1

2

AES ELETROPAULO

S u s t a i n a b i l i t y r e p o r t 2 0 1 2

3

Summary

About the report 3

Message from the CEO 4

Profile 7

Corporate Governance 11

Consistency 11

Transparency 14

Governance Structure 15

Corporate Structure 19

Capital Market 19

Strategic and Sustainable Planning 21

Sustainability Platform 23

Public Commitments 25

Corporate Management 26

Strategic Plan Cycle 27

Safety 30

Workforce Safety 31

Safety for the Population 33

Innovation and Excellence for the Customer’s Satisfaction 36

Customer Satisfaction 37

Operational Excellence 41

Efficient Use of Resources 45

Efficient Use of Financial Resources 45

Efficient Use of Power Resources 53

Efficient Use of Natural Resources 57

Development and valuation of employees, suppliers and communities 63

Development and Valuation of employees 63

Development and Valuation of suppliers 70

Development and Valuation of communities 74

Social Report (Ibase) 82

Assurance Report of socioenvironmental information 83

Assurance report on the process of engagement of public of relations 86

GRI Exam Statement 88

Index of GRI Indicators 89

Credits 93

4

About the report

GRI: 2.1; 3.1; 3.3; 3.4; 3.5; 3.6; 3.8; 3.9; 3.10

AES Eletropaulo provides, in this sustainability report, the initiatives to insure the

development of its business, by exposing the key matters related to the company’s social,

environmental and economic responsibility.

Published by the seven consecutive years under the guidelines of the Global Reporting

Initiative (GRI), this document is in compliance with level B of adherence to the guidelines,

and was subject to external verification. Eventually and always indicated in the explanatory

notes, specific assumptions for calculating the GRI indicators with additional methodologies

were adopted. Complementarily, reformulations in information previously provided are

indicated in the explanatory notes.

Published on an annual basis, the report covers the period between January 1, 2012 and

December 31, 2012 and provides information on the AES Eletropaulo’s activities in its

operational units in the State of São Paulo.

The content was defined together with all the company’s areas and based on the

discussions during the 4th Cycle of Relationship Discussions, carried out between

September and November 2012, which represented a development process, attended by

employees, suppliers and clients (corporate and residential).

This report is in compliance with the commitment established with target audiences on the

disclosure of the findings related to the Sustainability Platform, in the context of the

"Communication, Knowledge and Information".

C C+ B B+ A A+

Co

nte

nt

of

the

Re

po

rt

G3 Profile

Answer to items:

1.1;

2.1 to 2.10;

3.1 to 3.8, 3.10 to

3.12

4.1 to 4.4, 4ª14 to

4.15

Wit

h e

xter

nal

ver

ific

atio

n

Answer to all criteria mentioned to Level C plus: 1.2; 3.9, 3.13; 4.5 to 4.13;

4.16 to 4.17

Wit

h e

xter

nal

ver

ific

atio

n

The same required to

Level B

Wit

h e

xter

nal

ver

ific

atio

n

G3 Management

way Not required

Information about

Management Way to

each Indicator Category

Management Way

disclosed for each

Category of Indicator

G3 Performance

Indicators and

Sector

Supplement

Answer to a

minimum of 10

Performance

Indicators, including

at least one of each

the following

performance areas:

social, economic and

environmental.

Answer to a minimum

of 20 Performance

Indicators, including at

least one of each of the

following performance

area: economic,

environmental, human

rights, labor practices,

society, and

responsibility over the

product.

Answer to each

essential indicator of

G3 and of Sector

Supplement*

considering the

Principle of

materiality of one of

the following ways:

(a) answering to the

indicator or (b)

explaining the reason

of such omission.

To forward doubts and suggestions about this report, right to the board of Communication and

Sustainability, to the care of Luiz Pires, on the e-mail comunicacao@aes.com.

5

Message from the CEO

GRI: 1.1; 1.2; EU10; EU19; EU28; EU29

For the first time, we announced our financial results together with the social and

environmental enterprises of AES Brazil. This consolidates an important step in the

Strategic and Sustainable Planning, we released in early 2012, and provide more clarity to

the commitments we have made to contribute to the sustainable development of the

company.

The year 2012 was marked by significant events such as confirmation of the third tariff

review of AES Eletropaulo, the introduction of the program to reduce the electricity tariff and

the definition of the proposal for renewal of the licenses of distribution, transmission and

generation of electricity, maturing between 2015 and 2017. It is expected that the reduction

of electricity tariffs, implemented since January 2013, will contribute to greater

competitiveness of Brazilian industry and promote the economic growth of the Country.

The hydrology arising from a shyest scheme of rains in the 4th quarter of 2012 led to the

activation of higher level of thermoelectric power generation to supply electricity demand in

the country. This brings reflection on how the industry should move more consistently in

expanding the operational flexibility of the Brazilian electrical system, ensuring greater

security of supply against volatile hydrological situations.

In this scenario, we maintained investments and focus on customer satisfaction in the

pursuit of growth opportunities of our generation capacity and improving efficiency

standards and discipline in execution. We invested in 2012, R$ 1.2 billion in our operations

in electricity distribution - AES Eletropaulo and AES Sul, improving the quality of services,

and modernizing the power grid.

The frequency (FEC) and the average duration of interruptions (DEC) were reduced by 15%

and 19%, respectively, in the concession area of AES Eletropaulo, and in 8% and 9% in

AES Sul.

We surpassed 500 thousand families with regularized wiring in municipalities served by AES

Eletropaulo, which added to those of AES Sul are equivalent to 2 million people in low-

income communities benefited by our services and the education program for the efficient

and safe use of electricity, between 2004 and 2012.

On the subject of safety our number 1 value, we did not record fatal accidents involving our

own employees for the second consecutive year and reached 16.8% reduction in accidents

involving company employees and contractors. We regret two fatal accidents involving

employees of contractors of AES Eletropaulo and AES Sul and expanded our actions and

investments in training monitoring and consolidation of a culture consistent with our values

of safety to all those who provide services to us. Fatal accidents involving the population

were reduced by 16% in the areas where we operate.

In generation, we invested approximately R$ 139 million in the modernization program of

hydro plants. In pursuing the goal of expanding the generation capacity of AES Tietê, up to

3000 MW by 2016, followed with the environmental licensing process for installing the Term

Sao Paulo project with 550 MW capacity. We also acquired an option to purchase the

Project Term Araraquara, with a capacity of 579 MW, in São Paulo. We expanded, yet, our

activities in energy trading in the free market, achieving a portfolio equivalent to 288 MW as

part of our strategy for the rehiring of energy to be provided by AES Tietê from 2016.

After more than four years, we resumed thermoelectric operations on natural gas, in Rio

Grande do Sul, AES Uruguaiana, initially in an operation of an emergency nature, providing

6

up to 244 MW to the system from February 2013, but certain we could contribute to the

flexibility in the operation of the electrical system of the country enabling, together with the

Brazilian government, the conditions for sustainable and long-term operation.

We seeked, throughout the past year, to be more efficient and have discipline in execution,

especially in AES Eletropaulo, according to the third tariff review cycle. We invested in

technology, including a new modern Operation Center for AES Eletropaulo, and made

significant changes, integrating all business areas of the Group and the Commercial and

Operations areas of AES Eletropaulo in a single head office in the municipality of Barueri in

the State of São Paulo.

AES Brazil ended 2012 with EBITDA of R $ 2.6 billion and net income of R $ 1.1 billion,

46% and 62% lower than 2011. Part of this result is due to the sale of AES Atimus, recorded

in the balance sheet for the year 2011, and the reflections of the third tariff review of AES

Eletropaulo.

Our investments for 2013 will total R$ 1.1 billion, of which R $ 918 million for energy

distribution (R$ 647 million in AES Eletropaulo and R $ 271 million in AES Sul) and R $ 213

million in the continuing modernization program of hydroelectric plants at AES Tietê.

We obtained several recognitions throughout 2012, as recognition we dedicate the trust and

support of our employees, customers, investors, suppliers, shareholders, communities,

regulatory bodies and public power:

AES Eletropaulo and AES Tietê won the National Quality Award, the National

Quality Foundation;

AES Brasil was recognized for the second time as one of 20 model companies in

Sustainability, according to Sustainability Guide Exam;

AES Eletropaulo and AES Tietê integrate, once more, the Corporate Sustainability

Index (ISE) of BM &FBovespa;

AES Sul was named one of the 150 best companies to work for, according to the

Guia Você S.A 2012;

AES Eletropaulo was voted the most admired company in Brazil in 2012, the fourth

consecutive year in the category "Electricity Supply", in award sponsored by the

magazine Carta Capital;

AES Eletropaulo won the Children's Award, the ABRINQ Foundation / Save the

Children, as a reference company in the country in serving children from 0 to 6 years

through the work of Luz e Lápis Children’s Education Center.

Britaldo Soares

President of the Group AES Brasil

7

Profile AES Eletropaulo A company providing sustainable solutions in electricity for over 6.4 million customers

GRI 1.2; 2.1; 2.2; 2.4; 2.5; 2.7; 2.8; 3.6

Since 1998, AES Eletropaulo operates in the metropolitan region of São Paulo, distributing

electricity to 24 municipalities in São Paulo (see the list of municipalities in the table below)

in a total area of 4,526 km2. The Company is the largest distributor of electric energy in

Latin America supplying electric energy to 16.6 million inhabitants and 6,5 million consumer

units. Therefore, counting on a staff comprised of 5,872 own employees and 11,563

subcontracted employees, serving its clients with quality and efficiency.

The area of concession of AES Eletropaulo is focused on the main industrial and financial

center in Brazil, with a Gross Domestic Product (PIB) that represents more than 50% of the

total GDP in São Paulo, according to the information provided by Fundação Sistema

Estadual de Análise de Dados (Seade) and Instituto Brasileiro de Geografia e Estatística

(IBGE). The Human Development Index (IDH) of the region totals 0.828 – based on a scale

from 0 to 1. Based on these characteristics, AES Eletropaulo is responsible for the supply of

34.3% of the total electricity consumed in the State of São Paulo and 10.5% of the total

electricity consumed in Brazil.

In order to meet these challenges and focus on the supply of efficient and sustainable

electric energy solutions to meet its clients' needs, in 2012, the company invested R$ 831.1

million in the projects for maintenance, expansion and modernization of the network, in

addition to the services provided to the customer. This amount is 12.5% greater than the

investments performed in 2011 (R$ 738.7 million).

In 2012, AES Brasil, whose Group AES Eletropaulo also takes part, completed a significant

change in its work structure to provide further integration, synergy, improvement, efficiency

and competitiveness. In an innovative work environment that promotes the welfare of the

employees, AES Brasil transferred its head office and integrated the Group’s corporate

areas, including the Commercial and Operational areas of AES Eletropaulo, in a single

building in the city of Barueri (SP). For further information on the effects and benefits of this

change, see page 63.

Cities of Concession Area of AES Eletropaulo

Barueri Itapevi Santana do Parnaíba

Cajamar Jandira Santo André

Carapicuíba Juquitiba São Bernardo do Campo

Cotia Mauá São Caetano do Sul

Diadema Osasco São Lourenço da Serra

Embu Pirapora do Bom Jesus São Paulo

Embu-Guaçu Ribeirão Pires Taboão da Serra

Itapecerica da Serra Rio Grande da Serra Vargem Grande Paulista

8

GRI 2.3; 2.6; EU1; EU4

AES Eletropaulo in numbers 5.872 own employees and 10,251 subcontracted employees 6,5 million consumer units 24 cities served 151 substations 13.703,8 MVA of installed capacity 41.177,6 km of aerial distribution grid 3.134,9 km of underground distribution grid 1.766,7 km of aerial subtransmission line 190 km of underground subtransmission line R$ 9.95 billion of net operating income R$ 831,1 million invested in the modernization and expansion of the grid and customer

service R$ 107,9 million in net income R$ 113.24 in investments in the communities of our concession area 45.557 GWh* of energy distributed to the captive market and free customers R$ 1.157.629.316,47 of capital stock 66 thousand shareholders** 56.3% Free float***

* wh (watt-hour) is the unit of measurement that indicates the amount of energy necessary to power a 1 watt load for the period

of 60 minutes. 1 gwh (gigawatt-hour) is equal to 1 billion watts, or 3,600 gj. / ** AES Eletropaulo is a publicly-held company and

trades its shares in BM&FBovespa. / *** It is the percentage of free shares to be traded in the market and not held by strategic

shareholders (controlling shareholders and executive officers, as well as shareholders holding over 5% of the company’s total

capital). The free float does not comprise the restricted shares (which cannot be traded) and those in treasury. In practical

terms, the highest the free float is, the highest is the liquidity in the market.

GRI EU3

Units Consumers per Class 2010 2011 2012

Residential 5.749.408 5.956.173 6.094.754

Commercial 345.682 344.606 340.098

Industrial 29.020 28.465 27.972

Others 17.954 18.545 19.286

Total 6.142.064 6.347.789 6.482.110

GRI 2.3; 2.4; 2.5

AES Corp. e AES Brasil

AES Corp. is a global company operating in the generation and distribution of electricity.

Operating in 27 countries, its workforce, comprised of 27 thousand people, is committed

with the operational excellence and compliance with the energy consumption needs in the

world.

In Brazil since 1997, AES acts in the generation, distribution and sale of electric power,

with operations in the states of São Paulo and Rio Grande do Sul. Currently, it comprises a

workforce of 7.6 thousand employees in Brazil.

AES Brasil Group is comprised of two distributors, AES Eletropaulo and AES Sul, and two

generators, AES Uruguaiana and AES Tietê. Together, these companies account for

12.5% of electric energy distributed and 2.2% of installed capacity in the country.

For further information on the AES Eletropaulo’s background, access

www.aeseletropaulo.com.br.

9

Regulatory Landscape

The year of 2012 was one of significant changes in the Brazilian electricity sector. In

addition to the effects from the tariff reviews, the periodical process performed by the

National Electric Energy Agency (Aneel), the Federal Government announced a number of

reductions of electric power fees in order to stimulate the Brazilian economy through the

Provisional Measure 579.

The main purpose of the review is to ensure the fair value of the tariff charged against the

consumers, based on the gains in terms of efficiency and productivity of the distributor in a

specific period set forth in the agreement – each four years for AES Eletropaulo. The tariff

review index approved in July of 2012 by ANEEL was -9.33% (average effect absorbed by

the consumer) and -5.60% (economic effect).

The Company has already expected the tariff reduction due to the sharing of efficiency

gains and productivity, however, at a level lower than that provided by Aneel. The effects

from this change affected the Company as a whole and, despite of the recognition due to

the excellence in the management (see page 26), it resulted in the restructuring of positions

and salaries to be aligned with the new financial scenario (see page 65).

The tariff review in 2012 is not directly related to the annual tariff adjustment, in the period

and intercycles, in which the formula included in the concession agreement is applied.

Also in the regulatory landscape, on September, 2012, a measurement package was

announced in order to encourage the economy growth. This package, also through PM579,

seeks to reduce the energy costs to all consumers.

This initiative seeks for an average reduction of 20.2%1 in the electricity tariffs, of which, in

average, 16.2% refers to the residential customers and 19.7% to 28.0% refers to the

industrial consumers, based on two main aspects: reduction of the sectorial charges (up to

7%) and redefinition of the conditions for renewal of the concession agreements for

generation, transmission and distribution, falling due between 2015 and 2017 (up to 13.2%).

The effects from PM 579 and related legislation were already considered in the calculation

of the tariff of AES Eletropaulo, performed by Aneel, on February, 2013. The consumers of

AES Eletropaulo will have a reduction of 18.25%.

Awards and recognitions

GRI 2.10

The year of 2012 was marked by significant activities and consolidation of important

strategic actions of AES Eletropaulo, all directed to the construction of more efficient

processes for the improvement of the services provided and customer satisfaction. This

performance was recognized by the target audiences and translated into important awards.

Some of the significant awards are as follows:

● 2012 Abradee Award: promoted by the Brazilian Association of Electric Power Distributors (Abradee), it recognizes the best distribution companies operating in Brazil. In the year, the company advanced from the 8th to the 5th position, amongst the 29 companies with over 500 thousand clients. With respect to the specific categories, we refer to the first position in the ranking of the Economic and Financial Management, as well as the second position in the ranking of the Social Responsibility;

10

● Corporate Sustainability Index (ISE): for another year (portfolio of 2013), AES Eletropaulo will comprise this important portfolio of shares, of which it is a member since 2005 in BM&FBovespa;

● National Quality Award: promoted by the National Quality Foundation, recognized AES Eletropaulo, again, in 2012 for its management practices and continuous improvement;

● 2012 Most Admired Companies in Brazil: for the fourth consecutive year, AES

Eletropaulo was considered the most recognized company in the “Energy Supply” category in the award granted by Carta Capital magazine;

● 2012 Annual Balance of the Best and Largest Companies: organized by the Diário do Comércio newspaper, AES Eletropaulo was considered the best company in terms of financial results and efficiency;

● Best Brazilian Companies: awarded in the “Energy Efficiency” category in the first edition of the award granted by the Brasil Econômico;

● Company that Mostly Respects the Consumer: awarded in the “Energy Suppliers” category by the Consumidor Moderno magazine;

● Energy Efficiency Highlight: award granted in the 9th Brazilian Congress on Energy Efficiency;

● Children Award of Fundação Abrinq/Save the Children: AES Eletropaulo was recognized as a reference in Brazil in terms of services provided to children between 0 and 6

years old through the Luz e Lápis Children’s Education Center;

● Certification ISO 14001: The certification was made to all the processes of the company, from the distribution system to its facilities;

● Abrasca de Criação de Valor Award: AES Eletropaulo received the sectorial achievement award, for the acknowledgement of the efforts of the company, which created 13.7% of the value to its shareholders in average of the last three years.

● APEX global Awards 2011: it acknowledges the company and the country which performed the best implementation and development of Apex program, of AES Corp. and its practices.

● Certification OHSAS 18.001: in 2012, the health and safety management system of AES Eletropaulo was certified comprising all of the company’s facilities and activities;

Companies that Communicate the Best with Journalists: prize , awarded to

AES Brasil, which recognizes the quality of the relationships that companies have with journalists and with the market, as well as emphasizing the level of treatment offered to the press based on the accessibility, availability and ease of verification of general information or

related to business.

Sustainability Reference

In 2012, AES Brasil Group was recognized as one of the 20 sustainable role model

companies by the Exame magazine. This award, provided by one of the most recognized

business publications in Brazil, is the recognition of the commitment assumed by the

Group´s companies with the sustainable development, represented by strategy, goals in

the medium and long term and practical actions.

11

Governance Structure Strategic and Responsible Operation

The adoption of good practices is essential for the efficient business management and, therefore, an important basis for value creation

In order to develop a strategic and responsible corporate governance structure, the

companies comprising the AES Brasil Group operate in order to ensure the equity and

transparency in the relations with shareholders and the protection of the rights of the other

target audiences. Accordingly, these companies are based on the Consistency and

Transparency Principles of AES Corp. With respect to the consistency, the companies

adopt and comply with the commitment to develop, with all related parties, the transactions

and activities in accordance with their values and guidelines. In terms of transparency, the

companies work on a continuous basis to define an open and transparent communication

with all target audiences.

Vision, Mission and Values

GRI 4.8

In order to consolidate the high performance culture disseminated in all companies of AES

Brasil Group, AES Eletropaulo's initiatives are aligned with the organizational guidelines,

objective and long-term goals set forth in the Group's Strategic Sustainable Plan. All

companies comprising AES Brasil are guided by the same mission and Values.

Vision

To be the best power distribution concessionaire in Brazil by 2016.

Mission

Promote welfare and development with safe, sustainable and reliable offer of electric energy

solutions.

Values

Safety in first place;

Act with integrity;

Honor commitments;

Seek excellence;

Job satisfaction.

Consistency

In accordance with its values, specifically with respect to acting with integrity, since 2011

AES Eletropaulo comprises the Pro-Ethics Company Registry. As an initiative of the

General Controllership of the Federal Government (CGU) and the Ethos Institute, this

registry evaluates, judges – based on strict criteria – and discloses the organizations that

voluntarily intends to develop an environment of commercial integrity and confidence,

including those operating in the public sector. Integrate the registry 14 companies, of which

three comprise the AES Brasil Group (AES Eletropaulo, AES Tietê and AES Sul). For

12

further information on CGU initiative and Ethos Institute, visit:

www.cgu.gov.br/empresaproetica

Requirements evaluated by the Pro-Ethics Company Registry

● Adoption of an internal code of ethics;

● Adoption of social responsibility rules;

● Creation of a system to receive anonymous comments;

● Implementation of rules to receive gifts;

● Creation of internal commission to judge eventual deviations committed internally.

The recognition confirms that the ethics was always the basis to conduct business in AES Eletropaulo. It is a formal and express commitment disclosed by the Value Guide, a set of rules, assumptions and recommendations to ensure the transparency and consistency in the measures adopted by AES Brasil Group (see the table below for further information). In addition, the Ethics and Compliance Program promotes the good practices to all target audiences and ensures the highest ethics level in all relationships with our interested parties, reducing the exposures in terms related to reputation.

Value Guide

The activities of the companies comprising AES Brasil are supported by our Code of Ethics and Business Behavior, denominated “The AES Values – from Words to Actions”. The document is based on the AES Corp.’s guidelines, which support the corporate governance practices. The Value Guide is available to all interested parties at www.aesbrasil.com.br/Documents/GuiadeValores.pdf.

Contractual Compliance Review GRI SO2

The contractual compliance review has the purpose to verify the legal and ethics conduct of

the commercial partners, prior to an agreement contracting or renewal, and safeguard AES

Eletropaulo from situations that may characterize any ethics or legal violation, to ensure the

integrity of the business.

On a periodical basis, the Group offers training to improve the understanding of the Values

of the company and discussion of the daily ethical matters, such as the FCPA (Law against

Corruption). As on FCPA (Anti Corruption Law).

Based on the Compliance program, there are rules for evaluation and previous approval of

the engagements of all areas of the companies comprising the AES Group in Brazil with

respect to the amounts greater than US$100 thousand or that could be classified as high

risk, regardless of any value.

GRI SO3

Employees trained in procedures

against corruption 2009 2010 2011 2012

Management 303 13 337 1

Others 3,813 276 4,414 67

Note: In 2009, the training against corruption was performed by 96% of the employees; in 2010, employees that

have not performed the training in the previous year attended to the training, together with new employees; in

2011, the training was performed by 86% of the employees; in 2012, employees that have not performed the

training in the previous year attended to the training.

13

GRI 4.12

Integrity Commitments

AES Brasil Group is considered to be a reference by adopting strict initiatives that

supersedes the common market practices.

The companies comprising the Group are, for example, signatories of the Corporate

Treaty for Integrity and Anti-corruption, a joint initiative from Ethos Institute, Uniethos,

Patri, the United Nations Development Programme (Pnud), United Nations Office on

Drugs and Crime (Unodoc) and the Brazilian Committee of the Global Pact.

These companies also comprise the ethic committee of the National Quality Foundation

(FNQ), whose purpose is to contribute with other organizations in the development of the

best joint practices and in the production of materials to support other companies that

intend to adopt transparent and reliable initiatives.

