Environmental
Management

Biodiversity of water bodies and habitats

Hydroelectric plants can have a direct impact on the ichthyofauna (combination of fish species existing in a given bio-geographic region) due to the inflow and outflow of water inherent to energy generation. Tractebel Energia operates its power plants in such a way as to mitigate these impacts. These include various measures to divert fish away from the plant structures or allow them to escape from the interior of the plant to the main water body. In some cases, the fish may actually have to be recovered when for some reason they become trapped inside plant installations. Once captured, the fish are immediately returned to their original habitat.

Tractebel undertakes a range of different preventive measures against the introduction of invasive species, harmful organisms and pathogenic agents which can affect the reliability of energy generation. Among these initiatives are periodic surveys of the population of golden mussel larvae, often to be found in reservoir waters and cooling systems. Among other benefits, these surveys are used to plot the reproduction and life cycles of this organic incrustation, permitting the future adjustment of control methods in accordance with the seasonal reproduction period for this species. A further initiative is the control of aquatic macrophytes to diminish the effects of eutrophication (the excessive presence of nutrients in the water), preventing their indiscriminant development and ensuring the continued multiple use of the reservoirs.

The installation of hydroelectric plants has a transformational effect on the environment with the aquatic environment becoming lentic (reservoirs have a standing water effect) for example. While this process is taking place, changes occur in the physical-chemical characteristics of the water resources. This has a direct impact on the aquatic biodiversity, more especially the ichthoyfauna. Some species find the new environment to be ideal for their survival, development and reproduction, although others are unable to adapt to the new conditions. In order to assess this process over time, Tractebel Energia has been investing in R&D projects and monitoring the ichthyofauna in the regions of the hydroelectric plants it operates. The Company also promotes the periodic release of fish fries (newly hatched fish) into the reservoirs for restocking with native species. In 2015, Tractebel Energia invested approximately R$437.7 thousand in technological projects for developing germplasm banks and the production of native fish species for replenishing the Iguaçu River. In addition, 45 thousand native fish fries were released into the reservoirs along the Iguaçu River - 23 thousand at Salto Santiago HPP and 22 thousand at Salto Osório HPP.

Another impact arising from the installation of a hydroelectric plant is the loss of habitat resulting from flooding during the reservoir filling process. In the course of this process, a good part of the brush is cleared and stranded fauna recovered and relocated to areas in keeping with the original environment. Once the reservoir is filled, a permanent preservation area must be installed with the restoration of areas degraded by construction. While not involved in the installation of any new hydroelectric plant in 2015, Tractebel Energia donated or planted 262,218 seedlings of native forest species in the areas of influence of the plants it operates.

In August 2015, work started on the Pampa Sul TPP in Candiota (RS). Various initiatives were taken towards the conservation of the biodiversity of the Pampa Biome in the region. Among these, of particular importance is the Plant Germplasm Rescue Subprogram, involving the recovery of species on the Critically Endangered Species of Flora List in the state of Rio Grande do Sul. The subprogram is responsible for the relocation of two species of bromeliad, the collection and donation of iguana hackberry and myrtaceae seeds and the transplantation of examples of the swamp corticeira. In addition, the Company also implemented the following programs:

• Fauna Recovery and Relocation Program | For relocating animals found during brush clearance in areas directly impacted by the project.
• Replanting Riparian Green Cover and the Ecological Corridor Connection | Involves initiatives for conservation of riparian and headwater green cover.
• Forestry Replacement Program | For compensating the loss of green cover as a result of plant/reservoir installation.
• Ichthyofauna Rescue and Monitoring Program | Recovery of fish found during the construction process.
• Program for Control and Eradication of Invasive Exotic Plant Species | Helps to control invasive species which compete with and crowd out native species.

The Rational Brush Clearance Plan for the installation of the Santa Mônica Wind Farm Complex begun in 2014, sets out procedures for reducing the impact on the local flora and fauna. While the Company was authorized to clear brush over a 175.1-hectare area, in practice only 28% of this area was effectively cleared. Clearance of 5.79 hectares of a Permanent Preservation Area (APP) for the installation of the project required specific licenses and the replacement of green cover in an area equivalent to twice the size of the area cleared (11.58 hectares), also located in an APP and scheduled for implementation in 2016. In addition, the brush clearance phase at the Complex was run in tandem with the Fauna Rescue and Monitoring Program. Environmental Compensation payment to the licensing body is also required by law with the funds to be allocated to Conservation Units in the state of Ceará – amounts still to be established.

Other key initiatives under the Complex´s Basic Environmental Plan (PBA) in relation to the biodiversity are the Plan for Recovery of Degraded Areas and Control of Erosive Processes; the Water Quality Monitoring Program (surface and groundwater); the Soil Quality Monitoring Program; Noise and Vibration Levels Monitoring Program; and the Environmental Education Program.

