Tractebel Energia is a subsidiary of French-Belgian group GDF SUEZ, the world’s largest independent energy producer. GDF SUEZ operates throughout the entire energy value chain, in exploration and production, transportation, distribution and trading of electricity and natural gas.
Founded in 1998, the Company operates in the construction and operation of electricity generation units, and we are also active in energy trading. Our installed capacity has increased by 89% since we started our operations. At the end of 2014, we operated 27 plants, in twelve states, in all five Brazilian regions.
Guided by a consistent and sustainable expansion, Tractebel Energia operates aligned to best practices of corporate governance, being led by managers with extensive knowledge of the electricity sector.
Founded in 1998, the Company operates in the construction and operation of electricity generation units. Tractebel Energia is also an active player in energy trading.
At the end of 2014, the Company was operating 27 plants,
in twelve states, in all five Brazilian regions.
Strategy
Our strategy is to grow sustainably, with financial discipline, and maintain an efficient portfolio, based on diversification per type of industry, customer, and market (regulated and free customers, as shown in the graph below.
Contracted energy per type of customer and adopted strategic approach
(as at December 31, 2014)
* Estimated percentage.
In 2014, the total net output of electricity of the plants operated by Tractebel Energia reached 47,773 GWh (5,454 average MW), a 7.9% increase compared to 2013, a new annual record, since it exceeds the prior year’s 44,257 GWh (5,052 average MW). Of the total generated, hydroelectric power plants accounted for 40,489 GWh (4,622 average MW), up 7.1%; thermoelectric power plants accounted for 6,000 GWh (685 average MW), up 5.8%; and complementary plants accounted for 1,284 GWh (147 average MW), up 67.2%. GRI EU2
In order to retain our position as the largest private sector generator in Brazil, we aim for continuous, consistent, and sustainable growth. Either directly or through our parent company, we are always attentive to expansion opportunities in the different Brazilian regions, provided that such opportunities satisfy our economic feasibility requirements and are consistent with the concept of sustainable development. Therefore, we have been diversifying our energy matrix and the regional markets where we operate. In line with the domestic energy matrix, we prioritize renewable sources when expanding our generation facilities, although this does not mean that other sources are not taken into consideration in our expansion analyses, provided that they prove to be necessary for the country’s energy security.
The construction of large hydroelectric power plants, which represents a major share of the expansion, has been based on a model that provides for the transfer of share control from our parent company to Tractebel Energia only after the main intrinsic construction risks are mitigated. Since 2010, when we enhanced this model’s transparency, the transfer of share control is reviewed by the Special Independent Committee for Related Party Transactions, consisting mostly of board members not appointed by the parent company. GRI G4-41
Our installed capacity grew 62.5 MW in 2014. Total expansion for the year was 128.5 MW, through the merger of the generation facilities of the Ferrari Hydroelectric Power Plant, located in São Paulo, with 65.5 MW capacity, and the startup of the wind farms Fleixeiras I and Mundaú, in Ceará — each with 30.0 MW capacity and part of the Trairi Wind Farm Complex — and the Cidade Azul Solar Photovoltaic Plant, with 3.0 MW peak capacity, in Santa Catarina. On the other hand, we filed a request with the Brazilian Electricity Regulatory Agency (Aneel) in 2013 for the definitive revocation of the operation authorization and the return to the Federal Government of the Alegrete Thermoelectric Power Plant with a capacity of 66.0 MW, which is no longer cost effective.
Evolution of own installed capacity in operation
(in MW)
The construction works in the Santa Mônica Wind Farm Complex, in Ceará, with 97.2 MW of power, proceeded as normal to allow its startup in 2016. The power generated in Santa Mônica will be sold in the free market. Also in 2014, we started the expansion of the Ferrari Thermoelectric Power Plant from 65.5 to 80.5 MW, to be completed in 2015.
Another milestone in 2014 was our successful participation in the new energy auction for delivery beginning 2019, conducted in November, when we sold 386.9 average MW. This volume will be made possible by the mentioned expansion of the Ferrari thermal plant and the construction of the Campo Largo Wind Farm Complex, in Bahia, with 178.2 MW capacity in its first stage, and the coal-fired Pampa Sul Thermoelectric Power Plant, in Rio Grande do Sul, with 340.0 MW capacity.