Dissemination of Values

GRI SO2; SO3; SO4

Over 2012, 5,570 employees of all units of AES Eletropaulo attended to the trainings

directed to the disclosure and improvement of the Company's values and internal policies,

as indicated in the table below:

Trained persons by type of training (2012)

Subject Trained employees

Integration for new employees 7

Program of Leadership Development (PDL) 30

Workshop Contract Compliance 7

Prohibition of Second Job and External Activity 9

Prohibition of Extra Compensation in Christmas 562

Ethics Champions 4.962

FCPA (Foreign Corrupt Practices Act) 69

Global Ethics Day 1.739

AES Brasil Value Guide Certification 5.570

Total of Employees with Compliance Training 5.570

Suppliers trained by type of training(2012)

Theme Suppliers trained

FCPA (Foreign Corrupt Practices Act) 9

Prohibition of Extra Compensation in Christmas 168

Total of Suppliers with Compliance Training 177

Despite the efforts undertaken by AES Eletropaulo to disclose its value and adopt the

measures to prevent the unlawful actions, in 2012 we recorded two cases of corruption,

which resulted in the discharge of three employees. In one of the cases the supplier was

also blocked.

14

GRI HR6; HR7

Decent Work

AES Brasil works in order to eradicate child labor and prevent degrading and forced labor

in its supply chain by means of various tools.

Also in the register stage, the companies of the Group make available information related

to Ethics Code. In contracts, there are specific clauses on this matter. Also, audits in loco

are performed in suppliers. The matter is also included in the checklist of verification of

Safety Inspections.

In order to enter into this undertaking, AES Brasil has executed in 2010 the National Treaty

for the Eradication of Slave Labor in Brazil.

Transparency

GRI HR3; HR4; SO7; PR9

Aligned with the transparency guideline, AES Eletropaulo works, on a daily basis, to

establish the communication relationship with all target audiences. The company is

supported by the AES Helpline, the communication line, available 24 hours a day and 365

days of the year to receive and address the claims reporting ethics concerns or doubts

related to the Company’s values, as reported by the several target audiences of the

companies comprising the AES Brasil Group.

Through telephone (0800 891 4167) or internet (www.aeshelpline.com), AES helpline

receives from own employees or subcontracted employees, suppliers, shareholders and

others doubts, claims or denounces related to ethics, lack of ethics and business practices

deemed illegal, corrupt or not in accordance with AES values.

The reports do not need to be identified and will always be treated as confidential. The

confidentiality is ensured as all cases are received by an outsourced company globally

contracted by AES Corp., located in the United States of America, ensuring, therefore, the

accuracy, transparency and lawfulness of the verification process.

All reports are analyzed and verified by the Compliance Management. The most sensitive

cases are reported to the Ethics Committee for decision and resolution by the organization

leadership. AES Corp., on the other hand, manages the results of these inspections, whose

final level is the inspection, and the process may be resumed, if necessary.

In 2012, there was an accusation related to the religious discrimination. This happened in

March and was investigated by the Compliance department. At the end of the investigation,

it was concluded that it did not have legal basis.

AES Helpline AES Brasil AES Eletropaulo

2010 2011 2012 2010 2011 2012

Claims 314 278 250 249 222 197

Requests for guidance 105 102 53 81 77 45

Total 419 380 303 330 299 242

In 2012, AES Brasil Group received a total of 303 calls, of which 53 relate to clarifications

and 250 relate to cases that could affect the Group's values. At AES Eletropaulo, out of the

242 received calls, 197 were claims and 45 about guide requests.

15

Governance Structure GRI: 4.1; 4.3; 4.4; 4.9; 4.5; 4.6; 4.7; 4.10; 4.11

The corporate governance of AES Eletropaulo is supported by its corporate bodies, as

described below, which are responsible for the analysis and decision-making procedures in

accordance with the matters set forth in the Bylaws.

General Meeting

The General Meeting is the Company’s resolute body and, although it has the power to

resolve on all matters, it is generally requested solely with respect to those cases that are

private. There are two types of meetings: the ordinary and extraordinary. The Ordinary

General Meeting, as a rule, is requested by the Board of Directors, and shall occur in the

first four months of each year to resolve on the matters set forth in article 132 of the

Brazilian Corporate Law. The Extraordinary General Shareholders’ Meeting may be

requested by the Officers, Board of Directors (when installed) or by the shareholders of the

company in the cases provided in article 123 of the Corporation Law and whenever

necessary, to resolve on the matters that not require specific power.

Board of Directors

The Board of Directors is the body responsible for the determination of the general direction

of the Company’s business, as well as for the approval of relevant matters and under its

exclusive responsibility, as set forth in the By-Laws. It is comprised of 11 effective members

and nine alternates, of which two effective members are independent directors (as set forth

in the Level 2 Regulation of BM&FBovespa), one effective member and the respective

alternate representing the employees, and one effective member representing the minority

ordinary shareholders and the other shareholders indicated by the controlling shareholders.

The mandate of the currently management directors ends at the General Meeting requested

to approve the financial statements for the year of 2012, having met 14 times throughout

2012, to conduct and monitor, on an effective basis, the company’s economic, operational,

social and environmental performance.

Supervisory Board

The Supervisory Board is the body those oversights the executive officers’ acts, as well as

verifies its compliance with legal and statutory obligations. Its installation is optional and the

Bylaws on its functioning, in a permanent way,, or in the fiscal years in which it is installed at

the request of the shareholders. When operational, its opinion is mandatory with respect to

certain matters set forth in current law or in the Bylaws, such as annual management report,

including its opinion on the supplementary information that it may deem required or useful

by the General Meeting; proposals of the management bodies, to be submitted to the

General Meeting, related to the capital stock changes, issuance of debentures or

subscription bonus, investment plans or capital budgets, distribution of dividends,

transformation, incorporation, merger or spin off; among others. It is comprised of five

effective members and five alternates, with mandate through the first Ordinary General

Meeting held after the election of its members. Some of the meetings are held together with

the meetings of the Company’s Board of Directors.

Board of Executive Officers

The Board of Executive Officers is the executive body responsible for the company’s

management, in addition to the resolutions of the General Meetings and Board of Directors.

It is comprised of the CEO, the Company’s Vice-CEO and the Investor Relations Officer and

16

more five officers vice-presidents, with mandate of three years, reelection being permitted.

The mandate of the current members of the Executive Board terminates at the General

Meeting that approved the financial statements for the year ended 2012.

Sustainability Committee

The Sustainability Committee is not a statutory body of the Company being responsible for

ensuring the management and rendering of accounts related to the sustainability matters,

including the validation of the strategy and the oversight of the progress through the

monitoring of the action plans, development of indicators and measurement of goals. It is

comprised of the AES Brasil’s CEO and its vice-CEO and reports directly to the Board of

Directors of each one of the Group’s companies.

Management Policy Committee of Investments and Operational

The Management Policy Committee of Investments and Operational is a statutory body to

act together with the Board of Directors of and the Executive Officers of the company and its

function is to assess the Board of Directors, being its competence: (i) analyze the proposals

of the Annual Business Plan; (ii) analyze the proposals of investment plans on expansion,

replacement and improvement of facilities, programming, and operation and maintenance of

the company's budget; (iii) monitor the evolution of the performance indicators of the

company; (iv) assess the adequate provision of services of the company, in compliance with

the standards required by the regulator body; and (v) monitor the implementation of the

Annual Business Plan, well as the analysis of all issues involving strategic and relevant

aspects of technical-operational, legal, administrative, economic, financial, environmental

and social. The management committee has permanent operation and consists of six

members, appointed in the form of the Shareholders' Agreement of Companhia Brasiliana

de Energia.

Performance Forum (Management System)

It ensures the compliance with the strategic goals and planned operational performance. It

is supported by the company’s executive officers and leaderships.

Focused Groups and Areas

Compliance It is subordinated to the Vice-chair of Legal Matters of the AES Brasil, this area is

responsible for the Ethics and Conduct Code and its dissemination, trainings

related to ethics and compliance, inspection of the matters reported by the AES

Helpline Channel and evaluation of the reputation and ethics behavior of the

suppliers, agents, service providers and current or potential business partners.

Information

Security

It ensures the confidentiality, integrity and availability of the business information

complying with the requirements of corporate governance and legislation.

Internal Audit It prepares, together with AES Corp., an annual audit plan that includes the

business, regulation and control risks.

Internal

Controls

It proposes, improves and monitors the implementation of the best corporate

governance practices.

17

GRI 4.2;

Members of the Board of Directors

Chairman

Vincent Winslow Mathis*

Effective directors

Armínio Francisco Borjas Herrera

Bernerd Raymond da Santos Ávila

Britaldo Pedrosa Soares

Flora Lúcia Marin de Oliveira

Francisco José Morandi Lopéz

Heloísa Regina Guimarães de Menezes

Kenneth Joseph Zagzebski

Manuel Jeremias Leite Caldas (Independent Director)

Sergio Canuto da Silva (representative of the employees)

Sergio Silva do Amaral (Independent Director)

Alternate directors

Airton Ribeiro de Matos

Charles Rene Lebarbenchon

Marcelo de Carvalho Lopes

Marcos Ponce de Leon Arruda

Patricia Rosa de Oliveira (representative of the employees)

Paulo Camillo Vargas Penna

Pedro de Freitas Almeida Bueno Vieira

Ricardo de Abreu Sampaio Cyrino

Rinaldo Pecchio Junior

Members of the Supervisory Board**

Chairman

Sebastião Bergamini Júnior

Effective directors

Joaquim Dias de Castro

Marcelo Gasparino da Silva

Marcus Pereira Aucélio

Maria Carmen Westerlund Montera

Alternate directors

André Eduardo Dantas

Eduardo Coutinho Guerra

Kurt Janos Toth

Luis Eduardo Frisoni Junior

Luiz Ferreira Xavier Borges

18

Members of the Board of Executive Officers

Britaldo Pedrosa Soares - Executive President

Gustavo Duarte Pimenta - Executive Vice President

Paulo Camillo Vargas Penna – Executive Vice President

Pedro de Freitas Almeida Bueno Vieira - Executive Vice President

Rinaldo Pecchio Junior - Company’s Vice-CEO and Investor Relations Officer

Sheilly Caden Contente - Executive Vice President

Sidney Simonaggio – Executive Vice President

* Elected on May 3, 2012.

**Elected on April 16, 2012.

Corporate Structure

19

Capital Market The shares of AES Eletropaulo are listed in Level 2 Corporate Governance of

BM&FBovespa, which means that the company assumes a public and formal commitment

to comply with differentiated practices, which requires and reinforces transparency in all

acts.

In 2012, its roles comprised, for the second consecutive year, the ICO2 (Efficient Carbon

Index), developed by BM&FBovespa together with the National Social and Economic

Development Bank (BNDES) and that includes in its portfolio solely the companies that

adopt transparent practices with respect to the emission of greenhouse gases (GEE). In this

regard, AES Eletropaulo monitors and determines it's GEE emissions on a transparent

basis, reinforcing its commitment with the climate and environmental matters (for further

information, see page 60). The shares of AES Eletropaulo also comprise the Electricity

Index (IEE), whose purpose is to measure the electric sector performance.

In addition, it was maintained, for the eight consecutive year, in the Corporate Sustainability

Index (ISE), of BM&FBovespa. AES Eletropaulo is one of the 14 companies – amongst the

37 that comprise the 2013 portfolio – that authorized the public disclosure of its

questionnaires, allowing, therefore, the public to obtain further information on the company’s

operations and behavior.

The total shares of AES Eletropaulo is 167,343,887, of which 66,604,817 are common

shares (ELPL3) and 100,739,070 are preferred shares (ELPL4). The company also holds

ADRs (American Depositary Receipts) traded in the north american over-the-counter market

that, beginning January 2012, migrated to the Level 1 rules and were traded under code

EPUMY. The migration aimed at providing access to the ADRs by the investors, mainly

those domiciled abroad, as well as increase the liquidity of the shares.

In 2012, the common shares (ELPL3) closed the year at R$ 24.00, a decrease of 45.5%,

while the preferred shares (ELPL4) closed the year at R$ 16.80, a decrease of 54.0%. In

this same period, Ibovespa appreciated by 7.4% and IEE reduced at 11.2%.

For further information on the capital markets, access the investor relations section at AES

Eletropaulo website: www.aeseletropaulo.com.br/ri.

Aiming the integrated report, focused in the investor

In June 2012, AES Brasil was one of the four Brazilian companies that adhered to the

International Integrated Reporting Council (IIRC), an international association comprised of

regulators, investors, companies, sectorial associations, accounting professionals and

ONGs.

The purpose of this work group is to discuss and prepare the guidelines for the "integrated

report”, a summarized document that provides the economic, financial, social and

environmental information of the organization on a simple, direct and connected basis.

This project defines a more adequate channel for the communication with investors and

shareholders, as well as with the market analysts that believe that the long-term strategy,

and the relation between its social and environmental and the economic and financial

performance, represent relevant information for the investment decision.

20

Communications with shareholders and investors

In order to report to its shareholders and investors, AES Eletropaulo offers:

- E-mail: ri.aeseletropaulo@aes.com;

- Access to the RI site through mobile phone;

- Warning system of updates submitted directly to the e-mail of the shareholder, as requested;

- Twitter account focused exclusively in RI: @eletropaulo_rj

- Quarterly conferences offered to all shareholders;

- Public meetings with presentation of the business overview and results.

Strategic and Sustainable Planning GRI: 1.2

AES Brasil is committed with its sustainable development and operates as an agent to

understand, meet and advance the electricity needs of its clients, with secure and innovative

solutions for the economic, environmental and social development of the communities

where it operates.

This commitment is the main basis of the Company’s Strategic and Sustainable Planning,

launched in 2012 and that will be fully put in practice through 2016. AES Brasil’s planning

has four strategic guidelines that indicate the alternatives for the company to be able to

comply with its commitment. The strategic guidelines are the following:

Focus on customer

Expansion

Comments from the relation network

Efficiency and accuracy in the performance

The AES Brasil’s Strategic Planning was defined in order to ensure the alignment with the

Sustainability Platform, whose development commenced in 2010 and was launched with the

Strategic Planning at the beginning of 2012. The platform comprises a set of aligned

guidelines that affect all organization’s processes. The strategic guidelines and the main

and related matters of the Sustainability Platform have the same purposes and priorities,

ensuring that the actions are performed on a smooth and continuous basis, which ensures

effective and long-term results to the Company.

There are five main matters and three related matters with respect to the Sustainability

Platform of AES Brasil.

Main matters:

• Security;

• Innovation and excellence for the customer's satisfaction;

• Sustainable power generation;

• Efficient use of resources;

• Development and evaluation of employees, suppliers and communities.

21

Related matters:

• Education for sustainability

• Integration of relation network;

• Communication, information and knowledge.

Strategy Spread: The Knowledge Map

AES Brasil considers that the disclosure of the strategy of each business with its

employees is essential for the success of the Strategic and Sustainable Planning.

The purpose of the training is to disclose, with more details through the knowledge map,

the strategy for the 2012-2016 cycle of AES Brasil, stimulating the dialogue and the

understanding of all employees, as well as how, individually, each employee is able to

contribute with the compliance of the strategic goals.

Accordingly, AES Brasil developed a training that takes approximately four hours and is

performed on a playful and dynamic basis: the Map represents the business model, the

Strategic Planning of the organization, reinforcing the sustainability as an essential aspect

of the AES Brasil’s strategy and the We Are AES Culture.

Therefore, after understanding their role in the compliance with the Group’s strategy, all

employees of AES Brasil contribute to meet the Sustainable Strategic Plan Cycle’s goals.

AES Brasil at Rio +20

During Rio+202, AES Brasil’s CEO, Britaldo Soares, discussed about the preparation and

implementation of the Sustainability Platform and the Group’s need to focus on and be

committed with the sustainable development of all company, demonstrating how the

sustainability is effectively related to the business.

AES Brasil actively participated in Rio+20. The staff that attended to the event contributed

with significant discussions on the essential changes in governance structures, business

management and human behavior deemed necessary to the commitment with the

sustainable development.

The company was also involved in technical discussions that aim at identifying the electric

energy solutions to generate less environmental and social effects without, however, result

in loss of efficiency. The presence of the company confirmed the recognized position that

AES Brasil is assuming with respect to the matters related to the sustainability in the

electricity sector. We participated, as well, in the preparation of the document “2050

Brazilian View – a new business schedule in Brazil”. Prepared by the Brazilian Corporate

Council for Sustainable Development (CEBDS), the purpose of the document is to provide

a future sustainable view and determine the possible alternatives to ensure this. Another

aspect that reinforces the company’s commitment with sustainability is the appointment of

Britaldo Soares for the Board of Directors of CEBDS and as member of the Sustainability

Committee, of Amcham.

2 United Nations Conference about the sustainable development that joined, in June 2012, the political, business and civil leaders of

several nations to enter into proposals and agreements for the sustainable development.

22

Sustainability Platform GRI 4.16

In 2012, the Sustainability Platform of AES Brasil faced an important process of

consolidation and dissemination in the Group’s companies. The alignment with the Strategic

and Sustainable Planning is an important effect of this consolidation and already ensures

effective results for the organization.

With respect to the safety subject – the company’s most important value – several actions

were undertook in the concession area of AES Eletropaulo in order to ensure a reduction of

19% of fatal accidents with the population (for further information, see page 30).

Another important subject was the innovation and excellence of the Customer Satisfaction,

in which AES Eletropaulo reached the best index of Customer Satisfaction in the Abradee

ranking since the research was performed for the first time (for further information, see page

36).

With respect to the development and valuation of employees, it was given sequence to the

program for development and recognition of the best practices through the Supplier

Financial Performance Index (IDF) (for further information, see page 70).

With respect to the development and appreciation of communities, the Strategic Planning

and the Sustainability Platform allowed the consolidation of the Corporate Social

Responsibility Management System (SGRSC), which defines the guidelines of the private

social investment, allowing, therefore, the company to improve its operations at the

communities and align its social investments to the business strategy (for further information

on the SGRSC, see page 74).

In terms of platform management and governance, the Sustainability Committee met four

times in 2012 to monitor the 38 commitments and reported the updated information to the

Board of Directors and to the Supervisory Board two times.

One of the main decisions of the Sustainability Committee was the approval of the

company’s main sustainability indicators that must be reported on a quarterly basis

beginning 2013.

Sustainability Policy

GRI 1.2; 4.14; 4.17

The commitment of AES Brasil with the sustainable development is defined in the

documents that express our identity (View, Values, Ethics Code) and sustainability policy as

explained in our website (www.aesbrasilsustentabilidade.com.br).

23

INDICATORS 2011 2012

SAFETY Performed Goal Performed Status

Nº of fatal accidents with employees 0 0 0

Nº of fatal accidents with contracted 0 0 1

Total nº of fatal accidents 0 0 1

Nº of accidents with and without leave of employee 64 51 36

Nº of accidents with and without leave of contracted 70 56 71

Total nº of accidents with and without leave (including fatal accidents) 134 107 108

Total nº of accidents with the population 87 70 89

INNOVATION AND EXCELLENCE FOR CUSTOMER SATISFACTION Performed Goal Performed Status

DEC (Duration Equivalent of Interruption per Unit Consumer) 10.36 8.67 8.35

FEC (Frequency Equivalent of Interruption per Unit Consumer) 5.45 6.87 4.64

INS (Index of Level of Service) of Call Center (% of clients we responded in up to 30

seconds) – Annual average 88.8 89.0 91.7

EFFICIENCY IN USE OF NATURAL RESOURCES Performed Goal Performed Status

Recycled residue and/or reused / Quantity of generated residue (%) 11% 16% 55%

Own consumption of electric energy (MWh) 55% 53% 44%

Direct and indirect emission of CO2 - Losses and fuel - (tCO2e) 162,218 158,974 358,799

EFFICIENCY IN THE USE OF POWER RESOURCES Performed Goal Performed Status

Global losses (%) 10.51 % 10.30% 10.30%

Own consumption of electric energy (MWh) 45,251 44,346 44,198

Energy saved in the projects of Energy Efficiency and Transformation of Consumers

into Clients

(MWh)

62,338 46,000 116,685

DEVELOPMENT AND VALUATION OF EMPLOYEES Performed Goal Performed Status

Rate of voluntary turnover – own employees (%) 8.8% 6.0% 10.5%

DEVELOPMENT AND VALUATION OF COMMUNITIES Performed Goal Performed Status

Nº of beneficiaries by social projects of the company 1,231,000 1.231,000

mil

1,682,000

Nº of benefited families by the low income project 46,203 50,000 55,000

Knowledge of the Platform by the Employees

For the dissemination and adhesion of the Sustainability Platform in AES Brasil, it was

performed a research, on a sample basis, of the internal communication focused on this

subject, applicable to 600 employees, of all levels of authority.

The results indicate that, although most part of the persons interviewed declared to be

aware of the Sustainability Platform, the percentage of those that “know well” it is solely

17%. This information shows that, despite of the efforts undertaken to disclose the strategy,

still needs to be done a strong work, mainly focusing the role of the leaders as the persons

responsible for such disclosure. Accordingly, in 2013, it will be put in practice the Education

for Sustainability Program (commitment of the related matter Education for Sustainability),

24

not only to improve the knowledge on the Platform, and also to allow each employee to

understand how to use the sustainability principles in the personal and professional routine.

Dialogue Cycle

GRI 4.14; 4.16

Between September and November 2012, AES Brasil Group carried out the fourth edition of

the Dialogue Cycle, an engagement process that gathers the groups of the target audiences

to evaluate how the organization is in accordance with its expectations and demands. The

aspects discussed in these meetings are used as the support and feedback for the

corporate actions.

The 2012 edition was attended by 97 persons, including employees, suppliers and clients

(corporate and residential) of AES Eletropaulo.

Public Commitments GRI 4.12; 4.13

The companies of the AES Brasil Group are the signatories of the Global Agreement and

promote the Millennium Goals, the initiatives of the United Nations Organization (ONU).

The Global Agreement stimulates the business community to adopt, sponsor and promote

ten basic and universal human rights, labor practices, environment and prevention practices

against corruption and bribery. The signatories are invited to introduce the ten conduction of

business and activities and report its progress to ONU and to the company on a yearly

basis. Beginning 2005, AES Eletropaulo is the signatory of the Global Agreement and

discloses, on a yearly basis, the performance of its activities, as well as the social and

environmental effects through the sustainability report.

The Millennium Goals, on the other hand, are comprised of eight set of guidelines that

promote education, balance, reduction of child mortality, health of pregnant, fight against

Aids and other diseases, fight against starving, respect to the environmental and worldwide

development.

AES Eletropaulo adhered, in 2008, to the Business Agreement for Integrity and against

Corruption, participating in discussions with the community about the situation and

stimulating the business citizenship. The distributor maintains the relationship mainly with

the following:

Brazilian Association of Power Distribution Companies (Abradee): contributes to the operational and financial and economic excellence of concessionaires, focused on serving the customer;

Union of the Energy Industry in the State of São Paulo (SindiEnergia): studies, coordinates, protects and represents the agents of the energy sectors in the state of São Paulo;

Ethos Institute for Business and Social Responsibility: assists companies in

incorporating the concept of social responsibility in their management, by making use of an incessant evaluation and improvement process;

Abrinq Foundation: mobilizes the society towards issues related to the children and adolescent rights. AES Eletropaulo participates in the Company Friend of the Children Program, which encourages private social investment in measures on behalf of children and adolescents;

25

Unidos Group: a partnership between the U.S. diplomatic bodies in Brazil and the U.S. companies headquartered in the Brazilian territory, whose purpose is to disseminate the investment of companies which participate in environmental and social and economic development projects and promote corporate social responsibility before diverse segments of the society;

Brazilian Corporate Council for Sustainable Development (CEBDS): it comprises the principles and practices of the sustainable development in the business context, reconciling the economic, social and environmental aspects;

Companies for the Climate (EPC): a permanent business platform, organized by Fundação Getúlio Vargas, whose purpose is to organize, inform and structure the business leaderships for the management and reduction of the greenhouse gases, as well as climate management and proposals for public policies and positive incentives in the context of the climate changes;

Global Reporting Initiave (GRI): in 2012, AES Eletropaulo, through AES Brasil, was

classified as the Organizational Stakeholders, which means that the company is one of the key members that contributes with knowledge, performing an important role in the company’s governance;

International Integrated Reporting Council (IIRC): by means of AES Brasil, AES Eletropaulo participates in a international association between the regulatory bodies, investors, companies, ONGs and other entities whose purpose is the progress of the corporate performance reports, including economic, financial , social and environmental results.

