Sustainability Report, AES Eletropaulo 2009...Sustainability Report 2009 Company Profile AES Eletropaulo, the largest energy distribution company in terms of consumption and billing

Sustainability Report, AES Eletropaulo 2009

Sustainability Report 2009

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4 About this report

6 Message from the CEO

8 Company profile

14 Acknowledgments

25 Strategy and Management

30 Safety

35 Financial and Economic Performance

41 Operating Performance

48 Commercial Performance

51 Our Customers

62 Our Employees

74 Our suppliers

76 Society

86 The Environment

100 Credits

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About this ReportIn this Sustainability Report, AES Eletropaulo presents the initiatives taken to guarantee the

development of its business within economic, social and environmental parameters, the Triple Bottom Line. For the fourth consecutive year, the report follows the G3 guidelines of the Global Reporting Initiative (GRI), the international body responsible for structuring the principles and indicators used by organizations throughout the world in a format that enables the comparison of its performance with other companies.

Since the 2006 report, the company has used information surveys based on the GRI indicators and, as of this year’s report, it also includes indicators specific to the electric sector. As a result, the 2009 report is in compliance with GRI application level C. The level is self-declaratory, with no external verification of data referring to the indicators. The economic-financial data were audited by Ernst & Young.

On November 24, 2009 in the preparation of this report, a process of engagement with the stakeholders was carried out by means of a Sustainability Report Dialog Panel in which employees, suppliers, corporate and residential customers all took part. During the panel, participants voiced their opinions on the 2008 report and gave suggestions on topics and subjects to be included in future reports. Some of these suggestions are reflected in this report.

After engagement with the stakeholders, content was defined through a meeting with managers involved in the data and information survey in order to define relevant topics.

StAkeholdeR engAgement PAnel – AeS eletRoPAulo

mAin SuggeStionS WheRe they ARe

Contextualization of the indicators Throughout the report important variations in the indicators and published numbers are explained.

Introduce the company’s business and mention the impacts of an electric energy distributor

Profile Chapter

Give emphasis to the process – what the company does to improve it

Our Employees, Environmental Management, Operating Performance, Our Suppliers, Our Customers

Compare AES Eletropaulo’s data with other sector companies

Our Customers

Mention problems experienced by residential customers Our Customers and Environmental Management

Emphasize the environmental licenses and liabilities Environmental Management

Include criteria used for selection and evaluation of suppliers

Our Suppliers

Contextualize information on Worker Safety and give details of investment

Safety

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The sustainability Report is annual and covers the period from January 1 to December 31, 2009. The information refers to the operation of AES Eletropaulo within its concession area, which covers 24 municipalities in the State of São Paulo. There were no significant changes in the report’s scope compared to last year’s document or any reformulation of information.

Queries and suggestions on the content of this report should be referred to the Investor Relations Office or the Communications and Social Responsibility Office, by e-mail ([email protected] or [email protected]) or by letter (Rua Lourenço Marques, 158 – Vila Olímpia – São Paulo/SP – CEP 04547-100).

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message from the CeoIt is with great pleasure we release our results relating to the year 2009. Our group companies, in

a business environment exacerbated by the global economic crisis - which started in September 2008, expanded their investments aiming at better service quality and business growth.

In 2009, the AES Brasil Group invested R$ 774 million in the maintenance and expansion of the electric energy systems of AES Eletropaulo and AES Sul; in technological modernization, recovery of distribution losses, operational excellence of the AES Tietê power plants and development of new technologies in the telecommunication segment through AES Eletropaulo Telecom and AES Com Rio. AES Eletropaulo, the largest energy distribution company in Latin America, invested R$ 516 million, 13% above the volume of investments made in 2008.

We reiterate our commitment to the quality of services rendered to over 7 million customers in São Paulo, Rio de Janeiro and Rio Grande do Sul and we have programmed investments in the amount of R$ 1.1 billion for 2010, an increase of 42% compared to 2009.

Of this total, R$ 957 million will be invested in our energy distribution activities, mainly in AES Eletropaulo, which will invest R$ 691 million (growth by 34% compared to 2009), and in AES Sul, which will increase investments by R$ 266 million.

In order to minimize the impacts of unusually severe weather conditions in São Paulo, which affected our service quality indicators in 2009, coupled with our investments in the automation of the energy distribution grid, AES Eletropaulo has been intensifying its maintenance measures, in particular the increase of about 50% in precautionary tree pruning within its concession area.

With a view to better service and communication with our customers, in 2009 AES Eletropaulo issued a new electricity bill, modernized its Virtual Agency and implemented services through the SMS Torpedo Fácil. AES Sul made 2,300 new hookups as part of the Light for All Program (“Programa Luz para Todos”), which has already benefited 25,000 customers in its concession area since 2004, and also issued a new electricity bill in early 2010.

AES Tietê (parent company) generated 1,662 average MW of energy in 2009 (1,510 average MW in 2008) and invested R$ 54.5 million in the maintenance and operation of its power plants and the construction of small hydroelectric power plants in the State of São Paulo. We recently started an environmental license process in connection with a thermoelectric project with capacity of 500 MW, in the State of São Paulo. We have concluded the financial stabilization process of AES Uruguaiana and reduced the number of agreements made with energy distribution companies due to the absence of gas supply contracted from Argentina.

In the telecommunications segment, we have increased AES Eletropaulo Telecom’s and AES Com Rio’s customer portfolio by 45% and 22%, respectively. We invested R$ 58 million in expansion, grid improvements and system renovation which contributed to improve the level of services provided to our customers. In order to meet the rising traffic demand, our data transmission capacity was increased by 20%, reaching 446 Gbps.

In terms of safety – our top priority – we invested R$ 13.6 million in training, process improvements and individual and collective protection equipment procurement – for both company and outsourced employees – and in campaigns directed at the safety of population regarding risks relating to the electric power grid. Investments in the amount of R$ 18.8 million are planned for 2010, further reinforcing the safety campaigns with respect to the power grid and the population.

We invested about R$ 10 million in the development of leaders, training of successors and qualification of our employees for the sustainability of business, a growth of 10% compared to the amount invested in 2008. Our headcount was 5,900 at the end of the year and we enhanced professional growth opportunities for our employees. 325 job positions have been offered internally, representing growth of 38% compared to 2008. We have also been able to attract new talent on the

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market. Over 14,000 persons have applied for 20 positions in our trainee program.Our social activities have been expanded through the inauguration, in Osasco, of the sixth unit

of the House of Culture and Citizenship (“Casa de Cultura e Cidadania”) which, along with the units located in Caconde, Barra Bonita, Lins, São José do Rio Pardo and São Paulo, help almost 5,200 children and adolescents with cultural and sports activities and 1,500 youngsters and adults with income generating workshops and professional qualification courses.

In the environmental area, AES Tietê has reforested 2,700 hectares (1,100 hectares in 2009) of Permanent Preservation Areas located in the vicinity of the reservoirs adjacent to to ten hydroelectric power plants. In 2009, AES Tietê has also produced 2.5 million fry of seven indigenous species of the River Tietê and transferred them into its reservoirs.

In 2009, the companies of the AES Brasil Group posted net income of R$ 1.9 billion, growth of 9.6% compared to the previous year (R$ 1.7 billion). Energy distribution companies posted net income of R$ 1.2 billion (R$ 1.1 billion for AES Eletropaulo and R$ 157 million for AES Sul); power generation companies posted net income of R$ 805 million (R$ 780.2 million for AES Tietê and R$ 25 million for AES Uruguaiana) and the telecommunication companies posted net income of R$ 74 million (R$ 37.6 million for AES Eletropaulo Telecom and R$ 36 million for AES Com Rio). AES Brasil recorded EBITDA (income before interest, taxes, depreciation and amortization) of R$ 3.2 billion, an amount equivalent to 2008.

The work carried out by all our employees and partners, which contributed so much to the performance of the group companies, was acknowledged in many ways, most notably:

– AES Brasil was voted one of the 20 model companies in terms of Sustainability, by the Sustainability Guide of Exame magazine;

– AES Eletropaulo received the National Quality Award, granted by the National Quality Foundation; was elected the Best Energy Distribution Company in Customer Satisfaction in the Southeastern Region, according to the survey conducted by the National Electric Energy Agency according to the determination of the ANEEL Customer Satisfaction Index (IASC); and was also acknowledged as the Most Admired Company in the Energy Supply Sector by Carta Capital magazine;

– AES Tietê and AES Eletropaulo Telecom received the Silver Medal in the Paulista Quality Award;– AES Sul received the Silver Trophy in the Management Quality Gaúcho Award.

The dedication and commitment of our employees and the support of our customers, suppliers, financial institutions, regulatory agencies, government authorities and shareholders have been fundamental over 2009 and will be decisive for us to overcome the challenges ahead in 2010 and our continued contribution to Brazilian economic and social growth.

Britaldo SoaresCEO of AES Brasil

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Company ProfileAES Eletropaulo, the largest energy distribution company in terms of consumption and billing

in Latin America, reached the mark of 5,999,506 customers served in 2009, or 16.3 million people, in the most important social and economic region in Brazil. The concession area covers 4,526 km² and encompasses 24 municipalities in the Metropolitan Region of São Paulo, including the State Capital, where the company’s headquarters are located. Its main activity is the distribution of energy, through distribution and sub-transmission systems, to residential, commercial, and industrial customers, and public authorities. AES Eletropaulo sold 34,436 GWh of electric energy, up 1.8% compared to 2008, and posted net income of R$ 1.1 billion in 2009.

AES Eletropaulo went through an important process to align its trademark with that of its controlling shareholder, and launched another logo in 2009.

The company invested R$ 516 million in the maintenance, improvement and expansion of the electric system in 2009, in order to satisfy the market growth levels and boost the service quality level, most notably, the increase of 191 MVA (megavolt-ampere) in the system’s installed capacity and the conclusion of the construction of the new Tiradentes and Tenente Marques substations.

AES Eletropaulo is a publicly-held company, which participates in Level 2 of Corporate Governance on the BM&FBovespa (Bolsa de Valores, Mercadorias e Futuros de São Paulo) and, has been included in the portfolio of Bovespa’s Corporate Sustainability Index (ISE) since 2005, a listing of companies with the best sustainability performance indicators.

The company’s shareholding control is held by AES Holding Brasil Ltda. which, along with the National Bank of Economic and Social Development (BNDES), controls Companhia Brasiliana de Energia, a holding company of which AES Eletropaulo is a member under the corporate name Eletropaulo Metropolitana Eletricidade de São Paulo.

Vision, mission and Values Vision

To be the best energy distribution concessionaire in Brazil by 2011.

missionTo serve society through the provision of energy services and solutions by adopting a safe and

socially responsible approach.

Values- Safety first;- Act with integrity;- Honor commitments;- Seek excellence;- Fulfillment at work.

AeS eletropaulo in numbers 4.526 km² of operating area 24 towns and cities served 6 million customers 4,360 own employees 149 substations

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40.368 km of overhead distribution grid 2.883 km of underground distribution grid 34.436 GWh of electric energy sold in 2009 (captive market) R$ 516 million in investments in 2009, of which R$ 37.4 million was funded by customers R$ 1.1 billion in net income

Concession Area

historical BackgroundAES Eletropaulo originated from the split up in 1997, and the privatization in 1998, of Eletropaulo

– Eletricidade de São Paulo by the State Government of São Paulo. On December 31, 1997, the company was restructured, resulting in the creation of Eletropaulo and four other companies. Eletropaulo was privatized on April 15, 1998 by public auction.

AES Corp. purchased the company’s preferred shares in 1999, through subsidiaries, and through further acquisitions and reorganizations, the company became the principal shareholder in 2001. The present shareholding composition is the consequence of the corporate reorganization process

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implemented by Companhia Brasiliana de Energia, AES Corporation and BNDES in 2003, in order to strengthen the Group’s capital structure.

timeline

1899 Creation of AES Eletropaulo, through the founding of The São Paulo Railway Light and Power Company Limited.

1923 The shareholding control of The São Paulo Railway Light and Power Company Limited is transferred to the holding company Brazilian Traction Light and Power Co. Ltd.

1956 Restructuring of the holding company, which is thereafter denominated as Brascan Limited.

1979 The Brazilian government acquires from Brascan the shareholding control of Light – Serviços de Eletricidade S.A.

1981 Light is then controlled by the State Government of São Paulo, which changes the company’s name to Eletropaulo – Eletricidade de São Paulo S.A.

1997 The restructuring resulting from the privatization program splits Eletropaulo into four companies: two energy distribution companies (Eletropaulo Metropolitana Eletricidade de São Paulo S.A. and Bandeirante Energia S.A.), one energy transmission company (EPTE – Empresa Paulista de Transmissão de Energia Elétrica, presently CTEEP) and one power generation company (Emae – Empresa Metropolitana de Águas e Energia S.A.).

1998 Eletropaulo is acquired, through auction, by Lightgás, a consortium composed of AES Corp., Companhia Siderúrgica Nacional, Électricité de France and Reliant Power.

2001 After a new reorganization process, the entire shareholding control of the energy distribution company is held solely by AES Corp. The corporate name of Eletropaulo continues the same but the company is then denominated as AES Eletropaulo.

2003 Creation of the holding company Companhia Brasiliana de Energia, wherein BNDES is the partner of AES Corp. AES Corp. holds 50% plus one share in the voting capital of Companhia Brasiliana de Energia, and BNDES holds 50% less one share. Besides AES Eletropaulo, the holding company presently includes AES Tietê, AES Uruguaiana, AES Infoenergy, AES Eletropaulo Telecom and AES Com Rio.

the AeS CorporationThe AES Corporation is one of the global energy companies included in the Fortune 500 ranking,

operating in the power generation and distribution segments. The company, with a diversified portfolio of thermal and renewable sources, supplies sustainable and safe electric energy in 31 countries. The workforce composed of 27,000 persons is devoted to operational excellence and meeting the constantly shifting energy requirements around the world. In 2009, revenues from AES Corp., which holds and manages assets in a total amount of US$ 40 billion, amounted to US$ 14 billion.

The Company, founded 1981, built its first power plant in 1985 in Texas (USA) and, in 1990, already owned three other power plants in three U.S. states. In the 90s, AES began generating

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electric power in the United Kingdom, and has began to serve Argentina, Pakistan, China, Hungary, India and countries in Western, Central America and Middle East.

AES also develops sustainable power generation projects, such as wind power and other renewable energy sources. The company currently has over 6,000 MW in MW in operation, construction and in the pipeline.

The Group arrived in Brazil in 1997, where it owns eight operational companies, active in the electric energy and telecommunication segments – AES Eletropaulo, AES Sul, AES Tietê, AES Minas PCH, AES Uruguaiana, AES Infoenergy, AES Com Rio and AES Eletropaulo Telecom.

energy distribution Sector The energy distribution market in Brazil is regulated by the concession system. There are

currently 64 concessionaires in Brazil, both state-run and privately-owned, according to the National Electric Energy Agency (Aneel) data. About 47 million consumer units are served, of which 85% correspond to residential customers, in over 99% of the Brazilian municipalities. Residential customers accounts for 25% of the domestic market.

Social and environmental impacts of electric distribution utilities

Although the effects of energy distribution on the environment are less evident than those of power generation, energy distribution companies have organized all over the world to discuss the impact of their activities on the environment and to seek solutions. The sector is particularly vulnerable to climate changes, since adverse weather conditions, such as severe rains or floods, have a direct effect on its activities.

Faced with such a scenario, energy distribution companies began to observe the impact that their activities may have on the environment and to develop programs, such as the Energy Efficiency Program, in order to reduce electric energy consumption and, consequently, conserve natural resources. Waste generated by energy distribution companies, such as the oil used in transformers, represent potential sources of environmental hazard. To that end, concessionaires such as AES Eletropaulo maintain waste management programs, which provide for the adequate disposal or reuse of such waste.

The continual upgrade of facilities and distribution grids and the use of new technologies are also decisive in mitigating the impacts of energy distribution activities as they promote the use of low environmentally damaging materials and energy saving equipment.

energy Purchased by AeS eletropauloUnder the new regulatory framework of the Brazilian electric energy industry in effect since

2004, electricity distribution utilities do not buy energy directly from producers. Electric energy is traded at auctions and generated from various sources, primarily from hydroelectric sources (hydroelectricity is a clean source of energy and does not produce greenhouse gases). AES Eletropaulo also acquires all the assured energy produced by AES Tietê’s hydroelectric power plants (11.1 thousand GWh in 2009). With the expiration of this agreement scheduled for 2015, AES Eletropaulo will buy energy only at auctions and from Itaipu. The energy purchased by AES Eletropaulo in 2009 (41,254 GWh) was generated from hydroelectric sources (95%), fossil fuel sources (2%) and alternative energy sources (3%).

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industry and Concession Regulation Distribution concessions grant the right to distribute energy in a given area usually for a specific

term of 30 years. Power generation and transmission segments are also regulated by means of concessions, and generation concession agreements usually last for a term of 35 years.

The Concession Law establishes, among other provisions, the terms and conditions to be met by a concessionaire in providing electricity services, consumer’s rights and concessionaire’s obligations.

Guidelines applicable for the electricity industry are established by Laws No. 10847 and No. 10848/04 and Decree No. 5163/04. Pursuant to the new regulatory framework, energy distribution utilities must contract the total amount of their demand and buy energy through public auctions in the regulated environment, which contemplates the purchase of energy at the lowest rate in order to reduce costs that will be passed on to customers.

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ACknoWledgment ACknoWledgmentPRomoteR

One of the 20 model companies in terms of sustainebilit Sustainability Guide of Exame magazine

National Quality Award in the large companies National Quality Foundation

Ranked first in the ANEEL Customer Index (IASC), in theSoutheastern Region, ranked third in ABC

ANEEL

Most Admired Company in Energy Supply Sector in Brazil Carta Capital magazine

Fundação Cage Award, in the Health and Safety Management Fundação Coge

Acknowledgments

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Corporate governanceAES Eletropaulo, listed on the Bolsa de Valores, Mercadorias e Futuros de São Paulo

(BM&FBovespa), continuously works to enhance its corporate governance practices and thereby add value for its stakeholders. The company’s principles and practices are those established in the by-laws and the corporate governance guide, accessible through the company’s website (www.aeseletropaulo.com.br/ri). These documents set out the regulations and standards that govern the company’s corporate governance and the bodies responsible for their implementation: the Board of Directors, Board of Executive Officers, Supervisory Committee and the Shareholders’ Meeting.

AES Eletropaulo has participated in Level 2 of corporate the governance practices of BM&FBovespa since 2004 and was the seventh company to commit to the differentiated corporate governance practices – Level 2, which include: the disclosure in English of the full financial statements, the management report, the independent auditors’ report and explanatory notes – prepared in accordance with Brazilian corporate legislation, together with the additional explanatory note with reconciliation of net income for the year and shareholders’ equity, in conformity with accounting practices adopted in Brazil and the USGAAP, emphasizing the main differences between both accounting criteria; the granting to all holders of common shares and Class B preferred shares of the same terms and conditions granted to the controlling shareholders upon the transfer of the company’s control (tag along) and, at least, 80% of such amount to the holders of Class A preferred shares; preferred shares entitled to vote on some given matters; adhesion to the arbitration chamber to resolve corporate disputes; have at least 20% of independent members in the Board of Directors, among other practices.

For the fifth consecutive year, the company was included in the portfolio of the Corporate Sustainability Index (ISE), which gathers together companies that present the best performance in terms of sustainability. AES Eletropaulo, since it is a subsidiary company of AES Corp., a publicly-held company with shares traded on the New York Stock Exchange, has adjusted its controls to the Sarbanes-Oxley Act (SOx), which purpose is to ensure the accuracy of the financial statements of companies trading shares in the U.S. stock market.

All common shareholders are entitled to exercise their voting rights at annual shareholders’ meetings, held on an annual basis, and at extraordinary shareholders’ meetings, called at any time. Each common share entitles the holder thereof to one vote in the meetings, where decisions are made based on the majority of the votes. AES Eletropaulo has issued 66,604,817 common shares and 100,739,070 preferred shares, of which 2,369,349 are Class A preferred shares and 98,369,721 are Class B preferred shares.

Corporate governance Structure The company is managed by the Board of Directors and the Board of Executive Officers. The

Board of Directors is assisted in its duties by the Investment Policy Management and Operational Committee. The company also has a non-permanent Supervisory Committee, which was established upon the request of shareholders attending the shareholders’ meetings. The company’s Disclosure Policy and Value Guide (www.aeseletropaulo.com.br/ri) set forth the measures adopted to ensure that all conflicts of interest are avoided.

Board of directorsThe Board of Directors, composed of 11 active members and 7 alternates, is charged with the

definition of the strategy for conduction of the business of the energy-distribution company and the

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approval of the most relevant matters. Its staff includes two independent directors, as stipulated in the differentiated corporate governance practices standards – Level 2: 1 active member elected by minority shareholders and 1 active member elected by preferred shareholders and 1 active members and the respective alternate, elected by the energy distribution company’s employees. The joint term of office is 2 years, reelection being permitted.

The Chairman of the Board of Directors also holds the position of Chief Executive Officer of AES Eletropaulo. The members of the company’s Board of Directors are qualified and have recognized professional experience in the energy, finance, stock market and public administration sectors. The Company does not adopt a performance or qualification self-evaluation process with respect to the members of the Board of Directors. The compensation payable to the members of the Board of Directors, as well as any benefits of any nature and representation fees, is approved by the Annual Shareholders’ Meetings.

The Board of Directors held 11 meetings in 2009. At these meetings the Board deliberated on the company’s economic, environmental and social performance, including material risks and opportunities, by means of the analysis of its financial statements, operational and business performance indicators and primary lawsuits (including environmental lawsuits). In reliance upon such information, the directors identify the relevant matters and make recommendations to the management of the energy distribution company.

Composition of the Board of directors – As of december 31, 2009ChairmanBritaldo Pedrosa SoaresActive membersAndrew Martin VeseyLuis Felipe Alfonso Céron CéronLucio da Silva SantosPedro Roberto CauvillaPeter GreinerEduardo de Vasconcelos Correia AnnunciatoHelena Kerr do AmaralMarcos Cintra Cavalcanti de AlbuquerqueAndrés Ricardo Gluski WeilertFrancisco Jose Morandi Lopéz

Supervisory Committee The Supervisory Committee is a non-permanent body composed of five active members

and four alternates and is in charge of the company’s oversight, in particular in what concerns the rendering of accounts and the regularity and legality of management actions performed by the administrators. The members of the Supervisory Board were elected upon appointment by shareholders for a 1-year term of office, in the Company’s Annual Shareholders’ Meeting held on April 27, 2009 (“Annual Shareholders’ Meeting”). Of the nine members of the Supervisory Committee, among active and alternate members, six have been appointed by AES Elpa S.A. upon nomination by BNDES Participações S.A. – BNDESPar, in conformity with the provisions set forth in item 4.11 of the Shareholders’ Agreement of Companhia Brasiliana de Energia, signed on December 22, 2003, as amended, two by minority shareholders and one by preferred shareholders.

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Composition of the Supervisory Committee – As of december 31, 2009PresidentRicardo BererActive membersSebastião Bergamini JúniorRoberto LambMárcio Luciano ManciniMarcus Pereira Aucélio

Board of executive officersThe management of business and the implementation of strategic decisions taken by the Board

of Directors are incumbent upon the Board of Executive Officers. The Board of Executive Officers is composed of one Chief Executive Officer and six Vice Presidents, with a term of office of three years, reelection being permitted.

The compensation payable to the members of the Board of Executive Officers, as well as any benefits of any nature and representation fees, is determined by the Annual Shareholders’ Meeting, which may delegate to the Board of Directors the distribution among the members of the Board of Executive Officers.