We will maintain the predominance of renewable sources in our generation facilities in the coming years, basically through two actions. The first will be the transfer of GDF SUEZ’s equity interest in the Jirau Hydroelectric Power Plant—which will add another 1,500.0 MW in the next years to Company-owned renewable sources. The transfer of the Jirau HPP will involve the Special Independent Committee for Related Party Transactions. The second will be the scheduled, staggered shutdown of generation facilities with a long usage time in thermoelectric power plants in operation.
We also remain attentive to growth opportunities, both through mergers and construction of new projects.
Projects under Construction (as at December 31, 2014)
* It is envisaged that GDF SUEZ's stake in the project will be transferred to Tractebel Energia.
Power Plants
Type
Location
Installed Capacity (MW)
Concession/
Authorization -
original term expiration date
Total
Tractebel Energia's/
Group’s Share
Jirau*
Hydroelectric
Madeira River (RO)
3,750.0
1,500.0
Aug-43
UTE Pampa Sul – Phase I
Thermoelectric
Candiota (RS)
340.0
340.0
to be defined
Campo Largo Wind Farm Complex – Phase I
Wind Farm
Umburanas and
Sento Sé (BA)
326.7
326.7
to be defined
Santa Monica Wind Farm Complex
Wind Farm
Trairi (CE)
97.2
97.2
jan/45
Ferrari (retrofit)
Biomass
Pirassununga (SP)
15.0
15.0
jun/42
Total
4,528.9
2,278.9
Projects under Development (as at December 31, 2014)
* Thermoelectric Power Plant.
Power Plants
Type
Location
Installed Capacity (MW)
Total
Tractebel Energia's/Group’s Share
Santo Agostinho Wind Farm Complex
Wind Farm
Lajes and Pedro Avelino (RN)
600.0
600.0
Norte Catarinense TPP*
Thermoelectric
Garuva (SC)
600.0
600.0
Pampa Sul TPP* – Phase II
Thermoelectric
Candiota (RS)
340.0
340.0
Campo Largo Wind Farm Complex – Phase II
Wind Farm
Umburanas and Sento Sé (BA)
300.0
300.0
Total
1,840.0
1,840.0
CORPORATE GOVERNANCE
Our governance is based on the principles of ethics and transparency, and we endeavor to adopt the best market practices that effectively create value and management differentials.
Our Information Disclosure and Share Trading Policy, available on our website, complies with the rules of the financial market regulator’s rules. We are also focused on the consistency of our information and, beginning with this report, we now incorporate the guidelines of the Integrated Reporting framework, especially as regards the strategy to create value in the short, medium and long term.
The internal control system is based on the Sarbanes–Oxley Act (SOX). This system is continually improved and subject to annual testing and certification by management, and subsequent review by external auditors hired specifically for this purpose. The internal audit unit is dedicated to assess how financial and nonfinancial processes are conducted and the manuals and standards that are the pillars of Tractebel Energia’s management are applied.
These practices and differentials include:
Novo Mercado – Tractebel Energia is part of Novo Mercado, the segment of BM&F Bovespa with the highest level of governance practices, which surpass the requirements of Brazilian legislation.
Corporate Sustainability Index – In 2014, Tractebel Energia was one of 11 companies to have been part of the ISE for the tenth consecutive year, i.e., since the index was created. The new ISE portfolio, which will be effective until January 2016, gathers 51 stocks from 40 companies, representing 19 industries. At the closing date, November 14, 2014, these stocks totaled R$1.2 trillion in market value, equivalent to 49.9% of the total capitalization of the companies listed on BM&FBovespa.
Continuous improvement – We take into consideration recommendations such as those from the Brazilian Corporate Governance Institute (IBGC), the ISE, the ISO 26000 Guide, and the Global Reporting Initiative (GRI) in our assessments of our corporate governance continuous improvement. Since 2007 Tractebel Energia has published sustainability reports aligned with the GRI guidelines, and starting in 2013 we began to adopt the G4 version, comprehensive option. This cycle incorporates gradually the International Integrated Reporting Council (IIRC) guidelines into our communication process.
We pay special attention to equally protect the interests of all our shareholders efforts, who are ensured the following rights:
right to vote in annual or extraordinary shareholders’ meetings;
right to make recommendations to the Board of Directors using a specific channel in our website’s Investors Portal;
right to receive dividends and to participate in the distribution of profits or other distributions;
right to oversee our management in the event of circumstances provided for by Brazilian Corporate Law; and
right to receive no less than 100% of the price paid per common share of the control block, in accordance with Novo Mercado regulation, in the event of a public offering of shares as a result of sale of control (tag-along of 100%).