AES Eletropaulo understands that the adhesion to voluntary commitments is important for

the discussion on matters deemed relevant to the company, as well as for joint resolutions

to the current challenges.

Based on this, the company was committed to “engage again or identify and comply with the

Voluntary Commitments related to the sustainable development through 2013, in the context

of the related matter of Integration of Public Relations.

Corporate Management AES Eletropaulo received, for the second time, the National Quality Award, which recognizes the

best management practices.

GRI 4.5

AES Eletropaulo received, for the second time, the National Quality Award (PNQ) that

recognizes the best management practices. The company was one of the six awarded

between 41 candidates

The management of the companies of AES Brasil Group is guided by the Strategic and

Sustainable Planning and follows the Management Excellence Model (MEG), of the

National Quality Foundation (FNQ), comprised of 11 excellence points3. Such points are

converted into excellence criteria that, among other things, allowing the determination of the

maturity degree of the company’s management.

3 Systematic thought; organizational learning; innovation culture, leadership and during purposes; direction by proceedings

and information, future view; generation of value; people appreciation; knowledge on the customer and the market development of partnerships and social responsibility.

26

This measurement is performed through the independent evaluation and within the cycle of

PNQ, an FNQ’s initiative that acknowledges the world class companies, considered as

holders of the best management practices.

The organizations that participate in the PNQ are evaluated based on MEG and in

accordance with the scale that varies between 0 and 1,000, divided into ranges. AES

Eletropaulo had already been recognized by PNQ in 2009 and through the Ibero-american

Quality Award in 2010.

As an integral part of the Management Excellence Model of the AES Brasil’s companies and

as an important instrument for the organizational direction, the Strategic Planning is

reviewed on a yearly basis. This revision counts on the participation of the leaderships and

comprises all the company’s areas. The process is developed during the first six-month

period of the year, as a way to direct and improve the culture of organizational performance

in the short term (one year) and in the long term (five years), as set forth in the Strategic

Plan Cycle.

In 2012, AES Eletropaulo also won, in an integrated manner, the certifications ISO

14001:2004, which attests that quality and excellence of the company in the practices and

actions related to the Environment, and BS OHSAS 18001:2007, health and safety standard

of work.

Another important victory to AES Eletropaulo in 2012 was the renewal, for the third time, of

the ISO Certification 9001. The certification ensures that the company is in accordance with

the requirements of ISO Certification 9001:2008, which covers the quality management.

Strategic Plan Cycle GRI 4.5; 4.16

The Strategic and Sustainable Planning of AES Brasil is developed on a cycle basis,

allowing eventual corrections and adjustments over the process. The cycle of the strategic

planning is comprised of two stages: definition and establishment of the strategy.

During the definition stage, between January and June, the Xtrategy takes place, which is a

method to define the strategy developed by AES Corp. and adjusted by AES Brasil. The

Xtrategy allows the risk analyses and opportunities based on the following: macroeconomic

estimates; regulatory and political environment; projected market expansion; corporate risk

matrix; Swot matrix; and specific challenges related to each business.

Beginning June, the strategy is implemented, during which stage the discussions are

performed for the preparation of the budget of the company and the definition of the main

initiatives/projects for the definition of the strategic guidelines and commitments assumed in

the Sustainability Platform.

Between September and October, the budget assumptions and the projections of the

financial statements are discussed and approved by AES Corp. and the National Social and

Economic Development Bank (BNDES).

In accordance with the allocation of the resources approved by the respective boards, the

respective action plans are detailed and related to the strategic guidelines, including terms,

goals and responsible persons.

Between November and December, the individual goals and targets of the main executive

officers of the Group’s companies are defined, in accordance with the Strategic and

27

Sustainable Planning and the budget approved. Finally, all commitments are executed

through the management agreements (see below).

The last stage for the implementation of the strategy refers to the learning and adjustment,

in which the learning's of the previous process, is the starting point for the new cycle.

The report and disclosure of the long-term strategy, purposes and strategic goals for all

company's employees take place in February of the next year.

Forums of performance

On a monthly basis, the Performance Forums are performed, which are the meetings whose

purpose is the management and analysis of the performance, including the results from the

strategic and tactical indicators, as well as the revision of the action plans.

There are three types of meetings:

Results Meeting: material facts, points of attention and resolutions;

Business Meeting: strategic and performance plan of the business and main processes;

Preparation Meeting: tactical/operational plan and performance plan of the management agreements.

Intangible Assets

The non-accounting intangible assets comprise an important part of the Strategic and

Sustainable Planning and, in order to maintain them aligned with the business strategy, the

companies of the AES Brasil Group provide for a set of systems that allows the updating of

information, attraction and retention of persons and development of communities, in addition

to the innovation of products and processes.

The nonaccounting intangible assets are identified and evaluated based on the market,

technological and administrative aspects. Based on this analysis, these assets are classified

as follows:

Human – capacity, experience and knowledge;

Market – brand, clients and relationship;

Infrastructure – sundry systems and client master file; and

Technological – research and development, processes and products.

One of the Sustainability Platform Commitments of AES Brasil with respect to the Efficient

Use of the Resources is to restructure the management of these assets through 2014,

adjusting the definition, monitoring and measurement processes.

Risk Management

The Integrated Risk Management of AES Brasil allows the identification of and control over

the most significant corporate risks (which could affect the image and capacity of the

strategic goals and purposes) based on The Committee of Sponsoring Organizations –

Enterprise Risk Management methodology (Coso-ERM). This methodology allows that the

risks identified are classified based on the related probability and effects in the matrix

denominated heatmap.

28

The risks inherited to the businesses are grouped in four areas: strategic, financial,

operational and regulatory. These areas are divided into 57 categories. All risks are properly

addressed with an action plan, through a monthly monitoring of the key risks. The other

risks are monitored in intervals between four and 12 months.

In addition, some risks are monitored through the Key Risk Indicator (KRI), which verifies its

performance and is used as an advanced warning with respect to the related exposure or

potential loss.

STRATEGIC

INTANGIBLE ASSETS GOVERNANCE MARKET MARKET STRATEGY/

ELECTRICITY SECTOR

Reputation Technological

innovation

Policies and

internal controls

Organizational

structure

Relationship/ Water

shortages

Politics Macroeconomic

scenario

Recruitment and

Retention of

talents

Integrity in

Client´s

Registry

Unethical

conduct

Relationship with

stakeholders

Energy contracting Products and

services

development

Continued

operations

Succession and

Person

Dependence

Planning and

budget

Development

incentive

Market share and

competition

Investment decision Merger and

acquisition

FINANCIAL REGULATORY

Actuarial Credit Liquidity Electricity sector

Welfare plan Collection and default Commodities Tariff review

Concentration of receivables Exchange rate Concessions renewal

Access to capital

Debt acceleration

Cash flow

OPERATIONAL

Proceedings Sector infrastructure Personnel Information and

technology

Community General

Material and services

supply

Equity management Training Access to information Public safety Labor

Contractual obligation Quality in provision of

services

Health and safety Availability of systems Environment Civil

Commercial losses Technical losses and

energy efficiency

Relations with unions Integrity of systems and IT

environment

Tax/ fiscal

Project tracking Operational capacity Third parties Accounting practices

Operational efficiency Benefits

Target Audience

GRI 4.14; 4.15; 4.16; 4.17

Aiming at making its actions more effective and to meet the specific demands, AES Brasil

approved in 2012 a revision of the target audience map. With the involvement of the

leadership, the project, which started in 2011, resulted in the reclassification from six to ten

sets of target audiences of the company. In accordance with its level of relationship and

influence, the audiences were grouped as the ones that:

29

Influence: Press, Electrical Sector Agents, Organized Civil Society and Communities;

Support: Employees, Shareholders and Lenders;

Depend/Support: Suppliers and Clients; and

Regulate/Inspect: Public Power and Regulatory Bodies.

Integration of Relation Network

In order to ensure that the business management is able to meet to the expectations of our

target audiences and generate the contributions to the Strategic Plan Cycle, AES Brasil

structured and systematized its engagement process based on the international rule

AA1000. Thus, the company aims at obtaining expectations and demands, as well as the

sustainability aspects that could be controlled and over which the AES Brasil Group has

control.

This process is important to ensure that the expectations of these target audiences are

considered in the Strategic and Sustainable Planning in a clear and transparent way.

The application of the procedure in 2012 with the target audience, complies with the

commitment presented in its Sustainability Platform, as well as it starts the systematization

of a procedure to be applied to all target audiences of the Group in the next years. In 2013,

for example, the company will extend its scope by including the investors focused on the

publication of its first integrated report in the next year. Learn more about this Project on

page 20.

Safety It is the attitude protecting the life of our employees, suppliers and community

Sustainability Commitment

(2012-2016) Current Status Next steps

No fatal accidents (own and

contracted) per year

Not reached. A fatal accident with an

employee of a partner was recorded.

Maintenance of routine of safety

inspections, safety walks, internal

and external audits, security

dialogues, risk assessments before

starting the services, news events

and training

Reduce in 20% of accidents with

and without removal (own and

contracted)

Reached. It was registered a

reduction of 23% in relation to the

previous year

Maintenance of routine of safety

inspections, safety walks, internal

and external audits, security

dialogues, risk assessments before

starting the services, news events

and training

Reduce in 20% per annum total

accidents with population

Not reached. Although it has been

observed a reduction of 19% in fatal

accidents, it was registered an

increase of 2.2% in the total of

accidents

Improvement in the safety campaign

with the population

*The metric for monitoring of meeting the commitments of reduction of accidents is under review.

30

GRI LA8; LA7; LA9; PR1; EU16; EU18; EU20; EU21; EU25

Safety is the value number 1 of AES Brasil. This means that nothing is more important than

ensuring the physical integrity of the employees, suppliers and of the 16.6 million people

that on a daily basis enjoy the well being provided by the electricity in the concession area

of AES Eletropaulo.

The challenge is to reduce the accidents. Therefore, the safety efforts undertaken by AES

Brasil Group aims at anticipating the risks and seeking the preventive actions that would

represent the best safety conditions for all persons.

The Safety Programs of the AES Brasil’s companies are based on the global guidelines of

AES Corp. and on the Occupational Health and Safety Management System (SGSSO).

The requirements of the SGSSO are in accordance with the specifications of the OHSAS

18001 (Occupation Health Safety Assessment Series), an international rule focused on the

health and work safety, directed to the preservation of the physical integrity and health of

the employees and partners through the practices of mitigation of risks in activities and

facilities. As a result of the adherence of its Safety Management System, the company

received, in 2012, the OSHAS Certification 18001.

Although out of the three commitments, two commitments were not reached in 2012, AES

Eletropaulo recorded significant results, such as the reduction of 44% in the number of

accidents with own employees and decrease of 19% in the fatal accidents with the

population. Similarly to 2011, the company has not recorded any fatal accident with its own

employees.

According to the Occupational Health and Safety Management System of AES Brasil, the

Group received the award in 2012 from Fundação Coge, under the Labor Safety and Health

Management category. In December 2012, AES Eletropaulo was certified in Rule OHSAS

18001. The good performance, although, did not repeat with the outsourced companies and

one fatality was registered in 2012.

Workforce Safety

GRI LA7, LA8

The Safety Program of AES Eletropaulo, including all company’s practices, was prepared to

contribute with the consolidation of a safe environment through the commitment with

continuous improvement. This program is based on the Standards of AES Corp., 25 safety

standards focused on the improvement of procedures and practices and also based on the

compliance with the requirements of rule OHSAS 18001.

In order to ensure the effectiveness of the safety actions performed, the company monitors

such actions through the AES Corp. – Safety Management System, whose process is based

on a continuous cycle comprised of four stages:

Plan: identify the safety risks and define the goals;

Execute: include trainings, qualification and operational controls;

Verify: monitor the progress of the goals and perform the corrective actions;

Review: include the progress analysis actions to develop the changes, if necessary.

During 2012, it was given continuity to all practices set forth in the Safety Program, reaching

a reduction of 44% in the number of accidents with and without the leave of own employees

and increase of 1% in outsourced employees.

31

1.Frequency rate/ 2. Severity rate: accidents with suspension per million of men-hour of exposure to the risk over one year

3. In 2012 the company began to account for investments in individual and collective protection equipment (EPC / EPC) in total

investment in safety. 4. Information rectified in relation to previously reported change in methodology for calculating the

indicator.

Safety Program

GRI LA8

The Safety Program of AES Eletropaulo is comprised of several actions, comprised mainly

of the following:

Safety Walk

The Safety Walk is an initiative of AES Brasil Group and involved the leadership (CEO, vice-

CEOs, executive officers, managers and coordinators) of several areas operating in the field

in order to monitor the activities performed by own and outsourced employees, as well as

identify and eliminate the conditions and behaviors not in accordance with the security

policies.

In 2012, the leaders of AES Eletropaulo performed 27,166 safety walks, reaching the goal

set forth for the period. As a result of such walks, the leaders recorded all insecurity

conditions and all action plans for the correction and prevention were set forth for each one

of them, based on the study in each case.

Leader in Action

In order to skill the leaderships in order to guide and oversight the staffs for performing safe

work and, therefore, ensure the efficiency of our initiatives, this practice offers the training

based on three aspects (safety, quality and productivity) to the leaders that operate directly

in the field.

Safety Blitz in Contracted Companies

The Safety Blitz is a practice adopted by AES Eletropaulo with the contracted companies of

the Electrical Power System (SEP). This refers to a visit to suppliers for a safety inspection

in order to resolve the insecurity conditions in the entire value chain. In 2012, 10 blitze were

performed in the contracted companies.

Work Health and Safety 2010 2011 2012

Investments in Safety Programs (R$ thousands) 14.002 13.679 23.799³

TF (frequency rates)¹ – employees 6,55 5,994 3,29

TF (frequency rates)¹ – contracted parties 5,26 3,87 4,27

TG (severity rates)² employees 672 49,67 33

TG (severity rates)² – contracted parties 349 53,49 500

Fatal accidents – employees 1 0 0

Fatal accidents- contracted parties 0 0 1

Occupational accidents with and without suspension – employees

634 644 36

Occupational accidents with and without suspension – contracted parties

874 704 71

Discounted/lost days – employees 4604 2614 366

Discounted/lost days – contracted parties 1.1414 9684 8.433

32

Event Report

It is a communication line of the Integrated Management System with the employees to

stimulate the communication of probable accidents and behaviors or insecurity conditions in

the work environments, in addition to the environmental events. Accordingly, the company

ensures that all events that could potentially result in environmental accidents are reported

and verified, in order to perform the actions to eliminate the risks. The employees may also

provide suggestions with respect to the company’s safety and environmental practices. The

reports received are analyzed, classified and addressed in accordance with the event

potential. In 2012, AES Eletropaulo received 15,872 reports.

Safety Discussion

It comprises periodical meetings – monthly and weekly – aiming at providing information to

all employees with respect to all matters such as: environmental safety, result of the

inspections of accidents and reports on significant events, performance analysis,

occupational health, results from the field inspections, safety campaigns, technical and

operational procedures with significant effects on the safety or environment, among others.

Zero Tolerance

It comprises the prompt, effective and efficient actions based on the safety inspections

directed to identify and eliminate the insecurity conditions that could result in severe or fatal

accidents. The preventive actions reinforce the prompt leadership role to maintain and

develop a safe environment and the use of the controls to ensure that the safety conditions

in field are being complied.

Megasafety Inspection

Its purpose is to determine the existence and conditions of the tools, material, vehicles and

protection equipment. These are coordinated by technical managers, operational

coordinators and safety coordinators and technicians.

Safety Committees

GRI LA6

Four Committees represent the employees from AES Eletropaulo with respect to the

matters of health and safety. These Committees comprise 100% of the company’s

employees. The goal for 2013 is to ensure the periodicity of the meetings of each

committee.

COMMITTEE MAIN CARACTHERISTICS

Work Safety

AES Brasil

Approves safety goals and targets for AES Brasil Group’s companies, monitors the

main performance indicators, and approves investments and the allocation of

emergency proceeds for prevention or correction of safety related questions.

Work Safety

AES Eletropaulo

Monitors the indicators in detail by Regional Board of Directors and by the main

contracted companies; evaluates the main performance matters and the definition of the

preventive or corrective actions; aligns the activities, by continuously communicating the

members; recognizes monthly the employees that were recognized in the health and

safety matters.

33

Regional Committee and

Executive Committee of

Work Safety of

AES Eletropaulo

Analyses the main indicators of safety in each regional; as well as discusses with the

local safety staff the actions to be performed; and organizes the Critical Analysis

Meeting (RAC) involving their own or third party leaderships.

Internal Commission for

Accidents Prevention (Cipa)

It provides information and seeks for resources for prevention and improvements. It is

divided into subcomissions, which discuss differentiated subjects and address the

discussions to the CEO of Cipa. Each Board of Directors has specific analysis and the

subcomissions define how each area should act.

Safety for the Population

In 2012, AES Eletropaulo improved its actions directed to provide information to the

population on the risks of the electric energy in the context of the Viva sem Acidentes

Movement. The reduction of 19% in the accidents (from 16, in 2011, to 13, in 2012) is the

result of more than 153 safety blitze; 372 trainings for the civil construction professionals;

3,777 safety lectures and 6,199 presentations of the safety trucks, reaching an audience of

1.27 million people.

All these initiatives were reinforced by an intensive media campaign, since 2011, which

aimed at advising and warning the population with respect to the need of adopting safety

measures in relation to the electric network. In order to directly reach the population, the

campaign performed actions in the soccer stadiums, samba communities, public schools,

communities, work sites and trains of the Metropolitan Trains Company of São Paulo

(CPTM).

The focus of the campaign was the customers of classes C, D and E. Accordingly, the

campaign adopted a simple language based on the daily activities of the population in order

to ensure that the message could be better understood by the highest number of persons.

As recognition for the work of AES Eletropaulo in the execution of these actions, the

campaign resulted in the 2012 MaxiMídia Award, received from Meio & Mensagem

magazine, under the category “Best Mix Media Use”.

The fatal accidents with the population decreased in 19% between 2011 and 2012; but the

total number of accidents increased from 87 in 2011 to 89 in 2012. Between 2009 and 2012,

the total of accidents decreased 33% and the fatal accidents, 50%.

GRI EU25

34

Safety Day with the Population

In order to reinforce and continue with the initiatives to provide information of the electric energy risks to its

clients, on June 29, 2012 AES Eletropaulo launched the Safety Day with the Population. The action

comprises in the provision to the population of safety tips through interactive activities. Amongst the

attractive measures of the event, we count on the lan house truck equipped with interactive game that

challenges the participants with the exercises of “right or wrong” with respect to the electrical installations, in

order to stimulate the changes in the behavior and proper and safe use of electric energy.

Electric and Magnetic Fields

The electric and magnetic fields are always implemented in the electricity transmission. In this

regard, AES Eletropaulo adopts cautions and preventive measures with respect to the exposure of

the population during the development of the projects, in accordance with the recommendations of

the Worldwide Health Organization (OMS).

Under applicable legislation (Federal Law nº 11934, of May 5, 2009, regulated by ANEEL Normative

Resolution 398, of March 23, 2010), the company performed the studies for the measurement and

simulation of the magnetic fields and follows, on a periodical basis, the analysis of the institutes on the

matter. This monitoring is performed in partnership with the Brazilian Association of Electromagnetic

Compatibility (Abricem) and provides support to a research and development project with the purpose

to oversight the exposure levels of the employees and population to magnetic fields of 60 hz generated

in substations and subtransmission lines and, therefore, comply with the safety limits in all facilities.

The company aims also at defining the most adequate architecture for the electrical system and the

development of the remote sensitive terminals of the magnetic fields in the selected places (metrics). In

addition, the Project includes the development of a database that could provide the information to the

population and governmental agencies (federal, state and municipal), in accordance with Bill

2.576/2000.

In 2010, AES Eletropaulo has installed sensors in line Pirituba-Bandeirantes which allowed the

monitoring, in real time, of its electromagnetic field. In 2012, the tests of the new measurement system

were successfully completed, which innovates such in terms of calculation of the distance between the

field and buildings and portability, as allowing the measurements to be performed in several places.

Thus, it may be used to evaluate the levels of the magnetic fields in the areas next to the electric grid

35

Innovation and Excellence for the

Customer´s Satisfaction Provide an environment and culture that offer solutions to improve the life of persons and

ensure the quality and excellence in the services rendered to the customer

Sustainability Commitment(2012-2016)

Current Status Next steps

Reach a level above 85% of

customer satisfaction of AES

Eletropaulo at Abradee research,

until 2015.

In progress. Index in 2012 was of

80,6%, surpassing the goal set for

the year, which was 77.2%. This

result was achieved due to the

investments in the power distribution

network, the modernization and

expansion of channels and training of

operational and commercial staff.

Continue investments in the

distribution network and in the

modernization of the service

channels.

Implement an internal structure to

ensure the promotion and

management of innovative

practices and projects, through

2012.

Reached. 100% of action plan was

implemented, with the remodeling of

the internal structure of the team, as

well as the management of the

innovation projects. Once fulfilled,

this commitment no longer exists

from 2013

Maintenance and improvement of

internal structure

Promote an organizational incentive

culture, through 2014.

In progress. Reached 100% of the

planned for 2012, with the performance of internal campaigns with the “Innovation Week” and the participation in awards and events of the sector, on the theme Innovation

Define focus and concept of innovation for AES Brasil that will serve as base for the next internal campaigns, which shall include mobilization action and recognition

Implement five innovative solutions

and clean technologies in AES

Brasil that would generate value to

our interested parties, by increasing

quality and reducing the

environmental and social costs and

effects of our operations, through

2016.

In progress. Reached the goal of

mapping and beginning five

innovative projects

Monitor the implementation of five

projects already defined and

prospect strategic and

sustainable projects for the

maintenance of portfolio

Spread the innovation concept and

strategy in the value chain and

establish partnerships which extend

the results until 2016.

Not started. This commitment was

prioritized to start its planning from

2013, after the definition of the new

concept and the focus of the

company's innovation

Define the new concept of

innovation and focus of AES that

will allow the spread in the value

chain and strengthen the

relationship with suppliers to seek

solutions and common interests

AES Eletropaulo is a company that daily seeks for renewal and more efficient measures to

its practices. The company believes that simple acts can contribute to improve the routine of

the persons in the development of their daily activities inside and outside their work. In order

to disclosure this culture amongst its employees, AES Eletropaulo created, in 2011, an area

to stimulate the innovation and implement the innovation culture in the company.

