Sustainability Report 2009 by Light S.A

Annual Sustainability Report

2009

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Annual Sustainability Report

Brief profile Light is present in the lives of 10 million people scattered across 31 municipalities in the state of Rio de Janeiro. The electricity provided by Light drives both their lives and the economy. It brings with it efficiency, day to day reliability, technology and environmental awareness and encourages the efficient use of electricity.

Grupo Light, with its headquarters in the city of Rio de Janeiro, serves the needs of more than ten million people in Rio de Janeiro. is composed of the following companies - Light S.A., holding; Light Serviços de Eletricidade S.A. (Light SESA), distribution; Light Esco Ltda. (Light Esco), commercialization; and Light Energia S.A. (Light Energia), generation and transmission, amongst other companies.

Light began a major investment program in 2009 intended to improve electricity supply infrastructure and supplement its initiatives in the low-income communities. It was actively involved in urban development initiatives and the stimulation of culture, education, spor and the spread of knowledge. The voluntary participation of these communities on the Light Consumer Council reflects the scale of the effect of its efforts on its target public. On December 31 – 2009 Grupo Light capital comprised: BNDESpar, 24.4%; public, 23.5%; and 13.03% for each of the following companies: Companhia Energética de Minas Gerais (Cemig), Andrade Gutierrez Concessões S.A. (AGC), Luce Empreendimentos e Participações S.A. and Rio Minas Energia S.A. Indicators [2.1][2.2][2.3][2.5][2.6][2.9] Area covered [2.8]

Organograma

Electricity distributed Light SESA’s free captive customers over an area of 10,970 km² consumed 21,492¹ GWh in 2009, a volume which represents an increase of 2.7% on the preceding year’s figures. Including CSN, CSA and Valesul, this volume increases to 23.170 GWh. The current electricity distribution concession runs till 2026. Light SESA is currently Brazil’s fourth largest distributor in terms of the number of clients serviced and fifth largest in terms of volume of electricity distributed, according to the figures provided by the Electricity Research Company (EPE) linked to the Ministry for Mines and Energy. 1 – In order to maintain the comparison with the market homologated by ANEEL in the Rates Review, electricity and demand billed to the following industrial clients was excluded: Valesul, CSN and CSA, due to their migration to the High-voltage national grid. These clients consumed 1,678 GWh and demand stood at 8,270 GW in 2009. Transmission and Distribution Infrastructure [EU4] Distribution Lines (km) Transmission Lines (km) Overhead¹ Underground² Overhead Underground MT BT MT BT Light © 2010. All rights reserved.

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Annual Sustainability Report

18.987 31.579 3.259 1.440 1.871,84 163,04 ¹Overhead grid – Utilized in medium and low load areas. Its use is preferable due to lower installation and maintenance costs. However, it is more vulnerable to external influences. This option is predominant in Light’s distribution system and that of the country’s other concession holders.

²Underground grid – Utilized in high load areas and urban regions where design requirements so dictate. This option involves muc higher construction costs. Advantages: reliability – less likelihood of faults arising as these grids are protected from external influences. Disadvantages: harder to maintain and repair due to difficulty in accessing installations. One hundred percent hydraulic generation The 4,695,076 net MWh¹ of electricity produced in 2009 is 7.8% greater than the 2008 total. It should be emphasized however that hydraulic generation capacity is dependent upon the average flow rates occurring in the Paraiba do Sul and Ribeirao das Lajes basins. Over the last five years these figures have fallen below the average rate recorded during the last thirty years whereas the rates for 2009 where equal to or slightly greater than average. Light Energia is the country’s sixth largest private hydraulic energy generating company, with an installed capacity of 855 MW, according to the figures supplied by Abrage (Brazilian Association of Major Electricity Generating Companies). Its generating capacity comprises five plants and two elevators in the states of Rio de Janeiro and Sao Paulo.

1 Gross generating capacity less own consumption, water pumping and technical losses. Purchase and sale of electricity Six hundred and forty-six GWh where negotiated in bilateral contracts in the Free Contracting Environment in 2009 – 100% of the electricity commercialized by Light – and also on the spot market, brokered by CCEE (Chamber for the Commercialization of Electrical Energy). Specializing in customized electrical energy solutions developed in partnership with its clients, Light Esco is a leading player in the commercialization of electricity both in the free and alternative/incentivized markets and in the provision of infrastructure services sector. The company commercialized 1,703 GWh in its trading and brokerage activities in 2009 – an increase of 2.5% on the preceding year’s figures.

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Annual Sustainability Report

Light and its market [2.7] Total electricity consumption With a 2.7% increase in overall consumption and a 1.7% increase in the number of clients billed on the 2008 figures, Light’s performance in 2009 exceeded that of the Southeastern region as a whole, which shrunk by 2.4% according to the data provided by EPE (Energy Survey Company).

Captive and free clients¹ within the concession area consumed a total of 21,492 GWh in 2009, a figure which rises to 23,170 GWh if the consumption of CSN, Valesul and CSA are included. The captive market, which took up 89% of distributed volume, was the main factor responsible for the increase in Light’s total consumption for the year. The table below contains a breakdown of consumption figures based on client type and category. Consumption according to category 2008

2009

2009 - 2008

GWh

Class and type of client

Variation (%) 2009 vs 2008 4,3% 6,7% -0,9% 3,8% 3,0% -8,7%

Captive 18.292 19.084 792 Residential 7.388 7.880 492 Industrial 1.875 1.857 -18 Commercial 5.852 6.074 222 Others 3.177 3.273 96 Free1 2.636 2.408 -228 Residential Industrial 2.194 1.900 -294 -13,4% Commercial 277 339 62 22,4% Others 165 169 4 2,4% Total 20.928 21.492 564 2,7% Residential 7.388 7.880 492 6,7% Industrial 4.069 3.757 -312 -7,7% Commercial 6.129 6.413 284 4,6% Others 3.342 3.442 100 3,0% ¹ In order to maintain the comparison with the market homologated by ANEEL in the Rates Review, electricity and demand billed to the following industrial clients was excluded: Valesul, CSN and CSA, due to their migration to the Highvoltage national grid. These clients consumed 1,678 GWh and demand stood at 8,270 GW in 2009. The number of captive clients billed was approximately four million with thirty-two million free clients billed during the same period (three of which were self-producers) as illustrated in the table below. In addition to the free clients there are a further nine generators connected to the Company’s distribution grid. The following table provides details relating to the number of consumer units. Number of consumer units [EU3] Light © 2010. All rights reserved.

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Annual Sustainability Report

2007 2008 2009 Number of accounts billed (with and without consumption) 3.880.527 3.928.6893.995.916 – Regulated consumers RESIDENTIAL 3.575.553 3.624.4253.688.998 INDUSTRIAL 12.794 12.164 11.749 COMMERCIAL 269.905 269.088 271.768 RURAL 10.900 10.904 11.072 GOVERNING BODIES 9.502 9.981 10.177 PUBLIC LIGHTING 195 417 525 PUBLIC SERVICES 1.251 1.382 1.300 OWN CONSUMPTION 427 328 327 SUPPLEMENT Number of free consumers 30 32 32 INDUSTRIAL 20 19 18 COMMERCIAL 9 12 13 PUBLIC SERVICES 1 1 1 Captive energy market Consumption in the captive energy market increased by 4.3% in comparison with the 2008 figures, mainly in the commercial and residential sectors. The major contributory factor to this rise was the average temperature recorded this year, which was 1.1 °C above the 2008 average. Total billed consumption for the year was 19,084 GWh, an increase of 792 GWh on the preceding year which more than offset the 0.9% (18GWh) drop in industrial consumption attributable to the economic crisis. captive market consumption

Share of captive market (%) Variation in consumption 2009-2008 (%) Number of clients billed Variation in nº of clients 2009-2008 (%)

Residential 41,3

Commercial 31,8

+ 6,7 » 3,689,000 + 1,8

Industrial

Overview of

Others 9,7

17,2

+ 3,8

- 0,9

+ 3,0

» 272,000 +1,0

» 12,000 -3,4

» 23,000 +1,7

Average annual consumption for residential clients rose by 5.3% (or 179.5kWh) in comparison with 2008 (170.5 kWh). In the case of the captive industrial sector, the sectors most affected by a drop in consumption due to the financial crisis were metallurgy, manufacture of metal products, rubber and plastic goods and chemicals and pharmaceuticals.

Three of Light’s clients migrated to the free market in 2009: one from the commercial sector (hospitality industry), with an average monthly consumption of 1 GWh and two from the industrial sector, one from the steel sector and one from the publishing sector, which jointly accounted for an average monthly consumption of 4 GWh. In relation to the remaining categories, the positive performance of the rural sector (1.4%), government bodies (7.4%), and water, drainage and sanitation (1.1%) were the factors tha most influenced the 3% growth recorded. Light © 2010. All rights reserved.

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Annual Sustainability Report

Free market and concession holders Billed demand to free consumers¹ and the following concession holders - Ampla, Energisa Nova Friburgo and Cemig grew by 1.7% in relation to 2008, totaling 24,548 GW for the year. The 6.4% increase in demand of concession holders offset the 5.6% fal in demand by free clients during the period mainly attributable to the fall in billed demand by a major client in the steel sector. NB: Volumes quoted refer to annual sum of GW billed each month and covers both peak and off-peak periods.

The impact of the 8.7% shrinkage in the billed consumption of free clients was offset to a degree by the 5.2% increase in the volum of energy supplied to the three concession holders that border Light’s concession area, which amounted to 2,756 GWh. The drop in billed consumption of the free clients(1) was mainly due to the reduction in consumption of clients in the metallurgy and steel production sectors and the return to the captive market of three clients (two in the foodstuffs sector and one in the chemical sector, representing an average total monthly consumption of 15 GWh). Transportation of energy to free clients(1) and concession holders using the Light grid amounted to 5,164 in 2009. Despite the fact that the volume carried was 1.7% down on the preceding year this drop had little significant impact on the distributor’s revenue, given that billed demand (greatest value in KW between contracted demand and maximum registered demand at a determined

interval of time) is the principal parameter for the revenue that these consumers produce for Light. ¹ - In order to maintain the comparison with the market homologated by ANEEL in the Rates Review, electricity and demand billed to the following industrial clients was excluded: Valesul, CSN and CSA, due to their migration to the High-voltage national grid. These clients consumed 1,678 GWh and demand stood at 8,270 GW in 2009. Energy balance

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Annual Sustainability Report

Light and its personnel The increasing number of women on Light’s payroll and the fact that it has reached and surpassed a number of human resource targets, such as those relating to the number of hours given over to training, the scope of the appraisal system, the grooming of successors and employee satisfaction with the Quality of Life program are just some of the achievements of its personnel in 2009.

Light – Personnel profile Number of employees 2009 2008 Variation 3,694 3,732 - 1% Payroll - Composition Gender ParticipationAverage Average age Average salary % period (years) employed (years) Men 76.9 16.4 41.4 2,738.34 Women 23.1 8.6 36.6 2,771.21 General 100.0 14.6 40.3 2,746.04 Ethnic distribution - % White Black Asian and Indigenous 60.5 37.6 1.9 Persons with disabilities Hired in 2009 Total Distribution by gender 27 173 Men 52% Women 48% The number of women employed by Light grew 23.1% in comparison to the 21.9% recorded in 2008. The benchmark for the southeast region’s electricity generation, transmission and distribution companies at the close of 2008 was 24% of the total of those involved. Under these circumstances, Light would rank third amongst the ten companies considered. The training and qualification o women by the Light Academy’s School of Electricians was a significant step in increasing the participation of women in the traditionally male-oriented energy sector. This initiative resulted in the hiring of the first three women electricians to be employed by the company. The low number of women currently employed by its operational division results in their average salary exceeding tha of their male counterparts (see table below). The majority of the women on Light’s payroll are university graduates occupying professional positions within the company. (41.10%) [LA13]

[LA13] Composition of governance bodies and breakdown of employees per category according to gender, age group, minority group membership, and other indicators of diversity - 2007

Race Yellow

Administrative Board Management Female Male Female Male Female Male < 3030-50> 50< 3030-50> 50 < 3030-50> 50 < 3030-50> 50 < 3030-50> 50 < 3030-50> 50 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 2 0 Light © 2010. All rights reserved.

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Annual Sustainability Report

White 11 Indigenous 0 Dark 7 Black 0 No Information 13 Total 32

Race Yellow White Indigenous Dark Black No Information Total

25 9 7 0 1 1 13 4 2 3 2 0 20 7 10 62 24 20

27 0 26 4 27 84

33 0 15 2 30 80

0 0 0 0 0 0

1 0 0 0 0 1

0 0 0 0 0 0

0 0 0 0 2 2

4 0 0 0 1 5

1 0 0 0 0 1

24 0 7 1 11 43

6 0 0 0 1 7

4 78 37 0 1 0 1 13 7 0 0 1 1 38 14 6 132 59

Operational Professional Technical Female Male Female Male Female < 30 30-50 > 50 < 30 30-50 > 50 < 30 30-50 > 50 < 30 30-50 > 50 < 30 30-50 > 50 < 3 0 0 0 4 0 1 1 0 0 0 2 1 1 1 0 0 0 0 26 151 21 28 91 23 28 98 71 50 64 5 6 0 0 0 0 6 0 0 0 0 0 0 1 4 2 0 0 0 0 17 159 31 3 17 3 2 23 8 35 32 3 2 0 0 0 6 57 14 2 5 0 1 2 4 4 14 0 1 1 1 2 74 412 113 10 51 13 23 70 53 82 100 3 11 1 1 2 127 785 180 44 164 39 54 195 138 176 213 11 21

[LA13] Composition of groups responsible for corporate governance and breakdown of employees by category, according to gender, age group, minorities and other indicators of diversity - 2008 Administrative Board Management Female Male Female Male Female Male Race < 30 30-50> 50 < 3030-50> 50 < 3030-50> 50 < 30 30-50> 50 < 3030-50> 50 < 3030-50> 50 Yellow 2 1 2 White 24 34 14 22 31 31 1 1 6 1 23 5 3 71 39 Indigenous 1 1 1 1 Dark 12 16 5 10 19 19 8 1 12 8 Black 1 5 4 3 5 3 1 No Information 5 11 7 5 14 20 7 2 24 15 Total 45 67 31 40 69 73 0 1 0 0 1 6 1 39 7 4 110 63

Race Yellow White Indigenous Dark Black

Operational Professional Technical Female Male Female Male Female Male < 30 30-50> 50 < 3030-50> 50 < 3030-50> 50 < 30 30-50> 50 < 3030-50> 50 < 3030-50> 50 5 1 2 2 2 1 1 6 1 70 195 33 47 98 26 38 115 72 89 123 10 107 261 71 1 5 1 3 1 8 1 1 40 187 48 4 15 5 6 21 8 37 48 7 41 176 28 12 62 24 4 6 1 3 1 6 15 12 41 6 Light © 2010. All rights reserved.

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Annual Sustainability Report

No Information Total

2 3

1 17 231 94 1 145 681 201

10 28 10 67 147 41

18 63

41 57 7 32 1 15 264 93 182 140 142 220 18 175 756 199

[LA13] Composition of groups responsible for corporate governance and breakdown of employees by category, according to gender, age group, minorities and other indicators of diversity - 2009 Administrative Board Management Female Male Female Male Female Male Race < 3030-50> 50 < 3030-50> 50 < 3030-50> 50 < 3030-50> 50 < 3030-50> 50 < 3030-50> 50 Yellow 2 1 1 1 3 White 92 146 29 57 85 49 1 1 23 44 3 59 40 Indigenous 4 1 1 3 1 1 Dark 31 60 18 16 43 37 8 2 1 13 9 Black 3 17 4 4 9 5 1 1 No Information 8 29 11 9 49 62 7 7 28 16 Total 140 254 63 86 190 154 0 1 0 0 1 7 0 44 46 4 104 66

Operational Professional Technical Female Male Female Male Female Male < 30- > < > < < 30- > < 3030-50 > 50 30-50 30-50 > 50 < 3030-50 > 50 Race 30 50 50 30 50 30 30 50 50 Yellow 4 1 2 3 2 2 6 1 White 68 178 33 41 117 22 32 105 80 12 15 3 67 193 64 Indigenous 1 4 1 1 1 3 Dark 4 1 59 169 51 3 18 4 10 22 8 11 11 2 32 138 20 Black 12 59 21 4 5 3 2 4 6 40 6 No Information 25 182 98 17 26 8 36 32 52 1 14 1 11 223 70 Total 4 1 0 169 593 205 68 166 34 78 163 143 26 44 6 119 603 161 * Various positions in the commercial sector were altered and moved from the technical category to the administrative category in 2009. Light currently employs 173 professionals with specialist skills working in its administration, customer services, billing and virtual agency sectors, amongst others. The number of female employees and the appointment of a female to its board of directors in 2009 are particularly noteworthy. The individuals appointed at that time were selected from a specifically designed training program drawn up and run by the Light Academy. Light is now faced with the challenge of holding on to these individuals due to the widespread demand for qualified personnel by companies who have yet to comply with the Quotas Law. In 2009 the turnover for this group was 12.65%. In order to hold on to these employees and reduce this migration percentage Light introduced a comprehensive continuous education program specifically for these employees in 2008. This initiative is updated on a yearly basis in order to ensure that it addresses all the requirements identified. On the other hand, the company’s overall turnover fell to 8.34% in 2009 from the 11.92% recorded the preceding year [LA2] , conforme tabela a seguir.

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[LA2] Total number of employee turnover by age group, gender, and region. 2007 Age Range Region Greater Rio Total Greater Rio No info/ Upstate Total No info/ Upstate Grand total

Gender F M

F M

< 30 > 50 30-50 21 25 45 29 176 112

2008 Age Range Grand total 91 317

< 30 > 50 30-50 23 17 43 42 110 152

2009 Age Range Grand total 83 304

< 30 > 50 30-50 18 18 20 36 83 94

Grand total 56 213

50 201 1 5 11 18

157 2 15

408 8 44

65 127 1 1 8 24

195 1 23

387 3 55

54 101 2 6 17

114 14

269 2 37

12 23 62 224

17 174

52 460

9 25 74 152

24 219

58 445

8 17 62 118

14 128

39 308

[LA2] Rate of employee turnover by age group, gender, and region. 2007 2008 2009 Age Range Age Range Age Range Grand Grand Grand Region Gender < 30 > 50 30-50 total < 3 0 > 50 30-50 total < 3 0 > 50 30-50 total Greater F 8.80% 30.50%9.80%11.60% 9.35%17.89% 9.53% 10.48% 7.89%18.00%4.11% 6.87% Rio M 8.00% 31.30%6.90%12.40% 11.70%19.20%10.48% 12.76% 9.00%13.50%7.01% 9.04% Total Greater Rio 8.30% 31.20%7.50%12.20% 10.74%19.01%10.25% 12.19% 8.60%14.13%6.24% 8.48% F 7.10%500.00%9.10%21.60% 8.33%33.33% 4.35% 7.89% 20.00% 0.00%0.00% 5.13% Upstate M 20.40% 17.80%3.90% 8.20% 11.76%23.30% 6.61% 10.60% 10.34%14.91%4.49% 7.64% Total Upstate 17.60% 21.60%4.20% 9.10% 11.25%23.58% 6.47% 10.41% 11.76%14.05%4.19% 7.46% Grand total 9.20% 30.00%7.00%11.80% 10.80%19.64% 9.63% 11.92% 8.91%14.11%5.92% 8.34% The ethnic profile of Light’s employees is similar to that obtained by the 2000 IBGE Census of the population within the area in which the concession operates, having taken into account the fact that it requires all candidates for employment to have completed their secondary education and to be at least 18 years of age.

In addition to its own staff, the company has 7,689 personnel employed by outsourced service providers, all of whom have an indefinite employment contract [LA1]. Only those employees working in the Emergency division are subject to a 180-hour month; other employees work a 220-hour month [EU17]. All employees are employed on a full-time basis in accordance with legal requirements. The table below provides a breakdown of all Light’s employees for 2009, specifying the type of employment, type o contract and the region involved. [LA1]Total workforce by employment type, employment contract, and region. Collective agreements, remuneration and benefits

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Annual Sustainability Report

Region

2007

2008

2009

Greater Greater Greater Upstate Total Upstate Total Upstate Total Rio Rio Rio Definite-term contract 19 6 25 1 6 7 0 Indefinite-term contract 3.316 566 3.882 3.174 551 3.725 3.171 523 3.694 Total 3.335 572 3.907 3.175 557 3.732 3.171 523 3.694 NB: All employees are full-time. In 2009 Light successfully negotiated the 2009/2010 Collective Labor Agreement and the 2009 Profit Sharing Agreement. The joint negotiation of these two agreements reflects the continuity of the Company’s labor relations philosophy with its emphasis on variable remuneration. Labor contract

The agreements negotiated with the labor unions and the benefits conceded cover all of Light’s employees (LA4)[LA3].Since signing the 2008 Collective Agreement the company has ceased to employee any individual on contract for a specified period of time.

In the case of personnel employed by outsourced service providers, Light requires that all such entities are party to and comply with suitably negotiated agreements. All personnel are currently covered by agreements reached with the respective labor unions. [LA4]

The Company’s Remuneration Policy is composed of monthly salary, benefits and variable remuneration (Profit Sharing). The Profi Share program is negotiated on an annual basis with a commission representing all its employees in conjunction with the Collective Labor Agreement negotiations. All of Light’s employees, including its directors, have at least one common goal, namely Safety in th Workplace. The company’s wage scales are not linked to the national minimum wage (EC5). Amongst the main benefits offered by Light, the following are particularly noteworthy: medical and dental cover, reimbursement of expenses incurred and rehabilitation of employees and dependents suffering from neurological or physical deficiencies, private welfare package (Braslight) and assistance with infant nursery expenses. The regulations governing medical cover were altered in 2009 in order to comply with the Company’s Diversity Policy and now permit the inclusion as dependents of same-sex partners involved in a stable relationship. Similarly, Braslight conducted studies to alter its bylaws, recognizing the stable same-sex relationships. These changes should be implemented from 2010.

The Social Responsibility Agreement which obliges Light to inform the labor unions who are party to the accord of all proposed restructuring initiatives and seeks to adopt measures intended to lessen the impact of such measures on the employees shall be renegotiated in 2010 [LA5]. The table below shows the base salary proportions between men and women in Light, according to occupational category. [LA14] Ratio of basic salary of men to women by employee category Administrative/technical Average male salary / Average female salary categories - A number of positions in the Category 2007 2008 2009commercial department were changed in 2009 from Administrative 100% 102% 117%a technical to an administrative nature. (see table). Management 108% 112% 112% Operational 98% 108% 128%Operational category - Due to the scarcity of Professional 112% 111% 108%women employed in operational positions, the hirin Technical 164% 157% 120%of three newly qualified female electricians had a significant impact on this category. The following table gives a breakdown of minimum base salaries at the major operational units and the percentage of employees with pension rights.

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[EC5] Minimum basic wages at important operating units 2007 2008 Lower No. No. Lower Workplace BaseWorkplace Employees Employees Base-Wage Wage Av. Mal Av. Mal Floriano Floriano 168 1,147 672 168 1,272 470.34 R. Frei R. Frei Caneca Caneca 363 543 688 363 564 723.09 R. R. Venceslau Venceslau 192 99 757 192 95 730.45 Estr. do Estr. do Tindiba 201 757 Tindiba 228 837.65 Cascadura 315 1,156 Cascadura 213 470.34 Triagem 119 876 Triagem 103 950.11 Barra do Barra do Piraí 150 757 Piraí 144 730.45 Nova Nova Iguaçu 317 570 Iguaçu 322 837.65 Piraí 142 998 Piraí 135 1,068,87 *Plant closed in 2009.

