GRIG4-1

In 2014, a year marked by a severe drought, Tractebel Energia maintained its consistent results trend. Its net income was R$1.4 billion, basically the same as in 2013, but still 3.7% lower, despite the considerable increase in costs incurred to replace electric energy that was not able to generate.

The diversity of its energy sources, coupled with a coordinated planning and supply control, contract portfolio, and plant maintenance management, allowed the Company to face better the challenges arising from lower rainfall, and confirms the resilience pointed out by the market as one of its main differentiating features. The successful efforts in tax, regulatory and legal areas also contributed in terms of non-recurring gains, without which the net income would have been 17.7% lower than in 2013.

In January 2014 Tractebel Energia shares became once again part of the Ibovespa, the main index of the Brazilian stock market. In December, as has happened since 2012, we closed the year with the highest market capitalization in the Brazilian electric energy sector: R$22.1 billion.

As proof of soundness and credibility, the Company ratings remained at BBB in the international scale and AAA in the domestic scale, and the sustainable development-focused management has kept part of the BM&F Bovespa’s Corporate Sustainability Index (ISE) for the tenth consecutive year, which has been included in the index since it was created in 2005 – a feat shared with only ten other companies.

The largest private sector energy generator in Brazil, Tractebel Energia is a subsidiary of GDF SUEZ, the world’s largest independent producer of electric energy, which, through its president, Gérard Mestrallet, declared in 2014 its intention of reaching the same leadership position in Latin America within three years. Aligned with this goal, despite the low industrial performance scenario currently experienced in Brazil, the Company has confirmed the growth strategy, which is consistent with the country’s energy needs. At the new electricity auction held on November 28, for supply starting in 2019, the Company sold 386.9 average MW. This supply will be made possible with the expansion of the biomass-fired Ferrari Thermoelectric Power Plant, in São Paulo, corresponding to 9.8 average MW, and the construction of two new plants: the Campo Largo Wind Farm in Bahia, with an output of average 82.6 MW, and the Pampa Sul Thermal Power Plant, in Rio Grande do Sul, with an output of average 294.5 MW.

The construction of a new coal-fired plant represents an opportunity to contribute to the expansion of Brazil’s strategic reserve in low rainfall periods, such as the one that has been experiencing since the end of 2012. Note that the Brazilian power matrix depends mostly on renewable sources and Tractebel Energia’s power generation complex follows this feature. As at December 31, 2014, 84.1% of its own installed capacity of 7,027.2 MW, refers to renewable sources, especially hydroelectric plants, which total 5,629.8 MW, plus 278.4 MW from wind and biomass.

Actions planned for the coming years, such as the scaled shutdown of fossil fuel generation units which have been operating for a long time, and proceeding with the expansion of our generation facilities, especially using renewable sources, indicate that the future share of renewable sources in energy generation matrix will be even higher compared to nonrenewable sources.

With the same intention in mind, in 2014 was initiated not only the Ferrari expansion works but also the construction of the Santa Mônica Wind Farm in Ceará, which will have an installed capacity of 97.2 MW. In 2014 also started commercial operations in the Fleixeiras I and Mundaú wind farms, which have installed capacity of 30 MW each. These wind farms are part of the Trairi Wind Farm Complex, also in Ceará - which with these additional 60 MW now has a total installed capacity of 115.4 MW integrated into the National Interconnected System (SIN).

The largest solar power plant in Brazil also started commercial operations in 2014. The successful result of a research and development project led by the Brazilian Electricity Regulatory Agency (Aneel) and developed by Tractebel Energia in association with other companies and the Federal University of Santa Catarina, the Cidade Azul solar photovoltaic power plant has peak capacity of 3 MW and is the first solar power plant connected to the SIN.

As regards the plants in operation, new investments were made to upgrade and increase the efficiency of the Passo Fundo, Rio Grande do Sul, Salto Santiago, Paraná, and Ponte de Pedra, Mato Grosso do Sul hydroelectric power plants. The continuous improvement of generating facilities contributes to high availability levels; in 2014 this index was 96.5%, not considering scheduled shutdowns, which was especially significant considering the additional demand from thermal plants.

The diversity of Company's power sources, coupled with a coordinated planning and supply control, contract portfolio, and plant maintenance management, allowed Tractebel Energia to face better the challenges arising from a shortage of rainfall

The Company remains attentive to the communities neighboring our projects. In April 2014, in Quedas do Iguaçu, PR, it was opened the fourth Cultural Center sponsored by Tractebel Energia. Like its counterparts, this center is independently managed by a local association with a proven track record in managing cultural projects. Furthermore, in October was celebrated the first year of operation of the Tractebel Environmental Park, in Capivari de Baixo, SC, which has already welcomed 100,000 visitors.

As in previous years, the Company obtained important acknowledgments. From those who build its history, an organizational climate survey responded to by 76% of its employees reported a 74% satisfaction index, and 82% of the respondents stated they were proud to work at Tractebel Energia. The customer survey reported a 94.8% favorability index. The environmental management received from Chamber of Commerce of Rio de Janeiro Brasil Ambiental Award in two categories: Social and Environmental Responsibility and Atmospheric Emissions.

In terms of corporate stance, the Brazilian Institute of Business Ethics has distinguished as an outstanding entity in the Most Ethical Companies in Brazil Ranking; the financial statements received for the fifth time the Transparency Award from the National Association of Finance, Management and Accounting Executives (Anefac); and fund managers interviewed by the Institutional Investor magazine considered Tractebel Energia’s investor relationship program the best in Latin America.

Many challenges await the electricity industry in 2015, especially finding ways to compensate for the water shortage. Increased regulatory clarity and stability could help improve the industry’s management and security. In 2014, a promising sign from the Federal Government in this regard was the establishment of more realistic ceiling prices in the auctions conducted, which ended up attracting more investors with the actual capacity to honor the commitments assumed.

The Company and its parent company GDF SUEZ belief in Brazil’s potential. As part of future expansion, two new projects have strengthened wind power’s importance for and share in generating facilities as a whole. In addition to Campo Largo, which at the end of 2018 should reach installed capacity of 326.7 MW and an additional potential of approximately 300 MW, the Company has acquired the Santo Agostinho Complex, in Rio Grande do Norte, with potential of 600 MW. The business plan also includes evaluating new solar power projects, both to be interconnected with the SIN and for distributed generation.

Another major share of the Company´s growth planned for the coming years should be driven by the transfer of GDF SUEZ’s 40% stake in the Jirau Hydroelectric Power Plant, in Rondônia. Of the project’s 3,750 MW installed capacity, 1,500 MW will be added to Tractebel Energia’s capacity, which means the share of renewable sources will be even greater. Part of the UN’s Clean Development Mechanism, Jirau closed 2014 with 22 of its 50 generation units in operation, each with 75 MW of power. The transfer of this asset could start in 2015 and should be completed in 2016, in a process to be conducted with the necessary transparency, especially by involving the Special Independent Committee for Related Party Transactions.

New opportunities to expand the country’s power supply could arise as a result of the legal and regulatory easing of private sector participation rules for industries such as natural gas and nuclear power, in which GDF SUEZ has a proven track record.

We close this message sharing the joy for our achievements with those without whom none of this would be possible. Our sincere appreciation to the employees, customers, shareholders, service providers, suppliers, and partners of Tractebel Energia, and all those governmental and nongovernmental organizations with which we interact and share efforts to build a power sector increasingly more suited to the needs of Brazil.