tree species in Mata do Planalto (SP), Savana Arbórea Densa (savannah) and Cerrado: left bank of Paraná River (SP) (21.6 hectares 32 species) and right bank of the Paraná River (MS) (18 hectares 33 species) Biodiversity Impacts Management (GRI EN14; EN15; EN25, EN26) Fauna Management In the fauna management program, the two Conservation Centers at Promissão and Ilha Solteira stand out with their objective of developing projects with the Pantanal deer, jaguar, Guará wolf, Bush dog, among several other species of reptiles, birds and mammals. The Center for Conservation of Wild Birds of Paraibuna aims at studying, producing and reintroducing endangered birds in areas of influence of the Company s reservoirs. In 2012, CESP invested R$ thousand in the Marsh Deer Preservation Center of Promissão and R$ 1,535.3 thousand in the Wild Birds Preservation Center of Ilha Solteira. CESP also maintains the Wild Birds Preservation Center of Paraibuna which investment was R$ thousand. Number of species on the IUCN red list and on national conservation lists with habitats in areas affected by operations, ranked by level of endangerment (GRI EN15) Ichthyofauna Preservation and Fishing Management For the development of the Ichthyofauna Preservation and Fishing Management Program, CESP counts on the hydrobiology and aquaculture centers in Jupiá and Paraibuna, and on structures for fish transposition in Eng.Sergio Motta (Porto Primavera) HEP (fish elevator and ladder). The purpose of these stations is to reproduce native species of fries for the repopulation of reservoirs; to develop techniques of induced reproduction for new autochthonous ichthyofauna species, to hold ichthyologic and limnological surveys in reservoirs and main streams to save fi sh in CESP s plants during maintenance and cleaning operations. In 2012, R$ 1,276.1 thousand were spent with the hydrobiology and aquaculture centers of Jupiá and Paraibuna. The program is formed by seven subprograms: Limnological Characterization and Superficial Water Quality Monitoring It aims at the biological production in the reservoirs by evaluating time and spatial variations of the physical, chemical and biological characteristics of the water, providing subsidies to the selection process and implementing techniques to fi shing management in the reservoirs. Parameters analyzed in the Fish Handling Program, as to water quality and ichthyofauna in reservoirs and tributaries of CESP s plants show no signifi cant changes. (GRI EN25) Ichthyofauna monitoring and population dynamics It aims at learning the structures and dynamics of the fish community, reproductive biology, feeding dynamics and other variables of the species interesting for the fishing activity, also providing subsidies to monitor the fishing activity in the reservoirs. Survey on fishing production The targets are: to learn about the fishing production, evaluate the benefits from fish repopulation, evaluate fishing effort and fish capture by effort unit (CPUE) per reservoir. It also searches for involving professional fishermen in environmental programs developed by CESP. Characterization of areas of fish reproduction in streams It aims at identifying, registering and characterizing potential and effective areas for fish reproduction, by emphasizing spawning species, establishing measures of protection, enrichment or restoration of biogenic potential of these areas to favor the ichthyofauna reproduction. Operation of fish transposition equipment (elevator and ladder) in Engenheiro Sérgio Motta HPP It aims at promoting the transposition of migrating species during the spawning season. Fish rescue It aims at fish saving when preventive maintenance or corrective measures are under way in generating units, thus enabling the continuity of the reproductive migration activity especially during the spawning season. 98 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 99

51 Repopulation of reservoirs It aims at promoting the preservation of the ichthyofauna and maintenance of the fishing activity. The repopulation of CESP s reservoirs with fries is included in the Fishing Management Program and in 2011 amounted to: Repopulation of Fries Rivers Paraná and Tietê Location Eng. Sergio Motta 362, ,000 Ilha Solteira 516, ,000 Eng, Souza Dias 1,249,000 1,126,000 Três Irmãos 1,219, ,000 Total 3,346,000 3,068,000 River Paraíba do Sul Location Paraibuna 279, ,790 Jaguari 150, ,650 Total 430, ,440 Monitoring Systems Monitoring systems aim at following up and registering changes in environmental conditions caused by the facility development, as well as the efficiency of programs to mitigate the physical, biotical and social and economic impacts. Stability of marginal slopes It consists of the following up of the areas considered instable or potentially instable, defined during the diagnosis phases, when evaluating the evolution of the processes responsible for the slopes instability. Works started in 1999 and have been developed upstream and downstream Engenheiro Sérgio Motta HPP s dam. Upstream, measures to stop erosion of the slopes and planialtimetrical, geological, geomorphological and inclination surveys of the left bank of the reservoir were made. The historical river dynamics of the Paraná River aiming at finding out which river processes imposed by the dam s construction and the in-situ erosion measures of the banks and islands in order to quantify effective values of retreats of river islands and banks were also part of the downstream works. Gold Mussels The gold mussel infestation took place in 2001 in Paraná River basin, reaching Engenheiro Sérgio Motta HPP in 2002, Engenheiro Souza Dias and Ilha Solteira HPPs in 2004 and Três Irmãos HPP in The gold mussel is an exotic species that probably migrated from Asia in the ship water ballast. It has a large inlay capacity and high reproduction capacity which causes significant environmental and economic damages for companies using water as raw water, and those who use it for consumption and recreation purposes. This infestation, establishment and growth of gold mussel populations in streams cause obstruction of pipes and filters in hydro power plants, increase corrosion and the need of maintenance operations. It also causes inlay in fish farm tank screens, irrigation systems and vessels. Because of the number of damages, CESP has been making efforts to develop controlling and monitoring techniques as anti-fouling coating on intake screens, with dichloride doses in cooling systems of generating units, mechanical removal and/or proper