2009 No. Lower LWorkplace Employees Base-Wage Av. Mal Floriano 168 R. Frei Caneca 363 R. Venceslau 192* Estr. do Tindiba Cascadura Triagem Barra do Piraí Nova Iguaçu Piraí

1337

537.00

591

771.36

204 222 103

884.56 541.38 1,044,39

136

695.00

298 109

884.56 1,044,39

[EC15] Percentage of employees entitled to retirement, by position, age range and region. Administrativo Gerencial OperacionalProfissional Técnico Faixa de Tempo (anos) Faixa de Tempo (anos) Faixa de Tempo (anos)Faixa de Tempo (anos) Faixa de Tempo (anos) entreTotal entre 5 Total entre 5 Total entre 5 Total entre 5 Total Região < 5 5 -10Geral <5 -10 Geral <5 -10 Geral <5 -10 Geral <5 -10 Geral Grande Rio 17,97%5,86%23,83%32,66%10,55%43,22%22,65%12,11%34,76%24,59% 11,97%36,56%21,32% 6,74%28,06% Interior23,40%3,19%26,60%34,78%17,39%52,17%34,56%19,82%54,38%48,39% 3,23%51,61%30,22%15,83%46,04% *Formula = Number of retirable employees / Total by region ** Amount does not include retirees due to disability or officers. Complementary Welfare Light is the sponsor for the Braslight Social Security Foundation, a closed non-profit complementary welfare entity. Founded in 1974, its stated purpose is to guarantee a retirement pension for the contributing employees and welfare assistance to their dependents. Braslight offers the following plans: Plans A/B – Not open to new participants, these plans operate on a defined benefits basis. Annual defrayal rates, met by their participants and the sponsor, are determined based upon actuarial studies on a capitalization basis. Light © 2010. All rights reserved.

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Plan C – Combines the defined benefits and defined contributions options. Ninety-six percent (96%) of participants in all other welfare schemes migrated to this option. In order to obtain the necessary funds to provide defined contribution benefits the participating employee chooses the amount he/she wishes to contribute and the sponsor’s contribution is calculated in accordance with the plan’s regulations.

The complete regulations governing the plans and specifying the benefits and contribution requirements can be found at the following website http://www.braslight.com.br. [EC3] Braslight Complimentary Welfare Plans - Benefits Plans A/B Plan C Supplements pension following retirement on Full pension; reduced early retirement income; medical grounds; supplements pension following pension following retirement on medical grounds; retirement due to time served; supplements sickness benefit in addition to that paid by pension following age related retirement; government institutions: deferred proportional supplements sickness benefits paid by benefit, redeemable and portable. government institutions: deferred proportional benefit, redeemable and portable. Training and Development (LA10) Not only did the 70.8 hours of training per employee achieved by the Light Academy¹ in 2009 exceed the 50-hour target set for th period but also exceeded the 2008 overall total by 28% (see Table). Constituted by the Leadership and Commercial, Technical an Personal Development Schools, the Light Academy coordinated the definition of the organizational and human skills necessary for the company to achieve its strategic objective and consolidate a culture of sustainable results.

As a result, 2009 saw the successful implementation of programs intended to develop leadership, professional development and recognition and to identify new talent. ¹ The Light Academy – Is the company’s training and human development center. Founded in 2007, it has since evolved into a model corporate education facility which seeks to guarantee the alignment of the corporate strategy with the learning process. The academy concentrates on developing Light’s employees to their full potential as individuals, professionals and citizens in accordance with its Mission, Values and strategic objectives. [LA10] Average number of hours of training per year per employee, broken dow into job type Nature of Position M/H average 2007 M/H average 2008 M/H average 2008 Administrative 28.6 59.4 32.0 Management 142.8 31.3 70.7 Operational 48.4 66.9 97.4 Professional 29.7 42.5 57.5 Technical 55.8 47.4 88.6 General Average 53 55.2 70.8 The Leadership Development Program (PDL), intended to develop new leadership skills, was launched in 2009 in partnership with a specialized firm of consultants and will feature four training modules interspersed with applied coaching sessions over a two-year period. Leadership and Culture and Construction of High Performance Teams Teams were the chosen themes in 2009. The subjects for 2010 will be FClient Focus, Safety at Work and Sustainability.This last theme will be the subject of online courses and team workshops in 2010.

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Three thousand of the company’s personnel employed in non-managerial positions participated in the Employee Development Program (PDE) which seeks to align the following themes: the program for the transition of organizational culture and leadership development; the new skills model for non-managerial employees; the role of each employee in the achievement of corporate objectives; and support for ongoing training and development using self-teaching and team building tools. Amongst the initiatives planned for 2010 are the Self-Development Program and the Development Website, featuring educational material on sustainability

The creation and completion of two full cycles of the Recognition Program, which identifies and recognizes employees who stand out due to their attitudes and deeds was another success in 2009. The Multiplier Program, which includes the training of instructors mentors and coachers, will also be expanded in 2010. In order to ensure that knowledge developed within the company remains in-house, the Light Academy is currently developing a project entitled Valorization of Light’s Human Capital through Computational Intelligence, Strategic Indicators and Advanced Corporate Management Methods in partnership with PUC-Rio’s Computational Intelligence Laboratory. The purpose of this project is to identify and define human resources, knowledge and strategic processes for the organization in order to improve skills at both an individual and organizational level, with the objective of supporting the company’s market growth and measuring the return on investment of its training initiatives.

A new qualitative process for the management of performance and its consequences based on the model described above was applied for the first time in the management appraisal process that took place at the start of 2009, when 100% of the staff involved were trained under the new model. This achievement exceeded the 95% target set for the period. All employees received the same training on the Employee Development Program for the 2010 appraisal program. (LA11)(LA12) The table below illustrates the skills management and continuous learning programs developed by the Light Academy in greater detail. Skills management and continuous learning programs that support the continued employability of employees and career management [LA11] Our Staff – Careers and Succession Number of Trade Objective Main Programs Public Served Hours PDL Leadership Development Program (Modules I and II) Enablement of the Competences Model Executive Coaching Program Manager Coaching Program Train managers in leadership skills, process PDI - Individual Leadership and service management and knowledge Leadership 15,417 Managers School dissemination, and the mission and values of Development their staff Program Negotiating with Negotiators Light © 2010. All rights reserved.

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Develop and train professionals in the areas Development of: Generation electricity operation, School transmission and distribution information technology, materials, equipment and others

Technical College

Present solutions to: integrate new employees, supplement educational skills and encourage the personal and professional development of Light's staff

Fundamentals of the Electricity Sector Departmental planning workshop Coaches Development Program Integration of New Employees Plant Inspection Program University Grants Adolescent and Adult Education Program Trainee Development Program PDE – Employee Development Program Ethical Development Program Development of PPD Occupational Safety Training Program SGTS Training Operational Technical Program Defensive Driving Electric System Protection Training trainers PNew Engineer Development Program Electrician Development Program Rotation of Electricians Operational Conduct

71,365 All employees

150,514

Technical and operational employees

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Annual Sustainability Report

Meet the educational requirements to expand the Company , business, the integration of its Trade College productive chain and processes in the greater context of developing the concession and social and environmental responsibility

Program Development of Substation Maintenance Staff New Technology Workshop Series of Lectures – Commercial Process Improvements IT Recycling Programs The Light Customer Service Program IT System Training Commercial Processes Mobility Project Recreate Project Environmental Management System Programs English classes for Officers Trainer Development Program

25,681 All employees

Appraisal The appraisal process will take place yearly from 2010 on. Appraisals will be conducted through electronic medium in a secure and confidential environment. The 180º appraisal system involves self-appraisal, managerial appraisal and a feedback meeting to ensure that the employee is fully aware of his/her performance targets, strong points and opportunities for improvement.

The appraisal should also be used to define an individual development plan and to recommend an eventual successor. Two hundred and seventy-three professionals have been appraised in 28 meetings. A bank of potential successors will allow priority to be given to company personnel when filling new vacancies. The Career and Succession Committees have already identified potential successors for 54% of managerial positions in the company, a figure which exceeds the 50% target set for 2009.

The corporate survey was drawn up in 2009, in line with the parameters of the desired culture and the Leadership Development Program and will be applied in 2010: the results for each area will be disclosed and both specific and corporate action plans will be prepared based upon these findings. Quality of Life Program With an average satisfaction rating of 87% amongst employees, the Program is run in partnership with the health plan provider. The launch of the Quality of Life page on the Company’s intranet site and the inauguration of the Active Life Space, a gym located at Light’s headquarters were the highlights of a 2009 program involving some 19 initiatives that benefitted its employees and their dependents and boosted company morale. Light © 2010. All rights reserved.

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Annual Sustainability Report

Quality of Life Program Health Profile. Periodic monitoring of the health of employees, to identify risk factors and provide advice on these and existing illnesses.

Posture Correctional Unit. This initiative helped 82 employees in 2009 and achieved a satisfaction rating of over 82%. The unit is staffed by therapists and provides advice on the prevention of illness attributable to problems in the back and joints. Campaign against influenza and respiratory disease. Vaccination program that benefitted 71% of company employees in 2009. Chemical Dependency Prevention and Treatment Program. Program intended to educate and inform all company personnel about the risks of chemical dependency. Infant Health Program. Run by a multidiscipline team, the program had two groups in 2009, with 24 expectant mothers taking part and a satisfaction rating of over 90%. The program covers subject matter such as breastfeeding, healthcare for the expectant mother during the prenatal stage and infant care. Active Life Program. Group reeducation program designed to reduce obesity and promote a healthier lifestyle. The program achieved a satisfaction rating of 89% amongst the 21 participating employees in 2009. Anti-Smoking Program. Program to encourage non-smoking and to recommend treatment where necessary. Twenty-seven employees joined the program in 2009 and their progress will be monitored throughout 2010. Quality of Life Walk. This event takes place twice-yearly and is intended to encourage employees to take part in physical exercise, leisure activities and family integration. The Walk Against a Sedentary Lifestyle had a total of 350 participants, with a further 200 joining the Walk for the Prevention of Skin Cancer. The satisfaction rating for these two events exceeded 80%. Children’s Day. With a theme entitled Sing and Dance Children, the 2009 event was attended by 700 youngsters and included workshops for music and dance, theater, recreation, oral health and posture correction. The event achieved a satisfaction rating of 80%. Better Life. The theme for this event in 2009 was Stress. Five hundred employees and their relatives participated in this event which promoted physical and mental health. The event achieved a satisfaction rating of 83%. Preventative Campaigns. Educational initiatives relating to the prevention of dengue and swine flu were particularly relevant, as well as events such as International Women’s Day, World Heart Day, National Obesity Control Day and National AIDS Combat Day.

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Annual Sustainability Report

The Concept of this Report Voices, eyes, perceptions, doubts, impressions, questions. The eyes of all interested parties turn toward Light. The groups that collaborated on the 2009 Sustainability Report are represented in a graphic dialogue tracing information on the company’s sustainability efforts for the year. This is Light seen from the outside, responding from within.

The concept presented in the 2009 Report builds upon the Reports of the previous three years. All of them address light in terms of transformative energy. The 2006 Report was photographed almost entirely in black and white, yet is accented with occasional rays of yellow light. Hints of color begin to appear in the 2007 Report, where light is seen as bars of color and the yellow of the text pages. This marks the beginning of Light’s transformation. In 2008, the full spectrum appears in beautiful photographs of the city of Rio de Janeiro, depicting the paths energy takes to get to the people. With greater resolve and efficiency, Light expresses the comfort that energy can provide society. In 2009, the Report welcomes this society and lets its voice be heard. Light cultivates transparency, addresses sensitive issues and shows very clearly how far it has come – and where it intends to go. The Value of Sustainability Light understands that sustainability involves much more than a promise: It is a conscious choice to ensure that its service endures the test of time and guarantee the quality of its services and relationships with the public involved. In this report, written in accordance with Global Reporting Initiative (GRI) guidelines, which the Company adopted in 2007, Light presents the results of its 2009 performance [3.1]. For the second consecutive year, the Company adopts the GRI recommendations for Application Level A, including the Sector Supplement, which has 30 indicators specific to the electric utilities sector. The contents of the 2009 report were established based on a structured engagement process in which 61 representatives of interested parties identified the 29 most important (material) issues for Light’s activities from the perspective of their particular segment.

The interested parties put these issues in order according to their importance (High, Medium and Low). The printed version of the report highlights seven issues considered Highly Important, in addition to the Company Profile, Messages from the CEO and the Chairman of the Board, Governance, Methodology and Economic and Financial Results. The issues with Medium or Low Importance are examined in more detail in the online Report. The process of engaging the interested parties was coordinated by the Brazilian Foundation for Sustainable Development (FBDS). The full report of the 29 material issues is found in Chapter 5 – Methodology. The present Sustainability Report encompasses the Light Group and all its subsidiaries [3.6]. In addition to the issues identified by the interested parties, the document contains information about the company’s profile, market, personnel, corporate governance, economic and financial results, financial statements, GRI reference list and main corporate information. Light © 2010. All rights reserved.

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With the exception of the Financial Statements, which were audited in compliance with prevailing legislation, this Report was not audited. However, the information survey and calculation of indicators was coordinated by the Sustainability Work Group, composed of experts and managers from different departments in the Company, with the support of the FBDS [3.13]. Any questions or comments may be submitted by e-mail to comunicação@light.com.br[3.4]. Main Awards and Achievements [2.10]

Awards Sponsored ●

• Prêmio Comunique-se de Jornalismo e Comunicação Empresarial [Communicate Award for Journalism and Corporate Communications] (Culture Category)

In 2009, Light sponsored for the second consecutive year the Culture category of the Prêmio Comunique-se de Jornalismo e Comunicação Empresarial, which selects the two journalists of greatest distinction that year in the area of culture The awards went to Arthur Xexéo (print media) and Marcelo Tas (electronic media). The award ceremony for the Prêmio Comunique-se took place on October 29, 2009, in São Paulo. With its role in one of the most important awards in this segment, Light reaffirms its commitment to disseminating culture and supporting transparency and the right to information in the country.

Awards Received ●

Empresa Amiga do Hospital da Força Aérea Brasileira [Corporate Friend of the Brazilian Air Force Hospital] – January 2009

Light was honored with the certificate Empresa Amiga do Hospital da Força Aérea Brasileira and a medal of merit for excellence in services rendered, during commemoration of the institution’s 28th anniversary, located in the Galeão Air Base. Two years ago Light began a new business relationship with the Hospital and other aviation bodies, which included revision of contracts and important guidelines for implementing an energy efficiency plan. ●

Empresas que Mais Respeitam o Consumidor [Companies Most Respectful of Costumers] (2nd place in the quality service category) – Revista Consumidor Moderno – February 2009

In its sixth survey, the Revista Consumidor Moderno rated Light second among electric utilities companies for understanding and serving their customers. First place went to AES Eletropaulo, with 45% of the votes. Light won 27% of the votes, up 1% over 2008. ●

Prêmio Empresa Inovadora 2008 [Innovative Company Award] – SAP Brasil - March 2009

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Light won the Prêmio Empresa Inovadora 2008 in the Utilities sector, given by SAP Brasil and presented during the 13th SAP Forum, in March 2009. This achievement recognizes the company as a pioneer in Latin America in information technology solutions making it a leader in innovation and results through SAP software. ●

Finalist for the Prêmio Consumidor Moderno (Electric Energy category) – Grupo Padrão – March 2009

Light was a finalist in the Electric Power category for the 10th Prêmio Consumidor Moderno de Excelência em Serviços ao Cliente The award given by Grupo Padrão was created to identify and spread the best customer service practices in Brazil and to acknowledge companies that prioritize service excellence. ●

Parceria de Sucesso – SESI of Barra do Piraí – June 2009

In commemoration of Industry Day, SESI of Barra do Piraí honored Light and other companies with the Parceria de Sucesso diploma, in recognition of city development initiatives. Light was represented at the award ceremony by employees Sonia Margaret Curty and Carlos Eduardo Marchi, from Vale do Paraíba Regional Management. ●

The 50 Most Sustainable Companies According to the Media – Imprensa magazine – (29th place in the overall ranking and 2nd place for transparency) – June 2009

In the ranking of the 50 most sustainable companies according to the media, promoted by Imprensa magazine, Light won first place among public service concessionaires, second place in Transparency and 29th place in overall ranking (last year it was ranked 45th ). ●

Prêmio Evolução de Desempenho [Progress in Performance Award] (category of companies with more than 500,000 clients) – Associação Brasileira de Distribuidores de Energia Elétrica [Brazilian Association of Electric Power Distributors] (ABRADEE) – July 2009

In 2009 Light won ABRADEE's Prêmio Evolução de Desempenho, awarded to an electric utilities company with more than 500,000 clients. The criteria – which are also awarded individually – were client evaluation, operations management, economicfinancial management and social responsibility. The ABRADEE award is one of the most prestigious in the electric utilities sector and recognizes companies in three general categories - National, Regional and Progress in Performance -, in addition to the individual categories. ●

Empresa Sócio-ambientalmente Sustentável [Socio-environmentally Sustainable Company]– Synapsis Soluções e Serviços IT – July 2009

In July of 2009, Synapsis Soluções e Serviços IT awarded Light the title Socio-environmentally Sustainable Company, in recognition of its commitment exemplified when it adopted a Synapsis monitoring system for its fleet. The system not only brings Light © 2010. All rights reserved.

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operational and economic advantages, but is designed for sustainability.

With the new system, Light was able to reduce its fleet size and thus reduce polluting gas emissions and premature wear of material like tires and parts. Moreover, the system offers greater security to employees by monitoring vehicle speed, making it an important tool for reducing the number of vehicle accidents. ●

As melhores Companhias para os Acionistas 2009 [Best Companies for Shareholders 2009] (category for companies with market value between five and fifteen billion Reals) - Capital Aberto magazine- October 2009

In October of 2009, Light won third place in the ranking of the Best Companies for Shareholders in the category market value. The award from Capital Aberto magazine considers the company’s overall performance in the last three years. The publication attribute the company’s success to its focus on shareholders and restructuring of operations, which generated higher dividends and market appreciation. In fact, its dividend policy was cited as a solid strategy for attracting new investors. ●

Selo LAC – Loja Amiga do Cliente - [Customer Friendly Store] - Instituto Brasileiro de Relações com o Cliente [Brazilian Institute for Client Relations] (IBRC) – November 2009

Light was the first electric power distributor to receive the Selo LAC – Loja Amiga do Cliente, given by the Instituto Brasileiro de Relações com o Cliente (IBRC). The LAC seal is a certification of quality in-person client service given to large-sized companies in many different segments. By the end of 2010, the seal will be in 34 Light business locations and can be used in all of the company’s communication channels, including on power bills. In addition to this LAC seal, Light’s Customer Service (SAC) was considered one of the best among Brazilian companies, according to the IBRC’s annual survey. Light’s SAC reached 90% to 100% compliance with the survey’s criteria. ●

Prêmio Qualidade – Melhor Reunião 2009 [Quality Award – Best Meeting 2009] – Associação dos Analistas e Profissionais de Investimentos do Mercado de Capitais de São Paulo [Association of São Paulo Capital Market Investment Analysts and Professionals (APIMEC SP) – December 2009

Of 140 companies, the Associação dos Analistas e Profissionais de Investimentos do Mercado de Capitais de São Paulo (APIMEC SP) selected Light for its Prêmio Quality – Melhor Reunião 2009, awarded for best presentation in the organization’s meetings. Ronnie Vaz Moreira, Vice-president of Finances and Investor Relations, gave Light’s presentation.

Awards Won by Light Sponsored Projects ●

Light Sponsored the Prêmio Jabuti 2009 Winning Publication

The Light sponsored book Coleção Princesa Isabel, Fotografia do Século XIX,won the coveted Prêmio Jabuti 2009 – Brazil’s most prestigious award for literature – in the category Architecture and City Planning. The work by researchers Pedro and Bia Light © 2010. All rights reserved.

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Corrêa do Lago collected 1,200 images of Brazil in the 1800s, among them previously unpublished images of the session in which Parliament approved the Áurea Law. Its 432 pages of unseen photos were printed using state-of-the-art equipment. The editors found the material by chance in Portugal while visiting the last living granddaughter of the Princess and Count of Eu, Thereza Maria de Orleans e Bragança. ●

Projects Sponsored by Light Win the Prêmio Cultura do Rio de Janeiro [Culture Award of Rio de Janeiro]

The Vale do Café Festival, in the category Empreendedorismo [Entrepreneurship], and the Casa do Pontal Museum, in the category Preservação do Patrimônio Material [Preservation of Material Heritage], were honored with the Prêmio Cultura do Ri de Janeiro, from the State Secretariat of Culture. Both are sponsored by Light, whose sponsorship policy is dedicated to stimulating social and economic development of the people and state of Rio de Janeiro.

Awards and Achievements Earned by Executives José Luiz Alquéres, CEO Líder Empresarial Estadual do Rio de Janeiro no Setor de Energia Elétrica [Rio de Janeiro State Corporate Head in the Electric Utilities Sector] - Fórum de Líderes Empresariais [Corporate Heads Forum] – December 2009 Light’s CEO, José Luiz Alquéres, was elected Líder Empresarial Estadual do Rio de Janeiro by the Fórum de Líderes Empresariais, in the award’s 23rd year. In 2009, twenty-two heads were elected in categories for Sector (national influence) and State (regional influence). The winners were chosen based on the votes of 26,000 Brazilian businessmen. Cidadão benemérito do Rio [Outstanding Citizen of Rio] CEO José Luiz Alquéres received the title Cidadão Benemérito do Estado do Rio de Janeiro, from representative Délio Leal, unanimously approved by the State Legislative Assembly (ALERJ), in recognition of his career dedicated to Rio de Janeiro’s economic, urban and socio-cultural development. The award ceremony was in May of 2009. Chairman of the Associação Comercial do Rio de Janeiro [Rio de Janeiro Business Association] – ACRJ In June of 2009, Light’s CEO, José Luiz Alquéres, became the 59th chairman of the Associação Comercial do Rio de Janeiro (ACRJ), one of the country’s largest civil organizations. Member of the Academia Nacional de Engenharia [National Engineering Academy] CEO José Luiz Alquéres was sworn in as a member of the Academia Nacional de Engenharia in November of 2009. He was chosen based on his activities as a conscientious citizen committed to intellectual and professional contributions in the area. GRI Summary 2007 2008 2009 Income statement Net Income (in R$ millions) 4.992,4 5.386,6 5.432,3 EBITDA (in R$ millions) 1.137,8 1.504,1 1,188.0 EBITDA Margin (%) 23% 28% 21.9% Net profit (loss) (in R$ millions) 1.074,3 974,5 604,8 Light © 2010. All rights reserved.

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Financial Indicators Total Assets (in R$ millions)) Equity (in R$ millions) Net Debt (in R$ millions) Net Debt/EBITDA (ratio) Investments (in R$ millions) Share Performance Price at Year-end (in R$) Annual Change in Share Price Market Value (in R$ millions) Operating Indicators Light SESA Line Load (GWh) Energy Sold (GWh) Energy Transported (GWh) Light Energia Energy Sold (GWh) Light Esco Energy Sold (GWh) Environmental Environmental Investment (in R$ thousands) Number of ISO 14,000 certifications Energy Savings (GWh/year) Recycled Paper Used (%) Number of ISO 14,000 certifications (accumulated) Social Aneel Index of Customer Satisfaction (IASC) Community Investment (in R$ thousands) No. of communities served Clients visited in educational projects Training Hours – Managerial Training Hours – Overall Average Rate of accidents involving missed work - employees Rate of accidents involving missed work - workforce

9.030,1 2.691,8 1.461,7 1,3 361.8

9.462,0 2.803,7 1.580,3 1,1 546.7

9.360,2 2.887,1 1.637,1 1,4 563.8

28,65 34% 4.578,3

21,86 -14% 3.966,1

25,98 34% 5.298,2

33,160 18,307 8,018

33,022 18,292 8,026

33,319 19,084 6,876

4,967

4,900

5,074

390

434

646

18,627 93 47,1 97% 152

18,006 62 25,4 97% 182

19,666 31 1,03 100% 213

66.88% 14,403 85 85,000 142,84 53 1,52 4,36

56.20% 13,821 57 46,729 31,3 55.2 2,43 5,34

64.20% 21,626 43 20,354 70,7 70.8 3,17 5,21

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Summary of GRI Contents Light S.A. declares that its Sustainability Report has been produced in accordance with the Global Reporting Initiative (GRI), in respect of its consolidation model and the presentation of the information specified in G3. It further declares it has maintained application level A, achieved in 2008, as it is presenting all the essential indicators that apply to the company. Light is presenting 97 out of the 109 indicators reported, including the 30 sector indicators, 74 of which are essential and 23 additional. Eight indicators do not apply to Light and four are not available. Indicator type Economic Environment Labor and Decent Employment Practices Human Rights Society Responsibility for product Sector

Symbol EC EN LA

Essential 7 16 9

Additional 1 9 5

HR SO PR EU

6 6 3 27

2 2 4

Next is the GRI table of contents, associated with the Principles of Global Compact and Millennium Development Goals. Global Pact Principles Human Rights Principals 1 Respect the protect human rights; 2 Avoid human rights violations; Principles Labor of Principals 3 Support of freedom of association at work; 4 Eliminate all kinds of forced labor; 5 Eradicate child labor; 6 Eliminate workplace discrimination; Environmental Protection Principals 7 Keep a preventive focus on environment protection; 8 Promote environment responsability; 9 Encourage environmental friendly technologies; and Anti-Corruption Principal 10 Combat corruption in all its forms, including extortion and payoffs. Global Millennium Goals Compact

GRI G3 Topic 1

Page

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1.1

Statement from the most senior decision-maker about the relevance of sustainability to the organization and its strategy.

