Direction

Description

Higher Financial Economic Performance

Improvement of technical, economic and financial management of projects and the adequacy of the financial structure to the new business management model of the Eletrobras System.

Sustainable Expansion

Eletrobras System maintenance of the leadership in the Brazilian electric sector and a more significant presence abroad, and the development of a portfolio of experiments in order to sustain their competitiveness.

Operational Efficiency

Development of revitalization plans and efficiency of assets to meet the regulatory standards and the adoption of best practices.

People Excellence and Culture of Excellence

Improvement in People Management model in the Eletrobras System.

Readjustment of Business Model, Governance and Management

Changes in Eletrobras facing the new regulatory framework in the Brazilian electric sector. They include issues such as the review of corporate logic, strengthening of statutes, the adequacy of the organizational structure of the parent company and its subsidiaries, redesign of processes and systems and sustainable management of financial resources.

Projects

Results

Early Retirement Plan (PID)

By December/2014 4,448 employees were off in all Eletrobras companies, except Eletronuclear. The final step of shutdowns at Eletronuclear is scheduled for December/2015.

·         Total Cost: R$ 2.38 billion;

·         Annual savings: R$ 1.27 billion;

·         Payback: 22.5 months.

Immediate creation at the Holding of a centralized management of regulatory affairs.

Creation in May 2014, the Regulatory Board, which has been working proactively in regulatory conformations that may affect the results of Eletrobras, besides giving appropriate treatment to warnings, notices, fines and penalties imposed on Eletrobras companies by Regulation Offices.

Standardization of Integrated Business Management System (ERP)

The following steps have been completed:

• acquisition of licenses for all Eletrobras companies;

• definition of functional requirements for adopting the systems of all Eletrobras companies;

• preparation of Reference Terms for project office service contracts to implement the integrated ERP system in all Eletrobras companies.

Steps in progress:

• definition of integration and standardization requirements necessary to consolidate information at the Holding connecting with the systems in other Eletrobras companies;

preparation of bidding documents.

Project (cont.)

Results

Review of the Strategic Plan of the Eletrobras System 2010-2020 and its updates

The contracted consulting - Roland Berger - worked throughout the year 2014 in the development of products associated with the restructuring of the current business model of the Eletrobras companies. The main results were as follows:

·         The Strategic Plan of the Eletrobras companies for the 2015-2030 period was prepared and approved by the Executive Board and the Board of Directors of Eletrobras;

·         Proposals for a new business model, contemplating models of governance and management, realignment of corporate and organizational structures have been set and are under review by management. In this context they are forwarded:

o   the restructuring of the distribution business, with the sale of a significant portion of the shareholdings to a private partner;

o   the creation of service center for business support activities to be shared by all Eletrobras companies;

o   a unified management model for the SPEs in order to make more efficient control and management of operations of these companies.

New Business Model for the Eletrobras System

Restructuring of Management Model

Restructuring of Corporate Governance Model

Optimize the organizational structures of Eletrobras companies

Restructure the Distribution business

Unified Management Model for Special Purpose Companies

Creation of Shared Services Center

Discharge activities not directly linked to concessions (business generation and electricity transmission)

In 2014, Eletrobras Chesf has taken the following measures:

• Transfer to Codevasf the costs of operating and maintaining the common use of irrigation infrastructure of irrigated perimeters of Itaparica (Oct /2014);

• Ending in Dec/2014 of the supply contracts of electricity to irrigated perimeters discharged by Codevasf;

• Litigated actions by the Federal Court regarding the exemption process providing distribution services of drinking water to the population living in rural villages of installed perimeters in Santa Maria da Boa Vista and Tacaratu (PE), and Gloria e Rodelas (BA) due to those municipalities the does not take on this burden.

Obtaining compensation for remaining value in assets of G & T with concession extended by Law 12.873/2013

Eletrobras finalized evaluation through its subsidiaries to identify complements to compensation calculated as a result of Law 12,783/13.