Arbitration – Our Bylaws prescribe that any dispute between our shareholders, especially disputes related to the capital market or corporate law, shall be settled in the Market Arbitration Chamber—an independent and confidential body linked to BM&FBovespa.
Permanent Supervisory Board – Beginning in 2013, our Supervisory Board became a permanent body, which allows enhancing controls over the disclosed results.
Board of Directors Representative in the Sustainability Committee – since 2012, one of the Sustainability Committee’s members is the employees’ representative in the Board of Directors.
Management
Management Organization Chart
(as at December 31, 2014) GRI G4-34
1 Made up of nine members: chairman, vice chairman and seven directors, four of whom are from the controlling shareholder, two of whom are representatives of minority shareholders,
and one is an employees’ representative.
2 Nonpermanent and predominantly consisting of members not appointed by the parent company.
3 Consisting of board members and parent company representatives.
Management personnel selection and
appointment GRI G4-40
The Annual Shareholders’ Meeting elects our directors based on personal and professional development, and potential contribution to our management.
In addition to the bodies depicted in the organization chart above, there are eight other committees, reporting to the Executive Committees consisting of multidisciplinary teams that provide support for planning and decision-making related to each committee’s expertise: Energy, Ethics, Risk Management, Tax Management, Innovation, Industrial Control System Security, Sustainability and Finance Committees.
Our Bylaws and the Board of Directors Internal Charter, available on our website, establish the roles of our directors and executive officers, and the power delegation rules. The Internal Charter seeks to ensure the effective contribution of our directors, as well as to establish principles, practices, accountabilities, and ethical and integrity standards to be observed by the board members.
The main roles of this body include:
setting our mission, vision, values, policies and goals;
deciding on our strategic business goals and ensuring that the organizational structures and procedures required to achieve them are created;
providing clarifications to our shareholders; and
electing and dismissing our officers and defining their roles, as well as overseeing these executives’ management.
Under our Bylaws, the Board of Directors must consist of no less than five and no more than nine members and an equal number of alternates, all elected at a shareholders’ meeting (AGA), for two-year terms, with possible reelection. In 2014, the Board had 18 members, being 9 permanent members and 9 alternate members. One of the members shall be appointed chairman and another member vice chairman of the Board. Furthermore, one of the members and his or her alternate must represent our employees and be elected through a direct vote by the employees and approved at a shareholders’ meeting. At least 20% of the board members must be independent, as required by the Novo Mercado Regulation. The chairman of the board does not hold any executive position in the Company. Currently, the directors conduct self-assessment, registered in the public minutes. GRI G4-39 | G4-44
One of the ways to strengthen sustainability actions at the Board of Directors was to appoint one director to the Sustainability Committee. In addition to this type of involvement, the chairman of the board is also involved in the definition of the Sustainability and Management Report topics. Additionally, decision making on new ventures includes social and environment concerns and not only economic and financial issues. GRI G4-43
In 2014, 43 critical concerns were reported to the Board of Directors, divided as follows: GRI G4-50
Economic/tax nature: 12;
Administrative nature: 14;
Investments: 10; and
Regulatory or market-related: 7.
Composition of the Board of Directors
(as at December 31, 2014) GRI G4-LA12
Members
Alternates
Maurício Stolle Bähr
Chairman
Patrick Charles Clement Obyn
Philip Julien De Cnudde
Vice Chairman
Pierre Victor Marie Nicolas Devillers
Antonio Alberto Gouvêa Vieira
Representative of minority shareholders
Luiz Leonardo Cantidiano Varnieri Ribeiro
Representative of minority shareholders
Dirk Achiel Marc Beeuwsaert
Gil de Methodio Maranhão Neto
Guy Marie Numa Joseph Ghislain Richelle
Luiz Eduardo Simões Viana
José Pais Rangel
Representative of minority shareholders
José João Abdalla Filho
Representative of minority shareholders
Manoel Arlindo Zaroni Torres
André de Aquino Fontenelle Canguçu
Roberto Henrique Tejada Vencato
Representative of employees
Luiz Antônio Barbosa
Representative of employees
Willem Frans Alfons Van Twembeke
José Carlos Cauduro Minuzzo
Supervisory Board
The role of Tractebel Energia’s Supervisory Board, which became a permanent body in 2013, is to analyze our financial statements, supervise the actions of the Executive Committee, review the risk management and internal control systems and, if additional services are engaged from the firm that audits our financial statements, the proposals to be submitted to the Board of Directors.
The Supervisory Board has three to five members and an equal number of alternates, elected at an annual shareholders’ meeting for one-year terms, with possible reelection.