1.2

Description of key impacts, risks, and opportunities

2 2.1 2.2

Organizational Profile Name of the organization Primary brands, products, and/or services. Operational structure of the organization, including main divisions, operating companies, subsidiaries, and joint ventures.

2.3

2.4

Location of organization’s headquarters

2.5 2.6

Number of countries where the organization operates Nature of ownership and legal form

2.7

Markets served

2.8

Scale of the reporting organization Significant changes during the reporting period regarding size, structure, or ownership

2.9 2.10

Awards received in the reporting period

Report Parameters

3.1

Reporting period for information provided

3.2

Date of most recent previous report

3.3

Reporting cycle

8, 9

of the Board of Directors 7, 8 Message from the Chief Executive Officer

Throughout the report

Light Light Light Light Corporate Information NA Light Light and its market Light Light Governance The concept of the report The concept of the report The Construction of this Report The construction

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3.4

Contact point for questions regarding the report or its contents

3.5

Process for defining report content

3.6

Boundary of the report

3.7

Specific limitations on the scope or boundary of the report Basis for reporting that can significantly affect comparability from period to period and/or between organizations

3.8

of this report The concept of the report The construction of this report The concept of the report NA NA

3.9

Data measurement techniques and the bases of calculations

The construction of this report

3.10

Explanation of the effect of any re-statements of information provided in earlier reports, and the reasons for such restatement.

3.11

Significant changes from previous reporting periods

3.12

Table identifying the location of the standard disclosures Policy and current practice with regard to seeking external assurance for the report Governance, Commitments and Engagement Governance structure of the organization, including committees under the highest governance body Indication whether the Chair of the highest governance body is also an executive officer For organizations that have a unitary board structure, statement of the number of members of the highest governance body that are independent and/or nonexecutive members

3.13 4 4.1 4.2

4.3

4.4

4.5 4.6

4.7

Mechanisms for shareholders and employees to provide recommendations to the highest governance body Linkage between compensation for members of the highest governance body, senior managers, and executives, and the organization’s performance. Processes in place for the highest governance body to ensure conflicts of interest are avoided. Process for determining the qualifications and expertise of the members of the highest governance body for guiding the organization’s strategy on economic, environmental, and Light © 2010. All rights reserved.

The construction of this report GRI Index The concept of the report Governance NA

Governance Analysis of financial performance Governance Governance

Governance

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4.8

4.9

4.10

social topics. Internally developed statements of mission or values, codes 1, 2, 3, of conduct, and principles relevant to economic, 4, 5, 6, environmental, and social performance and the status of 7, 8, 9 e their implementation. 10 Procedures of the highest governance body for overseeing the organization’s identification and management of economic, environmental, and social performance, including relevant risks and opportunities, and adherence or compliance with internationally agreed standards, codes of conduct, and principles. Processes for evaluating the highest governance body’s own performance, particularly with respect to economic, environmental, and social performance.

4.11

Explanation of whether and how the precautionary approach or principle is addressed by the organization.

4.12

Externally developed economic, environmental, and social charters, principles, or other initiatives to which the organization subscribes or endorses.

4.13

Memberships in associations (such as industry associations) and/or national/international advocacy organizations.

4.14

List of stakeholder groups engaged by the organization

4.15

Basis for identification and selection of stakeholders with whom to engage

4.16

4.17

Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group. Key topics and concerns that have been raised through stakeholder engagement, and how the organization has responded to those key topics. ECONOMIC PERFORMANCE – EC Disclosure on Management Approach – Economic Performance Economic Performance

Strategic dialogue

Governance

Integrated Risk Management The 1, 2, 3, Construction 4, 5, 6, 1, 2, 3, 4, 5, 6, 7 e of this Report 7, 8, 9 e 8 Commitment 10 to Sustainability Governance A Construção deste Relatório A Construção deste Relatório The Construction of this Report The Construction of this Report 1, 7, 8, e 2, 7 e 8 9 Analysis of financial

Pag.:27

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EC1.

EC2. EC3. EC4.

EC5. EC6.

EC7.

EC8. EC9.

Direct economic value generated and distributed

Financial implications and other risks and opportunities for 7, 8 e 9 7 the organization’s activities due to climate change. Coverage of the organization’s defined benefit plan 1 obligations Significant financial assistance received from government Market Presence Range of ratios of standard entry level wage compared to 1 local minimum wage at significant locations of operation. Policy, practices, and proportion of spending on locallybased suppliers at significant locations of operation. Procedures for local hiring and proportion of senior management hired from the local community at locations of significant operation. Indirect Economic Impacts Development and impact of infrastructure investments and services provided primarily for public benefit through 2e8 commercial, in-kind, or pro bono engagement. Understanding and describing significant indirect economic impacts, including the extent of impacts. ENVIRONMENTAL PERFORMANCE – EN Disclosure on Management Approach – Environmental 7, 8 e 9 7 Performance Materials

EN1.

Materials used by weight or volume.

EN2.

Percentage of materials used that are recycled input materials

performance » Added Value Statements Energy efficiency Light and its people Analysis of financial performance Light and its people Working together with suppliers Investing in people

Community Efficiency NA

Connected to the environment Connected to the environment

Energy EN3.

Direct energy consumption by primary energy source.

EN4.

Indirect energy consumption by primary source.

Connected to the environment Connected to the environment Pag.:28

Annual Sustainability Report

EN5. EN6. EN7.

Energy saved due to conservation and efficiency 7, 8 e 9 7 improvements Initiatives to provide energy-efficient or renewable energy based products and services, and reductions in energy requirements as a result of these initiatives Initiatives to reduce indirect energy consumption and reductions achieved Water

EN8.

Total water withdrawal by source

EN9.

Water sources significantly affected by withdrawal of water

EN10.

Percentage and total volume of water recycled and reused Biodiversity Location and size of land owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas

EN11.

EN12.

EN13.

Habitats protected or restored

EN14.

Strategies, current actions, and future plans for managing impacts on biodiversity

EN15.

Connected to the environment Connected to the environment NA Connected to the environment Connected to the environment Connected to the environment Connected to the environment

Number of IUCN Red List species and national conservation list species with habitats in areas affected by operations, by level of extinction risk Emissions, Effluents, and Waste

EN16.

Total direct and indirect greenhouse gas emissions by weight

8, 9

EN17.

Total direct and indirect greenhouse gas emissions by weight

8, 9

EN18.

Initiatives to reduce indirect energy consumption and reductions achieved

7, 8 e 9 7

EN19.

Community Efficiency

Connected to the environment Connected to the environment Connected to the environment Connected to the Pag.:29

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EN20.

NO, SO, and other significant air emissions by type and weight

EN21.

Total water discharge by quality and destination

EN22.

Total weight of waste by type and disposal method

EN23.

Total number and volume of significant spills

EN24.

EN25.

EN26. EN27.

EN28.

EN29.

EN30.

environment Connected to the environment Connected to the environment Connected to the environment Connected to the environment

Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally Identification, size, protected status, and biodiversity value of water bodies and related habitats significantly affected by the reporting organization’s discharges of water and runoff. Products and Services

Connected to the environment Connected to the environment

Initiatives to mitigate environmental impacts of products and 7, 8 e 9 7 services, and extent of impact mitigation. Percentage of products sold and their packaging materials that are reclaimed by category Compliance Monetary value of significant fines and total number of nonmonetary sanctions for noncompliance with environmental laws and regulations Transport Significant environmental impacts of transporting products and other goods and materials used for the organization’s operations, and transporting members of the workforce Overall Total environmental protection expenditures and investments by type.

Connected to the environment NA Connected to the environment Connected to the environment

7, 8 e 9 7

Connected to the environment

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LA1. LA2. LA3.

LA4. LA5.

LA6.

LA7. LA8. LA9.

LA10. LA11. LA12.

LA13.

LA14.

Disclosure on Management Approach - Labor Practices 3e6 and Decent Work Employment Total workforce by employment type, employment contract, and region Total number and rate of employee turnover by age group, 6 gender, and region Benefits provided to full-time employees that are not provided to temporary or part-time employees, by major operations. Labor/Management Relations Percentage of employees covered by collective bargaining 3 agreements Minimum notice period(s) regarding operational changes

Light and its people Light and its people Light and its people Light and its people Light and its people

Occupational Health and Safety Percentage of total workforce represented in formal joint management-worker health and safety committees that help monitor and advise on occupational health and safety programs Rates of injury, occupational diseases, lost days, absenteeism, and work-related fatalities Education, training, counseling, prevention, and risk-control programs in place to assist workforce members, their families, or community members regarding serious diseases Health and safety topics covered in formal agreements with trade unions Training and Education Average hours of training per year per employee by employee category Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings Employees receiving regular performance and career development reviews Diversity and Equal Opportunity Composition of governance bodies and breakdown of employees per category according to gender, age group, 6 minority group membership, and other indicators of diversity Ratio of basic salary of men to women by employee 6 category HUMAN RIGHTS PERFORMANCE INDICATORS – HR Light © 2010. All rights reserved.

3, 4, 5 e 6

Full attention to safety Full attention to safety 4, 5 e 6

Full attention to safety Full attention to safety Light and its people Light and its people Light and its people

Light and its people

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Disclosure on Management Approach – Human Rights

1, 2, 3, 8 4, 5 e 6 A generator of clean energy

Investment and Procurement Practices

HR1.

Percentage and total number of significant investment agreements that include human rights clauses or that have undergone human rights screening.

HR2.

Percentage of significant suppliers and contractors that have 1, 2, 4 e 8 undergone screening on human rights and actions taken 5

HR3.

HR4.

HR5.

HR6.

HR7.

HR8.

HR9.

SO1.

Total hours of employee training on policies and procedures concerning aspects of human rights that are relevant to operations, including the percentage of employees trained Non-discrimination Total number of incidents of discrimination and actions 1, 2 e 6 taken Freedom of Association and Collective Bargaining Operations identified in which the right to exercise freedom of association and collective bargaining may be at significant 3 risk, and actions taken to support these rights Child Labor Operations identified as having significant risk for incidents of child labor, and measures taken to contribute to the 1, 2 e 5 elimination of child labor Forced and Compulsory Labor Operations identified as having significant risk for incidents of forced or compulsory labor, and measures to contribute 1, 2 e 4 to the elimination of forced or compulsory labor. Security Practices Percentage of security personnel trained in the organization’s policies or procedures concerning aspects of 1 e 2 human rights that are relevant to operations Indigenous Rights Total number of incidents of violations involving rights of indigenous people and actions taken SOCIETY PERFORMANCE INDICATORS – SO Disclosure on Management Approach – Society 8 e 10 Community Nature, scope, and effectiveness of any programs and practices that assess and manage the impacts of operations 8 on communities, including entering, operating, and exiting Corruption Light © 2010. All rights reserved.

Working together with suppliers

Human Rights

Human Rights 1, 2 e 8

1, 2 e 8

Electricity – a token of citizenship

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SO2. SO3. SO4. SO5. SO6.

SO7.

SO8.

PR1.

PR2.

PR3.

PR4.

PR5.

Percentage and total number of business units analyzed for 10 risks related to corruption Percentage of employees trained in the organization’s 10 anticorruption policies and procedures Actions taken in response to incidents of corruption 10 Public Policy Public policy positions and participation in public policy 8 development and lobbying Total value of financial and in-kind contributions to political parties, politicians, and related institutions by country Anti-Competitive Behavior Total number of lawsuits for unfair competition, anti-trust and monopolistic practices and their results Compliance Monetary value of significant fines and total number of nonmonetary sanctions for noncompliance with environmental laws and regulations PRODUCT RESPONSIBILITY PERFORMANCE INDICATORS – PR Disclosure on Management Approach – Product 1 Responsibility Customer Health and Safety Life cycle stages in which health and safety impacts of products and services are assessed for improvement, and percentage of significant products and services categories subject to such procedures Total number of incidents of non-compliance with regulations and voluntary codes concerning health and 1 safety impacts of products and services during their life cycle, by type of outcomes Product and Service Labeling Type of product and service information required by procedures, and percentage of significant products and services subject to such information requirements Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labeling, by type of outcomes Practices related to customer satisfaction, including results of surveys measuring customer satisfaction

Ethics Ethics Ethics Community Efficiency

Governace

Connected to the environment Full attention to safety

Quality in Light customer assistance

Marketing Communications

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PR6.

PR7.

Programs for adherence to laws, standards, and voluntary codes related to marketing communications, including advertising, promotion, and sponsorship Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship by type of outcomes. Customer Privacy

PR8.

Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data

Recognized transparency

Recognized transparency Quality in Light customer assistance

Compliance PR9.

EU1

EU2 EU3 EU4 EU5 EU6 EU7 EU8 EU9 EU10

O melhor serviço e o seu justo valor SPECIFIC PERFORMANCE INDICATORS OF THE ELECTRIC SECTOR - SECTOR SUPPLEMENT - EU Connected to Installed capacity, broken down by primary energy source the and regulatory system. environment Connected to Net energy production, broken down by primary energy the source and regulatory system. environment Number of residential, industrial, institutional and Light and its commercial consumer units. market Length of transmission lines and overhead and underground Light distribution lines, broken down by regulatory system. Allocation of CO2 equivalent emission allowances, broken 7, 8, 9 7 down by structure of the carbon credit market. The best Management methods for ensuring the availability and 8 service and its reliability of the short- and long-term electricity supply fair value Demand management programs, including residential, Energy 7, 8, 9 7 commercial, institutional and industrial programs. efficiency Activities and expenses related to research and Light on the development with a view to ensuring the reliability of the 7, 8, 9 7, 8 leading edge electricity supply and promoting sustainable development. Provision for decommissioning of nuclear power stations. Planned capacity versus projected capacity of long-term Connected to electricity demand, broken down by energy source and the Monetary value of significant fines for noncompliance with laws and regulations concerning the provision and use of products and services

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EU11

regulatory system. Average efficiency of thermal power plant generation, broken down by energy source and regulatory system.

environment 7

EU12

Percentage transmission and distribution losses in relation to total energy.

EU13

Biodiversity of replacement habitats versus biodiversity of 7, 8, 9 affected areas.

EU14 EU15

Programs and processes that ensure the availability of qualified labor. Percentage of employees entitled to retirement in the next 5 to 10 years, separated by job type and region.

EU16

Policies and requirements referring to the health and safety of employees, outsourced workers and subcontractors.

EU17

Days worked by outsourced workers and subcontractors involved in construction, operation and maintenance work.

EU18

Percentage of outsourced workers and subcontractors undergoing health and safety training.

EU19

Participation of stakeholders in decision-making processes related to energy planning of infrastructure development.

EU20

Approach for managing the impacts of relocation.

EU21

Contingency planning measures, management plans, and training programs for emergencies/disasters, in addition to recovery/restoration plans.

EU22

Number of people physically and economically relocated and indemnification, by product type.

EU23

EU24

7 8

1, 2

Programs, including in partnership with the government, aiming to improve or maintain access to the electricity supply and consumer assistance services. Practices for overcoming barriers related to languages, culture, poor schooling and special needs that affect access 6 to the electricity supply and consumer assistance services, in addition to the safe use thereof.

A lossreducing attitude Connected to the environment Investment in people Light and its people Full attention to safety Management of retained services Light and its people Management of retained services Growing with Brazil A generator of clean energy Connected to the environment A generator of clean energy A lossreducing attitude Quality in Light customer assistance

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EU25

Number of accidents and deaths of service users involving company assets, including judicial settlements and decisions, in addition to pending legal proceedings regarding illnesses.

EU26

Percentage of the population not served in areas with regulated services or distribution.

EU27

Number of residential disconnections due to non-payment, by disconnection duration and regulatory system.

EU28

Outage frequency.

EU29

Average outage duration.

EU30

Average availability factor of the power plant, broken down by energy source and regulatory system.

Full attention to safety Light serves the entire population in its concession area. Paying your bills on time The best service and its fair value The best service and its fair value/span> Connected to the environment

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Message from the Chairman of the Board of Directors[1.1] Light is a company that sets the standard for all Brazilians, especially those who have been a part of it since 2006, when Rio Minas Energia S/A – RME, a 100% Brazilian company, assumed its control.

At a time when a new share structure – now awaiting ANEEL approval – makes Light and Cemig together one of the world’s largest distribution companies, with over 11 million customers, and Brazil’s largest electric utility group, we must reflect back on the company’s recent past.

Light’s management strategy and its commitment to investments that yield the best service for its thousands of customers - between 2006 and 2009, annual investments rose 120%, up to R$ 560 million – reinvigorating its growth in subsequent years as opportunities in the state and the country emerged. Light grew 4.3% in the captive market in 2009, sidestepping the economic crisis. The majority of its performance indicators improved. It began trading its shares on international stock exchanges. It continually invests in new technologies that strengthen the quality of its supply. It works in communities to provide information and democratization of access to electric power. It looks to renewable sources to make its generation and distribution increasingly sustainable.

In successive internal programs, like the Transformation and Valuation programs, it set and agreed upon growth and performance goals and objectives with all its people. In 2010, the company will increasingly emphasis its focus on customers to raise quality and satisfaction on the part of all consumers and populations targeted. The company is ever more engaged in listening to and incorporating requests and issues related to these groups, as it demonstrated recently when it engaged all interested parties, as seen in this Report, and in managing for sustainability. Since committing to this publicly in 2006, its efforts have been acknowledged repeatedly, for example by its listing for the third consecutive year with the companies on the BOVESPA Index of Sustainability (ISE). I extend my appreciation to all who together built Light’s success with their work, energy and enthusiasm. Eduardo Andrade Chairman of the Board of Directors

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Message from the Chief Executive Officer [1.1] I address myself to everyone associated with Light and its interests: investors, society at large, government authorities, regulatory agencies, legislators, employees and especially our customers – who are the reason we exist. My objective is to give a brief overview of the year 2009 and outline key points for advancing our activities in 2010.

Going back to early 2009, we see a year laden with serious concerns. The outcome of the grave global financial crisis that exploded in October of 2008 was still a giant unknown, and the impact on Brazil was anyone's guess. At that point we established a working strategy for Light that had three main pillars.

The first was to be prudent and not expose the company or create any vulnerability; it was time to tighten the reins on spending, but without neglecting investment essential to preserving quality. Our second focus was to lend full support to reintegrating Rio de Janeiro into the nation’s expansion and make the electric power concessionaire company a major player in the State’s reenergized development. The third priority was managing our businesses: improving service quality, customer satisfaction and everything associated with our main activity, providing electricity.

This overview shows that in 2009 Brazil suffered much less than other countries, even though its Gross Domestic Product did not increase. This factor had numerous consequences for our market. Industry did not present the expansion we hoped for. On the other hand, however, weather conditions – especially higher temperatures – drove power consumption in our concession area to be one of the country’s highest. Our energy sold (captive market) grew 4.3% in a year that this figure was flat for many companies. This pushed our revenues higher. Light ended the year with net profit exceeding projections, which was great new in the eyes of ou investors. As to development in Rio, we believe that the measures we took were very positive. The role of managing an electric power company means far more than serving customers well: it involves all of society. We are literally immersed in Rio de Janeiro’s development. We participated in joint efforts that culminated in the city being chosen for the 2014 World Cup and the 2016 Olympics, which will be milestones for Rio de Janeiro. We seek to participate actively in everything that concerns our concession area. Light has also been involved in Rio Mais 20, a large-scale global conference on the environment to take place in 2012.

In this context, Light, in support of the Associação Comercial do Rio de Janeiro [Rio de Janeiro Commerce Association], attended the signing of the Protocolo Rio Sustentável [Sustainable Rio Protocol], which made Rio de Janeiro the first Brazilian city to set targets for reducing carbon emissions, applying new green technologies for the 21st century, factors that may boost dissemination o the city’s economic activities. Power companies have the potential to become major players in these processes, with this strengthening our country’s position in relation to the main issues being discussed. We were engaged in many such activities, with th state government and others, in their initial stages, with the City of Rio de Janeiro. Others involve mayors from our concession area who, early in their terms, hold promise as very enterprising politicians. This encourages us to look for further action in different cities in the Vale do Paraíba, Baixada Fluminense and here in the city of Rio de Janeiro.

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The third priority, concentrating on results and management, culminated with our system for monitoring indicators, which fall into three types: corporate indicators, around 10 of them; management indicators, approximately 40; and operational indicators, around 60. This set of indicators provides a permanent X-ray of our company and gives each manager – whether from an administrative or technical area, from Jacarepaguá, Volta Redonda or our headquarters –, a complete view of the whole company and the relative importance of his work in the context of global objectives. Thanks to this, throughout the year we were able to monitor the growth and changes in economic conditions and consider the public’s best interests with regards to our activities, without losing sight of the targets. In fact, at the end of the year, most of our indicators were “green,” some reached “yellow,” and a few remained “red.” The unsatisfactory results of the latter provide fuel for us to overcome and correct missteps. The market applauded this performance, and we were able to place shares previously held by only one owner – the BNDES – on the exchanges. Today Light has many foreign shareholders, with stocks purchased through institutional investors.

If we add the greater results from our social and cultural policies, the year was almost perfect. However, a very rare occurrence in November cast a shadow over it: three recurrences of failures (short circuits) in the underground systems in Copacabana and Leblon. With the population already impatient because of the huge nation-wide blackout just a few weeks earlier, the outages drew heavy fire from the press and demanded serious PR efforts to defend the company’s image. Many parties supported us, especially our employees and most government officials in our concession area. Light is extremely grateful for their recognition of our difficult position. Others, however, were less sympathetic. Nevertheless, this in no way dampens our efforts to improve our service constantly and to maintain the highest standards for information and transparency.

Even with the resulting problems from these service outages, there was improvement in 2009 – positive news indeed – for the FEC and DEC indexes, which show the frequency and duration of outages. These fell as compared to 2008, indicating that even given the year’s events, overall our customers experienced fewer and shorter outages. This is attributable to Light’s significant increase investments over the last four years, which rose R$250 million annually to R$ 560 million last year, with projections showing this upward trend will continue. These investments in the grid and managerial improvements were maximized by more intelligent application of information. We centralized all control of outage data; we centralized the dispatch centers; we armored over 1,000 km of grid; and we initiated intense efforts to upgrade our reading system by installing integrated or individualized electronic meters. Once summer began, we reinforced maintenance crews by adding 30% more people, and we stepped up replacement of overloaded transformers.

Light’s concession area can be divided into four groups of customers: the Vale do Paraíba, where supply quality is high and losses are low; the Baixada Fluminense, characterized by heavy losses and where we are concentrating grid armoring efforts; the city’s central area, which has one of the country’s highest quality standards; and areas of risk, which have very high loss rates and where, together with other organizations like public utilities concessionaires and state and city governments, we are using a pacification strategy that has yielded excellent results. One exemplary community is Morro Santa Marta, where the loss rates have dropped to almost zero. Early work in Cidade de Deus was also a landmark.