Composition of the Board of executive officers Chief executive officerBritaldo Pedrosa SoaresVice President of legal AffairsPedro de Freitas Almeida Bueno VieiraVice President of human Resources and managementCibele CastroVice President of distributionJorge Luiz BusatoVice President of Regulatory AffairsSheilly Caden ContenteVice President of Finance and investor RelationsRinaldo Pecchio Junior

ShAReholding ComPoSition

ShAReholdeR on % PnA % PnB % totAl % AES ELPA 51.825.798 77,8% 0 0,0% 0 0,0% 51.825.798 31,0% Brazilian government 13.342.384 20,0% 258 0,0% 0 0,0% 13.342.642 8,0%Cia. Brasiliana de Energia 0 0,0% 0 0,0% 7.434.390 7,6% 7.434.390 4,4% BNDES 1 0,0% 0 0,0% 734.576 0,7% 734.577 0,4%Other (Free float) 1.436.634 2,2% 2.369.091 100,0% 90.200.755 91,7% 94.006.480 56,2% Total 66.604.817 100,0% 2.369.349 100,0% 98.369.721 100,0% 167.343.887 100,0%

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Corporate Composition Since 2003, the National Bank of Economic and Social Development (BNDES) has been a partner

of AES Corp. in the share capital of AES Eletropaulo, through the holding company Companhia Brasiliana de Energia.

ethics and ComplianceThe principles set out in the Value Guide of AES Brasil pervade the activities of all Group

companies and support their corporate governance practices. The purpose of Ethics and Compliance, which was structured in accordance with the guidelines of AES Corp., is to set the highest ethical values with respect to the Group’s corporate decisions and disseminate a culture of good practices to employees and stakeholders.

In 2009, the Ethics and Compliance area was entirely automated in order to make training and processes more dynamic and to expand the means to reach the target audience. The goal for 2010 is to maximize automation and customize training sessions, thereby adapting them to the diverse stakeholders.

The measures adopted in terms of ethics and compliance are based upon four pillars: 1. Values Guide – from words to action 2. Helpline3. Training and Education 4. Contractual Compliance Review

Values guide – From Words to Action The Values Guide of the AES Brasil Group establishes the main organizational values and codes,

which cover themes such as: conflicts of interest; corruption; customer relations, suppliers and public authorities; political activities; release of information, among others. It is applicable to all employees and governance bodies, as well as to suppliers and other stakeholders. The Values Guide, besides being available on the intranet and Internet, is personally handed to employees, who must confirm receipt and know the company’s code and values. It is also disseminated through face-to-face encounters and online training to own employees and through talks to outsourced contractors.

The goal established by AES Corp. for 2010, as occurs in every two years, is to certify 100% of the employees with regard to the Values Guide. All employees have been invited to participate in

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the digital certification campaign, consisting of the access to the Guide through the intranet and the declaration that they know the content of the Guide and are aware of its principles.

helplineThe Helpline is a communication channel directed at employees and other stakeholders to

clear up doubts, conflicts and ethical dilemmas and to denounce anti-ethical behavior and illegal or corrupt corporate practices. The channel can be accessed by telephone – toll-free call, and service is available 24/7 – or through the intranet. Denouncements can be made anonymously, and confidentiality, if requested, is ensured.

Any queries, suggestions and denouncements are received by an outsourced company, located in the United States, in order to ensure the integrity, transparency and reliability of the investigation process. All denouncements are analyzed and investigated by the Ethics and Compliance area of AES Brasil, and the main cases are discussed by the Ethics Committee; if necessary, an action plan is prepared by the managers of the persons involved in the case and approved to the committee. AES Corp. manages the outcome of investigations and can reopen the process, if it deems necessary.

In 2009, the Group received a total of 337 calls, of which 97 were related to clarifications and 241 were related to allegations that infringe the company’s values. There was an increase of about 450% in calls compared to 2007, the year in which the area was created, due to the extensive work carried out to divulge the channel.

At AES Eletropaulo, of the 215 calls received, 89% referred to allegations and 11% referred to doubts or requests for support in decision-making.

training and educationTraining sessions relating to the values, principles and policies of AES Brasil are held face-to face and

on line. In 2009, the Group companies trained 4,867 people, of which 4,279 were from AES Eletropaulo. The themes relating to the values, ethics and AES Helpline are part of the program to integrate new employees and training sessions in the Human Resources area, and are also present in specific training and educational initiatives that involve employees in all the Group’s levels and suppliers.

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ethics disseminators Developed by AES Corp. along with University of Virginia – Darden School of Business – this training stimulates the debate on ethical dilemmas between employees of all the company’s areas, in order to encourage open discussion on the theme and support employees in their decision-making process, based on the highest ethical standards. In 2009, 690 people were trained at AES Eletropaulo.

Anticorruption The training content is in compliance with the U.S. law against foreign corrupt practices (Foreign Corrupt Practices Act – FCPA), adopted by AES Corp. in all subsidiaries. In 2009, all employees in the Group companies were trained by means of e-learning.

ethics lectures Monthly discussions between employees from operational units on situations that may interfere with the company’s ethical behavior and the implementation of company values.

Positive Behavior Situations where there is chance of conflict of interest and may be contrary to the company’s values are simulated. The purpose is to train all employees on annual basis.

insider trading Aims at revealing ways to prevent employees with access to inside information taking illicit advantage.

Suppliers Lectures given to owners and employees of the biggest service providers of AES Eletropaulo on the reliability and integrity of business partners, ethical commitments assumed in the service agreement and inclusion of suppliers within the scope of anti-corruption practices. In 2009, 201 partner companies and 1,532 outsourced workers were trained.

global ethics Weeks All AES Group companies throughout the world annually promote the Global Ethics Week, in order to strengthen the Group’s values practices through discussions, lectures and educational videos. In 2009, 4,222 employees were trained over the week in all AES Brasil.

Contractual Compliance ReviewAll agreements and transactions of the AES Brasil group companies within a pre-defined limit,

or those that may jeopardize the company’s reputation or activities, are analyzed with regard to the company’s ethical stance and values. It is a method that seeks to ensure the integrity of business, follow up the legal and ethical conduct of business partners and protect the company against unethical or illegal behavior. In 2009, 860 transactions, involving a total amount of R$ 3.7 billion, have been analyzed. Read more in Our Suppliers

CommitmentsAES Eletropaulo has joined the Corporate Pact for Integrity and Anti-Corruption, a joint initiative

from the Instituto Ethos, Uniethos, Patri, the United Nations Development Program (PNUD), Unodoc (United Nations Office on Drugs and Crime) and the Brazilian Committee of the Global Pact.

The company, together with the other AES Brasil Group companies, is also a member of the Ethics Committee of the National Quality Foundation (FNQ), whose purpose is to cooperate with other organizations in the development of best joint practices and the production of material to assist companies to make their practices transparent and trustworthy. FNQ’s good practices database includes the four pillars of ethics and compliance of the AES Brasil Group, which is considered a benchmark as it contains initiatives which go beyond those adopted in the Brazilian market.

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material information disclosure Policy and Securities trading The Disclosure Policy of AES Eletropaulo provides for the broad and transparent dissemination of

information, in accordance with the rules issued by the regulatory agencies of the financial market, such as the Brazilian Securities and Exchange Commission (CVM), the Brazilian Central Bank (Bacen) and BM&FBovespa. The company’s material facts are disclosed in order to offer investors the time necessary to make decisions, as stipulated in CVM Instruction 358/02.

However, the purpose of the Trading Policy is to inhibit the use of confidential and inside information in the trading of securities, thus preventing insider trading, also in compliance with CVM Instruction 358/02.

Information on the company’s business can be accessed by investors through the website www.aeseletropaulo.com.br/ri, which discloses quarterly reports, annual reports, notices to the market, material event notices, press releases, teleconferences, corporate policies and other institutional information.

AES Eletropaulo annually releases its financial statements in widely-circulated newspapers containing the analysis of its operational, economic, environmental and social performance. This information is also disclosed in the sustainability report, available on the company’s website.

Auditsindependent Auditors

Ernst & Young Auditores Independentes S.A. is the audit firm contracted to carry out the independent audit of the financial statements. Pursuant to the provisions set forth in CVM Instruction 381/03, the audit firm does not provided any other services, other than independent audit services.

internal AuditAES Eletropaulo has an internal audit department which operates in two segments: operational

(Business Process) and financial. The first segment analyzes all processes and procedures relating to the company’s operations, and the second segment analyzes the financial statements, both in compliance with the Sarbanes-Oxley Act, the Brazilian legislation, the regulatory rules of the energy sector and internal rules and procedures.

Risk managementIn 2009, risk management policies of AES Brasil group companies were standardized in order to

establish a consolidated view and integrated monitoring of risks to which the Group companies are exposed. The AES project, ‘The Way to Integrated Risk Management’ has identified 210 risks, which have been prioritized in accordance with their exposure and probability level and then grouped into 4 categories (Strategic, Financial, Operational and Regulatory) and 59 sub-categories. The purpose being; after detailed analysis, to seek controls and actions plans in order to mitigate such risks. The new system is scheduled to start operations during 2010.

Also in 2009, three risk monitoring models (Key Risk Indicator – KRI) have been defined for the implementation of pilot projects with respect to Project Follow-Up (AP), Investment Decisions (DI) and Outsourcing risks. The first two were scheduled to be implemented by the first half-year of 2010.

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RiSk mAnAgement: mAin ACtionS

CAtegoRieS RiSk StRuCtuRing meASuRe

Financial Economic & Financial Periodical follow-up of changes in the macroeconomic environment, through the financial model adopted by the company, which allows the quantification of any potential impact and the definition of measures to neutralize or minimize impacts, together with the follow-up of the company’s performance in order to make adjustments, if necessary.

Operational Definition of a system contingency (summer), expansion and maintenance plan, which allows means to prevent potential energy outage problems. Moreover, the purpose of property insurance is to indemnify losses caused by events occurred.

Operational Technological Identification and priority of electric system assets which will be replaced or upgraded, thus ensuring the continuity of the energy supply.

Environmental Definition of strategy to identify and deal with environmental risks that may affect the company’s business. This strategy is based upon the ISO 14001 standard, which has certified the Environmental Management System of AES Eletropaulo since 2000.

Energy supply Identification, measurement and management of risks relating to electric energy volume and prices, besides the use of tools to support the decisions relating to the contracting of electric energy.

Regulatory Regulatory & Political Follow-up of the changes in the regulatory and political environments that may affect the business, as well as the definition of an action plan to neutralize or mitigate any impacts.

Legal Periodical follow-up of changes in the legal environment. Potential impacts arising from the relationship with customers, suppliers, public authorities and employees are dealt with in accordance with the applicable legislation, doctrine and jurisprudence.

Strategic Social & Cultural(image)

Periodic monitoring of AES Eletropaulo’s reputation, mainly the consideration of comments from opinion makers. Actions plans are prepared to minimize or neutralize impacts.

Ethics and Compliance

Conduction of compliance and due diligence with respect to business partners, including compliance terms in agreements, thus ensuring the integrity of the company’s business and protection of its image.

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Relations with StakeholdersTransparency and the broad publicizing of information extend to all AES Eletropaulo’s

stakeholders. The company has various communication and relationship channels created to serve the needs of each kind of stakeholder.

Communications and Relationships ChannelsDescriptionInvestors, Customers, Society, Employees, Suppliers, Regulatory Bodies / Public Authorities, Media

RegulAtoRy AReA RelAtionShiP With FedeRAl And StAte RegulAtoRy BodieS

AGMs Periodic or extraordinary meetings, in which various topics related to company performance are discussed

Press Office Deals with the press and sends suggestions for topics to the communications vehicles

AES Brasil “Ligado” Newsletter Institutional message sent by the Communications area to all employees of Grupo AES companies in Brazil to publicize important topics

Call Center Telephone service available 24/7

AES Brasil Internal murals communicating the week’s main events

“Conexão” on-line Electronic Newsletter for corporate customers

Conference on financial results Quarterly release of company results

Customers Council Guidance, analysis, evaluation of the service and quality of the service rendered by the concessionaire utility

Electricity bill Commercial and institutional information

Contact Center Communication channel for private and public corporate customers

“Ligado” Station Program via web in MP3 format dealing with news on events and actions under-taken by Grupo AES Brasil companies with interviews and tips on health, culture and quality of life.

Talk to IR Agile service for investors and stock market analysts

Public Authorities Management Area allocated to management of the relationship with agents of the federal, state and municipal public authorities and public services, such as sanitation and transport

Manager “Ligado” Digital newssheet directed at Grupo AES Brasil managers aimed at early release of information and concepts related to leadership and people management.

Helpline Communications channel for receiving queries, suggestions and complaints over non-compliance with the Values Guide

Green Line Direct communication channel with the company through which organized civil society can air their views, make suggestions and complaints on the quality of the tree-pruning service

Service posts (12) and Cooperative-ly-run Posts (63)

Personal service for requesting services

Ombudsman Analyses, refers and replies to complaints

Electricians’ talks Talks on the correct and safe use of electric energy, given voluntarily by electri-cians in local communities

Participation of associations and institutions

Sharing experiences and best practices with other sector companies

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Sponsorship Financial or institutional support for campaigns, educational projects and cul-tural activities

Survey of organizational climate Evaluation of the work environment in accordance with six topics: ethics, leadership, communication, competence, safety and employee identification with company

Satisfaction surveys Undertaken by Abradee and Aneel, which evaluate the level of customer satisfaction

“Ligado” Portal Internal communications channel, updated daily, with information on the com-pany’s daily activities. Contains all company policies, regulations and procedures.

Social responsibility projects Cultural and sports activities for children and adolescents, income generation workshops and job-training courses directed at youth and adults, with the over-riding theme of safe and efficient use of electric energy

Publicity and advertising Advertisements in communications vehicles to consolidate the company brand, information for customers on important company actions and important com-muniqués to the market

Sustainability report Annual report on the economic-financial and social-environmental performance of the company

Meetings with the unions Discussion of topics of interest to employees

Meetings and seminars for investors Events focused on the stock markets

Monthly (Cipa), weekly and daily meetings on safety

Actions to prevent accidents and encourage safe behavior

“Ligado” magazine Internal monthly publication on the company’s main actions

Seminars Directed at public and private corporate customers promoting discussions on topics of interest to these customers

Easy SMS Torpedo Fácil Request for services via SMS messages via cell phone

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Strategy and management A well-structured strategy and quality management are at the core of business growth and

sustainability. Based on such drivers, AES Eletropaulo makes significant investments in the refinement of the strategic planning process and management excellence.

In 2009, as a result of these efforts, the company reached the status of ‘World Class’ company, when it received the National Quality Award, sponsored by the National Quality Foundation (FNQ).

The strategic and financial planning cycle structured in six steps, is carried out annually and organized in two distinct phases: preparation and execution.

The preparation of strategies is carried out through the Xtrategy process, which includes the definition of business, analysis of external and internal environments, identification of comparative references (RCs) and requisites of stakeholders (RPIs), qualification and quantification of corporate risks and respective scenarios up to the definition of the long-term strategic pillars.

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The implementation unfolds the strategies in the short term, through the strategic roadmap (BSC), which is guided by the organizational mission, vision and values, and contains the objectives, targets, action plans and respective operating (OPEX) and investment budgets (CAPEX).

CommitmentInvolving employees in the company’s strategy is key to ensuring everybody’s commitment and

dedication. In this way, AES Eletropaulo strategies are shared through training sessions, talks and staff meetings, by using the management agreement as a tool, which formalizes the commitments and links targets to variable remuneration providing a high performance workplace.

managementSince 2006, AES Eletropaulo has adopted the Management Excellence Model (MEG), from the

National Quality Foundation, as a tool to diagnose and enhance its management model. The culture of excellence is strengthened through the following management practices:

1. dissemination of Values– Safety first– Operate with integrity – Honor commitments – Seek excellence – Fulfillment at work

2. management System A series of monthly meetings, with the purpose of evaluating the success of strategies and plans,

by promoting the cultural changes necessary to achieve the planned operational performance, to accomplish the mission and fulfill the vision. The system includes the following committees: human resources, safety, ethics, customers, investment, R&D and energy efficiency.

3. Apex Culture (AeS Performance excellence) The AES Excellence Program – is a structured set of quality methodologies and tools that can

be used to improve business processes and identify solutions for various kinds of problems through projects. Apex tools are applied within diverse contexts and situations relating to operations, finance, customer services, among others.

The application of Apex at AES Eletropaulo in 2009, has generated projects focused on topics such as reduction of fraud, regularization problems and the quality of fraud inspection, among others.

4. learning organization (“organização que Aprende”)For AES Eletropaulo, the continual learning process symbolizes the origin of the concept of the

creation, acquisition, transfer and retention of relevant knowledge and, at the same time, offering a learning experiences to people, in particular the work groups: Apex, action forum, round table, work management, asset management , revenue management, among others.

The company, through the consolidation of such an approach, directs its actions to the challenges represented by the pillars of growth, financial and operational excellence, brand and reputation, talent and culture, in line with the prospects in the strategic roadmap: financial, customers and society, internal processes, people and culture.

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management Support tools Balanced Scorecard (BSC) A methodology model which allows the conversion of the strategy into strategic and specific goals, and to monitor the company’s performance.

FnQ management excellence model Systemic and structured management diagnosis mechanism which allows the verification of the level of maturity of management and the adoption of the principles of excellence found in international companies.

Benchmarking model A system to compare with the best companies both within and outside the sector, which allows the adoption of best practices in the business and support processes, among others.

Apex (AeS Performance excellence) Methodology adopted by AES Corp. based on a set of regular and consistent quality tools that may be used to improve processes and activities and to deal with problems.

Working Standard Certifications AES Eletropaulo has processes certified by ISO 9001:2000 (quality) and 14001:2004 (environmental) standards and is in the process of certification under the ISO 17025:2005 standard (quality management in test and calibration laboratories).

internal Committees The definition of work standards by identifying continuous improvement and cost reduction opportunities, prioritizing the quality and exchange of experiences in the solution of problems. The key processes involved refer to the respect and development of people and asset and revenue management.

intangible Assets In order to keep the intangible assets aligned with corporate strategy, AES Eletropaulo makes use of

a series of mechanisms that permit the renovation of knowledge, attraction and retention of personnel, improvement of customers’ satisfaction levels and development of communities, in addition to product and process innovation.

Intangible assets are identified and evaluated according to market (new services, demand and integrated solutions), technological (new equipment and business process) and administrative trends (management model and human resources demand). Intangible assets are classified as follows:

human Skill, experience and knowledge. The development and retention of talented people are decisive to the company’s growth. AES Eletropaulo has plans and programs that aim at providing employees with tools for their professional development.

market Brand, customers and relationships. The company’s reputation and perception by customers are at the core of work developed in 2009, involving the repositioning of AES Brasil brand.

infrastructure Diverse systems and customer database. Investments in systems and tools aiming at improving services are made on annual basis.

technological Research and development, processes and products, investments in R&D projects and modernization of the distribution grid and products are made on annual basis.

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Brand Repositioning Between 2008 and 2009, AES Brasil conducted extensive work to identify the essence, pillars and

qualities of its brand and businesses. A committee composed of the top management of AES Brasil was set up, and the work was based on an environment survey, surveys with customers, interviews and workshops with executive officers.

The outcome was largely divulged internally in August 2009 to all employees, and AES Brasil group companies – including AES Eletropaulo – have now gained a new logo, in line with that of its controlling shareholder, AES Corp. It was an intense transformational effort, not only of the company’s image but also of attitude and positioning, in order to multiply results, understand, satisfy and anticipate the customers’ demands, to develop relationships with people and make a difference in the communities.

The impact of this work on the customer was considerable as the two key relationship channels were innovated: the electricity bill and the website.

Besides receiving the coloring representing the new visual layout of AES Eletropaulo, the electricity bill was reformulated to facilitate the interpretation of important information on consumption and the better understand of technical data. Items comprising the final amount due – supply of energy, taxes, financial data, other products and services and rebates and discounts – are clearly discriminated, Also any data considered more relevant by customers, such as the invoice amount and payment date, energy consumption, customer number and installation and notification of past due bills, were highlighted.

The new bill also included information on the responsibility for public lightning in the customer’s region and the consumption rate for the past 13 months, thus enabling the customer to compare current consumption with consumption in the same month of the preceding year.

The website was also completely reformulated and started to offer, besides information on AES Eletropaulo, a broad portfolio of online services through the new Virtual Center. Registered customers are provided with a custom-made page containing the statement, payment status and consumption history. The Virtual Center also allows the request for services such as copy of the bill, new hookups, power re-connection, alteration of the payment date and request of reimbursement for electrical damages.

Public CommitmentsAES Eletropaulo is a signatory of the Global Pact and promotes the eight Millennium Goals, both

initiatives of the United Nations (UN). The first encourages the corporate community to adopt, sponsor and promote the ten basic and universal human rights, labor practices, environmental, corruption and bribery prevention principles. Signatories are invited to adopt the ten principles in the conduction of business and activities and report progress to the UN the society on annual basis.

The Millennium Goals, known in Brazil as the Eight Ways to Change the World, defined eight measures targeted at hunger and poverty eradication, universal education, gender equality, child mortality reduction and maternal health, the combat of AIDS and other diseases and environmental sustainability.

In October 2009, AES Eletropaulo, interested in further expanding its relationship with customers, started to actively participate in the Sustainable Company Reference Group (GRES) project in. GRES, which was organized by the Instituto Ethos de Empresas e Responsabilidade Social, is a cooperation program between companies and customers, created to encourage discussion on relevant topics relating to sustainability through innovation, cooperation and development of leaders. AES Eletropaulo also invited one suppliers’ representative and one community member to participate in the first stage of the project.

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AES Eletropaulo also participates in important business associations, such as:

– Brazilian Association of energy distribution Companies (Abradee): contributes to the operational and financial-economic excellence of concessionaires, focused on customer service.

– energy industry union of the State of São Paulo (Siesp): studies, coordinates, protects and represents the agents of the energy sectors in the State of São Paulo.

– American Chamber of Commerce (Amcham): influences policies in Brazil and in the United States, by promoting commerce, investments and corporate citizenship.

– World energy Council: largest multilateral energy sector organization in the world promotes the supply and sustainable use of energy.

– group of institutes, Foundations and Companies (gife): promote private social investment, by disseminating concepts and practices relating to the use of private resources in projects focused on the development of the common good.

– instituto ethos de empresas e Responsabilidade Social: assists companies in incorporating the concept of social responsibility in their management, through a process of continual evaluation and improvement.

– Abrinq Foundation: mobilizes society towards issues related to child and adolescent rights. AES Eletropaulo participates in the Child Friendly Company Program (“Programa Empresa Amiga da Criança”), which encourages private social investment in initiatives on behalf of the children and adolescents.

– +unidos group: a partnership between the U.S. Diplomatic Corps in Brazil and U.S. companies established in Brazil, whose objective is to disseminate the investment of member companies in environmental, social and economic development projects and to promote corporate social responsibility within diverse segments of society.

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SafetySafety is the Top Priority for AES Eletropaulo. To keep the population informed, to prevent

accidents on the electric power grid and to guarantee the safety of its employees and service providers are among its main commitments.

Safety is a constant theme of programs aimed at employees, such as the On the Road event (“Pé na Estrada”) and workshops and talks given to outsourced companies.

As well as a strong campaign in the media, AES Eletropaulo includes in all social projects instructions to the population on the risks involved in the electric power grid.

employees’ Safety AES Eletropaulo maintains processes and training sessions to prevent accidents to its

own employees, continually seeking the perfection of its safety levels. In 2009, the company made changes in the departments and sectors responsible for the area which resulted in the implementation of new programs, such as the Leader in Action (“Líder em Ação”) and the Safety Game (“Game de Segurança”).

Also in 2009, the company created the Occupational Health and Safety Management System Committee (SGSSO), with the participation of all the regional officers and the vice president of distribution, with the goal of implementing the 25 safety standards of AES Corp. in each and every regional office by 2010.