In addition, AES Eletropaulo has invested in the innovation of the electricity grid. Over the

last years, there were investments in the promotion of a more intelligent grid, resulting in an

36

energy of highest quality and reliability to approximately 6.5 million customers of the

company. The results from this investment can already be confirmed and in 2012 it has

been recorded the best operational performance indices of the company’s history.

Customer Satisfaction GRI PR5

The excellence in the customer service and the continuous improvement in the rendering of

the power supply are the assumptions adopted by AES Eletropaulo. In 2011, there was a

significant effort in the company to reorganize our customer care infrastructure, including

initiatives such as the improvement of the electronic customer care channels, opening of

new stores that offer assistance in person and launching of the platform of digital customer

care, the Mobile Web; in addition to the high investments in the field staffs and grid

technology.

Due to all this initiatives, an important objective was reached: increase the customer

satisfaction level. This index is measured by Abradee and, in 2012, the company received

grade 80.6 in the Quality Satisfaction Index (ISQP), the best index in 14 years, and 9.1

points greater than the research in 2011. This result leaves the company closer to the next

goal of 85% established for 2012. The expectation for the next years is to have a better

position in the association raking, from the 13th position to the 5th position through 2016.

In 1999, the Abradee research is performed annually based on the five themes of the

Quality Satisfaction Index , namely: Power Supply; Information and Communication; Light

Account; Customer Service; Image. In the total, 625 customers are interviewed in person to

contribute with the research that determines the level of satisfaction with the electricity

distributors.

The growth in 2012 is the result of the investment made by the company over the last years.

It has been R$831.1 million, an increase of 12.5% compare to 2011, focused in

maintenance, expansion, grid modernization and customer services.

Customer Satisfaction 2010 2011 2012

Levels of satisfaction obtained by research IASC-Aneel (%) 62,37 ND* 61,5

Level of satisfaction with Perceived Quality by residential customers

(ISQP) –Abradee research (%) 76,6 71,5 80,6

Quality of Services

Amongst the important investments between 2011 and 2012 in the customer services to

ensure the customer satisfaction, we include the following:

increase of 150 positions in the call center, in addition to the 400 positions available

so far;

engagement of 300 customer care positions with variable service capacity that will

be in stand by for emergency cases;

improvement of the electronic service capacity from 2,000/hour to 54,000/hour;

implementation of the Mobile Agency for field services in critical days.

In order to continue with the projects for improvement of the customer service, in 2012, the

company launched 14 new points of services in person, totaling 40 units that provide

37

several services to the customer, as second electric energy invoice, master file changes,

fraud reports, claims due to the lack of electricity, installation requests, indemnity claims for

electricity damages, amongst others.

In order to improve the customer care services, in 2013, AES Eletropaulo will provide, in its

customer service points, 127 self service terminals, 50 totens and 77 telephones (Fale

Fácil), transferring part of assistance in person to electronic points.

Customer Service Lines

Virtual Center

http://www.aeseletropaulo.com.br/Paginas/Servicos.aspx

SMS

27373

24 hour customer service number

Emergency calls: 0800 72 72 196 Business hour calls: 0800 72 72 120 Special call to hearing impaired customers: 0800 77 28 626

Stores that offer assistance in person

http://www.aeseletropaulo.com.br/clientes/Paginas/lojas.aspx

Services Network Assistance

In 2012, it was made a replacement on the assistance in person of AES Eletropaulo. The

current network, with 37 points strategically positioned, aims at the improvement in the

quality of the assistance by means of the centralization of services.

The selection of assistance points was made by a study prepared by the company which

include four main aspects: establishment of the ideal productivity per assistance position;

assessment of the average monthly demand of assistance per region; calculation of the

proper number of service positions per region; and exploration of the profile of the client

searching for the assistance in person.

An example of application of the method is Loja Rebouças (Avenida Rebouças nº 2708, in

São Paulo) the first to be fully reformulated in accordance with the new quality standards

enabling more comfort and agility in its service capacity.

Respect with the customer

AES Eletropaulo was elected the “company that most respects the consumer”, under the

Energy Suppliers category, according to the Consumidor Moderno magazine, as a result

of a research carried out together with Shopper Experience. The average reached by the

company was 6.44, taking into consideration that 21% of the consumers had experience

with the brand.

38

Call Center Excellence

In October, 2012, AES Eletropaulo was recognized for the best work presented in the

Brazilian Electricity Distribution Seminar (Sendi) – the most important meeting of the

representatives of the electricity sector. The winning project was the “U.R.A. – An

Automated Relationship”, which had good results from the improvement of the distributor’s

call center.

The study concluded that, with the expansion of the U.R.A. (Remote Customer Care Unit),

the capacity increased significantly, from 2 thousand to 54 thousand customers served per

hour. Such improvement enabled the increase of 19% to 43% in the withholding of calls.

Focused on the continuous improvement of the relationship with the customer, AES

Eletropaulo, beginning 2011, has invested in the expansion of the call center and in the

modernization of the points of services in person. In the total, approximately R$ 90 million

have already been allocated to these projects.

Express Invoice

In May 2012, AES Eletropaulo began the delivery of electricity invoices upon consumption

measurement. With this new system, the company reduced not solely the costs with the

delivery of the invoices, but also the environmental impacts related to the consumption of

paper and transportation of the invoices (reduction of the emission of CO2 by the usage of

fuel). This because the new equipment that measures the consumption also prints the

invoice, which is provided to the customer upon measurement. Accordingly, the

equipment communicates in long distance with the concessionaire’s billing system, which

receives the information and records the payment.

The project, developed in partnership with SAP, a recognized company in the business

management software, counted on an investment of R$ 11.2 million. In 2012, the project

was implemented in the region of Tucuruvi and currently serves 422 thousand customers.

It is expected that at the end of 2013 all 6.5 million customers of AES Eletropaulo will be

benefited with this new system.

Number of customer services

GRI PR5

39

Claim Services

GRI PR5, PR9

AES Eletropaulo provides to its customers the Ombudsman service to record eventual

statements related to the services provided by the concessionaire. In 2012, the main

registered statements related to requests for indemnity due to electricity damages (PID),

energy consumption, measurement and service orders. Together, these claims accounted

for 64% of the total claims performed during the year. The main claims received by

Fundação de Proteção e Defesa do Consumidor (Procon) relate to consumption issues

(amounts included in the invoices), including the debits charged (collection of pending

amounts and fees).

Following the analysis and calculation of all claims – taking into consideration the sector

regulation, 52% were classified as founded and the customers received the necessary

clarifications.

The Ombudsman service receives the claims recorded in the specific 0800 and also those

received by Agência Nacional de Energia Elétrica (National Electric Energy Agency- Aneel),

Agência Reguladora de Sanemaneto e Energia do Estado de São Paulo (São Paulo State

Sanitation and Energy Regulatory Agency-Arsesp) and Procon.

In February, the company received a notice of infraction in the amount of R$3,54 million of

Procon/SP. At the end of the year, the process was under administrative resource, for there

was no violation of assistance indicators, grounds used in such draft.

Solved claims (%) 2010 2011 2012

During service 50.4 57.4 63.8

In 30 days 84.10 91.29 91.04

Between 30 and 60 days 13.00 7.39 7.78

More than 60 days 2.90 1.33 1.19

Relevant Claims in relation with the total of complaints received

51.00 49.00 52.45

Solved claims in relation with the total of relevant claims 100.00 100.00 100.00

Claims solved in relation to the number of valid complaints 100 100 100

40

Information security

GRI PR8

The safety and protection of customers’ information are extremely important to AES

Eletropaulo. In September 2012, the access to the Virtual Center was interrupted for a

period of five hours due to a possible problem with the website, which permitted viewing the

other customers’ invoices. However, these invoices were not viewed by all customers. In

order to view the other customers’ invoices, the user had to have some technical – to

combine systematically certain codes – and have the intention to obtain third-party

information. The information security staff was promptly advised and did not record the

invasion nor use of any personal information stored in our system.

Operational Excellence Productivity (Summer Plan) GRI EC2; EU21

Beginning 2011, AES Eletropaulo introduced the PDA (Digital Personal Assistant), which

allows the submission and completion of the service orders through a pocket equipment

similar to the smartphone, improving the performance.

In addition to the performance improvements, there were benefits in the reliability and

coverage of information, which allowed the company to prepare a more precise map of the

events and time of customer care services. Again, AES Eletropaulo seeks for technological

innovation in order to increase the efficiency of its operations and improve the customer

care services. Accordingly, the preventive measures are important. An example is the

Meteorological Monitoring System (SIM), whose information directly affected the planning of

emergency events in 2012 arising from the climate damages.

Another example of proactive measure and prevention against critical scenarios is the

Summer Plan, adopted by the company since 1996. During this period, which presents

strong rain more frequently, affecting the distribution network, AES Eletropaulo provides its

entire technical staff to meet the calls and emergency events. This integrates the company’s

human resources strategy and, despite of the dismissals due to the company’s restructuring

(see page 65), there was an increase from 264 to 473 (during summer time) in the number

of professionals that operate in the emergency calls, which improved the operational

performance indicators

GRI EU6; EU7

Renew Program

The purpose of the Renew Program is to improve and increase the effectiveness in the

performance of the activities and reduce the costs with system maintenance, in addition to

support the decision-making process. Accordingly, this program reviews the company’s

processes and the changes in the IT area that will allow the integration and modernization

of the systems responsible for the company’s operation.

The reviews will also improve the customer services and allow the implementation of

systems adjusted to the AES Brasil’s processes, improving the results to the Group’s

companies.

Through 2012, more than 100 employees of different areas operated in the Inova program

projects. In 2013, it is estimated that 350 persons will adopt the program.

41

Distribution network expansion

GRI 2.9; EC8; EU6

In addition to invest in the modernization and automation of the electric grids, it is also

necessary to invest in the expansion of the system, ensuring the distribution in accordance

with the demand of the consumer units, without breaking down the system and reducing the

quality of the electric energy distributed. Accordingly, in 2012, AES Eletropaulo invested R$

216.5 million in projects for the expansion of the electrical system.

Amongst these investments, we highlight the construction of the new substation Ermelino

Matarazzo and the improvement of the substations Santo Amaro and Cotia, which, together,

totaled 200 MVA of power to the AES Eletropaulo’s system. The results from such

expansion are reflected in the improvement of the energy quality, as it allowed the new

balance of the load in the benefited regions.

In São Paulo, 20 new primary circuits for distribution in the substations of João Clímaco,

Carapicuíba, Bandeirantes, Ibirapuera, Ermelino Matarazzo and Parnaíba were launched, in

addition to the expansion of the capacity of other 38 primary circuits in the substations of

Cotia, Monções, Tamboré, Vila Talarico, Nações and Carapicuíba, with the reconstruction of

the underground stretches. With the new circuits, AES Eletropaulo can improve the quality

of our services due to the increase in demand for electric energy in the benefited regions,

totaling approximately 230 thousand customers.

For 2013, it is estimated the construction of 47 new circuits and the expansion of the

capacity of over 25 primary circuits in the substations of Monções, Vila Talarico, Nações,

Clementino, Carapicuíba, Monte Azul, Varginha and Guaianazes.

The new cycle of tariff reviews resulted in the need of reviewing the capacity of investments.

However, the focus will be maintained on the improvement of the quality of the services

provided. Accordingly, it is estimated for 2013 the investment of R$ 178.6 million in the

construction and expansion of the distribution substations, primary circuits and

subtransmission lines.

Innovation: Aiming Intelligent Networks

GRI EU6; EU21

For AES Eletropaulo, the efficient and secure provision of services, with quality, depends

directly on its innovation culture and the continuous investment in alternatives and electricity

distribution technologies. This is a daily concern in order to meet its goal that is to ensure

the customers’ satisfaction and to be the electric best power distribution concessionaire in

Brazil by 2016.

One of the tools to meet this purpose is the efforts undertaken by the company to introduce

technologies which are able to provide the smart grids in its concession area. The smart

grids are comprised of several equipment which is able to map the traditional electric energy

grid: sensors, automation devices and smart metrics. With this set of technologies, the

company is aware – at long distance and in real time – of the volume and quality of the

electricity that is being used in each consumption unit. Accordingly, the concessionaire will

be able to remotely perform the maintenance, monitoring of irregular connections and

cutting and reconnecting the installations.

In addition to the technological improvements established over the recent years (see page

41), in 2012, AES Eletropaulo prepared the roadmap of the Smart Grid Program for the

period between 2013 and 2015, which defines a restructuring project for the region of

Barueri (SP) – in order to test the definition of the applications and functionalities of the

42

smart grids, covering the electric energy grid of the city, five substations and approximately

56 thousand metrics; and another project in Vargem Grande Paulista and Caucaia do Alto,

which aims at testing the functionalities of the smart grid. Over this period, AES Eletropaulo

will make investments greater than R$ 70 million.

Investments, modernization and quality

GRI: PR9; EC2; EC8; EU6

One of the steps for the implementation of the smart grid is the investment in technologies

that ensure the monitoring of and remote control over the distribution networks. In 2012,

AES Eletropaulo concluded the installation of 1,488 new automatic connectors, equipment

that allows the recovery of the power supply remotely, in case of interruption due to any

external effect, without the need of allocating the maintenance staff to such place. Currently,

over 3 thousand equipment is implemented in the grid. With an investment of R$ 38.9

million, the installation of the automatic reconnectors resulted in the best operational indices

(DEC and FEC) of the company’s history, as demonstrated in the table below.

The installation of the automatic reconnectors prevented approximately 990 thousand

interruptions due to the failures in the transmission in the consumer units throughout the

year, allowing an FEC of 4.65 in 2012.

Another significant effect from the investments in the automation of the electric grid is

reflected in the reduction of the amounts paid in fines imposed by the regulatory bodies

arising from the interruptions in the energy supply. In 2012, the company paid a total

amount of R$ 24.9 million in fines, a decrease of 13% compared to 2011.

Another important aspect in 2012 was the project to map the substations. In total 100

substations and 140 primary circuits4 were mapped, with investments of R$ 20.2 million.

For 2013, it is estimated the mapping of 540 connectors, secondary circuits and capacity

banks.

The investments in modernization of the grid allow customers to have access to the

electricity with reliability and quality, which are already being recognized and that reflect in

our indexes of Customer Satisfaction (see page 37). Therefore, on an integrated basis, AES

Eletropaulo seeks for innovative solutions to comply with the commitments and goals of the

Sustainability Platform and the Strategic and Sustainable Planning.

DEC and FEC

In 2012, AES Eletropaulo reached the best indexes of DEC and FEC in its history. It was

registered 8.35 hours and 4.64 times, respectively, representing a decrease of 19% in the

DEC index and 15% in the FEC index, compared to the previous year.

4 Part of the distribution network that feeds the transformers; the grid that comes from the transformers and reaches the consumption points is

called secondary grid.

43

GRI EU28; EU29

Operational Indicators 2010 2011 2012

General DEC of the Company – determined value 10,60 10,36 8,35

General DEC of the Company – regulatory limit 9,32 8,68 8,67

General FEC of the Company – determined value 5,43 5,45 4,64

General FEC of the Company – regulatory limit 7,39 6,93 6,87

DEC – Duration Equivalent to the Interruption per Consumer Unit FEC – Frequency Equivalent to the Interruption per Consumer Unit

Electric Cab

The partnership among AES Eletropaulo, Municipality of São Paulo, Sindi Taxi and the

assembler Nissan commenced the pilot program Electric Cab – Zero Emission. The

purpose of the project is to evaluate the operational performance of ten electric taxis in a

city of São Paulo.

The vehicles are operational and we count on the support of five rapid loaders that supply

up to 80% of the total load of the vehicles within solely 30 minutes, allowing the resupply in

short stops and without affecting the daily activities.

The benefits of the project include the reduction of the consumption of fuels and, therefore,

the emission of CO2 derived from the extraction and refining of fuel and natural gas,

normally used in this category.

Distributed Energy

GRI: EC2; EU6; EU8

In April 2002, Aneel enacted a normative instruction in order to define the general conditions

for the access to the distributed generation. The rule created the Energy Compensation

System, which allows the customer to install small generators in its consumption unit and

exchange energy with the local distributor. The rule is valid in order to allow the generators

to use the alternative sources of energy (water, solar, biomass, eolic and qualified co-

generation).

Thus, the energy generated in a residential facility and not consumed and may be included

in the AES Eletropaulo’s system, which will use the credit to discount the consumption on

the following months. The credits may be used within 36 months and the information will be

included in the customer’s invoice, in order to inform the customer about the energy balance

and also to understand the invoice.

At the same time of the progress of regulation, AES Eletropaulo directed the resources of

the Research and Development Program to projects that may enable the concept of the

distributed generation in its concession area.

44

Solar energy in the city of São Paulo

With the purpose of performing it in practice, studies on technical, economic and

commercial feasibility in the use of photovoltaic solar panels in the electricity generation,

AES Eletropaulo invests in the implementation of trial plants.

The largest project will be made in the future stadium to be used in the opening of the 2014

World Soccer Cup, in São Paulo, and has the participation of AES Tietê, generating

company of Group AES in Brazil and other companies of the electrical sector and

investments of private enterprise.

On the other hand, in Parque Villa Lobos, the project aims at studying the aspects of the

distributed generation of solar energy and of the connection with the distribution network

and also developing national technology. It will be installed solar panels distributed and one

photovoltaic plant in the Park area.

Efficient Use of Resources The proper allocation of these resources in order to ensure balanced results with respect to all

relation network, in accordance with the company’s efficient use of resources

In the Sustainability Platform, this main theme – Efficient Use of Resources – is divided in

three types of resources: financial, energy and natural. The results are broken down below.

Efficient Use of Financial Resources Sustainability Commitment (2012-2016)

Current Status Next steps

Operate with costs that would place

us in the first positions of the Aneel

ranking in terms of operational

efficiency (between 25% of the

most efficient companies).

In progress. The action fronts that

AES will need to adopt to achieve

new ranking position by Aneel,

including the new scenario of tariff

review were mapped. The company

currently occupies the third quartile

of the ranking

Establish an action plan and

annual goals to achieve the goal

by 2016

Management restructuring of the

intangible assets through 2014.

In progress. In 2012, were mapped

existing processes for the management of intangible assets

Establish an action plan and annual goals to achieve the goal by 2014

The new cycle of tariff reviews of Aneel will significantly affect the revenues of

AES Eletropaulo. Therefore, the commitment with the efficient use of financial resources

becomes even more relevant and strategic for the business.

In this regard, in 2012, the Creating Value program was more relevant. The program – an

initiative of AES Brasil that seeks to improve the result of the company, either by an

increased revenue, either by optimal use of financial resources - brought a profit of R$

319.3 million, exceeding the goal of 2012 of R$ 318 million. The performance of the

program was in all areas of AES Brasil, having as main initiatives: improved performance of

collection agencies, migration of service channels, reducing labor contingencies, customer

segmentation, renegotiation of contracts, among other.

This confirms that the companies comprising AES Brasil have undertaken efforts to ensure

that the decrease in revenues does not adversely affect the target audiences.

45

Economic and Financial Performance

In 2012, the net profit amounted to R$ 107.9 million, a reduction of 93.1% as compared to

the amount of R$1,572.1 million registered in 2011. This reduction is explained by:

(i) negative impact of R$252.1 million, due to the effect of revision and tariff adjustment on Installment B, offset in part by the increase of R$120.9 million by virtue of the total market growth in 1.0% in 2012;

(ii) negative impact of R$295.4 million in 2012, related to the increase of costs of Installment A considering the tariff homologated in July 3, 2012;

(iii) increase of R$ 487.0 million in the expenses with Installment A in the first semester of 2012;

(iv) increase of 23.5% of expenses with PMSO (personnel, material, services and other);

(v) increase in the account other revenues and expenses due to non-recurring effect related to the sale of AES Eletropaulo,Telecom (AES Atimus) to TIM;

(vi) lower financial result, due to non-recurring financial revenue in 2011 (adjustment for inflation and interests on arrears on Finsocial contribution), reduction of capitalized interests and decrease of monetary updates due to lower judicial contingencies balance.

G

GRI: EC1

Wealth Distribution - by

interested parties

2010 2011 2012

R$ thousand % R$ thousand % R$ thousand %

Employees (566,418) 7.71% (551,052) 6,71% (615.893) 10.35%

Government (taxes, fees

and contributions and

segment taxes)

(5,250,345) 71.48% (5,729,558) 69,76% (4.916.937) 82.60%

Financing/third parties (180,863) 2.46% (360,817) 4,39% (312.179) 5.24%

Shareholders/retained (1,347,689) 18.35% (1,572,105) 19,14% (107.946) 1.81%

Added value distributed (7,345,315) 100% (8,213,532) 100% (952.955) 100%

Results 2012 – highlights (R$ million)

Consolidated IFRS (R$ million) 2011 2012 Variation

Gross revenue 15,240.2 15,313.7 0.5%

Net revenue 9,835.6 9,959.2 1.3%

Operating costs and expenses 6,961.4 8,442.1 21.6%

EBITDA 2,847.9 655.6 77.0%

Financial results (21.3) (51.6) 14.2%

Financial revenues 318.3 238.7 25.0%

Financial expenses (339,6) (399.6) 17.7%

Results before tax 2,323.2 98.7 95.8%

Net profit 1,572.1 107.9 -93.1%

46

Operating Revenue

The gross operating revenue reached R$ 15,313.7 million in 2012, a growth of 0.5% in the

period. This behavior is explained by: (the growth of 2.0% of owner-dominated market in the

period; by the increase of 1.3% registered in the line of other revenues in the same period of

comparison.

In 2012, the deductions amounted R$ 5,354.5 million, which represents a decrease of 0.9%

in the comparison with 2011. This evolution is explained by the decrease of values defined

by Aneel to CCC (Conta de Consumo de Combustíveis), PROINFA (Programa de Incentivo

às Fontes Aternativas de Energia Elétrica) and CDE (Conta de Desenvolvimento

Energético) charges, as well as of tax charges levied upon the supply revenue arising out of

the invoicing variation between the periods.

As a result of the changes mentioned above, net operating revenue was 1.3% higher than in

the comparison between the years 2011 and 2012, totaling R$ 9,959.2 million.

Operating Revenue (R$ million) 2011 2012 Var (%) 2011 x 2012

Supply revenue 13,558.0 13,609.0 0.4%

Other revenues 1,682.0 1,704.7 1.3%

Total gross revenue 15,240.2 15,313.7 0.5%

Deductions of gross revenue (5,404.6) (5,354.5) -0.9%

Net revenue 9,835.6 9,959.2 1.3%

Operating costs and expenses

In 2012, operating expenses rose 20.9% compared to 2011, totaling R$ 8,389.5 million. The

costs are detailed below:

Operating expenses (R$ million) 2011 2012 Variation (%) 2012 x 2011

Installment A 5,689.1 6,858.5 20.6%

Electricity bought for resale 4,464.1 5,376.3 20.4%

Transmission 1,225.1 1,482.2 21.0%

PMSO 1,250.7 1,531.1 22.4%

Personnel 545.9 704.6 29.1%

Third party services 461.0 503.0 20.9%

Materials 51.7 62.5 9.1%

Others 192.1 261.0 35.9%

Total 6,939.8 8,389.5 20.9%

47

Installment A

The expense on electricity purchased had increased by 20.4% in the year due to

higher purchase volumes and increased average price of purchased power.

In 2012, expenses with transmission and electric network usage charges grew by

21.0% compared to 2011, due to the increase of charges of Basic Network, the ONS

(Operadores Nacional de Sistema) and the System Service Charge (ESS).