Looking ahead, if ANEEL does issue approval, control of Light will undergo changes as players' holdings shift. One of these, Companhia Equatorial, will withdraw progressively; another, AG Concessões, will change the nature of its participation to be through Cemig, which in turn will own a higher percentage of Light. These positive changes will form Brazil’s largest concessionaire covering the diversity of an area like the state of Minas Gerais, the concession area covered by Cemig, Rio de Janeiro, the country’s second largest metropolis and one that poses enormous challenges while holding great potential for the future, and many of the state’s other less urban regions for which many projects are underway. Light © 2010. All rights reserved.

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Scale is a very important factor in the energy distribution business. This configuration extends us to 11 million customers. Cemig, including Light, is now unquestionably one of the largest companies in the world in terms of customer numbers. This will be important for the direction we are taking.

During our first two years at the helm, we focused on renovating and transforming Light management; in the subsequent two years, on increasing value. As of August, we will implement the customer focused plan. This plan includes not only everything we are currently doing to provide the highest quality service, but also giving customers more opportunities to voice their opinions and to influence our activities. We want to invite customers to help design our future, to bring before us their issues and expectations, and we want to provide answers to their questions. Our Sustainability Report already attests to this. Sometimes we overemphasize explaining our point of view. Now we will be listening more to our customers. This will intensify the importance of transparency, communication and openness, so that getting to know our company and its activities better, our customers can deposit greater trust in our work. Light has been serving Rio de Janeiro for 105 years. It seeks to ensure for society and for power consumers better standards of living, better conditions for running their businesses and greater satisfaction with our company’s service. We are extremely confident in Rio de Janeiro’s future, with great growth and development opportunities for our employees, suppliers, young people and above all the 4 million customers that represent the 10 million people who benefit from our services, who trust Light and will have ever more reason to do so.

The state and city governments, the State Legislature and the city councils are partners in our efforts not only to provide our customers with constantly improving service, but also to promote development and higher quality of life in our concession area. We acknowledge and appreciate the guidance from our Board of Directors and the commitment of all our employees – people who take pride in Light! José Luiz Alquéres Chief Executive Officer

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The structure of this Report

Undergoing a structured stakeholder engagement process, in order to hear what representatives of the various stakeholders workin with the company had to say about it, was an essential part of developing a sustainability strategy [3.5].

Light embarked on this initiative following three years of working towards greater sustainability, notably with the Company’s adherence to the Principles of the UN Global Compact, the United Nations Millennium Development Goals, the methodology of th Global Reporting Initiative (GRI) [4.12]and to the criteria of the BM&Fbovespa Corporate Sustainability Index (ISE), in which it features for the third consecutive year. Timely actions can become strategies, which in turn may evolve into programs, and today have become part of the Company’s processes. Sustainability is linked to both commercial decisions and to the spirit in which work is carried out. The sustainability management process is reflected in the Sustainability Report, which is produced annually [3.3],and was most recently published in February 2009, based on events in 2008 [3.2] .

The initiative of listening to stakeholder opinions was devised within the context of the Company’s Strategic Planning, with the aim of establishing whether stakeholder demands converged in the same direction as the company’s priorities. The process of engaging¹ with stakeholders confirmed this convergence and provided a basis for the structure of this Report. The printed version highlights th seven issues considered to be of high materiality for stakeholders and high impact for the Company, while the online version includes, in addition, those issues that were considered of medium or low materiality, under the same criteria. In this way Light aims to answer the concerns of stakeholders and to demonstrate the efforts undertaken through sustainable and committed management with the development of the state of Rio de Janeiro.

¹ The text describing methodology and the conclusions drawn from the engagement process with stakeholders is based, to a large extent, on the Technical Report from the Brazilian Foundation for Sustainable Development (FBDS), who acted as a consultant for this work. Methodology [3.11] The structured stakeholder engagement process 2009 [4.16]was carried out with support from specialists at the Brazilian Foundation for Sustainable Development (FBDS), who advised Light from the start of the sustainability management initiative in 2006.

The methodology employed here, as created by FBDS, took inspiration from international standard AA1000, which was develope by the English consultancy firm AccountAbility. The full text is available on the website www.accountability21.net.Carried out unde the supervision of the Wider Sustainability Working Group, who were also responsible for collection of data [3.9] and made up of sustainability working group members, and other specially selected executives, this work made it possible to gauge expectations, identify opportunities, map out the challenges associated with the company’s activities and identify the most relevant issues for Light and stakeholders, in relation to finances and the company’s image and reputation.

With the objective of creating a Materiality Matrix, or in other words defining the materiality issues that were of high, medium or low impact, both for stakeholders, and from the point of view of the Company, the methodology included the following stages: identifying and prioritizing stakeholders, defining materiality issues, creation of face-to–face engagement sessions, and finally defining Light © 2010. All rights reserved.

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the method for consolidation of results[4.15].

At the initial stage, 343 stakeholder representatives suggested by the Sustainability Working Group were assessed through an exercise in prioritization. Carried out by members of the Working Group, this exercise identified the impact (low, negligible, medium or high) of each stakeholder on the company, in accordance with the following criteria: Responsibility (legal, financial, operational) of the company towards the stakeholder Influence – power of influence or decision-making of the stakeholder on the Company Proximity – greater level of interaction between the Company and the stakeholder (including internal) Dependence – stakeholders that are directly or indirectly dependent on the Company Representation – stakeholders that are legal representatives of a group (leadership) Policies and strategic partnerships – stakeholders that the Company engages with due to its policies.

The first lead to 217 stakeholders with at least one high impact evaluation. Light’s executive officers added a further 31 indications. The 61 representatives of the stakeholders that participated in the process were classified into 13 categories or groups: Academics (2%), Trade Associations and Entities (10%), Clients (18%), Community (2%), Financial (5%), Suppliers (32%), Press (2%), Government (2%) and Regulatory Agency (2%). The categories Group Company, Specialists, NGO and Partners were not represented in the final selection. [4.14]

After defining the materiality issues within the Sustainability Working Group, which were then approved by Senior Management, the phase of stakeholder engagement was launched with the selected group of stakeholders.

In the first stage, participants answered a questionnaire on 20 materiality issues regarding their relationship with Light. The 20 issues approved by Senior Management were identified after a selection process from the 119 that were originally put forward by the Wider Sustainability Working Group, which were generated at the stage of defining the materiality issues. The purpose was to capture stakeholder expectations in relation to the company’s actions as well as their contributions to the company’s mapping of relevant commercial issues. At the second stage, those stakeholders who put forward previously unidentified issues, that were not mapped, identified strengths and weaknesses within the company. At this first face-to-face session, participants were split into groups with stakeholders from other categories, with a representative from Light acting as an observer. Apart from evaluating the degree of materiality of the issues through the individual completion of questionnaires, stakeholders discussed topics in groups to arrive at a consensual answer. The three most relevant and least relevant issues were presented by one member from each group to the whole session.

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chosen directly in relation to the group’s category. Each group completed a form with the strengths and weaknesses of its relationship with Light, and suggested three issues that were not covered in the initial questionnaire. A member of each group presented these additional issues to the session group as a whole. A third session allowed for individual appraisal of the degree of materiality previously attributed to the 20 materiality issues, as identified in the original questionnaire. The additional issues that had been suggested were consolidated and the participants indicated, individually, the two most relevant and the two least relevant issues.

From evaluating the content of these sessions, the Matrix of Materiality [4.17], was drawn up during the consolidation of results stage. On the vertical axis, the Matrix incorporates the results of the engagement process described here. This axis defines the most relevant issues for stakeholders, within the following criteria:

High Relevance – Those that received the highest number of points as “most relevant issue” in session 1, as well as those that were considered by more than 60% of participants to be “extremely relevant”. Low relevance – The three issues with the highest number of points as “least relevant issue”. Medium relevance – The remaining issues. On the horizontal axis of the Matrix, which defines the impact of these issues on the company, the following criteria were used: High impact – Issues present in the company’s 2010 Planning and outlined in the global objectives of the Chairman or the two Vice-Chairmen.

Medium impact - issues featuring in the Strategic Plan 2010, described in the objectives of Directors or featuring in the Risk Matri

Low impact – Other issues. The suggested order, which forms the basis for this Report, was validated by the Sustainability Working Group and by the Company’s Senior Management, which suggested a further issue to be included in the high impact category: issue 25, referring to the management of contracted companies. Light Materiality Matrix Issues of high, medium and low relevance 29 identified issues validated by the stakeholders and by Light Senior Management High Relevance Issues ● ● ●

Incorporation of different stakeholder requirements into Light’s Strategic Planning [1] Investment to protect against losses [2] Investment in energy efficiency [6]

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● ● ● ●

Quality customer service [8] Delivery of quality services and payment for services provided [10] Health and Safety in the Workplace [17] Management of companies contracted to deliver services [25]

Medium Relevance Issues ● ● ● ● ● ● ● ● ● ● ● ● ●

Education of customers on appropriate energy use [9} Commitment to transparency and accountancy standards [11] artnerships with suppliers [12] Challenges in finding qualified labor [14] Incentives for research and development of new technologies [16] Closer relationship with the community [22] Developments in the area of concessions [4] Measures to prevent defaulting on payments [5] Investment in expanding generating capacity [15] Improvements in environmental practices and mitigation of negative impact [18] Competitive positioning within the context of consolidation of the electricity sector [19] Commitment to sustainability [20] Light’s image [24]

Low Relevance Issues ● ● ● ● ● ● ● ● ●

? Partnership between Light and Associations for training community workers[21] ? Shared use of facilities among public service concessions [23] ? Selection of Electricians [27] ? Pruning of trees excluding those that interfere with the grid [29] ? Promotion of social and environmental management by suppliers [13] ? Need for secure financing [3] ? Earnings limited by the Brazilian Electricity Regulatory Agency, Aneel [7] ? Offer and promotion of product and services portfolio to the market [26] ? Human rights [8]

Questionnaire given to public representatives, during the structured engagement process coordinated by FBDS 1st Light Stakeholder Engagement Session, 23 September 2009 Purpose To identify relevant issues (having a financial impact or an impact on image or reputation) for Light and stakeholders. Clarification on the questionnaire Content The questionnaire was drafted in light of the company’s identified strategic issues, and those that impacted on stakeholders, which were mapped out using all current channels of engagement. Structure The questionnaire consists of 20 questions. Each issue must be evaluated according to its relevance to the different stakeholders, Light © 2010. All rights reserved.

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represented here by the composition of the different groups. For this evaluation, the scale below was used, where 0 is no relevance, 1 - low relevance, 2- medium relevance, 3 – significant relevance and 4 – extremely significant , as shown below: 0 1 2 3 4 In addition, a space for comments was provided at the end of each questionnaire. Participant Profile Group: Please select the applicable category to describe your working relationship. ( 1 ) Research ( 2 ) Syndicates and Trade Unions ( 3 ) Customer ( 4 ) Community ( 5 ) Financial ( 6 ) Supplier ( 7 ) Press ( 8 ) NGO ( 9 ) Partner ( 10 ) Public Authorities ( 11 ) Regulator ( 12 ) Trade Union ( 13 ) _________________________ Incorporation of the requirements of the different stakeholders into Light’s Strategic Planning 0

Investments to protect against losses (technical and non-technical) as part of Light’s strategy 0

Need for secure financing for Light, searching for the best local and international market conditions 0

Partnership of Light with Public Authorities in order to develop its area of concessions and to improve commerce in Rio de Janeiro reducing informality 0

Area of concessions in which the company works characterized by a high default level. 0

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costs to the customer’s budget; increase in services offered by the company 0

The company’s profits being limited by ANEEL, with almost 80% of the energy bill destined for other purposes 0

Quality customer service, with the due processing of complaints, in turn contributing to an improvement in service delivery 0

Light’s engagement in educating customers about appropriate energy use Light’s commitment to offering a quality service and the customer’s commitment to pay for the service provided 0

The company’s permanent commitment to transparency and accountancy practices. for all stakeholder service delivery. 0

Partnership of Light with an extensive supplier network, to deliver a good service, and for the development of innovative solutions, sound financial health and a motivated and competent work force. 0

Light’s initiatives to promote social and environmental management by suppliers 0

The Company’s challenge to find skilled labor 0

Investment of Light in generating energy using renewable sources, as part of its commitment to environmental issues 0

Furthering research and the developing of new technologies, including partnerships with academic centers and universities 0

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Safety in the Workplace, as a company priority 0

Improvement, on the part of Light, of environmental practices and mitigation of any negative impact, in line with current legislation 0

Consolidation of the Brazilian electricity sector, and positioning the company in such as way so as to remain competitive in the even of this happening 0

Lights commitment to sustainability as part the company’s mission, reflected in initiatives to promote the concept and to ensure transparency 0

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Governance

In order to respect the interest groups engaged with Light – shareholders, administrators, CEO’s, employees, Government, environment-related entities and individuals, capital market related entities and individuals, financial institutions, community and others –, the Company has developed its Corporate Governance model. Consolidated into a handbook, it gathers formal mechanisms and the practices that generate value for Light and its shareholders, which are always treated with an appropriate level of transparency in communicating with the market and other stakeholders. This model comprises nine principles, which - in line with their objectives- are the main instruments to avoid and solve conflicts of interests within the organization [4.6]: ● ● ● ● ● ● ● ● ●

Ethics; Equity (fair and equal treatment of minority groups and other stakeholders); Stability (warranty that corporate processes will continue); Alignment (focus of the administrators on maximizing value for the shareholders as a whole); Agility for taking decisions and implementing them; Transparency of information; Clarity of roles for all divisions; Meritocracy (valorization of capacities, commitments, postures, and actions which add value for the Company); and Accountability.

Changes in equity [2.9] On December 31, 2009, the shareholders’ equity of Light S.A. comprised 203,934,060 common shares with no par value. On December 31, 2009, after a Special Shareholders’ Meeting held by RME, a disproportional operation took place, which split up RME into three split portions, followed by the incorporation of these split portions by Companhia Energética de Minas Gerais Cemig, Andrade Gutierrez Concessões S.A., and Luce Empreendimentos e Participações S.A. A new Shareholders’ Agreement was also entered into by the Company’s four shareholders, which reproduces the rights and obligation as set forth in the previous Shareholders’ Agreement.

On December 30, 2009 the Company disclosed, under relevant events, the signing of a purchase agreement for Light S.A. shares owned by Andrade Gutierrez Concessões S.A. and the Fundo de Investimento em Participações PCP, which controlled Equatoria Energia. This operation will create an SPE holding 26.06% of Light’s equity, where Cemig and Luce will own 13.03% thereof. The operation as disclosed has not taken place yet. Light’s Shareholders’ Equity after the split-up of RME (status dated 12/31/2009)

Final status after the disclosure of the purchase (source: CEMIG Presentation - Communication to the Market) On July 14, 2009 the market was offered 29,470,480 shares of Light S.A., consisting of 16,079,135 shares owned by BNDESPar and 13,391,345 shares owned by EDF. On August 11, 2009 Banco Itaú BBA, the lead banker, exercised all of its option to acquire a supplementary batch of 2,700,000 shares owned by BNDESPar. Therefore, the total shares offered comprised 32,170,480 shares 18,779,135 of which were owned by BNDESPAR and 13,391,345 by EDF. The total of shares sold corresponded to 15.8% of the Company’s capital stock. Light’s shares are listed at the Bovespa’s New Market since July, 2005, in line with the best corporate governance practices and the principles of transparency and equity, in addition to granting special rights to minority shareholders. Light S.A. shares comprise Light © 2010. All rights reserved.

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the Ibovespa, Itag, IGC, IEE, IBrX, and ISE indices. The share composition of the Light Group is as shown in the chart below. Light’s Governance Structure [4.1] Light articulates its long-term vision from the Shareholders’ Forum, comprised by the Shareholders’ Meeting, the Statutory Audit Committee, and the Controllers’ Forum. The Shareholders’ Forum is responsible, in periodic meetings, for consolidating the alignment of decisions within the controlling group based on understanding and the pursuit of harmonization of relations. Interface Forums – the Board of Directors and the Audit, Finances, Human Resources, Management, and Corporate Governance and Sustainability Committees - provide the

Shareholders’ Forum with support (see the Governance Structure Map). Transparency in disclosures In order to access Light’s quarterly information (ITR) and annual information (IAN), as well as financial and corporate statements for each quarter, refer to website www.light.com.br. Such transparency is part of the company’s Corporate Governance policy, which also discloses its results to the market through CVM’s IPE System, in accordance with the law. The following items are also disclosed on the website: ● ● ●

The terms and conditions of the agreements entered into by the company and the parties it has relationship with; Negotiations of securities and derivatives issued by the company’s controlling shareholders; Excerpts of the RCAs, Special Shareholders’ Meeting, and Shareholders’ Meeting Minutes, Notice to Shareholders, Relevant Facts, and other information that is regarded as important to the market.

The annual schedule of the main corporate events – meetings, disclosure of results, etc. – is informed to analysts and investors at an annual public meeting, which is made available to CVM, the Brazilian Securities and Exchange Commission, and disclosed at the company’s website. Since 2007, Light is a member of the Brazilian Institute of Corporate Governance and appears at the portfolio of the Corporate Sustainability Index (ISE) of BM&FBovespa for the third year in a row, according to a list disclosed by BM&FBovespa in November, 2009, valid for one year. Shareholders’ Meeting As the highest level of deliberation of the shareholders, the Shareholders’ Meeting is exclusively responsible for electing the members of both the Board of Directors and the Statutory Audit Committee. In accordance with Brazilian corporate laws, the Shareholders’ Meeting is also in charge of approving the company’s financial statements and deciding on the following matters: 1) Amending the By-Laws; 2) Compensation of administrators and share-based compensation plan; 3) Decreasing or increasing the share capital; 4) Issuing debentures or subscription bonuses; 5) Creating or changing preferred shares; 6) Decreasing mandatory dividends; 7) Acquisitions of controlling interest; 8) Right of withdrawal; and 9) Selection of appraisers. Board of Directors The main responsibilities of Light’s Board of Directors are to provide guidance to strategic planning, supervise the Directors’ activities, set goals, develop business strategies, and appoint the CEO and directors according to the By-Laws. It is comprised by 11 official members and 11 deputy members. Official members include eight members representing the controlling group, two independent members, and an employees' representative [4.3].The number of deputy members follows the same structure. The current term of office for directors expires in 2010 at the minutes of the Shareholders’ Meeting (AGO), which deliberates on the results of the year ended in 2009. The members of Light’s Board of Directors Light shall comply with criteria as set forth in the

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Brazilian corporate law, have reputed business experience, and abide by the following principles and conducts [4.7]: ● ● ● ● ● ● ● ● ●

To be fully informed about the company, their business, and all the matters submitted to the Board of Directors; To bring any issue of Light’s interest to discussion and offer appropriate contributions; To put corporate interests above the members’ or directors’ interests; To work well as a team and express themselves appropriately; To keep a good relationship and cooperation with the other directors; To contribute to long-term planning; To attend the meetings and be available, if needed; To attend the meetings appropriately informed; and To act attentively and proactively.

The Board of Directors is supported by committees comprising directors only, who are assigned by the Board of Directors to study specific topics, which will be used as a basis for future analyses. The committees have neither power of deliberation nor may assum any task from their members as a whole. The Board of Directors shall meet on a monthly basis, and the decisions shall be taken by mutual agreement or by the majority. OFFICIAL DEPUTY Sérgio Alair Barroso Luiz Fernando Rolla Djalma Bastos de Morais João Batista Zollini Carneiro Eduardo Borges de Andrade (presidente) João Pedro Amado Andrade Ricardo Coutinho de Sena Paulo Roberto Reckziegel Guedes Carlos Augusto Leone Piani Ana Marta Horta Veloso Firmino Ferreira Sampaio Neto Paulo Jerônimo Bandeira de Mello Pedrosa Aldo Floris Lauro Alberto de Luca Elvio Lima Gaspar (BNDESPar) Joaquim Dias de Castro José Luiz Silva Carmen Lúcia Claussen Kanter Carlos Roberto Teixeira Junger Ricardo Simonsen Ruy Flaks Schneider (Independente) Almir José dos Santos Light SESA directors are the same as of Light S.A., except for the independent directors. Résumés Official Directors Eduardo Borges de Andrade (Chairman): Civil engineer, former CEO of Construtora Andrade Gutierrez S.A. (1978 - 2001). Current chairman of the Board of Directors of Andrade Gutierrez Concessões S.A. and official member of Companhia de Concessões Rodoviárias (CCR), as well as official member of the Board of Directors of Andrade Gutierrez S.A. Aldo Floris (Vice-Chairman):An economist, he was a member of the Board of Directors of the Rio de Janeiro Stock Exchange, Companhia Monteiro Aranha, Vale, and Valepar, as well as CEO of Bank of America in Brazil and a member of the Board of Directors of NGO Conservation International, which supports sustainable development. Sérgio Alair Barroso : Economist, he is the Secretary for Economic Development of the State of Minas Gerais, Chairman of the Board of Directors of Fosfertil, Ultrafertil, and Fertifos, consultant and business partner for the agribusiness, social responsibility, Light © 2010. All rights reserved.

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and environmental investments sectors. He was the CEO of Cargill between 1998 and 2007. He graduated in Economics from the Universidade São Lucas/SP, with Masters in International Economy from Boston University, USA.

Djalma Bastos de Morais:An engineer and Cemig CEO, he was also de CEO of Gasmig, the president of Telecomunicações de Minas Gerais S.A., Minister of Telecommunications, and Vice-president of Petrobras Distribuidora S.A.. Ricardo Coutinho de Sena: A civil engineer, he was an official member of the Board of Directors and President of Andrade Gutierrez Concessões S.A., as well as an official member of the Board of Directors of CCR, the Companhia de Saneamento do Paraná - Sanepar (Paraná Sanitation Corporation), Water Port S.A, and Dominó Holding S.A. Carlos Augusto Leone Piani: He graduated in IT for PUC-RJ and Business Administration from IBMEC, he has been the CEO of Equatorial Energia S.A. since March, 2007 and a member of the Board of Directors of Cemar since March, 2006. He was Cemar’s CEO from March, 2006 to March, 2007 and Administrative Vice-President and Investor Relations director from May, 2004 to March, 2006. Before that, he worked for at Banco Pactual for six years. In 2003 he was awarded a CFA Charterholder title by the CFA Institute and, in 2008, he concluded the Owners and President Management (OPM) from Harvard’s Business Administration School.

Firmino Ferreira Sampaio Neto: An economist undergraduate from UFBA and graduated in Industrial Planning from SUDENE/IPEA/FGV, he has been the Chairman of the Board of Directors of Equatorial Energia S.A. since March, 2006 and a director of Cemar since May, 2004. He was the President of Eletrobrás between 1996 and 2001 and of Eletrobrás Termonuclear between 2000 and 2001. For 14 years he acted as the president and financial director of Coelba. He is also a member of the Board of Directors of the following companies: Furnas, Itaipu Binacional, CHESF, Eletrosul, Gerasul, Cemig, Enersul, Cemat, and Light.

Elvio Lima Gaspar:A mechanical engineer from UERJ (1983), with an Executive MBA from COPPEAD–UFRJ. He was the Sub-Secretary for Planning of the State of Rio de Janeiro (January, 1999 - April, 2000) and Secretary for Planning and Economica Development and Tourism of the State of Rio de Janeiro (April - December, 2002). Since 2006 he has been director for the Socia Inclusion and Credit at BNDES.

Carlos Roberto Teixeira Junger: Degree in accountancy from the University of the State of Rio de Janeiro and graduated in Tax Administration from USP (1981). He is an auditor at the Brazilian Federal Revenue Service and the Private Insurance Surveillance Agency (SUSEP). He is also a consultant at the Department of Costs of Furnas Centrais Elétricas S.A. and is a member of the Special Group for the Non-Double Taxation Agreement with the US Revenue Service (IRS).

José Luiz Silva: A business administrator with an executive MBA from COPPEAD–UFRJ. He is a member of Light’s Board of Directors as the employees' representative, by INVESTLight. He is also a consultant hired by Light’s commercial division. He held several offices in the company, in particular as operational manager of Disque-Light, the company’s help desk service.