Aligned with the guidelines of the OHSAS 18001 international standard (Evaluation Series of Occupational Health and Safety), SGSSO contemplates the identification and evaluation of the hazards and risks inherent to the company’s administrative and operational activities, sets out goals and objectives relating to health and safety, provides for training sessions and raising awareness of the workforce on the prevention of accidents and the critical analysis of senior management on the measures adopted.

CertificationAES Eletropaulo is in compliance with the safety standards established in Brazilian legislation and

abides by AES Corp guidelines. Its goal is to obtain the OHSAS 18001 certification with respect to all the company’s segments by 2011. Thereafter, the certification may also be required for outsourced companies.

OHSAS 18001 is a management system which will enable AES Eletropaulo to methodically control and improve the performance level of its health and safety indicators. The implementation of such a system demonstrates the company’s concern with the physical integrity of its employees.

main Safety initiatives

leader in action Encompasses the training of all safety supervisors and partners, in order to maximize the profile of the leader in the field. The course is divided into modules that discuss topics relating to the human safety and behavior, as well as practical simulations of people management. The program, implemented in 2009, has already trained 366 employees.

Safety game A pioneering initiative in the Brazilian energy sector referring to a type of training through games. During the training, employees have the opportunity to check out their

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knowledge through onsite activities in a digital environment that simulates working conditions, the equipment and tools used on regular basis and the procedures applied. The game, implemented in 2009, has already been played by 1,850 own employees and 840 sub-contractors.

Standardization of the task card In 2009, the task cards were standardized. These cards provide instructions on each stage of a specific activity and the appropriate use of equipment, containing step- by-step working processes and other essential items for safe operation.

identification of the field leader As of 2009, the team leader is identified by a specific vest and is trained to use a whistle in situations of danger.

training Training sessions, which include mandatory themes in health and safety standards together with qualification and development standards, totaled 506,446 man hours in 2009. Training sessions are conducted by the Safety, Operational Training and Corporate Education Departments of AES Eletropaulo.

Safety discussions Before the implementation of any procedure, all techniques and operational procedures are reviewed to ensure safety. In 2009, discussions were standardized in all regional offices in order to homogenize information.

onsite inspections Visits to field teams to verify compliance with safety standards and use of protection equipment. In 2009, inspections were intensified and increased from an average of 1,600 to approximately 2,500/month, for both company and outsourced workers.

danger Reports Situations that may cause accidents are reported by employees to the safety department, which takes the necessary steps to prevent or minimize risks.

BBS (Behavior-Based Safety) The objective is to change behavior and attitude regarding safety. Through behavioral observation and orientation of teams on safe and unsafe behavior – carried out by company employees on informal basis – the company seeks to develop the ability to identify and control operational risks and emphasize safe practices in daily routines. The goal for 2010 is to intensify the employees’ qualifications.

Sipat The highlight of the 2009 edition of the Internal Week of Occupational Accident Prevention (Sipat), held in May, was the integration of all AES Brasil Group companies. The Global Safety Day was celebrated during the event and the campaign Viver é bom demais (Living is Great), started in 2008, continues. Initiatives such as instructions on safety, technical talks, defensive driving, disease prevention, work-related gymnastics, recreational theater and music activities, motivational talks and the presentation of AES Brasil safety indicators were presented during the event. Sipats are established by the Internal Accident Prevention Commissions (Cipas), which account for 100% of the workforce in discussions relating to occupational health and safety and are made up of managers and employees.

energy environmental Risk Prevention The Energy Environmental Risk Prevention Program (PPRAE) anticipates, acknowledges, evaluates and controls biological, chemical and ergonomic risks relating to energy distribution activities – both in open or confined spaces.

For example, extensive studies to identify fungus, bacteria and virus found in the underground energy distribution tunnels have been conducted, with the aim of controlling the employees’

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exposure to these biological agents. Although the studies have not detected any kind of pathology relating to activities in underground tunnels, in 2010 AES Eletropaulo decided to adopt the industrial cleaning of clothing used by the employees working in confined spaces. In this way, these biological agents are prevented from being carried from the tunnels to the employees’ homes.

In 2010, PPRAE is assessing the exposure to chemical, physical, and biological agents of linemen, field technicians and employees working in the maintenance shops and transformer reform, and also the implementation of corrective and preventive measures in order to prevent occupational diseases.

Fundação Coge AwardIn 2009 AES Eletropaulo won the Fundação Coge Award. The Fundação Coge promotes

the improvement of corporate management and technical culture in the energy sector. The acknowledgment was in the Occupational Health and Safety Management category, with the project, Study on Incident Energy by Electric Arc in Human Beings and Protection Factors, which competed against 69 other projects registered by 29 energy sector companies.

The winning project of AES Eletropaulo was based on the laboratory creation, in conditions equal or similar to those of the company’s standard distribution grid and the adoption of regular work positions with a test dummy fitted with with sensors, to obtain practical, real and operational conditions of the activities performed by linemen in the field.

outsourced Workers’ Safety AES Eletropaulo holds monthly meetings with its safety technicians and outsourced employees,

in order to reinforce occupational accident prevention standards and procedures. The verification of the correct use of individual and collective protection equipment and

compliance with work procedure methods are carried out through audit work – both with regard to the documentation of outsourced companies and the employee on site – during activities on the power grid. Inspections contribute to the reduction of frequency and gravity rates and cover 100% of the outsourced workforce.

The company highlighted its concern with the safety of employees hired through the workshop cycle carried out between April and May 2009. In these meetings, AES Eletropaulo aligned prevention and safety concepts, shared the results of the initiatives and discussed the chief expectations for the year.

Rate of Accidents in the Workplace In 2009, safety procedures were reviewed, which resulted, for example, in changes to highway

signs during activities on the power grid as well as the standardization of task cards, given that the number of accidents involving outsourced employees was greater than 2008.

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FReQuenCy And gRAVity RAte BASed on BRAZiliAn legiSlAtion

oWn emPloyeeS 2007 2008 2009 Frequency rate¹ 12,49 7,71 6,22 Gravity rate² 37 71 51 outSouRCed emPloyeeS Frequency rate 10,38 9,64 9,98 Gravity rate 627 1.025 1.649

WoRk ACCidentS

oWn emPloyeeS 2007 2008 2009Fatal accidents 0 0 0Accidents with loss of woking days 18 11 13Accidents without loss of working days 78 57 43Total 96 68 56 outSouRCed emPloyeeS Fatal accidents 1 1 3Accidents with loss of working days 33 26 33Accidents without loss of working days 79 78 81Total 113 105 117

¹ Accidents with loss of work per million man-hours of exposure to risk in a period of one year. ² Days lost due to accidents with loss of work per million man-hours of exposure to risk in the period of one year.

Population Safety AES Eletropaulo annually conducts educational and awareness campaigns aimed at the

population regarding the safe use of the electric energy. Advertising campaigns are broadcast in mass communication vehicles on the topic, mainly focused on the C, D and E classes – segments where accidents are most common – which cover themes such as the construction or reform of homes, installation of antennas and flying kites.

Messages on the theme are included on the electricity bills, in the call center waiting recording, on banners exposed in customer service centers, on company fleet vehicles and on AES Eletropaulo website. Partnerships with construction material stores and churches contribute to disseminate the information.

Between July 2008 and December 2009, over 6,000 posters discussing the topics of kites and construction have been fixed in lampposts in the São Paulo districts of São Mateus and São Miguel Paulista, and in the municipalities of São Bernardo do Campo, Santo André, Mauá, Diadema and São Caetano do Sul.

The outcome of these measures targeted at the population was measured through a survey conducted by the Brazilian Association of Energy Distribution Companies (Abradee) in 2009. The survey observed that 84.1% of the persons interviewed agreed that they had been informed by AES Eletropaulo about the risks and danger of the power grid.

AES Eletropaulo launched in February 2010 the Zero-Accident Campaign aimed at people more vulnerable to electrical accidents and regions in which an increase in fatal accidents was noted in 2009, such as Osasco, Carapicuiba, Diadema, São Bernardo do Campo and districts of the Northern,

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Eastern and Southern Sides of São Paulo city. Leaflets and informative material on the safe use of electricity were distributed.

In March the safety campaign featured in the media shifted into a more direct and targeted approach to the risks of electrical accidents. The campaign is spread over various media including television, radio, subway posters and billboards and in-car subway video screens.

ACCidentS in the AeS eletRoPAulo ConCeSSion AReA

PoPulAtion 2007 2008 2009Minor accidents 107 95 90Serious accidents 42 09 18Fatal accidents 30 22 26Total 179 126 134

AwarenessThe company gives lectures in schools, district associations, companies and construction material

stores to put out information to children and civil construction workers on the risks involving the power grid. The content is presented with the assistance of an experiment kit, through which the audience is taught how to handle electric appliances and are given pointers on energy saving and safety on the power grid. The 150 registered lecturers gave guidance to 424,176 people in 2009. The pamphlets offered at these events are also distributed by linemen and customer service center staff to the public in general.

The measures to raise population awareness on safety are maximized through the social responsibility programs, such as AES Eletropaulo in the Community and the House of Culture and Citizenship, which broach the theme in a transversal way in their activities. Projects reach an audience of about 152 thousand persons/year.

national Population Safety Week AES Eletropaulo participated in the IV National Week of Safety of Population with Electric Energy,

sponsored by Abradee between November 9 and 13, 2009. The event’s motto was “We inform but you need to do your part” and covered four themes: installation of TV antenna, flying kites, civil construction and electricity theft. The company contributed to the promotion of the event via the electricity bills and activities developed throughout the week.

Safety Blitz The Energy for Good volunteer program carried out blitzes in 2009 aiming at making the

population aware of the risks of the power grid. The first three editions were carried out in the Cities of Osasco and Diadema and in the São Paulo suburb of Penha. Over 50 employees participated in the program by distributing pamphlets containing safety tips. The volunteer action was also supported by a mobile teaching unit of the AES Eletropaulo Community project – a truck equipped with multimedia, which attracted the population with its interactive activities.

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Financial and economic Performanceoperating Revenue

Gross operating revenue totaled R$ 12.63 billion in 2009, growth by 7.5% compared to the previous year, mainly due to the 1.7% increase in captive market consumption and tariff adjustments of 8.01% and 14.88% applied in July 2008 and July 2009, respectively.

Deductions from operating revenue in the amount of R$ 4.58 billion were recorded in 2009, a growth rate of 8.5% (R$ 358.2 million) compared to deductions in 2008. These variations are mainly due to the increase in the energy supply revenue between the periods indicated and, consequently, the proportional increase of taxes levied on revenues (ICMS, PIS, COFINS and ISS).

Net operating revenue of AES Eletropaulo totaled R$ 8.05 billion in 2009, growth of 6.9% or R$ 520 million compared to 2008, mainly due to the tariff adjustments in 2008 and 2009 and the reduction in “Other Revenues”.

operating Costs and expenses Operating expenses, which totaled R$ 6.42 billion in 2009, growth of 9% (R$ 528.1 million)

compared to the same period of 2008, are described below:

oPeRAting exPenSeS - R$ millionS * 2008 2009 VAR. (%)Parcel A costs 4.700,3 5.110,1 8,7%Electric energy purchased for resale 3.753,9 180,7 7,7%Transmission 946,4 1.066,1 12,6%PMSO1 1.193,2 1.311,6 9,9%Personnel + Private pension fund 485,2 697,9 43,9%Third-party services 293,0 323,4 10,4%Materials 36,1 30,4 -15,8%Others 379,0 259,9 -31,4%Total 5.893,5 6.421,7 9,0%

¹PMSO: Personnel, Materials, Services and Other Operating Expenses

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operating CostsExpenses with electric energy purchases increased by 7.7% in 209, mainly due to the greater

volume of energy purchased in auctions and increases in costs of purchases of electric energy from Itaipu together with the average price of auctions.

In 2009, expenses incurred from charges for the use of the energy and transmission grid was 12.6% above 2008, mainly due to the increase in charges from the Basic System and Service Grid (ESS).

PersonnelPersonnel costs and expenses grew by 43.9%, mainly due to: (i) increase in costs from the private

pension fund, pursuant to the actuarial expectations; and (ii) labor agreements and penalties. Only personnel costs and charges were reduced mainly due to the adequacy of capitalization percentage rates from 21% in 2008 to 29% in the second semester of 2009.

other operating expensesOther operating expenses decreased by 31.4%, totaling R$ 259.9 million in 2009, a reduction of

R$ 119.1 million, due mainly to the reversal of R$ 76.7 million relating to the agreement signed with the Municipal Government of São Paulo, the first payment of which was made in August 2009.

other Revenues and expenses In 2009, Other Revenues and Expenses totaled an expense of R$ 54.9 million, compared to

a revenue of R$ 59.6 million in 2008, the latter is explained by the recognition of credits from FINSOCIAL in the amount of R$ 88.9 million in the period.

ebitdaEbtida (income before interest, taxes, amortization and depreciation) in 2009 was R$ 1.57 billion,

an amount 7.2% below that of 2008. This reduction was mainly the result of the combination: (i) of the growth of 1.7% in the captive market; (ii) the positive effect of R$ 76.7 million referring to the first installment of the agreement with the Municipal Government of São Paulo; and (iii) of the increase of R$ 154.3 million in the cost of the private pension fund.

otheR oPeRAting exPenSeS - in R$ millionS 2008 2009 VAR. (%)Personnel and charges 299,6 291,9 -2,6%Pension fund 26,4 180,7 584,7%Labor agreements and fines 159,2 225,3 41,6%Total 485,2 697,9 43,9%

otheR oPeRAting exPenSeS - in R$ millionS 2008 2009 VAR. (%)PCLD and write-downs 134,8 45,6 -66,2%Contingency provisions (reversion) 35,6 2,5 -93,0%Judicial penalties and agreements 81,2 72,5 -10,7%Others * 127,3 139,3 9,4%Total 379,0 259,9 -31,4%

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Financial Results Financial income totaled R$ 158.1 million in 2009 compared to a financial income of R$ 129.4

million in 2008. The main reasons for this growth are: the positive effect of the provision reversal, in the amount of R$ 285.1 million, relating to the adhesion to the Federal Tax Installment Payment Program (Refis) in 2009; and the positive effect of R$ 210.2 million relating to the recognition of credits from Finsocial in 2008.

The company posted net income of R$ 1.06 billion in 2009 compared to R$ 1.03 billion in 2008. The performance is mainly due to the positive effects of R$ 76.6 million relating to the agreement signed with the Municipal Government of São Paulo and R$ 298 million relating to the adhesion to Refis, whose effects were partially offset by the greater expense with private pension and the positive effect on 2008 results due to the Finsocial.

diVidendS 2009 (R$ milionS)Retained earnings as of December 31, 2009 0,0Net income for the period - up to December 31, 2009 1.063,2Realization of revaluation reserve - um tp December 31, 2009 73,5Net Balance 1.136,7Legal reserve (5%) (56,8)Dividends 1.079,8Interim dividends distributed (322,7)Interest on equity (70,8)Additional dividends proposed (686,3)Closing balance 0,0

Shareholder RemunerationThe amount distributed and proposed by the company totaled R$ 1.1 billion in 2009,

corresponding to 101.6% of net income for the year. On December 24, 2009, the company paid the amount of R$ 322.7 million in interim dividends relating to the first semester of 2009.

The payment of interim dividends and interest on equity, corresponding to the balance of net income for 2009, was approved at the Annual General Meeting (AGM) held on April 2010.

The amount of interim dividends proposed by the Board is shown in the table below and corresponds to R$ 3.85 per common share and R$ 4.24 per preferred share.

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indebtednessPursuant to Law 11638, the company included in the total debt balance for 2008, lease and

rental agreements under the line item “Leasing”. These agreements increased the debt balance by R$ 83.8 million in 2008 and R$ 16.3 million in 2009; however, for purposes of analysis, these amounts are not taken into consideration in the total debt balance.

At December 31, 2009, the company’s gross debt totaled R$ 4.46 billion, growth of 9.4% compared to December 31, 2008 (R$ 4.09 billion).

Net debt totaled R$ 3.22 billion at December 31, 2009, a reduction by 26.6% compared to December 31, 2008. The greater net debt compared to the closing balance in 2008 is due to the funding of R$ 600 million, which was promptly used for the payment of taxes – adhesion to Refis. Cash and cash equivalents totaled R$ 1.25 billion at December 31, 2009, a drop of R$ 341.3 million compared to 2008, a variation which also impacted the net debt.

Average equivalent cost of total debt of AES Eletropaulo decreased from CDI +2.8% p.a. at December 31, 2008 to CDI -1.22% p.a. in the same period of 2009. The drop is mainly due to the variation of IGP-M, a debt restatement index disclosed by Fundação Cesp (pension fund), which accounts for approximately 45% of the total debt balance, its cost corresponding to 46% of average CDI over the period.

Average term of total debt was practically unchanged from 7.1 years at December 31, 2008, to 7.0 years at December 31, 2009. The level was maintained due to the extension of the agreement signed with Fundação Cesp and the aforesaid funding.

The balance of debt indexed to the U.S. dollar at December 31, 2009 was R$ 105 thousand, accounting for less than 0.002% of total debt. The company does not have other foreign exchange or derivative transactions.

investmentsAES Eletropaulo invested R$ 516 million in 2009, growth of 12.9% compared to the previous

year. Of the total investments in 2009, R$ 478.3 million was invested from own funds and R$ 37.4 million correspond to projects funded by customers.

The company forecasts investments of R$ 691.0 million in 2010, of which R$ 53.9 million is funded by customers.

inVeStimentS (R$ millionS) 2008 2009 VAR. (%) Customer service and expansion of the system 203,3 226,2 11,3%Maintenance 84,0 120,7 43,7%Recovery of losses 53,8 76,1 41,4%Information technology 21,9 25,8 17,8%Others 46,5 29,5 -36,7%Total (with own funds) 409,5 478,3 16,8%Financed by customers 47,1 37,4 -20,7%Total 456,7 515,7 12,9%

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Remunerated investment The remuneration basis is composed of assets resulting in prudent investments made by the

distribution company. The tariff adjustment included the capital remuneration – that obtained from the application of WACC (as defined by Aneel) on the net asset base and the depreciation rate obtained from the application of the average depreciation rate on the gross asset base.

main investments in 2009Customer Services and System expansion – R$ 64.0 million in the conclusion of the construction works in Tiradentes and Tenente Marques

substations, with an increase of 191 MVA in the system installed capacity, a project which benefits about 193,800 customers;

– R$ 32.2 million in construction work in the overhead and underground medium voltage distribution grid, with the inauguration of 16 new circuits and the reconstruction of eight existing circuits;

– R$ 130.0 million in customer services, of which R$ 97 million was invested in the addition of 195.400 new residential, commercial, and industrial customers in 2009, resulting in the growth of 1.3% in the system’s maximum demand capacity, without overload nor deterioration of services rendered, which reached 7,594.6 MW.

maintenance – R$ 120.7 million was invested in projects relating to the maintenance of the grid and power lines,

upgrade of sub-transmission, automation of electrical systems, modernization of the underground system and acquisition/replacement of on-site equipment.

Recovery of losses – Regularization: in 2009, 80,177 connections were legalized in 150 regions within the concession

area of AES Eletropaulo, which benefited 320,708 people, with an average investment of R$ 409.5 per customer in material and labor.

– Inspections and detection of fraud and irregularities: in 2009, 335,967 inspections and 41,764 fraud detections were carried out. In this period, AES Eletropaulo allocated part of the fraud teams to other short-term projects with higher loss recovery added value, such as recovery of installations in housing complexes and regularization of problems with electronic meters in the reactive metering project.

the Stock marketShares issued by AES Eletropaulo are listed on Level 2 of Corporate Governance of BM&FBovespa

under symbols ELPL4 (common shares) and ELPL5 and ELPL6 (preferred shares). Additionally, the company also has ADRs traded on the U.S. over-the-counter market under rules 144a and RegS under symbols EPUMY and ELPSY (preferred shares).

The preferred shares (ELPL6) issued by AES Eletropaulo are part of Ibovespa, an index which reflects the behavior of the main stocks traded on the BM&FBOVESPA, and Itag, which measures the performance of a conjectural portfolio composed of shares issued by companies offering better terms and conditions to minority shareholders in the event of transfer of control.

The company is also part of the Electric Energy Index (IEE), whose purpose is to measure the performance of the energy sector and is also listed on the Corporate Sustainability Index of BM&FBovespa (ISE), which unites companies with clear commitment to social responsibility and corporate sustainability.

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Class B preferred shares (ELPL6) were quoted at R$ 34.50 at the end of the year, a positive performance of 60.3%, and ELPL5 shares presented a positive performance of 61.5%. The performance was lower than the performance presented during the same period by the São Paulo Stock Exchange Index (Ibovespa), which appreciated by 82.7%, but was in line with the Electric Energy Index (IEE), which presented earnings of 59.1%.

It should be noted that 2009 marked the recovery in the stock market fall caused by the financial crisis that started in September 2008. If taking into account the period from September 2008 to December 2009, the performance of AES Eletropaulo shares was aligned with IEE and Ibovespa, as the company’s shares had slightly depreciated during the crisis.

The ELPL6 shares were traded on all trading sessions of BM&FBovespa throughout the year. Liquidity data shows the performance of 417,149 trades, involving about 164.6 million preferred shares, with a daily average volume of R$ 29.2 million on the spot market during the period.

The prices of ELPL5 and ELPL6 shares were adjusted to the values of dividends during in the period under analysis.

1 Information on low-income residential customers is included in the residential line item.

DEC/08 FEB/08 APR/09 JUN/08 AUG/08 OCT/09 DEC/09

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operating PerformanceIn 2009 AES Eletropaulo invested R$ 516 million, of which R$ 346.9 million was in consumer services,

improvements and expansion to meet its expanding market and enhance the quality of its services. Investments aimed at keeping pace with market growth, optimizing electricity supply reliability,

reducing disruptions, recouping losses and improving technical and operating efficiency, were funneled principally into the adoption of new technologies and growing systems automation, which allows greater control over distribution network and facilitates recovery from disruption to energy supply and, consequently, contributes to improve the quality of services rendered.

All sub-transmission lines, substation implementation and expansion projects contemplate the environmental requirements established in current legislation.

System expansion The company invested R$ 96.2 million in projects to expand the electric system in 2009 to

satisfy the demand from the growing market and to expand the level of service quality, amongst which are:

- the increase of the system’s installed capacity of 191 MVA (megavolt-ampere), providing greater capacity to AES Eletropaulo’s substations;

- the conclusion of construction work on the new Tiradentes and Tenente Marques substations;- the construction work on the in the overhead and underground medium voltage distribution grid,

with the inauguration of 16 new circuits and reconstruction of eight existing circuits.

Scheduled for 2010 are the construction of a new substation and the expansion of six substations which, together, will add 184 MVA to installed capacity.

the tiradentes ProjectThe purpose of the Tiradentes project was to keep pace with the growth of population and

commercial and industrial activities in the Eastern Region of the City of São Paulo, thus benefiting over 160 thousand people. This permitted greater operational flexibility and a more reliable service in the regions of Iguatemi, Itaquera, São Mateus, Cidade Tiradentes, Guaianases, Lajeado and Água Rasa.

The Tiradentes substation, with transformation capacity of 80 MVA, started operations in June 2009. The project also included the construction of a 3.2 km overhead sub-transmission line in the Tiradentes 1-2 Aerial Station Network (RAE); the construction of 3.5 km of overhead sub-transmission line in the Guaianases 1-2 RAE; the construction of 5 medium voltage circuits in the Tiradentes overhead distribution line (LDA) and the underground exits of 5 medium voltage circuits in the Tiradentes underground distribution line (LDS).