disposal of waste to prevent infestation. V Brazilian Seminar on the Environment and Social Responsibility in the Electric Sector - SMARS: more sustainable and efficient sector The challenges for producing a clean and efficient energy without affecting the environment and at the same time generating profit for the companies and progress for Brazil were themes of the 5th Brazilian Seminar on the Environment and Social Responsibility in the Electric Sector (SMARS). The event, held May 27 to 29, in São Paulo, is a biennial promotion of the Brazilian National Committee on the Production and Transmission of Electric Energy (Cigré-Brazil). With each edition, the seminar has the support of a sector company. In this edition, CESP provided the support. The 5th SMARS gathered nearly 200 specialists from everywhere in Brazil. New Forest Code Aware of the updated New Brazilian Forest Code, the technical committee prepared a mini course titled Update of New Forest Code Regulations and of Environmental Licensing: Topics Related to the Electric Sector, given by Alacir Silva Borges, coordinator of the Committee on the Environment of the Brazilian Association of Electric Energy Companies (ABCE). The new laws provide two important chan ges for electric sector companies. The first defined the dimension of protected areas, with the strength of law. This used to be determined only in accordance with a Conama Resolution; the second defined the issue of legal reserves, projected for rural properties when faced with enterprises and, thus, the electric sector does not need to acquire areas for the legal reserve, avoiding a billion real liability. CESP Works CESP had two works selected for the technical sessions. One of them, presented by Jorge Watanabe, was Positive Aspects for Formalizing Inter-institutional Partnerships in Restoring Riparian Vegetation through the CESP Forest Promotion Program Case of the Galante Creek Micro Basin, in the municipalities of Monte Castelo and Tupi Paulista. The other was Environmental Education and Implementation of Selective Collection in the Rural Settlement of Caiuá, SP, within the context of the National Solid Waste Policy, presented by Carmem Lúcia Menezes. All informative and technical material for the 5th SMARS is available at the Cigré website and at: C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 101

52 GRI Index (GRI 3.12) Strategy and Analysis 1.1 Declaration from the CEO Main impacts, risks and opportunities 5, 8, 24, 44 e 88 Organizational Profile 2.1 Name of the Organization Primary brands, products and/or services Operational structure, including mainly divisions, operating units, subsidiary and joint ventures Location of headquarters Geographic Presence 5 e Legal Nature Markets served Size of the organization 5 e Significant changes during the reporting period Awards received during the reporting period Electrric Sector Supplement EU1 Installed Capacity (MW), by energy source (essential) 5, 45 e 52 EU2 Net energy production, by energy source (essential) 5, 42, 45 e 52 EU3 Number of residential, industrial, institutional and commercial units (essential) 45 EU4 Length of transmission and distribution lines (essential) NA EU5 Permissions of CO2 equivalent allocations (essential) NA Report Parameters Report Profile 3.1 Reporting period Previous report date Reporting cycle Contato data in case of question about the report 13 e 122 Scope and Boundaries of the report 3.5 Definition of the contents Boundaries of the report (countries, divisions, subsidiaries and suppliers) Declaration on any specific limitations regarding the scope or limits of the report Data used for the preparation of the report related to joint ventures, subsidiáaries. 10 e Measuring techniques and data base 10 e Effects of information adjustments Significant changes 11 Content Index of GRI 3.12 GRI Index 102 Externa Verification 3.13 Current policy and practice related to the search for external verification of the report 11 Governance, Commitments, and Engagement Governance 4.1 Governance structure 25, 36, 38 a Indication if the president of the highest entity for governance is also a CEO Independent and non-executive members of the highest degree of governance Mechanisms for shareholders and employees to provide recommendations or directions to the governance officers 33 e Ratio among remuneration to the governance officers, board members and corporate performance 37 e Processes effective to the governance officers to ensure the avoidance of conflicts of interest Process for determining the qualifications and expertise of the members of the governance officers Internal values, codes of conduct, and principles relevant to economic, environmental, and, social performance and the status of their implementation 22, 39 e Procedures by the highest degree of governance to supervise the identification and management on the part of the organization of the economic, environmental and social performance, including relevant risks and opportunities, as well as adherence to or compliance with internationally agreed upon standards, codes of conduct and principles Processes for evaluating the governance officers own performance, particularly with respect to economic environmental, and social performance 38 Commitments with External Initiatives 4.11 Precaution Principle 26, 44, 48 e Letters, Principles and Initiatives Participation in associations 31, 34 e 87 Engagement with Stakeholders 4.14 List of stakeholders engaged by organization 28 a Identifi cation of stakeholders 14 e Engagement of stakeholders 28 a Main subjects and concerns arose by stakeholders engagement 14 Performance Indicators Economic Performance EC1 Economic value generated and distributed (Essential) 57, 58, 110 e 111 EC2 Financial implications and other risks and opportunities for the organization s activities due to climate change (Essential) 87 EC3 Coverage of the fixed beneft plan of the Company 73 EC4 Financial aid received from the government (Essential) NA Presence in the Market EC5 Ratio between the lowest remuneration in the company compared to the lowest local 66 EC6 Policies, practices, and ratio among local suppliers at significant worksites (Essential) 30 EC7 Procedures to hire local employees and managers (Essential) 65 Indirect Economic Impacts EC8 Investment on infrastructure and services rendered to the public (essential) 79 e 81 EC9 Significant indirect economic impacts (additional) 80 Electric Sector Supplement EU6 Management for ensuring availabilkity and reliability of supply (essential) 47 EU7 