Ruy Flaks Schneider (independent member of the Board of Directors):An industrial mechanical engineer and President of Schneider & Cia. He was a director at Montrealbank, Renasce (National Shopping Mall Network), and Executive Vice-President of the Multiplan Group. Deputy Directors Luiz Fernando Rolla: An electrical engineer and a Cemig staff member since 1974, where he was responsible for implementing th Light © 2010. All rights reserved.

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ADR level I and II at the New York Stock Exchange, and Governance level at Bovespa. He is currently Finances, Investor Relations and Equity Interest Control director at Cemig. João Batista Zollini Carneiro:An economist, he Cemig’s Equity Interest Superintendent and administrative and financial director of Rosal Energia S.A., as well as a member of the Board of Directors of a number of companies within the Cemig Group and Finances professor at Ibmec-MG.

João Pedro Amado Andrade: A business administrator from PUC/RJ and owns a degree in Business from AUP – The American University of Paris. He has been a member of the Executive Committee of Andrade Gutierrez S.A. since December, 2003. Paulo Roberto Reckziegel Guedes:A civil engineer with an MBA in Corporate Management from Fundação Dom Cabral. He works as a Business Development director at Andrade Gutierrez Concessões S.A. He also worked at contractors Andrade Gutierrez, Sultepa S.A., and Sociedade Consórcio Conesul. Ana Marta Horta Veloso:An economist graduated in Industrial Economy from UFRJ. She works at the Long-Term Investment division of UBS Pactual. For 12 years she worked at the National Economic and Social Development Bank - BNDES and was a member of the Board of Directors of a number of companies: Klabin S.A. (2003/04), Acesita S. A. (2003/04), Valepar S. A. (2003), Vale (deputy member, 2003/04), and Net Serviços de Comunicação S. A. (1999). Currently she is a member of the Board of Directors of CEMAR. Paulo Jerônimo Bandeira de Mello Pedrosa: A mechanical engineer from the Brasília University (UnB), with supplementary technical education in auxiliary power plant systems, hydraulic turbines, and Small Power Plant Projects (PCHs), as well as an MBA from FIA-USP. He has been an independent member of the Board of Directors of Equatorial Energia S.A. since March, 2006. Currently he is the executive president of the Brazilian Association of Power Commercialization Agents (Abraceel) and Regulation professor at IBMEC. He worked at Eletronorte, Chesf, and, for four years, he as Aneel’s director. Lauro Alberto de Luca: An economist, he was Operations director at Banco Liberal S.A., which eventually became Bank of America. Currently he is the managing partner of FLB Consultoria e Participações Ltda.

Joaquim Dias de Castro: An economist with a degree from the Federal University of Rio Grande do Sul and Master in Economy from EPGE/FGV-RJ, he has been a deputy member of the Board of Directors of Telemar Participações S.A. since April, 2007. H has also been working as an economist at BNDES since January, 2004.

Carmen Lúcia Claussen Kanter: An architect with MBA in Marketing, she is a member Light’s Board of Directors, financial director of the Light Employee Investment Club (INVESTLight), director of the Brazilian Institute of Investor Relations (IBRI), and member of the Board of Directors of APIMEC-Rio. She was also a member of Braslight's Board of Trustees, of IBRI’s Board of Directors, and President of IBRI-Rio. Ricardo Simonsen:A mechanical engineer from PUC-RJ, as well as Master and Doctor in Economy from the Economics Graduate School of Fundação Getúlio Vargas (EPGE/FGV). Since 2003 he has been a technical director of FGV Projetos, a consulting unit of Fundação Getúlio Vargas, and a member of Vale's Governance and Sustainability Committee. Almir José dos Santos (independent member of the Board of Directors): As an economist, he was administrative and Light © 2010. All rights reserved.

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financial director of Fundação Eletronuclear de Assistência Médica, financial director of Eletronorte, President of Companhia Auxiliar de Empresas Elétricas Brasileiras (Caeeb), and Head of Eletrobrás’ Investment Department. Statutory Audit Committee Created at the request of the shareholders, Light’s Statutory Audit Committee is directly subject to the Shareholders’ Meeting. It is comprised by five official and four deputy members and its main responsibilities are to appraise financial statements, monitor and inspect the acts and proposals of the company’s management, as well as errors, frauds e other legal prohibitions, which may occasionally be verified and may have been caused by company members. The Statutory Audit Committee shall meet on a monthly basis or at extraordinary calls, as the case may be. Executive Office It is responsible for the direct management of the business and executes the strategy as approved by the Board of Directors. The executive officers are also responsible for representing Light either as plaintiffs or defendants, as the case may be. The company’s main executive officer is the CEO, who is appointed by the Board of Directors. He is responsible for appointing the other officers, whose names are approved and elected by the Board of Directors. The Executive Officers meet on a weekly basis or at extraordinary sessions, as the case may be. Executive Officers

José Luiz Alquéres – CEO Ronnie Vaz Moreira – Executive and Investor Relations Vice-President Paulo Henrique Siqueira Born – Sustainable Development and Concessions Director Ana Silvia Corso Matte – People director Luiz Fernando de Almeida Guimarães – Generation director Gustavo Cesar de Alencar – Network Director Roberto Manoel Guedes Alcoforado – Operations and Clients Vice-President Paulo Roberto Ribeiro Pinto – New Businesses and Institutional director Luiz Claudio Salles Cristofaro* – Legal director * Not included in the By-Laws Résumés Executive Officers José Luiz Alquéres – An engineer with corporate expertise in both public and private sectors, he has worked as the National Energy Secretary and was the President of large companies, such as Alstom, Cerj, and Eletrobrás. He was also the executive director of Cia. Bozano Simonsen. He held successful turnarounds in energy companies - such as Eletrobrás itself, where he was President in 1993 and 1994, when the company released its ADRs, and Escelsa (1995 and 1996) - and industrial companies, such as Alstom (2000 - 2006). Currently he is the honorary Vice-President of the World Energy Council, the Brazilian Infrastructure an Base Industry Association and the Commercial Association of Rio de Janeiro – ACRJ.

Ronnie Vaz Moreira – Graduated in Economy from UFRJ, with Masters in International Administration and corporate expertise in both the public and private sectors, he worked as financial director at Petrobras, President of Globopar, and Senior VicePresident of ABN AMRO Bank. He has a large experience in a number of capital market transactions, such as share sale and debt appraisal in both public and private markets, debt restructuring, and investor relations.

Roberto Manoel Guedes Alcoforado – Electrical engineer with Masters in Electronics from the Air Force Technological Institute. At Chesf, where he worked as a Planning and Operational Director between 1990 and 1993, he also developed activities in the transmission and generation system planning area and economical and financial planning (1975-1989). He was economical and financial director, Distribution director, and Vice-President of Companhia Energética do Rio Grande do Norte (Cosern) Light © 2010. All rights reserved.

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between 1996 and 2000. He was also President, Vice-President and Distribution Director of Companhia Energética de Pernambuco (Celpe) between 2000 and 2006.

Luiz Fernando de Almeida Guimarães – A civil Engineer graduated from the Federal Fluminense University (UFF), he initially worked at the public energy sector (Eletrosul and Itaipu Binacional) on the Itaipu and Salto Osório power plant projects, the Jorge Lacerda II thermal power station, and other units. In project companies Engevix and Enge–Rio, he coordinated the Executive Design of Tucuruí (Eletronorte) power plant, the inventory of the Paraíba do Sul river basin (Furna), etc., as well as self-generation studies for Vale and studies to increase the generating capacity of the Lajes power plant complex (Light). He was a member of the Board of Directors and chairman of the deliberative boards of the Paranapanema and Votorantim groups, in addition to being a member of technical operation and environment committees. Paulo Roberto Ribeiro Pinto – Graduated in Accounting Sciences, with a specialization in Economic Engineering and Industrial Administration from UFRJ, he has been working on the electrical sector for 39 years. He was Eletrobrás’ Financial Director and participated at the privatization program of the sector. Also, worked for Chest, Furnas, and Light.

Paulo Henrique Siqueira Born – A civil engineer with Masters in Water Resources and Economy from Cornell University (New York), he has been working in the sector since 1979, in particular in the planning and regulation areas. He worked at Copel (beginning as a trainee up to superintendent, 1979-1997), ANEEL (director assistant, 1998), Eletropaulo (superintendent, 1999), and Duke Energy (Vice-President, 2000-2006). Since the middle of 1990 he has had a leading role in the discussions on the institutional model and the regulation framework of the electrical sector. Ana Silvia Corso Matte – An attorney and graduated in Human Resources from PUC-IAG, she was engaged with the HR area after years working as a labor attorney. She played a significant role as an HR director at Jornal do Brasil, CSN, Sendas, and Telsul. In these companies she took part in processes to renew the corporate culture and create an innovative, result-focused management mentality.

Gustavo César de Alencar – An electrical engineer graduated in Work Safety Engineering from Pernambuco University, where he also attended MBA courses in Business Administration in a partnership with the Getúlio Vargas Foundation. In 1982 he became an employee of Companhia Energética de Pernambuco (CELPE), where he worked up to 2005 as a chief engineer, Grid Services manager, Operation and System Maintenance superintendent, Operations superintendent, Engineering superintendent, and Assets Management director. In 2007 he became Light' staff member, where he has been working as a Grid Director since 2009, after holding the office of technical superintendent. He is the Company’s representative at Abradee’s Technical Committee.

Luiz Claudio Salles Cristofaro – An attorney with MBA in Corporate Law, is the a retired senior partner of law firm Motta Fernandes Rocha and Business Law professor at PUC-RJ. As an attorney, he was engaged in a number of corporate, M&A, and financial restructuring operations. As CEO of Myrurgia do Brasil, he was responsible for restructuring and selling the Brazilian plant with over two hundred employees (1990 - 1995). New rules for disclosing and analyzing information: CVM Directives 480 and 481 Directives 480 and 481 of the Brazilian Securities and Exchange Commission (CVM), which became effective on January 1, 2010 respectively changed the rules for recording securities issuers and the rules for corporations to disclose information for convening shareholders’ meetings and requesting powers-of-attorney to cast votes at shareholders’ meetings.

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In line with changes in the Law, since 2010 Light, as an organization, as well as its Executive Officers, the Statutory Audit Committee, and the Audit Commission, will have additional responsibilities relating to the disclosure - both the regular one and that of the Annual Management Report - of information pertaining to the main administrative events of the year. The new rules shall apply to any information related to the 2010 financial year. Committees The objective of the Committees is to go further on topics, within the scope of their specific areas, so as to support the decision process of the Board of Directors and facilitate interaction with the Executive Officers. The existing five Consulting Committee at Light have neither executive nor deliberative functions. Additionally, they may not be directly operated by the Executive Officers. They are brought into action and gather in order to address those matters as set forth in the Governance Manual or topics that are specifically informed by the Board of Directors.[4.1]

1. Audit Commission – It analyzes and recommends Quarterly Information (ITRs) and Standardized Financial Statements be approved or rejected, prior to disclosure. It also checks the compliance with the New Market rules, in addition to set goals and activities. It assists the Board of Directors in defining the quality standard of financial reports and internal controls, as well as makes sure that external and internal auditors remain independent and objective. It meets at least every three months, or at any time at the request of the Board of Directors or by an initiative of its own members. 2. Finances Committee – It is responsible for identifying financial needs and suggesting ways to meet them. It monitors the company’s main financial indicators (cash flow, investments, loans, etc.), checks investments, identifies opportunities of improving capital cost, and recommends corrective actions to be taken, as the case may be. It meets at least every thre months, or at any time at the request of the Board of Directors or by an initiative of its own members. 3. Management Committee – Main tasks are to help defining action strategies for the Company and interacting with the officers so as to prepare the Strategic Plan based on budget guidelines, general and specific goals, perspectives, indicators, and measurements. It also supervises operating performance, economical, environmental, and social aspects of the company’s management. It meets at least once a month, or at any time at the request of the Board of Directors o by an initiative of its own members. 4. Human Resources Committee – It analyzes compensation guidelines and gives its opinion about them; it also monitors how the compensation policy is applied. Additionally, it revises the compensation, bonuses, management development and officers succession plans, as well as the assessment of their performance. It meets at least once a month, or at any time at the request of the Board of Directors or by an initiative of its own members. 5. Governance and Sustainability Committee – One of its main tasks is to propose governance and sustainability practices and rules which make sure that the company works well. Beginning in 2007, this Committee has become responsible fo monitoring sustainability-related issues as well. It evaluates the execution of governance practices, takes part in hiring independent members of the Board of Directors, and proposes that the Committees share responsibilities. It shall also monitor and point out changes in the way how the Board of Directors operate, including scheduling meetings, agendas and the information flow to shareholders. It meets at least every three months, or at any time at the request of the Board of Directors or by an initiative of its own members.

Customer Advisory Board Light’s management recognizes how relevant the Customer Advisory Board is relating to the improvement of the services rendered to the population. This Board, which was created by law, is a forum where customers may communicate with a public service company and is comprised by 16 representatives of leading associations in the household, business, rural, utilities and academic institution sectors. It meets with Light’s CEO and officers at least seven times a year. Light © 2010. All rights reserved.

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The contributions, criticism, suggestion, and claims are always openly received by Light. Each and every contribution by the directors are recorded in the Minutes, and any relevant proposals are sent to action and monitored at subsequent meetings. Light has established a direct channel between the Consumer Board and Light’s Ombudsman1, which is responsible for scheduling and recording the meetings.

Lectures and presentations by the company’s executives on topics raised by members of the Customer Advisory Board are usually included in the agenda for the meetings of the Board. 1

The Ombudsman is subject to the Institutional Relations and Ombudsman Superintendence and the New Business and Institutiona Office. Assessing the Board of Directors’ and Executive Officers’ performance This assessment, which is an instrument approved by the Board of Directors itself, analyzes how the Board works and acts, as well as the interaction among its own members, the General Secretary, the Committees, and the CEO [4.9]. The topics analyzed are as follows: ● ● ● ● ● ●

Information flow between the Executive Officers and the Board of Directors; Conduction and focus of meetings; Expedition and quality of decisions; Responsibility level; Internal harmony between Board members; Personal conduct of Board members.

Such assessment does not include specific environmental and social criteria. The CEO is analyzed according to aspects vision, strategic planning, leadership, company’s results, external relation and relation with the Board of Directors, development of key executives, and creation of opportunities for Light [4.10]. Executives’ variable compensation The executives’ variable compensation is determined by contracts and management commitments in line with strategic corporate objectives and monitored by indicators and goals. Three dimensions rule the officers’ variable compensation. The first dimension is directly related to the financial results (EBITDA, net income, dividend distribution). The second dimension relates to performance in each area separately and is monitored by specific goals [4.5], such as the Loss index, DEC and FEC set, compliance with environmental laws, etc.

In 2009, the third dimension was attached to the main challenges of Light and is common to the entire Executive Office. The decrease in the number of accidents to the whole staff is the social and environmental indicator that comprises this dimension. Therefore, unlike 2008, the Work Safety of own employees and service providers was the challenge that become part of the variable compensation of the company’s directors in 2009. This challenge is extended to all employees, as it is also an important indicator in the Gain Sharing Program (PLR), where all staff is included. Audit Light’s external audit has been used since the first quarter of 2008 by KPMG Independent Auditors, who is responsible for auditing the financial statements related to the year of 2009. In that period, independent auditors have worked solely on Light's accounting

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audit and did not render any additional or consulting service to Light. In 2008, Light adhered to the International Accounting Standard (IFRS), under PriceWaterhouseCoopers’ guidance. The adherence to the new standard is a mandatory item for joining the capital market as beginning in 2010, and is reflected in the Financial Statements related to the year of 2009. Compliance The Company’s main work standards, including Light’s Environmental Proceedings, are quoted in documents stating all activities that require internal control, so as to ensure compliance with the Law, rules, strategies, and guidelines. Monitoring the compliance with such standards is the specific responsibility of each manager, supported by internal audits. As to the value chain, the compliance with laws and rules is verified by assessing suppliers’ performance (see Suppliers). The objective here is to monitor the keeping of minimum conditions for qualification: Work Safety management, personnel training and qualification, work place organization and Human Resources and Environment management.

The Sustainable Development and Concessions, Legal, Energy and Environment Directors, in addition or the Ethics Committee, address occasional pending items or penalties related to legal, rule, and contractual requirements associated with the service. In the past three years, Light has recorded penalties in labor, civil, tax approvals, as well as with Aneel. Note that the payment of contingencies to the regulatory agency does not include the penalties related to the provision and use of products and services, as addressed to in indicator PR9 [SO8]. Payment of contingency (R$ thousand) [SO8]

MATTER 2007 2008 2009 Labor 17.131 17,914 13.602 Civil 47,648 11.519 12.325 Special Civil Courts 35.435 39.600 Tax 12.782 3.124 ANEEL 3.354 63 TOTAL 68.133 77.650 68.714 Note: As the actions performed by Light in 2009 have been re-classified, the Civil section has been divided into two new categories: Civil and JEC (Special Civil Courts). Event numbers and classification of 2008 have been reviewed. As to the number o contingencies, an increase in demand was verified in 2009, in particular in the civil courts, where customers challenged Power Cut suits as a result of REN (Power Recover) activities. The increase in the number of actions of this nature - 9,561 new actions in 2009, 12% more than the 8,522 actions recorded in 2008 - enabled Light to detect a higher number of frauds and, as a consequence, to perform more power cuts. Many of these actions were terminated in 2008 in the so-called conciliation, i.e., task forces established in order to conciliate a number of processes within a short period of time. This work is the result of a partnership between Light and the Court of Justice, supported by Light partner law firms. Number of contingencies 2007 2008 2009 NEWCONCLUDED NEWCONCLUDED NEWCONCLUDED Light © 2010. All rights reserved.

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Special Civil Courts 24566 1825823513 1981229147 31983 Civil 3544 1160 3545 1692 5283 2113 Labor 582 806 638 862 575 952 Tax 18 40 47 23 59 6 Light has no record of legal actions filed based on unfair competition, trust practices, and monopoly in 2009. [SO7] Membership in associations and relation with the regulatory authority Light interacts with Aneel, the regulatory agency of the electrical sector, on a regular basis by monitoring trends and decision processes which may materially impact the Company in such a strongly regulated sector.[4.13] In addition to directly working in public hearings, meetings and discussions with superintendents and agency directors, Light is engaged in partnership works with associations in the industry, such as the Abradee (Brazilian Association of Electric Power Distributers), Apine (Brazilian Association of Independent Electric Power Producers), et al. For three years now Light has had a strong participating, along with Abradee, in regular campaigns on topic electrical network safety, as well as planning future campaigns to fight losses. In 2009, Light played a distinctive role by acting proactively at the CPI (Parliamentary Investigation Committee), created for investigating Power Fees, with studies, researches, and consistent information, which happened to be material to the decision making process on this regard. The Company has also been actively participating in the Commercial Association of Rio de Janeiro (ACRJ). It is a member of the Micro and Small Business Council and of Rio Forum, which concentrates private and public entities concerned about associating business activity with market expansion. An example that illustrates the sustainable role of Light was Light’s adherence to the Sustainable Rio Protocol, an initiative of ACRJ which turned Rio de Janeiro into the first city in Brazil to have greenhouse gas emissions reduction goals. Additionally, the company makes its best efforts to offer support, so that businessmen may have an influence in economical and social discussions as a consequence of more familiarity with the topics being discussed. Membership in Associations (in and out the public sector) Abbreviation Entities ABCE Associação Brasileira de Concessionárias de Energia Elétrica (Brazilian Association of Power Concessionaires) ABDIB Associação Brasileira da Infraestrutura e Indústrias de Base (Brazilian Infrastructure and Base Industry Association) ABEE Associação Brasileira de Engenheiros Eletricistas (Brazilian Association of Electric Engineers) ABERJE Associação Brasileira de Comunicação Empresarial (Brazilian Business Communication Association) ABESCO Associação Brasileira das Empresas de Conservação de Energia (Brazilian Power Conservation Companies Association) ABGR Associação Brasileira de Gerência de Riscos (Brazilian Risk Management Association) ABNT Associação Brasileira de Normas Técnicas (Brazilian Technical Standards Association) ABRACEL Associação Brasileira dos Agentes Comercializadores de Energia Elétrica (Brazilian Power Trading Agent Association) ABRACONEE Associação Brasileira dos Contadores do Setor de Energia Elétrica Brasileira Light © 2010. All rights reserved.

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ABRAGE ABRASCA

(Brazilian Power Sector Accountants Association) Associação Brasileira das Grandes Empresas Geradoras de Energia (Brazilian Large Size Power Generating Companies Association) Associação Brasileira das Companhias Abertas (Brazilian Publicly Held Companies Association)

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Ethics Ethics is one of Light’s basic Corporate Governance principles. Ethical standards guide the Company’s commitment with a new sustainability-oriented management. The ethical conduct and solidarity expected of the company is set out in its Ethics Code, disseminated and evaluated by the Ethics Committee.

Organizational values and principles are widely communicated to the whole staff of the company, in all of its facilities, through a number of communication channels. The leaders are responsible for conveying such values and principles through exemplary behavior and attitudes. Suppliers/service providers must always be in line with the Company’s values and principles, as the failure t do this may give rise to warnings, penalties, and eventually contraction termination.

In order to disseminate the Code of Ethics and the channels of complaint for all stakeholders, the company uses the following media ● ● ● ●

A set of corporate formal communication channels; Governance Manual, available at the institutional website; Employment contract with the employees and supply contract with partners. Light’s Code of Ethics, with a version available at www.light.com.br.

Complaints of irregular practices are also heard by the Ombudsman office, which forwards them to the Operations and Customer Vice-President and the Ethics Authority in the Company for analysis. As to contractors’ employees, such analysis is performed along with the Management and the contractor. If the complaint is confirmed, Light asks the contraction for an action.

The penalties applied to violators of the Code may lead to the termination of the employment contract with the employee or contractor. Only the interested party may file a request for reconsideration of a decision on violations of the Code by the Ethics Committee, which will analyze and decide on the appeal. Fighting corruption Light is not tolerant with corruption. Based on its Code of Ethics and the actions of the Ethics Committee, the Company repudiates every and any form of corruption, a practice that is regarded as a direct violation of the Code. Work standards avoiding the occurrence of corruption events or conflict of interests in Light include the so-called Procurement Board. This Board approves all purchases amounting over R$ 100 thousand by a collegiate comprising representatives from the Procurement, Tax, Treasury and Legal areas. More than 95% of the total number of transactions performed by the company is subject to this kind of approval. The new functionalities implemented in 2009 to Light’s Procurement System and the digital signature project were added to this prevention. All material and service purchase requests and approvals comply with the standards set form in the corresponding competence matrix [SO2]. The Ethical Culture Reinforcement Program, which begun in 2008 and is available on the online and hardcopy versions, was incorporated to the integration of new employees in 2009 and extended to all of the Company’s areas, thus benefiting 929 Light © 2010. All rights reserved.

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participants [SO3]. The content of this Program addresses topics such as Ethics and anti-corruption procedures, with priority to those areas subject to higher exposure to risk (Field Operation, Customer Service, Procurement and Logistics, Treasury, Work Safety). In addition to emphasizing rules of conduct and expected behaviors, the Program introduces instruments that fight corruption: Code of Ethics and the Ethics Committee, Ombudsman Office, Light Complaint Line, Internal policies and rules.

The Internal Fraud Prevention area, created in 2009, analyzes with no bias any events which may be regarded as contrary to ethica commitment and Light’s internal rules on this regard, thus processing with transparence the analysis of the complaints related to commercial and operating activities. Additional goal is to map and eliminate risks and deviations inherent to the business. It is supported by specialized information safety consulting for managing fraud prevention and detection (fighting bad practices), analysis and orientation of the Confidential Channel via internet (are where employees may report unethical facts and contrary to the Company’s internal proceedings), as well as complaints to the Ombudsman Office by indicating administrative commitment.