THE COMPANY OPERATES A CORPORATE HEADWATERS CONSERVATION PROGRAM WHICH BY DECEMBER 2015, HAD DIRECTLY BENEFITED 903 FAMILIES

In other areas, the Company runs a corporate program for headwater conservation jointly with government organizations and the third sector. The program contributes to the water which the community consumes, helping to reduce pathogen water-borne diseases. Initiatives also include the enclosure of areas in the vicinity of headwater springs, the construction of protective brick-built covering around springs to avoid contamination and the reforestation of the surrounding area with indigenous species. As of December 2015, 831 springs had been protected in this manner to the direct benefit of 903 families. The program was recognized in 2013 with the Brazil Environmental Award. In 2015, this same initiative was ranked third in the Von Martius Sustainability Award, Nature category.

Tractebel Energia maintains operating units located in or adjacent to protected areas and/or areas of high biodiversity value. These are:

The Company also conducts surveys of species in the areas contiguous to the reservoirs. However, there is still no consolidated number of how many species figure on the national conservation lists. In 2014, the Company began a survey in two regions of the species included on the International Union for the Conservation of Nature’s (IUCN) Red List of Endangered Species with the following results: GRI G4-EN14

Given the nature of its business and current Brazilian legislation, the Company does not substitute habitats. Rather, it practices a process of environmental compensation through the allocation of a percentage of its investments destined for the installation of the power plant projects. Hence, Tractebel Energia supports the implementation and maintenance of conservation units in the regions in which it operates such as the Parque Estadual Fritz Plaumann and the Parque Natural Municipal Mata do Rio Uruguai Teixeira Soares. The Parque Estadual Fritz Plaumann covers an area of 717.5 hectares and is one of the most important environmental protection areas in the state of Santa Catarina as well as being a benchmark for management and organization. The Company was one of the parties responsible for its installation in 2006, representing environmental compensation for the licensing of the Itá Hydroelectric Power Plant. The Company’s joint operations with government and the third sector have been crucial for protecting the park, which includes one of the few remaining stands of Uruguay River Forest (or Deciduous Seasonal Forest), part of the Atlantic Rain Forest biome and classified as critically endangered. The conservation unit is administered by the state of Santa Catarina Protection Agency (Fatma), with technical collaboration from the State Park’s Co-management Team (Ecopef) and an Advisory Board representing 19 institutions.

The Parque Natural Municipal Mata do Rio Uruguai Teixeira Soares in the municipality of Marcelino Ramos in the state of Rio Grande do Sul is a Conservation Unit of 423 hectares. The conservation unit was donated to the community by the Itá Consortium of which Tractebel Energia is a part. The park was developed as environmental compensation (also for the licensing of the Itá Hydroelectric Power Plant) by the Brazilian Institute for the Environment and Renewable Natural Resources – IBAMA. The reason for selection and acquisition of the location for the park in the 1990s was similarly due to the existence of some of the remaining stands of Deciduous Seasonal Forest. The area represents a genetic bank, serving to replenish and maintain the region’s flora and fauna, including several species on the critically endangered list. Another notable characteristic of the park is management conducted on a participative basis with the support of an Advisory Council, its members drawn from 16 local institutions.

In 2015, no impacts on the biodiversity due to the introduction of substances that do not occur naturally in the habitats were identified. Furthermore, no monitoring and measurement of changes in habitat, ecological processes and direct and indirect impacts on affected species were conducted. Similarly, no measurement was made of the extent of impacted areas and reversibility or irreversibility of the impacts.

TRACTEBEL ENERGIA SUPPORTS THE INSTALLATION AND MAINTENANCE OF CONSERVATION UNITS IN THE REGIONS OF INFLUENCE SURROUNDING ITS UNITS

Water

Water withdrawal by the Company is regulated and inspected by the official agencies responsible for each region. In situations representing risks to water sources, withdrawal is suspended. Monitoring of quality indicators of water discharged into water bodies is conducted periodically using physical-chemical and biochemical analyzes in order to prevent pollution and/or contamination of the water source. The discharge of water used in the cooling systems of thermoelectric power plants complies with the standards required by the current legislation. In 2015, Tractebel Energia discharged a total of 842,031,622.98 m³ of water on a planned basis at a quality compatible with current legislation. GRI G4-EN22

The Charqueadas, Ferrari, Ibitiuva, Wiliam Arjona, Lages and the Jorge Lacerda Thermoelectric Plants operate on a closed circuit basis, recycling the water used in the generation process. The following table shows the percentage portion and volume of water recycled and reused in relation to total consumption.