Consumption management programs (essential) NA EU8 R&D activities and expenses (essential) 53 a 55 EU9 Provision for decommissioning nuclear plants (essential) NA EU10 Planned capacity in comparison and projected energy demand (essential) NA EU11 Average efficiency of thermal plants (essential) NA EU12 Transmission and distribution losses compared to total energy (essential) NA Environmental Performance Materials EN1 Material used per weight or volume (Essential) 89 EN2 Percentage of material used coming from recycling sources (Essential) ND Energy EN3 Direct energy consumption shown by primary source of energy (Essential) 89 EN4 Indirect energy consumption shown by primary source of energy (Essential 87 EN5 Energy saved due to improvements in energy conservation and efficiency ND EN6 Initiatives for providing low energy consumption products and services (additional) NA EN7 Initiatives to reduce indirect energy consumption and reducion obtained (additional) ND Water EN8 Total of water withdrawn (Essential ND EN9 Water sources signifi cantly affected by withdrawal of water (additional) 91 EN10 Percentage and total volume of recycled and reused water (additional) ND Biodiversity EN11 Location and size of company area in protected or high biodiversity areas (essential) 95 EN12 Description of significant impacts about biodiversity (essential) 88 e 95 EN13 Habitats protected or restored (Additional) 95 e 96 EN14 Management of impacts on biodiversity (additional) 86 e 98 EN15 Number of species in the Red List of IUCN (additional) 97 e 98 Emissions, Effl uents and Waste EN16 Total direct and indirect greenhouse gas emissions (GHG), by weight (Essential) 87 EN17 Other indirect signifi cant emissions of gases that provoke the greenhouse effect, by weight (Essential) 87 EN18 Initiatives to reduce greenhouse gas emissions (GHG) (Additional) ND EN19 Emission of substances that affect the ozone, per weight (Essential ND EN20 NOx, SOx and other significant atmospheric emissions, per type and weight (Essential) ND EN21 Total water discharge, by quality and destination (Essential) C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 103

53 EN22 Total weight of waste, by type and disposal method (Essential 89 e 93 EN23 Number and volume of significant spills (Essential) In 2012 there were no significant spills EN24 Weight of waste carried, imported, exported or treated considered dangerous according to Basel s Agreement 13 Annex I, II, III and VIII and percentage of waste internationally carried (Additional) 89 EN25 Identifi cation, size, status of protection and biodiversity index of water streams and habitats related or signifi cantly affected by the discharge of water and drainage (Additional) 98 e 99 Produtos e Serviços EN26 Initiatives to mitigate environmental impacts of products and services (Essential) 90, 92 e 98 EN27 Percentage of products and packages recovered Essential) NA Conformity EN28 Value of significant penalties paid and total number of no fi nancial sanctions resulting from the non-conformity with environmental laws and regulations (essential) 121 Transportation EN29 Signifi cant environmental impacts of the transportation of employees, supplies and equipment used in company (Additional In 2012 there was no significant environmental impact from the transportation of employee,s materials or other goods at CESP operations. General EN30 Total investment and expenses with environmental protection (Additional) 85 e 86 Electric Sector Supplement EU13 Biodiversity of replacement habitats (essential) 95 e 96 Social Performance - Labor Practices Positions LA1 Number of employees per position, work contract and region (Essential) 65 e 67 LA2 Number and rate of employees turnover per age, gender and region (Essential) 64 e 67 LA3 Benefits not offered to temporary or part-time employees (additional) 69 Ratio among Employees and Corporate Governance LA4 Employees under Labor Union agreements (Essential 78 LA5 Minimum term for the previous notification regarding operational changes (Essential) 77 Occupational Health and Safety LA6 Percentage of employees represented in formal safety and health committees (additional) 75 LA7 Injuries, occupational diseases, absenteeism and deaths (Essential 74 LA8 Education, training, counseling, prevention, and risk-control programs (essential) 76 LA9 Subjects relating to safety and health covered by formal agreements with labor unions (Additional) 77 Training and Education LA10 Average hours of training to employees per annum (essential) 69 LA11 Programs for managing the skill and continuous learning which support the workability of employees and their preparation for retirement (Additional) CESP does not have programs of this nature LA12 Employees receiving regular performance (additional) 73 Diversidade e Igualdade de Oportunidades Diversity and Equal Opportunities LA13 Members responsible for the corporate governance and minor groups (Essential) 67 e 73 LA14 Wage ratio among men and women per position (Essential 66 Electric Sector Supplement EU14 Programs and processes that ensure the offer of skilled labor (essential) 30 e 69 EU15 Percentage of employees with the right to retirement in the next 5 to 10 years, listed by functional category and region (essential) 73 EU16 Policies and requirements concerning the health and safety of employees and third party and outsourced workers (essential) 64 e 76 EU17 Days worked by third party employees (construction, operation and maintenance activities) (essential) 65 EU18 Training in the health and safety of third party and outsourced workers (essential) 75 Performance relating to Human Rights Investment Practices and Purchase Process HR1 investment contracts bearing clauses of human rights (Essential) 30 HR2 Companies hired and suppliers subject to evaluations concerning human rights (Essential) 31 HR3 Total of training hours per employee in policies and procedures relating to human rights aspects that are relevant for the operation, including percentage of employees who were trained (Additional) 70 e 77 Não Discriminação Non-Discrimination incidents HR4 Discrimination incidents and measures taken ( (essential) 31, 39, 65 e 77 Association and Collective Negotiation Freedom HR5 Occasions on which the right to exercise the freedom in associations (essential) 78 Child Labor HR6 Occasions on which there was a signifi cant risk of child labor (essentcial) 30, 31 e 77 Compulsory or slave related labor HR7 Occasions on which there was a significant risk of compulsory or slave related labor (Essential) 