Eight committees aligned to the Executive Board and composed by multidisciplinary teams support Tractebel Energia’s planning and decision-making
Composition of the Supervisory Board
(as at December 31, 2014) GRI G4-LA12
Members
Alternates
Manoel Eduardo Lima Lopes
Ailton Pinto Siqueira
Carlos Guerreiro Pinto
Manuel Eduardo Bouzan de Almeida
Paulo de Resende Salgado
Flávio Marques Lisboa Campos
Executive Committee
Under our Bylaws, the chief executive officer is responsible for conducting the Executive Committee’s meetings and coordinating and steering the activities of the other officers, assigning them any special role, and ensuring the enforcement of the Board of Directors’ and Executive Committee’s decisions.
The CEO and the other officers are appointed by the Board of Directors and elected by the Shareholders’ Meeting. The Executive Committee operates as a collective body, with a matrix approach to issues, within the specific assigned roles. Thus, economic issues are the responsibility of the Finance and Investor Relations Officer; environmental issues are the responsibility of the Production Officer; and social responsibility issues are the responsibility of the Administrative Officer. All these officers report directly to our CEO. GRI G4-35G4-36G4-42
Composition of the Executive Committee
(as at December 31, 2014) GRI G4-LA12
Name
Position
Manoel Arlindo Zaroni Torres
Chief Executive Officer
José Carlos Cauduro Minuzzo
Energy Production Officer
Luciano Flávio Andriani
Administrative Officer
Marco Antônio Amaral Sureck
Energy Sales Officer
José Luiz Jansson Laydner
Projects Development and Implementation Officer
Eduardo Antonio Gori Sattamini
Financial and Investor Relations Officer
Edson Luiz da Silva
Planning and Control Officer
Directors’ and officers’ compensation GRI G4-51G4-52
The Board of Directors’, Executive Committee’s, and Supervisory Board’s compensation policy takes into consideration the knowledge required, the complexity of the roles, and the expected results.
The members of the Board of Directors receive annual compensation of 13 variable installments, based on financial indicators, goals, and operating results, including sustainability-related aspects. The chairman of the board’s compensation is higher than the compensation of the other directors, and the director elected by the employees receives a bonus based on the profit sharing set for the employees.
The Executive Committee’s compensation consists of a fixed portion and a variable portion, in the form of a bonus. Benefits such as health care, life insurance, and pension plan are part of their fringe benefits.
In 2014, the total compensation of the Board of Directors was R$5.8 million, of which 19.5% was variable compensation. The Executive Committee’s compensation totaled R$14.5 million, of which 44.6% was variable compensation.
The members of the Supervisory Board receive fixed compensation in the form of management fees, which is set at the Shareholders’ Meeting, which is also responsible for electing these members. The amount paid to each member cannot be lower than 10% of the average monthly compensation set for the executive officers. In 2014 total compensation paid to the Supervisory Board was R$ 415,800.
COMPETITIVE ADVANTAGES
Readiness and management
Our management consists of experienced executives, committed to the best corporate governance practices. Our employees are prepared to couple technical know-how with a strategic, managerial vision of the business.
Synergy and tradition
The indirect parent company of Tractebel Energia is GDF SUEZ, the world’s largest independent energy producer, with installed capacity of 115.3 GW. It considers Latin America, in particular Brazil, one of its investment priorities.
GDF SUEZ has a vast experience in operating in other countries, where it operates taking into account technical, operating, regulatory and social and environmental aspects that foster process gains.
Focus on energy generation and trading
Because we do not operate in energy distribution and transmission, we maximize our human capital potential by focusing on prospection, assessment and development of new generation business opportunities, thus avoiding possible interest overlaps.
Because we operate in 12 states and in all five Brazilian regions, and because we have a diversified energy matrix, we are able to mitigate the effects of climate changes to better serve our energy sale commitments and help the country in terms of reaching its energy security.
We direct part of our generation from renewable sources, with higher margins, to free customers that demand this type of energy.
The graphs below show the customer portfolio and diversification per industry.
Breakdown of customer portfolio (as at December 31, 2014)
* Estimated percentage.
Tractebel Energia's indirect parent company is GDF SUEZ, the world’s largest independent energy producer, with installed capacity of 115.3 GW and which considers Latin America, in particular Brazil, one of its investment priorities
Strong cash generation with
economic and financial soundness
Our financial discipline, customer portfolio and energy matrix diversification, coupled with our economic and financial soundness constitute a strong differential offered to energy market customers. In December 2014 Standard & Poor’s confirmed our corporate credit ratings of brAAA/brA-1 in the Brazil National Scale, with stable prospects.
