ANNUAL MANAGEMENT REPORT AND FINANCIAL STATEMENTS CENTRAIS ELÉTRICAS DE SANTA CATARINA S.A. – CELESC CORPORATE TAXPAYER ID (CNPJ): 83.878.892/0001-55 COMPANY REGISTRY (NIRE): 42.3.0001127-4 STATE REGISTRATION:250.166.321 CVM Code: 00246-1 Fiscal years ended December 31, 2020 and 2019 MESSAGE FROM THE CHAIRMAN The year 2020 was extremely challenging, full of uncertainties and difficulties. In addition to the pandemic caused in an unexpected manner by Covid-19, which generated adverse effects throughout the economy, impacting both the drop in energy consumption and the increase in defaults, the company also faced, on June 31 and July 1, 2020, the “Cyclone Bomba”, considered the worst weather event in the history of Celesc, in addition to 3 other tornadoes in the West and Midwest of the state and a major disaster due to torrential rains in the Alto Vale. The cyclone caused extensive destruction to the power grid in Santa Catarina, interrupting about 50% of the power distribution by Celesc throughout the state, and generated financial losses of R$22.0 million. To restore the grid, Celesc's own employees and partners worked tirelessly, 24 hours a day, to provide energy to locations with difficult access and minimize the population's suffering. At the extreme of the climatic event, about 1.6 million consumer units suffered a power interruption in Celesc's concession area. On the same day, 300 company and outsourced teams were mobilized and started working to mitigate the damage, and by the next morning, they were able to reestablish the system for about 750,000 CUs, or half of the affected customers. Within 72 hours, almost the entire system was recomposed. To minimize the impacts in face of this challenging scenario, Celesc worked to raise funds and adopted measures to protect the company's cash, such as the continuity of the Incentivized Dismissal Plan (PDI), the partial contingency of investments, and the reduction of expenses with materials, services, and other expenses. If, on one hand, the board searched for ways to overcome the financial challenges, on the other, the employees worked to add quality to the services provided, contributing as agents of economic development and social welfare for the state. The figures confirm the effectiveness of the partnership and the effort to preserve the company balance that supplies energy to the people of Santa Catarina. Even facing all the challenges, in 2020 Celesc registered the best energy continuity indicators in the company's history. For the first time, the DEC (Equivalent Duration of Interruption per Consumption Unit) was below 10 hours, and the FEC (Equivalent Frequency of Power Interruption) was below 7.00, considering a twelve-month moving period (in November 2020, the registered DEC was 9.00 and the FEC 6.64), the result of strategic management and the work of its employees. This performance was reflected mainly in the positive results achieved in the year, which show the company's conditions to fulfill all its corporate obligations and still ensure its own sustainability, strengthening itself, more and more, as the energy of the people of Santa Catarina. In 2020, the consolidated EBITDA reached a total of R$922.6 million. In comparison to the same period of the previous year (R$724.8 million), this represents an increase of 27.3%, reflecting the company's resilience in the face of an adverse scenario, through an excellent performance of Revenues and Expenses in the period. Net income was R$518.7 million for the year, compared to R$283.6 million for the previous year, an 82.9% higher net result between the periods, which represents a net margin of 5.86% in 2020 compared to 3.54% in the previous year. One of the factors that explained the increased net result in fiscal 2020 in the Company, was the good result of equity in subsidiaries. In the Celesc D subsidiary, the positive performance is the effect of the increase in its billing, in addition to all the company's commitment to managing its manageable expenses and controlling investments. In 2020, R$671.2 million was invested in system expansion and improvement, operational efficiency, and management modernization. Of this, R$629.8 million was invested by subsidiary Celesc D and R$41.4 million by subsidiary Celesc G, with a total increase of 11.9% compared to the volume recorded in 2019 (R$599.9 million). Always focused on providing the best possible service to our consumers, we maintained our investments in the countryside as well, through the Celesc Rural Program. We invested about R$23 million in energy efficiency projects aimed at low income, charities and technical education, in addition to another R$3 million in 49 projects selected by the public edict on culture and sports. In addition, the company, which provides its services of great relevance to the Santa Catarina society and is sensitive to the critical moment that involved it, created an installment payment committee and paid in installments electricity bills for about 59 thousand consumer units, which totaled approximately R$220 million, of which R$100 million to Group A (industries, commerce) and