18 sustainability report Corporate Shared Message Profile Value from the Administration Creation

Foreword Attachments Context summary 20 years transmitting more than energy

In 2019, we will celebrate, in , 20 years of contributions to well-being, quality of life, and the development of the communities in our concession area. More than just transmitting energy, we are concerned with caring for the planet and promoting connections towards a future without frontiers and without barriers.

This is the legacy that we seek to leave to future generations, since we are convinced that where there are connections, there is life. Message from the Administration 621 million in “Green Bonds,” the first issue Message from within the transmission sector under this the administration classification. In this scenario, Fitch confirmed GRI 102-14 the credit rating for ISA CTEEP as Investment Grade at ‘AAA (bra)’, with a stable outlook. The year 2018 was undoubtedly one of the best in the history of ISA CTEEP. Our sound financial performance reflected positively on the market, with the price of our We are proud to present in this report our preferred shares traded in the stock market financial and operational performance, and increasing by 24%, reaching a price of BRL our contribution to relevant topics such as 75.74 per TRPL4 share, the then highest social, environmental, and technological historical price recorded, and which continues agendas. It was a year marked by significant to set new records. We also increased value results in all our fronts, totally aligned with creation for our shareholders with the our achievements in recent years and that distribution of approximately BRL 2 billion consolidate our position as a leading-edge in earnings, the highest amount since the company in the transmission segment of the Company was incorporated. Brazilian electricity sector. In operational terms, we raised our levels of Our strong cash generation was one of efficiency, quality, and safety. In this sense, the highlights in the year. In 2018, we one of the most significant indicators was the reached the first cycle of receivables for Non-Supplied Energy Index—which for years non-amortized assets existing in May 2000 has qualified our company as a benchmark in de Remuneração Regulatória), to allow (RBSE), arising from the process to extend the electricity sector—having registered our companies to have the necessary conditions the concession term. Net operating income best result in the last 15 years. to maintain the quality of their operations in IFRS totaled BRL 3.2 billion and the and continue to invest. consolidated EBITDA in IFRS, pursuant to Another relevant point in 2018 was the ICVM 527/12, reached BRL 2.5 billion with a Company’s participation in the tariff review Growth remains as one of the vectors of projects in the ANEEL transmission auction 78% margin. The consolidated net income in process. We remain attentive to the definition our strategy. Last year, the Company’s held in June last year reinforces our position IFRS reached BRL 1.9 billion, BRL 510 million of an adequate value for the Permitted investments in reinforcements and as a highly competitive player. In all, we higher than in 2017. Annual Revenue (RAP - Receita Anual improvements totaled BRL 144 million, are working in 10 new projects obtained in Permitida) for Operation and Maintenance, as and energizing new projects added an auctions, which represent a commitment to The solid balance sheet allowed for the best well as for the weighted Average Capital Cost RAP of BRL 61 million. Investments in our invest nearly BRL 2.9 billion. We will remain funding of the year in the infrastructure (WACC) of the projects and of the Regulatory subsidiaries, operational and pre-operational, attentive for opportunities of new projects bonds market with the issuance of BRL Remuneration Base (BRR - Base totaled BRL 294 million. Winning two new with suitable profitability.

5 2018 SUSTAINABILITY REPORT | ISA CTEEP BRL 621 million NET INCOME REACHED OBTAINED THROUGH THE ISSUE BRL 1.9 billion, OF “GREEN BONDS” BRL 510 MILLION HIGHER THAN IN 2017

The unique performance in 2018 is greatly The excellent results of the past year make due to the effort and training of our team of 2019 especially challenging. Our achievements more than 1,500 employees, which makes increase the responsibility for raising the level of the creation of a healthy and productive our operations, of our management and of value work environment one of our top priorities. creation. Furthermore, 2019 will be very special for Therefore, the result of the organizational us for another reason: we will celebrate 20 years climate survey in 2018—the best ever recorded of a journey that is intimately associated with the by the Company—and our inclusion, for the very history of the Brazilian electricity sector. third consecutive year among the ranking of Best Companies to Work published by GPTW, We are undergoing a moment of great climate change—proving that we are in sync are reasons for great satisfaction. satisfaction and motivation. Our proven capacity and committed to overcoming the challenges to reinvent ourselves to overcome challenges In the sustainability front, we remain signatories proposed by the current global agenda. Last year also marks the setting of a new empowers us to capitalize on the opportunities to the Global Compact and increased our strategic direction for our organization, aiming that come with the recovery of the country’s contributions to social projects, reaching the We also highlight the way we faced our for 2030 and mainly focused on creating economic growth. Completing two decades makes highest value ever invested by a Company technological challenges and addressed aspects sustainable value. To this end, we will seek us proud of everything we have accomplished through tax incentive laws. Just as important of innovation within the electricity sector. We growth based on the continuous increase and drives us to remain as a company that is as these values was our choice of the initiatives invested BRL 9 million in R&D projects and in efficiency and in the incorporation of synonymous with quality and committed to the to be supported, which are in line with the opened our doors for startups looking to find innovation at all levels of the company. This development of Brazil. organization’s priority social and environmental new solutions and inspire a more agile and positioning will allow us to become key players topics, which are education and training innovative work environment, and we ranked in terms of technological and regulatory of youths, development of communities second in the Top 50 Open Corps, organized by transformations, which will determine the Reynaldo Passanezi Filho surrounding our facilities, and the 100 Open Startups platform. future of the Brazilian electricity sector. PRESIDENT

6 2018 SUSTAINABILITY REPORT | ISA CTEEP Foreword About the Report Capitals

For the second consecutive year, we are publishing report considers our performance and that our economic and social and environmental of our wholly-owned subsidiaries. The GRI performance, with creation of value for the various indicators throughout the document cover stakeholders, in compliance with the principles only our role as holding company, with the of Integrated Reporting, developed by the exception of social and financial data that also International Integrated Reporting Council (IIRC). include our wholly-owned subsidiaries and NATURAL FINANCIAL INTELLECTUAL Also for the second consecutive year, this report equity-accounted companies, in line with our capital capital capital was prepared in compliance with GRI Standards: consolidated Financial Statements, which can “In Accordance – Core” option, of the Global be viewed here. GRI 102-45, 102-50 Reporting Initiative (GRI). The report also complies with recommendations from the Guideline for the Questions concerning this report Development of the Annual Report on Social and and suggestions—which are always Environmental Responsibility of Companies in the welcome—can be sent through the emails Electric Energy Sector, a requirement set out by [email protected] and/or HUMAN INFRASTRUCTURE SOCIAL AND RELATIONSHIP capital capital capital the Agência Nacional de Energia Elétrica – ANEEL [email protected]. The (National Electric Energy Agency). GRI 102-54 Corporate Communication and Sustainability Department is also available to address any The information refers to the year 2018 and topics published herein. GRI 102-53 Stakeholders the management practices described in the

SOCIETY EMPLOYEES GOVERNMENT

SUPPLIERS SHAREHOLDERS AND INVESTORS CLIENTS

8 2018 SUSTAINABILITY REPORT | ISA CTEEP Materiality Topics Subtopics Corresponding GRI 102-47 GRI 102-47 GRI indicators In 2018, we internally reviewed our Materiality Reliability/availability of the system EU3, EU6, EU12, EU21, EU23, EU28, EU29 Matrix looking to have this report reflect our Quality and Operational efficiency technologies in the services provided EU6, EU8, EU21 current strategic planning, completed in the fiscal 1 provision of services Cross-cutting topic, covered by several indicators, Management of assets year, and the topics of relevance to our priority especially 103-1, 103-2 and 103-3 stakeholders1, formally consulted in 2015: employees, Relationship with the government and regulatory agency 102-13, EU23 clients, shareholders and investors, suppliers, Engagement Relationship with clients (monitoring their satisfaction and needs) 416-1, 419-1, EU3, EU6, EU23, EU28, EU29 society, and the government. As such, this report 2 with groups of contains the updated business line and considers all stakeholders Shareholder and investor relations 102-43, 102-44, 102-46, 102-54 priority aspects determined in 2015, as well as the Consideration of demands and opinions of stakeholders in planning and internal procedures 102-40, 102-42, 102-43 102-44, 102-46, EU23 corresponding GRI indicators, divided into material Business ethics and integrity (values, principles, standards, norms, internal and external mechanisms to guide 102-12, 102-16, 102-7, 102-18, 205-1, 205-2, 205-3, 406-1, ethical conduct and measures taken in case of non-ethical behavior, etc.) 408-1, 409-1, 411-1, 412-1, 412-2, 412-3, 414-1, 414-2 subtopics. GRI 102-40, 102-43, 102-46, 102-49 Governance and 3 Compliance Long-term economic perpetuity of the business (macroeconomic scenario, strategy, etc.) 102-10, 102-14, 201-1, EU8, EU19 In 2019, we will revise the methodology to promote Compliance with laws, internal regulations and norms; occurrence of fines and nonfinancial sanctions 102-12, 102-2, 102-4, 307-1, 407-1, EU22, EU25 a new consultation with our stakeholders in order Knowledge and succession management 205-2, 404-1, 404-2, EU14, EU15 to address the demand for information concerning Development of Performance assessment, management of competencies, and leadership development 404-2, 404-3, 405-2, EU14 4 our business. We will also update our Materiality Human Capital Career plan and continuous learning 404-1, 404-2, 404-3 Matrix every two years, in line with the continuous Health, safety, and quality of life of employees 403-1, 403-2, 403-3, 403-4, EU16, EU17, EU18 improvement that guides our actions. Ecosystems, 304-1, 304-2, 304-4, 305-1, 305-2, 305-3, 305-4, 305-5, 5 landscapes and Compliance with laws and environmental requirements, including licenses/conditions 307-1, 308-1, 308-2, EU13 biodiversity Materiality Matrix 2018 Quality assessment of products and/or services and performance of contracts Suppliers and Relationship with suppliers and feedback on performance 102-9, 102-10,102-11, 102-40 à 102-44, 414-1, 414-2 + 6 contractors 1 Assessment of labor practices (employment practices; health and safety practices; union relations; work hours, 3 etc.) Relationship and awareness raising in communities about the safe coexistence with transmission assets (for 6 4 Community example, guidance on prevention of fires, disposal of waste, irregular occupations/invasion, etc.) 7 7 EU21, EU23, EU24, EU25, 103-2, 416-1, 416-2 5 2 relations 8 Procedures to prevent health and safety risks for communities (for example, falling of structures, electrical discharges, exposure to electrical and magnetic fields, etc.) Environmental ecoefficiency stemming from improvements in installations, infrastructure, and equipment (for 9 example, age of the installations; maintenance, etc.) Ecoefficiency 302-1, 302-2, 302-3, 302-4, 302-5, 103-2 8 Responsible consumption of energy (electrical energy and fuels, at the operations/facilities

ISA CTEEP STAKEHOLDERS CTEEP ISA Responsible use of materials in operations/facilities Financial risks and opportunities associated with climate change 9 Climate change 201-2, 305-1, 305-2, 305-3, 305-4, 305-5, 305-6, 305-7 Regulatory risks and opportunities associated with climate change

- ISA CTEEP +

1 Definition of these stakeholders is based on the impact that our activities have upon the different audiences and the influence of these audiences in our business

9 2018 SUSTAINABILITY REPORT | ISA CTEEP Corporate profile ISA CTEEP IE Pinheiros 100% GRI 102-1 IE Serra do Japi 100% As one of the leading energy transmission of ISA Group and we have, among our investors, companies in Brazil, we are a publicly traded , leader in Brazil in the electric energy IE Aguapeí 100% corporation, with shares listed on the Brazilian sector. We also have 60,000 shareholders, stock exchange B3, where, since 2002, we have including individuals and legal entities, in various IE Itaúnas 100% been a part of Level 1 in Corporate Governance, countries. We have full shareholding interest or which recognizes the voluntary adoption of partial interest, along with other organizations, in IE Itaquerê 100% renowned practices in this field. We are a part the following companies. GRI 102-2, 102-5 IENNE 100%

IE Tibagi 100%

IE Sul 100% 100% ISA CTEEP ISA 100%

IEMG 100%

Evrecy 100%

IE Itapura (Lote 25) 100%

IE Biguaçu 100%

IE Itapura (Lote 10) 100%

IE Madeira Pumas 24,5% | Chesf 24,5% 51%

IE Ivaí TAESA 50% 50%

IE Paraguaçu TAESA 50% 50%

IE Garanhuns Chesf 49% 51%

IE Aimorés 50%

TAESA 50% EQUIVALENCE EQUITY

11 2018 SUSTAINABILITY REPORT | ISA CTEEP Presence in Brazil

We have operations in 17 Brazilian states2 Furthermore, in auction No. 2/2018 by the and our main clients are public energy utility National Electric Energy Agency (ANEEL) for companies—in 2018 there was a total of transmission lines, we were awarded two lots, 46 energy generating and self-producing further reinforcing our position in the state of companies, 15 transmission companies and São Paulo and in Brazil’s Southern region. In all, 9 energy distribution companies—in addition in 2018 we were working in ten new projects MA to free consumers (11 in the year). Nearly obtained in auctions, with investments of nearly 25% of all energy transmitted in the country BRL 2.9 billion. PB pass through our transmission networks, a PI percentage that reaches 60% if we take into In order to perform a vital role in the PE account all energy consumed in the Southeast Sistema Interligado Nacional – SIN (National AL region, the country’s most populous region. In Interconnected System), with innovation RO TO São Paulo, we account for almost 100% of the and quality, at the end of 2018 we had: GRI BA energy transmitted. GRI 102-2, 102-4, 102-6, EU3 102-7, 102-8 MT

IE Pinheiros SP GO IE Serra do Japi SP IE Itaquerê SP IE Itapura (Lote 10) SP MG ES IE Itapura (Lote 25) SP MS 126 18,600 25,800 IEMG MG 550 KV SUBSTATIONS KILOMETERS OF KILOMETERS IE Aimorés MG SP TRANSMISSION LINES OF CIRCUITS EVRECY MG and ES IE Paraguaçu MG and BA PR IE Itaúnas ES IE Madeira SP, MG, GO, MT and RO IE Aguapeí MS SC IE Tibagi MS IE Garanhuns PB, PE and AL IE Sul PR, SC and RS RS INSTALLED TRANSFORMATION IE Ivaí PR 2,358 CAPACITY OF 1,524 KILOMETERS OF OWN EMPLOYEES3 IE Biguaçu SC FIBER-OPTIC CABLES 65,900 MVA IENNE TO

2 , , Paraná, São Paulo, , Espírito Santo, Rondônia, , , Goiás, , Maranhão, Piauí, Paraíba, , Alagoas and Bahia. 3 Includes Board members, interns and apprentices.

12 2018 SUSTAINABILITY REPORT | ISA CTEEP ISA Group Our holding company, Interconexión Eléctrica ISA Manifesto S.A. E.S.P. – ISA, is a multi-Latin business group Central America Corporation linked to the Ministry of Mines and If we are aware that we are all one, there is a connection. Energy in Colombia. Its shares are traded on Colombia the Colombian Stock Exchange and through If we understand that our planet is fragile and that we must care for it, there is a American Depositary Receipts (ADRs) - Level 1 connection. program, in the North American market. If we understand that our actions, Ecuador however small, cause impacts, there is a With its operations based on creating connection. sustainable value, and guided by principles If we find that in each and every one of us of ethics, transparency, social and is the change we want to see in the world, environmental respect, innovation, and digital there is a connection. transformation—which are commitments that If we are sure that our well-being is Peru Bolivia support the business of the 43 subsidiaries connected to that of others, there is a controlled by the Group—ISA is known for the connection. excellence of its operations in the following If we know that excellence is the result of sectors: electric energy, concession of the effort we dedicate to each action,there is a connection. highways, and telecommunications. In 2018, for the fourth consecutive year, the company If we are committed to having a constructive Brazil and responsible participation in decision- was included in the Dow Jones Sustainability making, there is a connection. Index (DJSI) and, for the third time, in If knowing that we are driven by The Sustainability Yearbook, prepared by large challenges moves us, there is a RobecoSAM. In the year, ISA also received the Chile connection. Quality Seal granted by the Colombian Stock Exchange, for its corporate governance criteria. Argentina After half of century, we are renovated, creating connections, one after the other. As a result of these differentiators and of Without borders. Without barriers. That’s the qualified performance of its activities, our legacy for future generations. ISA contributes to the improvement of life for more than 170 million people in Brazil, We are convinced that if there is a connection, there is life. Colombia, Chile, Peru, Bolivia, Ecuador, Let’s celebrate. Argentina, and Central America.