Personnel

Costs and expenses with personnel increased by 29.1% in the year due to the following

factors:

I. restructuring of the workforce according to the internal review process in search of greater efficiency, which will further benefit the results of the company;

II. increased costs to the private pension entity; and

III. increase for the readjustment of wages, charges and benefits from 2011 and 2012.

Personnel- in millions R$ 2011 2012 Var (%)

2012 x 2011 Personnel and charges 433.0 537.9 24.2%

Pension entity 112.9 166.7 47.6%

Total 545.9 704.6 29.1%

Third Parties Services and Materials

The expenses with materials and services from third parties closed the year at R$ 565.5

million, with an increase of 10.3% compared to 2011, mainly influenced by the expenses

with the Action Plan 2011-2012 and operational bases reform and change to the new

corporate headquarters.

Other Operating Expenses

Other operating expenses increased by 35.9%, totaling R$ 261.0 million in 2012. The main

highlights are:

I. the reversal of labor and tax provisions in the third quarter of 2011, totaling R$73.2

million;

II. increase in PCLD (Provision of Credits and Doubtful Losses) and write-offs reflecting

higher default rates for the period; amounts offset by the reduction of R$ 16.2 million

in the line of other expenses primarily due to lower advertising expenses and

compensation for damages to consumers; the latter due to the higher volume of

reimbursements made in the due to the extratropical cyclone in 2011.

Operating expenses (R$ million) 2011 2012 Variation (%)

2012 x 2011

PCLD and write-offs 89.6 167.5 86.9%

Provision (Reversion) for contingencies 7.0 14.6 109.6%

Convictions and court settlements - - NA

Others * 184.0 148.3 -19.4%

Total 192.1 261.0 95.9%

* Leases and rents, compensations, losses and damages, advertising, bank tariffs, IPTU etc

48

Other revenues and expenses

The account of other revenue and expenses increased from an expense of R$ 47.9 million

in 2011, also to an expense of R$ 914.1 million in 2012, reflecting the sale of AES Atimus in

October 2011. Excluding this effect, the increase of R$ 149.6 million in 2012 compared to

the previous year is explained mainly by the increase of R$ 92.4 million with construction

expenses due to higher Capex in the period, plus the growth in R$ 57.2 million in expenses

for decommissioning asset.

Ebitda

In 2012, the EBITDA (earnings before interest, taxes, depreciation and amortization, initials in English) the company reached a total of R$ 655.6 million, a decrease of 77.0% compared to the previous year, when EBITDA was R$ 2,847.9 million. The following factors explain this performance:

(i) negative impact of R$ 252.1 million due to the effect of the tariff review and adjustment on Installment B, partially offset by an increase of R$ 120.9 million due to the growth of 1.0% of the total market in 2012;

(ii) negative impact of R$ 295.4 million in 2012 related to the increase of Installment A costs in relation to what was found in the tariff approved on July 3, 2012;

(iii) increase of R$ 487 million in the expenses with Installment A in the first semester of 2012 compared to the first semester, reflecting greater expense with power purchase for resale and charges of Basic Network, ONS and ESS;

(iv) increase of 23.5% with PMSO expenses; and

(v) increase in the account of other revenues and expenses due to the non-recurring effect related to the sale of AES Atimus to Tim in October 2011.

Financial results

In 2012, the financial result was a net expense of R$ 51.6 million, while in 2011 the result

was a net expense of R$ 21.3 million. This performance is explained by the following

factors:

I. positive impact in third quarter of 2011, non-recurring item of R$ 54.3 million, as a

adjustment for inflation and interest on arrears over the Finsocial contribution;

II. reduction in the average time of closure of the works and putting into operation of the

management system of works resulting in a decrease of R$ 21.0 million in

capitalized interest;

III. provisions in fourth quarter of 2012, related to notices of infraction issued by ANEEL

in the amount of R$ 18.3 million related to indicators DEC and FEC 2009 and

nonconformities raised by the regulatory agency in the preparation of the valuation

report of the Regulatory Compensation Base. The company has filed an appeal

together with ANEEL to review the figures for non-compliance with Regulatory

Compensation Base.

IV. reclassification of the fair value of the financial asset related to concession

previously recorded in equity and now recognized as adjustment for inflation, totaling

an expense of R$ 15.1 million;

V. negative impact of R$ 6.7 million due to the decrease in CDI between periods, due

to the reduction of 3.2 pp in the CDI for the period.

And partially offset by:

49

I. restatement on the transfer of properties sold in April 2007, totaling R$ 39.4 million.

The completion of the transfer of the remaining property of the operation allowed the

accounting of amounts related to adjustment for inflation for the period;

II. allowance in the amount of R$ 27 million recognized in fourth quarter of 2011 related

to the notices of infraction issued by ARSESP and Aneel, positively impacting the

same period of 2012;

III. favorable ruling with respect to the action seeking PIS credit offset, in third quarter of

2012, which resulted in the recognition of R$ 18.5 million. The company recalculated

the amounts related to the action involving PIS credit and found an additional credit.

This value only refers to the monetary update of the difference determined through

recalculation of the action

Compensation to the Shareholders

The Management of AES Eletropaulo proposes the distribution of 25% of base for payment

of dividends for the year of 2012, considering the amount of JSCP (Interest on Own Capital)

previously proposed discounted the Income Tax, totaling R $ 54.9 million. The Managers

further propose that the remaining amount of R$ 138.2 million is allocated to the Statutory

Reserve to reinforce working capital and financing of maintenance, expansion and

development of the company's activities.

Allocations will be ratified at the Annual General Meeting (AGM) which is expected to occur

by April 30, 2013, as well as the ratification of the interest on capital in the gross amount of

R $ 54.3 million deliberated at the Board Meeting and the definition to the effective date for

payment.

The amount of complementary dividends proposed by the managements of the company is

of R$ 0,5 million, and of JSCP, is of R$ 54,3 million, corresponding to R$ 0,31 per ON share

ON and R$ 0,34 per PN share.

Debt

On December 31, 2012, the company's gross debt totaled R$ 3,935.9 million, R$ 209.4

million higher at the end of 2011, reaching R$ 3,726.5 million. The 5.8% increase in gross

debt refers mainly to:

(i) the 14th issue of debentures in November 2011, worth R$ 600 million disbursement

in January 2012;

(ii) disbursements from FINEP during 2012, totaling R$ 19.8 million;

(iii) partially offset by:

(iv) amortizations of principal of the 10th issue of debentures in the amount of R $ 200

million, CCB Citibank in the amount of R $ 50 million and CCB Bradesco in the

amount of R$ 30 million and;

(v) the reduction of the net debt recorded with Fundação CESP in R$ 96.8 million, due

to the fact that the payments to the pension fund of the installments for the year

2011 were higher than the costs from the actuarial calculation. The balance of this

debt totaled R$ 1,133.0 million at the end of December 2011.

Cash totaled R$ 814 million at the end of the year, R $ 576.4 million lower than the same

value of 2011. At the end of 2012, the company's net debt totaled R$ 3,114.8 million, 34%

higher than the balance of 4T11, due mainly to the lower balance of cash.

50

The average cost of total debt of AES Eletropaulo showed variation from CDI + 0.98% p.a.

on December 31, 2011 to CDI + 1.21% p.a. on December 31, 2012. The average debt

maturity was 6.9 years, a level slightly higher than the term of 6.6 years as of December 31,

2011.

Investments

In 2012, the volume of the company's investments totaled R$ 831.1 million, representing an

increase of 12.5% compared to the same period in 2011. Investments with own funds

totaled R$ 796.2 million, while projects financed by the customer during this period totaled

R$ 34.9 million.

In 2013, the Company plans to invest R $ 646.9 million, 22.2% lower than 2012. From this

amount, R$ 621.0 million with their own resources and R$ 25.9 million funded by customers.

Main investments – 2012

System Expansion and Customer Services

• In 2012, it was invested R$ 195.5 million to meet the addition of 202 thousand new

customers, of which 55.4 thousand are related to regularization of illegal connections.

• R$ 216.5 million were invested in system expansion in 2012, with focus on an increase

in installed capacity of 187MVA, as a result of the deactivation of processing 88/3.8kV of

ETD Ibirapuera (-36MVA), retraining of ETD Campestre (-27MVA), expansion of ETD

Santo Amaro (40 MVA), Cotia (40MVA), Leopoldina (45MVA), Guaianazes (5MVA) and

energizing the new ETD Ermelino Matarazzo (120MVA). Moreover, the works of Air

Channel of Station Peri 1-2, LTA Piratininga - Bandeirantes 1-2 and LTA Piratininga -

Bandeirantes 3-4 and RAE Sertãozinho were completed. These improvements will

benefit a population of about 1.7 million inhabitants.

51

Recovery of Losses

• We invested R$ 27.9 million for the completion of 55.4 thousand regularization of illegal

connections, correction of irregularities of 43.6 thousand irregularities and replacement of

109.2 thousand obsolete meters.

Maintenance

• The cumulative total invested in 2012 was R$ 213.0 million, mainly in the maintenance of

2005 km of the network, in addition to the installation of 1,488 automatic circuits recloses.

Others

There were allocated R$ 99.1 million for the creation of the New Administrative

Headquarters and acquisition of vehicles mainly aimed to support the contractors to carry

out works for the expansion of the network and pruning and emergency classes.

Commercial Performance

The AES Eletropaulo’s concession area has the most diverse economic activities, whether

industrial, commercial or service. Also, it has the largest population concentration in the

Country.

In 2012, the total market in the concession area of the company grew by 1% compared to

2011. This performance reflects the low economic growth of the Country, which strongly

impacted the industrial activity in the company's concession area.

Moreover, the market performance for the year was sustained by the residential and

commercial classes, due to favorable indicators of unemployment and income, and the

higher volume of sales in the State of São Paulo, which grew 9.9%. Furthermore, the

consumption of the total market in the year had a positive impact of an additional 0.8 day

billing (+103 GWh). These numbers were offset by the exit of a free customer for the basic

network and the dismissal of a customer which, together, negatively impacted with 534

GWh in the year. Excluding the impact of billing days and the exit of customers, the total

market would have registered a growth of 2% in 2012.

Power Consumption (GWh)

Type of customer 2011 2012 Var. (%)

2011 x 2012

Residential 16,408 17,029 3.8%

Industrial 5,996 5,803 -3.2%

Commercial 11,614 11,815 1.7%

Public power and others 2,799 2,922 4.4%

Captive market 36,817 37,570 2.0%

Free Consumers 8,284 7,987 -3.6%

Total Market 45,101 45,557 1.0%

52

Efficient Use of Power Resources Commitments Current status Nest steps

Reduce global losses at AES Eletropaulo in 13,35% until 2016

In progress. Reached the goal of

2012 to reduce overall losses of AES

Eletropaulo in 2%, of 10.51% in 2011

to 10.30% in 2012.'s Actions for the

recovery of commercial losses were

intensified as the fight against fraud

and the informal connection and

management of technical losses

Intensify actions for the recovery of

commercial losses and maintain the

management of technical losses

Reduce own consumption of electric power in 20%, through 2016.

In progress. In 2012, there was a

2.2% reduction in energy

consumption compared to 2011. It

was performed an inventory and

identification of major opportunities

for reduction. Contributed to the

reduction of energy consumption

change of four units for the new

headquarters of AES Brazil, between

July and December 2012 - building

with more efficient electrical design

Establish an Internal Management

Committee of Energy Consumption

and other natural resources, focusing

on new energy efficiency projects,

and internal awareness campaigns

Contribute to reduce the energy

consumption of our customers by

180 thousand mwh by 2016

In progress. There was a reduction

of 109.3 thousand MWh, exceeding

the 2012 target of 57 thousand MWh.

Result of the intensification of

regularization of electrical

installations of low-income

consumers and energy efficiency

projects in schools, hospitals, etc

Keep the intensification of the

"Turning Consumers into Clients"

and of projects of energy efficiency

projects for clients such as Public

Authority

With respect to the efficient use of power resources, the efforts undertaken by AES

Eletropaulo were focused on the reduction of the technical and commercial losses. In

addition to the engineering actions, including the construction of new substations and

circuits for load redistribution (for further information, see page 41), the company acted to

become more efficient in the customers’ equipment in the context of the Energy Efficiency

Program, including the regularization of irregular connections through the Transformation

from Consumers to Customers program.

Decrease of technical and commercial losses

GRI: EU6; EU7; EN6; EN7; EU12; EN26

The losses in the distribution represented the difference between the electric energy

required and the electric energy effectively sold to the customers in the same period,

classified into two types: technical and commercial (non-technical).

In 2012, the initiatives to reduce the losses increased by 537 GWh. This volume of added

energy resulted from the initiatives that comprise the loss mitigation plan. Amongst the main

actions, we refer to the following: inspection of frauds directed to the segment of high history

of irregularities and increased impact in the volume of added energy; recovery of

installations which were discontinued due to the lack of payment of the customers that

started to use irregular energy; replacement of the obsolete metrics for more modern

equipment, which allows more accurate balance and reading, contributing to reduce the

53

invoicing losses due to inaccurate reading; and regularization of informal connections (read

more on page 77).

In 2012, AES Eletropaulo performed 282 thousand inspections to avoid fraud and

irregularities, resulting in 46 thousand measurement irregularities. In addition, 67.3thousand

installations were recovered whose power supply was discontinued

Energy consumption

GRI: EN4; EN5; EN7

The electricity consumption in AES Eletropaulo in 2012 was 44.29 GWh, 2.1% lower than

the previous year. This result approximates to the commitment assumed by the AES Brasil

Group which provides for the reduction of 20% in own consumption through 2016,

considering 2011 as the base year. This way, the company exceeded the goal for the year,

established in 44,36 GWh.

The economy in the period, which totaled 1,05 GWh, corresponds to the energy demand of

a city of 41 thousand inhabitants for about a year.

Total Consumption of Energy by Source 2010 2011 2012

Hydropower (%) 93 88 88*

Fossil fuel (%) 5 4 10*

Alternative sources (gas, wind power, solar energy etc.) (%) 2 8 2*

Total consumption of energy (GWh) 46 45.07 44.29

* in virtue of the lack of information the national energy balance started to consider the proportion of the contracts of purchase of energy of AES Eletropaulo.

54

Reduction of consumption of energy of clients and Program of

Energetic Efficiency

GRI: EU6; EU7; EN6; EN7; EN26

In addition to the Transformation from Consumers to Customers project (see page 77), AES

Eletropaulo invests in energy efficiency projects to the customers of the industrial, public

power and service groups.

Throughout 2012, AES Eletropaulo invested R$ 46.84 million in energy efficiency projects,

in cities of concession area, such as São Paulo, Diadema, Pirapora de Bom Jesus,

Carapicuíba, among others.

The plans benefited state and municipal schools, hospitals, traffic lights and tunnels of the

São Paulo state capital besides public buildings, among others, totaling in the 520 units a

reduction of 38,846 MWh/year of energy consumption, which is equivalent to the average

monthly consumption of more than 14.1 thousand households.

One of the initiatives that can be perceived by the São Paulo citizens daily is replacing

incandescent light bulbs with LED lights in about 110 thousand traffic lights of the city.

Besides saving about 80% of the electricity, requiring less maintenance, this kind of lighting

is safest because it ensures that drivers and pedestrians have no doubts about the color of

light, regardless of the reflection of sunlight. In 2013, a refinement of the project includes the

installation of no breaks that keep the traffic lights system running even during a potential

power outage at 176 intersections, corridors and critical city.

In August 2012, Eletropaulo ended, together with the Municipality of São Paulo, the works to

replace the lighting system of more than seven tunnels totaling 20 in the city. AES

Eletropaulo project’s benefits go beyond improvements in lighting: the action also reduced

thefts of cables, saving energy and maintenance costs, but also in the care of the electrical

system.

In addition, another 195 schools in the municipal city of São Paulo and another 73 of the

state have benefited from the modernization of the lighting system, which also brings

greater economy and quality for students, especially for those studying at night.

In health, R$ 1.5 million was invested in the improvement of lighting and HVAC systems of

12 public hospitals, benefiting patients and physicians.

GRI EN6

Reduction of energy consumption of clients Saved energy (MWh) Investment

(R$ million)

Efficient Energy Program 38.846 46,84

Program of Transformation of Consumers into Clients 77.839 58,77

Total 116.685 105,61

55

Main Projects Developed in 2012

Education

Project: 73 State schools and 195 of the Municipality of São Paulo

Customer: Education Secretariat and Municipal Education Secretariat

Total amount invested in the projects: R$ 9.1 million

Scope of the project: modernization of the lighting system

Estimated energy savings: 8,030 MWh / year

Public buildings

Project: municipal governments, governmental departments and governmental agencies

Customer: Taboão da Serra, Pirapora do Bom Jesus, Sub Municipality of São Paulo,

Diadema, and Carapicuíba

Total amount invested in the projects: R$ 3.0 million

Scope of the project: modernization of the lighting system of 219public buildings, including

schools, Basic Health Unit (UBS), hospitals, Municipal Market of São Paulo and

administrative buildings

Estimated energy savings: 4,082MWh/ year

Public lighting (tunnels)

Project: 7 tunnels in the city of São Paulo especially Anhangabaú, Roosevelt and Court of

Appeals

Customer: Municipality of São Paulo

Total amount invested in the projects: R$ 13.6 million

Scope of the project: modernization of the lighting system of the tunnels with LED

technology

Estimated energy savings: 18,884 MWh / year

Health

Project: several hospitals

Clients: 10 State Hospitals, IAMSPE and the Hospital of Military Police

Total amount invested in the projects: R$ 1.5 million

Scope of the project: modernization of the system of air conditioning, and lighting

Estimated energy savings: 8,006 MWh / year

Street lighting

Project: Street lighting of the City of São Paulo

Clients: CET/PMSP

Total amount invested in the projects: R$ 16.7 million

Scope of the project: replacement of over 110 thousand incandescent lamps by led lamps.

Estimated energy savings: 25,781 MWh/year

56

Efficient Use of Natural Resources Commitments Status Next Steps

Expand by 40% waste

recycling and cut by 25%

waste disposal in landfills by

2016

In progress. Exceeded the goals of 2012 for

recycling of waste, as well as for the disposal to

landfill of waste generated by the company. It

was registered 49% of recycling and reuse of

waste generated in 2012, a rate above the 15%

target projects to the year was recorded. It was

also registered the reduction of waste sent to

landfill, 55% of total generation in 2011 to 45%

of total generation in 2012, an index above the

target of 53% projected for the period.

Additionally, there was a reduction of 73.2% of

the total waste generated by the company.

These results were obtained from the

prioritization of major waste volumes and

greater environmental impact and

appropriateness of the allocation process.

Enhance and monitor

processes, raising awareness of

people involved, to ensure the

efficient management of

generated waste and its proper

disposal

Give priority to the partners

receiving the waste taking into

consideration the social and

environmental aspects of the

plant for treatment/disposal of

the waste until 2016

In progress. In 2012, were mapped and

prioritized the suppliers recipients of waste,

environmental criteria were defined and

mapped the current processes to manage those

suppliers to identify potential improvements

Review the procedure for hiring

and management of waste

suppliers and recipients and

implement new process

including phases of training,

adaptation and development of

these suppliers

Reduce in 10% the water

consumption, in 10% the co2

emissions and in 5% the

paper consumption and

prioritize the use of renewable

fuel in the fleet up to 2016

In progress. It was not achieved the goal of the

year for the 2% reduction in water consumption,

which increased by 7.6% compared to the

consumption of 2011 , mainly due to works in

the buildings (old and new) that served as

headquarters to AES Brazil.

Although the goal of reducing the energy

consumption has been achieved, the goal of

reducing emissions of CO2 was not achieved in

consequence of the increase of the emission

factor of the national electric grid and the impact

of high energy consumption in company

inventory.

It was reached the target of 2% reduction in

paper consumption compared to 2011

Establish an Internal

Management Committee of the

Consumption of Natural

Resources, with a focus on new

projects and beyond internal

awareness campaigns.

To sustain efforts to reduce its

own consumption of electricity,

as well as losses in the system.

Merge at least 20% of

recycled and reused material

and/or equipment in the power

grid up to 2016

In progress. It was performed an inventory and

equipment with greater potential for reuse were

prioritized. The pilot project was implemented

that would measure the viability and return

(financial and environmental) of this recycling

process.

Measure the results of the pilot

project, make possible

adjustments and assess the

possibility of extending the

scope of the project, including

new materials

Structure, up to 2013, the risk

management and

opportunities identification

system associated with

weather changes

In progress. The action plan was completed in

2012 with the involvement of the internal public

for mapping risks and opportunities associated

with Climate Change

Define guidelines for the

performance of AES as to

Climate Change and establish a

Management Model

57

GRI: EN14, EN26, EN28, EN30

AES Eletropaulo is supported by the Environmental Management System (SGA), whose

main purposes are the prevention, correction, mitigation and control of the environmental

effects. SGA offers the system of continuous improvement through the development of

management purposes, goals, programs and procedures, and operating instructions,

aligning, therefore, the company’s processes and activities, specifically with respect to those

that represent the most significant risks to the environment.

The system also refers to themes that involve management of services and material

suppliers, taking into account issues related to the compliance with the environmental laws,

good environmental management practices and regulations and the company’s policies, in

addition to prevention of impacts. Another point of attention of SGA is the impacts that the

AES Eletropaulo’s activities would cause against the communities in the surroundings, in

order to identify ways to minimize them. All these actions are directed by the Sustainability

Policy of the AES Brasil Group, which operates in accordance with the prevailing

environmental laws and regulations and with respect to the natural resources.

In 2012, the certification ISO 14001:2004 scope reached 100% of the company’s processes

and units, covering all AES Eletropaulo’s operations in the 24 cities of the concession area.

Environmental protection expenses (R$ thousand) 2010 2011 2012

Direct Costs - Environment Management 3,409 3,225 3,068

SGA - Environmental Management System and others 147 1,676 1,463

Environmental Offsets and Licensing 1,217 810 1.313

Recovery of the Quality of the Soil and Underground water 3,558 6,616 11,256

Prevention to Pollution (Construction of Oil collecting basins - ETDs)

2,175 2,677 2,078

Other environmental management costs (personnel) 314 138 1

Other costs of environmental management ND ND 2,237

R&D Projects 2,916 2,176 655

Energy Efficiency Projects 62,871 54,978 35,008

TOTAL 76,607 72,297 57,080

Environmental sanctions

2010 2011 2012

26 21 18*

* Monetary value of significant fines: R $ 229,968.21 (does not consider the penalties with ongoing resource).

58

Waste and material

GRI: EN1; EN22

The development of the activities in AES Eletropaulo depends on the resources such as

cables, poles, metallic material, isolators and transformers, amongst other items. Currently,

these materials are managed based on the specifications of purchase, without the control of

volume or mass. In 2012, it was started the alignment work, so the information may be

reported in 2013.

Based on the commitment to use at least 20% of recycling and/or reused materials and

equipment in the electric energy grid through 2016, AES Eletropaulo started, in 2012, a

project to evaluate the potential use of the reverse logistics in all operation.

We prioritized three types of material with a greater reuse potention, poles, ironware and

insulators, which received a differentiated treatment from the removal of the grid to the final

treatment for reuse. It was implemented the pilot project and it is estimated a cost reduction

of approximately R$ 3.8 million/year.