another R$120 million to Group B (residential). With the investments over the last few years, the service quality indicators have been improving continuously and Celesc has been establishing itself more and more as a Group, with constant and consistent development of its power generation activities and new businesses. Besides the investment policy, the subsidiaries maintain their focus on optimizing operating costs, continuously managing the cost of Personnel, Materials, Services and Others - PMSO. Regarding the performance in the Capital Market, the Company's Preferred shares (CLSC4) presented a positive variation of 14.20% in the accumulated in the last 12 months, highlighting that, in the same period, the Electric Energy Index (IEE), which measures the behavior of the main shares in the electric sector, presented a positive evolution of 8.12% and the Bovespa Index closed the year with a rise of 2.92%. For the coming years, the credit line with the Inter-American Development Bank - IDB, will continue to enable the partial financing of the investment program in energy infrastructure of Celesc D. The resources will be applied in the execution of expansion and modernization works of the electrical system until 2022. This operation jointly with the IDB brings a series of important advantages in relation to the other financing modalities. Given the dynamism and evolution of the sector, Celesc D overcame the obstacles and managed to hold on to the concession, in one year of the end of the 2016-2020 cycle. Greater efforts in the distribution segment will involve working on revenue recovery, automation of activities and digital transformation, training, qualification, and continuous strengthening of employee health and safety, and investment management. Celesc's biggest challenges are to reduce the global losses (technical and non-technical), to reduce provisions, to increase the incorporation of the investments in the remuneration base, and to balance, jointly with the employees and the unions, the situation of the assistance and social security liabilities. Therefore, the company will achieve longevity and adequate economic-financial sustainability to strengthen itself and operate effectively in other segments of power energy, such as distributed generation, commercialization, and transmission. Regarding automation and digitalization, the company has already started the works for the implementation of the first city that will be equipped with all the power meters fully automated - smart meters, has made it possible for consumers to pay their overdue invoices directly in the service stores with credit and debit cards, will install 82 totems throughout the state with about 20 services available to customers, has invested approximately R$40 million in recloses, among others. The company's Master Plan was also revisited in 2020. The Celesc Group's strategic assumptions are part of its Master Plan, a broad, long-term plan, currently called Celesc 2025-2035. It was restructured in 2019, based on exhaustive scenario studies, stakeholder aspirations, and the legal guidelines connected to strategic management, to indicate the path to be followed by the company for sustainability and continuous improvement of the services provided to society. After the annual review conducted in 2020, the Corporate Identity was maintained as well as the Strategic Positioning, which indicates a strategy of capitalizing on synergies around the company's core business: distribution. Meanwhile, the strategic map, which defines the strategic objectives, result drivers that the company intends to achieve, and guides the main indicators and physical, financial, and sustainability targets, according to the defined strategic positioning, was also redesigned and received new indicators. The positive results registered in the technical and economic indicators reflect a greater solidity of the Group, and, mainly, an increasingly better service to the Santa Catarina society. We would like to express our gratitude to the entire Board of Directors and to each one of our Employees who devote a lot of energy to this daily journey in search of providing a better quality of life to the people of Santa Catarina and good results to our shareholders. Cleicio Poleto Martins Chief Executive Officer ANNUAL MANAGEMENT REPORT 1. PRESENTATION Dear Shareholders, We present the Annual Management Report and the Financial Statements of Centrais Elétricas de Santa Catarina S.A. - Celesc, for the fiscal year ended December 31, 2020, accompanied by the Opinion of the Fiscal Council, the Report of the Statutory Audit Committee - CAE, the Opinion of the Board of Directors, and the Report of the Independent Auditors. This Report is primarily intended for the Company's shareholders, but is available for public access on the websites of Celesc, the Securities and Exchange Commission of Brazil (CVM), and B3, and is also published written in a large circulation newspaper in the municipality where the Company's headquarters are located and in the Official Gazette of the State of Santa Catarina, in accordance with Brazilian law.