30, 31 e 75 Safety Practices HR8 Percentage of safety personnel trained in policies or procedures of the organization relating to human rights aspects that are relevant for the operation (Additional) 76 Indigenous Rights HR9 Number of violation incidents against Indigenous people and measures taken (Essential) 31 e 65 Electri Sector Supplement EU19 Participation of stakeholders in energy and infrastructure planning decisions (essential) 79 EU20 Approach for the management of displacement impacts (essential) 79 EU21 Contingency measures and plans for disasters / emergencies (essential) 26 Social Performance - Community Community SO1 Programs and practices that evaluate and manage the impacts of operations on communities (essential) 78 Corruption SO2 Number of business units subject to analysis of risks related to corruption (Essential) 36 SO3 Percentage of employees trained in corporate anticorruption policies and procedures (Essential) 39 SO4 Actions taken in response to incidents of corruption (Essential) 39 e 65 Public Policies SO5 Public policy positions and participation in public policies development and lobbying (Essential) 32 e 34 SO6 Total financial contribution to political parties or related institutions (Additional) By law, state-owned companies are impeded from making financial contributions to political parties and the like Unfair Competition SO7 Number of legal suits due to unfair competition, anti-trust, monopoly and its consequences (Essential) Since this is an energy generation company, a public utility regulated by the federal government, there are no lawsuits for unfair competition, trust or monopoly practices, against CESP Conformity SO8 Fines and sanctions for noncompliance with laws and regulations (essential) There was no case of nonconformity with laws and regulations Electrric Sector Supplement EU22 Number of people physically and economically displaced and the indemnification (essential) 79 Performance Regarding the Responsibility on the Product Customer Health and Safety PR1 Stages in which health and safety impacts of products and services are assessed for improvement (essential) 79 PR2 Total number of incidents of non-compliance with regulations and voluntary codes concerning the impacts caused by products and services on health and safety during their life, per type of incident (additional) NA Product and Service Labeling PR3 Information on products and labeling procedures (essencial) NA 104 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 105

54 PR4 Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labeling, explained per type of incident (Additional) NA PR5 Practices toward the customer s satisfaction, including the results of the research to measure the customer s satisfaction (Additional) 29 Marketing Communications PR6 Adherence to laws, standards and voluntary codes of marketing communications (essential) 34 PR7 Total number of incompliance cases with regulations and voluntary codes related to marketing communications such as publicity, promotion and sponsorship, broken down by type of results (Additional) 34 PR8 Total number of proven complaints related to the violation of privacy and loss of customer data (additional) 64 Compliance PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the In 2012, there were no provision and use of products and services (essencial) fines for nonconformity with laws or regulations related to the supply and use of products and services Electric Sector Supplement EU23 Programs for improving or maintaining access to electricity (essential) NA EU24 Practices for dealing with access barriers (education attainment, special needs, etc.) (essential) NA EU25 Accidents and deaths of service users involving company goods (essential) 74 EU26 Population not served in areas with regulated distribution or service (essential) NA EU27 Number of residential cut-offs due to default in payment (essential) NA EU28 Frequency of energy supply interruptions (essential) NA EU29 Average duration of interruptions in energy supply (essential) NA EU30 Average availability factor for generation plants (essential) 47 Relatório de asseguração limitada dos auditores independentes Essential Indicator Electric Sector Indicator Additional Indicator NA ND Not applicable Not available 106 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 107

55 108 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 109

56 Social Balance Sheet - IBASE (GRI EC1) 1 - Calculation Basis R$ thousand R$ thousand Net Revenue (NR) 3,354,005 2,957,525 Operating Income 1,433,334 1,503,782 Gross Payroll (GP) Internal Social Indicators R$ thousand % on GP % on NR R$ thousand % on GP % on NR Food 8, % 0.25% 8, % 0.29% Mandatory social charges 50, % 1.51% 51, % 1.73% Private pension scheme 8, % 0.26% 9, % 0.32% Health 13, % 0.39% 11, % 0.40% Training and professional development % 0.02% 1, % 0.04% Day-care or day-care allowance % 0.00% % 0.00% Other % 0.00% % 0.01% Total - Internal social indicators 81, % 2.44% 82, % 2.80% 3 - External Social Indicators R$ thousand % on GP % on NR R$ thousand % on GP % on NR Education 3, % 0.10% 4, % 0.14% Citizen Children Institute 2, % 0.08% 2, % 0.08% State Fund for Children and Adolescents Rights % 0.00% % 0.03% Minor Apprentice % 0.02% % 0.03% Environmental Education % 0.00% % 0.00% Culture 4, % 0.15% 5, % 0.17% Energy History and Sanitation Foundation / Museum 1, % 0.03% 1, % 0.03% CESP s Choir % 0.00% % 0.00% Rouanet Law and Audiovisual Law 3, % 0.12% 4, % 0.14% Sport % 0.02% 1, % 0.03% Sports Incentive Law % 0.00% % 0.02% Sponsorship to the athlete Maurren Maggi % 0.02% % 0.02% 3.4 -Other 208, % 6.22% 190, % 6.42% Financial Compensation for the Water Use 208, % 6.21% 189, % 6.40% Other % 0.01% % 0.02% Total contribution for society 217, % 6.49% 200, % 6.77% Tax (exclluding social charges) 596, % 17.77% 528, % 17.88% Total - External social indicators 813, % 24.26% 729, % 24.65% 4 - Environmental Indicators R$ thousand % on GP % on NR R$ thousand % on GP % on NR Investments related to the company s production/operation 19, % 0.58% 34, % 1.18% Três Irmãos HEP Reforestation % 0.00% % 0.02% Porto Primavera HEP Reforestation 2, % 0.07% 3, % 0.12% Erosion Control of Dam s Borders 5, % 0.16% 22, % 0.75% Groundwater Monitoring % 0.00% % 0.00% Inspection of Dam s Borders 1, % 0.04% 1, % 0.04% Seedlings Nurseries Jupiá, Primavera and Paraibuna 3, % 0.11% 2, % 0.10% Fish Farming Jupiá and Paraibuna HEPs 1, % 0.04% 1, % 0.05% Marsh Deer Conservation Center in Promissão % 0.02% % 0.03% Wild Birds Conservation Center