In addition to the purchase and efficient use of the material, the proper management of the

waste generated is a commitment assumed by AES Eletropaulo. In 2012, the company

increased by 32.64% the recycling and reuse activities, as well as reduced by 78.68% the

generation of waste for landfill in relation to 2011.

GRI EN22; 3.11

Residues

Non Hazardous Residues (t) 2010 2011 2012¹

Reuse 391 439 321

Recycling 9,708 13,168 21,029

Recovery 0 0 0

Incineration (or use as fuel) 92,501 53,211 142²

Sanitary landfill 74,145 79,974 17,046

Total 176,745 146,792 38,538

¹For wastes that are not heavy it is applied factors of volume of conversion for weight, estimated by the

company, as well as data provided by the contractors responsible for waste disposal of the residues.

²A wide variation in the category "Incineration (or use as biomass fuel)" occurs by changing the method of

calculation and volume of conversion factor for weight of the residue of pruning. In addition, part of this amount

started to be recycled.

³A variation in the category of landfill due to the seasonality of the generation of construction waste while reducing hazardous waste happens for the decommissioning project of the site of Cambuci.

59

GRI EN22

Hazardous Waste (t) 2010 2011 2012

Recycling 100 1.074 639

Recovery (including energy recovery) 1.332 1.516 611

Incineration (mass burning) 67 18 33

Sanitary landfill 1.974 4.079 1.177

Co-processing 209 559 329

Decontamination PCB 0 0 102

Total 3.682 7.246 2.891

4 The weight of oil for reduction is estimated base on the intensity of the gross oil.

GRI EN24

Transported hazardous waste(t) 2010 2011 2012

Transported 3,682 6,054 2,242

Received treatment 3,682 6,054 2,242

Water

GRI: EN8; EN9; EN21

In 2012 the consumption of water in the AES Eletropaulo units was 1246,379 m³, a volume

7.6% higher than the goal for the period. This amount is equivalent to 21.52m³/employee,

2.6% higher than the previous year.

In order to comply with the commitment of reduction in water consumption, an inventory of

all sites of the company was made. An internal management commission was created

analysis of the treatment and establishments of action plans focused on the reduction in

consumption.

Total consumption of water per source (m³) 2010 2011 2012

Supply (public network) 127,621 115,913 126,379

Underground source (pit) ND 1,591 -

Superficial collection (water courses) NA NA -

Total Consumption of water (m³) 127,621 117,504 126,379

Water consumption by employee (m³) 22.53 20.98 21,52

Water discharge per quality and disposal

Discharges Quantity(m³) Treatment Quality Disposal Was it reused by another organization?

Oily water from Underwater Transforming Chambers

974 Physical-chemical treatment

NA Hired Company

No

Effluents from Underwater Transforming Chambers

2.877 Biological Treatment

NA Hired Company

No

60

Emissions of Greenhouse Gases (GEE)and Substances Depleting

the Ozone Layer (SDOs)

GRI: EN3; EN4; EN16; EN17; EN18; EN19; EN29

In 2012, AES Brasil commenced the implementation of a Risk Management and

Opportunities Identification System associated with the Climate Changes, which is a

commitment of the Sustainability Platform and whose purpose is to evaluate the company’s

weaknesses for the proposal of prior measures for climate adjustments, amongst other

purposes.

In addition, the inventory of emission of greenhouse gas (GEE) was improved, which started

to considered additional sources compared to the previous year. We included emissions

related to the recharge of fire extinguishers and solid waste.

Taking into consideration the emissions directly controlled by AES Eletropaulo, it was

totaled 8,106.49 tCO2e, mainly corresponding to the consumption of fuel in the fleet and

emission of SF6.

The indirect emissions corresponding to the energy consumption for the performance of the

organization activities totaled the equivalent to 350,692.24 tCO2, taking into consideration

the average monthly emission of 0.0686 tCO2/MWh of the Brazilian Integrated System

(SIN). It is also emphasized there was an increase of 135% in the SIN’s average emission

factor, and, if the assumptions of the previous year are maintained, the value would be

151,355.25 tCO2.

The increase with respect to the previous year resulted from the change in the water

system, caused by a long lasting draught, and the subsequent increase in the use of the

thermoelectric plants to meet the Brazilian energy supply.

GRI EN16

Direct emissions of Greenhouse Gases per source (equivalent tCO2)

2010 2011 2012

Direct emissions 7,367.49 8,106,49 7,367.49

Stationary combustion 5.84 11.33 5.84

Mobile combustion 4,235.35 6,253.63 4,235.35

Fugitive emissions 1,350.80 967.38 1,350.80

Solid Waste 1,775;49 874.15 1,775.49

Indirect emissions related to energy purchase 154,851;47 350,692;24 154,851.47

Total Emissions 162,218;96 358,798;73 162,218;96

GRI EN19

Emissions of substances destroying the Ozone layer

Type of gas

Consumption (t) ODP (Ozone Depletion Potential) CFC11 (t equivalent)

2012 0,0749 0,004 0,004

61

Control of impacts to biodiversity

GRI EN11; EN12

The works for the analysis of impacts to biodiversity occur in the licensing phase of

undertakings. In this phase, less aggressive project alternatives are identified and in the

event of technical-financial unfeasibility of implementation, offsets are made.

Parque Estadual da Serra do Mar

Location: State of São Paulo (several municipalities)

Position regarding the area: within the area

Operation: subtransmission electrical system

Operating unit size: 2.07 km2

Biodiversity value: covered area of remaining portions of Atlantic Forest - Conservation Unit

Parque do Pedroso

Location: Santo André - SP

Position regarding the area: within the area

Operation: subtransmission electrical system

Operating unit size: 0.14 km2

Biodiversity value: covered area of remaining portions of Atlantic forest - Conservation Unit

APA Capivari Monos e APA Bororé

Location: São Paulo - SP

Position regarding the area: within the area

Operation: Subtransmission electrical system

Operating unit size: 0.42 km2

Biodiversity value: covered area of remaining portions of Atlantic forest APA - Environmental

Preservation Area (Municipal)

APA do Carmo

Location: São Paulo - SP

Position regarding the area: within the area

Operation: subtransmission electrical system

Operating unit size: 0.14 km2

Biodiversity value: covered area of remaining portions of Atlantic forest APA - Environmental

Preservation Area (State)

Parque Ecológico do Tietê

Location: São Paulo - SP

Position regarding the area: within the area

Operation: subtransmission electrical system

Operating unit size: 0.24 km2

Biodiversity value: covered area of remaining portions of Atlantic forest - Conservation Unit

Substations and Lines in spring areas

Location: municipalities within our concession area

Position regarding the area: within the area

Operation: subtransmission lines and substations

Operating unit size: 2,73 km2

Biodiversity value: APRM (area of preservation and recovery of springs)

62

GRI EN13

Pomar Urbano

Performed in a joint partnership with the Government of the State of São Paulo, the

program Pomar Urbano (Urban Orchard) aims at promoting the environmental and

landscape recovery of the margins of Pinheiros River, in São Paulo. The project occurs over

part of one of the subtransmission lines of AES Eletropaulo, at the margins of the river, and

over the last three years, the company was in charge for the maintenance of two sections,

corresponding to 37.3 hectares. Other companies performed the maintenance of other

sections.

63

Development and valuation of

employees, suppliers and communities To know, get involved with transparency and positively affect our target audiences for the

constructions of a collective agenda to generate value to all parties.

AES Eletropaulo is engaged to offer a favorable professional work environment to its

employees, and development and recognition to its suppliers, as well as the definition of

actions focused on the communities where we operate.

Development and valuation of employees

Commitments Status Next steps

Reach an index above 85% of satisfaction

in AES Brasil work environment until 2016.

In progress. In 2012, the goal of 80%

was not reached in AES Eletropaulo, staying in 74%

Evaluate possible improvements to existing initiatives focused on the development and recognition of employees and management, improving programs and strengthening the internal communication processes

In order to comply with its strategic and business commitments, as well as seeking for the

creation of value for all its target audiences, AES Eletropaulo is specifically focused on its

employees. A company seeks, on a daily basis, to create systems to stimulate and

appreciate the employees, focusing on the efficiency, professional satisfaction and quality of

life.

In 2012, an important project was concluded: the transition to the new head office. At the

end of 2010, we started the preparation of this change, which was supported by a number of

discussions between all hierarchical levels, research about the employees’ opinion and

feasibility studies.

In January 2012, the group Embaixadores da Mudança (Ambassadors for Change), which

gathered 60 employees representing all areas to discuss and create solutions for all issues

related to the transition to the new head office. The Ambassadors for Change continued to

meet even after the completion of the transition, in order to evaluate the suitability of the

employees to new working strategy of the company and identify possible areas for

improvement.

The change into the new head office involved the allocation of 1,500 employees - who were

previously in different offices in the City of São Paulo - in one single building in the city of

Barueri (SP).

The main purpose of the change was to increase the integration, synergy, agility, efficiency

and competition capacity of the company, in an innovative environment that would be able

to promote the welfare of the employees, in addition to reduce the company’s costs.

Therefore, the new head office provides for a more modern physical space that improves

the integration between the employees, also improving the work. It has also an

infrastructure to support the needs of the employees, as a site for meal and the Off Space,

which provides for entertainment activities.

64

New working strategy

The changes are not solely related to the location and infrastructure. AES Brasil believes in

an innovative method of work. The transition to the new head office also changed the work

culture. The effects for the employees started with the work time, which commences at 7

a.m. and ends at 4:00 p.m., defined with the purpose of reducing the time in the traffic of the

Metropolitan Region of São Paulo in the rush hours. In accordance with the estimates, the

change in the initial work time – which previously was at 9:00 a.m. – resulted a gain of

approximately 58 minutes in the displacement of the employees.

The new work time allows the employee to return to his/her place earlier than he/she was

used to, increasing the free time for personal activities and, therefore, improving the quality

of life.

The new working strategy of AES Brasil also resulted in changes in the daily activities. The

planning and organization of the work time are further emphasized and disclosed by the

company. The purpose is to increase the productivity without increasing the working time.

Therefore, before the change to the new head office, 100% of the employees were trained

about the new way to work and acts related to it.

It also implemented the remote work. The employees that do not record the working hours

can negotiate with the respective leaders and perform the work remotely once a week. The

purpose of this initiative is to provide the employees with more flexibility to perform their

personal and professional activities, contributing, therefore, to their satisfaction and quality

of life.

Displacement of the employees

One of the most important and most discussed issues in the management process for

change was the issue of displacement of the employees to the new work site. The

Ambassadors for Change held discussions to reach a transportation model that meets, in

the best possible way, the needs of the 1,500 employees allocated in the new head office.

The company provides a freight transport that serves about 840 employees. There are 24

routes covering the entire metropolitan region of São Paulo and allow employees to arrive

and leave the work site within the stipulated time.

Satisfaction in work environment

In order to evaluate the employees’ opinion on the infrastructure, quality of life, integration

between the areas and remote work at the new head office of AES Brasil, an Evaluation

Research was performed and received over 600 responses. In accordance with such

research, 87% of the employees are satisfied with the new work environment and the quality

of the facilities. For 40% of the employees, the quality of life was improved with the change,

and 54% believes that the new working strategy facilitates the daily activities. Also

according to the evaluation, the remote work affected positively the life of 73% of the

employees, and 70% of the employees declared that the integration with the other areas

made the work more accurate and productive.

These results confirmed that the new working strategy is already consolidated amongst the

employees and that contributed to improve the work environment and daily productivity.

In 2012, 74% of the employees of AES Eletropaulo provided a positive evaluation of the

new workspace. Although the goal was not reached (85%), we consider that many factors

adversely affected the results, mainly the restructuring of the company when the research

was performed.

65

Restructuring

In the second half of 2012, AES Eletropaulo went through a period of restructuring in its

employees’ staff. This adjustment was necessary due to the effects of the tariff review and

led to the resizing of positions and teams. Thus, it was necessary to conduct a review of the

impacts to all target audiences and it was decided to make major adjustments.

It was promoted adaptations that implied a change of functions and compensation equating

thus reducing 68 positions in administrative and operational base, increasing by 470

vacancies the number of electricians who work customer service, and encouraging 70

people to retire within the Retirement Incentive Program. Adding to the dismissals in the

period, there was a net increase of 204 vacancies in the company.

Development and appreciation

GRI LA12

The integration and development of the AES Brasil’s employees are continuous. The

employee’s transparency in the professional performance is analyzed, amongst other

periods, during the Performance Evaluation with Feedback 360º, which involves leaderships

and the employees in the analysis of the performance of subordinated employees, peers

and managers. Such transparency is implemented during the Pé na Estrada, a direct

discussion between senior management and the employees, which provides the results

from previous year, company’s strategy, investment plan and goals for the year, in addition

to respond to the questions performed by the employees in the microphone. In addition, the

employees attend to the discussions in the tables to present the improvement proposals that

may be used in the Group’s environmental strategic plan. In 2012, 18 meetings were held,

attended by 192 participants of all companies. In order to stimulate and compensate the

employees that stand out in the development of their daily activities, the Company adopted

the Recognition Program.

Recognition of employees

To encourage and prize the employees that stand out in the development of daily duties,

since 2009 AES Brasil keeps the Recognition Program: dynamic, management and values

of AES. In AES Eletropaulo, in 2012, 326 persons benefited, including 235 dynamic

recognition to employees or staffs whose actions had positive impact on the company taking

into consideration the responsibilities of the position.

Siga Livre: the path for expansion at AES Brasil

GRI LA11

The professionals of the AES Brasil Group also have the opportunity to define their career

plans and to establish the goals for their professional expansion through Siga Livre, a

program that provides information on the hierarchical levels and knowledge, formation and

experience necessary to be in charge of each position.

The Siga Livre content was reviewed and updated at the end of 2012, with 764 promotions

and 1,300 salary increases due to merits or change in position, in connection with the

program in AES Eletropaulo.

66

Internal recruiting

The development and retention of talents are essential for the good performance of the

businesses. Therefore, AES Brasil prioritizes the internal recruiting with respect to the new

opportunities.

In 2012, 40% of the vacations were occupied by employees already working in the company

in other positions. The main objective of the program is the improvement of the succession

plan, as well as to encourage the employees to prepare their career plan, so that in the

future these employees are able to be in charge of new positions in the organization.

So that the positions may be available to all in a democratic manner, the company uses the

internal communication tools, such as intranet, board and bulletins, to do the disclosure.

When AES is not able to fill internally out all spaces, an external selection process is

opened, coordinated by human resources area, with active participation of the requesting

area manager.

Profile of the employees

GRI LA1

General information 2010 2011 2012

Total number of employees 5,663 5,668 5,872

Employees with age up to 30 years old (%) 30.73 28.32 31.79

Employees with age between 31 and 40 years old (%) 40.14 40.81 40.38

Employees with age between 41 and 50 years old (%) 23.29 24.26 22.10

Employees with age over 50 years old (%) 5.84 6.61 5.71

Number of women in relation to total of employees (%) 19.83 19.64 17.61

Women in management position in relation to total of management positions (%) 24.18 25.98 25.00

Black employees women (black and mixed race) in relation to total of employees (%) 2.15 2.01 2.04

Black employees (black and mixed race) in relation to total of employees (%) 17.55 17.33 18.95

Black employees (black and mixed race) in management position in relation to total of management position (%)

1.10 1.57 2.38

Trainees in relation to total of employees (%) 1.2 0.3 0.9

Employees annual program for contracting of apprentices (%) 0.62 2.38 0.6

Disabled Employees 62 71 61

GRI LA13

67

Professional Development 2010 2011 2012

School level profile – describe in relation to the total of employees % % %

Basic education 11,50 10,11 7,99

High school education 59,53 60,20 65,32

Higher education 24,64 24,77 21,74

Post graduation (specialization, Master’s degree or Ph) 4,33 4,92 4,94

Illiteracy among work force 0,00 0,00 0,00

Amount invested in Professional Development and education in relation to the payroll

1,09 1,60 1,61

68

Turnover

GRI: LA2

In 2012, there were 1,071 hiring compared to 864 dismissals, 180 were women and 684

men. In the period, the voluntary turnover rate5 was 10.43%. The target established by all

AES Brasil Group’s companies is up to 6% and the result observed is the reflex of the

structure of the company.

Compensation and benefits

GRI: EC3; EC5, LA3, LA14

AES Eletropaulo is concerned about to remain attracting and competitive in the market and

adopts a compensation policy that includes a number of benefits to its employees.

The company’s salary policy includes nominal salary (fixed compensation), additional

compensations and benefits, in addition to the Profit Sharing Program (PLR). The fixed

compensation is tied to the position and job duties, according to the level of responsibility.

On the other hand, the variable compensation is based on the individual performance

evaluation and on company’s result and it is paid through the Profit Sharing Program.

The lowest compensation in base salary paid by the company corresponds to 1.69 times the

2012 current minimum salary. With respect to the equity in the compensation of operational

positions, for example, men had a salary 4% higher than the women compensation. In

2011, this difference was 29%.

The Company also offers to all employees the private pension plan, such as Fundação

Cesp, Previdência Itaú-Unibanco and MetLife. These are three different options – defined,

supplementary and voluntary – and the contributions are defined in accordance with the

characteristics of each plan, with disbursements performed by the employees and by the

company.

Benefits

Meal ticket

Transportation ticket

Life insurance

Health plan

Coverage for disqualification/invalidity

Mother and father leave

Pension plan

Note. the benefits are not entitled to the employees working during a half period

5 (GRI 3.9) The rate of voluntary turnover only considers dismissals requested by employees, not considering dismissals,

and reflects the organization's ability to retain talent. Calculation formula: ((disconnected voluntarily + accepted) / 2) total employees

69

GRI LA14

Compensation profile

% of employees by salary range 2010 2011 2012

Until 5 minimum wages 64,75 59,56 62,77

From 6 to 10 minimum wages 23,91 26,59 25,90

From 11 to 15 minimum wages 6,06 8,01 8,69

Above 15 minimum wages 5,28 5,84 6,02

Compensation profile

Average salary by category (R$) 2010 2011 2012

Board of director positions 28,866.74 28,685.85 33,192.54

Management positions 14,350.86 14,787.84 16,186.58

Administrative positions 3,950.97 4,159.86 4,365.91

Production positions 1,640.58 1,786.97 1,776.34

Men/ women salary 2012

Board of Directors -

Executive Board 83%

Management 111%

Administrative 66%

Operational 96%

Apprentices 100%

Trainees 100%

Interns 96%

Quality of Life

GRI: LA8

The quality of life in the work environment is one of the main concerns of AES Brasil.

Therefore, AES Sul invests in programs and actions to identify hazard and risk factors

related to occupational health.

Through the Occupational Health and Safety Management System (SGSSO), based on the

OHSAS 18.001 and on the Behavior Based on Safety (BBS), the company adopts control

measures aiming to insure people’s health, safety and ergonomics.

One of the initiatives is the program Viva Bem Viva Mais, divided in three stages, whose

purpose is to reduce the stress and promote the quality of life, contributing to the

professional and personal development of the employees: Viva o Corpo – focused on the

care with health of the employees; Viva a Mente – focused in reducing the stress and lack of

physical exercises; Viva Mais – promote campaigns for promotion of physical and mental

welfare.

Another action that aims to further improve the AES Sul employee and assist him in times of

difficulty, contributing to a more peaceful, secure and balanced professional and personal

life, is the Count on with Us Program. This program values the confidentiality and has a

team of social workers who attend in person or via 0800, offering comprehensive social

support in different situations and procedures, such as direct care to employees and

dependents seeking help from social context; home and hospital visits to remote

employees: 24h care in case of accidents; information and support to employees removed

by Social Security (INSS); among others. The Personal Support Program is another service

channel that aims to restore emotional well-being of the employee. Through it, employees

and their families can seek psychological, legal, financial aid, speech therapist, among

others. Services are offered by professionals, by phone or in person.

70

Communication with internal public

AES Brasil seeks for the continuous discussion with its employees and maintains a number

of communication channels through which the employees are able to issue their opinion,

resolve doubts and know better the company. We refer to the Rede Ligado, comprised of

five channels integrated with Communication.

Development and valuation of

suppliers Commitments Status Next steps

Implement the contracted companies’ development and improvement management program until 2014.

In progress. New social,

environmental, safety and operational criteria for hiring and evaluating suppliers were refined

From new criteria, assess gaps and develop Program of Development of Suppliers

Have 100% of service suppliers qualified in sustainability, encouraging them to adopt sustainable practices and seek certification of its products and services until 2016.

In progress. New social,

environmental, safety and operational criteria for hiring and evaluating suppliers were refined

From the new criteria, draw model of the program of Education for Sustainability for selected suppliers

Implement the furtherance program for small and new suppliers until 2014.

Not started. This commitment was

planned for 2013. Draw the Support Program for Small and New Suppliers

Implement a contracting model of suppliers at total cost until 2012.

Reached. The model of hiring of

suppliers based on the methodology of Strategic Sourcing which includes the assessment of the total cost was defined, in addition to refining the criteria for hiring and evaluation of suppliers that will also compose the total cost. Once fulfilled, this commitment ceases to exist in 2013

Implement new criteria for pilot suppliers to verify the opportunities and areas for improvement regarding the total cost

Adopt prioritization of suppliers of materials and services that have environmental practices process by 2016

In progress. Studies and activities

were performed to define environmental criteria that will be inserted in the hiring model and supplier management

Draw and implement a pilot project that considers the social and environmental criteria already defined and select group of suppliers to test the model, including actions of development and recognition

In order to comply with the commitment to establish a clear and transparent relationship with

its suppliers, AES Brasil Group created, in 2011, a performance evaluation system of this

target audience considered critical, which directly affects the company’s business, including

agreements with an effective period of at least six months and of high value. Therefore, all

most significant suppliers to AES Brasil are considered by the tool. The entire process is

based on the procedures of the Certification ISO 9001.

The Suppliers Performance Index (IDF) counts on the participation of the managers of the

areas of all companies comprising the Group, which are responsible for completing, on a

monthly basis, the questionnaire including aspects related to the safety, environment, social

responsibility, quality, management, productivity, relationship and contractual clauses.

In 2012, IDF improved significantly its scope, which also improved the tool. When it was

created, the IDF had four questionnaires to evaluate approximately 40 suppliers. Currently,

there are 12 questionnaires that evaluate approximately 200 suppliers and over 300

agreements, once some of them are responsible for more than one agreement.

71

The flexibility of the tool enables the creation of specific questionnaires for each category of

services and materials, converging the weights of evaluation criteria and their questions to

the characteristics of each object. In 2012, for example, specific assessment models were

developed to companies of power generation suppliers, which allowed the inclusion in the

evaluation of suppliers who provide services and provide materials and equipment for AES

Tietê and AES Uruguaiana.

The evaluation cycle of the IDF is on a monthly basis in accordance with the effective period

of the agreement, being the detailed results shared with suppliers after each evaluation. In

accordance with the note provided, the tool classifies the suppliers into four performance

rates: excellent; in compliance with the standards; needs improvements; not in compliance

with the standards. When the classification is at the last two rates, the tool determines that

the manager prepares an action plan in order to allow the supplier to reach the minimum

standards. The effectiveness of the action plan is evaluated as from the improvement in the

note obtained in the months subsequently to the commencement of the action plan.

The significant development in 2012 was the participation and commitment of the managers

that developed action plans also to the suppliers that complied with the minimum standards,

contributing, therefore, effectively and on a proactive basis with the development of this

target. In 2012, it was implemented 711 plans, as compared to 177 in 2011.