The inauguration of the Tiradentes distribution transformer station (ETD) included a presentation from the children of the of the Guri Project Friends Association (“Associação Amigos do Projeto Guri”), who sang a song specially composed for AES Eletropaulo, the project’s sponsor. Adolescents benefiting by another company social program, the House of Culture and Citizenship of Vila Guacuri (“Casa de Cultura e Cidadania da Vila Guacuri”), were responsible for the artistic work decorating the wall surrounding the ETD, consisting of graffiti inspired themes on safety, caution on the power grid and energy saving.

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the tenente marques ProjectThe objective of this project was to meet the expansion of the Municipalities of Cajamar and

Santana do Parnaíba and also alleviating the loading on Parnaíba, Jordanésia and Gato Preto substations, which served the region until the conclusion of ETD Tenente Marques. This project also contributed to improvements in the service conditions in the districts of Anhanguera, Brasilândia, Jaraguá and Perus, thus benefiting over 31 thousand people, as well as commercial, industrial and service activities.

The Tenente Marques substation, with transformation capacity of 120 MVA, started operations in June 2009. The project also included: the construction 1 km of overhead sub-transmission line in Tenente Marques RAE for connection with the new substation; and the construction of 5 medium voltage circuits in the Tenente Marques LDA and underground exits of 5 medium voltage circuits in the Tenente Marques LDS.

System maintenance The amount of R$ 120.7 million was invested in maintenance, renovation, modernization and

automation of the electric system in 2009. The main works in the low voltage overhead distribution system covers the maintenance work in

204 circuits, the installation of 36 km of compact grid and the restoration of 290 secondary networks. The installation 42 km of compact grid (growth by 16% compared to 2009) and the modernization of 750 secondary networks (growth of 158% compared to 2009) are scheduled for 2010.

Renovation and modernization of the Sub-transmission System The projects for renovation and modernization of the electric sub-transmission system involved

the replacement of obsolete or unreliable operational equipment, most notably:

– the modernization of the protection system of 83 feeder circuits, with the installation of new digital protection relays to replace electromechanical relays;

– the elimination of medium voltage circuit breakers using SF-6 gas extinction and magnetic blower, which were replaced by 23 vacuum circuit breakers;

– the replacement of 31 sets of batteries and 18 rectifiers at the end of their useful life in 21 substations;– the installation of oil collection basins and separation boxes in eight substations in order to prevent soil

contamination in case of leakage.

The installation of 32 medium voltage vacuum circuit breakers to replace those using SF6 greenhouse gases, as well as the installation of oil collection basins and separation boxes in ten substations to reduce soil contamination risks, forecast for 2010, among other improvements.

Sub-transmission AutomationThe purpose of the projects for automation of the sub-transmission electrical system is to reduce

operating costs, accelerate power reconnection, improve energy quality and replace obsolete or unreliable operating equipment. Among the highlights are:

– Substitution of analogical radios responsible for the communication between stations for digital radios;– Implementation of history modules in SCADA, data supervision and acquisition software;– Digitalization of stations, with the use of localized man-machine interface (remote monitoring), with

the integration of closed circuit cameras;

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– Upgrade of the automation system, with the replacement of Remote Terminal Units (UTRs) in 24 stations;– Upgrade of operational metering in 33 stations, with the replacement of analog meters for digital

meters in 635 circuits;– Automation of 24 underground switches in the underground distribution grid; – Integration of AES Eletropaulo’s and the transmission company ISA CTEEP’s systems, which made

possible the visualization in real time of the gauging and status of frontier circuit breakers.

The plan for 2010 is to continue implementing these improvements, such as, the replacement of UTRs in 23 substations and modernization of metering in 52 substations, corresponding to 1,100 circuits with analogical meters replaced by digital meters.

distribution AutomationThe automation of devices in the overhead distribution grid permits the segregation and isolation

of a part of the grid in the event of any failure, which reduces the number of customers suffering outages and boosts the quality and continuity of supply. In 2009, 150 automatic switches were installed, totaling an installed system of 269 switches. The target is 419 switches by 2010.

Renovation and modernization of the underground System In 2009, 167 failure identifiers and 87 maneuver points were installed in the underground

system, which will speed up the reconnection of electric energy in the case of disconnection. 11,000 meters of cable, 148 transformers at the end of their useful lives and 106 exit boxes, which connect customers to the low voltage network, were replaced.

In 2010, the goal is to continue to implement improvements in the underground system, which includes the replacement of 6,000 meters of cable, 150 transformers and 194 exit boxes.

Customer Service Requests for power capacity increases and hookups for new customers accounted for

approximately R$ 130.1 million in investments in 2009. Throughout the year, 195,400 residential, commercial and industrial customers were connected to the AES Eletropaulo’s system, resulting in growth of 1.3% in the maximum system demand, which reached 7,594.6 MW.

Plm ProjectImplemented in 2008, the Product Lifecycle Management (PLM) project represented an

investment of R$ 5.2 million in 2009, which accounted for 37% of the project. Another R$ 11.3 million is forecast for 2010, totaling R$ 16.5 million.

The objective of the PLM Project is to innovate, integrate and manage assets in technical and operational processes aimed at the expansion and maintenance of assets comprising the electric system. It consists of redesigning technical and operating processes by replacing the various systems and current tools for solutions that permit the management of assets – such as the use of GPS functions (global positioning satellites) and PDAs (personal digital assistants) – synchronized and integrated with other existing corporate systems, such as ERP (Enterprise Resource Planning) and GIS (Georeferenced Information System).

The project is in compliance with ISO 9001 requirements and uses the best practices and technologies available on the market, which ensures greater accuracy of technical and financial information and consistency between assets installed in the concession area, the physical asset

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base and the accounting asset base. About 900 employees will receive training on the PLM project solution, and the beginning of operations of the new management process is scheduled to 2010.

georeferenced information System AES Eletropaulo implemented new functions in its GIS in 2009, aiming at better management

of its assets. The company started a registry quality certification project based upon the on-site determination of all electric assets included in its database to comply with a determination from the National Electric Energy Agency (Aneel). The conclusion of this determination is scheduled for 2010. The incorporation of this determination into the GIS database will represent an improvement in the quality of the company’s technical records.

GIS offers support for the analysis of operations, feasibility studies with respect to new construction work, studies for connection of new sources and new customers and mitigation of environmental impacts arising out of the construction or re-construction of new distribution lines.

Partnership with governmental Authorities Public works require adaptation of AES Eletropaulo’s electric system infrastructure. The expansion

of the road and subway systems and the modernization of public spaces require reallocation or changes from overhead power lines to underground power lines and the raising of the sub-transmission lines.

AES Eletropaulo fulfilled all requests from state and municipal governments and utility companies. The company holds regular meetings with the representatives of such bodies to evaluate the technical feasibility of the work and provide instructions with respect to the best alternative.

Among the construction work mentioned is the conclusion of Rodoanel – a highway system surrounding the City of São Paulo – and the widening of the Marginal do Tietê ring road. The construction of subway Line 4 (Yellow) and the expansion of Line 2 (Green) have also required the direct involvement of AES Eletropaulo. Its staff offers support at the beginning of the shield work (tunnel excavator) and its removal at the end of the work.

In 2009 AES Eletropaulo signed an agreement with the São Paulo Municipal Government that contemplates debt payment and conversion of 7.76 km of overhead distribution grid into an underground grid in 2010, comprising 5 km in Ibirapuera Park, 0.7 km at Rua José Paulino, 0.71 km at Rua do Gasômetro and 1.35 km at Avenida Brigadeiro Faria Lima.

incident and Service handling In order to maintain the reliability of the distribution system and the quality of energy supply,

AES Eletropaulo constantly monitors its concession area. The 130 operators in the company’s operation centers monitor in real time, rains, storms and other events that may interrupt supply. The work performed by linemen on-site is remotely monitored by operators.

Service agility is also enhanced by the motorbike-operatives, who can easily move through traffic and, therefore, preserve safety at the incident location and gather information for the operating center to instruct the teams dispatched.

A new service order management system was developed in 2009, which will allow the automatic dispatch of such service orders in early 2010, through intelligent terminals carried by the on-site teams, without the need of voice resources. A new alternative which enables customers to send a complaint regarding outages through SMS was also created. See more in the customers section.

The distribution grid’s switches, which identify the occurrence of energy interruption – decisive to the speeding up of services will be monitored in real time in early 2010.

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The Weather Information System (SIM) received new investments, which provide for the installation of 11 weather stations in AES Eletropaulo’s concession area. In 2009, two stations were installed and resources to forecast summer rains have been implemented. Investment of over R$ 2 million in SIM are estimated.

BlackoutsA rapid response from AES Eletropaulo to power outages is vital to minimize damages from

prolonged electric service disruptions, such as in the blackout that occurred in November 2009 as a result of a simultaneous short circuit along the transmission line that feeds the Itaberá energy substation belonging to the transmission company Furnas, and another short circuit in the substation.

AES Eletropaulo gradually reestablished the supply of energy and about 6 hours after the incident all 24 municipalities in its concession area were already back to normal. Firstly, the energy distribution company followed the measures previously set between the National System Operator (ONS) and the sector agents to reestablish energy supply in previously defined regions. Then, through coordinated efforts with the ONS and energy transmission companies, the company reestablished energy distribution in all areas served by the company. Compared to the average global rate for incidents of such nature, the reconnection time was considered low.

The prolonged energy interruption resulted in the increase in the number of indemnity requests due to electrical damages during the period. Between November 2009 and February 2010, of the total 34.7 thousand requests registered, 16.9 thousand were related to the blackout.

Summer operation As the major part of AES Eletropaulo’s electric system is on the surface, it is highly affected by

weather phenomena, such as storms, air currents, atmospheric discharges and abrupt temperature changes. During summer, when the volume of rain increases, there is sizeable growth in demand that may reach one thousand daily incidents. Also, the year 2009 was a year unusually characterized by severe rains, with rainfall volume 24% greater than that registered in 2008, well above the historical average volume.

The company activates the Summer Plan during this period, which is divided into two parts: in the first three and the two last months of the year. There is a staff increase of 110% in distribution and sub-transmission linemen, 110 motorbike-operatives are on patrol and there are 16% more operators in the call center.

The main cause of interruptions observed in this period of the year is related to the fall of tree branches on power lines. In order to minimize such problem, AES Eletropaulo has been enhancing its tree pruning program. The program, based on current environmental legislation, is approved by the municipal governments of the 24 municipalities in the concession area and provides for growth of 53% in the volume of tree pruning in 2010. For purposes of comparison, 177,000 trees were pruned in 2008, 145,000 in 2009 and, 300,000 are estimated for 2010.

The company expanded the use of teams for emergency services in the summer of 2010. On regular summer days, the company deploys up to 256 teams to deal with energy interruption complaints. On critical days, when severe storms occur, 539 teams can be deployed with the consequent reduction in outage time.

technical Quality indicatorsDue to the exceptionally high volume of rainfall observed in 2009, it was possible to identify

growth of 18% in the FEC indicator relating to the average frequency of emergency interruptions,

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and 29% in DEC indicator relating to the average number of hours that each customer is without energy during a given period.

Besides the adverse weather conditions, DEC and FEC indicators have been impacted by necessary scheduled disconnections due to the substantial growth in the electric system expansion and maintenance work aimed at increasing the reliability and quality of energy supply.

technology and ServicesAES Eletropaulo maintains a hi-tech complex, which is unique in the energy distribution sector and

a benchmark in Brazil. It is composed of laboratories with different functionalities and equipment repair and test workshops. In 2009, the Insulating Mineral Oil Regeneration Unit was added to the complex, which is responsible for the regeneration of 900,000 liters of oil throughout the year.

New technologies aimed at ensuring the reliability of the equipment used in the electric system are developed in the complex. For example, new measurement technologies focused on the reduction of losses, were implemented, and sound emission tests in aerial platforms were conducted in 2009. Another highlight was the development of a hybrid technology to feed trolleybus vehicles, which allowed the simultaneous use of electric energy in alternate or direct current.

The implementation of the Metering Project targeted at low-voltage customers is scheduled to be implemented in 2010, in order to diminish commercial loss ratios; moreover, the Energy Management System (SGE) used by the Metering Center will be updated to offer support to the studies on electric system operations and the loss prevention plan.

laboratories

metrology laboratory Responsible for the calibration of the equipment used by the investigation and inspection teams, in order to identify fraud in energy consumption. In 2009, new energy electronic meter models were certified for use in the measurement of public lightning and customers with a fraud track record, and quality control checks have been carried out on 430 thousand meters.

Chemical laboratory Carries out physical, chemical and chromatographic analysis in insulating mineral oil samples taken from transformers and switches in order to prevent damage to equipment and the electric grid. It controls the quality of 1 million liters of insulating oil which is recycled and reused by the company every year. In 2009, the company bought a new chromatographer, used in the mapping of the PCB content, a toxic component found in the insulating oil composition in distribution transformers.

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ePi and ePC Quality Control laboratory Checks the conditions of use of aerial platforms and individual and collective protection equipment, such as gloves, sleeves and helmets, thus contributing to the employees’ safety. Sound propagation tests are also performed to analyze the structural behavior of aerial platforms. In 2009, dielectric tests were performed on 71,084 Individual Protection Equipment items (EPIs) and Collective Protection Equipment items (EPCs).

WorkshopsIn workshops, equipment removed from the grid by regional units is reformed for reuse, an

initiative which reduces the volume of waste generated and contributes to the optimization of investments. For example, 5.5 thousand overhead and underground distribution transformers 137 thousand meters, 129 grid protectors, 269 protection and control switchboards, among other items, have been restored only in 2009. The restoration and capitalization of equipment accounted for an investment of R$ 15 million in 2009.

Fleet Renovation Pursuant to one of the requests submitted by the employees during the In the Road event (“Pé

na Estrada”) event, AES Eletropaulo concluded the renovation of 67% of its vehicle fleet in 2009. The initiative, started in 2008, a period in which 64 new vehicles had been delivered, contemplates the replacement of about 900 vehicles – 687 light vehicles and 221 heavy vehicles, with containers, aerial platforms, metropolitan ladders and cranes. The average life of the fleet, which was 11.5 years, changed to approximately 4 years after the reforms.

The majority of the light vehicles are outsourced, a fact, when coupled with the renovated fleet, provides financial and operational gains. Furthermore, in order to promote the reduction of greenhouse gas emission, AES Eletropaulo has adopted flex fuel light vehicles by prioritizing the use of ethanol.

operating targets for 2010– Implementation of the automatic dispatch or service orders to on-site teams, through the use of

smart terminals;– Increase in the installation of automatic switches in the energy distribution grid;– Real time monitoring of 440 switches in the energy distribution grid;– 300 thousand trees pruned;– Installation of 42 km of compact grid and reform of 750 secondary networks;– Installation of 32 vacuum medium voltage circuit breakers to replace those using SF6 greenhouse gas; – Installation of oil collection basins and separation boxes in ten substations;– Replacement of UTRs in 23 substations and modernization of metering in 52 substations; – Replacement of 6 thousand meters of cable, 150 transformers and 194 exit boxes in the

underground system;– Investment of R$ 11.3 million in the PLM project;– Conversion of 7.76 km of overhead distribution network into underground network in the city of São Paulo.

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Commercial Performance In 2009, the total market of AES Eletropaulo’s concession area, including the consumption of

captive customers and free customers, totaled 41,269 GWh, consistent with that of 2008 (41,243 GWh). 34,436 GWh was distributed to the captive market, representing growth of 1.7%. This growth is due to the greater volume of residential and commercial classes (4.1% and 4.4% growth, respectively), which partially offset the drop of 8% in the consumption of industrial customers who were affected by the global financial crisis.

6,832 GWh was delivered in 2009 to free customers also affected by the crisis, a decrease of 7.3% compared to the previous year. The performance of the AES Eletropaulo total market was above the performance registered by the Southeastern Region, whose performance over the year fell by 2.4%. The company’s net income was also superior in comparison to the total Brazilian market, which decreased by 1.1%, according to data from the Energy Research Company (EPE).

Residential Customers Consumption by the residential class grew by 4.1% compared to the previous year. This growth

is mainly due to: (i) the increase in the number of billed customers (167,000 new consumer units in the last 12 months); and (ii) increase in actual income (growth of 3.2% in 2009, according to data from the Monthly Employment Survey (PME) conducted by the Brazilian Institute of Geography and Statistics (IBGE)), and the subsequent increase in the population consumption capacity.

Commercial Customers The captive consumption of the commercial class grew by 4.4%. This growth was mainly stimulated by tax incentives, such as the reduction of the federal tax (IPI) on electric and electronic appliances, civil construction materials and vehicles. Retail sales in the metropolitan region of São Paulo grew by 7.2% in 2009 compared to 2008, according to the Monthly Commerce Survey (PMC) conducted by IBGE.

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industrial Customers 6,032 GWh was distributed to captive industrial customers¹ of AES Eletropaulo in 2009, a fall

of 8% compared to the volume in 2008. The slowdown in the industrial class is due to the decrease in production resulting from the effects of the global financial crisis. According to data from the Monthly Industrial Survey (PIM), also conducted by IBGE, industrial production in the State of São Paulo dropped by 13.0% in 2009 compared to the same period in 2008. The greatest reduction was observed in steel products (-29.8%) and automotive sectors (-18.5%), which account for about 12% and 8% of the company’s captive industrial consumption, respectively.

other Customers (rural customers, public lightning, public authorities, electric traction, water/sewage) – the captive consumption of other classes was 2,638 GWh in 2009, growth of 2.5% compared to 2008.

Free Customers The consumption of Free Customers in AES Eletropaulo’s concession area totaled 6,832 GWh,

a decrease of 7.3% compared to the total consumption in 2008. During the year, six consumer units migrated to the Free Contracting Environment (ACL) and five units returned to the Regulated Contracting Environment (ACR). The net effect of the transfer was 25 GWh more in the ACR and, consequently, reduction by the same volume in ACL.

losses Distribution losses correspond to the difference between the energy required for the year

(46,980 GWh) and the energy effectively sold to customers during the same period. These losses are calculated based on the “Physical Loss Criterion”, where energy billed relating to fraud recovery is disregarded. Although losses are calculated in terms of electric energy, they are normally represented as a percentage of the energy required. Based on such methodology, the loss was 11.8% (5,548 GWh) in 2009, divided into technical (6.5%) and commercial losses (5.3%). Technical losses are inherent to the energy distribution system, and commercial losses are mainly caused by equipment failure and fraudulent action by customers on the energy distribution grid.

The increase of 0.23% in the company’s total losses is perceived when comparing 2009 with the same period the previous year. The main changes in this indicator were due to: (i) the lower volume of energy from other systems passing through AES Eletropaulo grid; (ii) the lower number of billing days in the captive market and the dislocation between energy purchases and sales due to the billing schedule; and (iii) the growth in commercial losses in 2009.

In 2009, AES Eletropaulo carried out 335,967 fraud and irregularity prevention inspections, in which 41,764 irregularities were discovered in regard to metering and 80,177 informal (concealed) connections were regularized, the best result obtained since 2003 when records began to be kept. For purposes of comparison, 434,600 inspections were carried out in 2008, through which 58,400 irregularities were found, and 74,500 concealed connections were regularized.

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Consumption in Brazil Energy consumption in Brazil totaled 388,204 GWh in 2009, which corresponds to a reduction

of 1.1% compared to 2008, according to data released by the Energy Research Company (EPE). The result was affected by the global financial crisis, which mostly affected industry.

Industrial consumption fell by 8% compared to the previous year, the most significant downturn being in the Southeastern Region, which registered a reduction of 9.8%. However, the impact of the crisis was softened in São Paulo due to the diversified structure of its industrial complex. Industrial consumption in the State was 6% lower than 2008.

However, internal demand remained high thanks to the measures adopted by the government to mitigate the effects of the crisis, such as the selective reduction of taxes and interest and expansion of credit. Residential consumption grew by 6.2% compared to 2008, the best performance since 1999. The result reflects the increase in the number of customers but also an increase in average residential consumption. In 2009, 1.8 million consumer units were incorporated into the electric grid, a monthly average of 150,600 connections.

Commercial consumption also posted growth – of 6.1% – compared to the previous year, due to the opening of new commercial units, many of which present high consumption levels, such as hypermarkets and shopping centers.

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our CustomersAES Eletropaulo continuously invests in the improvement and upgrade of its distribution

network. For example, in 2009, new substations have been inaugurated and new technologies were implemented in order to enhance and speed up services provided to customers.

The company received important acknowledgements from its customers at the end of 2009: it was considered the Best Energy Distribution Company in the Southeastern Region, a category that considers companies with over 400,000 consumer units, in the Aneel Consumer Satisfaction Index (IASC) survey, annual conducted by the National Electric Energy Agency (Aneel).

This acknowledgment reflects the consumer’s perception regarding the quality of the services rendered by AES Eletropaulo and the company’s commitment to supply electric energy in a safe, efficient and responsible way. The distribution company’s performance attained a satisfaction level of 71.51%, growth of 6.4% compared to 2008.

The continual evaluation of the customers’ satisfaction is part of the company’s relationship strategy to enhance the quality of its services. Along with IASC, AES Eletropaulo also participated in the survey conducted by the Brazilian Association of Energy Distribution Companies (Abradee) and carries out surveys itself in the service stores and call centers, after each call. In 2009, the result from the Abradee survey remained unchanged.

The Aneel Customer Satisfaction Survey, conducted annually among 64 distributors, evaluates satisfaction, perceived price, service quality, reliability and loyalty. * Group of 29 largest sector companies.

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In order to meet the diverse mix of demands that a distribution company of any important utility should satisfy, AES Eletropaulo offers specific products and services tailored to each segment: residential customers, corporate customers and public authorities.

Residential customers comprise the segment known as low voltage, composed of consumer units with voltage lower than 2.3 kilovolts (kV). Above this level are the medium and high voltage segments, composed of industrial and commercial customers, that is, corporate customers.

Residential CustomersThe year of 2009 was characterized by the automation and operation of services targeted at

customers. AES Eletropaulo’s virtual center was redesigned and included a greater number of services with better accessibility, which allows users to clear up doubts and solve problems through the Internet. The call center, stores and franchised network also adopted new technologies aiming at speeding up services and reducing waiting time in lines and calls. The improvements implemented required investments of over R$ 1.1 million.

AES Eletropaulo offers the following communication channels to residential customers:

Virtual CenterThe Virtual Center, available at the website www.aeseletropaulo.com.br, was redesigned in 2009

and now includes services previously offered only in stores, such as indemnity requests. The Virtual Center offers services such as hookups, disconnection and reconnection requests, copy of the electricity bill and alteration in the bill’s payment date, among others. It also has an online service chat through which the customer can directly interact with an operator to clear up doubts and solve problems.

A more customized service was also implemented: customers registered in the website are able to visualize messages and alerts about specific scheduled disconnection in the area where they live, check their balance, change the billing address, register the bill for automatic debit, check consumption history, among other services. In 2010, registered customers will receive informative e-mails about maintenance work close to their homes, billing and due payment notices.

The goal for 2010 is to continue with the automation process and include services such as access to a copy of the bill for commercial customers and implementation of a new chat model for customer service.

Besides the services targeted at customers, AES Eletropaulo website also releases general

The Abradee survey, conducted annually with 49 distributors, evaluates energy supply, information and communication, electricity bill, customer service and company image.*Group of 29 largest sector companies

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information on the company, its history, values, administrative structure, economic and financial performance, as well as data on social, environmental and research and development projects developed by the company.

Stores and Partner networks AES Eletropaulo runs 12 own stores and 63 third-party centers of the partner service network,

which are opened to the public from Monday to Friday, 8:30 a.m. to 4:30 p.m. They offer electricity hookup, reconnection and disconnection services, copy of the electricity bill and underground network requests, among other services. Units also offer service tokens, through which customers have access to the services of the Virtual Center.

In 2009, stores and partner networks received line management software that enables the control of service time in order not to exceed established limits. The new technology allows each team to monitor in real time, stores and the partner network and can adopt immediate measures if it identifies any problems. A commercial information portal was set up to standardize procedures and support operators. Consequently, the average waiting time was 12.77 minutes, and the average response time was 11.85 minutes, the targets being 18 and 12.34 minutes, respectively. In total, 2.1 million customers were served in the stores and the partner networks in 2009.