in Paraibuna % 0.01% % 0.01% Wild Fauna Conservation Center in Ilha Solteira 1, % 0.05% 1, % 0.04% Environmental Licenses % 0.01% % 0.01% Environmental Research & Development % 0.01% % 0.01% Construction of Oil Containment Basins % 0.00% % 0.00% Sewage Network among Plants % 0.00% % 0.00% Toxic Residues Handling - Askarel 2, % 0.07% % 0.00% Investments in external programs and/or projects 6, % 0.19% 4, % 0.15% Conservation Units - Parks ,31% 0,13% ,15% 0,07% Resettlements Emancipation ,14% 0,06% ,16% 0,08% Total environmental investments ,81% 0,77% ,62% 1,33% Social Balance Sheet - IBASE 5 - Personnel Indicators Number of employees at the end of the period 1, Number of admissions in the period Number of interns Number of employees over 45 years old Number of women working at the company % of management positions held by women 1.,11% 13,64% Number of African descendents working at the company % of management positions held by African descendents 1.59% 1.52% Number of handicapped people or with special needs Relevant information as to the company s corporate citizenship practices 2013 Goals 2012 Relation between the highest and lowest compensation in the Company 20,5 23,1 Total number of work-related accidents Social and environmental projects developed by the company were defined by: (X) board and managers (X) board and managers Safety and health standards at the workplace were defined by: (X) all + Cipa (X) all + Cipa Regarding trade union freedom, the right to collective bargaining and the internal representation of workers, the company: ( ) will not get involved ( ) does not get involved ( X ) will follow ILO standards ( X ) follows ILO standards ( ) incentivará e seguirá a OIT ( ) incentiva e segue a OIT The private pension scheme includes: (X) all employees (X) all employees The profit sharing scheme includes: (X) all employees) (X) all employees When selecting suppliers, the same ethical and social and environmental responsibility standards adopted by the company:: (X) are required (X) are required As regards employees participation in voluntary work programs, the company: (X) organizes and encourages (X) organizes and encourages Value added to be distributed (in R$ thousand): In 2012 In ,849,139 1,783,527 Distribution of Value Added (DVA): (GRI EC1) % of Total % of Total Government 34% 32% Employees 10% 11% Shareholders 8% 6% Third Parties 48% 51% Retained 0% 0% 110 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 111

57 ANEEL Tables 1 Operational Performance and Productivity Indicators - ANEEL Technical Data (raw materials, production capacity, sales, losses) Number of Consumers Served - Captive NA NA NA Number of Consumers Served - Free Number of Locations Served (municipalities) NA NA NA Number of Own Employees 1,283 1,330 1,463 Number of Third Party Employees ND ND ND Number of Commercial Offices NA NA NA Energy Generated (GWh) 42, , ,947.1 Energy Purchased (GWh) ) Itaipu NA NA NA 2) Initial Contracts NA NA NA 3) Bilateral Contracts ) Com Terceiros ) Com parte relacionada ) Auctions NA NA NA 5) PROINFA NA NA NA 6) CCEAR NA NA NA 7) Mecanismo de Compensação de Sobras e Déficits - MCSD NA NA NA Global Electric Energy Losses (GWs) Electric Energy Losses - Total (%) on energy requirements NA NA NA Techincal Losses - (%) sobre requisito de energia NA NA NA Non Techincal Losses - (%) sobre o requisito de energia NA NA NA Energia Sales (GWh) (*) 41, ,799 (**) Residential NA NA NA Industrial NA NA NA Commercial NA NA NA Rural NA NA NA Public NA NA NA Public Lighting NA NA NA Public Services NA NA NA Substations (in units) NA NA NA Installed Capacity (MW) 7, , ,455.3 Transmission grid (in km) NA NA NA Distribution grid (in km) NA NA NA Distribution Transformers (in units) NA NA NA Sales of energy by installed capacity (GWh/MVA * No. hours/year) Energy Sold by Employee (GWh) (**) Number of consumers/employee NA NA NA Added Value / GWh Sales DEC NA NA NA FEC NA NA NA Legend: NA > Not applicable; ND > Not Available (*) A quantidade de energia vendida pela CESP em GWh representando todos os contatos bilaterais de curto e longo prazo no Ambiente livre. Contratos bilaterais no ambiente regulado (CCEAR e venda no mercado de curto prazo-ccee). (**) Data corrected considering energy values by the measured criterion. 2 Distribution of Wealth Government and Social Charge - ANEEL R$ thousand % R$ thousand % R$ thousand % ICMS 0 0,0 0 0, PIS 59,517 6, , COFINS 272,776 27, , (-) Credit on COFINS/PIS over Usage energy grid -31,715-3, , INSS 37,822 3, , ISS Recoverable Income Tax 214, , Recoverable Social Contribution 81, , , RGR 100, , , CFURH 208, , , TFSEE/Other charges 17, , , R&D 33, , , =Value Adistibuted (total) 993, , , Sectorial Default - ANEEL R$ thousand % R$ thousand R$ thousand ENERGIA PURCHASED 142, SETORIAL CHARGES RGR 100, % CCC - 0.0% - - CDE - 0.0% - - CFURH 208, % TFSEE 17, % ESS - 0.0% - - P&D 33, % Total (A) 359, % Percentage of bad debt % % % % Total of Bad Debt (A)/Net operational Revenue 0,0% 0,0% 0.0% 0.0% 4 - Investments in the Concession - ANEEL Investments R$ thousand % R$ thousand R$ thousand Expansion on distribution / transmission) NA NA NA NA Renewal of distribution / transmission NA NA NA NA Subtransmission NA NA NA NA 112 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 113

58 5 - Other Indicators - ANEEL Gross Operating Revenue (R$ thousand) 3,819,891 3,379,086 3,318,788 Deductions from Revenue (R$ Thousand) -465, , ,461 Net Operational Revenue (R$ Thousand 3,354,005 2,957,525 2,905,327 Custo e Despesas Operacional do Serviço (R$ Thousand) -2,223,347-1,771,292-1,713,369 Unrecoverable Revenue (R$ Thousand) NA NA NA Income from Service (R$ Thousand) 1,130,658 1,186,233 1,191,958 Financial Result (R$ Thousand) -576, , ,974 Income Tax / Social Contribution (R$ Thousand) -230, ,253-80,688 Net Income (R$ Thousand) 147, ,581 93,042 Interest on Capital (R$ Thousand) 115,000 75,000 75,000 Dividends Distributed (R$ Thousand) (Proposed) 271, , ,440 Costs and Operating Expenses per MWh sold (R$ Thousand) Wealth (Net added value) by Employee (R$) 1,441,26 1,341,00 1,136,48 Wealth (Value to Distribute) by Operating Revenue (%) 48.41% 52.80% 50.10% EBITDA (R$ Thousand) 2,072,317 1,746,937 1,408,024 EBITDA Margin (%) Current Liquidity Liquidity Gross Margin (Net income / Gross Operating Revenue) (%) Net Margin (Net income / Gross Operating Revenue) (%) Profitability of Net Equity (net profit/net equity) (%) Capital Structure - Own Cpital (%) Onerous third party capital (%) (loans and financing) Customer default (accounts past due up to 90 days / Gross