In 2009, the area received and managed 83 complaints. After an analysis was performed, 41 of them were regarded as inapplicabl and 27 as applicable. Two complaints are still being investigated. In 13 cases, the investigated information happened to be insufficient to come to any conclusion. As a consequence of investigations, both own employees and contractors were impacted, as shown in the following table [SO4]: Dismissed

Monitored 22

Suspended 71

Warned 1

In the specific case of applicable complaints, whenever the team is identified, the Management and Control Team, along with the team manager, is responsible for analyzing, on a case-by-case basis, the actions to be taken. The 27 complaints classified as applicable in 2009 had the following impact: Dismissed

Suspended Warned Trained/oriented 24 1 14 1* * Fraud detection training performed with the power reading employees of contractor Provider. The Action Plan of the area for 2010 has defined the following objectives: To implement improvements of the Administrative Engagement mark, prepare a report through BI (SAP), implement the Voice Channel and develop a database for managing all complaints received through conventiona channels or other divisions.

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Integrated risk management

In its third year of implementation, the Integrated Risk Management program introduces improvements in the methodology by featuring a number of changes as to the methodology that has been adopted in previous years, as well as new research lines, such a Image Risk. The aim here is to provide the company with a structure, systems, and processes applied to identifying, analyzing, mitigating, and monitoring its main risks [4.11]. The methodology used in 2009 to classify and categorize risks brought changes compared to the one that had been adopted in

previous years, as seen the chart as follows. Risk Portfolio, updated in 2009 A new methodological revision is scheduled for 2010, which will include a descriptive re-formulation and risk re-grouping. This task will culminate with the disclosure of the Ris Portfolio 2010-2014. As a differential aspect in risk management, Light is not stuck to operating risk assessment only. A tool for assessing the main variants affecting the company is now at the validation phase. In 2009, the area incorporated benchmarking to its activities, i.e., a comparative study of financial accounting indications adopted by power distribution companies throughout Brazil. The incorporation of new economical and financial indicators with a regulatory aspect is studied for 2010, the application of which is material to the specific needs of the power industry. The study, carried out by Light, targets not only at comparing. It tries to go further by making best efforts to understand and justify the discrepancies as shown among the companies. Therefore, it considers the specific needs of these companies and the market where they operate. Given this information and analyses, the company may identify its most critical points and focus its efforts toward minimizing them. Also new was the creation of the Strategic Intelligence (IE) activity, in order to provide the company with real-time instruments to support decision making related to the market and competitors. The challenges of this new area of activity include the implementation of a new culture to the use of information within Light and staff’s awareness of the benefits of risk management.

It must be pointed out that any information treated by the Strategic Intelligence cause the risk management process to get easier, as the responsible area will then have more quality data at its disposal. The challenge of the Integrated Risk Management for 2010 remains unchanged: To improve efficiency in identifying and mitigating risks, incrementing the processes supporting decision making and monitoring performance goals and indicators, all from the integration among Risk Portfolio, Strategic Intelligence, and risk measurement processes (Corporate Value at Risk – CvaR).

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Strategic dialogue [Highly relevant / impacting issue 1: Inclusion of the needs of different target publics in Light’s Strategic Planning]

The outlook by the various target publics was included in the cycle of the Company’s 2009 Strategic Plan, with the performance of the first structured commitment process by the parties in question, held with the support of FBDS and with the purpose of raising the most relevant issues for Light as well as for the parties in question, in order to include them in the 2010-2013 strategic plan. This dialectical process included in the Company’s plans and the aspirations by the parties in question were one of the key actions of the 2009 strategic guidance.

The strategic guidance process that led to the construction of a strategic ambition for the 2010-2013 period, described Light’s chie risks and internal and external opportunities by means of a SWOT matrix, in addition to analyzing macro-economic and sectoral trends based on a reference scenario. Ambition / Strategic Vision 2013 To display a consolidated performance in indicators that measure return to shareholders and growth of current and of business; corporate excellence recognized in governance, sustainability, operating effectiveness, and asset management; presence among the country’s best distributors; and a culture in line with customer satisfaction, with the pursuit of results the acknowledgment of persons, and the development of the concession area.

This strategic ambition is the result of actions based on respect for the Light personnel and for their values, on the understanding by all staff members with regard to the Company’s Mission and of compliance with the plans put in place – within a structured process that embraces environmental analysis, definition of strategies, programs, goals, and their monitoring in accordance with the budget. All these components are a part of the management commitments greed on among the Board of Directors, Senior Managers, and the entire managerial body.

Hence, Light is preparing to overcome challenges which in 2009 started with the effects of the world economic crisis and ended up with a chain of events which caused punctual interruptions in electricity supply to a number of streets in the city of Rio de Janeiro.

Strategic ambition should be achieved in two stages: in 2010 on conclusion of the Appreciation Plan, and in the 2011-2013 period, on consolidation of the culture of focusing on customers.

In the case of the 2010 strategic plan, our challenges have been already defined. As to the external outlook, the vision by specialists will be absorbed into the process for preparing scenarios to improve the array of macro-economic and sectoral assumptions, based on which Light should define its strategies and objectives. In the internal outlook, the commitment by the internal public will also be increased, strengthening Light’s commitment with sustainability. Light’s Mission [4.8] To be a major Brazilian company committed with sustainability, respected and admired for the excellence of the services provided to its customers and to the community, for the creation of value to its shareholders, and an excellent place to work. The Light people’s values [4.8] Results oriented Light © 2010. All rights reserved.

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Appreciation of merit Courage and perseverance Ethical behavior and solidarity Happiness

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A loss-reducing attitude [Highly relevant / impacting issue 2: Investments in fighting losses]

Electricity losses jeopardize the quality of services provided to customers and consist in a loss to Light. The nature of the concessio area is essential to examine the context of the Company’s actions. The city of Rio de Janeiro, more specifically, has hundreds of communities under the control of drug dealers or militias. Often in these locations, it is impossible to provide even a basic service, le alone perform maintenance on equipment. And without mentioning formalizing and measuring the supply.

Light is committed to the joint effort of implementing Community Pacifying Program developed by the Government of the State of Rio de Janeiro and a number of its partners. The program which to date has benefited nine communities in the city, is based on implementing Police Pacifying Units (UPPs) This new Public Safety model for police actions encourages contacts between the population and the police, jointly with emphasis on social policies in the communities. By recovering territories occupied for decade by drug dealers, and more recently by militias, the UPPS bring peace to the communities. The units work under the Community Police principles, which concept and strategy are based on a partnership among the population and institutions involved in public safety.

As a partner in this effort, Light has adopted a special policy in pacified communities – such as Santa Marta in Botafogo, the subjec of a case brought up in this Report. These actions are developed by Light in conjunction with the State Government’s program, wit its goal of pacifying 100 communities by the end of the current administration. Fighting losses Conventional actions The improvements implemented in the conventional system of preventing losses through inspections have had excellent results. The new intelligence analysis by means of a software developed by a specialized company – together with the improvements put in plac in the process for normalizing frauds – has lead to a much greater success rate in the ratio between the volume of inspections, proved frauds, and the volume of associated energy.

From January to May 2009, 20,893 inspections were carried out, with 5535 proved frauds and an average 677 kWh of associated energy per inspection. From June to December – following the adoption of the new analysis and normalizing model – the number of inspections carried out dropped to 13,375, with 5298 proved frauds and an average productivity of 1119 kWh of associated energy per inspection. This outcome shoes that an almost equal volume of detected fraud involved a 65% larger amount of associated energy. During the year, the average success rate was of 33%, against the 29% target. Armored grids and new technologies In association with conventional regulating actions, the new armored networks played an important role in the prevention of nontechnical losses. As they are safer and more modern, violation and external access to the network is made more difficult, to steal energy and self-reconnection. In several areas where they have been installed, the increase in billings has already been felt – even before introducing the new electronic measurers installed by Light. These devices are important items in the new Centralized Measuring System (SMC), as they provide greater control of measuring and billing. A study performed in three areas in which the networks were armored and the SMC put in place - Padre Miguel (the Bangu market), Sargento Roncalli (the Belford Roxo market), and Éden (the São João de Meriti market) – evidenced that customer billings rose by 20% on average. Comparatively, in each of the respective markets in which Light has not installed armor and new Light © 2010. All rights reserved.

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technologies, average billings rose by 6% only. In Sarapuí (the Duque de Caxias market), billed energy increased 45%, while the market rose by only 13% over the same period. It is expected that when billings with the SMC begins in 2010, Light will be able to further reduce losses and default in the areas under consideration. As additional gains, the new armored networks provide a number of benefits to the system and to consumers. As they are more protected against invasions, they contribute in improving the system’s performance and in reducing interruptions in supply, besides reducing operating costs.

On the other hand, the Individual Measuring System (SMI) is being put in place in well built-up areas, where tampering with the network is less frequent. This type of measurement is concentrated chiefly in condominiums in Barra da Tijuca, Recreio, and Jacarepaguá. Losses in these areas were reduced from 25% to 9% on average during 2009. Measurements and control of anomaly alerts are performed from Light's Measurement Control Center (CCM). “[...] because I’m certain that 85% to 95% of the resident [of the communities] want to pay this electricity bill, but they can’t get the bill transferred to their name, they can’t get the meter changed. So what happens? The guy buys a house, the house doesn’t have a meter, do you really think he’s not going to ask a passing electrician to hook up a wire? Or is he going to be without electricity until Light decides to bring a meter?” (Debater 1, during the process of exchanges between the interested parties) Investments Low-voltage armored networks and new measuring technologies concentrated roughly R$ 120 million of the total sum invested by Light in preventing non-technical energy losses during 2009 (R$ 170 million as against R$ 150 million in the previous year. Based on this investment program for centralized measuring systems, in 2009 Light sped up modernization of the low-voltage networks with 638 km in armor. Ongoing investments in new measuring an armoring technologies point to a sustainable decline in non-technical losses. As of June 2009, following ratification by Inmetro of the new electronic measurers specified by Light, the company was enabled to start the process of adapting already installed measurers and to resume installation of the new equipment.

The remaining R$ 50 million were directed at conventional actions for energy recovery and process improvements. As a result, the volume of recovered energy during the year rose to 151.9 GWh, a mark 17% above the 2008 level. Results The amount of energy added during the year (57.9 GWh) increased 36% as compared to 2008 (42.7 GWh), despite the number o normalized customers having been 5% below that of the previous year. The volume recovered is equal to the increase in the billings that arose from the normalizing of measuring equipment. The qualitative improvements put in place in the conventional procedures were an important contribution in this increase.

The total loss rate during the year was equal to 21.75% of the total energy that circulated in the Company’s network [EU12]. This outcome, 1.33 p.p. above the 20.42% seen in 2008, was affected by increased technical losses (115 GWh greater) and by nontechnical losses (388 GWh greater). This result was also affected by the natural growth of informal areas and those under the control of organized crime or of militias, a factor which precludes actions by our teams in preventing the fraud industry. The drop in consumption by large customers that migrated to the free market (and had no non-technical losses), with an adverse effect on the cable load, also reflected on results.

The 2010 Energy Recovery Plan includes a number of actions likely to add as much as 502 GWh in energy to the system at an estimated temperature projection, a volume equal to the area’s target based on market expectations. It is estimated that roughly 25 thousand customers should be normalized, of which 98 thousand through conventional actions (normalized by means of inspections Light © 2010. All rights reserved.

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and unlawful connections formalized), 50 thousand by means of network armoring, and 90 thousand after installing electronic measuring. The regions most benefited by investments in these new technologies are those known as Baixada Fluminense and Zona Oeste, where Light has 1540 thousand registered customers in urban areas (outside of the risk communities), and where 80% of Light’s non-technical losses are concentrated (net of losses in the risk areas). “I think that Light’s strong point is its engagement in the community. It’s, what do you call it, social work?” (Debater 3, during the process of exchanges between the interested parties.) Santa Marta, a success model [EU23] The array of initiatives developed by Light during 2009 in the Santa Marta community, in partnership with the State of Rio de Janeiro Government’s pacification program, took on a much larger dimension than was originally estimated. The project was successful in terms of energy efficiency by means of awareness actions, replacement of the entire network, and direct benefits to consumers, not to mention energy recovery. For this reason, it was converted into an action model that will be reproduced in other communities of the same nature. Brazil has R$ 7.5 billion in business losses resulting the theft of electricity, of which R$ 700 million in Rio de Janeiro alone. In many places Light is unable to provide a quality service because access to it is prevented by threats from organized crime to its staff members and assets.

A microcosm of this situation, the Santa Marta community located in the district of Botafogo, in Rio de Janeiro, has shown that it is possible to overcome the discouragement of these large sums and to reverse this status of informality with actions by the state government and a pact of transparency between the community and the public service concessionaire.

Yet, for the community to arrive at the current average of 98% of electricity bills paid punctually - very much higher than the averag for all retail customers, which stands at roughly 66% of accounts paid punctually – a lot of work was required in addition to a collective effort, which in this case began on December 29, 2008 in the facilities used by Associação de Moradores do Morro Santa Marta.

At that time, the place was under the control of drug dealers and had no basic public services. Only 80 homes received light bills in the community, a universe of 1544 families. Total billings were in the region of R$ 650 per month, for 461 MWh of electricity supplied. The result? Losses close to 278 kWh/month per home, overloaded transformers, an unlawful low-voltage network inter-connected to the Light network, and makeshift residential installations throughout the community. See how the Company was able to change this situation in the Santa Marta complete case in Chapter 7, in the item Development of the concession area. Energy loss is the quantitative difference in energy made available by Light to its customers through the electrical grid, known as own load, and the electricity actually billed. Losses may be of a technical nature, when they occur because of the transmission and distribution process, and non-technical, when they are caused by the theft of electricity or by deficiencies in equipment and processes.

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Energy efficiency [Highly relevant / impacting issue 6: Investments in energy efficiency].

Light stand out for its energy efficiency programs regulated by Aneel and the efforts undertaken by Light Esco, a Light sales agency with its specialized projects in energy efficiency, management, and consultancy to several customers throughout the country. Energy efficiency entails conscious consumption and a greater equality in the supply of energy and safety for the system.

Investments in renewable energy and large-scale energy efficiency projects are part of a vision of the future intended to ensure service provision and to contribute to the mitigation of climate change caused by greenhouse gas emissions. Light’s Energy Efficiency Program [EU7] With the advent of mandatory investments in energy efficiency projects since 1999, Light completed 141 projects in the scope of it Energy Efficiency Program (PEE), with total investments of R$ 290.6 million. This sum is in accordance with the amount determined by Aneel. Total savings resulting from these projects is of 479.46 GWh yearly, which is equal to roughly 2.5% of consumption by Light’s regulated market in 2009. In 2009 Light invested roughly R$ 33 million in 17 PEE projects. R$ 17.8 million from this total were aimed at projects in lowincome communities. The PEE also includes energy efficiency projects in priority areas, such as sanitation, health, and education. Energy Efficiency [EN5] Breakdown of Investments per Project Type (%) Year 2007 2008 2009

Low- Public Public Public Commercial Industrial Education Income Services Lighting Authorities 39.77 61.60 53.84

4.33 26.16 31.30

15.69 -----

34.36 4.77 12.71

3.98 6.51 ---

0.49 -----

0.40 -----

Others 0.98 0.97 2.15

Total Investments (R$ thousands) 31.931 15.607 32.990

Energy Savings (GWh/year 47.10 25.40 1.06

Although it has concluded two projects PEE only in 2009, with total investments of R$ 2.25 million and 1.06 GWh yearly in energy savings, by August 2010 Light will have concluded a major portion of its 15 projects still outstanding.

Investments by Light in this program over the last three years were of roughly R$ 80 million. This represents more or less 40% of al investments made by Light over the last ten years. The savings in energy obtained during the period, of 73.56 GWh yearly, is equal to the average consumption of 250 thousand homes in twelve months.

With regard to mitigating climate change, the environmental gains obtained by the PEE and the solutions implemented by Light Esco contribute to reduce greenhouse gas emissions (GEE) [EC2]. Solely by means of energy efficiency projects put in place in the communities, Light avoided 2700 tons in CO2 emissions into the atmosphere. With regard to the internal public, a positive impact to the Company by the PEE is the integrated vision which it develops in every area – legal, project management, accounting, acquisition and logistics, regulations, financial, and others. This vision creates a Light © 2010. All rights reserved.

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common interest that favors the program’s development and creates an awareness that the focus is not only the electricity sold, but also its quality, together with customer satisfaction. The Energy Efficiency Program includes mandatory investments made by electricity concessionaires pursuant to Law 9991 dated July 24, 2000, and other legal provisions. The law provides that the concessionaires should invest a yearly minimum sum equal to 0.5% of their net operating revenues in actions to prevent electricity wastage. PEE projects in public institutions Sanitation - Emphasis on the efficiency project developed by Light at Cedae’s Guandu Water Treatment Station. The world’s largest. The project which will permit Cedae to postpone a R$ 35 million investment to expand water distribution, is focused on reducing wastage and involved modernizing the valves and electric motors in the system for cleansing filters. The improvements implemented, estimated to last over 10 years, will avoid pumping 1100 liters per second of water and will provide the release of 1450 liters per second of treated water to the distribution system. Total investment will be of roughly R$ 20 million, with energy savings estimated in excess of 14 thousand MWH yearly. Conclusion is expected during the second half of 2010.

Health – The Pedro Ernesto University Hospital, a reference in Rio de Janeiro, was included in the energy efficiency actions in its lighting systems and environment control in its surgical facilities. With the purpose of reducing the rate of hospital infections, the new system treats the air with ultra-violet lamps on entry and when exhausted. In addition, environmental pressure is controlled automatically in order to avoid contaminating patients and medical staff. Light invested R$ 2.2 million in the project, which was concluded in 2009. Energy savings are estimated at 1004 MWh yearly and the benefits will last on average 10 years. The project was concluded in 2009.

Education - Light will modernize 10 thousand light fixtures at Centro de Educação Tecnológica e Profissionalizante (CETEP) in th district of Quintino, a part of Fundação de Apoio à Escola Técnica do Estado do Rio de Janeiro (FAETEC). Cetep Quintino accommodates over 10 thousand students in 14 teaching centers and the courses are completely free. The project includes replacement of lamps, light fixtures, and reactors. The investment of roughly R$ 760 thousand will lead to energy savings of 679.0 MWH yearly, and the benefits are estimated to last 5 years. Efficient Community Project Operating since 2002, the Efficient Community carries out integrated actions including changing lamps and refrigerators, consumer education, modernizing electricity networks, and commercial formalizing in a number of low-income communities in the city of Rio de Janeiro. The actions carried out by Light under this project removed over 20 thousand persons from informal conditions. For 2010, the Efficient Community IV project estimates the replacement of roughly 300 thousand lamps, of 23 thousand

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refrigerators, and the revamping 450 electrical installations and 31 thousand formalizing of casual consumers. “Haroldo, he plays fo

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the team. We call him on a Sunday at midnight, one in the morning, the guy’s asleep, the guy answers. These are the employees wh

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play for the Light team, I have to congratulate them.”

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(Debater 2, during the process of exchanges between the interested parties.) Investments The PPE 2008-2010 Investment Plan sought to reflect the actual needs of Light’s concession area: the nature of the consumer market, the Company’s relations with the parties in question, the priorities of the 31 municipalities covered, and the country’s priorities in increasing energy efficiency. The Action Plan submitted to Aneel provides for R$ 98 million investments for the 20082010 period, And was prepared based on three assumptions: social contribution, institutional support to public authorities and services, and the increase in competitiveness by local enterprises. “…I would combine the work in the communities with the work with the representative bodies; for example, Light is considered, by the service distributors, as a company that pays a lot of attentio to consumer protection bodies.” (Debater 1, during the process of exchanges between the interested parties.) Light’s PEE Investment Plan – 2008/2010 Type of project Investment (%) (R$ thousands) Low-income 49,000 50.0 Trade and services 4,000 4.08 Public authorities 7,050 7.19 Public services 35,450 36.17 GEM 1,000 1.02 Home use 1,000 1.02 Management plan 500 0.51 Total 98,000 100.0 Challenges and goals for 2010 One of Light’s challenges is to obtain institutional support in the federal, state, a local government spheres in order to expand its energy efficiency projects in public service areas such as Sanitation, Health, and Education, intended to assist in reducing costs and in implementing improvements the public bodies’ management processes. Another challenge is to form a partnership with government and class associations to attract to the State of Rio de Janeiro new companies to provide solutions and to supply energy efficiency equipment, besides encouraging the rational use of energy in other consumer units.

Light also faces the challenge of increasing synergy between PEE and R&D programs in order to more efficiently employ funds invested in energy efficiency, to potentialize the benefits created, and based on the expertise acquired, to introduce innovations in th energy efficiency area.

Light’s goal for 2010 is to continue its Action Plan and to make investments in the region of R$ 63 million which when added to the R$ 33 million with regard to 2009, and the R$ 2 million in 2008, total the estimated R$ 98 million to be applied to energy efficiency projects from 2008 to 2010. Eco-efficient projects and marketing energy With a 54% increase in service revenues as compared to the 2009 targets, and 74% as against 2008, Light Esco is placed among the major Brazilian companies in energy efficiency in terms of billings. It provides personalized solutions to its customers, in marketing energy in the free market as well as in energy and infrastructure services. An example of this type of solution was the supply of 100% renewable energy from small hydro plants to Hotel Intercontinental in 2009. Light © 2010. All rights reserved.

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The company is a pioneer in the development and adaptation of technology for the production and distribution of iced water (distric cooling). Air conditioning solutions for buildings, condominiums, and industrial facilities are very attractive to customers, as they rationalize and optimize the use of energy. And they also contribute to the planet’s environmental balance by reducing greenhouse gas emissions.

In 2009, TV Globo retained from Light Esco a complete package for optimizing energy use, including refurbishing of the air conditioning system, improvements in the co-generation unit, and the construction of a branch with a 138 kV substation. Also, a highlight of the year was the association by Light Esco, Petrobras Distribuidora, and Ecoluz to create EBL. This new company is in charge of implementing customized energy efficiency projects (automation of the air conditioning system and refurbishing the lighting system) for 32 buildings of a major communications company, located in a number of states in Brazil. The 2008/2009 year was marked by the implementation of several energy efficiency and projects and Central Iced Water retrofit (CAG). It is expected that by 2010 roughly 2.8 MW will be removed from peak demand in the electricity system, a volume which is wasted through the use of inefficient equipment.

It is expected that billings from energy and infrastructure services in 2010 will exceed the 2009 figures by 112%, which will result in a 46% growth by Light Esco.

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Quality in Light customer assistance [Highly relevant / impacting issue 8: quality customer assistance] Light customers are the Company’s objective. Quality assistance is much more than a commitment: It is an obligation, a privilege, and also a great differential in the industry’s competitive environment. To customers, quality assistance is an important part of the service provision, as this provides the security of Light’s support to their requirements and needs.

In the retail as in the large customer segment, improvement actions are ongoing and seek to assure customers an assistance capable of providing solutions to their requirements with the support of more and more efficient processes. Retail The Retail customer segment makes available several channels to access easily information, products, services, and miscellaneous requests. The assistance team is comprised of qualified and regularly trained staff members, whom will be continuously aligned with customer needs, market changes, internal (operating aspects) and external (the economic and political scenarios) contingencies.

Virtual assistance – which is now equal to 20% of Light’s entire assistance – rose 10% in volume as compared to 2008. The key channel is still telephone assistance which accounts for 67% of demand, followed by commercial offices with 13% of the total. In 2009 roughly 10 million customers were assisted, 4% of which had complaints. “...this constant expansion, it’s noticed… it’s going for a better image compared to the others… but an improvement in the quality of the service, that’s something else...” (Debater 3, during the process of exchanges between the interested parties.) Assistance and Relationship Channels - Retail 24-hour free service, divided into Disque-Light Comercial (0800 282 0120), for service requests, complaints, information, and campaigns; Disque-Light Emergência Help desk service (0800 021 0196), for assistance in interruptions in energy supply and incidents (Disque-Light) involving the electrical network; and Disque-Light Exclusivo, for customers with impaired hearing and speech (0800 285 2453). Retail customers may request services and consult online by means of the Virtual Office and Clique-Light (chat), in addition to simulating consumption, information on Website programmed interruptions, and tips on savings and safety. In the case of major www.light.com.br customers, in addition to displaying the bill, the website also provides information on special fees, corporate solutions, and a corporate assistance structure, in addition to tips on savings, notions on energy efficiency, and other services. Light has 39 assistance offices in 25 of the 31 municipalities in its concession area, Commercial and which are open from Mondays to Fridays, from 8 am to 6 pm. Offices located in self-service offices shopping malls in the districts of Tijuca, Penha, Madureira, Barra da Tijuca, Ilha do Governador and Santa Cruz are also open on Saturdays. The 36 self-service terminals provide the issue of copies of bills, changes in basic Self-service data, authorization of automatic charges in banking accounts, requests to deliver bill at terminals other addresses, and changes in maturity dates, among other services. Mounted on a van-type vehicle, the Mobile Assistance Office has an online operating system that uses an Internet wide band and provides all the assistance of a commercial Light © 2010. All rights reserved.