Fuels

Tractebel Energia’s Policy on Climate Change incorporates measures for reducing the consumption of fossil fuels, among these the preferential use of flex-fueled vehicles, the engagement of collective passenger transportation services at the majority of plants and the use of conference calls and video conferencing. The following tables show the consumption of fossil fuels and energy intensity for 2015 and 2014.

Reduction of energy consumption GRI G4-EN6 G4-DMA (Energy)

The Jorge Lacerda Thermoelectric Complex accounts for 76.6% of installed capacity in Tractebel Energia’s entire thermoelectric generation complex. The JLTC recorded a slight year-on-year increase of approximately 0.5% in energy consumption during 2015. The result reflects largely shortfalls in output at UTLA, the most efficient plant in the Complex. The main causes were: the formation of ash deposits, a fault in the feed water heater and increased consumption as well as reduction in efficiency of UTLA2 due to natural wear and tear of the equipment (overhaul scheduled for 2016/2017). However, there was no significant decline in consumption at UTLA1 and UTLB, principally due to initial installation work on investments, overhauls and corrective maintenance work in 2015 and improvements in operational and maintenance procedure.

In 2016, the Company envisages greater reductions as a result of the implementation of investments at UTLA1 (new precipitator, replacement of turbine vanes, new condenser and economizer) and the start of other actions and adaptations at UTLA2: combustion system, BP turbine and automation modernization. In relation to auxiliary energy consumption, there was a 0.5% reduction in relation to 2014.

THE COMPANY ENVISAGES ADOPTION OF MEASURES TO REDUCE FOSSIL FUEL CONSUMPTION, AMONG THEM, THE PREFERENTIAL USE OF FLEX-FUEL CARS

Waste

Tractebel seeks to dispose of waste generated from its units in an environmentally correct manner and, wherever possible, to promote its reuse or recycling. The Company neither imports nor exports waste, insists that the companies engaged for final disposal comply with the appropriate environmental legislation, particularly Law 12,305/2010, which introduced the National Solid Waste Policy.

THE WASTE FROM TRACTEBEL ENERGIAS’S UNITS IS DISPOSED CORRECTLY IN LINE WITH THE CURRENT LEGISLATION SUCH AS THE NATIONAL SOLID WASTE POLICY

The Company sells fly ash from its coal-fired thermoelectric plants to the cement industry as part of its commitment to the corporate Policy on Climate Change. The use of fly ash contributes to the reduction in CO₂ emissions by substituting limestone in cement manufacture. Ash from the biomass plants is used in agriculture to replace conventional agricultural inputs, among these limestone.

On the other hand, bottom ash is used as foundation material for highway asphalting. This same material is also used to neutralize soil acidity in the recovery of coalmine tailings due to their high pH. Some of the bottom ash from the Charqueadas Thermoelectric Plant is returned to coal mining areas and used for the environmental recovery of land directly contiguous to the mine affected by coal mining activities.

Emissions

Based on the emissions from the plants for which it has operational control, Tractebel Energia reported a total year-on-year decline in 2015 of 4.11% from 6,413,949.50 tCO₂e in 2014 to 6,150,621.41 tCO₂e in 2015. There was a reduction in Scopes 1 and 2 and an increase in emissions under Scope 3.

The evolution in GGEs taking the corporate stake  approach is intrinsically related to the operational control approach, emissions varying proportionally to Tractebel Energia’s shareholding stake in the plants. Hence, it can be argued that there has been a reduction in total GGEs.

In addition, the Tubarão Wind Farm is shown as part of Tractebel Energia’s generator complex given its 100% operational control and 100% stake in the project although plant emissions are insufficient to have any impact on Tractebel Energia’s aggregate emissions (growth of 11.20 tCO₂e in 2015 emissions).

In the light of the data shown above, there was a decrease in Tractebel Energia’s emissions in 2015 compared with 2014 of 4.13%, in line with a similar decrease taking the operational control approach, of 4.11%.

From the point of view of plants operated by the Company, emissions of substances which deplete the ozone layer amounted to approximately 0.21t of hydrochlorofluorcarbons – HCFC (R-22), corresponding to 374.67 tCO₂e. On the other hand, taking the corporate stake approach, emissions amounted to 0.24 t of R-22, corresponding to 438,35 tCO₂e. This gas is used in refrigeration equipment and air conditioning installed at the Company’s units. GRI G4-EN20

The Standards and Methodologies used for measurement were:

• ISO 14064-1:2007 - Greenhouse Gas Effect - Specification and guidance to organizations for quantifying and preparing reports on emissions and removal of greenhouse gases
• Brazilian GGE Program Protocol.

Tractebel Energia’s full Emissions Inventory for 2015 (and all its Subsidiaries) can be found in Attachment I of this Report.

Investments

The principal environmentally-dedicated investments made in 2015 were distributed as shown in the following table.