The Express Service was launched in order to speed up service to customers requesting more complex and time-consuming services, such as technical problems and project analysis. It is targeted at engineers, electricians, realtors and customers with a large volume of requests.

These services are related to intervention in the distribution grid to serve a new customer or change a consumption profile, such as, hookups to buildings, installation changes with voltage increase or preliminary consultations on construction yet to be built.

The 12 stores of AES Eletropaulo has served 4,919 customers since June 2009, totaling 18,556 services through the Express Service, which represents a reduction of 57% in the average response time and 40% in the average waiting time regarding this type of service.

Also in 2009, the quality of services in stores and the partner network began to be monitored by means of an online satisfaction survey conducted in the company’s own units. The customer issues an opinion on the service, waiting time, store infrastructure and provides a general evaluation on the company. 38,413 surveys were conducted in December 2009 which showed a satisfaction level between good and outstanding.

A process was also adopted for the management of complaints and eulogies presented at stores and the partner network, which posted a reduction of 85% in complaints and an increase of 620% in eulogies from January 2009 to January 2010.

Another resource used by stores to reduce waiting time is the self-service token which offers the same services as the Virtual Center.

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Call CenterCustomers can make toll-free calls, 24/7, by using the Emergency Service Center (0800 72 72

196) and report energy outages, downed power lines or problems on the distribution grid, besides clearing up doubts. Users can also evaluate the quality of the service by means of the satisfaction survey after the call. Commercial customers have their own trained staff to solve specific problems in this segment.

In order to speed up the call center services, two new software programs were implemented in 2009. One allows the management of call lines, in order to prioritize urgent and more complex requests and minimize the need for transfer. The other evaluates the service every 30 minutes and enables the detection of problems and the adoption of rapid action. Moreover, operators – both in the call center and in the stores and Ombudsman office – have access to an Intranet portal which standardizes procedures, data and instructions, this permits faster solutions. As a result, the number of calls answered within 30 seconds by the call center has improved.

Hearing or speech impaired persons are served by the Preferential Service Center (0800 77 28 626), which includes all emergency and commercial services.

the ombudsmanThe AES Eletropaulo Ombudsman’s Office, which is structured to perform a proactive role, offers

an exclusive service center, prepared to meet the customers’ demands through a team of qualified professionals selected to perform this kind of service.

Customers may make contact to solve problems, present criticisms, suggestions and complaints through the Ombudsman Office Service Center (0800 72 73 110), from Monday to Friday, from 8:00 a.m. to 6:00 p.m.

torpedo FácilAES Eletropaulo has developed a new communication channel which makes use of the short

message service by cell phone (SMS) to send reminders to customers. Customer can interact through this channel and send a request for an electricity bill copy and emergency reconnection and inform on any power outages. Beginning in 2010, customers will be sent messages, such as scheduled disconnection, invoiced bill, possibility of energy interruption, among others.

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Services and ProductsBesides the services and products offered to residential customers, corporate customers are also

offered differentiated services, which are tailored to their demand. The main services are:

SeRViCe deSCRiPtion WheRe to Find inFoRmAtion

Electricity Bill Sent on monthly basis to the customer’s address, it contains information on monthly consumption, tariff information, service quality indicators, consumption meter reading date, estimated date of next reading and, also, tips for careful and safe use of electric energy. In 2009, on the launching of a new logo of AES Eletropaulo, the bill layout was completely changed, making information easier to understand. Starting 2010, any customer registered with the Virtual Center will receive the bill also through e-mail.

Virtual Center, stores and partner networks and through the Torpedo Fácil

Copy of the Bill In 2009, the Virtual Center started to offer the accounts relating to all months up to two years, so that the customer is able to access his/her bill record.

Virtual Center, stores and partner networks and through the Torpedo Fácil

Scheduled Disconnection

During maintenance and expansion services, AES Eletropaulo disconnects the power grid in order to ensure the safety of its employees and the population. The company’s website keeps an updated list containing the areas where the scheduled disconnections will be carried out.

Virtual Center, stores and partner network and through the Torpedo Fácil

Reading and Delivery

About every 30 days, on the date informed on the electricity bill, a meter reader duly identified visits the addresses to make the reading of the consumption registered by the energy meter. The bill is delivered monthly to the address indicated, within a minimum period of five days prior to the due date, by a representative of AES Eletropaulo, also duly identified.

Virtual Center, stores and partner network

Register Updates Registry data, such as name and address for delivery of the bill, can be updated.


New connection or voltage increase

Buildings already connected to the electric grid receive electric energy as soon as the electrician performs the service. The connection request includes the name of the owner in AES Eletropaulo database, thus facilitating the rendering of technical services. Information on standard connections with installed capacity of up to 20 kW is available on the company’s website. Voltage increase requests are made at stores and the partner network.

Virtual Center, call center, stores and partner network

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interruption in Supply due to non-PaymentAES Eletropaulo, in compliance to a legal determination, notifies defaulting customers that are

subject to interruption in the supply of electricity due to non-payment. This notification is sent in the bill subsequent to that unpaid.

After notification, customers are granted a period of 15 days to make the payment. If payment is not made after this period, the electricity supply may be cut off at any time.

There is a specific field in the bill for inclusion of the warning. In “Notification / final warning of past-due bills”, the customer may check which bills are still outstanding.

national Reconciliation Week Between December 7 and 11, 2009, AES Eletropaulo participated in the National Reconciliation

Week; an initiative aimed the swift resolution of processes involving customers. Among the 681 cases indicated, 303 agreements have been made, which resulted in the payment of indemnities to customers. The Reconciliation Week, held in São Paulo, permitted the resolution of processes with lower costs to the company and greater satisfaction to customers.

Disconnection Request

Termination of the energy supply service. Virtual Center, call center, stores and partner network

New Maturity Date Request

Customer can choose the most convenient date in the month for payment of the electricity bill.


Checking of meter and voltage analysis

The customer can self-check the operation of the meter by means of a few simple steps, which are explained at AES Eletropaulo website. In the event of problems, it is possible to request the verification of the meter and analysis of the voltage from the company.


Public lightning The AES Eletropaulo website offers the contact information of the entities responsible for public lightning in the areas served by the company for purposes of complaint in the event of disconnected of broken lamp, or any other problems. It is also possible to inform through the website by filling in a specific form.


Indemnity for electrical damages (PID)

Customers can request indemnity for damages to electrical equipment caused by problems in the network by going to the stores of AES Eletropaulo. Through the company’s website, it is possible to download the Indemnity Request Form, which should be handed in at the stores. The indemnity terms and conditions are defined by Aneel (National Electric Energy Agency).


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Corporate CustomersComposed of the industrial, commercial and service sectors, the high and medium voltage

consumer segment – corporate customers – is offered differentiated products and services due to the higher level of energy requirements.

AES Eletropaulo offers differentiated communication channels to corporate customers. There are services and information directed at this segment in the Virtual Center.

Contact CenterPersonalized telephone service provided by a team of professionals trained to offer services such

as: technical and commercial information and instructions; copy of bills; new hookups; contractual amendments; reconnections; transfer of responsibility; analysis of amounts and re-billing; checking of metering; release of pulses and scheduled disconnections. An exclusive mail box number is also available for the sending of documentation.

Customer managers Customer managers are specialized professionals who provide individual services. They provide

explanations on matters relating to commercial issues and support the customer in the evaluation of the best options for contracting electric energy and identification of products and services that maximize the company’s productivity. Managers serve private and public customers and, for the latter, besides the abovementioned services, managers provide special support in connection with public works. See Operating Performance.

Services and ProductsBesides the services and products offered to residential customers, corporate customers are also

offered differentiated services, which are tailored to their demand. The main services are:

differentiated electricity bill In addition to the data included in the residential electricity bill, this bill contains the description of consumption of active energy – that effectively generating useful work – and reactive energy – that necessary for operation of equipment (transformers, electric motors, reactors, etc.).

temporary Additional demand (dAt) An option for customers who, during a certain period in the year, increase energy consumption to expand production, events, ornamental lightning or an increase in the voltage capacity of refrigeration equipment. The DAT is contracted for a defined period and, besides being an alternative to the use of diesel generators, it has advantages, such as more competitive prices, possibility of increasing production and greater flexibility in contracting of demand.

iCmS credits for payment of bill Industrial corporate customers can make the payment of part of the electricity bill through transfer of Value-Added Tax (ICMS) credits. A later payment surcharge is negotiated on the amount paid by using ICMS credits.

Voltage curve Free customers, through the Energy Management System (SGE), can access through the website their metering data (voltage and demand curve and power factor).

Pulse supply Service offered to all customers in Group A which have demand controllers, thus enabling the management of their energy use, as well as of the volume of demand throughout the

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day, which also permits the partial reduction of voltage. energy efficiency projects AES Eletropaulo develops energy efficiency programs, whose purpose

is to offer instructions and alternatives to avoid waste. These projects are targeted at corporate and residential customers and government bodies. One example is the project developed together with the State Government of São Paulo, which promoted the replacement of the lightning system in 145 schools in the state. Together with the Municipal Government of São Paulo, the company has implemented improvements in the lightning system of two tunnels in the state capital, thus obtaining an 80% saving in consumption.

tariff Simulator Corporate customers have access to the simulator on the AES Eletropaulo website. It can simulate the best contractual and tariff options and evaluate the impacts of energy scenarios on business and options for the best contracting method.

Free energy market Corporate customers’ managers carry out analyses and provide advice to potentially free customers who are interested in migrating to the Free Contracting Environment (ACL), to facilitate better decision making.

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tariffsEnergy tariffs, net of taxes, are calculated by Aneel, and their components are classified into

two groups: Parcel A and Parcel B. The first, consisting of sector charges, energy purchase costs and transmission costs, refers to the transfer of costs and are considered as non-manageable, because their amounts and volumes, as well as their variation over time, are beyond the company’s control, or because they refer to charges regulated by legislation.

Parcel B refers to the coverage of personnel costs, material costs and any other activities directly related to the operation and maintenance of distribution services, as well as depreciation costs and remuneration on the investments made by the company to provide the service. These costs are identified as manageable costs because the concessionaire is able to partially manage them.

As stipulated in the distribution company’s concession agreement, three mechanisms are established to update supply tariffs:

Annual tariff Adjustment (iRt), whose purpose is to annually reestablish the purchasing power of the revenue obtained by the concessionaire. Aneel (National Electric Energy Agency) applies the annual tariff adjustment procedure based on the parametric formula established in the concession agreement.

Periodical tariff Review (RtP), the main purpose of which is to analyze, after a period previously defined in the concession agreement, the financial and economic balance of the concession. The revenue necessary to cover efficient operating costs and the adequate remuneration on investments is calculated in the Periodical Tariff Review.

extraordinary tariff Review (Rte), through this mechanism, Aneel can, upon the concessionaire’s request and when duly confirmed, review tariffs.

In 2001, the Tracking Account for Variations in Parcel A Items was established through Inter-ministry Ordinance, the balance of which is considered for purposes of calculation of the tariff adjustment. The purpose of this account is to minimize any economic and financial effects arising out of any fluctuations in prices relating to Parcel A items between the periods of the distribution companies’ tariff adjustments.

The second process of Periodical Tariff Review of AES Eletropaulo was concluded in July 2009, which had been temporary since 2007. The financial effects of the period from July 2007 to June 2009, arising from of the conclusion of this process, were added to the result of the Annual Tariff Adjustment of 2009, which accounted for a reduction of 0.54% in the rate. In the period from July 4, 2009 to July 3, 2010, the IRT was defined at 14.88%, in accordance with the composition below:

tARiFF AdjuStment

Parcel A Sector 2,49%

Purchased 4,55%

Transmission 1,12%

Parcel A 8,16%

Parcel B 0,09%

Basic 8,25%

Total 5,33%

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low-income Social tariffImplemented by the federal government and regulated by Aneel, the Low-Income Consumer

Tariff is a subsidy on the electricity bill to residential customers that meet the requirements established by Aneel.

Pursuant to current regulation, until a date to be set by Aneel, a household with an average monthly consumption of up to 79 kWh, and above 120 kWh in only one of the last 12 months is automatically entitled to this benefit. Also entitled to the benefit are households with average monthly consumption between 80 kWh and 220 kWh in the last 12 months; households with a per capita income of up to R$ 140.00 and whose breadwinner receives the financial aid provided by the Brazilian government under the family allowance program named “Bolsa Família”. In 2009, on average 729,547 customers of AES Eletropaulo per month were entitled to the Low-Income Consumer Tariff based on the said criteria.

With the enactment of Federal Law No. 12212, of January 20, 2010, the requirements will change starting July 2010. The benefit will be extended to residential customers that meet at least one of the following conditions:

– Registered under the social welfare programs, master file (“Cad Único”), with a per capital income

of up to half of the minimum wage;– Belonging to a family registered in Cad Único, with income of up to 3 minimum wages and with a family

members with a disease or illness the treatment of which requires the permanent use of devices;– Receiving permanent social welfare benefits (persons with disabilities and the elderly who are 60

years of age or older who receive 1 minimum salary);– Residing in overcrowded slums and irregular places. These persons may apply with the municipal

governments for registration with Cad Único to be entitled to the low-income consumer tariff.

The new rules are subject to regulation by Aneel, which will have two years as from the publication of Law No. 12212/10 to establish the criterion for exclusion of customers who do not meet the new conditions.

Quality of Supply indicators AES Eletropaulo uses specific quality indicators to measure the time and frequency in which

customers are left without energy. The Average Interruption Duration Index (DEC) refers to the

AdjuStment By ConSumeR ClASS

The adjustment rate perceived by the various consumer classes is differentiated as the cost structure used by Aneel varies in accordance with the voltage level to which the consumer is connected.

Other financial costs - Parcel A 0,21%

Other financial costs - Parcel -

Tariff 1,67%

Total 14,88%

Captive high voltage (industries and large commercial establishments) 14.33%

Low voltage (residential, small commercial establishments and customers subsi-dized by the low-income social tariff)

12.99%

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number of hours in which, on average, each customer is left without energy during a particular period. The Average Interruption Frequency Index (FEC) shows the number of times in which, on average, the customer is left without energy during a particular period. The table below shows the performance by regional units and the AES Eletropaulo total in 2009.

Region deC (2009) FeC (2009)Western 20,29 9,28Southern 14,31 7,46Northern 8,55 4,28Eastern 9,19 5,50ABC 11,67 6,47Total AES Eletropaulo¹ 11,86 6,17

¹The total shows the aggregate average of the regional figures

exteRnAl SoCiAl indiCAtoRS

Clients/Consumers

a) excellence in services 2007 2008 2009

Profile of consumers and clients

Energy sale per rate class (GWh): % total

Residential 39,53 40,88 41,91

Residential - low income 1,91 1,72 1,69

Commercial 30,92 30,42 31,22

Industrial 19,88 19,37 17,52

Rural 0,08 0,08 0,08

Government 3,34 3,25 3,33

Public Lighting 2,70 2,59 2,61

Public Services 1,65 1,68 1,64

Client satisfaction 2007 2008 2009

Satisfaction level obtained through the IASC - ANEEL survey

65,52 65,10 71,51

Satisfaction levels verified by surveys made by other entities (Abradee, Vox Populi and other) and/or own survey (to specify) ISQP – Index of Quality Satisfaction obtained from residential clients – ABRADEE (Brazilian Association for Electric Power Distri

75,10 80,40 80,10

Customer services 2007 2008 2009

Number of calls answered (Call Center) 9.981.268 9.911.314 10.580.769

Number of answers at the regional offices 970.801 1.444.023 2.131.813

Number of answers through the Internet 2.661.408 3.449.935 3.738.775

Complaints in relation to the total phone calls answered (%)

1,62 2,21 1,03

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Average waiting time until the beginning of an answer (minutes)

0,40 1,42 0,19

Average answer time (minutes) 3,65 5,22 4,28

number of consumers’ complaints submitted to:

2007 2008 2009

the company 18.566 29.511 27.264

Aneel state/regional offices) 645 2.948 4.433

Procon (Consumer Protection Agency) 2.389 4.512 5.044

Court 3.449 2.330 3.416

Complaints - main reasons 2007 2008 2009

Term for performance of services (%) ND ND 3.2

Inadequate supply of energy (%) 0,6 0,6 0,9

Interruptions (%) 1,1 1,2 1,9

Emergencies (%) 2,6 1,2 1,0

Consumption/measurement (%) 10,5 20,7 22,2

Undue energy cut off (%) ND ND ND

Undelivered bills (%) 5,6 11,5 8,6

Poor performance of services (%) 0,2 0,2 0,3

Electric damages (%) 8,8 4,1 7,3

Irregularities in measurement (fraud, energy misappropriation) (%)

5,2 2,5 4,3

Other 65,4 58,0 50,3

Complaints resolved 2007 2008 2009

During the answer (%) 60 49 59

In up to 30 days (%) 100,00 ND 67,00

Between 30 and 60 days (%) 0,00 ND 14,00

After more than 60 days (%) 0,00 ND 19,00

Complaints considered valid in relation to the total complaints (%)

56,00 72,00 59,00

Complaints resolved in relation to the number of valid complaints (%)

100,00 100,00 100,00

Number of innovations implemented due to the interference of the ombudsman and/or customer service

ND ND ND

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our employees The year of 2009 was characterized by intense efforts for the integration of Human Resources

policies and digitalization of processes in all AES Brasil Group companies, which allowed greater cohesion between programs and transparency in the relationship with employees, thus opening new professional growth opportunities throughout the entire Group.

The focus of such work is on policies based on individual merit, which acknowledge best performance, encourage continuous learning and expand career opportunities. The granting of continued education scholarships, internship, recognition program, language scholarships and participation in courses and seminars are a few initiatives of these policies.

For AES Eletropaulo to put into practice the suggestions of employees and encourage their participation and, consequently, their development, are critical factors for sustainable growth. To this end, the ‘Free Ahead’ (“Siga Livre”) professional growth, and dynamic, managerial and value recognition programs, with initiatives originating from suggestions presented by company employees in the ‘On the Road’ (“Pé na Estrada”) event, were implemented in 2009.

For 2010, the challenge will be to ensure that managers use these tools more effectively, thus enhancing even further the human resources management process. It is also intended, by means of communication work, that employees know and understand the impact of policies and tools on their professional development and career growth.

At the end of 2009, AES Eletropaulo had 4,360 own employees and 7,191 outsourced workers, spread over 21 administrative and operating units and 12 service stores. Throughout this period, there were 516 dismissals and 252 left the company (193 male and 59 female).

AES ElEtropAulo tElEcom

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on the Road (“Pé na estrada”)An initiative in which the Chief Executive Officer of AES Brasil directly communicates with

the employees, the ‘On the Road’ (“Pé na Estrada”) event presents the company’s strategy, the investment plans and targets for the current year, in addition to the previous year’s results. The event is an opportunity for everybody to present suggestions on improvements and to offer solutions solutions, and one of the main topics discussed is Safety.

Based on opinions manifested in 2009, the company prepared a plan of action containing 203 measures, of which 185 have been concluded. Among the examples of initiatives originating from the 2008 event are the ‘Free Ahead’ (“Siga Livre”) job and career plan, the recognition program and the substitution of the company’s vehicle fleet for new models.

In the second edition, the Pé na Estrada event repeated the success of employee participation and commitment. 220 people from all areas were selected to represent AES Eletropaulo in the round table carried out during the event. Through the APEX – AES Performance Excellence methodology, new measures to be assessed for implementation and eventual improvement of the working environment were proposed.

The event was carried by video media in the form of a TV news program and presented by the employees themselves. Anchorpersons and producers were selected through an internal campaign, which resulted in 67 candidates. Of this total, 25 candidates were selected, who received training with a journalist and visited Rede Record to be acquainted with the behind the scenes of a TV news program.

Professional developmentAES Eletropaulo makes tools available that offer professional growth opportunities to its

employees. In 2009, job, career and recognition plans were implemented as well as a new further education program, in addition to internal recruiting.

Free Ahead (“Siga livre”) The Free Ahead (“Siga Livre”) – Professional Growth Program, launched in 2009 – promoted

the restructuring of the job and career plans at AES Eletropaulo and defined the hierarchical level, attributions, knowledge, education and necessary experience for each position in the company. Accordingly, employees can visualize which competencies, skills and knowledge they need to have to move up in the company. The program is also used to define the salary classifications and raises due to promotion and to provide support for the internal recruiting and training program, succession, training the development plan and resource allocation.

Its implementation required intense revision and construction efforts regarding career structures and the descriptions of about 600 positions available in the Group. The attributes of each positions, as well as the knowledge requires, education level and minimum experience necessary for each

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position were reviewed. Through the program, 3,175 transfers were made, of which 971 classifications and 1,724 merits (salary upgrades without modification of position) and 480 promotions (change to a higher position).

The Siga Livre Program was broadly divulged to employees. The communication process included face-to-face presentations and divulgation on the Portal Ligado, the Conexão Ligado and the Revista Ligado. The program updates are publicized in the Portal Ligado and easily accessed and followed up by employees.

training and QualificationThe training and qualification programs of AES Eletropaulo are divided into three categories:

leadership development, further education and technical and operational training. The aim of leadership development is in the preparation to rapidly respond to the organization’s

challenges, manage subordinates toward the attainment of goals and disseminate the company’s culture and Values. The fourth Leadership Development Program Convention was held in 2009 with all AES Brasil Group companies and discussed the theme of safety with the participation of 300 employees from AES Eletropaulo.

The AES Corp. runs a partnership with the University of Virginia, Darden School of Business in the USA for leadership training with emphasis on management. This university was chosen due to its international reputation in business studies. The programs are specifically designed to develop leaders and to improve the functional strategic areas of AES businesses. The courses are total immersion and depending on their nature can last up to two weeks.

The Further Education Program offers scholarships for post graduation, masters and doctorate courses. Besides the formal program, in 2009 a partnership was set up with the teaching institutions Escola Superior de Propaganda e Marketing (ESPM) and Fundação Instituto de Administração (FIA), in order to offer employees the opportunity to obtain a MBA in Corporate Management, Finance and Energy Management. Furthermore, in order to qualify employees for future internal opportunities the company runs a scholarship program for graduation and technical courses. The company also offers language courses to employees whose position requires the knowledge of a second language and also promotes participation in external seminars and workshops. Internal seminars, lectures and workshops are also held, in addition to computer, grammar revision and self-development courses, through e-learning and Corporate TV.

The programs targeted at the operational and technical areas, also satisfy the requirements established in labor legislation regarding the basic qualification of employees who will work in operational, commercial, technical or administrative activities and preparation for specific functions in management and process control, basic human resources and integration activities.

leAdeRShiPS deVeloPment

PRogRAm goAl PARtiCiPAntS in 2009

Leadership Development program

Develop competences in managers at all levels, including future leaders that Grupo AES considers essential for people management.

325 leaders trained (managers and coordinators)

Leader Coach Prepare leaders to act as leader-educators and to create a culture of feedback.

16 leaders trained

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tRAining

2007 2008 2009Man-hours of training 708.588 591.929 502.446Average per employee 167 hours 137 hours 118 hoursParticipants in courses, lectures, seminars 130,6 thousand 80,1 thousand 71 thousandand training sessions

The reduction of man-hours of training in 2009 is due to the lower number of projects demanding specific training. In 2008, the implementation of new projects, such as the CCS (new system of integrated commercial management), required the training of a large contingent of employees.

FuRtheR eduCAtion

PRogRAm goAl RegiStRAtionS in 2009

Study grants for postgraduate courses (MBA, master’s and doctorates), language courses, participation in seminars, congresses and workshops

Update and improve employees’ competencies.