13 2018 SUSTAINABILITY REPORT | ISA CTEEP MARKET TRENDS: Business model Digitization, Decentralization, Decarbonization, Climate Change, Intelligent Mobility, Protagonist Consumer, Inclusion

• Substations INDUSTRY PLAN: NATIONAL • Transmission ENERGY PLANNING • Availability of Lines assets

INFRASTRUCTURE INFRASTRUCTURE SOCIETY capital capital

• Waste generation • Investments • Emissions and spend on • Consumption of mitigating impacts DEMAND FOR TRANSMISSION natural resources NATURAL INFRASTRUCTURE NATURAL EMPLOYEES capital capital

• Own and third- party Social • Added-Value to Capital Distribute • Dividends Verde Inovação FINANCIAL (Green) (Innovation) FINANCIAL GOVERNMENT capital capital CONNECTIONS PARTICIPATION THAT INSPIRE IN AUCTIONS • Employee • Employee remuneration diversity Articulação Desenvolvimento • Benefits package • Training and (Coordination) (Development) • Health and safety qualification • Employee development HUMAN HUMAN SUPPLIERS capital capital

• Investments in INVESTMENT IN CONSTRUCTION, • Impact of social social projects REINFORCEMENTS, AND projects • Measures to IMPROVEMENT OF ASSETS • Supplier address impacts development upon society SOCIAL AND SOCIAL AND SHAREHOLDERS RELATIONSHIP RELATIONSHIP AND INVESTORS capital capital

• Innovation • Patents Ecosystems • New processes and • Investments in OPERATION AND MAINTENANCE TO systems Innovation and ENSURE AVAILABILITY OF THE LINE • Increased efficiency R&D TO DELIVER ENERGY INTELLECTUAL INTELLECTUAL CLIENTS capital capital

RISKS: Legal and regulatory; Environmental, social, and property; Market, liquidity and credit; Suppliers; Errors or omission 2018 Highlights Auction No. 2/2018 by ANEEL: Represents all WE ACQUIRED LOTS 1 AND 10, WITH EXPECTED infrastructure, lines, towers, substations that INVESTMENTS OF BRL 879 MILLION INFRASTRUCTURE comprise the company’s BRL 9.4 million capital operations. Acquisition of IE Sul: INVESTED IN R&D Comprises brand, reputation, and innovative IN 2018, WE BECAME FULL OWNERS OF THE ASSET projects developed within Seven projects the business. IN RESEARCH AND DEVELOPMENT (R&D) 99.99% availability AVERAGE FOR OUR TRANSMISSION LINES INTELLECTUAL capital BRL 2.47 million IN EBITDA Represents management BRL 1.9 billion of employees and all their BRL 4.5 million INVESTED IN TRAINING AND QUALIFICATION OF IN NET INCOME knowledge. HUMAN HIGH-PERFORMANCE TEAMS capital BRL 144 million Represents the financial INVESTMENTS IN REINFORCEMENTS AND IMPROVEMENTS resources invested 86% favorability and generated by the IN ORGANIZATIONAL CLIMATE ISSUE OF BRL 621 million company’s operations. IN GREEN BONDS FINANCIAL capital

BRL 15.8 million 12.8% reduction Represents the INVESTED IN INCENTIVE PROJECTS IN THE AREAS OF IN GREENHOUSE GAS EMISSIONS (GHG - SCOPES 1 AND 2) relationship with all HEALTH, CULTURE, SPORTS, AND EDUCATION SOCIAL AND company audiences. RELATIONSHIP 64.5% reduction BRL 414,000 IN CONSUMPTION OF FOSSIL FUELS capital Represents all interactions INVESTED IN A COMMUNITY RELATIONS PROGRAM, the company has with BENEFITTING 8,000 PEOPLE THROUGH 49 ACTIVITIES the environment and its BRL 2.5 million ecosystem services. INVESTED IN THE ENVIRONMENT 99.53% NATURAL OF SUPPLIERS HIRED ARE LOCAL SUPPLIERS capital

15 2018 SUSTAINABILITY REPORT | ISA CTEEP Awards and recognition Strategy GRI 102-11

Best Places to Work: In 2018, our Group adopted a new strategy, management. Afterwards, a large event was FOR THE THIRD CONSECUTIVE YEAR, WE WERE INCLUDED IN THE GREAT PLACE TO WORK RANKING (GPTW), AS ONE OF THE BEST COMPANIES TO WORK, FEATURING AMONG THE 80 with directives for sustainable development held for the launch, in which, simultaneously, all NATIONAL AND MULTINATIONAL COMPANIES WITH MORE THAN 1,000 EMPLOYEES. that will guide us up to 2030. Called ISA 2030 group companies learned of the future steps that and with the motto “Our future inspired by will allow for the continuity of the profitable and 2018 Transparency Award: sustainable value,” the strategy stems from a perpetual growth of the business, with creation AWARD GIVEN BY THE ASSOCIAÇÃO NACIONAL DOS EXECUTIVOS DE FINANÇAS, long development process of which we actively of value for all stakeholders and the environment. ADMINISTRAÇÃO E CONTABILIDADE - ANEFAC (NATIONAL ASSOCIATION OF FINANCE, participated. ADMINISTRATION, AND ACCOUNTING EXECUTIVES) IN PARTNERSHIP WITH THE FUNDAÇÃO INSTITUTO DE PESQUISAS CONTÁBEIS, ATUARIAIS E FINANCEIRAS - FIPECAFI (NATIONAL ASSOCIATION OF FINANCE, ADMINISTRATION, AND ACCOUNTING EXECUTIVES) AND The starting point for the planning was our FUTURE INSPIRED BY SERASA EXPERIAN, THE AWARD ACKNOWLEDGES OUR EXCELLENCE AND TRANSPARENCY Manifesto—looking to materialize inspiring SUSTAINABLE VALUE IN DISCLOSING ACCOUNTING INFORMATION. WE WERE AWARDED IN THE CATEGORY OF connections, that go much beyond transmission COMPANIES WITH NET REVENUE UP TO BRL 5 BILLION. of electricity—and took into account market Having sustainability at the core, our strategy trends and scenarios, determined with the help foresees a balanced development of the Encontro para Debates de Assuntos da Operação - of national and international consultants. The business portfolio and the expansion to EDAO (Meeting to Discuss Operational Matters): three D’s are among them—Decentralization, new geographies, with answers to major OUR PROJECT TO IMPROVE MONITORING OF THE PHYSICAL AND PSYCHOLOGICAL HEALTH Decarbonization, and Digitization—joined by OF EMPLOYEES OF THE COMMAND ROOM OF THE POWER SYSTEM OPERATORS WAS ONE OF challenges of today and guidance through a fourth D, Disruption, in addition to relevant THOSE AWARDED IN THE 5TH EDITION OF EDAO. the strengthening of our value proposition aspects such as ecosystem, integration, digital through innovation, digitization, and creation Top 50 Open Corps: transformation, ‘prosumer’ (neologism for the of alliances and synergy. Investment in WE WERE RECOGNIZED AS THE SECOND MOST ENGAGED COMPANY WITH STARTUPS AT THE merger of two words—consumer and producer), businesses of the future will mean going TOP 50 OPEN CORPS, ORGANIZED BY THE 100 OPEN STARTUPS PLATFORM. leading role, inclusion, and mobility. beyond core activities, with transformational innovation and considering contributions of Open Innovation Week: With this foundation in place, in March 2018, open innovation ecosystems. WE PLACED FIRST AMONG THE MOST ENGAGED COMPANIES WITH STARTUPS IN THE 2018 the Vice President of Corporate Strategy of the EDITION OF THE OPEN INNOVATION WEEK, WHICH HAD THE PARTICIPATION OF MORE THAN ISA Group held a meeting of leaders in Brazil, With these aspirations, the strategic planning 100 LARGE COMPANIES AND 250 STARTUPS. where she presented a first look of the strategic is based on four pillars—that form the word planning, improved through dynamics conducted VIDA (LIFE) and challenge the ways of doing Valor 1000: with professionals in order to determine things and relating to the world: FIRST PLACE IN THE TRANSMISSION SEGMENT AND SECOND PLACE IN THE ELECTRIC ENERGY contributions. Once the strategy was defined, CATEGORY. THE RECOGNITION BY THE TRADE JOURNAL “VALOR ECONÔMICO” EVALUATES A SERIES OF INDICATORS, SUCH AS NET REVENUE, EBITDA MARGIN, SUSTAINABLE GROWTH, a Meeting of Leaders was held in October in PERFORMANCE OF SHAREHOLDERS’ EQUITY, MARGIN OF THE BUSINESS ACTIVITY, CURRENT the country to present ISA 2030 to our senior LIQUIDITY, ASSET TURNOVER RATIO, AND INTEREST COVERAGE.

16 2018 SUSTAINABILITY REPORT | ISA CTEEP Integrate digitization into our operations, assets, and develop value offerings

Minimize the environmental impacts of the operations Seize the business opportunities stemming from new operating models and disrupting technologies Promote initiatives that generate a Verde (Green) Inovação (Innovation) positive environmental impact Support the strategy with new means of 20 innovation to improve competitiveness and 30 new business development

Integrate digitization as an instrumental Enter into partnerships to improve lever to allow for the competitive competitiveness and develop long-term V•I•D•A• excellence of our businesses capabilities

Activate initiatives with positive social impact Participate in collaborative schemes to

drive innovation Develop a leadership style to face adaptive and technical challenges

Integrate capabilities from different businesses to generate opportunities Venture into innovative businesses and new markets in order to diversify the current portfolio Articulação (Coordination) Desenvolvimento (Development)

17 2018 SUSTAINABILITY REPORT | ISA CTEEP COMMITMENT GROWTH

Our strategic planning also reflects the commitment with the challenges set out in the Our strategy to create sustainable United Nations’ Agenda 2030, especially considering the following Sustainable Development value foresees our business continuity, Goals (SDGs): with the addition of growth-oriented businesses. In this sense, we actively take part in the transmission auctions promoted by the National Electric Energy Agency (ANEEL).

In 2018, we acquired two lots at an auction held in June, reinforcing our operations in the State of São Paulo and in Brazil’s Southern region, and completed the acquisition of 100% interest in IE Sul. At the end of the period, there were ten projects underway, with total investments of to effectively contribute with the achievement BRL 2.9 billion. of the ISA 2030 strategy.

Given its relevance and for the commitment Assessment of opportunities for new projects, and of reinforcements of all, reaching predefined milestones, for both local and corporate projects, accounts and improvements is conducted by a for 30% of the variable pay of our leaders. multidisciplinary group, which considers the complexity, the relevance of the projects, The individual performance assessment of and the authorized investment. Our each employee, for the cycle beginning in focus has always been on proposing 2019, is also based on the strategy, with and adopting projects and solutions that In order to successfully achieve this purpose, monitored monthly and presented to our the definition of up to five challenges per value technical-operational soundness a total of 28 global corporate projects were Board of Directors. area, with goals and at least one indicator and the economic-financial balance of developed, 20 of which we have direct with clear and transparent metrics. These the concession, for the benefit of involvement. Each initiative has a responsible In addition, our portfolio of local projects, indicators are cascaded in the Integro, our society. In this sense, we conducted person and concrete milestones, measured which takes into account regulatory and individual performance assessment system, studies to define the best route,looking through strategic goals, whose evolutions are market specificities in Brazil, and how we since the teams are fundamental for the to mitigate socio-environmental recorded in the Quadro de Gestão Integral – communicate with our main stakeholders, success of the strategy and to create an impacts. QGI (Integrated Management Table), shows the direction to be followed in order inspiring future through sustainable value.

18 2018 SUSTAINABILITY REPORT | ISA CTEEP JAGUAR CONNECTION Reduction in Greenhouse Gas Improvement in quality of life Emissions (GHG) The Jaguar Connection Program is the trading part of the carbon credits that will Technical and economic support to Projects that are part of backbone of our strategic sustainable value be reinvested to finance new projects and issue and trade carbon credits pursuant to this Program generate positioning, which is why it involves all benefit the surrounding community. The international methodologies: benefits to communities Group companies to contribute to the SDGs action also ratifies our contribution and that (ARR) (REDD+) How? considered in ISA 2030, through three main of our companies to the compliance with the Agroforestry Reduction of greenhouse pillars: combating climate change, community Convenção Sobre Diversidade Biológica – CDB Reforestation gas emissions resulting Creation of Recovery from deforestation and decent jobs development, and preservation of the jaguar. (Convention on Biological Diversity) and to forest depletion To this end, the program promotes the recovery the commitments assumed by the countries Awareness about loss and conservation of forests that absorb at the 21st United Nations Conference on Education and of biodiversity on the awareness greenhouse gases (GHG), allowing for the Climate Change (COP-21). It also confirms our planet generation of carbon credits in priority areas willingness to operate our business in a context of operation for the protection of the jaguars. of sustainable development and commitment Mitigation of climate change communities rural of Development Income generation Projection through trading of In addition, it aims to help improve the living to the major global causes. 2030: Reduction of 9 million tons of CO through 2 conditions of rural populations and strengthen projects within the Program carbon credits their social organizations; raise awareness In 2018, we held the second call for projects JAGUAR about the care for the environment and for the in Brazil and obtained nine entries for CONNECTION biodiversity on the planet. participation in the Jaguar Connection. In 2019, For 2030, Jaguar Connection will select 20 the projects will be prioritized and evaluated projects for recovery and preservation of Jaguar Connection will reach financial through a due diligence process prior to forests in Latin America, in the countries where ISA A self-sustainable program A self-sustainable 2018 in projects for calls of the Result operates. sustainability from the revenue from integrating the Program. Colômbia 109 projects Return on resources registered through trading of carbon credits Peru 67 projects ISA investment of registered USD 1.6 million Third-party investments: Bolívia 5 projects • Financiers registered % of resources • Technical cooperation for the Program Brasil Jaguar Connection 9 projects registered Issue and trading of Over carbon credits Funding of new Chile 200 projects registered in projects 10 projects registered Latin America % of resources to owners of the project

19 2018 SUSTAINABILITY REPORT | ISA CTEEP Corporate governance GRI 102-18

Our governance model adheres to (64.2% at the end of 2018) and reinforcing American Depositary Receipts (ADRs) - SEC recognized practices, with clearly defined transparency and access to information Rule 144, of the United States. roles of the administration bodies towards by investors. On the Investor Relations ethical and transparent management, website, we provide, in Portuguese and The year was marked by appreciation of our focused on sustainable development English, financial and stock market data, our common and preferred shares, which closed of the business, and value creation for Company Bylaws and policies, among other 2018 trading for BRL 68.89 and BRL 69.18, stakeholders. Through this commitment, relevant documents. respectively. In December, TRPL4 reached we have participated, since 2002, of Level the highest trading value in history until 1 Corporate Governance portfolio of Brazil’s Given the differentiators in corporate then, BRL 75.74 per share, and continued stock exchange (B3 S.A. – Brasil, Bolsa, governance adopted, our shares are also setting new records after that. In addition, Balcão), a segment of listing with better included in several indices, such as the Índice our preferred shares had an average daily rating of companies that voluntarily adhere de Governança Corporativa –IGCT (Corporate volume traded in the B3 stock exchange to obligations additional to those required by Governance Index) and the Índice Brasil of BRL 26.9 million, with an average 2,300 the Law of Corporations. These obligations 100 (IBrX 100), a portfolio that contains the trades daily. Our market cap on December include, among others, maintaining at least most traded shares in B3. Furthermore, since 31, 2018 was BRL 11.4 billion (BRL10.5 billion 25% of the outstanding shares in the market 1999, we have participated in the program on December 31, 2017).

89.50% 1.28% 35.82% Shareholder ISA Capital do Brasil ISA Capital do Brasil ISA Capital do Brasil composition Total: 57,714,208 Common Total: 1,286,132 Preferred Total: 59,000,340 shares shares TOTAL (12/31/2018) 9.75% 51.88% 35.39% Eletrobras Eletrobras Eletrobras Total: 6,289,661 TRPL3 Total: 52,005,758 TRPL4 Total: 58,295,419

TOTAL: 64,484,433 TOTAL: 100.236.393 TOTAL: 164,720,826 0.75% 46.83% 28.79% Other 100% Other 100% Other 100% Total: 480,564 Total: 46,944,503 Total: 47,425,067

20 2018 SUSTAINABILITY REPORT | ISA CTEEP STRUCTURE BOARD OF DIRECTORS (BD) GRI 102-18 • Formed by up to 10 members (eight in We are managed by the Board of Directors 2018), elected in the GA after appointment Board (BD), which has a one-year term, and by the by the controlling shareholder and minority Members Executive Board, which has a three-year term. shareholders, for one-year terms, with The General Assembly (GA) ordinarily convenes possibility for reelection; up to April 30 of each year to, among other • One representative of the employees, Bernardo Gustavo Carlos duties, check the accounts of the administration appointed through direct elections and Vargas Gibsone Marin Garat and examine, discuss, and vote on the Financial BOARD CHAIRMAN VICE-CHAIRMAN approved at the GA; Statements pertaining to the previous fiscal (INDEPENDENT) period; decide on the allocation of the net • Two independent members; income for the period, and decide on the • The positions of Chairman of the Board and distribution of dividends; elect members to the of the Company CEO are held by different Board of Directors and the Audit Committee, as professionals in order to avoid conflict of interest. well as the Executive Board, if necessary. • Meetings convened according to an annual calendar or whenever summoned by the Chairman of the Board or any Board member; César Augusto Fernando Augusto José Andrés • Responsible for approving our strategic plan, Ramirez Rojas Rojas Pinto Romero Tarazona which considers financial, social, environmental, BOARD MEMBER BOARD MEMBER BOARD MEMBER efficiency, innovation, market, and people management aspects, among others; • Responsible for overseeing management of the business and assessing the Administration Report, the Financial Statements, and the accounts of the Executive Board; • Elect members of the Executive Board; and • Select and remove Independent Auditors. Marcos Milena Orivaldo Luiz Simas Parentoni López Rocha Pellegrino Other duties of the BD can be found on the BOARD MEMBER BOARD MEMBER BOARD MEMBER Company Bylaws. (INDEPENDENT)

21 2018 SUSTAINABILITY REPORT | ISA CTEEP Executive Board Audit Committee GRI 102-18 • Permanent nature; • Formed by 3 to 5 effective members and an equal number of alternates (five in 2018), with participation of representatives of minority shareholders and preferred shareholders; and • Responsible for overseeing the acts of administrators, ensuring compliance with legal and statutory duties; providing opinion on the Administration Report; examining the trial balance and other financial reports and providing opinion on the Financial Statements every fiscal year.