Operating Revenues last 12 months) 1.4% 0.7% 0.6% 6 Internal Social Indicators - ANEEL Employment / Employability / Administrators a) General Information Total number of employees 1,283 1,330 1,463 Employees up to 30 years of age (%) Employees between 31 and 40 years of age (%) Employees between 41 and 50 years of age (%) Employees between over 50 years of age (%) Number of women in relation to total employees (%) Women in managerial positions in relation to total managerial positions (%) African-Brazilian employees (Black and Brown) in relation to total employees (%) African-Brazilian employees (Black and Brown) in relation to total employees (%) African-Brazilian employees (Black and Brown) in managerial positions in relation to total managerial positions (%) Interns in relation to total employees (%) Employees in the apprentice contracting program (%) Employees with special needs b) Remuneration. benefits and career (R$ thousand) Remuneration Gross payroll 220, , ,941 Compulsory social charges 8,877 51,158 49,059 Benefits Education training and professional development Food-voucher, basket and snack 8,532 8,682 8,249 Transportation Health 13,063 11,890 14,064 Foundation 8,877 9,546 8,407 Day care or day care aid c) Profit sharing Total investment in company profit sharing program (R$ thousand) 5,297 8,591 7,585 Sums distributed in relation to gross payroll (%) Company actions in power of employees (%) ND ND ND Division of highest pay by lowest pay in cash paid by the company (includes profit sharing and bonus) Division of lowest pay at the company by the current minimum wage (includes profit sharing and bonus) d) Remuneration profile Identify the percentage of employees in each salary bracket (R$) Up to 5 minimum wages From 5.01 to 15 minimum wages From to 30 minimum wages Over 30 minimum wages By Categories (average wage in current year) R$ thousand Director Positions Manager Positions Administrative Positions Production Positions e) Workplace Health and Safety Average overtime per employee/year Total number of work accidents with employees Total number of work accidents with third parties / contracted parties Average work accidents by employee/year Accidents with temporary leave of employees and/or service providers (%) Accidents that resulted in mutilation or other damage to the physical integrity of employees and/or service providers. with permanent leave from the position (including RMI) (&) Accidents that resulted in death of employees and/or service providers (%) Total WA (work attendance) rate for the company in the period. for employees Total WA (work attendance) rate for the company in the period. for third parties/contracted parties ND ND ND Investments in specific programs for HIV patients (R$ thousand) NA Investments in dependency prevention and treatment programs (drugs and alcohol) (R$ thousand) C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 115

59 6 - Indicadores Sociais Internos - ANEEL f) Professional development Education attainment profile percentage in relation to total employees Elementary education High school education Higher education Graduate Studies (specializationon. Master s. PhD) Illiteracy in the workforce (%) 0 0 NA Sum invested in professional development and education (R$ thousand) Number of hours of professional development per employee/year g) Behavior in face of dismissals Number of employees at the end of the period (dismissed) Number of admissions during the period Labor claims filed by total dismissed in the period (%) Labor claims Sum claimed in lawsuits (R$ thousand) 467, , ,000 Amount provisioned in liabilities ND ND Number of existing lawsuits 1,936 1,945 2,078 Number of bound employees in the lawsuits 4,624 4,210 3,754 h) Preparation for retirement Investment in complementary pension plans (R$ thousand) 8,877 9,546 8,407 Number benefited by the complementary pension program 1,206 1,272 1,387 Number benefited by the retirement preparation program i) Outsourced Workers Number of outsourced / contracted workers ND ND ND Total cost (R$ thousand) ND ND ND Outsourced / contracted workers in relation to total workforce (%) ND ND ND Remuneration profile - % of employees in each salary bracket ND ND ND Up to 5 minimum salaries ND ND ND From 5.01 to 15 minimum wages ND ND ND From 5.01 to 15 minimum wages From to 30 minimum wages ND ND ND Over 30 minimum wages ND ND ND Education attainment profile in relation to total outsourced (%) ND ND ND Elementary education ND ND ND High school education ND ND ND Higher education, Graduate studies ND ND ND Total SR (seriousness rate) for the company in the period, for employees ND 5,12 ND Total SR (seriousness rate) for the company in the period, for outsourced/ contracted workers ND ND ND j) Administrators Remuneration and/or total fees (R$ thousand) (A) 1, Number of Directors (B) Remuneration and/or average fees A/B (*) 178 (*) Board of Director Fees (R$ thousand) (C) Number of Directors on the Board (D) Average monthly fees (C/D) (*) 53 (*) Legend: NA > No applicable; ND > Not available (*) The sums shown in 2011/2010 were wrongly calculated. 8 External Social Indicators - ANEEL Community a) Management of company impact in surrounding community Number of community complaints impacts caused by company activities ND ND ND Number of improvements implemented in company processes based on community complaints ND ND ND b) Company involvement in accidents related to third parties Sum claimed in lawsuits (R$ thousand) ND ND ND Amount provisioned in liabilities (R$ thousand) ND ND ND Number of existing lawsuits ND ND ND Number of people bound in the processes ND ND ND c) Low Income Tariff Number of customers / consumers with low income tariff NA Total customers/consumers with low income tariff in relation to total residential customers/consumers (%) d) Company involvement with social actions Funds applied in education (R$ thousand) 3,459 4,220 4,739 Funds invested in health and sanitation (R$ thousand) ND ND ND Funds applied in culture (R$ thousand) 4,940 5,119 4,515 Other funds invested in social actions (R$ thousand) 842 1,627 1,502 Amount destined for social action (do not include legal obligations, or taxes, or benefits tied to the conditions of employees at the company (R$ thousand) 5,331 6,896 7,680 Of the total destined to social action, percent corresponding to donations in products and services (%). ND ND ND Of the total destined to social action, percent corresponding to donations in cash (%) Of the total destined to social action, percentage corresponding to investments in own social project. 