50 scholarships

teChniCAl-oPeRAtionAl tRAining

PRogRAm goAl PARtiCiPAntS in 2009

Technical Training Train employees, according to legal requirements and in compliance with compulsory basic education, so that they can work in the electric system, in commercial functions and in customer service.

71 thousand

Energy Rodeo Disseminate best practices and pay tribute to linesmen who carry out the trials with agility, safety and technical knowledge. Also to promote activities for employees in the commercial and customer service areas.

75 competitors4,200 participants in the event

Emerging Leader Given every two years in partnership with FIA, this is aimed at training managers in management tools and advanced leadership.

10 employees trained

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Performance evaluationPerformance evaluation applies to all employees and is carried out on an integrated basis for all

AES Brasil Group companies, which permits employees from different Group companies to evaluate each other. The model adopted is the 360°, which involves self-evaluation, evaluation by peers, managers and subordinates, in the case of leaders.

The model adopted by AES Eletropaulo is divided into eight competencies: technical and functional; result-oriented; problem solving; team work; initiative; relationships; safety; and commitment to the company and Values of AES Brasil Group. Results are discussed and validated in committees and are used both to identify talented people and successors for key positions and to prepare individual career plans.

The Development Program (“Programa Desenvolver”), launched in 2009, consists of establishing an improvement plan with the employee who failed to obtain a good score in the performance evaluation. The improvement plan is formal, clear, objective and tangible, resulting in a true performance management process where both the employee and the manager work to improve performance. At AES Eletropaulo, 133 employees participated in the Programa Desenvolver in 2009.

Acknowledgment Programs The new acknowledgment program, created in 2009, is an incentive to employees who stood out

due to excellence on the job. In the first year, the program recognized 250 personnel. It is divided into three phases:

dynamic acknowledgment Monthly awards for employees who generate results for the company. Each officer can indicate an employee in his/her staff for acknowledgement.

management acknowledgment Quarterly awards for leaders whose accomplishments exceed expectations and demonstrated AES Group leadership competencies and Values.

Acknowledgment by AeS Values An award for employees who stood out for demonstrating AES Values on a daily basis. In 2009, the reward was delivered by the Chief Executive Officer himself to 54 AES Eletropaulo employees during the On the Road (“Pé na Estrada”) event.

Succession PlanAES Eletropaulo’s succession plan was structured to include the management level in 2009. The

purpose is to identify employees suitable to hold hierarchical positions in the short term (from 12 to 18 months) and long term (from 18 to 24 months). Nominations are made through interviews with the immediate leader and reviewed by the rank immediately superior to the leader and also considers the performance evaluation. The plan encompasses all strategic positions: vice presidents, officers and managers.

Another important pathway to identify potential future leaders is the AES Eletropaulo trainee program created in 2009. Candidates go through five selection stages: candidate profile analysis, online test, English fluency evaluation, panel with the presence of all company executives and a direct interview. AES Brasil Group received 14,382 candidate enrollments in 2009, of which 13 were selected for AES Eletropaulo.

The target for 2010 is to implement a program to prepare employees who are about to retire so that transition is carried out on orderly manner. Of the total number of employees in 2009, 24.1% were in a position for retirement over the next five to ten years.

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Recruitment and Selection The Internal Recruitment and Selection Program, through which open job positions are made

available to all AES Brasil Group employees, was expanded in 2009. The purpose was to show clearly the requirements and skills necessary for the vacancies so that employees can make an attempt to occupy them or prepare a career plan to fill them in the future. Hence, all employees have opportunity to develop and grow in their career.

The disclosure of open positions is made to all employees by means of internal communication tools (Intranet, mural and bulletins). The Recruitment Program, which is in its second year, offered 219 positions in 2008, and received applications from 894 candidates from the entire Group. In 2009, 350 positions were offered, resulting in the enrollment of 1,520 personnel.

When positions are not filled internally, the external selection process is opened and coordinated by the Human Resources Department, with the active involvement of the leaders from the requesting area. Over the year, 93 persons were hired externally.

The recruitment and selection process targeted at trainees with technical and graduate education is carried out in partnership with a specialized consulting company to ensure the quality of the selection process. NGOs and schools are called on to fill in the positions in the young apprentice and young citizen program, which manage the recruiting process. Both the young apprentice and the young citizen programs were effective in the insertion of young people in the labor market and proof of this is number of company’s employees who participated in these programs.

disabled Person employment Program The purpose of the program is to encourage the inclusion of disabled persons in the labor market

and to comply with labor legislation. In 2009, the company sponsored the qualification of 50 disabled persons in partnership with the National Industrial Education Service (Senai) and Instituto Edison, to fill in positions in the administrative and operational areas.

Recruitment is carried out by internal campaigns to motivate indication by employees and, in cases of external selection, Non-governmental Organizations (NGOs) are consulted for selection of qualified professionals. In 2009, AES Eletropaulo had 60 disabled persons on its staff.

RemunerationAES Eletropaulo’s remuneration program is divided into two categories: fixed and variable. The

program is aligned with AES Corp. guidelines for all Group companies in Brazil, as well as with local market practices. Fixed remuneration is tied to the position and job attributes, according to the level of responsibility. Variable remuneration is based on the individual performance evaluation and also on the company’s results, that is, the individual part is directly aligned with the employees’ performance, and the collective part is aligned with the company’s financial and operational results. Both are recognized and paid through the Profit Sharing Program.

The remuneration management is guided by four strategic components:

– Ensure internal equity by means of support to functional and organizational plans;– Chart job and salary structure;– Identify best market remuneration practices and ensure competitiveness to attract and retain

talented people;– Provide managers with tools and processes for decision-making related to their subordinates’

remuneration management.

In operational positions, male employees received a salary 8.2% higher. This percentage rate

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is different from the one disclosed up to 2008 (and which registered higher salaries for female employees in operational positions) because the calculation of this indicator was reviewed and modified, thus explaining the change in the rate in 2009.

BenefitsBesides satisfying legal requirements, the company offers benefits compatible with the market,

which are extended to the employees’ family members. The Personal Support Program (PAP), for example, is a psychosocial guidance telephone service aimed at assisting employees and family with financial, legal and personal problems, which contributes to promoting personal well-being and a good and safe working environment.

The company contributes with an amount equivalent to that paid by employees in the private pension plan, which supplements the retirement paid by the National Institute of Social Insurance (INSS), up to a pre-defined limit.

occupational health and Quality of life The company’s health program adopts the measures established in labor legislation, including

the occupational examinations and action programs of the Occupational Health Control Program (PCMSO). Occupational and clinical examinations, which are annually performed by all employees, cover, besides the mandatory items, individual counseling to prevent cardiac diseases and identification of the Body Mass Index (BMI). The BMI measurement allows tailored medical guidance and contributes to the direction of campaigns targeted at healthy eating, obesity prevention and life quality.

The employee-oriented ‘Live Well Live Longer’ (“Viva Bem Viva Mais”) life quality program was created in 2009. Composed of three concepts – Alive in Body, Alive in Mind and Alive Longer – the program focuses on the reduction of daily stress and the reduction of critical health indicators. The purpose is to promote physical and mental health, resulting in benefits such as the improvement of employees’ professional and personal performance. Partnerships with gyms and cultural and leisure centers have been made in connection with this program.

Within the scope of the Viva Bem Viva Mais concept, two other projects were launched in 2009 focused on two main concerns that affect the world population: smoking and inadequate food education.

Respiratory health Targeted at combating smoking, it included the participation of 217 people, among AES Brasil’s employees and family members, of which 170 were from AES Eletropaulo. The program offers informative and motivational lectures, weekly group psychological counseling sessions and drug treatment, if necessary. Family members receive an average discount of 46% in medication and easy payment plans. Employees’ family members receive distance psychological treatment.

BeneFitS (R$ thouSAndS)¹

2007 2008 2009Food assistance 22.700 23.102 25.950Private pension 111.936 26.391 180.687Health 22.600 23.449 25.454Education 2.661 3.038 3.286Professional training and development 629 1.035 1.908Daycare or daycare assistance 635 681 754

¹Does not cover part-time employees.

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eating Well The purpose of the program is food re-education and the adoption of a healthier life style, aiming at weight loss, muscular mass increase and general health improvement. Monthly educational talks and bi-monthly personalized services are offered, with physical exams, diet and body composition evaluations, weight measurement, general diet prescription, instructions and nutritional follow-up are carried out. In the first year, the program received 922 participants in AES Brasil, of which 732 from AES Eletropaulo.

AES Eletropaulo also offers the following quality of life programs to its employees:

Work-Related gymnastics The aim is to prevent osteomuscular diseases caused by fatigue from muscular strain at work,

unresolved posture problems, and movements or efforts that damage the health of joints, and to reduce diseases caused by various occupational risk factors. AES Eletropaulo contributed to the reduction of occupational diseases and registered the following results at the end of 2009:

– Maintenance of the number of Occupational Accident Reports (CATs) due to occupational disease – 2 cases in 2008 and 3 in 2009;

– Maintenance of the number of CATs due to typical accidents characterized by shoulder and low-back pains – 12 cases in 2008 and 4 in 2009.

Walking and jogging Program The program focuses on a sports category which builds up discipline, balance and vigor. It is fully

subsidized by the company. The program is based on the fact that the practice of sport is the healthiest and most efficient way to treat the most diverse health problems and, mainly, prevent stress.

Vaccination CampaignsVaccines against seasonal flu, diphtheria, hepatitis A and B are given, totaling 3,050 doses in 2009.

influenza A h1n1 PlanThere was major mobilization in 2009 and a campaign oriented at providing instructions on

Influenza A H1N1 was prepared. At AES Eletropaulo, 396 employees were monitored but there was no report of confirmed cases among employees.

Agita julho (Agitate july)Internal championship with nine sports categories, such as indoor soccer, volleyball, tennis

and running, in addition to many activities for the employees’ families. 625 people from AES Brasil participated in the 2009 edition, including 377 from AES Eletropaulo.

lectures and talksThe Company adopted a series of initiatives of a preventive nature, which aim at improving

the health of employees. In 2009, talks and lectures on ergonomics, hearing protection, shoulder health and STD/AIDS prevention, obesity and hypertension have been held, with the participation of 21.7 thousand people. AES Eletropaulo has a partnership with the Hospital São Camilo in Company Health Programs.

hearing Conservation Campaigns Besides the controls performed in occupational examinations, the company holds informative

talks on auditory disease prevention for all employees, especially those who work in activities that

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offer this kind of risk, besides making available on the Intranet informative reports on the theme together with vocal health.

energy Rodeo and Sipat In these annual events, the company includes themes connected to health promotion. The Energy

Rodeo, for example, offers general life quality-oriented activities, with body measurement, social, eating and sports habits surveys. Participants receive from a health instructor, tips and guidance for a healthier life. The event was organized in partnership with the Social Industry Service (Sesi). The Occupational Safety area warned about the danger of driving under the influence of alcohol by means of simulators and emphasized the importance of life by using as a motto the slogan “Life is worth more”.

The Occupational Accident Prevention Week (Sipat) offered lectures on disease prevention and ergonomics. Participants received work-related gymnastics and massage sessions.

internal Communication In 2009, AES Brasil reformulated existing communication channels and created other tools,

creating the Rede Ligado, which unites all Group companies. The aim is to bring people together by divulging messages that affect the employees’ daily routines through clear and dynamic articulation. One of the characteristics of the Rede Ligado is the fact that employees can contribute to the channels by sending suggestions for themes and expressing their doubts and criticisms.

ligado magazine Monthly publication which highlights topics related to the organization’s strategy, events, services and articles focused on safety, social responsibility, ethics, behavior, the environment and quality of life.

ligado Bulletin Sent by e-mail, the bulletin communicates urgent and important company matters that require timely disclosure.

Conexão ligado Weekly updated mural containing corporate and unit information, together with indicators.

estação ligado Monthly web radio, lasting 10 minutes, broadcasting entertainment, information, services and integration between companies.

gestor ligado Digital informative report, sent every two months to the managers of AES Brasil, related to leadership, campaigns, initiatives and actions to be implemented.

Portal ligado Corporate intranet, launched in March 2010, completes the Rede Ligado. It has a modern and harmonious setting focused on services for employees.

organizational Climate Survey AES Brasil conducts annual Organizational Climate surveys, taking into consideration six concepts:

competency, leadership, communication, commitment to the company, safety and Code of Conduct. In 2009, the Group’s overall index was 71%. Among the positive points were the perception of safety at work, the understanding of the Code of Conduct and the employees’ intent to remain at the company. The survey also noted the existence of improvement opportunities, such as expanding the employees’ existing recognition channels and giving a formal feedback every six months.

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inteRnAl SoCiAl indiCAtoRS

employees/employability/management

a) general information 2007 2008 2009

Total number of employees 4.241 4.141 4.360

Employees up to 30 years old (%) 30,00 27,10 26,80

Employees between 31 and 40 years old (%) 40,90 42,80 42,90

Employees between 41 and 50 years old (%) 25,30 25,90 25,20

Employes above 50 years old (%) 3,80 4,20 5,10

Number of female employees in relation to the total number of employees (%)

20,00 20,00 20,40

Women holding management positions in relation to the total management positions (%)

17,00 22,00 20,70

Black female employees (black and brown) in relation to the total employees (%)

1,20 1,20 1,70

Black male employees (black and brown) in relation to the total employees (%)

11,50 9,90 12,90

Black employees (black and brown) holding management positions in relation to the total management positions (%)

3,00 1,00 6,00

Interns in relation to the total employees (%) 2,24 1,44 1,42

Employees under the apprenticeship program (%) 0,17 0,17 0,80

Disabled employees 53 59 60

b) Compensation, benefits, carreer 2007 2008 2009

Compensation

Gross payroll (R$ 000) 202.638,00 206.438,00 225.912,00

Mandatory social charges (R$ 000) 79.005,00 82.030,00 83.004,00

Benefits

Education (R$ 000) 2.661,00 3.038,00 3.286,00

Meal (R$ 000) 22.700,00 23.102,00 25.950,00

Transportation (R$ 000) 2.437,00 2.422,00 2.105,00

Health (R$ 000) 22.600,00 23.449,00 25.454,00

Foundation (R$ 000) 5.356,00 5.358,00 6.039,00

Other (specify) (R$ 000) _ _ _

c) Profit sharing 2007 2008 2009

Total investment in the company’s profit sharing program (R$ 000)

23.300,00 32.200,00 43.943,00

Amounts distributed in relation to the gross payroll (%) 11,50 15,60 19,45

Company shares held by employees (%) NA NA NA

Division of the highest cash compensation by the lowest cash compensation paid by the company (including profit sharing and bonuses)

88 61,7 57,98

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Division of the company’s lowest compensation by the current monthly minimum wage (including profit sharing and bonuses)

1,7 1,1 1,80

d) Compensation profile - identify the percentage of employees in each salary level

2007 2008 2009

up to 5 monthly minimum wages (%) 41,00 60,80 47,90

from 6 to 10 monthly minimum wages (%) 37,70 23,10 33,50

from 11 to 15 monthly minimum wages (%) 11,90 8,50 10,70

Above 15 minimum wages (%) 9,40 7,60 7,90

Per categories (average salary for the current year) - R$

office positions 26.303,00 28.163,09 26.756,50

management positions 12.556,00 13.231,42 13.780,00

administrative positions 2.997,00 3.217,48 3.357,70

production positions 1.717,54 1.846,82 1.923,77

e) Professional development 2007 2008 2009

Education level - describe the percentage in relation to the total employees

Elementary school (%) 12,10 9,85 10,96

Secondary school (%) 47,50 47,56 53,58

High school (%) 36,00 37,89 30,39

Post-graduated (especialization, master degree, doctorate) (%)

4,40 4,70 5,07

Analphabet in the headcount (%) 0,00 0,00 0,00

Amount invested in professional development and education (%)

1,48 1,47 1,31

Number of professional development hours per employee/year

167 136 118

f) Conduct in case of dismissals 2007 2008 2009

Number of employees at the end of period 4.241 4.141 4.360

Number of hirings during the period 335 283 516

Labor claims filed per total employees dismissed over the period (%)

31,00 34,00 29,00

Labor claims

Amount claimed in court (R$ 000) 570.721 587.214 547.040

Provision recorded in liabilities (R$ 000) 387.770 389.945 406.550

Number of lawsuits in progress 4.974 4.775 4.678

Number of employees acting as parties to the lawsuits 5.540 5.316 6.385

g) Pre-retirement 2007 2008 2009

Investment in supplemental pension plan (R$ 000) 5.300,00 5.400,00 6.039,00

Number of beneficiaries of the supplemental pension plan

3.517 3.405 3.499

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Number of beneficiaries of the pre-retirement program 0 0 0

h) management 2007 2008 2009

Total compensation and/or fees (R$ 000) (A) 6.618,00 9.983,00 7.341,00

Number of Officers (B) 7 8 6

Average compensation and/or fees A/B (R$ 000) 827,00 1.130,00 1.160,00

Board of Directors compensation (R$ 000) (C) 335,00 361,00 346,00

Number of Directors (D) 11 11 11

Average compensation C/D (R$ 000) (considering only the directors who receive compensation)

61,00 54,00 56,00

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our SuppliersAES Eletropaulo’s supplier base consists of of small, medium and large companies, both national

and multinational. They mainly supply materials used in the electric system, such as: conductors, connectors, poles, circuit breakers, transformers and meters, as well as assorted materials used in the administrative units.

Service providers, in turn, are responsible for fulfilling resources needs (human, technical and technological) for activities such as expansion of maintenance of the overhead and underground grid, connection of new customers, meter reading and delivery of bills, surveillance and security services, clearing of easements, tree pruning, and reform of equipment. In 2009, 7,191 professionals worked at AES Eletropaulo as service providers.

AES Eletropaulo’s hiring policy is applied to all suppliers on equal basis. The major part of the contractors’ base – over 90% – is composed of regional suppliers and service providers.

Contracting Strategy The contracting strategy takes into account the best technical and commercial offer. Among technical

requirements are strict safety, environmental, social responsibility and compliance requirements.The contracting process is conducted by the procurement area, through market consultation and

by means of bids. The analyses of bids received by the pre-defined date are based on technical and commercial aspects, and qualified bidders participate in the negotiation process. AES Eletropaulo also makes use of e-procurement, an automated price quotation tool, to carry out less complex processes in a shorter time. The tool also allows the adoption of other kinds of bidding in accordance with convenience and strategy, such as reverse auction, an online negotiation category.

During the registration stage, stakeholders are asked to provide documentation for legal, fiscal and tax approval purposes. Specific consultations with respect to the company’s financial soundness and compliance with social and environmental legislation are carried out. During the contracting process, additional requirements are set out, taking into account the complexity of the scope and its importance to the business. For more complex processes, the company may request specific licenses, such as: environmental licenses, ISO 9001 and ISO 14001 certifications, compliance with occupational safety requirements, training on topics such as NR10 and NR33 rules, evaluation of prototypes, industrial certification, compliance questionnaire, among others.

The management of suppliers of the AES Brasil Group companies was integrated in 2009. The best Group practices have been sought and applied, thus obtaining significant benefits after consolidation of the volumes contracted, the standardization of routines, regulations, procedures and controls, as well as the specialization of professional working in the area. Environmental requirements from suppliers have also been integrated. Those considered as potentially critical to environmental and occupational safety were certified and periodically inspected so that the compliance with environmental laws and safety standards is extended to the value chain. In 2009, 16 companies from AES Eletropaulo have been inspected for purposes of verification of environmental practices.

For 2010, the expansion of the contracting process is scheduled to take into consideration consolidated volumes/demands from AES Brasil Group companies and the introduction of business analysis and negotiations based upon the Total Cost of Ownership (TCO), which provides for the implementation of methodologies to permit the analysis of bids, not only in function of the lowest price but on the global lowest cost, thus establishing partnerships with a better cost/benefit ratio for both parties.

Moreover, AES Eletropaulo constantly seeks to obtain excellence in its processes and, to this end it has enhanced controls and reduced the lead-time on the introduction of online workflow tools and greater e-procurement use. Quality methodologies and tools are also used to identify and solve problems.

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training and development AES Eletropaulo signed agreements with teaching institutions, such as the National Industrial

Educational Service (Senai) to develop labor qualification courses for service providers. The company also carries out workshops and training sessions to divulge the Value Guide

concepts, where it explains ethics and compliance issues. They are aimed at employees, as well as to the owners, partners and managers of partner companies and contractors.

Contractual Compliance ReviewAll agreements and transactions from AES Brasil’s companies within a pre-defined limit, or that

may be prejudicial to the company’s image or activities, are analyzed under the Group’s ethical and values point of view, as well as the guidelines stipulated in the Values Guide, the code of ethics of the AES Brasil Group, covering topics such: occupational safety, conflicts of interest, corruption, customer relations, suppliers and public authorities, release of information, among others.

The contractual review is a mechanism that aims at assuring the integrity of AES Eletropaulo’s business, monitoring the legal and ethical behavior of business partners and protecting the company against ethical or legal breaches.

When dubious issues arise, the compliance staff conducts an investigation on the company involved and tries to clarify them with the contractor itself. In the event of existence of serious evidence, the contract is not recommended. The purpose is to ensure that all companies with which AES Brasil is involved are reputable.

The Group companies’ agreement include specific compliance clauses, whereby the contractor undertakes not to get involved with any criminal scheme or one that involves human rights violations, such as slave and child labor. Suppliers’ and service providers’ contracting forms also include specific questions with respect to ethics and compliance, and this document has evidentiary nature.

An Intranet portal accessed by all AES Brasil Group companies was created in 2009, thus allowing each company to remotely insert the supplier and the transaction to be analyzed by the compliance area, ensuring tracking and greater speed to the process. Consequently, the number of analyses has increased fivefold compared to 2006, when the contractual analysis practice was introduced. Also in 2009, AES Brasil adopted the SAP management system, which also covers compliance terms and conditions.

860 transactions were analyzed in the period, involving a total amount of R$ 3.7 billion at AES Eletropaulo.

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SocietyAES Eletropaulo’s social responsibility strategy is to develop the communities in which it

operates, in terms of economics, environment and social actions; as such, sustainability pervades its strategy, management and also social and environmental projects. Based on this assumption, the company implemented social programs and projects based on two principles: education, culture and sports; and social and business inclusion. And, to contribute to the strengthening of these principles, AES Eletropaulo encourages its employees to participate in voluntary social actions, by encouraging their interaction with the community.

Aware of the nature of the service rendered and its commitment to sustainability, the company includes safety in the electric grid and efficient consumption of natural resources in its social responsibility programs, thus developing specific actions to make the population aware on the safe and proper use of electric energy. Energy efficiency programs, for example, do not only encourage electricity saving but also bring more efficient equipment and devices to poor communities, thus reducing waste. Some of these initiatives, such as the substitution of old refrigerators and fluorescent lamps, are included in the Clean Development Mechanism (MDL) projects of AES Eletropaulo.

In 2009, AES Eletropaulo allocated R$ 23.5 million to social projects. Of this amount, R$ 7 million refer to resources from tax incentive laws (Rouanet Law, Sports Law, allocation of 1% of the Income Tax payable to Municipal Children and Adolescent Funds and the Cultural Action Program of the State of São Paulo).

indicatorsAES Eletropaulo has a partnership with Instituto Ethos and used indicators from the Ethos

Questionnaire to measure and follow up its social and environmental performance. The Institute’s mission is to organize, attract and help companies to manage their business in a socially responsible way by making them partners in the construction of a fair and sustainable society.

The Questionnaire indicators are also used as criteria for the Social Responsibility Award of the Brazilian Association of Electric Energy Distribution Companies (Abradee), one of the most important awards in the energy industry. The annual award acknowledges the distribution company that reaches the highest score based on three criteria: Ethos indicators, residential customer satisfaction level in the Abradee survey and Ibase results regarding citizenship and the environment.