EFFECTIVE MEMBERS ALTERNATE MEMBER

Ricardo Lopes Cardoso Luiz Flávio Cordeiro da Silva Manuel Domingues de Jesus e Pinho João Henrique de Souza Brum Flavio Cesar Maia Luz João Antônio Pinheiro Sampaio Meirelles Paula Prado Rodrigues Couto Eduardo da Costa Ramos Felipe Baptista da Silva Luiz Alberto Meirelles Beleiro Barreiro

Committees GRI 102-18

Carlos Rinaldo Rafael Reynaldo Weberson Eduardo In order to support decisions by the Executive Supervisory Committee: Its main duties are to Ribeiro Pecchio Junior Falcão Noda Passanezi Filho Guioto Abreu Board and the relationship of its members with improve internal control and risk management CHIEF TECHNICAL CHIEF FINANCIAL CHIEF INSTITUTIONAL CHIEF EXECUTIVE CHIEF PROJECT the BD, prioritizing administrative efficiency and systems, as well as corporate governance OFFICER OFFICER AND INVESTOR RELATIONS OFFICER OFFICER OFFICER professional management, we have in place the practices; enhance the effectiveness of internal RELATIONS OFFICER following Advisory Committees: audits; oversee the work of Independent Auditors; and approve the annual work plan of the Internal Remuneration Committee: Responsible for Audit, supervising its fulfillment. In the year, it was overseeing, analyzing, and proposing to the BD formed by Milena López Rocha, César Augusto topics related to collective bargaining agreements Ramirez Rojas and Marcos Simas Parentoni. and the remuneration of employees and directors, Our Executive Board is formed by up to five members, with three- which includes a fixed and variable pay policy, Credentials of the members of all administration year terms, with possibility of reelection and with roles performed as and the Participação de Lucros Retidos – PLR bodies are available on our Investor Relations set forth by law and by the Company Bylaws. Duties of the Executive (Profit-Sharing). In 2018, its members were Milena website. Board are set out in the Company Bylaws. López Rocha, Bernardo Vargas Gibsone and César Augusto Ramirez Rojas.

22 2018 SUSTAINABILITY REPORT | ISA CTEEP Ethics and compliance GRI 103-1, 103-2, 103-3 – 412-1, 412-2, 412-3 | GRI 102-16

Our business is guided by ethical principles Other initiatives in 2018 involved the revision dignity of people, especially labor rights of transparency and equity, and based on of the Code of Ethics and Conduct and the and the environment. Among the clauses maintaining and continuously reinforcing development of the Anti-corruption Policy, are those that require compliance with all honest, constructive, upright, and socially both approved by the BD, to be launched in standards in force, protection of work, ban responsible conduct. In order to institutionalize the beginning of 2019. The policy includes on child and slave labor, antiterrorist, and the and structure these principles, already a series of guidelines for ethical conduct of requirement of operating in compliance with expressed in the activities performed, in 2018, business on topics such as conflict of interest, environmental laws. GRI 102-12, 412-1, 412-3 we created the Compliance Department. gifts and presents, relationships with public The purpose was to formalize the internal entities and donations and sponsorships, guidelines in relation to the topic and, in invitation and participation in events, undue this sense the department materializes our facilitation payments, among others. commitment to ethics on a daily basis. To this end, it is associated with the Internal All these initiatives are part of the work Audit and reports directly to the Presidency, to develop a structured Corporate Ethics Code of Ethics and Conduct while maintaining a link with the Supervisory Program, to be launched in 2019. In addition, GRI 102-16 Committee, the Ethics Committee and the Vice the dissemination of the Program, of the President of Audit and Compliance. Code and of the Anti-corruption Policy will be Reformulated in 2018 to include aspects enhanced through training on compliance, in of the anti-corruption law, our Code of Ethics and Conduct is applicable to all The creation of the department allowed which all employees will participate in 2019, operations to consolidate our philosophy for improvements already in 2018, such as and, after that, in annual refresher workshops. and our corporate values, through guiding a greater emphasis on the assessment of criteria of conduct applicable to all possible suppliers and the requirements for We have been signatories to the United employees and members of the Board of financial contributions in sponsorships and Nations Global Compact since 2011, and are Directors. On the document, we address donations, through due diligence processes committed to the 10 principles related to topics of human rights and state our non- that take into account economic, social and Human Rights, Labor Rights, Environmental tolerance, by any of our stakeholders, environmental and human rights aspects Protection, and Fight Against Corruption. In directly or indirectly, of practices that (legal restrictions, child and slave labor and 2018, we conducted impact assessments violate human rights or that promote child reputational risks, among others). In addition, related to human rights in 100% of our labor or any form of slave labor. new suppliers are now continuously monitored operations. Furthermore, 72% (159) of our and, in 2019, this will be extended to all significant investment agreements contained commercial partners. clauses that protect human rights and the

23 2018 SUSTAINABILITY REPORT | ISA CTEEP Integral risk management GRI 102-11, 102-15

We have in place a structured Risk Management process, common to all companies in the ISA Group. This way, we have an integrated and consolidated view of possible impacts, whether positive or negative. The process is based on the concepts set out by the ABNT NBR ISO 31000 standard (Risk Management - Principles and Guidelines) and is described in our handbook of Integral Risk Management, revised in 2017, and in the Corporate Policy for Integral Risk Management, according to which professionals “must seek the integrity of business resources, business continuity and sustainability through the INTERNAL AUDIT ETHICS LINE permanent management of risks identified by GRI 103-1, 103-2, 103-3 – 205-1, 205-2, 205-3 GRI 103-1, 103-2, 103-3 – 406-1 | GRI 102-17 us and our companies.” We were the first company in the electric all risks of corruption, in 2019 we will initiate We have in place the Ethics Line, which is used In 2018, this process gained greater agility and sector to obtain the international Quality work to identify risks of fraud. for reporting, by our internal and external ease through the development, by internal Assessment certification (valid until 2020), audiences, any nonconformity with our Code of resources, of an Integral Risk Management granted by The Institute of Internal Auditors In 2018, in addition to having assessed 100% Ethics and Conduct, including aspects associated App that allows the individual areas to (IIA), which recognizes the quality of our of the risks associated with corruption, we with human rights and anti-corruption. Contacts, independently enter their risk assessments Internal Audit. trained Senior Management, Managers and which are confidential and have guaranteed into a central database. All risks are critically Coordinators on policies and procedures to fight anonymity, are strictly investigated and monitored analyzed and consolidated by our Risk The highlight for 2018 was the advance in corruption. This topic was also communicated by the Presidency, through the Ethics Committee. Management area. Also, in line with the the development of an audit focused on the to all our business partners in the year, which risk governance model adopted by the IIA business and on risks mapped as critical, allowed us to close the period without incidents In 2018, among the contacts received, no (The Institute of Internal Auditors), each line being even more proactive in anticipating of corruption and without terminating or not violations of human rights were identified of defense has specific and independent and minimizing a variety of financial and renovating agreements with suppliers for that (discrimination, harassment and child labor, among responsibilities in risk management, which reputational risks. In this sense, after mapping same reason. GRI 205-1, 205-2, 205-3 others) or cases of corruption. GRI 205-3, 406-1

24 2018 SUSTAINABILITY REPORT | ISA CTEEP ensures transparency of the process among all operation of the projects (as of the date the Consolidated risks are presented and parties involved. project is energized). evaluated at Executive Board meetings and, quarterly, reported to ISA, where they are Another improvement was the The risks in Assets include the life analyzed by the Committee and by the Board implementation of programs to raise cycle and more complete analyses, with of Directors of the holding company. awareness and train employees in the risk the application of techniques and tools management methodology. By the end of that allow for accurate diagnoses and 2018, 87% of our business areas were using support decision making. In 2018, with the app and about 50 employees were the App and the structuring of the Asset trained in the risk management process. Management Process, we had a relevant advance in risk management in assets: This work also allowed the volume of risks on a scale of 0 to 4, according to the identified and monitored to increase from 55 Methodology of the Self- Assessment Plus in 2017 to 190 in 2018—all broken down by by the Institute of Asset Management process, project and asset. (IAM) we obtained a score of 3.02, above the 2017 score of 2.3, and of our target score for the period, of 3.0. RISK RATING Process risks consider a series of variables, Risks are classified into 14 categories— with a focus on ethics and compliance, Legal and Regulatory, Social, Environmental, reinforced by the incorporation of the risk Property, Market, Suppliers, Errors and analysis for corruption. Omissions, Political, Human Capital and Labor Relations, Governance, Fraud, Equipment The areas are responsible for identifying Failure, Information Technology, and Natural risk events in their activities, their causes, Phenomena—and in three areas: Project, the likelihood of occurrence, and the Asset and Process. possible impacts (which may be financial, reputational, operational losses, etc.). With Project risks include reinforcements, these variables, risks are classified, which improvements and possible events in the supports the decision on how they will structuring phases (from portfolio offering to be managed. In the case of adoption of effective structuring of the project), execution action plans, for high-impact risks, the Risk (project implementation phases, including Management area will monitor the risks contracting and interactions with external and determine the eventual need for direct agents, including governmental agents) and involvement of our Internal Audit.

25 2018 SUSTAINABILITY REPORT | ISA CTEEP Context Macroeconomic Regulatory and Industry EU23

The year 2018 was marked by a high degree We actively participate in the discussions in We intend to establish our role as an agent We maintain regular contacts with the National of uncertainty regarding the economic policy favor of the improvement of the Brazilian of sustainable construction for the future Electric Energy Agency, the ONS—of which our and uncertainties due to electoral disputes. It electricity sector. Our relationship with of the electricity sector, which includes President is a member—and with the Empresa was a year of slow recovery, in which the Gross regulatory and governmental bodies is strategic participation in associations and de Pesquisa Energética – EPE (Energy Research Domestic Product (GDP) closed the year at BRL based on proactivity and partnership in the entities: GRI 102-13 Company), and contribute to public consultations 6.8 trillion, up 1.1%, according to data from the search for solutions looking to develop the opened by the regulator, especially those related Instituto Brasileiro de Geografia e Estatística sector and the country. In 2018, examples • Instituto Acende Brasil (Acende Brasil to the transmission sector. – IBGE (Brazilian Institute of Geography and in this regard are the technical cooperation Institute); Statistics). Household consumption grew by agreement signed with the Operador Nacional In the year, our interactions focused on 1.9% and the per capita GDP showed slight do Sistema - ONS (National System Operator) • Associação Brasileira das Empresas de supporting the legal and regulatory stability advance, 0.3% compared with 2017. Inflation as for the joint development of Research & Transmissão de Energia Elétrica - ABRATE of the sector, with active participation in measured by the Índice Nacional de Preços ao Development projects, and the participation of (Brazilian Association of Transmission the process of public hearings to define Consumidor Amplo – IPCA (National Extended our Institutional Relations Director in a panel Companies of Electric Power); methodologies for tariff revision, postponed to Consumer Price Index) was 3.7% in the year discussion on the Cost of Regulatory Capital 2019 (retroactive to July 2018). The scope of and the Selic base interest rate reached a in Electricity Transmission, in an event held in • Associação Brasileira da Infraestrutura the public hearings included definition of the historical low of 6.5% p.a. Brasília (DF). e Indústrias de Base - ABDIB (Brazilian methodology for establishing the Receita Anual Association of Infrastructure and Base Permitida – RAP (Permitted Annual Revenue) Industries); from Operation and Maintenance of companies, the ANEEL price reference pool, which will serve • Associação Brasileira de Companhias de as basis for pricing the regulatory remuneration Energia Elétrica - ABCE (Brazilian Association base, as well as contributions to define the of Electric Energy Companies); WACC regulatory methodology.

• Associação Brasileira dos Contadores do For 2019, the main challenges will be to Setor de Energia Elétrica - ABRACONEE continue receiving the Rede Básica do Sistema (Brazilian Association of Electric Power Sector Existente - RBSE (Basic Grid of the Existing Accountants); and System) and to have the main contributions of transmission companies taken into account in • Associação Brasileira das Companhias Abertas the Tariff Review methodology, since they are - ABRASCA (Brazilian Association of Publicly intended to preserve the economic-financial Held Companies). balance of the concession agreements.

27 2018 SUSTAINABILITY REPORT | ISA CTEEP TRANSMISSION SECTOR

According to data from the Ministry of Mines and Energy (MME), in the year, 3,966 kilometers of transmission lines and 13,061 230kV 40.2% 1.8% 750kV MVA of additional transformation capacity entered into operation. With this, in December, the Sistema Elétrico Brasileiro – SEB (Brazilian 345kV 7.1% Transmission 2.9% 800kV (CC) Electric System) totaled 145,543 kilometers Lines of transmission lines, of which approximately installed 40% refer to the 230 kV system, although 600kV (CC) 8.8% 34.6% 500kV projections for the next three years foresee in the SEB. an increase in the 500 kV class, mainly due to reinforcement in interconnections. 440kV 4.6% Our contribution to the system is expressed Planned expansion in the maintenance of 18,642 kilometers of of new transmission lines transmission lines (including subsidiaries and affiliated companies), which accounts for Installed 12.8% of the total maintained in Brazil at the Voltage Transmission Lines Voltage Plan Plan Plan end of 2018. Class (kV) (km)* % Total Class (kV) 2019 2020 2021

230 58,438 40.2% 230 1,233.5 1,720.0 1,647.8

345 10,319 7.1% 345 0.0 131.0 150.0

440 6,756 4.6% 440 0.0 0.0 150.0

500 50,363 34.6% 500 3,421.8 851.0 3,940.0

600 (CC) 12,816 8.8% 600 (CC) 0,0 0.0 0.0

* Considers the transmission lines in operation in the Basic Grid, 750 2,683 1.8% 750 0.0 0.0 0.0 connections of power plants, international interconnections and 190 kilometers installed in the standalone system in Boa Vista, State of Roraima. In December, in addition to the increase in kilometers 800 (CC) 4,168 2.9% 800 (CC) 5,096.0 0.0 0.0 of lines related to the expansion in the month, adjustments were made in the historical values, as a result of the closing meeting held Total SEB 145,543 100.0% Total SEB 9,751.3 2,702.0 5,887.8 between the MME, ANEEL and ONS. Source: MME/ANEEL/ONS

Source: MME/SSE

28 2018 SUSTAINABILITY REPORT | ISA CTEEP Creation of shared value Creation of shared value

As part of our commitment to creating sustainable value, we incorporated into our management model the main stakeholders with whom we build and share development interests. To this end, we have a Corporate Social Responsibility model, in which we make commitments to the various groups: GRI 102-40, 102-42, 102-43

Society: In order to create value from relevant issues, we align society’s expectations with our commitments, based on respect for and promotion of human rights, sustainable human development, and demands of general interest.

Employees: In recognition of and encouragement to the contributions of teams to the expected results, we value clear and respectful working relationships that provide an environment of trust and integral development in human, labor and social aspects.

Government: Through transparent operations and with clearly defined rules, with respect and to promote the rule of law, we aim to contribute to the creation of a favorable environment for the provision of services.

Suppliers: We invest in ethical and impartial supply processes that add value to the supply chain and that are grounded on criteria such as cost-benefit, efficiency and competitiveness.

Shareholders and investors: We have in place best governance practices to promote growth with profitability and value creation, thereby ensuring our sustainability.

Clients: By providing quality services at competitive prices, we conduct our business to ensure customer satisfaction and build long-term relationships. GRI 103-1, 103-2, 103-3 – 416-1, 416-2

We further measure our value creation based on the capitals of the Integrated Reporting, in order to transparently communicate the contribution of our performance—as is the case of this report.