0% 45% 43% Employees who carry out volunteer work in the community external to the company / total employees (%). ND ND 0,00 Number of monthly hours donated (released from normal work hours) by the company for employee volunteer work ND ND 0 Consumers registered in the Family Stipend Program/Number of consumers from the low income segment (%). NA NA NA e) Company involvement in cultural, sports, etc. projects (Rouanet Law) Sum of resources destined to the projects (R$ thousand) 3,910 4,070 3,076 Numer of projects benefited by sponsorship Sum of funds destined to the bigger project (R$ thousand)* * Detail in relation to the greater project: project title, beneficiary (sponsored: individual or legal entity) 1,000 1,000 1,000 Legend: NA > Not Applicable; ND > Not available 9 External Social Indicators Suppliers - ANEEL Suppliers In relation to child labor, forced labor and work safety and health conditions, etc. a) Supplier selection and evaluation Suppliers Inspected by the company / total suppliers (%) ND ND ND Non-qualified suppliers (nonconformity with company s social responsibility criteria) / Total Suppliers (%) Suppliers with SA 8000 certification / total active suppliers (%) 0, b) Support for supplier development Number of training sessions offered suppliers Number of training hours offered to suppliers External Social Indicators Customers / Consumers - ANEEL Customers / Consumers a) Excellence in Service NA NA NA b) Technical Quality of Services Provided NA NA NA c) Safety in the End Use of Energy by Consumer NA NA NA Legend: NA > Not Applicable; ND > Not available 10 Government and Society - ANEEL a) Management of company impact on surrounding community Funds Allocated in Government Programs (not obliged by law): Federal, State and Municipal (R$ thousand) ND ND ND Number of Initiatives / Events / Campaigns Geared towards Citizen Development (voting, conscious consumption, anti-corruption practices, children s rights, etc.) ND ND ND Advertising Funds Destined for Institutional Campaigns for Citizen Development (R$ thousand) ND ND ND Funds Invested in Programs that Use Fiscal Incentives / Total Resources Destined for Social Investments (%) ND ND ND Legend: NA > Not Applicable; ND > Not available 116 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 117

60 11 Universalization - ANEEL Service goals NA NA NA Service calls made (no.) NA NA NA Meeting goals (%) NA NA NA Total municipalities universalized NA NA NA Municipalities universalized (%) NA NA NA Electricity for All Program Service goals NA NA Number of service calls made (A) NA NA NA Meeting goals (%) NA NA NA Electricity for All Program Origin of Funds Invested (R$ thousand) Federal government Energy Development Account - CDE NA NA NA Global Reversion Reserve - RGR NA NA NA State Government NA NA NA Own NA NA NA Other NA NA NA Total funds invested (B) NA NA NA O&M NA NA NA Average cost per service (B/A) NA NA NA 12 Energy Efficiency Program PEE - ANEEL a) Origin of Funds by Consumer Class (R$ thousand) NA NA NA b) Energy efficiency NA NA NA 13 Low Income Tariff - ANEEL Number of domiciles served as low income NA NA NA Total low income domiciles of total domiciles served (residential customers/consumers) (%) NA NA NA Revenue from billing in the residential low income sub-class (R$ thousand) NA NA NA Total revenue from billing in the residential low income sub-class in relation to total revenue from billing in the residential class (R$ thousand) NA NA NA Subsidy received (ELETROBRAS) related to low income consumers (R$ thousand) NA NA NA 14 Funds invested in Technological and Scientific Research and Development - ANEEL By research themes (R&D Manual ANEEL) - ANEEL Total cost Energy efficiency (A) Renewable or alternative source (B) Environment (C) 9,279 1, Quality and reliability (D) 18,350 2,054 1, Planning and Operation (E) 16, ,982 1,003 Supervision, control and protection (F) 12,108 1,199 1,024 1,927 Measurement (G) 3, Data transmission over the electric grid (H) NA NA NA NA New materials and components (I) Development and technology to combat fraud and theft (J) NA NA NA NA Total investment in R&D (K) 59,109 5,515 6,050 3,473 Funds invested in Energy Efficiency (A) over Total Invested in R&D (K) (%) NA NA NA NA Funds invested in Renewable or Alternative Sources (B) over Total Invested in R&D (K) (%) Funds invested in Environment (C) over Total Invested in R&D (K) (%) Funds Invested in Quality and Reliability (D) over Total Invested in R&D (K) (%) Funds invested in Planning and Operations (E) over Total Invested in R&D (K) (%) Funds invested in Supervision, Control and Protection (F) over Total Invested in R&D (K) (%) Funds invested in Measurement (G) over Total Invested in R&D (K) (%) Funds invested in Data Transmission over the Electric Grid (H) over Total Invested in R&D (K) (%) NA NA NA NA Funds invested and New Materials and Components (I) over Total Invested in R&D (K) (%) Funds invested and Development of Technology to Combat Fraud and Theft (J) over Total Invested in R&D (K) (%) NA NA NA NA 15 Environmental Indicators - ANEEL Environmental indicator U.M. Recovery of degraded areas Implementation of reforestation in own areas Hectares Recovery of loaned areas Hectares Implementation of forest promotion in outsourced areas Hectares Number of forest species saplings produced 1,053,025 2,131,343 2,393,884 No. Management of wild fauna Number of managed species No. Number of individuals that refer to managed species No. Conservation of ichthyofauna Number of ichthyological and limnological monitorings No. Number of species produced for stock No. Number of fries used for stock 3,826,870 4,013,440 3,697,015 No, Preservation ot Union heritage areas Number of utilization regularizatons of CESP areas No, Generation and treatment of residues Number of aquatic plants removed when taken water for the hydroelectric plant 2,205 1,710 2,355 m³/year Number of organic residues produced in CCFS destined for composting 14,400 13,000 12,590 m³/year Environmental Education Number of municipalities served No, Number of educational units and entities served No, Number of students served 13,243 21,755 41,010 No, Number of service calls to teachers (training) No, Number of visitors to the Fauna Conservation Centers 2,079 35,720 34,319 No, Number of participants in activities by the internal public 707 1,935 2,081 No. Research & Development Quantity of projects in development No. Investments in R&D R$ 16 Environmental Indicators for Generation Companies - ANEEL Source of generation: Hydraulic U.M Electric energy consumption from generation and auxiliary units MWh 68,363 71,719 75,853 Erosion of reservoir banks Hectares ND Restoration of riparian vegetation Hectares ND Quality of water and sediment from reservoirs ND ND ND Rescue of fish from turbines Kg 3,431 12,177 ND Number of fries used for stock Qty, 3,776,570 4,013,440 3,697,015 Removal of residues from reservoirs (trash, macrophytes, industrial effluents and domestic effluents and silting sediment) Kg 2,205 1,710 ND Launch of untreated sanitary effluents and spills of lubricating and hydraulic oils in turbines ton or m3/year ND ND ND 118 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 119