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dialog Panel with StakeholdersAimed at improving the preparation of its Sustainability Report and establishing a process of

engagement with its stakeholders, in November, 2008, AES Eletropaulo held its first Dialog Panel with stakeholders. Fifty-three people took part in the event, among employees and residential and corporate customers.

During the Panel participants evaluated topics related to the 2008 Sustainability Report and suggested improvements for the 2009 edition. The measures already adopted in this report can be seen in the line item About this Report.

In 2010, AES Eletropaulo will continue to hold the panel and will expand it, with the inclusion of other interested parties.

In addition to the suggestions made in the panel, consultations with internal areas and company leaders will contribute to defining topics to be dealt with in the AES Eletropaulo 2009 Sustainability Report, which uses the guidelines of the G3 version of the Global Reporting Initiative.

house of Culture and Citizenship Mainly directed at poor communities, the purpose of the House of Culture and Citizenship is

the transformation, through learning, of the reality of children, adolescents and adults, by offering activities connected to arts, culture, citizenship, quality of life and income generation. In 2009, the project gained a new unit – in Osasco (SP) – which adds to the unit in Vila Guacuri, in São Paulo (SP), and benefits over 2 thousand children, adolescents and adults in the AES Eletropaulo concession area. AES Brasil has another four units in Caconde, Barra Bonita, Lins and São José do Rio Pardo (SP), sponsored by AES Tietê (the Group’s power generation company), and benefits in all, over 5,200 people. The units totaled over 17,000 visits to courses and workshops in 2009.

The program has two distinct operating fronts and its parallel theme is the safe and efficient use of electric energy. The first front is targeted at children and adolescents. From Monday to Friday, between 8:00 a.m. to 5 p.m., it offers in the two units activities such as storytelling, circus activities, visual and digital arts, music, theater, dance and artistic gym and floor gymnastics. The pedagogical methodology applied was developed by a multidisciplinary custodial team.

Another front is targeted at adolescents and adults, who have access to professional and entrepreneurship courses, income-generation workshops, as well as adult-oriented education and talks. In order to reach its target audience, courses are held in the evening from Monday to Friday and on Saturdays.

Satisfaction SurveysIn order to gauge the project’s results and its impact on the community, AES Eletropaulo

conducts satisfaction surveys every six months. Numbers gathered by the Instituto Ideafix in May 2009 show that 95.9% of the people interviewed agree that the House of Culture and Citizenship contributes to improving life in the community. The survey again observed the satisfaction with pedagogical guidelines: interviews conducted with persons responsible for the participating children indicate that in 82.5% of the cases, the school performance of their children has improved, and the average score of educators of all courses was above 9. The survey also observed that 95% of the people interviewed are aware of responsible consumption of electric energy and 88.5% are aware of the safe use of the electric grid.

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PartnershipsThe House of Culture and Citizenship projects are developed in partnership with the private

sector, public authorities, NGOs, local associations and organizations.

Rotary Professional learning Center (nurap)Through Nurap, 51 adolescents in Vila Guacuri participated in the Young Apprentice Program.

Currently, 46 adolescents have been inserted into the job market, through hotels and private companies.

universidade metodista (São Bernardo do Campo unit)Through this partnership, children and adolescents from the House of Culture and Citizenship

receive psychological, speech and psycho-pedagogical counseling.

empreender com energia Project – partnership with Aliança empreendedoraStructured in three stages, the Empreender com Energia is one of the projects carried out at the

House of Culture and Citizenship focused on income generation. Five groups were formed, with a total of 45 participants, for the production of craft, bio-jewelry (ecological and hand-made bijoux) and food products. The Empreender com Energia, with one-year duration (August 2009 to August 2010), encompasses:

– identification and creation of productive groups, in accordance with the growth potential in Vila Guacuri (first stage carried out between August and October 2009);

– Qualification of the business plan, feasibility study, strategic planning, etc. (second stage carried out between October 2009 and April 2010);

– Group counseling meetings, general meetings and follow-up of indicators (third stage carried out from April to August 2010).

Aliança Empreendedora is a non-profit social organization which promotes and supports entrepreneurship of people and communities as a tool for sustainable social and economic development.

urban Centers Platform – unicefAES Eletropaulo is one of the developers of the Urban Centers Platform, an initiative from the

United Nations Children’s Fund (Unicef), whose purpose is to promote the commitment of different sectors of society to the reduction of inequality and improvement of life conditions in urban centers. Developed in four-year duration cycles (2008 to 2011), it is being originally implemented in the Cities of São Paulo and Itaquaquecetuba (SP) and Rio de Janeiro (RJ).

The participation of AES Eletropaulo is through the sponsoring group in Vila Guacuri, and one of the main purposes is to promote real community development in Vila Guacuri, in São Paulo, by means of the integration of community groups and associations. The House of Culture and Citizenship was responsible for divulging the project in the community and implementing the proposed measures. The unit’s director is the group’s representative at the Integrated Development Studies and Programs Center (Cieds) and Unicef.

For purposes of implementation of the Urban Center Platform, the sponsoring group promoted a series of initiatives. Firstly, it selected, along with a state high school in the region, two adolescents for the process of development of the Young Communicators in Viração magazine, in São Paulo. The goal is to develop the adolescent so that he/she is the spokesperson of the initiatives developed by the sponsoring group in the entire community.

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urban PlatformsThe Group also assisted with the organization and participation in the first Intercommunity

Meeting of the Urban Center Platform Project, held on November 14, 2009. The forum is a space to organize, participate, discuss and exchange ideas on community goals and indicate six priorities in the action plan. The sponsoring group also promotes weekly meetings, seminars and workshops in order to develop understanding on the reality and rights of children and adolescents living in the community and their ability to discuss and propose solutions.

Communities that obtain the progress proposed will be certified by Unicef in 2011. With this in mind, the goal is to reach the six priorities established in the action plan of the sponsoring group:

– Children up to 6 years of age with guaranteed right to survive, to have a birth certificate, receive care and protection and fully develop;

– Children and adolescents with universal access to quality education, which ensures their permanence and learning in school and conclusion of basic education at the right age;

– Children and adolescents protected against HIV transmission and, if HIV positive, receive adequate treatment and enjoy the right to family life and community participation;

– Children and adolescents protected against the most diverse kinds of omission, neglect, inadequate care, discrimination, exploitation and violence;

– Engaged adolescents actively participating in society’s decisions and recognized by their great transformation potential;

– Children and adolescents from different races and cultures with equally respected rights in all public policies.

Querô Workshops – entrepreneurship and citizenship through the cinema Since August 2009, 34 adolescents from the House of Culture and Citizenship participated in the

Querô Workshops, an educational program oriented to the movie industry. This work will last until August 2010 and is being carried out by the production company Gullane Filmes.

Adolescents at the workshops make short films guided by industry professionals and dedicate themselves to all the stages required in a production, from concept to screenplay writing, planning to financial sponsor.

Although in progress, the workshops already show good results. One of the participating adolescents was hired by Buriti Filmes, and the short film developed by another two members of workshop was awarded by the Municipal Government of Diadema, in the First Eldorado Video Show.

“In the Workshops I learned some drawing techniques, how to write a script and to get an idea of camera angles. But more than that, I learned how to be a better person, in terms of both the people around me and in assuming my responsibilities and duties. I saw that I was not alone in the world and that I must work together with others in order to achieve a better life. The workshops also gave me the opportunity to discover new places and new people... really great. I believe that the Workshops help a lot in the education of a citizen taking the long-term view of his future. Now I want to finish my studies and try to get into a university specialized in my area, as I really like it. Being hired by the Buriti Filmes company was extremely gratifying - to have been rewarded so quickly. Then you feel happy, knowing that all the hard work has not been in vain, that all your effort was worth it.”

Antônio Vieira Campos Jr., 17

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“In the Workshops I learned functions such as editing, writing a script, directing and using the equipment. I broadened my view of the world, learning to criticize, that is, to put my ideas forward, accept ideas, and to be much more sociable. The prize we won in Diadema was very important, it gives us encouragement to continue with each short or feature film we make. One of the things we also liked was how we could put into practice what we had written, get the idea off the drawing board and turn it into images. This was magical for me.”

Jobson Moraes de Oliveira, 16

“On the technical side, I learned how to work with the electronics and equipment, and a bit of editing. On the personal side, I learned to impose my ideas on life. The Workshops helped me to improve my writing and my Portuguese. I learned to respect other people’s ideas. One of the good things here is to be able to transform ideas into film, a reality. The Workshops are helping a lot, as well, in my studies, showing me how life is through the cameras and showing and teaching me how to fulfill my responsibilities. The prize I won in Diadema with Jobson was very important, as it was an opportunity for me to put into practice what I had learned in the Workshops about film-making. My expectations for the future are to progress in my life, making audiovisuals, as it is one of the things with which I most identify.”

Wesley Henrique Ferreira da Silva, 15

AeS eletropaulo in the CommunityComposed of mobile modules (trucks and tents), the purpose of the program is to raise

awareness and educate in an interactive and informal manner in deprived communities on the conscientious and safe consumption of electric energy.

Participants, in the two trucks adapted with multimedia equipment, receive tips on more efficient and safer consumption habits and learn about the electric energy path, from generation to residences. This information is transmitted in a dynamic way, through an interactive video-quiz, played in a 180° screen with touch screen technology. In 2009, the two trucks received 92 thousand visits.

The tents, which remain erected for about two months in a regularized community, house the target audience (children and adolescents) that attend the state schools and residents’ associations or other institutions close to the communities covered by the Program ‘Transformation of Consumers into Customers’.

The project offers activities that discuss safer and more conscientious consumption by means of new habits. Among the attractions are miniatures of windmills, a hydroelectric power plant that actually works and a show of the history of electricity and the impact of consumption growth on the environment. In another activity, participants ride bicycles that generate power to illuminate a circuit of lights and they also learn about energy transmission, the loss process and the impacts caused by irregular energy connections.

The capacity is 96 people per session, with four daily presentations of two hours each. The project had 60 thousand participants in 2009, from approximately 70 schools and 20 local institutions and one of the highlights was its presence in the Feirão Super Casas Bahia, at the end of 2009.

AdditionAl ACtiVitieSEducation

Education for the Young and adults - 90 enrollments

Public policies and community articulation

Informatics course for adults - 45 participants

Storytelling - 720 participations

1st Intercommunity Meeting – Urban Centers Platform (Unicef) - 75 participations

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luz e lápis (light and Pencil) Child educational CentersAES Eletropaulo maintains, with own resources, two Luz e Lápis Child Educational Centers (CEIs),

located in Santo Amaro and Guarapiranga, in the City of São Paulo. The CEIs, certified as a Public Interest Civil Society Organization (Oscip), adopt the constructive methodology, which makes children want to explore and discover all the possibilities of their body, their ability to observe, think and act, thus contributing to the exercise of citizenship. About 300 children between 1 and 5 years and 11 months, in a social risk situation or members of low-income families, benefit from the program.

In November 2009, the Municipal Council of Children and Adolescent Rights approved the Educar para a Vida (Educate for Life) project, which will be implemented by 2010 through the raising of funds for the Municipal Children and Adolescent Fund. The objective of this initiative is to offer extracurricular activities such as dance, plastic arts, physical training and computer courses.

The CEIs Luz e Lápis have 47 employees, including director, coordinators, teachers and assistants, to put into operation the strategy defined by the Board of Executive Officers. The members, both from the Board of Executive Officers and the Supervisory Board, are volunteer employees from AES Eletropaulo, nominated in December 2009, in an annual shareholders meeting, for a two-year term of office.

“When I came to work on this project in 1999, I didn’t imagine how much of my life it would take. I’ve been through five different managements, each with its own way of doing things. I’ve acquired a lot of knowledge, had a lot of disappointments, met a lot of people, made a lot of friends, become part of the community and wholeheartedly support the project. I’m very happy to be a part of this group. The future of “ Luz e Lápis” (Light and Pencil) is headed toward what I’ve always dreamed of: a place where I want to be, a place of possibilities, a place where I exist.”

Lilian F. Pires, coordinator of Luz e Lápis

“I’ve noticed that the changes made to the CEIs have brought great results to the children’s education. Starting with the Lilás, which before was a model with little attraction but which has improved 100%. The Lilás is beautiful in that it makes you feel proud to see the treatment of the children. The educators are well prepared, as they undergo courses and periodical talks with the coordinating team. The work that the CEIs do for the children at risk or from low-income families is extremely useful, as we have noticed great satisfaction from the parents and family members. Whenever possible, I would give my little bit of knowledge so that these CEIs can keep growing.”

Romivaldo de Souza Vasconcelos, caretaker at Luz e Lápis for seven years

energia do Bem (energy for good) Volunteer ProgramEnergia do Bem is an AES Brasil voluntary program, whose purpose is to offer support and

commit company employees and contractors and respective family members who wish, voluntarily, to contribute to the transformation of communities where AES is active. Launched in 2008, the program had the participation of 1.1 thousand employees during 2009.

The online portal was launched in September 2009 to divulge volunteer opportunities and countermeasures offered by the Group to facilitate voluntary work. Employees registering on the website (www.energiadobem.com.br) have access to the volunteer guide and can apply for available vacancies.

In order to format the program a preliminary survey was conducted – in all AES Brasil Group companies – to understand expectations and to chart the profile of company employees and third parties regarding voluntary work. Results showed that 80.64% of company employees and 66.5% of third parties would like to volunteer. The majority prefers to work in educational, environmental and citizenship areas and in projects targeted at children and adolescents.

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The Energia do Bem program has three principles:

distributing the energia do Bem: the purpose is to rally employees toward seasonal and emergency campaigns, such as Winter, Christmas Campaign, among others, and encourage donations to social projects supporting children and adolescents. In 2009, the Christmas Campaign benefited 577 children, and the Winter Campaign benefited seven institutions. In order to celebrate the International Volunteer Day – on December 5 – The AES Brasil Group and H. Melillo, a company partnered with AES in the House of Culture and Citizenship and AES Eletropaulo in the Community, carried out volunteer actions in the cities of Osasco, Barra Bonita (SP) and Canoas (RS).

AES Eletropaulo’s employees in São Paulo participated as volunteers in the social organization Centro Promocional Cristo Rei – which assists 152 children and adolescents from 6 to 18 years of age – and worked in the physical renovation of the place, such as wall painting, gardening, furniture organization, the library, toy space and domestic appliance installation. Acting to transform: the aim is to encourage social engagement and volunteer initiatives of employees in institutions partnered with AES Eletropaulo. It also covers the selection and follow-up of social projects included in the Municipal Council of Children’s and Adolescents’ Rights (CMDCAs) that receive the transfer of 1% of the income tax payable by the company; giving lectures; school activities, communities, institutions and the company’s social projects. entrepreneurship in the Community: the aim is to encourage the social work of employees by the presentation of social projects to be developed – with the support of AES Eletropaulo – in communities. The implementation of this initiative is scheduled to 2010.

“It’s very gratifying to take part in this voluntary action and see that other people are always interested in taking part. This experience makes us think a lot about the values and I myself have re-thought about many things in my life. Particularly, I became more aware of the relationship with my parents, and began to pay more attention to this.”

Rinaid Leal, HR assistant at AES Eletropaulo

energy efficiency The AES Eletropaulo Energy Efficiency Program offers instructions and alternatives to avoid

energy waste. The company allocates 0.50% of its net operating revenue to the program, pursuant to the determination of the National Electric Energy Agency (Aneel).

Investments are directed at projects oriented to commercial, industrial, low-income residential, public authorities and service sector customers. In 2009, AES Eletropaulo invested R$ 57.2 million in the projects and saved 161,554 MWh/year, sufficient to supply over 60 thousand homes. Moreover, R$ 32 million in own resources were allocated to the Program ‘Transformation of Consumers into Customers’.

Technological improvements were implemented within the scope of the energy efficiency program projects, such as the replacement of equipment in lightning, acclimatization, refrigeration, electric motors and water heating systems.

Among the projects developed in 2009 were:

tunnels (Sebastião Camargo and jânio Quadros) The replacement of the sodium-vapor light system for electromagnetic lamps with superior useful life and lower

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environmental impact. The project also provided for the replacement of the entire electric grid installed down the center of the tunnels, aimed at reducing or eliminating cable theft. As well providing energy saving of about 80%, the new lightning system has substantially increased the safety of users due to the better color reproduction, visual comfort at the tunnel entrance and lower failure rates. The project totaled R$ 2.9 million, an amount that has been invested since 2006, and in 2009, the sum totaled approximately R$ 308 thousand.

hospital Beneficência Portuguesa A project in the amount of R$ 2.8 million which provided for the upgrade of the air conditioning system, thus increasing the reliability of the system and further protecting medical staff and patients. The economy generated released financial resources for the purchase of infrastructure materials offering better technical conditions for over 4 million consultations annually.

State teaching units Total replacement of the lightning system in 145 teaching units, including external sites, such as sports courts, parking lots and courtyards. The project included the performance of 100 theater plays, in order to raise awareness among teachers and students on matters relating to energy efficiency, safety and the environment.

Santa Casa de misericórdia A project in the amount of R$ 600 thousand implemented in four hospital units, which promoted the replacement of lightning systems, in order to improve physical conditions to serve patients and release financial resources of about R$ 200 thousand/year to other needs.

The work carried out in association with the State and Municipal Governments of São Paulo will be continued in 2010. Through the association with the State Government, projects in over 200 schools of the State Education Secretary are scheduled to be implemented, as well as the conclusion of work in 26 technical schools (Etec/Fatec). Through the association with the Municipal Government, the improvement of the lightning system in 400 schools and four tunnels is scheduled to be implemented. Projects in hospitals, basic health units, public buildings and sports centers will also be developed.

transformation of Consumers into CustomersThis program aims at regularizing clandestine electricity connections, in order to enhance energy

supply conditions to low-income communities and disseminate instructions on the safe and efficient use of electricity. Through the program, internal electric installations in homes are renovated, with the replacement of switches, plugs, circuit breakers and distribution boxes.

In order to ensure lower energy consumption, the project promotes the replacement of incandescent lamps for compact fluorescent lamps and refrigerators in poor condition and high consumption for energy-saving models. This initiative comprises the Clean Development Mechanism (MDL) projects of AES Eletropaulo – still under approval – and should generate carbon credits in the future. Another measure to reduce the use of electric energy is the installation of a solar heating system to replace the electric shower.

The program also provides for awareness raising and educational initiatives regarding the safe and correct consumption of electric energy, through the social project AES Eletropaulo in the Community.

The clandestine connection regularization project, implemented five years ago, reached 355,566 regularizations in 2009, benefiting 1.4 million people in 903 deprived communities located in its concession area. This year, R$ 32.02 million was invested through own resources and another R$ 32.83 million through the Energy Efficiency Program, totaling R$ 64.85 million.

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Research & developmentThe Research & Development Program (R&D) of AES Eletropaulo encourages innovation

and offers investment opportunities aligned with corporate strategy and the appreciation of the knowledge generated by employees in association with institutes, universities, manufacturers and public and private R&D companies. It is also an important tool to promote continuous improvements in the quality of services provided and the reduction in environmental damages.

The company allocates 0.20% of its net operating revenue to the R&D program, in compliance with energy legislation. Projects include technical, commercial and operational processes; development of more efficient technologies; reduction of environmental impacts; safety of employees and contractors and promotion of sustainable initiatives to communities, among other correlated topics.

In 2009, the organizational structure was changed due to the establishment of the R&D and Energy Efficiency Management Coordination. Among the initiatives of the new Management is the prospection of new partners in R&D projects with research entities in the Northeastern region and with industries. The development of a R&D and energy efficiency management tool was also requested, which will be completed by 2010.

In the same year, the company presented 16 R&D projects concluded at the Technical Journey, a Human Resources initiative which encourages employees to present ideas related to their area of work.

Among the R&D projects targeted at improving energy distribution services are the partnership with Siemens for the construction of a dry voltage transformer in underground chambers and the Weather Monitoring System (SIM).

Directed at reducing environmental impacts, there are the projects, Characterization of Discarded Materials on the Grid and the Recycling Potential Evaluation, scheduled to be concluded by 2011, with the aim of identifying and quantifying materials discarded during the company’s activities after their useful life, and the evaluation, recycling, reuse and lifecycle analysis options regarding scrap materials.

In 2009, R$ 25.3 million was invested in 80 R&D projects (including two management projects), of which 22 were concluded during the year. For 2010, an investment of R$ 57.2 million in R&D projects is forecast.

¹ Energy diagnoses: identifies and evaluates conditions of refrigerators and those of electric installations in poor state of maintenance.² Solar heaters: solar panels installed on rooftops used to heat shower water.

mAin ACtionS oF the eneRgy eFFiCienCy PRogRAm

yeAR 2007 2008 2009Regularized connections 71.844 74.500 80.177Donated standardized entry meters 71.844 74.500 80.177Fridges replaced 4.527 3.345 5.026Light bulbs replaced 103.000 0 130.000Intermal diagnoses 500 0 600Energy diagnoses¹ 22.334 17.732 18.751Solar heaters² - 50 -

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media CampaignsOne of AES Eletropaulo’s main concerns is to make customers aware of the safe and efficient use

of electric energy. Its campaigns are disseminated on TV channels, radio stations and widely-circulated newspapers, as well as on the Internet, hoardings, billboards in train, subway and bus stations, which address topics such as building work close to the electric grid and responsible energy consumption.

In 2009, the company invested R$ 9.4 million in campaigns disseminated on TV channels, such as Globo, Record, SBT and Band, and on radio stations, such as Nativa FM, Heliópolis FM, Capital AM and Globo AM. One of the highlights was the continuity of the campaign that specifically focuses the power grid risks. Commercials show typical situations experienced by the target audience – C, D and E classes – with the purpose of making the population permanently aware, aiming at preventing accidents in the power grid. The campaign should continue in 2010.

The 2009 energy-saving campaigns targeted at population were addressed in humorous manner with animated electric and electronic appliances in the leading roles, with themes such as turning off the TV stand-by system, washing the maximum volume of clothes in the washing machine and turning off lights when there is no one in.

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the environmentAES Eletropaulo adopts the Integrated Environmental and Occupational Health and Safety Policy

of the AES Group in Brazil, which establishes the commitments to be adhered to by all company employees regarding its Environmental Management System (SGA). Its integrated social and environmental policy includes raising the awareness of employees and the population, as well as investments in technology and R&D projects focused on environmental conservation.

In order to satisfy such commitments, the SGA, certified in compliance with ISO 14001:2004, was developed and integrated with the company’s Occupational Health and Safety System (SSO) aiming in principal to support the guidelines of AES Corp. with respect to environmental standards. This System is annually audited to confirm adherence with said requirements and legal standards.

SGA is a continual improvement process, through development of management objectives, goals and programs. It provides for the systematization of all the company’s activities, in particular those imposing greater risks to the environment, such as those with the potential to affect air, water and soil quality. The system also includes service and materials suppliers’ management and qualification actions, with respect to compliance with environmental legislation, company policies and environmental impact and accident prevention.

In 2009, the company adopted initiatives that reflect its commitment to sustainability. The Environmental Sustainability department, responsible for the implementation of three projects to integrate the Clean Development Mechanism (MDL) in the same year, currently in validation stage, was created. According to good market practices, the company also responded to the Carbon Disclosure Project (CDP) questionnaire, an international initiative funded by the Carbon Trust and a group of foundations whose aim is to carry out a global survey on the level of greenhouse gas emissions.

Clean development mechanism Projects AES Eletropaulo has three Clean Development Mechanism (MDL) projects in the validation stage

for submission to the Inter-ministry Global Climate Change Commission (CIMGC), the entity in charge of actions from the Brazilian government within the scope of the United Nations Framework Convention on Climate Change (CQNUMC). Upon approved, the projects will be registered by the MDL Executive Committee and will be allowed to issue and sell the Certified Emission Reduction Certificates (RCEs), known as carbon credits. The projects implemented are:

energy efficiency measures in State Schools The project aims at making the lightning system of public schools more efficient, through initiatives such as the change of incandescent lamps for fluorescent lamps that consume less energy. Total emission reduction estimated in the project is 31,406 tons of CO².