30 2018 SUSTAINABILITY REPORT | ISA CTEEP Additionally, in consolidation via equity- the construction of the new substation Infrastructure In operation accounting, we had interest in the following 345/138 kV João Neiva 2 and the expansion Interligação Elétrica Norte e Nordeste assets: Interligação Elétrica Madeira (51% of the 345 kV Viana 2 substation. The capital (IENNE); ISA CTEEP, 24.5% Furnas and 24.5% Chesf), subsidiary started the civil works for the Interligação Elétrica de Minas Gerais Interligação Elétrica Ivaí, Interligação Elétrica Viana 2 substation in 3Q18; however, the (IEMG); We are a company in constant evolution, whose Garanhuns and Interligação Elétrica Aimorés, installation licenses for the transmission line Interligação Elétrica Pinheiros; operations are focused on driving the social the three latter in consortium with Taesa. and the João Neiva 2 substation have not Interligação Serra do Japi (Serra do and economic development of Brazil. To this Our operation in these assets is intended to yet been issued. Japi); end, we prioritize efficiency and quality in all influence the adoption of best practices that Evrecy Participações Ltda; and services and activities we provide, and we make govern our businesses. • IE Itapura continuous investments, keeping our network Interligação Elétrica Sul (IE SUL), The project is located in the State of São Paulo acquisition completed in 2018, for and comprises the implementation of a 440 modernized and directly contributing to the the nearly BRL 20 million, with the expansion of the national transmission system. beginning of our wholly-owned control. OPERATIONAL kV (-125/+250) static MVAR compensator at the existing Bauru substation. Installation of At the end of 2018, in addition to our own GRI 102-10 assets, we had 13 wholly-owned subsidiaries, Wholly-owned subsidiaries in operation are this equipment in the substation guarantees six of which were in operation and seven under continuously strengthened through guidelines benefits for the SIN and, in particular, for construction. Under construction relating to governance, safety, management, social voltage control in the 440 kV grid of the State Interligação Elétrica Itaúnas; and environmental responsibility, and incentive of São Paulo. The works began in May 2018. Interligação Elétrica Itapura; to capacity building. In addition, planning and Lot 10 of transmission auction No. 02/2018 Interligação Elétrica Aguapeí; execution of projects and of maintenance are was incorporated into this SPE, formed by the unified, with integrated and optimized allocation implementation of a 440 kV substation with Interligação Elétrica Itaquerê; of resources and execution of projects, providing maximum power of 1,200 MVA, in the city of Interligação Elétrica Tibagi; greater profitability to our business. Lorena (SP). Interligação Elétrica Itapura and Interligação Elétrica Biguaçu – both of which were acquired at transmission auction No. • IE Aguapeí 02/2018, carried out by the National Electric ASSETS UNDER CONSTRUCTION The project is located in the State of São Energy Agency (ANEEL), on June 28, 2018, Paulo and is formed by the implementation with 30-year concession terms. Status of assets at the end of the period, was: of the Baguaçu and Alta Paulista substations IE Biguaçu has a Permitted Annual Revenue with 1,400 MVA, 107 km of transmission line, (RAP) of BRL 38.2 million and a maximum • IE Itaúnas 440 kV of the Alta Paulista substation to the construction period of 60 months. IE The project is located in the State of Espírito sectioning of the Marechal Rondon-Taquaruçu Itapura has a Permitted Annual Revenue Santo and is formed by the implementation transmission line and section of the 440 kV (RAP) of BRL 10.1 million and a maximum construction period of 48 months. of a 345 kV transmission line (79 km), transmission line from the Baguaçu substation which will interconnect the 345 kV Viana 2 to the sectioning of the Ilha Solteira-Bauru substation to the João Neiva 2 substation, transmission line.

31 2018 SUSTAINABILITY REPORT | ISA CTEEP • IE Itaquerê all cabling necessary in Florianópolis will The project is located in the State of São be underground, without impacts on Paulo and comprises the implementation of communities. Another highlight were three 500 kV (-180/+300) MVAr synchronous adjustments in the design of the original compensators at the Araraquara 2 substation layout of the concession bid, so as not to (existing, operated by State Grid). interfere in a Quilombola community and in Installation of this equipment in the an Environmental Conservation Unit. substation guarantees benefits for the SIN and, in particular, for voltage control for the We have as differentiators the technical 440 and 500 kV system of the State of São capacity of our teams and a strong financial Paulo. The subsidiary began operations in discipline, attributes that allow us to carry out the third quarter of 2018. and deliver work within the period established by ANEEL and, many times, delivered ahead • IE Tibagi of schedule. All projects are conducted The project is located in the States of São Paulo based on our Project Management Institute and Paraná. It is formed by the implementation (PMI) philosophy and close and transparent of the 230-kV transmission line (18 km) Nova management. Porto Primavera (SP) - Rosana (PR) and the Rosana 230/138 kV substation, which will connect to the Nova Porto Primavera substation. The subsidiary received the Installation License from IBAMA and began Energy Decision-making processes for energy planning The PET stems from studies jointly developed construction in the third quarter of 2018. planning and and development of the infrastructure in the by EPE and agents of the sector, through transmission sector are under the responsibility Groups of Regional Transmission Studies. • IE Itapura/IE Biguaçu infrastructure of sectoral agencies such as the Energy Initial interactions with the environmental Research Company (EPE) for medium and There is also in place an Plano de Ampliações e development long-term planning, and the National System Reforços – PAR (Expansion and Reinforcement agencies to define the format of the studies | EU19 | Operator (ONS) for short-term planning. Plan), with a three-year horizon, developed by required, as well as negotiations with Planning the expansion of the Brazilian electric the ONS, with a short-term vision. Based on landowners. IE Biguaçu has specificities that system is consolidated based on the Ten-Year consensual solutions between these groups of will require solutions in order to minimize Transmission Plan and on the Programa de regional studies, the necessary infrastructure environmental impacts, since it involves Expansão de Transmissão – PET (Transmission works are defined for the expansion of the interconnecting the continent to the island Expansion Program), with a five-year horizon. country’s electricity system. of Florianópolis, which will be achieved through submarine cables. Also in line with our social and environmental commitment,

32 2018 SUSTAINABILITY REPORT | ISA CTEEP MANAGEMENT OF ASSETS the disturbances in the year and the total energy EU6, EU23 transported through our transmission system—in other words, it measures the effectiveness of the Based on ANEEL’s Research & Development guaranteed energy delivery. The indicator was program, we began in 2017 the formal structuring only 0.000303% in 2018, the best result in the of the Asset Management project. In 2018, what last 15 years. started out as a project evolved to become a process, with important results and gains recorded in the maturity assessment. Asset Management Non-Supplied Energy Index (IENS) tools are already incorporated into everyday routines, driving better choices throughout the life 2016 2017 2018 cycle of the assets, from the design of projects to the eventual choice for decommissioning. 0.000654% 0.000572% 0.000303% These assessments are then consolidated in a where we showed, in practice, how the Asset With a new mindset, employees are supported priority matrix, through which our assets are Management Process has transformed areas in their decision-making process based on the classified according to levels of risk, allowing and projects. SALVO methodology, which allows for proper for prioritization of investments. We further Frequência Equivalente de Interupção – identification and prioritization of activities, rely on software that includes Decision-Making ASSETS IN OPERATION FREQ (Equivalent Frequency of Interruption) through the analysis of: Support Tools, which take into account costs, AND QUALITY OF SERVICES and Duração Equivalente de Interrupção – risks, and performance of assets; and Change GRI 103-1, 103-2, 103-3 – 416-1, 416-2 DREQ (Equivalent Duration of Interruption): Criticality: Management, to correctly manage risks and Indicate, on average, the number of DETERMINES WHICH ASSETS HAVE impacts arising from technical, administrative, We are one of the benchmarks in performance occurrences and frequency of outages. GREATER POTENTIAL TO IMPACT THE regulatory changes, and the application of new in our industry, a position that is due to the BUSINESS; technology, among others. commitment to the responsibility assumed as providers of public services. Remunerated for Technical indicators Health of assets: For a successful Asset Management Process, we the availability of assets through the Permitted SHOWS THE CURRENT CONDITION EU28, EU29 developed in 2018 a three-year training program in Annual Revenue (RAP), we closely monitor OF ASSETS, SUCH AS, FOR EXAMPLE, ESTABLISHING THE LIKELIHOOD FOR both classroom and online versions. The purpose is our operational performance and levels of FAILURE; AND to train 100% of the employees and consolidate a efficiency—in 2018, the average availability of 2016 2017 2018 long-term lifecycle vision— 70.6% of our employees our transmission lines reached 99.99%. EU6 Improvement were trained in 2018. With this same purpose, we FREQ 0.112 0.093 0.061 hosted in the year the 1st Asset Management Fair, Índice de Energia Não Suprida – of assets: which had the participation of 250 people among IENS (Non-Supplied Energy Index): HELPS IDENTIFY WHICH ASSETS HAVE GENERATED GREATER IMPACT ON THE employees and representatives of 12 companies Obtained through the percentage ratio between DREQ 2.23 min. 1.86 min. 1.04 min. ACTIVITIES IN RECENT YEARS. from the electricity sector. The event had lectures the total accumulated non-supplied energy of all

33 2018 SUSTAINABILITY REPORT | ISA CTEEP POWER TRANSFORMERS REACTORS TRANSMISSION LINES

Availability 100% of the systems EU6 99.9777% 99.9979% 99.9983% 99.9999% 99.9414% 99.9948% 99.9882% 99.9946% 99.9119% 99.9541% 99.9566% 99.9110% 99.9323% 99.8806% 99.8279% 99.5%

99.0% 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018

The achievement of qualified performance maintenance and operation tasks of greater countries. We have also developed solutions is also due to our maintenance discipline risk, so that all procedures are rigorously and that focus on performance improvement, and to our ongoing investments in meticulously followed. To do so, the program such as a new process for scheduled modernization—in 2018, we invested BRL uses photographic records and audits at shutdowns, which have become more agile 10.8 million in expansion and BRL 25.1 critical phases in field interventions. and simple, without prejudice to the high million in renewal of our transmission lines— levels of safety already demonstrated. in addition to the contribution of our teams, We have also adopted world-class Through the initiative, which takes into trained to monitor the performance of the benchmarks, such as the indicators set out account our new reality of growing our assets and whose activities are carried by The International Transmission Operations transmission line portfolio, there are gains out with seriousness and care. One of the & Maintenance Study (ITOMS), and we are in productivity and to the environment: programs to reinforce this commitment is the only company in Brazil to integrate the physical documents, previously in hard copy, called Atenção Total (Total Attention), which program that measures the performance of were digitized, with a significant reduction in encompasses additional procedures in electricity transmission companies in various paper consumption.

34 2018 SUSTAINABILITY REPORT | ISA CTEEP Another milestone in 2018 was the complete modernization of the Milton Fornasaro Future of substation, one of the most important in the city of São Paulo, responsible for the load for transmission the city’s west side, providing even greater availability of electric energy and reliability of We have allocated investments the system due to the remote actions of the in digitization, considering Operations Center. The digitization focused the transformations in the on the control, protection, automation and electricity sector and in line supervisory systems, allowing: EU23 with our growth strategy and maintenance of high efficiency standards. One such project is Greater automation: the remote assistance, through EMERGENCY PREVENTION have in place a Crisis Committee, responsible THE RELAYS, WHICH ARE A PART OF THE GRI 103-1, 103-2, 103-3 – 416-1, 416-2 | GRI EU21, EU23, 102-11 for making decisions and adopting emergency SUBSTATION’S PROTECTION SYSTEM, which our assets are monitored AND IN THE PAST WERE OPERATED BY and supervised remotely by response processes. ELECTRONIC PANELS, WERE REPLACED our Bom Jardim Operation We invest in the prevention of emergencies BY INTELLIGENT ELECTRONIC DEVICES, Center, with activities from the that could affect the availability of assets, We adopt monitoring practices in our areas in WHICH ARE SMALLER AND WORK WITH remote control, such as the the environment, and society, which includes order to minimize situations that place people INFORMATION IN A DIGITAL FORMAT. activation of circuit breakers a constant assessment of the performance at risk. In the case of irregular settlements, and emergency alternators. The index of equipment and of the conditions of we formally notify the occupants about the Greater reliability: project focuses on continuous the facilities. The idea is the early detection risks, in addition to providing means for their INFORMATION FROM INTELLIGENT ELECTRONIC improvement and, through the of failures that could impact the availability voluntary relocation, such as transportation DEVICES ARE MORE PRECISE AND CONCISE, adoption of new technologies, of assets, such as preventive replacement and storage of goods and belongings. If MAKING FOR A MORE RELIABLE OPERATION works to fully automate the of equipment and investment in other more vacating is not voluntary, a request for OF THE SUBSTATION. system, without the need of robust and reliable equipment, among other reintegration of property is filed, which Greater safety human interference, even if measures. is always done in coordination with local and agility: done remotely. This is one of authorities and other agencies. WITH GREATER DATA QUALITY, IT IS the paths that indicate our We have in place an Emergency Service Plan POSSIBLE TO CARRY OUT REMOTE attention to innovation and to for Transmission Lines, with guidelines to In partnership with distribution companies in ACTIONS WITH SPEED AND SAFETY IN THE the creation of a future inspired be followed in case of falling of structures the State of São Paulo, we have formed a group PROCESSES TO RESTORE A SUBSTATION. by sustainable value. for temporary and definitive recovery of the called “Plano Verão” (Summer Plan), which Facilitated maintenance: transmission lines, and an Environmental prepares the facilities that supply coastal towns MAINTENANCE OF A DIGITAL SYSTEM IS Preparedness and Emergency Response Plan, for the increased demand in the region as a SIMPLER AND LESS COSTLY, IN ADDITION applicable to our substations and transmission result of the tourism in the months between TO MINIMIZING FAILURES. lines. For quick response in case of events, we November and March.

35 2018 SUSTAINABILITY REPORT | ISA CTEEP 19% R$ MILLION REVENUE FROM OPERATION AND MAINTENANCE Financial Capital 3,637 GRI 103-1, 103-2, 103-3 387 The consolidated revenue from operation and maintenance totaled, in 2018, BRL 1.04 billion, 3,051 1,043 247 18% higher than in 2017. This increase is justified For the disclosure of our economic and financial by a positive variation of the IPCA/IGPM rate of 881 results and that of our subsidiaries, we comply the Permitted Annual Revenue (RAP) cycle from with Technical Pronouncements CPC No. 47 - 2017/2018 to 2018/2019, by the variation of Revenue from Client Contract (IFRS 15) and CPC 1,269 the adjustment tranche, by the beginning of the No. 48 - Financial Instruments (IFRS 9), reviewed 1,496 operation of new reinforcement and improvement by the Comitê de Pronunciamentos Contábeis -CPC projects, and by the tariff increase in the Conta (Accounting Pronouncements Committee), the de Desenvolvimento Energético -”CDE” (Energy Comissão de Valores Mobiliários – CVM (Brazilian Development Account) for free consumers. Securities and Exchange Commission) and the International Accounting Standards Board (IASB), 523 18% BRL MILLION which entered into force on January 1, 2018. 1,043 859 401 388 REVENUE FROM REMUNERATION Application of CPC 47 generated a positive 881 848 OF CONCESSION ASSETS impact of BRL 188 million in net income for 2018 26 27 2017 2018 and BRL 680 million in shareholders’ equity. The Revenue from remuneration of RBSE concession financial asset of the Basic Grid of the Existing Revenue from Infrastructure assets totaled BRL 1.27 billion in 2018, a drop System (RBSE), previously classified as a financial Revenue from O&M of 15% compared with the previous year. The asset at amortized cost, began to be measured Revenue from remuneration of concession asset - RBSE decrease mostly stems from non-recurring at fair value with the application of CPC No. 48. Revenue from remuneration of concession asset recognition in 2017 of the complementary value of Adoption of CPC No. 47 the RBSE report of BRL 432 million, partially offset Other by the monthly IPCA inflation adjustment and the GROSS OPERATING REVENUE 41 RAP 2018/2019 cycle adjustment for inflation. 55 In 2018, our consolidated gross operating REVENUE FROM INFRASTRUCTURE 21 116 Revenue from the consolidated remuneration revenue totaled BRL 3.64 billion, up 19% 35 56 of concession assets totaled BRL 523 million, compared with 2017, and this growth is Our consolidated revenue from infrastructure -30 -23 -49 -5 30% higher than in 2017. The positive mainly explained by the adoption of CPC No. totaled BRL 387 million in 2018, up 57% 2017 2018 variation reflects the monthly recognition 47 and by the increase in the revenue from compared with 2017, mainly due to an of the inflationary effect and the monetary infrastructure as a result of advances in the increase in investments in subsidiaries in pre- Revenue from O&M CDE/PROINFA restatement using the IPCA and the IGPM rates subsidiaries under construction. operational phase. New Projects Variable Tranche Advances Adjustment Tranche by the RAP 2018/2019 adjustment cycle.