61 Brazilian Accounting Rules NBC T15 Information on Social and Environmental Nature Human Resources Remuneration and benefits granted to employees, managers, outsourced and self-employed manpower Item Measuring Unit Value a) gross remuneration broken down by employees, managers, outsourced and self-employed manpower R$ thousand 220, ,325 b) ratio between the highest and the lowest remuneration in the company, for employees and managers Index 23,11 25,68 c) social charges expenses R$ thousand 50,622 51,158 d) feeding expenses R$ thousand 8,532 8,682 e) transportation expenses R$ thousand f) private pension expenses R$ thousand 8,877 9,546 g) health expenses R$ thousand 13,063 11,890 h) expenses with work safety and medicine R$ thousand ND ND i) expenses with education (excluding environmental education): payment of scholarships R$ thousand j) cultural expenses R$ thousand ND ND k) expenses with professional training and development R$ thousand 718 1,175 l) expenses with day care school or aid to pay day care schools R$ thousand m) participation in profits or results R$ thousand 5,297 8,591 Composition of human resources Item Amount a) total number of employees at the year end 1,283 1,330 b) total of employees hired c) total of employees dismissed d) total of interns at the year end e) total of employees with physical special needs at the year end f) total or outsourced manpower at the year end ND ND g) total number of employees broken down by gender F F M F M 189 1, ,134 h) total number of employees broken down age, as follows: under 18 y.o y.o y.o. 1,022 1,092 Over 60 y.o i) total of employees broken down by schooling, such as:: illiterate 0 0 first grade High School university level post-gradutes j) percentage of managerial position, by gender F M F M 11.1% 88.9% 13.6% 86.4% Brazilian Accounting Rules NBC T15 Information on Social and Environmental Nature Ambiente Externo Interaction with Community Item R$ x thousand a) education, except for environmental character 3,349 4,100 b) culture 4,940 5,119 c) health and sanitation 0 0 d) sports and leisure, sponsorship for publicity purposes are not considered 550 1,002 e) food 0 0 Interaction with clientes Item Amount a) number of complaints directly received in company (amount) ND ND b) number of complaints received by other means such as consumer protection agencies (amount) ND ND c) number of complaints legally received (amount) ND ND d) number of complaints received at each level enrolled (amount)) ND ND e) number of penalties and indemnifications to customers, determined by consumer protection agencies or justice (R$ thousand) ND ND f) measures taken by the company to solve or minimize the complaints (amount) ND ND Suppliers interaction Use of social responsibility criteria to select suppliers. Every contract signed by CESP with its suppliers bear clauses regarding social responsibility matters, human rights and labor issues, on which the payment is subject to approval, by the suppliers hired, about his fulfillment of its work obligations. These clauses forbid child labor, slave work, but in 2012 suppliers were not evaluated in this item. Meio Ambiente Environment Interaction with the environment Item R$ x thousandl a) investment and expenses with maintenance of operational processes to improve the environment (R$ thousand)) ND ND b) investment and expenses with preservation and/or recovery of degraded areas (R$ thousand) 9,125 6,479 c, dinvestment and expenses with environmental education of employees, outsourced, self-employed and, managers of the company and community (R$ thousand) e) investment and expenses with other environmental projects (R$ thousand) ND ND f) amount of environmental, administrative and legal suits against the company (amount) g) value of penalties and indemnification regarding environmental matters, administratively or judicially determined (GRI EN28) (R$ thousand) 27,965 28,953 h) liabilities and environmental contingencies (R$ thousand) ND ND Labor Suits against the company Item Amount a) number of labor suits against the company (amount) 1,936 1,945 b) number of labor suits upheld (amount)) c) number of labor suits dismissed (amount) d) total value of indemnifications and penalty fees paid due to law enforcement (R$ thousand) ,331 complete this information, processes partially promoted or closed by deals may be considered valid. 120 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 121

62 Contact List (GRI 3.4) General Coordination Executive Coordinating Office Manager: Márcio Rea - Phone nº: Supporting and GRI Indicators Team Technical Team from Generation Board Technical Team from Financial and Investor Relations Board Technical Team from Engineering and Construction Board Technical Team from Administrative Board Technical Team from Environment Department Technical Team from Human Resources Department Technical Team from Communication Department Technical Team from IT Department GRI Indicators Coordinator Roberto Aparecido Duscchitz Segato Graphic Design Coordinator Inácio Hiroyuki Katagiri Electronic Publishing Tadeu Barros Macedo Translator Lígia Nastri Photos Ader Gotardo Arquivo CESP Arquivo ICC José Caldas Renato Ramalho Corporate Information COMPANHIA ENERGÉTICA DE SÃO PAULO CESP Avenida Nossa Senhora do Sabará, CEP: Vila Emir São Paulo SP Brasil Phone: (11) FAX: (11) CNPJ: / Website: The Company website is also available to those visually impaired. At the Company s website there are also information available on the financial performance, corporate governance, reports, quarterly and annual financial statements and others. The Investor s Relations (IR) link is available in Portuguese, English and Spanish. For IR Assistance please contact: ricesp@cesp.com.br 122 C E S P - S U S T A I N A B I L I T Y R E P O R T S U S T A I N A B I L I T Y R E P O R T C E S P 123

63 124 C E S P - S U S T A I N A B I L I T Y R E P O R T