The following claims were submitted to ANEEL:

• Generation: Chesf and Eletronorte subsidiaries;

• Transmission: subsidiaries Chesf, Furnas and Eletrosul.

The Furnas valuation to generation is in progress.

The claim of Eletrosul of R$ 1.007 billion was recognized by ANEEL. Others are being evaluated by this agency.

Develop and implement Project Management Offices (EGP) in the Eletrobras companies

The Project Management Office of Eletrobras holding company already operates in line with the three main existing EGPs in the Eletrobras System, located in Generation, Transmission and Distribution Boards, acting in monitoring and integrated reporting of expansion projects (owned and shared properties) that are critical to the business of Eletrobras;

At the same time, licenses for the adoption of integrated software are being purchased, which should allow an electronic flow of information between the offices of companies and the offices of Generation, Transmission and Distribution boards, located at the Holding;

Also concluded: (i) Mapping Project Office in all Eletrobras companies and (ii) Maturity Level Analysis in Project Management at the Holding;

The planning of the 1st EGPs Seminar of Eletrobras companies scheduled for November 2015 was completed.

Projects (cont.)

Results

Internationalization

The Artilleiros plant in Uruguay, with 65 MW and a 50% of shareholding by Eletrobras, is in partial operation (position December/2014);

The Tumarin plant in Nicaragua, with 253 MW, and a 50% of shareholding, is under construction;

The remaining 17 projects are under study and are located in several countries in Latin America and Africa, such as Uruguay, Peru, Bolivia, Guyana, Congo and Mozambique.

Implement hired portfolio expansion projects (Generation)

In 2014, 1,169 MW were implemented;

Until May 2015, 612 MW will start into operation. This corresponds to 24% of the total of 2512.6 MW forecasted for 2015.

Prospect new expansion projects (Participation Plan in Auctions) - Generation

In 2014, Eletrobras obtained 270.7 MW (proportional to its shareholding), which corresponds 10% of the total auctioned in auctions held in the year. The amount won is 67% of the target set in BMMP for the period 2014-2018;

Implement hired portfolio expansion projects (Transmission)

In 2015, until May, Eletrobras implanted 3,218 Km of transmission lines (LT): 11% of the Km of LT target set for 2015.

The current forecast for growth in 2015 is 2,003.2 kilometers, equivalent to 86% of the initial forecast for the year.

Prospect new expansion projects (Participation Plan in Auctions) - Transmission

In 2014, Eletrobras gained 3,259 km of LT (proportional to its shareholding), which corresponds to about 50% of the total auctioned in auctions held in the year. The amount won is 31% of the target of 10,400 Km established in PDNG for the period 2014-2018.

In 2014, Eletrobras won 3,259 km of LT (proportional to their shareholding), which corresponds to about 50% of the total auctioned in the year. The amount won is 31% of the target of 10,400 Km established in BMMP for the period 2014-2018.

Implement the sale of services related to energy efficiency

It was negotiated four Consulting and Training services in ISO 50001 and Municipal Energy Management, with signature of three confidentiality agreements for project analysis to be implemented through SPE;

Approved by the Executive Board the Public Call Notice of partners for development of projects in Energy Efficiency;

Constitution of SPE for IP projects in partnership with private companies :

·    Minutes of the Bylaws and Shareholders' agreement already drafted ;

·    Budgetary, technical, financial and legal analyzes of the Business Plan already made.

Projects (cont.)

Results

Implement unified model of variable compensation (PLR) of Eletrobras companies

Analyzes with formulation of assumptions and methodology were performed to a new PLR payment model that considers, as one of the dimensions, the elements of the results reported in the Business Performance Goals Agreement (CMDE);

The Negotiation among Eletrobras and unions evolved into a pact of the PLR which is currently under development.

Perform mitigation plan of critical risks for the Eletrobras Companies

The risk map was reviewed and the critical risks, including those considered mandatory by Eletrobras holding control, were analyzed in an integrated manner with all Eletrobras Companies, coordinated by the Risk Management Area of the Eletrobras holding company and the Risk Committee of Eletrobras, which supports the Board of Directors.