36 2018 SUSTAINABILITY REPORT | ISA CTEEP OTHER REVENUES BRL 724 million recorded in 2017. Consolidated EBITDA infrastructure costs reached BRL 359 million, Our other revenues, mainly related to leases up 60% due to the variation in revenue from The consolidated EBITDA in 2018, pursuant of infrastructure for telecommunication infrastructure for larger volume of purchase of to ICVM No. 527/12, was BRL 2.47 billion, an companies, fiber optic cables and lightning materials for the pre-operational construction increase of BRL 411 million compared with rod cables, totaled BRL 27 million in 2018, in phase of the subsidiaries. the EBITDA in 2017. EBITDA margin in the year line with the amount recorded in 2017, BRL 26 was 78%. million. Consolidated general administrative expenses were BRL 167 million in 2018, an increase of FINANCIAL RESULT DEDUCTIONS FROM OPERATING REVENUE 28% compared with 2017. This expansion can be explained by increases in judicial demands, Our financial result in 2018 totaled an Deductions from consolidated operating in personnel costs due to union agreements, in OTHER REVENUES AND expense of BRL 142 million—in 2017 the revenue reached BRL 452 million in 2018, an third-party services, with expenses for external OPERATING EXPENSES expense totaled BRL 66 million. The variation increase of 30% in relation to the 2017. The rise consulting, in information technology and legal between the years stems from nonrecurring was mainly due to the increase in regulatory fees, and in expenses for projects under the The result from other operating revenues and recognition in 2017 of the reduction in charges resulting from the increase in the Energy tax incentive law. expenses totaled BRL 24 million, mainly due interest rates and charges, related to Development Account (CDE), related to free to the registration of the acquisition of IE SUL, adherence to the Special Tax Regularization market consumers. in the amount of BRL 25 million. In 2017, and Program, in the amount of BRL 54 million; expense of BRL 55 million was recorded due from the increase in charges and interest R$ MILLION 23% NET OPERATING REVENUE to a nonrecurring provision for the reversal of rates on loans due to the increase in debt, 892 GRI 102-7 359 the facilities of the Existing System (RBSE), in both offset by higher income from financial the amount of BRL 57 million. investments. 724 In 2018 our net operating revenue reached BRL 225 3.19 billion, 18% higher than 2017, which was BRL 2.70 billion. EQUITY ACCOUNTING INCOME TAX AND 366 369 SOCIAL CONTRIBUTION In 2018, we recorded the result from equity ADMINISTRATIVE EXPENSES AND O&M accounting in the amount of BRL 201 million, In 2018, income tax and social contribution (OPERATION AND MAINTENANCE) AND an increase of 61% in relation to the previous decreased 29%, totaling BRL 421 million. INFRASTRUCTURE COSTS 167 year, mainly due to the negative impact of the The decrease stems from tax savings of 130 tariff revision in IE Garanhuns, which took place BRL 201 million for payment of Interest Administrative expenses and costs for in 2017, to adjustment for inflation of RAP in on Shareholders’ Equity to shareholders, infrastructure implementation and operation 2017 2018 the 2018/2019 cycle and to the adjustment for with an effective income tax and social & maintenance services in 2018 reached BRL the monthly variation of the IPCA rate on the contribution rate of 18% in the year (30% Infrastructure O&M Costs Expenses 892 million, an increase of 23% compared with Costs flow of the concession’s financial asset. in 2017).

37 2018 SUSTAINABILITY REPORT | ISA CTEEP NET INCOME consolidated net debt was BRL 2.32 billion. REMUNERATION OF SHAREHOLDERS VALUE-ADDED DISTRIBUTION The average cost of the consolidated debt GRI 201-1 Our net income in 2018 reached BRL 1.90 went from 8.3% p.a. on December 31, 2017, In line with our Company Bylaws, we foresee billion, up 37% over the previous year, mainly to 7.9% p.a. on December 31, 2018, when its distribution of minimum dividend, with upper In 2018, we determined a Value Added of BRL as a result of: reduction in income tax and average maturity was 3.2 years. threshold between BRL 359 million and 025% 3.6 billion, higher than the result recorded in social contribution for payment of Interest on of the net income for the period. In addition, 2017, of BRL 2.8 billion. This result reflects the Shareholders’ Equity; adoption of CPC No. 47, we are considering the possibility of paying out value of the wealth we generated, distributed with an impact of BRL 188 million on income; extraordinary dividends. along the year, mostly as remuneration of increase in the equity accounting result; and shareholders` equity, followed by taxes, charges 601 reduction in other operating expenses. 192 In June 2018, we informed the market of the and contributions. practice of proceeds with proposed distribution INDEBTEDNESS 2017 of at least 75% of regulatory net income, 166 subject to approval at the General Assembly 252.6 984 On December 31, 2018, our gross debt was BRL 1.94 and limited to the maximum leverage of 480.8 963.3 BRL 3.02 billion, an increase of BRL 1.07 billion 3.0x Net Debt/EBITDA ratio and possibility of billion in relation to the same period in intermediate payment of dividends, as provided Value-added 2017, mainly due to funding obtained in the for in the Company Bylaws. distribution period. Worth noting was the 7th issue of (Million) green bonds, totaling BRL 621 million, the In 2018, we distributed approximately BRL 2 656.7 GRI 201-1 first ever issue in the transmission segment billion in proceeds, corresponding to BRL 12.05 1.225.0 under this classification. Another important per share. milestone were the Credit Agreement 559 operations under Law No. 4,131/62, for 172 Retained Earnings USD 210 million, with a swap instrument 1.465 contracted as a hedge for protection against Employees Remuneration of shareholders’ equity exchange variation in the period. 2018 Taxes, charges and contributions BRL 3.02 Remuneration of third-party capital Our consolidated cash availabilities totaled BRL 698 million on December 31, 2018, billion up 13% compared with the previous 819 RATING year, which totaled BRL 617 million. This increase can be mostly explained by higher In 2018, Fitch Ratings affirmed our National volume of funding during the period and Long-Term Rating ‘AAA+(bra)’ and of our issues by the operational cash generation and of unsecured debentures (4th, 5th, 6th and 7th flow of receivables from RBSE. Thus, the Bonds BNDES Credit Agreement Other issues) with a stable outlook.

38 2018 SUSTAINABILITY REPORT | ISA CTEEP TEAMS Human GRI 103-1, 103-2, 103-3 – 404-1 | GRI 102-8 Capital GRI 103-1, 103-2, 103-3 – 405-2 At the end of the fiscal period, we had Throughout the program, interns must present a 1,524 employees, of which 1,294 were men project for improvement. In 2018, the program The operational efficiency and quality that and 230 women. Headcount increased by set a new record in number of registrations, with highlight our performance are the result of 3.5% compared with the previous year as 30,000 applicants, of which 45 young talents attracting and retaining teams with high a result of the integration of professionals were selected for the new 2019 cycle. technical skills, committed to excellence, a from subsidiaries, in November, responsible vision of social responsibility and, above all, a for operation and maintenance activities— Check for the complete turnover sense of ethics and innovation, both in line with with the exception of IE SUL, whose wholly- rates in GRI Attachment. corporate values and guidelines that steer the owned interest began during the year—after business, as set out in the Code of Ethics and authorization from ANEEL to share resources. Conduct. Insourcing is intended to promote gains in internal satisfaction from the uniformity of In this sense, we have in place six cultural traits, people management practices, strengthening which guide how we operate and relate to the the sense of belonging of these professionals various stakeholders: to a Group that acknowledges the activities GRI 102-16 performed. To constantly reinforce this topic, we disclose safety information in areas of • Responsible: We are focused on our circulation of people between worksites and objectives, we seek differentiated lounge areas, called Corredores de Segurança performance and accept challenges; (Safety Corridors), aiming to maintain employees alert and updated. • Agile: We are agile in decision-making and in seeking sustainable results; Our turnover rate in 2018 was 7.9%, equal • Prudent: We prioritize life; to 0.6 percentage points below the previous year. GRI 401-1 • Collaborative: We contribute with one another and build joint solutions; Aiming to attract, train, and retain young talents • Simple: We do our work with confidence taking undergraduate and technical courses, we and simplicity; and have in place an internship program, in which members participate in classroom and distance • Integrated: Our identity is unique. education courses, periodic assessments and feedback from internship supervisors.

39 2018 SUSTAINABILITY REPORT | ISA CTEEP HEALTH AND SAFETY MANAGEMENT We have an Occupational Health & Safety systematization of the guidelines of the temporary employment contracts. In Management Committee, which holds monthly Behavioral Process), exposure and analysis addition, all professionals who have SAFETY meetings with employees from several of indicators in order to propose actions and access to our facilities, whether company GRI 103-1, 103-2, 103-3 – 403-1, 403-2, 403-3, 403-4 hierarchical levels to discuss improvements reinforcement measures and eventual causes of employees or contractors, undergo Safety that can strengthen occupational health and workplace accidents, in addition to topics from On-Boarding. GRI 403-1, EU18 We have in place standards and a Health safety strategies. Among the topics covered by other areas, such as Management of Worksites and Safety Policy to protect and preserve the the Committee are safe behavior, formalization and Environment, which directly impact the In 2018, we also implemented the Weekly health and safety of employees, suppliers, and revision of occupational health and safety health and safety of employees. EU16 Dialogue on Safety (DDS - Diálogo Semanal third parties, visitors and stakeholders, and we procedures (such as reporting workplace de Segurança), so that leaders and invest in safe and healthy work environments. accidents, management of contractors and We also have in place Management and employees can discuss topics associated Dialogue frameworks, such as the Internal with health and safety, assess potential risk Comissão Interna de Prevenção de of accidents, and address prevention. DSS Acidentes do Trabalho – CIPA (Commission was created as part of the Total Attention to Prevent Workplace Accidents), which Program, created by the area of operations is responsible for raising awareness on and is extended to contractors who relevant aspects of health, well-being, participate in our activities. GRI 403-1, EU18 and safety. In 2018, there were 14 active CIPAs in the units. Safety Meetings are held Occupational health and safety topics are monthly in facilities with an active CIPA, also covered in 100% of the Collective with the participation of professionals Bargaining Agreements, including, but not from contractors, where several previously limited to, workplace accident reports, defined relevant topics are discussed. The employment stability for one year in the activities that involve Working with Voltage case of accidents, election of CIPA members (TcT - Trabalho com Tensão) are regularly and regular meetings on occupational health monitored by the Maintenance Engineering and safety. GRI 403-4 department, with intensified analysis of processes and of eventual failures by the We structured safety actions in the process Line Coordinators, and the leaders of we call MAIS - Mudança de Atitude Inspira activities undergo psychological assessment Segurança (Change in Attitude Inspires and technical training. EU18 Safety), whose main goal is to foster safe behavior. To this end, we prepared a All our formal Management and Dialogue comprehensive internal communication frameworks (Management Committee, campaign, in which the core message was CIPA and Safety Meetings) cover 100% “With MAIS we reduce risks and multiply of employees—with open-ended and safety.”

40 2018 SUSTAINABILITY REPORT | ISA CTEEP MAIS is a continuous process where the HEALTH AND QUALITY OF LIFE attitudes of employees are observed in Safety in heights order to identify flaws that could lead to In 2018, we acquired an aerial lift The year was marked by the reinforcement accidents. To this end, it is important to value basket, with articulated and telescopic of our preventive health approach, through safe behavior, ensure participation of all boom, hydraulic drive and infinite initiatives to improve the physical and emotional employees, and train and engage people. In turning, which lifts more than 350 well-being of employees. The highlight was the this sense, “observers” are formed through kilos to 32 meters in height, with launch of the Quality-of-Life Program called training (86 professionals in 2017, and 70 guaranteed insulation of up to 500 Vida 360º, which focuses on adopting healthier in 2018) to make voluntary and planned kV. Innovation promotes safety habits that promote happiness, both inside and observations, by establishing a routine to and convenience to field workers outside the corporate environment. The initiative identify behaviors and conditions that could performing maintenance activities follows the health promotion concept set out pose risks and, subsequently, adopt control in the system, such as replacement by the World Health Organization (WHO), which measures. of chain of insulators, changes of encompasses six pillars: components in the cable, opening We also have in place the program called “+ of jumpers and cleaning of switch Physical health: Based Spiritual health: Encourages the segurança com você” (More safety with you), contacts, among others, without on a balanced nutrition search for the meaning of having one of the five acknowledgment initiatives contact between parts energized and and regular practice of a purpose in life, which facilitates of the program “+ Conexões com Você” points without voltage. physical activities; facing everyday difficulties and (More Connections with You), whose goal problems; is to encourage the adoption of safe habits and behaviors at all hierarchical levels, and promote safety management for employees The year was also marked by the holding and contractors. Thus, this recognition seeks of a Workshop on Health, Safety and Professional health: Emotional health: Relates to to encourage collective awareness among Environment, geared towards our contractors Encompasses the self-esteem, by reinforcing the teams by disclosing safety indicators of each who operate in our units. During the event, relationship between importance as an individual, in area, fostering employee engagement in three companies that completed their contracts individuals and their addition to the roles assumed as accident prevention. with us without recording any type of accident workplace; father/mother, sibling, child, friend, received recognition. Issues concerning the employee, etc.; and The areas receive recognition when they environment were also discussed in the reach a certain number of days without workshop and the Supplier Recognition Social health: Addresses the Mental health: Related to the accidents, with or without lost time, according Program was launched. relationship between individuals cognitive area, helps “filter” to their classification group. There are three and society, including interpersonal things that really matter in pillars of recognition: for area, manager and See the health and safety indicators relationships (among employees a context where people are employees. in the GRI Attachment themselves, their families, friends, constantly exposed to new and community, etc.); information.

41 2018 SUSTAINABILITY REPORT | ISA CTEEP In the year, we also had the presence of an all ages. An initiative was also conducted at total of 195 employees received benefits in occupational physician in our units and the the headquarters to measure blood pressure 2018 through technical and graduate courses, execution of specific campaigns, as well as an and blood sugar levels, with the participation language courses, and postgraduate/MBA. We ample dissemination of health topics in internal of more than 100 employees; development also signed partnerships and agreements with communication materials. On Health Day, we of the Integrated Health and Safety System; universities, schools of languages, associations, held the Semana Interna de Prevenção de psychological assessments and an award- research centers, institutes, and Unions. And, for Acidente do Trabalho - Sipat (Internal Week winning project to improve the physical and all development needs, we consider participating of Workplace Accident Prevention), with the psychological health monitoring process of in internal and external events, such as seminars, formal launch of the 360º Vida program and employees of the Command Room of the workshops, symposia, conferences, lectures, the development of activities as a health round, Power System Operators. forums and congresses. with blood pressure measurement, blood sugar and guidelines on practicing physical DEVELOPMENT In 2018, a total of BRL 4.3 million, approximately activities and healthy eating habits, in addition GRI 103-1, 103-2, 103-3 – 404-1, 404-2 30% more than in 2017, were invested in the to lectures about the purpose of life and GRI 103-1, 103-2, 103-3 – 410-1 | EU14 Technical and Administrative courses, including prevention of Aids and Sexually Transmitted the Education Incentive Program and online Diseases (STDs). The event was held in all In order to maintain prepared teams that course customization projects and leadership regional offices and headquarters, involving contribute with solutions to the challenges of development. On aggregate, 58,000 hours of nearly 80 employees. the energy transmission sector in Brazil, we offer training were provided, equivalent to almost 38 our employees training programs (internal and hours per employee. GRI 404-1 Every month we conduct nutritional external), as well as opportunities for young assessments and consultations, at headquarters people to enter the labor market. In 2018, we See more information about training hours and regional offices, and promote the invested in the training of technical multipliers in the GRI Attachment participation of employees in street races, as (train the trainers), to disseminate knowledge an incentive to health, integration, leisure, and about these activities. We have in place a recognition of athletes. Our employees took Corporate Information and Knowledge Policy, part in three races in 2018. National disease which provides on the development of knowledge awareness days are reinforced internally. management strategies and practices capable of During Pink October and Blue November capturing, maintaining and transferring experience (prevention of breast and prostate cancer and institutional memory. ELO Program (Evolve, Lead, and Obtain) respectively), news reports were shared and The leadership development program was continued in 2018 through two training co-participation was offered for exams: 50% There is also the Education Incentive Program, initiatives based on aspects to qualify Decision-Making and improve Success and Failure for male employees over 45 years of age for through which we subsidize for professionals Management. PSA - Prostate Specific Antigen - exams, and who have been with the Company for a year 50% for mammograms, for women over 50, part of the costs in training associated with in addition to PAP smear for employees of our areas of business and desirable skills. A

42 2018 SUSTAINABILITY REPORT | ISA CTEEP best in our history, three percentage points higher than in 2017 (83%) and eight points higher than in 2016 (78%). With this result, we were once again included among the companies with the best organizational climate in Brazil (called P90), in a ranking prepared by Hay Group consulting. One of the aspects that contribute to a good organizational climate is the differentiated offer of benefits, which goes beyond what is required by law.