In addition, to improve the transparency of the process, the Group is developing a

satisfaction survey with all its critical suppliers. Initially scheduled for 2012, the research was

scheduled for the second six-month period of 2013.

IDF Improvements

In 2012, AES Brasil began a process of improvement of evaluation of the suppliers. The

criteria evaluation is being revised in order to supplement the evaluation on the social and

environmental evaluation of our business partners. We improved the analysis taking into

consideration the aspects related to the labor rights, of environment, health and safety,

improving the process in relation to the new challenges for purposes of sustainability of the

businesses.

This revision was performed in two stages, which analyzed, individually, the perception of

the leadership of AES Brasil and the suppliers, through dialogue panels, on the new

evaluation criteria.

In 2013 the work will be focused on the revision of the evaluation questionnaires in the IDF,

taking into consideration both positions. The results from this evaluation will be converted

into action plans to improve the social and environmental performance of the suppliers,

considered in the Best Supplier Award, annually performed by the company.

Incentive and Recognition

With the improvement of the IDF, we also increased the recognition of the suppliers that

obtained the best performance in the evaluations. Since 2011, AES Brasil promotes the

AES Brasil Best Suppliers Award. With the slogan, “Large partnerships deserve large

recognition”, the award is based on the IDF and recognizes the best practices of the

partners, taking into consideration the safety, environment, social responsibility, quality,

management, productivity, relationship and contractual clauses.

Amongst the 205 suppliers (responsible for 323 service agreements and supply

agreements), 118 were qualified to the award process, 34 as the final candidates and seven

were the winners in the following categories: IT Services; Electric System Services (SEP);

SAC Services; Infrastructure and Support Services; Generation Projects and Inventory

72

Material. There was also the delivery of the Highlight in Sustainability to two suppliers who

hold shares in favor of the environment and / or the company. See the winners at

www.aesbrasil.com.br/fornecedores.

Suppliers Profile

GRI EC6

In 2012, AES Eletropaulo held commercial relationship with 2.100 companies, of small,

medium and large sizes, national and multinational to supply materials, equipment and

services to meet the technical, operational and administrative needs of the plants.

Over 60% of the employees engaged are comprised of suppliers and regional service

providers. 10,251 professionals operate in AES Brasil through service providers in 2012.

Employment policy

GRI EC6

AES Brasil adopts specific rules to select its suppliers, including at the beginning of the file

information on the basic guidelines in terms of safety, environment and Value Guide. In this

stage, the company requires documentation for legal and tax qualification and consultations

are performed regarding the company’s financial health and the compliance with the social

and environmental legislation.

The compliance with the requirements on the part of the suppliers is guaranteed by means

of periodical and receipt inspections, industrial evaluation, ethics and compliance

questionnaire, evaluation of the social and environmental responsibility and technical and

work safety audits performed by AES Brasil and specialized companies.

For more complex proceedings, AES Uruguaiana may require specific environmental

licenses, evidences of compliance with the conditions and requirements of occupational

safety and trainings regarding the regulatory rules nr-10 and nr-33 and evaluation of

prototypes.

In the contracting processes, AES Brasil identifies the needs and expectations of the

suppliers, which are subsequently analyzed and used for the improvement of the practices

related to the relationship. Accordingly, it seeks the means to adjust the company’s

expectation for the performance of the suppliers on a sustainable manner.

During the effectiveness of the agreements, events, meetings and workshops are carried

out to ensure the continuity of supply without harming the parties. The main subjects

addressed are ethics, safety and performance. In AES Eletropaulo, the percentage of

purchases performed with the local suppliers6 is 75.37%.

Contractual compliance review

GRI: HR2; HR10

In order to improve the ethical level in the business relations and avoid corruption, the

Ethics and Compliance area of the AES Brasil Group evaluates the reputation of the

potential business partners, ensuring the ethical behavior of its business and reducing

eventual risks against the company’s reputation. Therefore, before completing a transaction,

6 Local suppliers mean those located in the State of São Paulo.

73

the Ethics and Compliance Program provides for a number of analysis and research of

compliance, denominated due diligence7 of the partners involved.

In addition, the Compliance Agreement is attached to the agreement, which provides for the

measures to be adopted by the partner in relation to the commitment of not performing

unlawful acts, in addition to provide for the termination of the agreement with respect to the

non-compliance with the terms of such appendix. In 2012, 100% of the suppliers qualified8

in the compliance process were evaluated with respect to these aspects, including the

health and security conditions.

In 2012, 2 thousand operations were evaluated in AES Brasil, of which 1,000 relates to AES

Eletropaulo operations.

In the year, the total of 106 suppliers, with agreements that include the verification clauses

focused on the human right matters, were also submitted with respect to such matters. The

agreements entered into with the suppliers evaluated were all accepted.

7 A due diligence is a . set of investigative acts to be performed before a business operation is achieved.

8 It is included in the compliance process suppliers with contracts exceeding US$ 100 thousand, or having any interaction

with any government authority.

74

Development and valuation of

communities

Commitment Current Status Next steps

To define policy, strategy and sources for private social investment, seeking to narrow the focus to the AES Brasil group’s core business by 2013.

Reached. Defined in the Management

System of Corporate Social Responsibility and Private Social Investment Policy, enhancing the environmental performance of the Group with projects more connected to the core business. Once reached, the commitment ceases to exist in 2013

Improve measuring indicators processes and outcomes of private social investment

Define own mechanism for revenue generation of Culture and Citizenship House up to 2013.

Reached. Besides cost reduction from

2013, was released Scenic Cia Scenic Aruanã, a group that is part of the House of Culture and Citizenship and aims to generate income through the shows performed. A process of attracting new sponsors was also implemented. Once fulfilled, this commitment ceases to exist from 2013

Perform at least two performances that generate income for the House of Culture and Citizenship and have at least two more sponsors in 2013

Participate from preparation e implementation of three public policies aimed at sustainability up to 2016.

In progress. Mapping process and

support or partnership of the AES institutions that promote discussions on public policy

Define the institutions that will receive support from AES in 2013 and which issues will be prioritized

To identify and recognize society’s best sustainability, by 2014.

Not started. This commitment was

planned for 2013. Define criteria and model for the recognition of best practices

To expand the access to regularized electric energy and to efficient consumption to 164 thousand households in low income communities, by 2016.

In progress. With the intensification of

the project Transformation of Consumers into Clients, it was possible to expand access to regularized electricity to 55 thousand families , exceeding the projected target for the year of 45 thousand families

Keep the intensification of settlement of electric connections of the project Transformation of consumers into Clients

GRI SO1

In 2012, AES Brasil consolidated the Corporate Social Responsibility Management System

(SGRSC), whose purpose is to ensure the continuous improvement of the social activities

and ensure the maximum alignment with the company’s strategy established by the

sustainability policy and in accordance with the rules and standards applicable to the

businesses of AES Group in Brazil, such as ISO 26000 and AA 1000.

The importance of the SGRSC is also reinforced by the definition of the responsibilities and

decision-making processes, ensuring: improved efficiency in the identification and priority of

the expectations of the target audiences with respect to the businesses; the proper mapping

of the social effects related to activities – which will direct the projects and action plans,

generating information that would allow the monitoring; and the rendering of accounts

internally and externally.

In 2012, R$121.6 million was invested and allocated, of which R$ 34.8 in our resources and

R$ 86.8 in incentives, in projects of promotion of access to the education, culture and sport;

inclusive professional training; energy efficiency and access to regular electricity; and social

influence for the promotion of social matters aligned with the guidelines of the sustainability

policy of AES Brasil.

It may be noticed that one of the consequences of the tariff review in AES Eletropaulo (for

more information, see page 9) was the reduction of the profit margin of the company and

hence the social investments encouraged in December 2012 to be used in 2013

75

Development and appreciation of communities

2010 2011 2012

Social investment (R$ millions) 23,50¹ 82,78 121,55

Estimated number of benefited persons 19 thousand ² 1.231 thousand 1.682 thousand

¹ In 2010, no investments of the program Turning Consumers into Clients were recorded.

² In 2012 it was not accounted for the number of beneficiaries in safety campaigns and of the program Turning Consumers into

Clients.

Private social investment (ISP)

One of the most important tools of the SGRSC is the Management Process of the Private

Social Investments, which defines – clearly and directly – the guidelines of the private social

investment in the AES Brasil and the criteria for the selection of the projects. The process in

AES Brasil is described below.

76

GRI EC8

Culture and Citizenship House – AES Eletropaulo

Main social project of AES Brasil, the Culture and Citizenship House is to transform the

reality of thousands of children, people and adults by means of activities that are focused on

art, culture, citizenship, quality of life and income generation. Directed mainly to the poor

communities, the project served directly, in 2012, approximately 4.7 thousand persons in its

activities and, indirectly, 214.3 thousand persons, with the presentations and lectures

performed. In the AES Eletropaulo units, 1.1 thousand persons were served by the activities

and 57.7 thousand for the presentations and lectures.

Operating in social and human development, the project contains seven units: São Paulo

and Osasco, with investment from AES Eletropaulo; the Barra Bonita, Lins, São José do Rio

Pardo and Caconde units, which AES Tietê is responsible for; and Novo Hamburgo, in the

state of Rio Grande do Sul, which is sponsored by AES Sul.

The program comprises two stages, whose transversal themes are the safe and efficient

usage of electricity and the responsible consumption of the natural resources. The first of

them, offered from Monday to Friday, from 8:00 a.m. to 5:00 p.m., is directed to children and

adolescents and offers activities as circus, and visual and digital art, music, theater, dance

and artistic gym. The pedagogic methodology is developed and monitored by a

multidisciplinary staff of professionals.

The other area, which is aimed at young people and adults, promotes access to vocational

and entrepreneurship courses, workshops for income generation, lectures and cultural

events.

For more information about the culture and citizenship house go to the site

www.casadeculturaecidadania.com.br

GRI EC8

AES Eletropaulo in the Schools

One of the major program projects of Consumo Mais Inteligente, (read more on page 78),

AES Eletropaulo in the Schools aims to foster change in consumption habits and works

directly in teacher training which multiplies in the classroom, information on the safe and

efficient use of electricity, besides providing three trucks with games and interactive play

activities visiting schools and communities.

In 2012, the project served 2,407 teachers from 291 public schools in the concession area

of AES Eletropaulo and was attended by 63.7 thousand students, among children and

adolescents who developed artwork on the matter, ranging from models to plays, music and

dance. The trucks hit the audience of 123.6 thousand people. Therefore, the project totaled

189.8 thousand participation of people in 2012.

77

Prêmio Criança 2012

In 2012, AES Eletropaulo received the award Prêmio Criança 2012, Prêmio Criança (Child

Award) 2012, sponsored by Abrinq Foundation/Save the Children, for the social project

Centro Educacional Infantil Luz e Lápis. This award identifies and recognizes every two

years, projects with good practices destined to children from 0-6 years, allowing visibility to

successful initiatives, developed in Brazil. In its 19th edition, the Child Award received 202

registered initiatives, which went through several stages of analysis by experts in the field of

childhood. From these initiatives, 10 were chosen as finalists and four of them were

awarded, including 3 non-governmental organizations and one company, i.e., AES

Eletropaulo.

In addition to financing Luz e Lápis, AES Eletropaulo serves on the executive management

of social institution, with volunteers comprising the Board of Executive Officers and

Supervisory Board.

GRI: EU6; EU7; EU22; EU24; EN6; EN7; EN26; EC9; SO1

Transformação de Consumidores em Clientes

Mainly focused on regularizing the informal connections (popularly denominated “cats”) and,

therefore, offering safe and reliable electricity to all persons and contributing to the welfare

of poor communities, AES Eletropaulo had adopted since 2004 the Transformation from

Consumers into Clients program.

The regularization of these connections stimulates the efficient and safe use of electricity. In

addition, many of the beneficiaries received an official address, which provides another

sense of citizenship to these poor communities, allowing bank loans and purchase in

installments, in addition to facility their entry in the formal work market. The familities served

by this program were registered by AES Eletropaulo, in partnership with the Municipalities

and the Social Development Ministry to benefit from the Social Tariff of Electricity (TSEE).

In addition to the regularization of these connections, the program performs, through the

field managers, a strong education work for the safe and proper use of electricity, directing

the communities to avoid accidents with the electricity grid and providing tips to save

electricity.

During their visits, the managers also identify some places that need some repairs, such as

the refurbishment of the internal electrical installations, replacement of lamps, replacement

of freezers for more efficient models (with the Procel A Seal) and installation of smart

showers.

These measures help families to reduce consumption and, consequently, the energy bill,

contributing to the maintenance of low default levels. The energy economy of the program,

in 2012, reached 77.839MWh/year, promoting a reduction of 26.61MWh in the peak time.

In 2012, the total number of connections reached 55,479 families, benefiting approximately

195 thousand people, besides replacing 6.507 refrigerators and 502.412 lamps, refurbish

356 homes that had poor electrical installations and install 195 systems for heating water for

bathing by means of solar energy . Investments in 2012 totaled R$ 58.7 million - R$ 23.7

million from own resources and R$ 35 million from funding incentive.

78

Main Results of Transformation of Consumers into Clients (2004 a 2012):

11,5 million lamps replaced

36 thousand freezers replaced

3 thousand internal residential refurbishments

12.5 thousand economic showers installed

215 solar heating systems for bathing water

179 thousand energy diagnoses

3.1 thousand external lighting systems

482 thousand donated electrical utility meter box

512 thousand customers served

288 low income communities benefited

2 million people benefited

R$ 379,8 million investment: R$ 183 million of own resources and R$ 196,8 million of

funding incentive

79

Main private social investments of AES Eletropaulo in 2012

GRI 2.10; 4.12; EC4; EC7; EC8; EC9; SO1; SO5; EU14

Line of activity: education, culture and sports

Project Description Area of influence Number of beneficiaries Funds invested(R$) Sources of funds

Program Consumo Mais inteligente

Through projects in AES Eletropaulo, it aims to raise awareness about the safe and efficient use of electric energy and promote environmental education. The project program includes projects AES Eletropaulo in Schools (read more on page 76), Viva sem Acidentes, among others.

All concession area of AES Eletropaulo

AES Eletropaulo in the Schools (189,753); Viva sem Acidentes= (1,227,293)

R$ 6,590,022 AES Eletropaulo in the Schools R$ 2,934,000 Viva sem Acidentes

R$ 2,934,000 of own resources and R$ 3.656.022 of resources of energy efficiency

House of Culture and Citizenship

Main social project of AES Brasil, the House of Culture and Citizenship aims to transform the reality of thousands of children, youth and adults through activities focused on art, culture, citizenship, quality of life and income generation, especially for low-income communities.

São Paulo (Vila Guacuri) and Osasco

158,862 through partipation in lectures and presentations

R$ 995.800,00 Own resources

Luz e Lápis Children´s Education Center

With the title of Oscip (Organization of Civil Society and Public Interest), serves 300 children, from 1 to 6 years old, from low income families or social risk.

Two units – Santo Amaro and Guarapiranga, both in the South Region of the city of São Paulo

300 children R$ 1,410,785 Own resources

Energia do Bem (Good Energy)

AES Brazil volunteer program that aims to engage and offer support to own and contracted employees and their families who wish to voluntarily contribute to the development of communities where the Group is inserted.

Applicable to all units of AES Eletropaulo

576 R$ 145,778 Own resources

Sendi Main event of dissemination of good practices in the sector of energy distribution

Brazil 2.500 R$ 37.000,00 Own resources

V Fopase - Paulista Forum of Health, Safety and Quality of Life in the Work of Electricity Sector

Debate on the proposals for the improvement of policies of Safety, Health and Quality of Life of companies in the energy sector as well as its contractors.

Brazil 2.000 R$ 7.500,00 Own resources

Metropoles - The Challenge of Sustainable Development

Creation of 6 episodes on sustainable development to be broadcast on TV Culture

Brazil Non estimated number 145,344.59 Funding incentives - Proac

Movies Room - Cine Moviola

Aims to bring national and international cinematography to the population. The project has its structure made with recycled products and is equipped with audiovisual material

State of São Paulo, in the cities of Caconde, Barra Bonita, Lins, Osasco, São José do Rio Pardo and São Paulo

Non estimated number 253,456.57 Funding incentives - Proac

Cria Cores (Create Colours)

Bring culture to the population through puppet theater.

20 cities in the concession area of AES Eletropaulo

Non estimated number 235,235.00 Funding incentives - Proac

Urban changes in the Paulista capital of the start of the 20th century

Book on urban development, sanitation, production and distribution of electricity and gas

Brazil Non estimated number 170,939.19 Funding incentives - Proac

Energy Museum Network Operations of the Energy Museum Network Foundation and Sanitation.

São Paulo Non estimated number 89,055.50 Funding incentives- Proac

Filma Brasil (Recording Brazil)

Contest of scripts for short and medium length films, performed entirely through the Internet, with a subject related to human development. The proposal includes a specific web portal, ready to receive, in a practical and instant way, works from screenwriters, producers, professional and amateur, individual or legal person from the whole of Brazil.

Brazil Prediction of about 7000 participants

131,483.50 Funding incentives - Proac

Show musical (Musical Show)

Cultural event that counted with the participation of musicians of the sertanejo kind of music.

Carapicuíba 5 thousand people R$ 86,000.00 Own resources

Improvement in 15 lowland fields

Works carried out in fields, locker rooms and cafeterias and installed stands and bank reserve for players

São Paulo / South and East Zones

Surrounding communities R$ 167,960.34 Funding incentives - PIE

80

Line of action: inclusive professional training

Project Description Area of influence Number of beneficiaries Funds invested(R$) Sources of funds

Electricians database

(Partnership with Senai, Instituto Edson, IVC (Instituto Vital Correia), IPESP (Special Payments Institute of São Paulo) and others located in concession area). Aiming to meet the strong demand for professionals in the sector and to ensure the quality of technical, behavioral training and customer satisfaction, AES Eletropaulo developed a project of Bank of Electricians, which recruits, selects and trains people for its own table of employees and also for their contracted partners.

All concession area of AES Eletropaulo

950 R$ 5.414.410,00 Own resources

Line of action: energy efficiency and access to regulated electricity

Project Description Area of influence Number of beneficiaries Funds invested(R$) Sources of funds

Transformation of Consumers into Clients

The Program of Transformation of Consumers into Clients, which aims to promote regular access to electricity through the regularization of illegal connections (known popularly as "cats") aimed at providing safe and reliable electricity for all, and to contribute to the well being of people of disadvantaged communities.

All concession area of AES Eletropaulo

55.4 thousand and 195 thousand people

R$ 58.768.947 R$ 23.7 million and R$ 35 million of resources for Energy Efficiency Program

Line of action: social influence

Project Description Area of influence Number of beneficiaries Funds invested(R$) Sources of funds

Brazilian Corporate Council for Sustainable Development (CEBDS)

Through participation in technical councils and discussion groups, CEBDS integrates the principles and practices of sustainable development in the context of business, reconciling economic, social and environmental dimensions.

In 2012 we contributed actively to the preparation of studies and documents such as the Vision 2050.

Brazil Non estimated number R$ 16,000 Own resources

International Integrated Reporting Council (IIRC)

International coalition of regulators, investors, companies, NGOs and other civil society that aims the development of corporate performance reporting, integrating economic, financial, social and environmental outcomes.

Brazil Non estimated number 44.788,28 Own resources

81

Annual Social Report Company: AES Eletropaulo

1- Base for calculation 2012 Value (thousand reais) 2011 Value (thousand reais)

Net revenue (NR) 9,959,198 9,835,578

Operating income (OR) 204,679 2,344,513

Gross payroll (GP) 433,111 5

2- Internal Social Indicators

Value (thous) % over GP % over NR

Value (thous) % over GP

% over NR

Alimentation 49,005 11.31% 0.49 % 44,318 8.70 % 0.45 %

Compulsory social charges

125,591 29.00% 1.26 % 112,579 22.10 % 1.14 %

Private pension 166,709 38.49% 1.67 % 112,320 22.05 % 1.14 %

Health 44,778 10.34% 0.45 % 34,880 6.85 % 0.35 %

Safety and health at work

23,799 5.49% 0.24 % 13,679 2.69 % 0.14 %

Education 737 0.17% 0.01 % 0 0.00 % 0.00 %

Culture 0 0.00% 0.00 % 0 0.00 % 0.00 %

Capacitation and professional development

6,235 1.44% 0.06 % 6,402 1.26 % 0.07 %

Daycare or daycare assistance

1,162 0.27% 0.01 % 1,129 0.22 % 0.01 %

Participation in the profit or results

71,671 16.55% 0.72 % 61,874 12.15 % 0.63 %

Others 0 0.00% 0.00 % 0 0.00 % 0.00 %

Total- internal social indicators

489,689 113.06% 4.92 % 387,181 76.02 % 3.94%

3- External Social Indicators

Value (thous) % over OR % over NR

Value (thous) % over OR

% over NR

Education 8,191 4.00 % 0.08 % 13,703 0.58 % 0.14 %

Culture 2,107 1.03 % 0.02 % 11,994 0.51 % 0.12 %

Health and sanitation 0 0.00 % 0.00 % 0 0.00 % 0.00 %

Sport 168 0.08 % 0.00 % 3,521 0.15 % 0.04%

Fight against hunger and food safety

0 0.00% 0.00% 2,224 0.09% 0.02%

Other 116,132 56.74% 1.17% 220 0.01% 0.00%

Total of contributions for society

126,599 61.85% 1.27% 31,662 1.35% 0.32%

Taxes (excluding social charges)

3,570,224 1,744.30% 35.85% 4,306 0.18% 0.04%

Total- external social indicators

3,696,823 1806.16% 37.12% 35,808 1.53% 0.36%

4- Environmental Indicators

Value (thous) % over OR % over NR

Value (thous) % over OR

% over NR

Investments related with production/ operation of

20,104 9.82 % 0.20% 15,143 0.65% 0.15%

Investments in programs and/ or external projects

36,977 18.07 % 0.37% 57,154 2.44% 0.58%

Total of investments in environment

57,080 27.89 % 0.57% 72,297 3.08% 0.74%

As to establishment of "annual goals" to minimize waste, the general consumption in production/ generation and increase efficiency in the use of resources

( ) does not have goals ( ) meets from 0 to 50%

( ) meets from 51 to 75% (x) meets from 76 to 100%

( ) does not have goals ( ) meets from 0 to 50%

( ) meets from 51 to 75% (x) meets from 76 to 100%

5- Indicators of functional body

2012 2011

No of employees at end of period

5,872 5,668

No of admissions during period

1,071 529

No of contracted employees

10,251 11,563

No of interns 51 19

No of employees above 45 years

1,023 1,108

No of women working in the company

1,034 1,113

% of position of leadership occupied by women

26.13 25.98%

No of black that work in the company

1,298 1,096

% of position of leadership occupied by black

5.00% 1.57%

No of people disabled or with special needs

61 71

82

6- Relevant information as to exercise of corporate citizenship

2012 (thousand reais) 2011 (thousand reais)

Relation between biggest and lowest remuneration in the company

81.79 75.73

Total number of work accidents

36 64

Social and environmental projects developed by the company were defined by:

( ) board (x) board and

management

( ) all employees

( ) board (x) board and management

( ) all employees The safety and health

patterns of the work environment were defined by:

(x) board and management

( ) all employees

( ) all Cipa (x) board and management

( ) all employees ( ) all Cipa

As to union freedom, the right of collective bargaining and internal representation of

( ) does not involve

( ) follows OIT rules

(x) incentivizes and follows

OIT

( ) does not involve

( ) follows OIT rules

(x) incentivizes and follows

OIT

The private pension contemplates:

( ) board ( ) board and management

(x) all employees

( ) board ( ) board and management

(x) all employees The sharing of profit or

result contemplates: ( ) board ( ) board and

management (x) all

employees ( ) board ( ) board and

management (x) all

employees In the selection of suppliers, the same ethical standards and social and environmental responsibility adopted by:

( ) not considered

( ) are suggested

(x) are required

( ) not considered

( ) are suggested (x) are required As to participation of

employees in volunteer work programs, the company:

( ) does not involve

( ) supports (x) organizes and

incentivizes

( ) does not involve

( ) supports (x) organizes

and incentivizes

Total number of claims and critics by consumers

in the company

21,059

in Procon 3,935

in Justice 2,376

in the company

26,312

in Procon 4,977

in Justice 5,360 % of claims and critics

addressed or resolved in the

company 57.8%

in Procon 54.2%

in Justice 122%

in the company

55.0%

in Procon 44.0%

in Justice 53.2% Total added value to

distribute (in thousand R$)

In 2012: 5,952,955 In 2011: 18,086,851

Distribution of Added Value (DVA)

86.60% government 1.81% shareholders 10.35% employees 5.24% third parties

70.33% government 19.44% shareholders 5.88% employees 4.35% third parties

7- Other information

83

Limited Assurance Report of

Independent Auditors Limited Assurance Report of Independent Auditors

To the Shareholders and other Interested Parties of AES Brasil Barueri - SP

Introduction

We have been hired with the purpose of applying the procedures of limited assurance on the

information of sustainability disclosed on the Sustainability Reports of AES Eletropaulo, AES

Tietê and AES Sul, related to the year ended of December 31, 2012.