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Mobile Assistance office, in addition to displaying institutional and educational videos focused on the Office efficient use of electricity and on safety against risks involving the electrical network. The Mobile Office also drives through municipalities that do not have commercial offices yet. The Ombudsman’s Light receives customers’ complaints and suggestions through telephone 0800 284 Office 0182. Assistance is provided from Mondays to Fridays, from 8:30 am to 5 pm. Service is provided during the 24 hours and may be accessed through numbers (21) Fax 2588-0046 and 2588-0048. Customers may request any of the commercial services and may also send documents. By means of the “Post Paid” service, customers may send free of charge to Light by Letters mail the documents required to perform any commercial service that requires this. Users of this communications channel may receive information of public interest Twitter published by Light, such as network safety tips and energy savings, rights and twitter.com/lightrio obligations of electricity consumers, any programmed network maintenance, and others. Recognized quality In 2009 Light was Brazil’s first electricity distributor certified with the LAC - Loja Amiga do Cliente Seal, granted by Instituto Brasileiro de Relações com Clientes (IBRC), for quality, training, and accessibility detected during visits to its commercial offices. I also received the 2009 Abradee Award for the Best Progress in Performance among the major companies in the electricity business. Assistance by Light, according to surveys Retail assistance is assessed chiefly by two annual satisfaction surveys: by Abradee and by Aneel.

In the 2009 Abradee Satisfaction survey, Light’s score in the Customer assistance area (IDAR) was 72.70%, against 72% in 2008 Despite considering that its current level is important - above 70% - Light’s target is to leverage this performance in 2010 to a more significant growth. Light experienced a 67% increase in the attributes (IDATs) surveyed in the Assistance area in 2009 (see table). ABRADEE Survey - service rates IDAR - Customer service Facility to enter into contact with the company when information or services are IDAT - required IDAT - Waiting time to be served Speed of attendants when being served IDAT - (time spent being served) IDAT - Attendant awareness of the subject Clarity of the information provided by IDAT - attendants Politeness of attendants . i.e. attention. IDAT - courtesy and respect for the customer Timeframe informed to carry out the IDAT - services requested by the customer Permanent solution of the problem. i.e.

2008 72,00%

2009 72,70%

74,30% 67,70%

76,20% 71,00%

69,10% 73,50%

70,60% 74,20%

72,00%

73,10%

80,90%

77,30%

70,60%

72,40%

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IDAT - resolving the problem once and for all 69,50% 69,20% Performance of that timeframe requested by the company to resolve the customers’ IDAT - requests 70,00% 69,90% In the Aneel survey, quality perceived in assistance by Light showed two important advances in 2009. In the Information item, the attribute “Equal assistance to all consumers” rose 6.81 p.p. and totaled 73.42%, as against 66.61% in 2008. And the Access item (see table) grew even more, by 10.08% (71.57% as against 61.49% for the preceding year). In 2009, Light grew in 100% of the access attributes measured under the survey. ANEEL Survey – perceived quality

2008

Light 2009

08 x 09 Informed Equal service for all consumers 66,61%73,42% 6,81 Access 69,49%71,57% 10,08 Punctual provision of services 54,87%67,72% 12,85 Facility to enter into contact with the company 56,64%65,45% 8,81 Friendly service 64,30%73,02% 8,72 Easy access to bill distribution centers 78,72%87,10% 8,38 Fast responses to client requests 52,91%64,55% 11,64 [PR5] Consumer satisfaction rates Survey Rate 2007 2008 2009 Aneel Aneel Consumer Satisfaction Rate (IASC) 66.9% 56.2% 64.2% Abradee Perceived Quality Satisfaction Rate (ISQP) 74.1% 72.5% 75.3% Abradee Customer Approval Rate (IAC) 71.0% 64.2% 67.8% Abradee General Satisfaction Rate (ISG) 75.7% 69.8% 77.8% Light’s own Service Provision Satisfaction Rate (ISES) 86.2% 92.2% 89.8% In the 2009 Abradee Satisfaction Survey, Light’s performance in the 2009 ISQP was the second best score in the Company’s history. Growth compared to 2008 was of 2.8 p.p. Please note that Light had not grown in ISQP since 2005. In the IASC survey measured by Aneel, the Company grew by 8 p.p. and in the ISES survey measured by Light itself, the 2.4 p.p. decline as compared to 2008 is considered stable as it is placed inside the survey’s error margin and within the 90% satisfaction level, equal to the 2009 target. Surveys, methodologies, and calculation criteria.

Surveys are important instruments to improve Light’s relations with its customers, as they throw a light on the degree of satisfaction by the latter with the quality of the deliverables provided by the concessionaire, in addition to providing instruments and incentives intended to improve our performance. Each survey has its own methodology to arrive at the quality rates. Three important Retail surveys are performed annually at Light: by Aneel (IASC), by Abradee (ISQP) and by the company itself (ISES). In its annual survey, Aneel calculates the Aneel Consumer Satisfaction Rate (IASC). Customers assess distributors under five parameters: Quality of service, value (price), fidelity, reliability, and satisfaction. The survey compares customer perception in Light © 2010. All rights reserved.

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connection with the quality of services provided by the 64 electricity distributors in Brazil. Performed by Instituto Innovare in 2009, the Abradee survey measures the degree of satisfaction by residential customers with the quality of the products and services provided by the distributors, expressed chiefly by three rates: ●

●

The Customer Approval Rate (IAC) – Reflects the public’s impression on the company, based on a reply to a question asked at the survey’s beginning. The Perceived Quality Satisfaction Rate (ISQP) – This rate weighs satisfaction stated by the importance attributed by customers to each attribute/area. The areas assessed are: Energy Supply; Information and Communications; the electricity bill; Customer Assistance; Image. The General Satisfaction Rate (ISG) – The reply to a question asked at the end of the Abradee Survey reflects the customer’s definite opinion, following the company’s general assessment.

Light’s own survey has been performed since 2005 and examines satisfaction by residential customers with regard to the quality of assistance and the services provided by the company. It has been conducted under the same methodology as the Abradee Survey since 2008.

The performance of assistance in 2009 was monitored internally by means of performance goals and indicators, with the following results: Service Performance Goals Indicators Results Best service level Call center 88.50% of customers assisted service level in 30 seconds Commercial office service level 90.26% of customers assisted in 30 seconds Virtual office service level 83.99% of emails answered in 24 hours Reduce average assistance and Average waiting time (mm:ss) Call center – 04:40 waiting time (call center and Virtual office (chat) – 13:42 virtual office) Average waiting time (mm:ss) Call center – 00:23 Virtual office (chat) – 10:12 Improve quality of assistance Quality score by supervision Average for all channels: 64 Assessment with the “Opine” 96% of assessments rated tool in offices assistance as excellent or good Increase Virtual office’s share Percentage of Virtual office’s 20.36% in assistance share in assistance Actions performed in 2009 Extension of assistance and training of staff members; the provision of new functions to customers; refurbishing and adaptation of commercial offices, all of which certified by ISO 14001; the use of new technologies to speed up processes in the field; a number o accessibility options for customers with special needs; and relationship actions were some of the means found by Light in 2009 to extend assistance actions and achieve excellence levels.

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The number of attendants was increased, as were business hours dedicated to training. The Virtual office started to offer more functions such as the installment payment of past due sums, printing of copies with expired agreements, refunds of damages and losses, and others – in addition to Visa card payments in 26 commercial offices, which now function under the concept of collection posts. As far the use of technology goes, emphasis on remote monitoring of customer assistance in the three key channels and pilot experience in Palm advanced technology, when issuing and monitoring field service orders, to speed up execution. With regard to comfort and ease, Light refurbished three offices (Centro/Primeiro de Março, Méier, and Nilópolis) and opened three others (Mesquita, Rio Poupa-Tempo Zona Oeste, and Rio Poupa-Tempo Baixada), in order to provide more customer assistance comfort in areas with large concentrations of people. In addition, the self-service terminals were replaced with more modern equipment.

With regard to accessibility [EU24], besides priority assistance, the commercial offices provide access ramps, adapted lavatories, tactile signaling for the blind, and attendants trained in Brazilian Sign Language (LIBRAS) in ten offices with heavy traffic, and also bills in Braille - a monthly statement with information on the electricity bill – and free of charge telephone assistance through a 0800 number for customers with handicapped hearing and speech. Please note that 100% of the work force in the Virtual office is composed of persons with special needs, in charge of online and chat assistance. Accessibility indicators measured by Light may be found in the specific table in this Chapter. Among customer relations actions, we point out the campaigns printed on the electricity bills which have taken to homes public utility topics such as tips on saving electricity, information on consumer rights and duties, besides the disclosure of cultural actions and social works throughout the state. In addition it offers total family and home insurance at an accessible price, and exclusive promotions to encourage timely payment, payments with Visa Electron charge cards, and concurrence with automatic charging to bank accounts (movie and theater tickets and several discounts, in a partnership with a number of companies: Oi operator, Espaço Z, Metrô Rio, Niely Gold, Walmart, and Jornal do Brasil). Accessibility Indicators – 2009 Consolidated data 31 Commercial offices adapted to assist handicapped persons Commercial offices with assistance in Libras or tactile signaling Average waiting time for priority assistance in commercial offices Average yearly hours of behavioral training for assistants (man/hours)

10 10 minutes 7,5 hours

Refunds for damages and losses

The recent interruption in supply on November 10, under the responsibility of the Inter-connected Transmission System, created enormous difficulties in Light’s area and in those of other distributors, owing to the increased demand for refunds due to electrical damages. However, as Light already had in place legal and regulatory procedures, the technical analysis and commercial processes and deadlines for these claims were maintained.

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cases of electrical damages caused to equipment located in the consuming unit, after evidence of losses. Light has been working vigorously to speed up customer claims. Requests for and submission of documents may take place through any of Light’s assistance channels. In addition to emphasizing information on refund procedures in the website and in Twitter, the assistance team has undergone new training. Action Plan The 2010 Action Plan is organized for ongoing improvement and includes several challenges, with emphasis as follows.

A search for excellence is behind every assistance action, responsible for representing customers within Light. The volume of complaints is one of the most important parameters to assess customer perception with regard to assistance quality. For this reason regular monitoring of complaints is part of the ongoing improvement goal for quality assistance.

By means of an in-depth examination of complaints by type, area, time of year, frequency, etc. - Light is engaged in promoting process improvements, detects punctual deficiencies, encourages changes in retaining services, and many other actions with a focus on customers. In order to improve analyses, projects are being created to prospect for data allowing greater speed and precision in extracting specific information to manage complaints, covering all company areas. Improvements have also been proposed to access assistance channels, such as for example the extension of services in the virtual channel. On the other hand, monitoring actions provide a preventive analysis of knowledge and behavior by assistants for recycling and alignment actions put in place in advance of any negative effects from complaints, and lead to contribute to the goal of solving customers’ problems in one contact only. This entire task is also intended to improve area results and the performance of quality attributes used to measure assistance, in the Satisfaction Surveys undertaken by Abradee and Aneel. Activity Term for implementation Daily monitoring of indicators in every January-April 2010 assistance channel, chiefly average waiting time and assistance. Monitoring of attendants with a longer average January-April 2010 waiting time and specific training to reduce this rate, encouragement of a more flexible and specialized assistance, and reduction of waiting time. Detect and concentrate on customers with a January-June 2010 greater number of contacts / requests (deficiencies), detecting likely procedural and operating faults. Implement a consumption and account January-December 2010 simulator, reconnections and exclusive access to property developers and construction companies, among other improvements to Light © 2010. All rights reserved.

Areas involved Assistance and Commercial Managements

Assistance and Commercial Managements

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ease and speed up access to the Virtual office. Definition of ongoing training programs, January-December 2010 including e-learning, in all the assistance channels. Creation of a system to schedule personal As of March 2010 Assistance Management assistance in order to reduce waiting lines during peak hours at each office. Daily monitoring and follow-up with the March 2010 Assistance, Customer managements, compliance with agreed on Service, Billing, and Energy terms with customers in meeting requests and Recovery Management services. Privacy policy Light’s relationship commitment with its customers also complies with the precepts defined in Aneel Resolution no. 456 dated November 29, 2000, which consolidates all the provisions in connection with the general conditions for the supply of electricity. The Resolution deals with the personal nature of Electricity Supply Agreements and refers to the criteria as defined in the Consumers’ Defense Code, which states that any information on consumer units will be given to the responsible parties only, to court authorities by virtue of an express order to this end, to other public institutions owing to the law, or to legally identified representatives. This practice is emphasized by the Light Code of Ethics. Light’s Quality Policy and Registry Information Security assures preservation and even provides for disciplinary measures in the occurrence of any deviations:

“The external disclosure of registration data to third parties will not be permitted, as well as the undue handling of suc data in corporate commercial systems, and the parties responsible will be subject to the appropriate disciplinary penalties, applicable to any likely or potential losses caused to the Company."

Light’s Code of Ethics also assured the confidential nature of customer information. Hence, there are no records of complaints or lawsuits questioning any aspects of violations of privacy or losses of customer data in any communication channels [PR8]. Large Customers In the Large Customer segment fidelity is essential, as all of them have the option of migrating to the free market. Therefore, in its customer assistance Light displays an array of differentials intended to ensure these customers the best kind of advisory services for the energy needs, in three basic types of actions.

Corporate Customers - Customers with accounts in excess of R$ 1 million yearly have account executive available to them, who provide personalized assistance by means of regular visits, scheduled meetings, and business events. By being closer to its customers, account executives are able to anticipate their needs and to seek out the best solutions. This type of assistance currently covers a universe of roughly 140 customers. The service exists since 2002.

Large Customers Facilities - Customers with large accounts up to R$ 1 million yearly can count with exclusive telephone assistance by specialized commercial analysts, with support by an exclusive telecommunications platform, a special number, e-mail, and chat. As it is specialized, this assistance has no commitment with speed, but rather to detail the claims with customers and to provide the most adequate solutions for each case. This class has a customer base of roughly 2500 names. The service was created Light © 2010. All rights reserved.

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in 2007.

New Mid-Voltage Connections – Special assistance to all kinds of new requests for Mid-Voltage connections: Hotels, condominiums, factories, and other enterprises. This assistance is also highly specialized and involves a complete study that covers customer’s location area, the available network, the infrastructure required for assistance, and many more details. Demand for these services has grown significantly, based on new investments that will anticipate great events such as the 2014 World Cup and the 2016 Olympic Games. Satisfaction surveys and internal monitoring Every year since 2002 Light has held a survey to measure satisfaction in the Large Customers segment, based on a method adopte by Abradee and applied by a specialized institute. Light also assesses the level of satisfaction by its large customers by means of the following regular actions: ¦ Monitoring of telephone assistance through calls made to the team on different hours. The specific indicators to measure the assistance’s efficiency are the number of calls made vs. the number of assistances, cordial greeting, duration of assistance, and definite resolution of problems. ¦ Rate of Customer Satisfaction with the assistance by the account executive. This rate is measured in the Annual Satisfaction Surve by means of a specific indicator – and it is a part of the quantitative and qualitative targets contained in the assistance coordinators’ management agreements ¦ Satisfaction by free customers – which may be former customers or potential customers – is measured by Light Esco (marketing company) through direct contacts. The information obtained is transferred to Light Sesa. From the internal viewpoint, the rate of calls given up in the Large Customer Area – the number of calls lost ´- is monitored regularly. The target for 2009 was 4%, but the annual average was surprising and stood at 3.06% only (see the following table). Random telephone calls measure the qualitative nature of general assistance conditions – courtesy, solicitude, ability to solve problems, discretionary authority, etc. Large Customers Large Customer Area: to ensure a 4% average rate of calls given up Target JAN FEB MAR APR MAY JUN JUL AGO SEP OCT NOV DEC Annual 2009 average 4.00% 2.00% 4.00% 3.00% 4.00% 4.00% 5.00% 2.00% 2.00% 2.00% 1.00% 2.00% 4.00% 3.06% The annual average number of visits by account executives to customers was 262, as against an estimated 192. The percentage increase was of 36.45%. Large Customer Assistance Commercial Assistance – Result of IDAT Satisfaction Survey 2010 Attribute Ease of Access to deal with business topics Pro-activity of commercial team Discretion/Ability to represent company Well-mannered / Goodwill by commercial team’s staff Speed in providing service, solving problems, or providing response to customers Light © 2010. All rights reserved.

Results - % 2008 2009 84.3 74.5 80 74,5 81.3 71.3 89.6 83.4 80.1

68.6 Pag.:82

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Management skills by commercial team’s staff Assure customers are well informed Assure customers are well informed with regard to deadlines for meeting requests Ability to negotiate / flexibility Definite solving of problems

85.7 79.2

80.4 64.5

77 80.4 84.2

63.6 70.3 69.0

Survey Rate 2007 2008 2009 Large Customer Satisfaction Large Customer Satisfaction Survey 73.0% 77.1% 71.7% Targets and challenges – Large Customers The target in 2010 for large customer assistance is to increase the satisfaction rates measured by the annual survey in all the segments, at the corporate and middle market levels (Large Customer Area), with emphasis on the reversal of the rates obtained with IDAT and ISQP (general), measured by the satisfaction survey.

The new Virtual Large Customer office that will be created in late 2010 is one of the area’s major challenges. This facility will be a supplement to the assistance provided by commercial analysts; customers will be given access to an exclusive area, with direct access to a number of services, such as for example copies of bills and updating registration data – currently available only by means of telephone assistance and that will be accessed solely by virtual assistance. This will make commercial analysts available to provide greater customer support services. The Virtual office will also employ web mining resources, allowing it to monitor and examine key customer demands and accesses more frequently, so that assistance will be a pace ahead of their needs [EU24] . The 2010 Action Plan – Large Customers The actions planned for 2010 are intended to reverse the scenario of declining Large Customer assessment rates, and to increase the perception of satisfaction, besides recovering 100% of the change between the 2008 general ISPQ of 77.1% and that for 2009 of 71.7%. The target is therefore to resume the 77.1% level. Action Planned Action Scope Organizational Structure

Customer relations

Deadline

Occupation of vacancies pending March to September Training plan jointly with Academia Light, 2010 covering structural and functional aspects, norms, procedures, basic electrical sector legislation, technical aspects, SAP, contractual structure and specific training for account executives. Permanent assessment of the regulatory March 2010 context for a possible launching of the Energy Plus service. Implementation of the Large Customer VirtualBy December 2010

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Relationship Events

office Launching of the Large Customer eBy June 2010 newspaper Disclosure of Mid-Voltage Bill in line with Ongoing action Institutional Communications Communications campaigns with guidance on By June 2010 customers’ rights and obligations Segmented workshops with market June and November 2010 information, regulations, services, and the efficient use of energy.

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The best service and its fair value [Highly relevant / impacting issue 10: quality service provision vs. payment for service provided Providing energy consumers with a world-class quality service requires substantial investments in modernizing, automating and extending networks, in intelligence and reliable systems. To this end, in 2009 Light invested R$ 80 million in improvements to its transmission network and R$ 308 million in the energy distribution network, for greater safety and to anticipate increased demand based on expectations for development of the concession area. Just as quality energy is a consumer’s right, payment for such services is a concessionaire’s right. Among awareness campaigns, community actions and loss recovery strategies, Light seeks to approach consumers and show the importance of this exchange relation, in which each one should do its part to assure a favorable outcome. In communities, where this equilibrium is strongly impacted, Light is engaged in government initiatives to turn around the results.

Increased demand during the summer, chiefly in view of a strong heat wave, was also part of the Company's work agenda, which seeks to anticipate its actions and prevent situations likely to jeopardize a normal energy supply, by implementing the Summer Plan. The plan consists of an array of preventive and emergency integrated initiatives designed to minimize the effects of storms, windstorms, and the greater demand typical of the summer season. These initiatives are implemented every year and range from increasing the size of field teams to awareness campaigns about efficient energy use. The substations’ load capacity In 2009, 80 of Light's 86 transmission substations operated under a firm capacity. Another five were given an alert status (6%) and one only (1%) was considered critical. This result is greater than that for 2007, when 71 of the 84 substations (84%) had a firm capacity, ten (12%) were placed on alert, and 3 were considered critical (4%). With regard to the distribution substations, 103 of the 114 substations (91%) worked with firm capacity, six (5%) were placed in alert, and five were considered critical (4%). In 2007 only 63 of the 110 distribution substations (57%) operated under a firm load, while 43 were on alert (39%), and four in a condition deemed to be critical (4%). Investments in transmission and distribution Light invested R$ 80 million in transmission during 2009. These funds were aimed at the construction of three new transmission substations (Copacabana and Marapicú, in progress, and Recreio, concluded), the expansion of 5 others, (Campo de Marte, Recreio, Pavuna, Guanabara, and Jaboatão, this last one is armored). Projects for the Carmari, Itaguaí, and São João substations were also started. Seven substations during the year had their Environmental Management Systems (SGAs) certified. It is expected that in 2010 R$ 120 million in investments will be employed to build 5 substations (Carmari, Itaguaí, São João, Paciência, and Tomás Coelho), an expansion in 10 others (Fundão, Vigário Geral, Taquara, Santa Clara, Boca do Mato, Guadalupe, Guanabara, Pavuna, Saudade and Vigario), the construction and reconstruction of overhead circuits, underground circuits, the conclusion of refurbishing in the Copacabana substation, and other modernizing efforts. “We think it’s very important [Light’s commitment to offer a quality service]; and the commitment of the client to pay for the service provided, because quality always needs investment. It has to be a two-way street.” (Debater 4, during the process of exchanges between the interested parties.) Investments in distribution rose to R$ 308 million, employed in the construction of the Santa Rosa, Conservatória, and Vitória Light © 2010. All rights reserved.

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substations and the expansion of the Lages, Santa Perciliana, Carmo, Jamapará, Pinheiral, Santa Rosa, Francisco Medeiros, and Governador Portela stations. New circuits numbering 36 were installed and 34 others had their voltages converted in 12 substations: Anta, Mangueiral, Jamapará, Posses, Cotril, Carmo, Paulo de Frontin, Engenheiro Nóbrega, Ferreiros, Governador Portela, Morro Azul, and Palmas. Reinforcements were made to 194 km of network while 849 km were armored. Certification of seven substations was granted by SGA.

Investments planned for 2010 in distribution are of roughly R$ 274 million, chiefly aimed at new connections (low- and midvoltage), the increase on low voltage loads for 13 thousand customers, conversion of 18 circuits (6-13 kV) in the Avelar, Andrade Pinto, Cananéia, Maçambará, Miguel Pereira, and Paty do Alferes substations, armoring of 263 km in networks, elimination of overloading in 1100 transformers, refurbishing the underground system, construction of 47 circuits (totaling 264 km), in addition to the construction of seven substations (Marcone, São Lourenço, Rio D’Ouro, Dutra, Parapeúna, Vila Pombal, and Amparo) and th expansion of eight others (Paraíba do Sul, Esteves, Ilha da Madeira, Lídice, Pentagna, Rio Claro, Teófilo, and Vitória). Quality Supply Duration and frequency indicators in 2009, with regard to interruptions pr consumer unit - DEC and FEC – declined by 9.0% and 90.25 respectively as compared to 2008, in accordance with a calculation methodology specified by Aneel The 2009 values do no consider the event in the National Inter-connected System on November 10, 2009 that caused a great impact on the indicators and contributed with roughly 28% of annual DEC and 15% of annual Light Global FEC [EU28][EU29]

In particular regarding FEC, which points to the network’s physical conditions, in 2009 Light had its best results in the last three years with rainfall in the region of 1250 mm, 4% above the 2008 figure and 39% that for 2007. Even under more severe climate conditions, the frequency of interruptions in Light’s electrical system showed a decline. Further, it is important to consider that the high temperatures in 2009 that led to a 33% increase in low voltage demand in November and of 15% in December, as compared to the same period in 2008. DEC and FEC stayed below the regulatory target by 2.13% and 35.4% respectively – without the occurrence that arose in the Inter-connected System and that led to the black-out on November 10, 2009. The global annual targe is calculated by weighting annual target for each set of consumer units and the respective number of consumers in those units. In the last three years Light paid almost R$ 7 million in fines for the supply and sue of goods and services [PR9]. In 2009 the company paid a R$ 2,456,473.32 fine in connection with violations of DEC/FEC during 2007. “...this happened because they set up that monitoring center (Control and Measurement Center)… Something funny happened… the power went off… and when I called, they told me over the phone they already knew...” (Debater 2, during the process of exchanges between the interested parties.)