PERFORMANCE MANAGEMENT Acknowledgment GRI 103-1, 103-2, 103-3 – 404-3 The platform called “Mais conexões Through performance evaluation and In 2018, training actions foreseen in which requires the creation of a Retirement com você” (“More Connections with feedback, we work to retain and develop the PDIs were based on the 70/20/10 Program, including, in addition to knowledge You”) recognizes employees who act in professional talents who contribute to the methodology, where 70% of learning stems transfer, succession plans. Given its relevance, line with our safety guidelines; honors achievement of strategic objectives and to from professional everyday experiences; a meeting is held annually between Human professionals for their time with the the creation of a future through sustainable 20% from observation and interaction with Resources professionals and CEOs of the company (5, 10, 15, 20, 25, 30, 35 and value. To this end, in 2017 we implemented employees, which includes coaching and Group companies to identify future successors 40 years); recognizes professionals who the Nine Box tool to analyze employee mentoring; and 10% from courses and training. in leadership positions. EU15 submit stories based on performance in performance based on achievement of Thus, development is also a result of the the categories of excellence, leadership agreed-upon goals (registered in the participation of employees, who assume, along See, in the GRI Attachment, the percentage and sustainability; highlights results Íntegro tool) and the development of with us, the responsibility for professional of employees eligible for retirement. achieved based on our culture and the skills required for each role. For the advancement. values; and encourages the culture effectiveness of the tool, a calibration phase of celebrating commemorative dates, must be conducted by a multidisciplinary Another milestone in the year was mapping of ORGANIZATIONAL CLIMATE predetermined in the corporate committee, which allows for the full critical knowledge and of employees holding calendar. In 2018, it also had the assessment of deliverables and behaviors such knowledge so that, in 2019, we can begin Every year we promote an organizational Innovation category, to encourage observed, formalized through feedbacks actions to share this information, essential to climate survey with results that indicate the contribution of our employees with new and that provide support to the Planos de the perpetuity of the business. This is due to assertiveness of the people management ideas that create value for the business. Desenvolvimento Individual - PDIs (Individual the number of active employees at the age or actions. In 2018, adherence to the survey was Development Plans). contribution period sufficient for retirement, 95% and the favorability index was 86%—the

43 2018 SUSTAINABILITY REPORT | ISA CTEEP compatible application. There are minimum Social and and maximum stock parameters and criteria Relationship for readiness, segregating the needs for Capital maintenance activities and new business. We have in place a strategic supply process, whereby we aim to optimize purchases in We manage our relationships to create inspiring terms of cost, risk and performance. We also connections. We prioritize transparent, timely have a Supply Management Center, with and coherent communication that contributes technical, financial, socio-environmental and to the achievement of our strategy and compliance analyses, and the information strengthens the connection with the various of commercial partners is concentrated in audiences. the Supplier Management cell. The news in 2018 was the launch of the supplier prequalification platform, where interested SUPPLIERS companies can register their information in COMMUNITIES GRI 103-1, 103-2, 103-3 – 408-1 – 409-1 | GRI 103-1, 103-2, 103-3 order to participate in bidding processes. The GRI 103-1, 103-2, 103-3 – 413-1 – 414-1, 414-2 – 308-1, 308-2 – 204-1 | GRI 102-9 implementation of the portal is part of the strategy to improve procurement processes innovation and continuous improvement. A significant portion of our transmission lines For the efficiency of our operations, we and conveys greater security in contracting, The program also aims to develop strategic is located in urban areas, where 89% of the seek to establish relationships of trust aiming to mitigate possible risks. and long-term partnerships and coordinate Brazilian housing deficit is concentrated. In this with suppliers, since energy transmission and encourage suppliers in the quest for sense, free areas such as safety buffer areas infrastructure depends on vast amounts In November 2018, we also held a workshop excellence. The program is based on six in transmission lines become vulnerable to of materials and equipment, which must on Health and Safety in a partnership pillars: Prequalification, Services during illegal occupation—a situation that increases be compatible with each other, and meet between the areas of Procurement, the execution of the contract, Document exposure of surrounding communities to risks. technical and performance requirements, in Sustainable Projects, and Occupational Health management, Quality in the provision of appropriate volume and availability to meet & Safety. services, Engagement and responsibility with In order to minimize the problem, we seek the long life cycle of transmission lines and Occupational Health and Safety, and the solutions to use these buffer zones with safety substations. At the occasion, suppliers who stood Environment. while promoting social and environmental out between January and October 2018 benefits. One such action is the R&D We manage and maintain stocks at an received recognition in the Health and Safety At the end of 2018, we had a commercial “Development of a Monitoring System and adequate level, determining in detail the category. During the workshop, the Supplier relationship with nearly 500 suppliers, 222 of Sustainable Management of Rights-of-Way,” which items available in the distribution centers Recognition program was also launched, which hired in the year. A total of BRL 429.1 takes into account demands for urban expansion, and classifying materials in order to facilitate aiming to find conscious and committed million were geared to suppliers during that food production, among other variables, in order the identification of equipment with companies, involved with sustainability, period. to define appropriate uses for the rights-of-way.

44 2018 SUSTAINABILITY REPORT | ISA CTEEP In 2018, a total of 50 loans for use agreements In order to strengthen our transformation were signed, providing benefits to society. capacity, in 2018 we started to put together a Private Social Investment strategy. We selected SOCIAL INVESTMENT and invested BRL 15.5 million in 24 projects to be developed throughout 2019, among which: In line with the ISA 2030 strategy and the Manifesto that governs the activities of the • Jaguar Parade: An outdoor exhibit of more ISA Group, with a focus on building a future than 60 sculptures that allude to the valuation inspired by sustainable value, we have put of Brazilian wildlife, represented by the jaguar. together our social investment guidelines in At the end of the event, some of the pieces order to leave a positive and lasting legacy. To will be auctioned and part of the proceeds do so, we have defined pillars of operation: will be geared to organizations that focus on preservation of the species and their • Young protagonist: For allocation of ecosystem; resources to social projects that empower youths and prepare them for the labor market, • Virada Sustentável: It is the largest Thus, we use geo-referencing techniques and which organic waste, such as leftover food, providing them with a better intellectual and sustainability Festival in Latin America, which geographic information systems, with software is transformed into fertilizers, and the professional outlook; will provide a positive and inspiring vision for processing spatial data. company responsible for the activity also on the subject, in addition to reinforcing the helps secure the area. In other transmission • Local development: To define priorities, it transformation networks and social impact in Projects such as these are already ongoing in lines, such as in the city of Taubaté, Postos involves processes to listen to communities place in the city of São Paulo; some regions. One such example is the pilot de Entrega Voluntária – PEV (Voluntary Drop- and provide support to income generation project called “Plantando na faixa” (“Planting Off Points) were created in order to minimize projects and social empowerment; and • Festival Semear: It will involve cultural and on the Right-of-Way”), carried out under the accumulation of irregular waste. sustainable initiatives, intended to generate passage of a transmission line in the district • Environment: Focuses on minimizing impacts income, engage and provide a lasting positive of Vila Nilo in São Paulo, where frequent We have also identified intelligent solutions to and promoting actions that add value to impact on the community. Vegetable gardens incidents of illegal occupation were recorded. minimize impacts of eminent domain. In addition wildlife, flora, and communities. will be planted in the rights-of-way of some of The solution consisted in using the area, nearly to adopting incentive contracting modeling, our transmission lines, with direct involvement 2,400 sqm, for cultivation without the use of which has yielded a high number of amicable Education is a cross-cutting theme in our actions, of the surrounding communities; pesticides, of produce such as lettuce, arugula, agreements, we seek to offer, through loan for permeating the three pillars. In addition, we tomatoes, parsley and scallion. In addition to use agreements, the use of portions of the land have improved our social governance model • A Terceira Idade faz, conhece, aprende e inhibiting illegal occupation of the area, the to generate sustainable revenues, especially to by refining the criteria to select projects to be joga: It consists of a set of workshops and vegetables can be sold at affordable prices to underprivileged people occupying unproductive conducted through tax incentive laws and/or educational strategies aimed at prevention the neighboring community. The area also has land. In the State of Espírito Santo, the innovation own resources. Our quest is for transparency of diseases and promotion of health among an area for composting, a process through involved a project for the allocation of a fishery. and initiatives with high social impact. the elderly, socialization, promotion of culture,

45 2018 SUSTAINABILITY REPORT | ISA CTEEP increased self-esteem, social inclusion, and emergency response audiences. In the year, monitored visits to the Children’s Cancer access to new technologies. It is a free, a total of 349 initiatives were carried out, Hospital (Grupo de Apoio ao Adolescente continuous education program that caters to benefiting more than 8,000 people with e à Criança com Câncer - GRAACC), Casa nearly 1,500 senior citizens; lectures on the importance of the energy de Apoio, and interactions with Doutores transmission business; safety buffer zones for da Alegria (Doctors of Joy), both at the • Food Distribution to the Elderly: In transmission lines; risk associated with flying headquarters and in regional offices, and conjunction with the food depot CeasaMinas, kites, balloons and irregular fires; in addition lectures by the health professionals from this initiative provides dried fruit and to guidance on the correct disposal of waste Hospital de Amor. Throughout the year fruit pulp, in natura foods and packets of and rubble, with the promotion of recycling. we also supported CEAP, through our dehydrated soups to nongovernmental We also established closer ties with the fire participation in the Career and Profession Fair agencies that develop programs to care for department, carrying out specific lectures and in the Innovations Fair. senior citizens; and offering guidance on prevention of and response to incidents involving power lines. Another milestone was our support, for one • Professional Training Program – Casa do EU24 more year, to McHappy Day, which donates Moinho: Civic, educational, and professional to GRAACC part of the amount collected training of socially vulnerable women; and Concerning the projects that received from the sales of Big Mac on that day: our investments via tax incentive schemes at employees purchased 647 tickets of the • Polo Esportivo Gerando Falcões: Group the end of 2017 and that were developed sandwich and 410 items from the GRAACC of sports workshops for children and young throughout 2018, we promoted the project store, representing an amount collected for adults from needy communities, in addition called “Conexões do Bem”, an event with all the institution five times larger than in 2017. to psychosocial care to promote social institutions to which we allocate investments. Part of the tickets acquired by employees development and inclusion. The idea was to establish a connection were voluntarily donated to other institutions between the social projects and ourselves, that cater to children, and this spurred In addition to incentive resources, we also allowing for the identification of partnership another internal action to collect beverages conduct initiatives with own resources totaling opportunities and new forms of operating, and promote games, which resulted in BRL 414,000. One example is “Amigos da especially in terms of volunteerism of our moments of integration with the children Energia,” a program intended to prevent employees. accidents in communities, strengthening the Also in terms of volunteerism, through the relationship with these communities and One of the results of this approach program called “Energia Solidária,” we carried providing safety to the energy transmission was internal engagement to encourage out an initiative called Knowledge Week system, in addition to reducing environmental volunteering, highlighted through several that involved the donation of books, and impacts through lectures and educational actions that celebrate the National Volunteer the Christmas Campaign, through which we initiatives. To this end, the initiative involves Day, when activities were carried out to bring collected over 1,000 toys and items, all sent actions with schools, neighborhood together employees and the social projects to the institutions recommended by Fundação associations, rural producers, plants, and we support. Among them we highlight Abrinq.

46 2018 SUSTAINABILITY REPORT | ISA CTEEP Innovation is also the means by which we also supported the Open Innovation drones for the inspection of transmission Intellectual we intend to strengthen our position of Week, in March, with the participation of our lines, towers and rights-of-way: We already Capital prominence in the Brazilian electricity Innovations Manager in the panel “Imagining use drones with visual command in line sector, positively influencing the ongoing Sustainable Futures: A Vision of the Energy inspections, which provide greater safety and transformations, reason why initiatives should Industry”. At the event, we were recognized efficiency to this activity. We invest in innovation to create sustainable consider gains that go far beyond our business. as the company that most engages with value and to contribute to the growth of ISA Opportunities include projects developed with startups. Another highlight was our With R&D, an investment of BRL 1.5 million, we Group, which works to have a balanced business own resources, agreements and partnerships, participation in the 100 Open Techs, intended studied the development of methodology and portfolio. As such, innovation is considered in addition to ANEEL’s Research and to generate business contracts between large operating procedures for inspection of towers, in terms of business/services opportunities Development Program (R&D), which determines companies and innovative scientists. transmission lines and substation through associated with the core business (electric energy that a percentage of Net Operating Revenue drones and image recognition software. transmission), ancillary businesses (storage (NOR) be allocated to R&D actions— an amount RESEARCH & DEVELOPMENT In addition, R&D includes the development of of energy through batteries and distributed that, in 2018, totaled BRL 9.4 million. EU8 training for drone operation to inspect assets generation) and independent businesses in the electricity sector (already provided to (outside the energy sector, but based on the Innovation must be considered by all Throughout 2018, we invested in seven R&D 68 employees) and the pilot development of a competencies and resources we have available). employees in the development of their projects regulated by ANEEL: flight automation algorithm for the inspection activities. Our close ties with startups and of assets. learning institutions contribute in this sense, • Provision of ancillary services with energy in a movement that was reinforced in 2018 storage systems in electrical systems • Development of Monitoring System and through the organization of events, such as with high penetration of intermittent Sustainable Management of Rights-of-way: DemoDay, when 40 professionals from several generation: With an investment of Implementation of corporate GIS system with levels and different internal areas conducted approximately BRL 2.7 million, this includes georeferenced database, involving our assets business rounds with 20 guest startups. technical, regulatory, and market studies to and international benchmark of experiences define a strategy for the implementation of an in sustainable management of rights-of-way. We also participated in the major innovation energy storage system for network services in Investment of BRL 2.1 million. events in Brazil. One such event was Oiweek, the coastal region of the State of São Paulo. held in February on the campus of the For this, it also considers an international • Development of methodology for lean University of São Paulo (USP), which invited benchmark of experiences in the application management of R&D projects to leverage the business innovation community, investors, of battery systems for ancillary services and to innovation in the electricity sector: policy makers, journalists and startups to the power network. A total of BRL 376,000 geared toward connect and share relevant knowledge the development and implementation of about the directions that will steer society • Development of an integrated system R&D project management methodology, in the near future. Aiming to contribute to to consolidate processes, methodology, promoting events in the electricity sector to the country’s technological development technology for autonomous flight and disseminate agile and lean methodologies for and encourage open innovation programs, image processing in the operation of management of R&D projects.

47 2018 SUSTAINABILITY REPORT | ISA CTEEP • System Specializing in Decision Making Another important event in the year was Aiming at Asset Management in the execution of a technical cooperation Electric Energy Transmission Systems: agreement with the US Trade and Development and implementation of an Development Agency (USTDA), aimed asset management system through a process at identifying substation modernization to disseminate and change management technologies and solutions, with greater culture. Investment of BRL 1.7 million. reliability not only in the network we operate, but throughout the Brazilian electricity sector, • Methodological contributions to define with significant benefits for consumers. It is the cost of regulatory capital for the expected that the North American agency electric energy transmission sector in will invest USD 488,000 in the initiative, and Brazil: Investment of BRL 894,000 in the whose work will begin in 2019. preparation of studies of the regulatory and economic impacts of the definitions of Our Group supports, through various means, different methodologies for the calculation the development of intellectual capital and of the cost of regulatory capital in Brazil knowledge management in companies and worldwide. In 2018, it included an such as the program called Jornadas do international seminar about calculation Conhecimento, whose objective is to “inspire of regulatory WACC, in partnership with the future by leading transformation” by Instituto Acende Brasil and the University of encouraging the dissemination and recognition São Paulo (USP). of innovative and sustainable practices conducive to establishing connections. In the • Management of Innovation and of the system, which has become increasingly term. With this focus, we anticipate and year, we increased our participation thanks to R&D project portfolio: Approximately complex due to changes in load profile; to seek innovation concerning possible a significant number of projects registered. 109,000 were allocated in events such as the emergence of “prosumers” (consumers technologies and processes that will steer Awarding will take place in 2019. DemoDay, workshops and benchmarking who also produce energy); and to the the sector in 2050. In 2019, in this model, trips to prospect projects and initiatives growth of energy from renewable and we will initiate projects for the substations in innovation, in addition to contract intermittent sources, such as wind and solar, and transmission lines of the future, in See in the GRI Attachment management and open innovation processes among other challenges. The partnership addition to an initiative that takes into the investments in R&D. with startups and universities. is in line with demands of ONS’s Plano account communication and relationship Diretor de Desenvolvimento Tecnológico – between agents from Transmission In the context of ANEEL’s R&D, in 2018 PDDT (Technological Development Master Operation Centers and the Operator. Thus, we entered into a technical cooperation Plan), which aims to create a portfolio of the projects will enable gains not only for agreement with the National System Operator technological projects to be implemented in us and the ONS, but for the entire electricity (ONS) for solutions in the operation of the the sector in the short, medium and long sector and society at large.