Responsibilities of the Management of the Company

The Managements of AES Eletropaulo, AES Tietê and AES Sul are responsible for the

preparation and presentation in adequate form of the sustainability information disclosed in

the Sustainability Reports according to the Guidelines of the Sustainability Reports of the

Global Reporting Initiative - GRI (GRI-G3) and with the internal controls that have determined

as necessary to allow the preparation of these information free from relevant distortions.

Responsibility of the independent auditors

Our responsibility is to express conclusion on the sustainability information disclosed on the

Sustainability Reports, based on the work of limited assurance conducted according to NBC

TO 3000 (Work of Assurance Different of Audit and Review), issued by the Federal Council of

Accounting (CFC), which is equivalent to the international rule ISAE 3000, issued by the

International Federation of Accountants, applicable to historical non financial information.

These rules demands the fulfillment of ethical requirements, including requirements of

independence and that the work is executed with the purpose to obtain limited assurance of

the information disclosed on the Sustainability Reports, taken together, and free of relevant

distortions.

A work of limited assurance conducted according to the NBC TO 3000, equivalent to ISAE

3000, consists, mainly, of questionings to the Managements of AES Eletropaulo, AES Tietê

and AES Sul and other professional of the Company involved in the preparation of the

information disclosed in the Sustainability Reports, as well as the application of analytical

procedures to obtain evidence that allows us to conclude in the best manner of the limited

assurance on the sustainability information disclosed on the Sustainability Reports.

The proceedings applied were:

(a) the planning of works, considering the relevance, volume of quantitative and qualitative

information and operational system and internal controls that served as base for the

84

preparation of sustainability information disclosed on the sustainability Reports of AES

Eletropaulo, AES Tietê and AES Sul;

(b) the understanding of the method of calculation and the proceeding for compilation of

indicators through interviews with the responsible managers for the preparation of the

information;

(c) application of analytical procedures on quantitative information and questioning on

qualitative information and its relation with information disclosed in the Sustainability Reports;

(d) confrontation of financial nature indicators with financial demonstrations and/ or

accounting records;

(e) verification if organizational and operational limits defined by AES Eletropaulo, AES Tietê

and AES Sul for the preparation of the Sustainability Reports is aligned with the criteria

established by the Global Reporting Initiative- GRI.

We believe the proceedings applied and the evidence obtained in our work are enough and

appropriate to justify our conclusion to a limited extent.

Range and limitations

Our work had as purpose the application of procedures of limited assurance on the

sustainability information disclosed on the Sustainability Reports of AES Eletropaulo, AES

Tietê and AES Sul, not including the evaluation of the adequacy of its policies, practices and

performance in sustainability.

The procedures applied do not represent an examination in accordance to the Brazilian and

international audit rules. Additionally, our report does not provide limited assurance on the

scope of the future information (as for example: goals, expectations and projections) and

descriptive information that are subject to subjective evaluation.

In a limited assurance work the procedures applied are less extent than those applied in a

reasonable assurance work, therefore the level of assurance obtained is lower than the one in

a reasonable assurance work on the sustainability information disclosed on the Sustainability

Reports of AES Eletropaulo, AES Tietê and AES Sul.

Conclusion

Based on the procedures performed, described in this report, nothing has come to our

attention that leads us to believe that the sustainability information disclosed in the

Sustainability Reports of AES Eletropaulo, AES Tietê and AES Sul, related to the year ended

on December 31, 2012, were not compiled, in all relevant aspects, according to the

Guidelines of the Sustainability Reports of Global Reporting Initiative- GRI (GRI-G3) and with

registrations and files that served as base for its preparation.

São Paulo, February 22, 2013 KPMG Risk Advisory Services Ltda. CRC 2SP023233/O-4 Eduardo V. Cipullo Accountant CRC 1SP135597/O-6

85

Limited Assurance Report of

Independent Auditors To the Shareholders and other Interested Parties of AES Brasil Barueri - SP

Introduction We were hired with the purpose of applying procedures of limited assurance on the information disclosed on the report of "IV Cycle of Dialogues with Public Relation AES", related to the year ended on December 31, 2012, prepared under the responsibility of its Management. Our responsibility is to issue a Report of Limited Assurance on this information.

Procedures Applied The procedures of limited assurance applied were performed according to Rule NBC TO 3000 - Work of Different Assurance of Audit and Review, issued by the Federal Council of Accounting (CFC) and with ISAE 3000- International Standard on Assurance Engagements, issued by the International Auditing and Assurance Standards Board (IAASB) both for assurance work that are not of audit or review of historical financial information. The procedures of limited assurance comprised: (a) the planning of the works, considering the relevance, the coherence, the volume of quantitative information and operational systems and internal controls that served as base for the preparation of the report " IV Cycle of Dialogues with Public Relation AES"; (b) the understanding of the method of engagement and consolidation of indicators through the participation in dialogue panels with publics relation occurred between September and November, 2012; (c) confrontation, based in sampling, of qualitative information disclosed in the report " IV Cycle of Dialogues with Public Relation AES".

Criteria of preparation of information The sustainability information disclosed in the report " IV Cycle of Dialogues with Public Relation AES" were prepared according to the guidelines for sustainability reports issued by the Global Reporting Initiative (GRI G3) and with principles of rule AA 1000 APS (2008).

Range and limitations Our work had as goal the application of procedures of limited assurance on the information disclosed in the report " IV Cycle of Dialogues with Public Relation AES",

not including the evaluation of adequacy of its policies, practices and performance on sustainability. The procedures applied do not represent an examination according to the Brazilian and international rules of audit. Additionally, our report does not provide limited assurance on the scope of future information (as for example: goals, expectations and ambitions) and descriptive information that are subject to subjective evaluation.

86

Conclusion Based on our review, we do not have any knowledge of any relevant change that must be made in the information disclosed on the report "IV Cycle of Dialogues with Public Relation AES" related to the year ended on December 31, 2012, so that it is prepared according to the registrations and files that served as base for its preparation. São Paulo, February 22, 2013 KPMG Risk Advisory Services Ltda. CRC 2SP023233/O-4 Eduardo V. Cipullo Accountant CRC 1SP135597/O-6

87

Index GRI 3.12

This AES Eletropaulo Sustainability Report meets the standards for level B+ of application

according to the guidelines of the Global Reporting Initiative (GRI).

The following table presents the information and reference of the chapters in which are

located the GRI consolidated responses to this report.

PROFILE ITEMS

Indicator Page

1.1. Message from the CEO 4, 6

1.2. Description of the main impacts, risks and opportunities 7, 23

Organizational Profile

2.1. Name of the organization 5, 7

2.2. Main brands, products and/or services 7

2.3. Operational structure of the organization 8

2.4. Location of organization´s headquarter 4, 7, 8

2.5 Countries in which the organization operates and in which its main operations are located

5, 8

2.6. Type and judicial nature of the property 7

2.7.Type of markets 7, 8

2.8. Size of the organization 8

2.9. Main changes on the report 89

2.10. Awards and Recognitions 9, 10, 26

Parameters for the Report

3.1. Period covered 4

3.2. Date of the most recent previous report 4

3.3. Cycle of report issuance 4 (annual)

3.4. Contact for doubts 4

3.5. Process for definition of the report´s content 4

3.6. Limit of the report 4, 7

3.7. Specific limitation as to scope or limit

Answer: there are no specific limits as to the scope or limits

3.8. Base for the preparation on the report 4

3.9. Techniques on the measurement of data and base for calculation

Answer: The measurements follow instructions of the GRI guidelines. Otherwise, notes inform the techniques used 3.10. Reformulation of information from previous reports

Answer: There was a rectification related to customer service reports submitted in 2009 and 2010, as well as some safety indicators due to the change in methodology for calculating data. All corrections are identified by explanatory notes. 3.11. Significant changes in the scope, limit or measurement method

Answer: The conversion methodology of the volume of waste by weight of pruning significant changed compared to the previous year due to the improvement of the method of calculation. 3.12. Table that identifies the location of GRI index 89

3.13. Political and actual proactive related to search for external verification to the report 83, 84, 85, 86, 87

The Global Reporting Initiative is checking the level of adherence to their guidelines in this report. The economic and financial data, the GRI indicators and IBASE Social Report were audited by KPMG SA. This message will be overwritten after completion of the GRI check Governance, Commitments and Engagement

4.1. Governance Structure 15, 16, 17, 18

4.2. Chair of the Highest Governance Body 17, 18

4.3. Independent or non-executive members of the highest governance body 17, 18

4.4. Mechanisms for shareholders and employees to provide recommendations 15, 16, 17, 18

4.5. Relationship between remuneration and performance of the organization 15, 16, 27

4.6. Processes to avoid conflicts of interest 15, 16,

4.7. Qualifications of members of the highest governance body 17, 18

4.8. Mission and Values, codes of conduct and principles relevant 11

4.9. Responsibilities for implementation of political, economic, ambient and social 15, 16

88

4.10. Self evaluation of the highest governance body 15, 16

4.11. Precautionary principle 15, 16

4.12. Charters, principles or other initiatives developed externally 25, 26, 80, 81

4.13. Participation in associations and national/ international organisms 25, 26, 80, 81

4.14. Relationship of stakeholder groups engaged by the organization 23, 29, 30

4.15. Basis for the identification and selection of stakeholders with whom to engage 23, 29, 30

Answer: Stakeholders are determined and chosen internally, taking into account the strategic importance of each of the selected groups to the activities of the company 4.16. Approaches to stakeholders engagements 23, 25, 29, 30

4.17. Main themes and concerns raised by means of stakeholders engagement 23, 25, 29, 30

Answer: The process of construction of the Sustainability Platform counted with the involvement and participation of various stakeholders of the company. The historic, as well as the material matrix, can be verified at:www.aesbrasilsustentabilidade.com.br PERFORMANCE INDICATORS

Indicator Page/answer

EC1. Direct economic value generated and distributed 446

EC2. Financial implications and other risks and opportunities due to climate change 41

EC3. Coverage of the pension plan benefit

Answer: Participation in private retirement plans of AES Tietê is voluntary and covers all employees of the company. The plans offered are the CESP Foundation, Previdência Itaú Unibanco and MetLife, having three different options to choose - set, supplementary and voluntary - and contributions are established according to the characteristics of each, with payments made by employees and the company.

EC4. Significant financial aid received from the government 78, 79, 81, 83

Presence on the Market

EC5. Variation on the proportion of wage compared to local minimum wage 68

EC6. Policies, practices and proportion of costs with suppliers 72

EC7. Hiring of local staff 80

Indirect t Economic Impact

EC8. Impact of infrastructure investments for public benefit 42, 43, 76, 78, 79, 80, 81 EC9 Indirect economic benefit 78, 79, 80, 81

ENVIRONMENTAL

Materials

EN1. Materials used by weight or volume 58

EN2. Percentage of materials used that are recycled

Energy

EN3. Direct energy consumption broken down by primary energy source 60, 61

EN4. Indirect energy consumption broken down by primary energy source 60, 61

EN5. Energy saved due to improvements in conservation and efficiency 54

EN6. Initiatives to provide products and services with low energy consumption 55

EN7. Initiatives to reduce indirect energy and reductions obtained 54

Water

EN8. Total water withdrawal by the source 55

EN9. Water sources affected by withdrawal of water 55

EN10. Percentage and total volume of water recycled and used --

Biodiversity

EN11. Location and size of land owned 61

EN12. Significant impacts on biodiversity of activities, products and services 61

EN13. Protected or restored habitats 62

EN14. Strategies for managing impacts on biodiversity 57, 58

EN15. Number of species on the Lista Vermelha of IUCN and other conservation lists --

Emissions, effluents and waste;

EN16. Total direct and indirect emissions of greenhouse gases 60, 61

EN17. Other relevant indirect emissions of greenhouse gases 60, 61

EN18. Initiatives to reduce emissions of greenhouse gases and reductions achieved 60, 61

EN19. Emissions of substances that destroy the ozone layer 61

EN20. NOx, SOx and other significant atmospheric emissions --

EN21. Total water discharge by quality and destination 56

EN22. Total weight of waste by type and disposal method 58, 59

EN23. Total number and volume of significant spills

Answer: It was not recorded any significant oil; fuels spills; leakage of chemicals and other waste in 2010, 2011 and 2012 EN24. Weight of transported waste deemed hazardous 59

89

EN25. Description of protection and index of biodiversity water bodies and habitats

Answer: No collections / water disposal / effluent were made in water bodies considered sensitive and / or in protected areas. Products and services

EN26. Initiative to mitigate the environmental impacts 57, 58

EN27. Percentage of products and recovered packaging materials, by Category of products

Not applicable

Accordance

EN28. Value of fines and total number of sanctions for noncompliance with environmental laws

58

Transport

EN29. Environmental impacts related to transportation of products and of workers 60, 61

Answer: The company does not transport goods and workers being environmental impacts related to greenhouse gas emissions presented in the indicator EN16. General

EN30. Investments in environmental protection 58

LABOR PRACTICES AND DECENT WORK

Employment

LA1. Total workforce, by employment type, employment contract and region 66

LA2. Total number and turnover rate of jobs, by age, gender and region 68

Reactions between Labor and Governance

LA3. Comparison of benefits of full time employee and temporary 68

LA4. Percentage of employees covered by collective bargaining

Answer: 100% of employees are covered by collective bargaining agreement

LA5. Description of notifications (terms and procedures)

Answer: In the Collective Agreement it does not mention the term or period of notice that employees are notified. It is said that if significant operational changes occur that they are previously discussed with the Union, and the company provides the entity with all information related to operational changes and the referred study of the same. This occurred in the moving to the new headquarters in Barueri (SP).

Health and safety at work

LA6. Percentage of total workforce represented in formal safety and health 33

LA7. Percentage of total workforce represented in formal safety and health 31, 32

LA8. Education programs, prevention and risk controls 32, 33

LA9. Themes related to safety and health covered in formal agreements with trade unions

Answer: Formal agreements with trade unions cover the following topics related to health and safety at Work: provision and use of personal protective equipment (PPE), training and education, right to refuse unsafe work, and compliance with ILO - International Labor Organization. Training and Education

LA10. Average hours of training per day --

LA11. Programs for skills managements and lifelong learning and retirement 65

LA12. Percentage of employees receiving performance reviews 64

Diversity and Equal Opportunities

LA13. Composition of senior management and council, and proportion of groups and gender

67

LA14. Composition of senior management and council, and proportion of groups and gender

68

LA15. Return to work and retention rates after maternity/ paternity leave, described by gender

--

HUMAN RIGHTS

Buying Process

HR1. Description and percentage of policies, guidelines to manage all human right aspects in investments

--

HR2. Contracted companies are submitted to evaluation on what refers to human rights 73

HR3. Policies on evaluation and treatment on the performance of human rights 14

Non Discrimination

HR4. Total number of discrimination incidents and measures taken 14

Freedom of Association

HR5. Policy of freedom of association and the degree of their application

Answer: No operations in which there is risk to freedom of association were identified. It consists in the Collective Agreement of AES Tietê a clause of Union Relations Policy, recognizing the union as the legitimate representative of its employees. This ensures that the union exercises its representation through releases of union leaders, achievements meeting, union officials access to the premises of AES Eletropaulo, union membership, distribution of information, participation in corporate meetings and availability of the minutes of Cipas.

Child Labor

HR6. Measures to contribute to the eradication of child labor 14

Forced labor/ slave

HR7. Measures to contribute to the eradication of forced labor 14

Safety Measures

HR8. Measures to contribute to the eradication of forced labor --

Indigenous Rights

HR9. Total number of incidents or violations involving rights of indigenous people and the measures taken

--

HR10. Percentage and total number of transactions that have been analyzed for risks related to human rights and/ or the impact of such risks

73

90

SOCIETY

Community

SO1. Programs and practices to evaluate and manage the impacts of operations on the communities

74, 77, 78, 79, 80, 81

Corruption

SO2. Units analyzed for risks related to corruption 12, 13

SO3. Percentage of employees trained in anti corruption policies and procedures 12, 13

SO4. Answer to cases of corruption 13

Public Policies

SO5. Answer to cases of corruption 81

SO6. Policies of financial contributions to political parties, politicians or institutions

Answer: AES Brazil and its subsidiaries do not contribute to political parties in the country.

SO7. Number of lawsuits for unfair competition --

Accordance

SO8. Fines and description of non monetary sanctions -

PRODUCT LIABILITY

Health and safety of the client

PR1. Policy to safeguard the health and safety during use of the product 31

PR2. Non conformities related to the impacts of products and services

Answer: There were no cases registers of non conformity related to health and safety of consumers

Development of products and Services

PR3. Type of information on products and services required by labeling procedures --

PR4. Non conformities related to the impacts of products and services --

PR5. Practices related to Customer Satisfaction, including results of survey 37, 38, 39, 40

Communication and Marketing

PR6. Programs for adherence to laws, standards and voluntary codes --

PR7. Cases of non compliance related to regulations and voluntary codes concerning marketing communication

Answer: There were no cases of non-compliance related to regulations and voluntary codes concerning marketing communications. PR8. Proven complaints related to the violation of privacy or lost of customer privacy

Compliance

PR9. Fines for failure to perform in providing products and services 14, 40, 43

SECTOR INDICATORS

EU1. Installed capacity (MW), discriminated by the source of energy and by regulatory system

7

EU2. Net production of energy, discriminated by the source by primary energy source and regulatory system

Answer: Indicator not applicable to AES Sul.

EU3. Number of consumer units that are residential, industrial, institutional and commercial

8

EU4. Length of transmission and distribution lines overhead and underground 8

EU5. Allocation of allowances of emission CO2 equivalent, described by market structure and carbon credits

Answer: This indicator does not apply to Brazil, because it is the allocation of emission permits, something that there isn´t in the country. EU6 Management approach to ensure the availability and reliability of electricity supply in the short and long term

41, 42, 43, 44, 53, 55, 77 EU7. Management programs on the demand side 55, 77

EU8. Research and development in reliability of supply and sustainable development 44

Answer: According to the regulation of the electricity sector, 0.2% of net operating revenues of AES Eletropaulo is intended for research and development program , having been invested in 2012, R$ 22.8 million. EU9. Provision for decommissioning of power plants

Answer: Indicator not applicable for AES at Brasil.

EU10. Planned capacity compared to the projected electricity demand in the long term, discriminated by energy source and regulatory system

--

EU11. Average efficiency of thermoelectric generation by energy source (%)

Answer: Indicator not applicable to AES Eletropaulo.

EU12. Percentage loss of transmission and distribution in relation to the total of energy 53

EU13. Biodiversity of replacements habitats of affected areas --

EU14. Programs and processes that ensure the availability of skilled workforce 78

EU15. Percentage of employees entitled to retirement in the next five to ten years, broken down job category and region

--

EU16. Percentage of employees entitled to retirement in the next five to ten years, broken down job category and region

Answer: All safety guidelines of AES Sul are applicable to its suppliers in the performance of their hired activities.

EU17. Days worked by contract workers and subcontractors undergo training relevant to health and safety

--

EU18. Percentage of outsourced and subcontractors undergo training relevant to health and safety

91

Answer: 100% of employees are undergoing training and safety assessments.

EU19. Participation of stakeholders in decision making related to planning of infrastructure development

--

EU20. Measures to contingency planning, management plan and training program for disasters/ emergencies and recovery plans

31

EU21. Measures to contingency planning, management plan and training program for disasters/ emergencies and recovery plans

31, 41, 42

EU22. Programs, including those in partnership with the government, to improve or maintain access to electricity and customer support service

77

EU23. Programs, including those in partnership with the government, to improve or maintain access to electricity and customer support service

--

EU24. Practices to address barriers related to language, culture, low education and special needs which hinder the access to electricity and for service to the consumer, as well as its safe use

77

EU25. Number of accidents and deaths involving service users involving company´s assets, including judicial decisions and agreements and pending legal cases related to diseases

34

EU26. Percentage of population in areas with unmet distribution or regulated service

Answer: There are no demands of new requests repressed , since 100% of the concession area municipalities are universalized. The new requests arise from population growth and are met by the deadlines set by law, and are considered the program of regularization of illegal connections (Turning Consumers into Clients). EU27. Number of residential disconnections for non-payment, broken discriminated by duration of disconnection and by regulatory system

Answer: In 2012 there were 583.819 occurences.

EU28. Frequency of interruptions of power supply 43

EU29. Average duration of interruptions of power supply 43

EU30. Average availability factor of the power plant, discriminated by energy source and by regulatory system

Answer: Indicator not applicable to AES Eletropaulo.

INFORMATION ON MANAGEMENT APPROACH

Approach Approach Approach

EC

Economic performance 45

Presence in the market 7, 8

Indirect economic impacts 78-81

EN

Materials

57-62

Energy

Water

Biodiversity

Emissions, effluents and waste

Products and services

Compliance

Transport

General

LA

Employment

63-69

Rel. between work and governance

Health and safety at work

Training and education

Diversity and equal opportunity

HR

Buying process 73

Non discrimination

14, 15 Freedom of association

Child labor

Forced/ slave work

Safety practices 30-35

Indigenous rights 90

SO

Community 72

Corruption 12

Public policies 78, 79

Anticompetitive behavior 14, 15

Compliance

PR

Health and safety of the client 32, 33

Labeling of products and services 90-91

Communication and marketing

Client´s privacy 41

Compliance 11-14

92

Credits

General Coordinator

Paulo Camillo Vargas Penna

Vice-CEO of Institutional Relations, Communication and Sustainability

Content Guidance

Luciana Alvarez

Sustainability Management

Content Coordination

Luiz Pires

Sustainability Specialist

Wording and edition

Sustainability Report

Revision

Assertiva Produções Editoriais

Graphic Project, layout development and graphic production

Ricca RI