Diversification per industry
(as at December 31, 2014)
Source: Internal study based on IBGE’s classification.
Attractiveness for the capital market
Since joining BM&F Bovespa’s Novo Mercado, in 2005, Tractebel Energia has been posting a good performance, with appreciation above the Ibovespa. In addition to the competitive advantages, the following differentials contribute to our success in the capital market:
we operate in a strategic industry, with a defensive profile in times of crisis;
funding with attractive terms, excellent risk rating: the ratings obtained in 2013 were maintained in 2014;
stable financial performance , with strong cash generation, high average EBITDA margin, consistent net income, low foreign exchange exposure, and active financial management;
industry leader, as the largest private sector energy generator in Brazil;
highest market capitalization among electricity industry companies: R$22.1 billion at the end of 2014;
clear sales strategy, with appropriate contracting level for the coming years, and contracts indexed to inflation;
good cash flow predictability;
diversified energy matrix, consisting of small, medium-size, and large hydroelectric, thermoelectric, wind, photovoltaic, and biomass power plants; and
rational dividend and interest on capital payout.
The definition of the payout to be distributed depends on macroeconomic conditions, our financial position, and investment prospects. Our management’s commitment is to pay out at least 55% of adjusted net income, which is higher than the 30% provided for by our Bylaws and the 25% provided for by the Corporate Law.
In 2014, total payout will be R$775.2 million, equivalent to R$1.1875973571 per share or 55% of the distributable adjusted net income.
The annual payout defined since Tractebel Energia carried out the secondary share offer—which led to our listing in the BM&FBovespa Novo Mercado (in 2005)— is shown below.
Payout evolution – 2005 a 2014
1 Considers adjusted net income for the year.
2 Based on the closing price weighted by volume of the common shares in the period.
INTANGIBLE ASSETS
In addition to those disclosed in our financial statements, our intangible assets include: human capital, research, development and innovation, and image.
Human capital
In a competitive, high technology, highly regulated industry, which supplies an essential good to society, the development of a company’s staff is key. Thus, Tractebel Energia continuously invests in training, which allows the Company to attract and retain the best talents. In 2014, we allocated to 75,386 hours to training, development and formal qualification, or an average of 66.5 hours per employee.
To ensure the qualification of our human capital, we also have the following programs: GRI EU14
As our parent company, at Tractebel Energia we are committed to stimulate the creativity of our employees with a focus on innovating our operations. For this purpose, we maintain the program Inove, which rewards innovative ideas and projects in five categories: Operation and Maintenance, Research and Development, Sales and Business, Social and Environmental, and Management. All employees can participate, except organizational units’ managers and members of the Innovation Committee. In the last cycle, 60 projects were enrolled and seven were rewarded.
Another important tool to strengthen an innovative culture is Tractebel Energia’s R&D program, following the guidelines of Law 9,991/2010, which prescribed that electricity companies must allocate one percent of their annual net income to R&D, distributed as follows:
R&D projects: 40%;
National Fund for Scientific and Technological Development (FNDCT): 40%; and
Ministry of Mines and Energy (MME), to fund The Energy Research Bureau (EPE): 20%.
The goals of any R&D project must be submitted to the Brazilian Electricity Regulatory Agency (Aneel). The main goals of our R&D program are: training, technologic development, knowledge dissemination; minimizing environmental impacts and biodiversity research; and renewable energy research.
Tractebel Energia's corporate image is built and strengthened by its representatives attitudes and practices. The core values to achieve this are value sharing, operating efficiency, transparency, and dialogue. Permanent communication channels with the stakeholders, surveys and consultations allow to identify and assess the expectations related to operations and how Tractebel Energia’s image is perceived.
VALUE CREATION
The creation of shareholders and society value strengthens our commitment to sustainable development and integrates our corporate values. Our key aspects for value creation include financial, manufactured, intellectual, human, social and relationship, and natural capital, as illustrated in the table below – together with the Integrated Reporting principles.
Capital
Financial
Manufactured
Intellectual
Human
Social and relationship
Social and relationship
Assets
Return on investment
Plants
Facilities
Technologies
Research, Development and Innovation (R,D&I)
Qualification and training
Health and safety
Promoting ethics and integrity
Taxes
Corporate social responsibility programs: environmental improvement, cultural promotion, and social inclusion