SF6 emission Reduction Program Used as a insulator in electric equipment, SF6 (Sulphur Hexafluoride), an insulating gas and electric arc extinguisher, has a Global Warming Potential 23,000 times greater than CO². The aim of the program is to implement a SF6 management system to prevent the discharge of this gas into the atmosphere. Total emission reduction estimated in the project is 53,321 tons of CO2.

Substitution of domestic Refrigerators The partial objective of the Program for Transformation of Consumers into Customers program is the change of refrigerators in low-income residences for new low-energy consuming refrigerators. Through a pioneering initiative, AES Eletropaulo has signed an agreement with the electric and electronic appliance manufacturer

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Whirlpool for the development of greenhouse gas-free refrigerators or refrigerators using gases that do not affect the ozone layer. The outcome was the replacement of HFC (Hydrofluorocarbon) – presently used in the majority of refrigerators sold in Brazil and listed among the seven Greenhouse Gases (GEE) under mandatory reduction by the Kyoto Protocol – for isobutane, which is not included in the GEE list and does not affect the ozone layer. Refrigerators manufactured through this partnership are being used in the program. Total emission reduction estimated in the project is 20,748 tons of CO².

iSo 14001:2004 CertificationIn September 2009, AES Eletropaulo obtained the ISO 14001:2004 certification for the electric

energy overhead subtransmission line process. This certification is added to the scope of previously certified segments that include administrative buildings, substations, own service stores and the Operating Center (COE).

As of 2009, the certification quantification format was changed and began to be carried out by process/segment. This accounting was carried out by installation up until 2008, a year with 190 certified sites. Based on the new methodology, growth from 50% to 62.5% was registered in certified segments. The company’s goal is to certify 100% of its processes by 2011, including the underground network, the overhead distribution network and the Cambuci Complex.

The objective is to make AES Eletropaulo become a reference in the energy sector in terms of environmental matters. The company is annually visited by energy companies interested in knowing SGA processes and participates in environment-related forums.

environmental Qualification and Supplier management Committed to share best management practices and raise environmental awareness with

partners, AES Eletropaulo and other AES Brasil Group companies worked to unify environmental qualification and supplier management guidelines.

Suppliers considered as potentially critical – with respect to environmental matters and occupational safety – started to be approved or inspected on a periodic basis, which contributes to the dissemination of respect for the environment in the company’s value chain. In 2009, 16 companies had their environmental practices checked.

environmental Awareness of employees In 2009, during the celebration of the Global Environment Day, the Group companies divulged to

all employees a message from AES Corp. and the Environmental Sustainability Officer, emphasizing the parent company’s environmental premises and programs and everybody’s responsibility regarding environmental protection.

Throughout the year, the company promoted meetings with environmental experts, such as the former Minister of the Environment, Marina Silva, who addressed the topic “Forests and protected areas in Brazil in the context of climate change”.

In order to increase dissemination of information on the environment, the company has invested in the recording of videos and the development of interactive training sessions that permit the individual participation of the employees at their convenience.

environmental licensingIn 2009, AES Eletropaulo continued with the environmental licensing and regularization process

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regarding the Sub-transmission infrastructure (existing lines and substations) and obtained 25 environmental licenses and authorizations relating to new projects, expansions, reconstructions or re-capacitations of sub-transmission lines and substations.

As an example, the company obtained installation licenses relating to the Germânia Station Overhead Branch Line (RAE), the Germânia Distribution Transformer Substation (ETD) and the environmental operating license relating to the North Complex and Tenente Marques RAE and ETD. These licenses add to the favorable opinion of the Environmental Quality Control Department (DECONT) for implementation of RAE Monte Azul and the granting of authorization by the Water and Electric Energy Department (DAEE) for RAE Tenente Marques.

Municipal authorizations have been issued for the reform of eight ETDs: Vila Paula, Monte Belo, Ribeirão Pires, Nações, São Bernardo do Campo, Imigrantes, Silvestre and Alvarenga; nine authorizations for vegetation cutting under overhead sub-transmission lines in the municipalities of Diadema, Barueri, Embu-Guaçu, Santo André, Taboão da Serra and Mauá and with the municipal sub-administrations of Lapa, Itaquera and Ipiranga; two authorizations from the Environmental Company of the State of São Paulo (Cetesb) for the opening of security swathes under overhead circuits of energy distribution. No license was necessary for the Bandeirantes Pirituba Overhead Sub-transmission Line (LTA).

The company also gave continuity to the implementation of the Environmental Management Plan on construction work already started and planned, consisting of the best management of environmental impacts stemming from activities performed by contractors. The performance of environmental inspections on these construction sites ensures the environmental quality in the performance of services and effective compliance with the terms and conditions set forth in the licenses.

In accordance with requirements from environmental agencies, all projects built by AES Eletropaulo after 2004 are licensed.

environmental indemnificationsEnvironmental indemnifications are measures to contain or reestablish the balance in locations

affected by unavoidable environmental impacts arising out of, for example, electrical system expansion and maintenance work, imposed by environmental agencies. For example, in 2009, AES Eletropaulo planted 229 saplings and delivered another 1,040 saplings to municipal nurseries.

environmental liabilities AES Eletropaulo has a Potential Environmental Liability Investigation and Recovery Program

which checks potential contamination in situations of real estate purchase and sale, and in operational areas where activities with greater contamination potential are performed. These environmental studies are performed in conformity with Cetesb regulations and their purpose is to check the impact on soil and underground water of activities developed by the company in the past. The main interference of the company’s activities with the environment is caused by oil leakages. In 2009, the distribution company allocated R$ 10.2 million to the program.

In 2009, AES Eletropaulo concluded the execution of the soil recovery project in the area where the old warehouse of Usina Piratininga was located and where equipment with oil was stored. Presently, the case is in the process of monitoring the quality of subterranean water, aimed at ensuring the efficiency of the recovery project implemented. All area management processes are conducted under the control of the competent environmental agency.

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Actions for the Benefit of the environment In 2009, AES Eletropaulo allocated R$ 68.4 million to actions and projects aiming at reducing

the environmental impact of the company’s activities. The main projects and actions refer to environmental licensing processes, liability management, pollution prevention actions, energy efficiency and R&D projects. The company also developed projects relating to urban tree planting, material and waste management, cross-arm substitution and water sources.

urban tree PlantingIn order to prevent accidents involving the power grid and the population and to reduce energy

interruptions, AES Eletropaulo carries out preventive tree pruning close to power lines. It also offers an emergency service channel (0800 72 72 196) so that customers can report the necessity of of tree pruning, as well as a direct Green Line channel, through which the society can help to inspect the quality of tree cutting. It is possible to access the Urban Tree Planting Guide through the company’s website (www.aeseletropaulo.com.br), which contains tips on the appropriate species of tree for planting under the power grid, as well as guidelines for correct tree pruning.

The company also offers training in urban tree planting to employees from contractors and the Municipal Government of São Paulo. In 2009, the company qualified 475 personnel. The company also promotes technical meetings with biologists, agricultural engineers and forestry engineers in order to discuss the best practices directed at urban tree planting. In the last year, the third Technical Meeting was held with the presence of 120 professionals.

In 2010, negotiations for a partnership with the São Paulo City Hall involving the availability to the Municipal Authorities, of a methodology for visual risk analysis (AVR) of trees, developed by the company’s R&D project and equipment for the application of the methodology, are ongoing.

urban orchardIn association with the State Government of São Paulo, the main purpose of the Urban Orchard

project is to promote environmental and landscaping recovery of the banks of Pinheiros River, provide professional qualification and develop environmental education activities.

The environmental education center serves about 2 thousand visitors per month and over 1.3 thousand people participated in the work fronts and received professional qualification to work with gardening. AES Eletropaulo sponsors the project together with 23 other companies.

mananciais (Water Source) ProjectImplemented in 2006 the Mananciais Project counts on the participation of 10 of the 13

municipalities in the concession area inserted in APMs. The aim of this project, which is a part of the company’s strategic planning, is to ensure compliance with environmental legislation and contribute to public policies for reduction of irregular occupation of protected areas.

In 2009, AES Eletropaulo introduced a tool in its business system, whose purpose is to warn if the location where the connection of energy was requested is inserted in the Water Source Protection Area (APM). Furthermore, the company’s engineering and project teams are being trained to use the Geographic Information System (GIS) to visualize there areas.

Cross-armsIn order to reduce the use of wood and remove the incentive for illegal extraction, AES Eletropaulo is

working on a project for the substitution of wooden cross-arms for galvanized steel ones. 300 cross-arms

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were installed in 2009 through a pilot project in the City of São Paulo. As of March 2010, the steel braces will be adopted as standard for new sites and the replacement of old cross-arms, whenever necessary.

Compact gridThe installation of the compact grid enables better adjustment between the overhead distribution

power grid and vegetation, increasing the reliability of the continuous supply of electric energy and minimizing the need of intervention in vegetation. In 2009, the company had 1,272 kilometers of compact grid, corresponding to 7% of total distribution grid. The number is constantly growing.

environmental noise ControlSince it operates in a predominantly urban area, where ambient noise levels, emanating from

several sources combine causing noise to be a remarkable characteristic of big cities, AES Eletropaulo recognizes the importance of monitoring and minimizing it.

The purposes of the Ambient Noise Control Program of AES Eletropaulo are:

- Identify a calibration method capable of checking the contribution of sites’ operation to the noise level;

- Seek alternatives to minimize noise propagation in cases where it may result in legal breach and cause discomfort to the surrounding community.

In order to comply with the program, the company invested about R$ 30 thousand in research of better calibration techniques in 2009. Based on the results obtained, the company intends to invest an additional R$ 1.25 million in 2010 on ambient improvements, mainly new measurement systems, acoustic protection projects and erosion combat.

Atmospheric emissionsIn order to mitigate environmental impacts arising from its activities, AES Eletropaulo

implements management actions in its activities and establishes partnerships with public and private entities. The objective of these initiatives is to encourage the adoption of cleaner technologies and reduce the emission of greenhouse gases (GEE) responsible for global warming.

One example is the renovation of the vehicle fleet prioritizing flex fuel vehicles which permit the use of ethanol, which is less polluting and more efficient as compared to previously used models. The result was a reduction in emissions of GEE by means of mobile sources by 36.3% compared to the previous year. In 2009, about 5,409 tCO2 were emitted through the consumption of fossil fuels in the vehicle fleet.

Also, in order to contribute to the reduction of GEE emission air quality, the company participates in the Hydrogen Cell Fueled Bus Project, which promotes urban transportation with a low environmental impact.

Another highlight is the control of SF6, applied in the company’s circuit breakers. The company purchased equipment that allows the recycling and reuse of this greenhouse gas, thus avoiding its emission into the atmosphere. The initiative which comprises the MDL project of AES Eletropaulo, contributed to zero SF6 emissions in 2009.

Besides SF6, the company monitors other gases that interfere with the ozone layer, such as R22 fluid, R134 fluid and FM200 fluid, used in equipment from the electric system and maintenance of air conditioning and fire prevention system.

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Between 2009 and 2010, the consolidation of indicators relating to this monitoring was changed, which modifies the numbers disclosed in prior years.

Fuel ConSumPtion %

2007 2008 2009Gasoline e diesel (km/l) 11,20 10,21 9,73Ethanol (km/l) 8,80 6,36 6,52Natural gas GLP/GN (km/m³) 3,40 4,21 4,21

*Due to their age, cars using natural gas were auctioned during the fleet renewal process.

energy and Water Consumption AES Eletropaulo has guidelines aimed at employees, that focus on the responsible consumption

of resources and seeks solutions to reduce water and energy consumption at its sites. Administrative and operational units are monitored monthly.

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Waste managementWaste management is focused on the prevention of soil and water contamination and follows

the guidelines of SGA and AES Corp. All waste generated by the company’s activities is identified, packaged, stored and finally disposed of, which is in accordance with environmental legislation. In 2009, R$ 8.35 million was invested in the treatment and disposal of toxic waste.

Liquid effluents generated are disposed of in the sewage system, where they receive proper treatment. In 2009, the total volume of effluents was 105,169 m³.

ScrapThe scrap generated by the company’s activities is separated and sold to recycling companies

which are environmentally qualified. The main materials allocated for recycling are aluminum, iron, bronze, copper, wood chips, cross-arms, lampposts, reactors and porcelain materials. In 2009, 3.9 thousand tons of scrap were sold, resulting in revenues of R$ 6.4 million.

WAteR And eleCtRiC eneRgy ConSumPtion

2007 2008 2009Total water consumption (m³) 117.956 112.147 104.950Electric Energy (GWh) 40 46 47

mAin mAteRiAlS uSed in ComPAny ACtiVitieS

2007 2008 2009Electric conductors – copper (m) 2.196.943 2.188.807 3.077.207Electric conductors – aluminum (m) 4.905.098 4.495.627 5.227.564Steel strand (m) 406.097 261.000 488.756Electricity meters (unit) 335.505 328.407 491.415Overhead and underground distribution 2.344 2.944 2.307transformers (unit)Concrete poles (unit) 9.885 13.301 15.577Wooden poles (unit) 1.300 720 280Iron poles (unit) 7.950 14.505 18.535Wooden braces (unit) 30.200 43.240 21.540Lightning rods (unit) 40 46 47Energy and current transformers (unit) 14.037 16.791 21.291

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hAZARdouS WASte

2007 2008 2009

hazardous Waste In 2009, AES Eletropaulo built an oil insulating mineral treatment central with capacity of 900

thousand liters/year. This initiative contributed to eliminate the presence of underground tanks and reduce risks in the process performed by contractors and reduce oil transportation accidents through tank trucks on public roadways. The new area is equipped with cover, water and oil separating system, besides remote monitoring of leakages in tanks and pipes.

Hazardous waste management also included the purchase of one more gas chromatographer, equipment that monitors the quality of insulating fluids in transformers, which allowed the expansion of the number of annual analysis. These analyses check, for example, the lack of PCB¹ in the oil of electric equipment. Since 1997, the company keeps a broad program for identification, removal and destruction of transformers contaminated with PCB but also a program for monitoring to ensure the total absence of the substance.

Recycling ProgramThe purpose of the Recycling Program is to raise awareness and encourage the participation of

all employees in the reuse of administrative waste based on the separation and recycling of paper, plastic, glass, metal and printer cartridges in administrative and operational units. AES Eletropaulo discloses, among employees, the application of the 3R (reduce, reuse and recycle) concept, maintains specific garbage collection points, sells recyclable waste generated and converts the income into social projects.

¹ Utilization of combustible industrial waste and/or raw material in high temperature ovens.² Utilization for removal of additives, contaminant elements and degrading products in used or contaminated lubricant oils.

ReCyCling PRogRAm ReSultS

2007 2008 2009Paper, Plastic, Glass and Metal for recycling - m3 1.113 1.279 1.395Ink cartridges (units) 1.267 1.536 1.799

Light bulbs in public lighting (unit)

49,785 31,181 24,665 Decontamination and dispatch for recycling of metal parts

Fluorescent light bulbs (kg) 7,155 7,521 4,108 Decontamination and dispatch for recycling of metal parts

Batteries (kg) 11,198 11,580 11,820 Recycling

Materials impregnated with oil (kg)

43,046 118,975 91,231 Co-processing in cement ovens/incineration¹

Insulating mineral oil (kg) 2,344 2,944 2,307 Re-refining²

Lubricant oil (liters) 4,000 2,110 3,600 Re-refining

environmental targets for 2010- Installation of galvanized steel cross-arms to replace wooden cross-arms.

- Investment of R$ 1.5 million in measuring environmental noise, in acoustic protection and anti-erosion projects.

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enViRonmentAl indiCAtoRSenViRonmentAl indiCAtoRS

Recovery of degraded areas 2007 2008 2009 2010 target

Area preserved and/or recovered through sustainable management of plant life below the transmission and distribution lines (in ha)

37,30 37,30 37,30 37,30

Preserved area / total preserved area within the concession area, as required by law (%)

NA NA NA NA

Contribution for the increase of green areas in the municipalities through the Urban Afforestation Program ( in ha)

0 0 0 0

Isolated protected network (ecologic network or green line) within the urban area (in km)

1.672 1.942 2.135 2.377

Isolated protected network percentage in relation to the total distribution network within the urban area

9,0 10,0 11,0 12,0

Costs for environmental impact management (afforestation, sustainable management, use of protected equipment and network) (R$ 000)

45.737,00 65.267,00 68.412,8 No targets defined

Number of accidents due to violation of the environmental security norms

0 0 0 0

Number of assessments and/or fines for violation of environmental rules

5 4 2 0

Amount incurred for assessments and/or fines for violation of environmental rules (R$)

10.500,00 34.218,40 0 0

generation and treatment of wastes 2007 2008 2009 target

Emission

Annual volume of greenhouse gases (CO2, CH4, N2O, HFC, PFC, SF6) emitted to the atmosphere (in tons of CO2 equivalents)

279.771 283.303 290.115 No targets defined

Annual volume of emissions that destroy the ozone (in tons of CFC-equivalents)

4,6 5,0 4,8 No targets defined

effluents

Total effluents volume (m³) 117.956 112.700 105.169 No targets defined

Total volume of treated effluents (m³) 117.956 112.700 105.169 No targets defined

Treated effluents (%) 100 100 100 100

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Solid wastes 2007 2008 2009 target

Annual quantity (in m3) of solid wastes generated (garbage, discharges, debris, etc.)

55.750 73.875 82.593 No targets defined

Percentage of wastes sent for recycling with no association with the company


Percentage of recycled waste per unit or entity associated with the company (specific project)0

0 0 0

Waste recycling costs (R$ 000) 683,09 932,00 10,00 No targets defined

Percentage of consumption material reused (raw materials, equipment, electric wires and cables).

2007 2008 2009 target

Distribution transformers (%) 74,20 70,57 64,41 No targets defined

Energy meters (%) 42,05 32,89 31,67 100% limited to 300,000 meters returned from the system and that may be restored

Insulating mineral oil (%) 100 100 100 100

Costs for final destination of non-hazardous wastes (R$ 000)


handling of hazardous Wastes 2007 2008 2009 target

Equipment replaced by non-PCB insulating mineral oil - Askarel (%)

100 100 100 100

Percentage of decontaminated lamps in relation to the total replaced in the company (%)

100 100 100 No targets defined

Percentage of decontaminated lamps in relation to the total replaced in the consumer units (%)

ND ND ND No targets defined

Costs for treatment and destination of toxic wastes (incineration, embankment, biotreatment) (R$ 000)

301,48 2.670,93 8.356,00 No targets defined

use of resources in the production process and management processes of the organization

2007 2008 2009 target

Total energy consumption per source

_hydroelectric (%) 96 95 95 ND

96


_fossil fuels (%) 3 4 2 ND

_alternative sources (gas, eolian energy, solar energy, etc.) (%)

1 1 3 ND

Total energy consumption (GWh) 40 46 47 ND

Energy consumption per kWh distributed (sold) 0,00123 0,00137 0,00136 ND

total fossil fuel consumption by the company’s vehicle fleet per km driven

_oil (km/l) 6,90 6,35 5,87 No targets defined

_diesel (km/l) 4,30 3,86 3,86 No targets defined

_alcohol (km/l) 8,80 6,36 6,52 No targets defined

_natural gas (km/m3) 3,40 4,21 4,21 No targets defined

Total water consumption per source (m3):

supply (public system) 117.956 112.147 104.950 No targets defined

underground source (well) ND* ND* ND* No targets defined

superficial impounding (water course) NA NA NA NA

Total water consumption (m3) 117.956 112.147 104.950 ND*

Water consumption per employee (m3) 28 27 24 ND*

Cost reduction obtained by the reduction of consumption of energy, water and consumer materials (R$)

97.377,27 118.271,24 108.098,94 ND*

origin of Products - consumer material 2007 2008 2009 target

Percentage of material acquired in accordance with the environmental criteria verified by the company / total material acquired

ND* ND* ND* No targets defined

Percentage of Green Seal and other certified (Proce, Inmetro, etc. ) materials acquired

ND* ND* 44,44 No targets defined

Percentage of material acquired with forest certification ( Imaflora, FSC and other)


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environmental education and awareness – Community – in the organization

2007 2008 2009 target

Number of employees trained under the environmental education programs

4.218 4.116 4.253 100%

Percentage of employees trained under the environmental education programs / total employees

99,00 99,00 97,86 100

Number of environmental training hours / total training hours


Resources invested (R$ 000) 438,60 324,00 447,00 No targets defined

environmental educating - Community 2007 2008 2009 target

Number of elementary and secondary school units served


Percentage of schools served /total number of schools in the concession area


Number of students served 12.000 36.932 180 No targets defined

Percentage of students served /total number of students of the school network in the concession area

ND ND 0 ND

Number of qualified teachers 120 1.354 0 ND

Number of technical and high school units served ND ND 0 ND

Percentage of schools served/total number of schools in the concession area

ND ND 0 ND

Number of students served ND ND 0 ND

Percentage of students served /total number of students from the school system in the concession area

ND ND 0 ND

Resources invested (R$ 000) 1.800,00 300,00 535,00 ND

energetic efficiency Programs (Pees) focused on the culture of conservation and rational use of energy

2007 2008 2009 target

Number of low-income domiciles served by the program

71.844 74.500 80.177 45.000

Percentage of low-income domiciles served by the program in relation to the total low-income domiciles

9,75 10,23 10,99 6,16

Number of efficient equipment donated 107.907 4.786 135.026 250.000

Number of domiciles served for adequation of the electric installations of the house

500 0 600 650

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Number of electrician professionals trained by the program

0 0 0 0

Pees - Solar heating 2007 2008 2009 target

Number of solar heating systems installed 9 30 6 100

Pees municipal energetic management 2007 2008 2009 target

Number of municipalities served by the municipal energetic program

1 1 0 0

Percentage of municipalities served in relation to the total municipalities of the concession area (%)

4,2 4 0 0

R&d focused on the environment 2007 2008 2009 target

Resources invested (R$ 000) 521,00 1.295,00 2.087,00 4.119,00

Number of patents registered with the INPI (Brazilian Intellectual Property Office)

0 0 0 0

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enViRonmentAl PeRFoRmAnCe indiCAtoRS FoR eleCtRiC eneRgy diStRiBution And/oR tRAnSmiSSion ComPAnieS

Performance indicators

measurement units indicator’s purpose 2007 2008 2009

Plant life suppression

M2 of area suppressed (per quarter)

Measure the areas subject of plant life suppression either for construction of substations or for opening of access.

29.640 135.160 47.000

Lopping Volume of wastes generated per month (in m3)

Measure the lopping waste volume generated from the network maintenance.

1.576 1.122 2.041

Burnings Number of occurrences and area degraded by burnings (per year)

Measure the efficiency of preventive and corrective burning actions.

ND ND ND

Oil spill Spill points (per month)

Measure the efficiency of preventive and corrective actions for equipment oil spills.

123 114 101

Use of alternative sources in environmentally protected areas

Number of residences served

Measure the efficiency of programs aiming at mitigating impacts caused by the concessionaire in areas of great interest and under environmental protection

NA NA NA

R&D actions that favor the prevention of pollution

Physical/financial schedule on the project development

Measure the efficiency of programs aiming at establishing pollution prevention actions.

3 3 4

100


general Coordination:Márcia MagnoCommunication and Social Responsibility Office

Content guidance:Luciana AlvarezExternal Communication and Social Responsibility Management

Support:Sandra Coelho

text, editorial review, graph project and on-line schedule:Grupo TV1

Photos:AES Images DatabaseLu de FrancescoMelhor Imagem

Documents

Sustainability Report, AES Eletropaulo 2009...Sustainability Report 2009 Company Profile AES Eletropaulo, the largest energy distribution company in terms of consumption and billing