48 2018 SUSTAINABILITY REPORT | ISA CTEEP Solid Waste Act (Law No. 12,305/2010), Law BIODIVERSITY habitats, whose restoration measures were Natural of Penal and Administrative Sanctions (Law GRI 103-1, 103-2, 103-3 – 304-1, 304-2, 304-3 – 307-1 approved and are audited by the relevant Capital No. 9,605/1998), State Environmental Policy agencies. GRI 304-3 EU13 (Law No. 9,509/1997), Ordinance No. 421/2011 The implementation, retrofitting and of the Ministry of the Environment, CONAMA reconstruction of power transmission lines, In the year, a total of 41 environmental Resolution No. 237/1997, and Resolution No. 5, our core business, may require suppression events were recorded, 38 of which were Our business strategy takes into account of the Environmental Department. of vegetation, with impacts on biodiversity. caused by oil leaks from substation opportunities, impacts, and risks to the However, we do not initiate any work without equipment. In order to prevent recurrence, environment, and are managed through In 2018, a total of 14 processes were first obtaining all applicable environmental we carried out a survey of pieces of our Environmental Policy which sets out the underway in environmental agencies, six licenses, and we often make changes to the equipment prone to problems and responsible use of natural resources and the of which were to obtain Preliminary and layout in order to minimize environmental provided their maintenance or replacement. work to ensure that processes and operations Installation Licenses, four Waivers of License, interference. We also invest in monitoring None of the occurrences had significant are geared toward sustainable development. a Terms of Reference issued, and three wildlife and, when applicable, in environmental environmental impact, reason why we were In this sense, we have had in place a Sistema processes to obtain Operating Licenses, compensation, strictly following environmental not assessed fines or nonmonetary sanctions de Gestão Ambiental – SGA (Environmental in addition to application for Renewal of conditionals. GRI 304-2 of environmental nature. GRI 306-3, 307-1 Management System) since 2002, in line with Operating Licenses and reports to meet the the ABNT NBR ISO 14001 standard. Our SGA conditions of the Operating Licenses in force in By the end of 2018, we had power EMISSIONS AND ENERGY includes all substations and 7% of them have the period. transmission lines located in 6,663.11 GRI 103-1, 103-2, 103-3 – 305-1, 305-2, ISO 14001 certification. hectares of legally protected areas and In 2018, our environmental investments 3,237.01 hectares of lines in the vicinity 305-3, 305-4, 305-5, 305-6, 305-7 We also have an Environmental and Asset totaled BRL 2.5 million, of which BRL or in buffer zones, and our operation and Our construction, operation and maintenance Department and an Environmental Legislation 1.8 million in our SGA and to meet the maintenance activities in those locations do activities of transmission lines do not release Monitoring Group responsible for ensuring environmental conditions of the business, BRL not have significant impact on biodiversity, significant amounts of Greenhouse Gases legal compliance of the operations concerning 615,300 in eco-efficiency initiatives and BRL but rather spot impacts, due to the need environmental aspects at federal, state, and 26,500 for the correct environmental disposal to prune trees in order to guarantee and when compared to others in the energy municipal levels, in addition to technical of waste. provide safety to the operations. Such sector. Nonetheless, in 2016, we adhered standards and procedures of the energy activities impacted 0.189 hectares in 2018. to the goal to reduce our annual emissions sector. Installations and works that we conduct GRI 304-1, 304-2 of SF6 gas by 10% (SF6 is an essential gas are duly licensed, and their environmental for the electricity sector given its insulating studies are available for consultation by In order to mitigate impacts on protected properties, but also with high potential for the relevant environmental agencies. areas, we comply with requests of global warming) in our direct operations. Therefore, we comply with all environmental environmental agencies and carry out In 2018, with efforts to minimize SF6 leaks, requirements applicable to our activities, actions such as reforestation, monitoring we achieved a 21% decrease in SF6 losses, including, among others, the National of wildlife, and collection of germplasm, thereby avoiding the release of 4,299 tCO2e Environmental Policy Law (Law No. 6,938/81), among others. In 2018, we maintained in comparison with the previous year. the Forestry Code (Law No. 12,651/2012), 1,982 hectares of protected and/or restored GRI 305-5

49 2018 SUSTAINABILITY REPORT | ISA CTEEP Ecoefficiency in fleet management CONSUMPTION OF RESOURCES GHG GRI 103-1, 103-2, 103-3 – 306-2, 306-3 Emissions In 2018, we developed a project to generate carbon credits by replacing gasoline | GRI 103-1, 103-2, 103-3 – 303-1 with renewable fuel in light vehicles using flex fuel technology. The credit is We monitor the use of resources in our activities TOTAL DIRECT EMISSIONS (SCOPE 1)* obtained by proving the reduction of Greenhouse Gas Emissions (GHG), where and by our workforce and carry out activities GRI 305-1 each ton of CO2 reduced/avoided is equivalent to one carbon credit. Annually, to raise environmental awareness. Despite the fleet management will undergo an audit process to determine compliance with low water consumption in our operations, we 2017 22,973.58 project requirements. Generation of credits is calculated based on a historical have adopted procedures for water reuse in cooling systems and rainwater harvesting at 2018 16,917.22 level of fuel consumption by the corporate fleet, considering at least the three headquarters and at the substation in Registro— previous years. As such, in 2018, 99% of the average consumption of our fleet action that will be replicated to other assets. The came from renewable sources, thereby avoiding the release of nearly 440 tCO e. 2 substations also have procedures in place for the GRI 305-5, 302-4, 302-5 TOTAL INDIRECT EMISSIONS (SCOPE 2)* environmentally correct disposal of waste. Liquid From the acquisition of electric energy effluents generated in the offices and in our GRI 305-2 substations are sent to the public wastewater treatment network. *2017 496,488.26

2018 435,727.72 Energy consumption within the organization Total consumption of water by source (m3) GRI 302-1 GRI 303-1 2016 2017 2018 TOTAL INDIRECT EMISSIONS (SCOPE 3)* 2016 2017 2018 GRI 305-3 Diesel (l) 394,331.08 376,703.55 138,665.79 Groundwater 67,920.00 45,420.04 46,478.19 2017 12,352.904.61 (wells) Fleet - Fuel Gasoline (l) 178,716.68 83,920.96 24,696.46 consumption 2018 10,266.305.00 Municipal city Ethanol (l) 176,252.93 812,659.04 688,783.80 20,708.00 21,021.35 22,735.69 supply

In addition, during the year we acquired 10,000 Power generators Diesel (l) N.D. N.D. 38,240.00 carbon credits from the ECOMAPUA project as Total consumption of a way to offset part of our emissions, which Total 29,658.94 26,170.75 29,538.87 electricity (MWh) Data not available for consumption of surface water (rivers, lakes, totaled 10,000 tCO2e in the period. and oceans), rain and residual waters of other companies

* Data revised and adjusted due to recalculation of transmission losses. Note: Given a revision of the sources of emission, 2016 data is not available.

50 2018 SUSTAINABILITY REPORT | ISA CTEEP Attachments Operational Indicators Diversity in the workforce* GRI 102-7 GRI 102-8 2016 2017 2018 2018 Total energy transmitted (GWh) 132,043.80 133,206.56 138,725.34 Number of employees with disabilities 54 Installed transformation capacity (MVA) 46,542.00 47,965.00 48,805.00 Black and pardo employees 284 Number of substations (No.) 109.00 110.00 110.00 Black and pardo employees in management positions 1 Number of municipalities (No.) 402.00 402.00 402.00 *Data not available for the years 2016 and 2017.

Workforce Workforce by age GRI 102-8 GRI 102-8 2016 2017 2018 2018 Employment category Unit Total Total Total < 30 30 a 50 > 50 Employment category Unit Board Members Number 20 20 21 Men Women Men Women Men Women President Number 1 1 1 Board members Number 0 0 2 1 16 2 President Number 0 0 0 0 1 0 Directors Number 4 4 4 Directors Number 0 0 2 0 2 0 Managers Number 24 25 30 Managers Number 0 0 12 5 13 0 Coordinators Number 85 66 70 Coordinators Number 0 0 33 9 27 1 Specialists Number - 23 25 Specialists Number 0 1 10 9 5 0 Administration Number 238 248 280 Administration Number 23 47 81 96 26 7 Operational technicians Number 1,038 1,032 1,029 Operational technicians Number 163 13 604 7 242 0 Interns Number 64 45 55 Interns Number 29 26 0 0 0 0 Apprentices Number 7 8 9 Apprentices Number 3 6 0 0 0 0 Total Number 1,481 1,472 1,524 Total Number 218 93 744 127 332 10

* In 2016 the specialists were recorded under the coordinators category.

52 2018 SUSTAINABILITY REPORT | ISA CTEEP Value-Added Statement (BRL thousand) GRI 201-1

2016 2017 2018 2016 2017 2018 Revenues 8,562,102 2,879,754 3,197,563 8 – Value added distribution -8,703,413 -2,765,423 -3,578,381 1.1) Sales of goods, products and services 8,558,047 2,864,941 3,182,317 8.1) Personnel -223,166 -223,517 -252,614 1.2) Other revenues 4,055 14,813 15,246 8.1.1 – Direct compensation -156,258 -148,199 -173,242 1.3) Revenue associated with the construction of 0 0 0 8.1.2 – Benefits -50,915 -56,184 -58,264 own assets 1.4) Provisions for credits of doubtful debtors - 8.1.3 – FGTS (Severance Indemnity Fund for 0 0 0 -15,993 -19,134 -19,192 Reversal / (Constitution) Employees) 2 - Inputs acquired from third parties -328,306 -431,845 -348,724 8.1.4 – Other 0 0 -1,916 (includes the amounts for taxes – ICMS, IPI, PIS 8.2) Taxes, fees and contributions -3,365,105 -997,197 -963,304 0 0 0 and Cofins) 8.2.1 – Federal -3,338,010 -967,320 -927,782 2.1) Costs of products, goods and services sold -29,941 -29,066 -28,932 8.2.2 – Stade -371 -884 -711 2.2) Materials, energy, third-party services, and -298,365 -402,779 -319,792 other 8.2.3 – Municipal -26,724 -28,993 -34,811 2.3) Loss / recovery of assets 0 0 0 8.3) Remuneration of third-party capital -182,830 -179,197 -480,795 2.4) Other 0 0 0 8.3.1 – Interest -169,100 -166,457 -468,270 3 - Gross value added (1-2) 8,233,796 2,447,909 2,848,839 8.3.2 – Leases -13,730 -12,740 -12,525 4 - Depreciation, amortization and depletion -8,313 -8,873 -8,347 8.3.3 – Other 0 0 0 5 - Net value added produced by the entity (3-4) 8,225,483 2,439,036 2,840,492 8.4) Remuneration of Own Capital -247,500 -500,400 -1,225,000 6 - Value added received in transfer 477,930 326,387 737,889 8.4.1 – Interest on Shareholders' Equity 0 0 -592,000 426,824 228,307 405,588 6.1) Results of equity accounting 8.4.2 – Dividends -247,500 -500,400 -633,000 6.2) Financial revenues 51,106 98,080 332,301 8.4.3 – Retained earnings / Loss in the period -4,684,812 -865,112 -656,668 6.3) Other 0 0 0 8.4.4 – Share of non-controlling shareholders in 0 0 0 7 - Total value added for distribution (5+6) 8,703,413 2,765,423 3,578,381 retained earnings (only for consolidation)

53 2018 SUSTAINABILITY REPORT | ISA CTEEP Private Social Investment (incentive and own – BRL)* Total weight of waste by type and disposal method (Tons) GRI 203-1 GRI 306-2 2017 2018 Waste Destination 2018 Education 1,162,747,928 1,655,000 Recycling Institutional strengthening - 1,630,000 Co-processing No hazardous waste was disposed Hazardous Waste Local development - 245,000 Landfill of in 2018 Infrastructure - 1,295,200 Reuse Health and wellbeing 1,262,875,950 4,608,640 Recycling 4,449.42 Support to culture and sports 3,404,127,225 6,421,000 Composting 0 Non-Hazardous Waste Total 5,829,751,104.00 15,854,839.69 Co-processing 0 Landfill 76.36 * 2016 data not available.

Proportion of spending on local suppliers* Average number of training hours per employee GRI 204-1 GRI 404-1 2016 2017 2018 2016 2017 2018 Percentage of spending on local 99.59% 90.87% 99.53% suppliers (%) Board members NA 0 0 Amount of local procurement (BRL) NA 98,207,813.00 2,036,781.58 President NA 9 70 Total amount of procurement (BRL) NA 108,158,384.00 429,143,916.00 Directors NA 14.05 28 Managers NA 49.45 57.47 * Local suppliers are those located in Brazil Coordinators NA 84.01 52.27 Specialists* NA 24.12 GHG emissions intensity Administration NA 13.6 15.46 GRI 305-4 Operational technicians NA 65 42.51 2016 2017 2018 Interns NA 72.7 47.26 Apprentices NA 4 10.23 Total emissions / Energy transmitted (tCO e/Mwh of NA 0,00390 0,00326 Total investment 2 NA 3,000,000.00 4,262,238.53 energy transmitted) In training (BRL)

NA: information not available * Training of specialists was recorded together with the Coordinators.

54 2018 SUSTAINABILITY REPORT | ISA CTEEP Health and safety indicators* GRI 403-2 2016 2017 2018 Company employees Number of accidents 6 3 6 Rate of injury 1.81 0.89 1.82 Rate of occupational diseases 0 0 0 Rate of lost days 48.16 16.25 53.63 Rate of absenteeism 0.69 0.52 0.29 Number of fatalities 0 0 0 Contractors Number of accidents 13 9 8 Rate of injury 8.81 4.49 4.48 Rate of occupational diseases NA NA NA Rate of lost days 92.88 36.42 42.58 Rate of absenteeism NA NA NA Number of fatalities 0 0 0 Company employees and contractors Number of accidents 19 12 14 Rate of injury 3.96 2.23 2.75 Rate of occupational diseases 0 0 0 Rate of lost days 61.91 23.75 49.75 Rate of absenteeism NA NA NA Number of fatalities 0 0 0

Transmission and distribution losses as a percentage of total energy EU12 2016 2017 2018 GWh % GWh % GWh % Total transmission losses ND 1 5,328 4 5,860 4

* The safety indicators consider only the accidents that resulted in lost time.

55 2018 SUSTAINABILITY REPORT | ISA CTEEP Total number and rates of new employee hires and employee turnover by age group, gender and region* GRI 401-1 Total Under 30 From 30 to 50 Over 50

Men Women Men Women Men Women

New hires (No.) 106 19 23 37 25 2 0

Total number of terminations (No.) 120 9 6 32 16 54 3

Rate of new hires (%) 7.4% 10.2% 37.7% 5.0% 19.8% 0.6% 0.0%

Turnover rate (%) 7.9% 7.5% 23.8% 4.6% 16.3% 8.9% 18.8%

Ratio between salaries and remuneration of women to men, by employment category* GRI 405-2

Employment category 2018

Board members

President There are no women in these employment categories

Directors

Managers 1.05

Coordinators 1.03

Specialists* 0.93

Administration 0.95

Operational technicians 1.16

* Due to a revision in the reporting format of the indicators, information for 2016 and 2017 is not available.

56 2018 SUSTAINABILITY REPORT | ISA CTEEP Length of above and underground transmission and distribution lines by regulatory regime EU4

Voltage (KV) 2016 2017 2018 Extension of lines (Km) Extension of circuits (km) Extension of lines (Km) Extension of circuits (km) Extension of lines (Km) Extension of circuits (km) 500 ------440 5,341.50 6,363.25 5,341.50 6,363.25 5,341.5 6,363.25 345 452.32 664.68 452.32 664.684 452.32 664.684 230 1,152.90 1,271.48 1,163.02 1,281.60 1,163.02 1,281.6 230/345 (underground) 32.76 74.016 32.76 74.016 32.76 74.016 138 6,124.06 9,264.26 6,124.06 9,264.26 6,124.06 9,264.26 88 1,165.73 1,375.66 1,165.73 1,375.66 1,165.73 1,375.66 69 2.09 2.09 2.09 2.09 2.09 2.09

Investments in R&D 2018* Percentage of employees entitled to retirement 2018* EU8 R$ EU15 AS - Alternative sources of electric power generation NA Employment Category In 5 years In 10 years TG - Thermoelectric Generation NA Board members 0.00% 0.00% MS - Management of Watersheds and Reservoirs NA EN – Environment 2,132,238.8 President 0.00% 0.00% SA - Safety 1,548,200.08 Directors 25.00% 50.00% EE - Energy Efficiency NA PL - Planning of Electric Power Systems NA Managers 26.67% 33.33% OP - Operation of Electric Power Systems 4,363,774.78 Coordinators 25.71% 41.43% SC - Supervision, Control and Protection of Electric Power Systems NA QC – Quality and Reliability of Electric Power Systems 376,511.93 Specialists 16.00% 32.00% MB - Measuring, billing and combating commercial losses 894,246.99 Administration 7.86% 12.86% OT - Other 108,963.46 Total 9,423,936.04 Operational technicians 18.08% 29.35%

* Due to a revision in the reporting format of the indicators, information for 2016 and 2017 is not available.

57 2018 SUSTAINABILITY REPORT | ISA CTEEP GRI Standards Content Index GRI 102-55 SELO GRI Correlation with the Principles of the Global Correlation with the Sustainable Disclosures Page/Disclosure Omissions Compact Development Goals

GENERAL DISCLOSURES 102-1: Name of the organization 102-2: Main activities, brands, products and services 11 and 12 SDG 7 - Affordable and Clean Energy 102-3: Location of headquarters São Paulo 102-4: Location of operations 12 102-5: Ownership and legal form 11 102-6: Markets served 12 SDG 8 – Decent Work and Economic 102-7: Scale of the organization 12 Growth 102-8: Information on employees and other workers 12 6 102-9: Supply chain 44 GRI 102: 102-10: Significant changes to the organization 31 General and its supply chain disclosures 102-11: Precautionary Principle or approach 16 2016 102-12: External initiatives 23 102-13: Membership of associations 27 SDG 7 - Affordable and Clean Energy STRATEGY 102-14: Statement from senior decision-maker 5 and 6 102-15: Key impacts, risks, and opportunities 24 ETHICS AND INTEGRITY 102-16: Values, principles, standards, and norms of behavior 23 10 102-17: Mechanisms for advice and concerns SDG 16 - Peace, Justice and Strong about ethics 24 10 Institutions GOVERNANCE 102-18: Governance Structure 20 to 22

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STAKEHOLDER ENGAGEMENT 102-40: List of stakeholder groups 30 100% of our employees are covered by 102-41: Collective bargaining agreements collective bargaining agreements. 3 102-42: Identifying and selecting stakeholders 30 102-43: Approach to stakeholder engagement 9 and 30 ISA CTEEP is in the process to review the management 102-44: Key topics and concerns raised of the controls of the contact channels with stakeholders REPORTING PRACTICES 102-45: Entities included in the consolidated financial statements 8 GRI 102: General 102-46: Process for defining the Report 9 disclosures content and the topic boundaries 2016 102-47: List of material topics 9 Any restatements of information are described 102-48: Restatements of information in the relevant topics. 102-49: Changes in scope and boundaries 9 102-50: Reporting period 1/1/2018 to 12/31/2018 102-51 Date of most recent report 1/1/2017 to 12/31/2017 102-52: Reporting cycle Annual. 102-53: Contact point for questions regarding the report [email protected] 102-54: Claims of reporting in accordance with the GRI Standards 8 102-55: GRI Content Index 58 to 72 This document has not been subjected to 102-56: External assurance external assurance.

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SPECIFIC CONTENT ECONOMIC PERFORMANCE 103-1: Explanation of the material topic and its boundary 36 to 38 103-2: The management approach and its 36 to 38 GRI 201: components Economic 103-3: Evaluation of the management performance approach 36 to 38 2016 201-1: Direct economic value generated and SDG 8 – Decent Work and Economic distributed 38 Growth ISA CTEEP will begin the process of assessing 201-2: Financial implications and other risks risks and opportunities related to climate 7 SDG 13 – Climate Action and opportunities due to climate change change INDIRECT ECONOMIC IMPACTS 103-1: Explanation of the material topic and its boundary 44 103-2: The management approach and its 44 GRI 203: components Indirect 103-3: Evaluation of the management 44 economic approach impacts SDG 2 – Zero Hunger 2016 SDG 5 – Gender Equality SDG 7 – Affordable and Clean Energy 203-1: Infrastructure investments and services 44 to 46 SDG 9 – Industry, Innovation and supported Infrastructure SDG 11 – Sustainable Cities and Communities PROCUREMENT PRACTICES 103-1: Explanation of the material topic and its boundary 44 GRI 204: Procurement 103-2: The management approach and its 44 practices components 2016 103-3: Evaluation of the management approach 44 204-1: Proportion of spending on local suppliers 54 ODS 10 - Reduced Inequalities

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Correlation with the Principles of the Global Correlation with the Sustainable Disclosures Page/Disclosure Omissions Compact Development Goals ANTI-CORRUPTION 103-1: Explanation of the material topic and its boundary 23 and 24 103-2: The management approach and its components 23 and 24 GRI 205: Anti- 103-3: Evaluation of the management 23 and 24 corruption approach 2016 205-1: Operations assessed for risks related to SDG 16 - Peace, Justice and Strong corruption 24 10 Institutions 205-2: Communication and training about SDG 16 - Peace, Justice and Strong anti- corruption policies and procedures 24 10 Institutions 205-3: Confirmed incidents of corruption and SDG 16 - Peace, Justice and Strong actions taken 24 10 Institutions ENERGY 103-1: Explanation of the material topic and its boundary 49 103-2: The management approach and its components 49 103-3: Evaluation of the management approach 49 302-1: Energy consumption within the organization 49 7 and 8 SDG 7 – Affordable and Clean Energy 302-2: Energy consumption outside the Consumption of energy outside the GRI 302: organization organization is not monitored Energy 2016 SDG 7 – Affordable and Clean Energy SDG 8 – Decent Work and Economic Growth 302-4: Reduction in energy consumption 50 8 and 9 SDG 12 – Responsible Consumption and Production SDG 13 – Climate Action SDG 7 – Affordable and Clean Energy SDG 8 – Decent Work and Economic 302-5: Reductions in energy requirements of Growth products and services 50 8 and 9 SDG 12 – Responsible Consumption and Production SDG 13 – Climate Action

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WATER 103-1: Explanation of the material topic and its boundary 50 GRI 303: 103-2: The management approach and its Water 2016 components 50 103-3: Evaluation of the management approach 50 303-1: Water withdrawl by source 50 7 and 8 SDG 6 - Clean Water and Sanitation

BIODIVERSITY 103-1: Explanation of the material topic and its boundary 49 103-2: The management approach and its components 49 103-3: Evaluation of the management approach 49 GRI 304: 304-1: Operational sites owned, leased, Biodiversity managed in, or adjacent to, protected areas 8 SDG 15 – Life on Land 2016 and areas of high biodiversity value outside protected areas 304-2: Significant impacts of activities, products, and services on biodiversity 49 8 SDG 15 – Life on Land 304-3: Habitats protected or restored 49 8 SDG 15 – Life on Land This indicator is only 304-4: IUCN Red List species and national monitored on lines under conservation list species with habitats in areas construction and will begin 8 SDG 15 – Life on Land affected by operations to be monitored and reported starting in 2019.

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EMISSIONS 103-1: Explanation of the material topic and its boundary 49 103-2: The management approach and its components 49 103-3: Evaluation of the management approach 49 305-1: Direct (Scope 1) GHG emissions 50 7 and 8 SDG 13 – Climate Action 305-2: Energy indirect (Scope 2) GHG emissions 50 7 and 8 SDG 13 – Climate Action GRI 305: Emissions 305-3: Other indirect (Scope 3) GHG emissions 50 7 and 8 SDG 13 – Climate Action 2016 305-4: Intensity of greenhouse gas (GHG) emissions 54 8 SDG 13 – Climate Action 305-5: Reduction of GHG emissions 50 8 and 9 SDG 13 – Climate Action This impact is not relevant in the transmission 305-6: Emissions of ozone-depleting business, since these types of gases are substances (ODS) not released in the direct operations of the 8 and 9 SDG 13 – Climate Action company. This impact is not relevant in the transmission 305-7: Nitrogen oxides (NOX), sulfur oxides business, since these types of gases are (SOX), and other significant air emissions not released in the direct operations of the 8 and 9 SDG 13 – Climate Action company. EFFLUENTS AND WASTE 103-1: Explanation of the material topic and its boundary 49 103-2: The management approach and its 49 GRI 306: components Effluents and 103-3: Evaluation of the management waste 2016 approach 49 SDG 12 – Responsible Consumption and 306-2: Waste by type and disposal method 54 8 Production SDG 12 – Responsible Consumption and 306-3: Significant spills 49 8 Production

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Correlation with the Principles of the Global Correlation with the Sustainable Disclosures Page/Disclosure Omissions Compact Development Goals ENVIRONMENTAL COMPLIANCE 103-1: Explanation of the material topic and its 49 GRI 307: boundary Environmental 103-2: The management approach and its compliance components 49 2016 103-3: Evaluation of the management approach 49 307-1: Non-compliance with environmental laws and regulations 49 SUPPLIER ENVIRONMENTAL ASSESSMENT 103-1: Explanation of the material topic and its boundary 44 103-2: The management approach and its components 44 103-3: Evaluation of the management 44 GRI 308: approach Supplier En- 308-1: New suppliers that were screened using 27.93% of the commercial partners were vironmental environmental criteria screened in the year based on environmental 8 Assessment criteria. 2016 239 suppliers were assessed in the year for environmental aspects, all of which were identified as potential causes of actual and/ 308-2: Negative environmental impacts in the or potential impacts due to soil degradation; supply chain and actions taken soil contamination; improper waste disposal; 8 deforestation and non-compliance with legal obligations. No contract was terminated in the year because of these possible impacts. EMPLOYMENT 103-1: Explanation of the material topic and its boundary 39 GRI 401: 103-2: The management approach and its Employment components 39 2016 103-3: Evaluation of the management approach 39 401-1: New employee hires and employee SDG 8 - Decent Work and Economic turnover 39 6 Growth

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OCCUPATIONAL HEALTH AND SAFETY 103-1: Explanation of the material topic and its boundary 40 103-2: The management approach and its components 40

103-3: Evaluation of the management 40 GRI 403: approach Occupational 403-1: Occupational health and safety Health and management system 40 Safety 2016 403-2: Types and rates of injuries, occupational illness, lost days, absenteeism 40 SDG 8 - Decent Work and Economic and number of work-related fatalities Growth 403-3: Workers with high incidence or high risk of diseases related to their occupation 40 403-4: Health and safety aspects covered in formal agreements with trade unions 40 TRAINING AND EDUCATION 103-1: Explanation of the material topic and its boundary 42 103-2: The management approach and its GRI 404: components 42 Training and education 103-3: Evaluation of the management 42 2016 approach 404-1: Average number of training hours per year by employee 42 6 404-2: Programs for upgrading employee skills and transition assistance programs 42

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The activities performed by employees do not present a high incidence or risk of diseases related to their occupation. Among the various activities required for the energy transmission service, there are some that are carried out in GRI 404: 404-3: Percentage of employees receiving a "controlled zone," a perimeter classified as Training and regular performance and career development having a high risk of exposure to potentially 6 SDG 8 - Decent Work and Economic education reviews hazardous agents, in this case, electricity. Growth 2016 To obtain and maintain authorization to perform their activities and to access these areas, employees undergo periodic training and exams, which vary according to the environmental agents identified on the site. DIVERSITY AND EQUAL OPPORTUNITY 103-1: Explanation of the material topic and its 39 GRI 405: boundary Diversity 103-2: The management approach and its and Equal components 39 Opportunity 103-3: Evaluation of the management 2016 approach 39 405-2: Ratio of basic salary and remuneration of women to men 56 6 SDG 5 - Gender Equality NON-DISCRIMINATION 103-1: Explanation of the material topic and its boundary 23 GRI 406: Non- 103-2: The management approach and its 23 discrimination components 2016 103-3: Evaluation of the management approach 23 406-1 Incidents of discrimination and corrective actions 24 6

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FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING 103-1: Explanation of the material topic and its boundary 103-2: The management approach and its components GRI 407: 103-3: Evaluation of the management Freedom of approach Association and We guarantee to all employees the right to Collective trade union membership. Such conduct is also Bargaining followed by suppliers, who guarantee their 2016 employees are free to decide on exercising their freedom of association. Collective 407-1: Operations and suppliers in which the bargaining is duly respected throughout its right to freedom of association and collective scope, and all trade union entities governing 3 bargaining may be at risk the category are guaranteed to: a) send the negotiation agenda; b) participation of trade union negotiators in negotiation meetings; c) conduct the entire negotiation process; d) close the collective bargaining agreement. CHILD LABOR 103-1: Explanation of the material topic and its boundary 23 and 24

GRI 408: 103-2: The management approach and its 23 and 24 Child Labor components 2016 103-3: Evaluation of the management approach 23 and 24 In the year, we identified risks of cases of child, 408-1: Operations and suppliers at significant forced or compulsory labor in 85% of our 3 risk for incidents of child labor supply chain.

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FORCED OR COMPULSORY LABOR 103-1: Explanation of the material topic and its boundary 23 and 24 GRI 409: Forced or 103-2: The management approach and its 23 and 24 Compulsory components Labor 2016 103-3: Evaluation of the management approach 23 and 24 409-1: Operations and suppliers at significant In the year, we identified risks of cases of child, SDG 8 - Decent Work and Economic risk for incidents of forced or compulsory labor forced or compulsory labor. 4 Growth SECURITY PRACTICES 103-1: Explanation of the material topic and its boundary 23 and 24 GRI 410: 103-2: The management approach and its Security components 23 and 24 Practices 2016 103-3: Evaluation of the management approach 23 and 24 There was no formal training in specific human 410-1: Security personnel trained in human rights policies or procedures with security SDG 8 - Decent Work and Economic rights policies or procedures personnel during the year. Growth RIGHTS OF INDIGENOUS AND TRADITIONAL PEOPLES 103-1: Explanation of the material topic and its GRI 411: boundary 23 and 24 Rights of Indigenous 103-2: The management approach and its and components 23 and 24 Traditional Peoples 103-3: Evaluation of the management 23 and 24 2016 approach 411-1: Incidents of violations involving rights of No cases of violations of indigenous rights indigenous and traditional peoples were recorded 1

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Correlation with the Principles of the Global Correlation with the Sustainable Disclosures Page/Disclosure Omissions Compact Development Goals HUMAN RIGHTS ASSESSMENT 103-1: Explanation of the material topic and its boundary 23 and 24 103-2: The management approach and its components 23 and 24 GRI 412: 103-3: Evaluation of the management Human approach 23 and 24 Rights 412-1: Operations that have been subject to Assessment human rights reviews or impact assessments 23 and 24 1 2016 In the year, we did not conduct training in 412-2: Training of employees in human rights human rights policies or procedures related to 1 policies and procedures this topic. 412-3: Significant investment agreements and 159 contracts signed (72% of total number of contracts that include human rights clauses or contracts) with suppliers in 2018 contained 2 that underwent human rights screening clauses related to Human Rights. LOCAL COMMUNITIES 103-1: Explanation of the material topic and its boundary 44 GRI 413: Local 103-2: The management approach and its 44 Communities components 2016 103-3: Evaluation of the management approach 44 413-1: Operations with local community engagement, impact assessments, and 44 1 SDG 11 – Sustainable Cities and development programs Communities SUPPLIER SOCIAL ASSESSMENT 103-1: Explanation of the material topic and its boundary 44 GRI 414: 103-2: The management approach and its 44 Supplier components Social 103-3: Evaluation of the management Assessment approach 44 2016 414-1: New suppliers that were screened using We do not select suppliers based on social social criteria criteria. 2 414-2: Negative social impacts in the supply We do not conduct this assessment in the chain and actions taken supply chain. 2

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CUSTOMER HEALTH AND SAFETY 103-1: Explanation of the material topic and its boundary 33 103-2: The management approach and its components 33 103-3: Evaluation of the management approach 33 In our community relations, we value the responsibility for the impacts generated by our activities. We have in place preventive and corrective measures, applicable to 100% GRI 416: of operations, including: monitoring and full Customer compliance with safety standards applicable Health and to activities; restrictions on the use of safety Safety 2016 416-1: Assessment of the health and safety buffer zones (delimitation of an area with impacts of product and service categories adequate and safe width for construction, operation, maintenance and inspection of lines); preventive maintenance; installation of barriers and visual signs; periodic inspections on land; employee training; and guidance to the population living in the vicinity of the installations about the safe coexistence with the lines and safety buffer zones. 416-2: Incidents of non-compliance concerning the health and safety impacts of 33 products and services SOCIOECONOMIC COMPLIANCE 103-1: Explanation of the material topic and its boundary 43 GRI 419: So- cioeconomic 103-2: The management approach and its 43 compliance components 2016 103-3: Evaluation of the management approach 43 419-1: Non-compliance with laws and No cases of non-compliance were recorded in regulations in the social and economic area 2018

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SECTOR GUIDELINES FOR THE ELECTRICITY SECTOR EU3: Number of residential, industrial, institutional and commercial customer 12 accounts EU4: Length of above and underground transmission and distribution lines by 57 SDG 9 – Industry, Innovation and regulatory regime Infrastructure SDG 7 – Affordable and Clean Energy EU6: Management approach to ensure short- and 33 SDG 9 – Industry, Innovation and long-term electricity availability and reliability Infrastructure EU8: Research and development activity and expenditure aimed at providing reliable SDG 7 – Affordable and Clean Energy electricity and promoting sustainable 47 SDG 9 – Industry, Innovation and development Infrastructure EU12: Transmission and distribution losses as a percentage of total energy 55 EU13: Biodiversity of offset habitats compared to the biodiversity of the affected areas 49 8 SDG 15 – Life on Land EU14: Programs and processes to ensure the availability of a skilled workforce 43 EU15: Percentage of employees eligible to retire in the next 5 and 10 years broken down by job 42 category and by region EU16: Policies and requirements regarding health and safety of employees and 40 employees of contractors and subcontractors We have several types of contracts that require hiring contractors, such as EU17: Days worked by contractor and construction, environmental studies, subcontractor employees involved in cleaning, vegetation pruning, repairs, construction, operation and maintenance cargo transportation, surveillance, building activities maintenance, consulting services, among others. However, information on these audiences is not managed systematically.

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114 people – Includes training in Operating EU18: Percentage of contractor and Instructions, procedures, safety signage, etc. We subcontractor employees that have undergone do not control the total number of contractors, so relevant health and safety training there is no percentage, but training is offered to all contractors who require OSH training.| page 39 EU19: Stakeholder participation in the decision making processes related to energy planning 32 SDG 7 – Affordable and Clean Energy and infrastructure development EU20: Approach to managing the impacts of No compensation occurred on behalf of ISA displacement CTEEP EU21: Contingency planning measures, disaster/emergency management plan and training programs, and recovery/restoration 35 SDG 7 – Affordable and Clean Energy plans EU22: Number of people physically or economically displaced and compensation, No compensation occurred on behalf of ISA broken down by type of project CTEEP EU23: Programs, including those in partnership with government, to improve or maintain SDG 9 – Industry, Innovation and access to electricity and customer support 35 Infrastructure services EU24: Practices to address language, cultural, low literacy and disability related barriers to accessing and safely using electricity and 46 customer support services EU25: Number of accidents and fatalities for users of the service involving company assets, including decisions and legal agreements, in No community accidents were recorded. addition to court cases pending relating to diseases EU28: Power outage frequency 33 EU29: Average power outage duration 33

72 2018 SUSTAINABILITY REPORT | ISA CTEEP Credits

GENERAL COORDINATION Department of Corporate Communication & Sustainability

EDITORIAL SUPERVISION AND WRITING KMZ Conteúdo

GRAPHIC DESIGN AND LAYOUT S+G Comunicação

PHOTOGRAPHS Denis Ribeiro (page 04) www.istock.com www.depositphotos.com

73 2018 SUSTAINABILITY REPORT | ISA CTEEP