[PR9] FINES PAID (R$ thousands) 2007 Su of fines paid to Aneel in connection with the supply and use of goods and services (R$ thousands)

4,450.6

2008 26.1

2009 2,456.5

As a public service provider committed with development in its concession area, Light always seek s to improve management with the aim of ensuring an available and reliable supply of energy to its consumers, reducing interruptions. In this regard, as a Light © 2010. All rights reserved.

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complement to regular inspection and short-term preventive or corrective maintenance activities, Light works in the long run to modernize its database (in order to perform as many operations as possible directly from the Measurement Control Center, minimizing commuting by its teams) and its electrical system components, in addition to investing in network automation. [EU6] Rights and obligations In addition to knowing what Light does every day to generate quality energy and to improve its transmission and distribution networks, consumers need to know their rights and obligations. To this end, Light developed a permanent communications strategy to show clearly what is the concessionaire’s and consumers’ responsibility in the pact involving a public service concession: A quality provision should have the counterpart of payment for the services in addition to essential precautions by both parties for everything to function in the best manner.

Information on consumer rights and obligations takes place through an array of integrated disclosure actions and permanent contacts, as provided in article 100, item II, Aneel Resolution 456/00. Displaying topics with regard to rights and obligations on the electricity bill is equal to direct information delivered at home, to four million of Light’s customers. This topic has its own home page in Light’s website and was the subject of a campaign displayed in the home page during October, November, and December (www.light.com.br). Furthermore, this campaign is permanent by means of informative leaflets handed out in all of Light’s 39 commercial offices, where the key aspects are also exposed in banners. Twice monthly disclosures on (www.twitter.com/lightrio) Twitter are also available in the Internet. One of the strategies for this disclosure is to always show a right and an obligation as a couple, so that consumers will understand how rights and obligations go together in day-to-day activities.

For example, consumers are entitled to receive electricity in the homes / offices at the established standards of voltage and continuit rates. For this to happen, however, they have an obligation to preserve the technical adequacy and safety of the internal electrical facilities of the homes / offices in accordance with official Brazilian technical norms and Light’s norms.

The 2010 Action Plan includes a new round for disclosure of this topic through the internal channels – electricity bill, website home page, commercial offices - in addition to places where a great number of people circulate, emphasized in medias with a large public exposure. Regular disclosures will be maintained in the specific website pages (www.light.com.br/direitosedeveres),in informative leaflets handed out in commercial offices, and on Twitter. “The guy who is the president of the [residents’] association has to say: we have to do our bit. Light can’t come here to complain, and a guy go there, with a blackberry on the table, saying there’s nothing he can do. He has a cell phone like that and he can’t pay the electricity bill? Throw the phone away and pay the light bill!” (Debater 2, during the process of exchanges between the interested parties.)

Assessment and monitoring through surveys Area Survey Abradee Customer Satisfaction information and Survey communications Aneel Satisfaction Quality

Attribute under assessment

Rate of satisfaction (%) 2008

2009

Change 2009-2008

57.60

66.20

+ 8.6 p.p.

54.51

56.11

+ 1.6 p.p. Pag.:87

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Survey

perceived: Information

obligations

As of 2010, Light will define goals for improvements in customer satisfaction rates with regard to information received, and to spread throughout the concession area the culture of knowledge of the rights and obligations by electricity concessionaires and of consumers. “I don’t think the electricity bill is high, actually… Divide your bill by thirty days, by the number of people that live in your house and see how much it comes to… You pay around four times as much for the cell phone…” (Debater 4, during the process of exchanges between the interested parties)

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Full attention to safety [EU16] [Highly relevant / impacting issue 17: Occupational safety)

Light takes care that employees of service provision companies receive the same treatment as their employees in issues such as Health and Occupational safety. This concept of a work force was adopted in the Company’s management model, and it is include in the “work force casualty frequency rate”, related to performance for the purpose of profit sharing pay-outs. Light is the first company in the Brazilian electricity sector that adopted the Safe Work Management System – SGTS. Created in Canada and customized for the electrical activities and focused on high risks, SGTS reflects the specific requisites and priorities in both of these sectors. Developed to cover five major topics, Leadership, Risk Management, Education, Control and Protection, and Monitoring, SGTS works in favor of controlling and reducing risk levels associated with Light’s activities. The object for 2010 is to increase concurrence with the System by 10% throughout the Company. “Safety at work, I think that’s fundamental. When I say safety at work I mean everything, workers, network protection, protection of the system, because they can all cause accidents.” (Debater 2, during the process of exchanges between the interested parties)

Incidents recorded over the last three years – Light group employees [LA7] 2009 2008 2007 GREATER REST OF GREATER REST OF GREATER REST OF REGIONS RIO STATE RIO STATE RIO STATE Total Staff Members 3.171 523 3.169 472 3.340 478 Number of Casualties 22 1 13 5 11 1 Typical Days Lost 205 15 124 21 163 15 Days Charged 0 0 0 0 0 0 Casualty Rate (Casualties 7,72 11,21 2,05 5,29 1,6 1,02 and Occupational Diseases) Days Lost Rate 71 15 20 22 24 15 Deaths - Typical 0 0 0 0 0 0 Number of Casualties 23 0 22 5 26 0 Commuting Deaths - Commuting 0 0 0 0 1 0

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Accidents and 2009 2008 2007 occupational diseases With Without Total With Without Total With Without Total death death death death death death Workers retained 3 84 87 3 84 87 1 75 76

In order to reduce these accidents Light is investing in training and in spreading knowledge and skills for a safe behavior. By observing the work front, management examines how tasks are performed, and subsequently makes recommendations to its staff members, providing guidance on improvement aspects. The Company also undertakes assessments of competencies and skills in order to qualify labor, and plans investments in knowledge and skills. Health and Safety topics included in formal agreements between unions and Light in the last three years [LA9] Collective Labor Agreement Social Responsibility Agreement Extra rehabilitation pay owing to occupational Employee health and safety accidents; Working environment that favors safety and Sick or extra pay owing to occupational physical and mental health; accidents and diseases; Safety training; Sick pay supplements; Investment that do not put at risk health and Retirement owing to disability; safety of staff members, and of neighboring Indemnity for disability or death owing to populations; occupational accidents; Implementation of actions intended to prevent Social and psychological assistance; professional risks, in particular accidents with Regular clinical exams; electricity and traffic accidents; Leave to accompany hospitalized dependants; Awareness actions in favor of major public Permanent Committee for Accident Prevention; health issues and prevention of drug dependence Minutes of CIPA Meetings; practices; Occupational diseases; Maintenance of CPPA (Permanent Committee Medical plans; for Accident Prevention) and Internal Service providers; Committees for Accident Prevention (CIPA), with participation by the company’s senior management, unions, and other representative bodies; Certification actions involving health, safety, and environment. Health and safety of employees in service providing companies Surveillance of practices by service providing companies with regard to compliance with legislation, health and safety, ethical behavior with customers, and respect for the environment. Social protection, in particular with regard to coverage of occupational accidents, health, and Light © 2010. All rights reserved.

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retirement. Coverage and social protection for employees with systems that ensure physical and moral dignity in case of occupational accidents, diseases, etc.

Accidents involving the public

Accidents with the population are those caused by the interference of persons in the public in general with Light’s network. The risks behind the causes of such casualties are considered largely to be voluntary actions, as they arise from actions by the populatio itself. In addition to the social cost posed by such incidents, they also lead to legal proceedings consisting of compensation claims for accidents involving the population.

In view of this, Light discloses preventive actions jointly with entities and participates in nation-wide campaigns warning of the risks inherent to electricity. Total number of accidents with the population [EU25][PR2] > Accidents involving the public Total number of accidents without death Total number of accidents with death

2007 2008 2009 31 33 24 15 11 08

1. 1. There are no targets with regard to accidents involving the population, as this is a risk not subject to management. 2. 2. Accidents involving the population are not included in the overall number of Light's occupational accidents, or those of retained companies. 3. 3. Source: http://www.funcoge.org.br/csst/relat2008/pdf/br/empresas/brasil_tab.pdf

Legal claims referring to population accidents

Lawsuits resulting from accidents involving the 2007 2008 2009 population – Based on Legal Counsel 56 69 50 Note: The above data represent the number of lawsuits filed involving the public (population), considering the basic period for Light’s defense. Audits of Occupational Safety Management Audits of Occupational Safety Management, regularly held by the Occupational Safety team, are intended to assess the quality and efficiency of the practices adopted in the provision of services, of the Technical Supervision’s actions, and of the procedures adopted. They also serve to check qualifications, skills, and training, and authority of the staff members acting in risk areas. Audits also cover a detailed inspection of personal and collective protective equipment, vehicles, and work tools. All the audited items are based on regulations issued by the Ministry of Labor and Employment, ABNT Norms, the Brazilian Traffic Code and Light © 2010. All rights reserved.

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Light’s Safety, Operating, and Technical Procedures. Audits transfer technical knowledge to service providers and encourage commitment by the managers of retained companies, besides providing pro-active indicators at a number of points in the operating process. The five key service provision companies will be audited in 2010, and together they account for 42% of the retained companies’ total labor force. These companies carry out their activities in the Electrical Power System (SEP). Safety Inspection and Prospecting Programs Based on the conditions of Health and Occupational Safety Management contained in the agreement entered into with service provision companies, Light intensified observations in its work fronts by adopting stricter criteria in connection with their actual commitment with safety management, regarding the adoption of a safe behavior by their employees, as a basis to ensure accidentfree work. These criteria imply in the requirement that the retained company’s management should formally agree to correct any non-conformities detected in day-to-day practice, by means of a Conduct Adjustment Agreement. In case of non-compliance of a specific contractual clause, the company will be fined according to the nature of the non-conformity detected. Occupational Safety Inspections cover operating teams and buildings. The purpose is to detect any likely non-conformities with legislation, rules, and good practices in occupational safety management, in addition to proposing the necessary corrective actions. Non-conformity reports prepared after inspections will point out any conduct not in accordance with the standards adopted by the field teams and any insecure conditions detected in facilities, as well as actions by managers of the inspected area, in order to correct deviations. Inspections in 2010 will become mega-inspections: the Occupational safety teams will concentrate on a certain segment and will perform impacting actions on the improvement opportunities detected, in particular on behavioral aspects. Occupational Safety professionals will also provide all the guidance required to the members of the teams inspected. The concept used does not imply a criticism to workers, but rather safe work management with immediate guidance in punctual aspects, managed by the team leader, and the creation of systemic knowledge to avoid the repletion of deficiencies. The Safe Work Management System Implementation of the Safe Work Management System (SGTS) proceeded in 2009, developed specially for electricity concessionaires and that meet the requirements of the key existing norms. SGTS is founded on several basic assumptions: responsibility and accountability for occupational safety performance start with senior management, and extends over the other hierarchy levels. Company leadership is actively involved in occupational safety management, which is focused on the elimination and control of high risks, for their own employees as well as for those of service provision companies. This management’s performance is backed by the fully exercised rights and responsibilities by all the employees. Concurrence by Light’s processes in 2009 to SGTS criteria rose from 37% to 41.1%, in line with the target’s projected growth to 85% during the 36-month implementation period.

The System consists in five basic topics. The topic Leadership embraces: a) Light’s Policy on Occupational Health and Safety; b) a system of leadership meetings and involvement; c) the SGTS Manual; d) the Permanent Health and Safety Committee; e) the Light © 2010. All rights reserved.

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Communications Policy; and f) Safety as a company value. The topic Risk Management involves: a) Preliminary Risk Analysis (Programmed Services); b) Preliminary Risk Analysis (an informal chat); c) written work procedures: step by step, with risk factor and rating; and d) safety rules.

The topic Education embraces: a) legal training under norms NR-10, NR-33 and others; b) training for managers, coordinators, an work force technicians; c) work force qualifying bodies; and d) training programs (formal qualifying).

The topic Control and Protection embraces: a) protective equipment (PPE and CPE); b) critical equipment and tools; and c) quick actions during emergencies. Within Monitoring can be found: a) safety of retained companies – formal training and management (V9.5); b) observing work fronts; c) investigating accidents; and d) statistical reports and analyses. Permanent Committee for Accident Prevention (CPPA) Chaired by the Personnel Board, the CPPA includes representatives from several Company areas – Superintendence, Occupationa Health and Medicine Management, Environmental Management, and workers’ representatives.

The Committee was reorganized in 2009 in order to place it more in tune with the V9.3 project – Efficiency in Operating and Corporate Management, in the Appreciation Plan, and also to meet SGTS assumptions. Its principal attributions are to monitor the guidelines designed in the Occupational Safety Policy in order to ensure a full development of a prevention culture; to assess results and propose rearranging the actions contained in the Company’s accident mitigation plan; to examine proposals intended to update guidelines in the Occupational Safety policy, and to preserve workers’ health; and to monitor results of the action plans prepared b the Internal Committees for Accident Prevention (CIPAs).

The Committee is also included in one of the clauses in the collective labor agreement, and its actions cover 100% of the work forc (own employees and service providers). Its meetings are held every two months. [LA6]

In case of a serious accident with a service provider, the retained company’s managers will be called to a meeting by the Committe to submit the causes of the accident and the action plan implemented to ensure that events of this nature do not repeat themselves. Commitment with Occupational Health Management In 2009 Light held meetings with the retained companies’ senior managements and with these companies’ staff members who work with the network. During these events organized by the directors for People and Customers, the Company stressed the assumption that Occupational Safety is a commitment by everyone – and that the managers are responsible for ensuring an accident-free work environment, pursuant to the Appreciation Plan’s project V9.3. On that occasion a Safety Protocol was entered into, whereby the parties confirmed their commitment to adopt best practices in occupational safety management in their daily routine. Occupational Health Medical Control Program - PCMSO PCMSO performs diagnoses and health actions regarding occupational activities performed within the Company, aimed at minimizing or eliminating risks according to parameters defined by the World Health Organization, the International Labor Organization, and the Ministry of Labor and Employment’s Regulations. Among other benefits, PCMSO contributes to reduce incidents, absenteeism owing to diseases, and labor liabilities, in addition to improving employees’ quality of life.

In 2009, 10% of employees were submitted to the Regular Health Exam (EPS). One of the factors that led to this result was the us of Occupational Health Mobile Units, which performed exams without employees having to travel from their work place to the Central Unit. The target for 2010 is to repeat this 100%.

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Rate of overall absenteeism owing to sick leave, per region [LA7] 2007

2008

2009

REGION Greater Rio 3.22 3.81 4.06 Rest of State 3.55 3.83 0.8 Note: The absenteeism calculation was made based on leave due to occupational accidents and other diseases, whether related or not to work. Specific programs Executive Check-up Program The program allows occupants of management posts to perform 25 medical procedures in one day and in one location only. This check-up is based on the prevention of chronic degenerative diseases and cardiovascular risks, in view of the exposure by this class of workers and a high level of emotional involvement. The estimated 100% target was met and is being maintained for 2010. 12th Campaign for the Prevention of Influenza and Other Respiratory Diseases The annual vaccination campaign was held in 2009 at Light to protect employees against the influenza virus and its complications, such as infections of the upper respiratory tract. The campaign has been successful in reducing the rates of respiratory diseases, and of absenteeism as a result. The target public’s 71% attendance exceeded the 70% target for 2009, which will be maintained in 2010. Education, training, and counseling programs, prevention and risk control in progress to provide assistance to employees and their families or to members of the community in case of serious illnesses [LA8]

ASSISTANCE PROGRAMS

Employees Employees’ Families Community Members

Education and Training Yes x x

Counseling

Yes x x

Prevention and Risk Control Yes No x x x

Treatment

Yes x x

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Management of retained services [Highly relevant issue/: Management of retained service provision companies]

In 2009 the Company put in place actions to ensure compliance by retained companies with the Light Group’s policies. The idea is to advance in managing 7689 employees of retained service provision companies, focused on quality control systems and in the overall management of agreements, by minimizing risks associated with occupational safety, to seek operating excellence, reduce customer complaints, and also to reduce the risk of having among the retained companies’ employees, staff members without an appropriate profile for providing the services, in terms of the required competencies as well as of values compatible with those of Light. Below follow the key actions to emphasize management of the services retained. Enabling and training Enabling and qualifying service providers according to the quality standards required by Light is always a priority for the Company. This permanent improvement process involves actions from three different areas: Human Resources, the area in charge of guidelines strategies, and training actions; Safety and Occupational Health, in support of defining the training agenda, class hours, and legal obligations; and the Control and Management area, in charge of monitoring compliance with all the requisites with regard to profile and enabling of the service providing companies’ labor force.

All employees that provide services to Light should make proof of their qualifications in accordance the activities performed and the re-cycling that is from necessary time to time, or due to changes in legislation. [EU18]. Requisites of Regulations NR-10 (safety in facilities and services with electricity), NR-18 (working conditions and environment in the construction industry), and NR-33 (safet and health in occupations in confined spaces), in addition to others, as well as specific requisites by Light for field activities, should be fully included in the training programs for retained companies.

In addition to Light having undertaken a review in 2009 of its training agenda (contents and class hours), it detected and succeeded in reducing to zero the lags in operating training and safety among employees of retained companies, as training courses of this sort have are valid for two years and re-cycling is mandatory. “Light used to be very respected. An employee came and he was respected; he was an employee of Light. He was well known as the guy who read the meter. Nowadays you don’t even know who the meter reader is… he arrives at your building, stays a few seconds and leaves. I mean, he’s lost his identity, Light has lost its connection with the client, which used to be the guy who read the meter...” (Debater 1, during the process of exchanges between the interested parties)

An important target for 2010 included in the Appreciation Plan (item V9.5 – Retained Company Management), is to ensure that enabling employees of service provision companies should take place under the new standard required by Light. The first action in this regard will be to assess the quality of the training courses held internally by the retained companies. It is estimated that all the staff members of the retained companies’ supervision group will undergo training in programs focused on occupational safety. The method of observing work fronts will be the first training program applied to the supervision group, which following the course will disseminate the new method in their companies. This specific training will act chiefly on behavior. The teams go out to the field to observe and detect insecure behavior, corrected by means of educational techniques. The purpose is to achieve excellence in performing field services with maximum safety. The observations by the work fronts are a part of the Safe Work Management System – SGTS, which Light is now putting in place as a pioneer in the Brazilian electricity industry. “The big challenge, not only fo Light, but for the other companies as well […] is that the service is really bad…”

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(Debater 3, during the process of exchanges between the interested parties) Another training target includes re-cycling Light managers in contract management, in order to strengthen the professional management of retained companies, with the resulting improvement of their internal management. The quality control system [EU16] Light implemented a standard inspection of commercial field services and of services in connection with energy recovery. The 2010 target is to implement this methodology in the network’s other activities. The idea is to prevent that companies that do not adopt best management practices from providing services to Light.

The new quality control system does away with subjectivity and makes the process more transparent for retained companies, which will now be assessed in accordance with the same inspection standards. Results are found every month and formally submitted to the retained companies in regular meetings with the managing area. From June to December Light was able to improve the quality indicator for commercial field activities by 33%, i.e.: we reduced the non-conformity rate to a figure below 10%. Bearing in mind that the methodology considers a 5% error margin, Light is still faced with the challenge to work on this difference during 2010, seeking out excellence in service provision.

An improvement expected for 2010 is the implementation of a systemic treatment for non-conformities observed in the field, and ensure flexibility to correct them. This systemic treatment of discrepancies imparts a professional approach to management and brings to light an ongoing improvement process in the provision of field services. Visits to retained companies A regular procedure of visits to retained companies which was put in place in November 2009, monitors compliance by these companies with labor obligations (payroll analysis, concurrence with collective agreements, benefits packages, severance payments etc.), and payments of social security and taxes, besides the adoption of good social and environmental responsibility practices. The new verification routine will reduce labor and tax risks and will put right discrepancies likely to be practiced by the companies, which often occurs owing to a lack of information. This will also be a means of identifying socially responsible companies, those improvement opportunities in a number of processes, and the adoption of better management practices. “When you invest in an employee of another company, after a while that company leaves and you lose all those workers, or they are passed from one company to another. So you need to have employees, for the street too, who are trained by Light itself, because this is a very specific thing.” (Debater 2, during the process of exchanges between the interested parties) These visits to retained companies are conducted based on a specific methodology and take place every quarter. The various routine aspects are given a score, and on conclusion of the analysis Light will act in the correction of the deviations pointed out in th report, if necessary. The methodology consists giving companies a score. The initial score is 10, and numbers are subtracted for each non-conformity found. Discrepancies are rated in two groups: risks associated with occupational issues and the tax angle. These two groups are also analyzed from the angle of materiality – high, medium or low – for each non-conformity found. The company loses 1 point for each nonconformity with a high materiality, 0.5 points for each nonconformity with a medium materiality and 0.25 for each nonconformity with a low materiality. Discrepancies with a high degree of materiality are those in connection with payroll calculations, labor obligations, ISS and IRRF taxes; a mid degree of materiality includes a service provider’s profile and training, concurrence with the collective labor agreement, and taxes paid in arrears.

The purpose of this procedure is to bring all the retained companies to a minimum risk and best practices level, in management as in the social responsibility aspect. Light © 2010. All rights reserved.

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Overall management of agreements Light is intent on putting in place an integrated management system for the retained companies, to provide support to actions by the managers with regard to risk, safety, quality, communications, and business sustainability. The system includes consolidating in one sole environment all the information with regard to the period of service provision by each retained company, in a specific portal an with individual descriptions. There will be an integrated vision that will allow visualizing all the information for each service provided – registration data, obligations, quality, performance, etc. - from its start to its conclusion. All the managing areas will have access to these same information.

The term for this action’s conclusion is August 2010. The gains arising from this project’s implementation are intended to make the management process more flexible and safer with regard to the information related each service provider. Another important factor is a ranking of service providers based on integrated information, whereby the best ranked may be benefited by contractual extensions, wards, best practice disclosure, etc. Light already has a set of information, registration data, training of service providers, safety, quality, etc. - although without the overall view. The actions to start integration are being prepared with support from the IT area. In addition to the challenge of being able to visualize the retained company’s “life” in one sole environment, Light managers are also being prepared for this new management model. Summary of actions programmed for 2010

I. Integration of management information – Data on persons and vehicles, training, compliance with obligations, quality in service provision, safety, control in applying materials, social and environmental responsibility, and others. II. Professionalized management – Definition of management model, training of managers, putting on place a monitoring standard to confirm concurrence with the model, assessing results. III. Emphasis on issues related to sustainability and assessment of the positive impacts in the contractual partnership. IV. Safety – Extend training in observing work fronts to retained company supervisors, enabling them to play the role of multipliers and to systematize the observation process, with a view to detecting insecure behaviors likely to result in accidents and acting in a preventive manner before an accident takes place. V. Quality control process (inspection) – Consolidation of the inspection standards, adopting and systematizing treatment of non-conformities. VI. New management model - Consolidation of the new management model in such a way as to turn it into a standard for use for any service or by any manager.

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November and its lessons

November 23, 2009: three districts in the South Zone of Rio de Janeiro were left with no electricity for several hours. This has recurred on several occasions in other districts in the North Zone. An irritated population, losses, numerous complaints, and Light’s image scathed. A challenge that taught the company and its people a number of lessons – overcome by the competency and obstinacy of an entire team. Background To understand what happened in November, we must go back in time to events – especially the Parliamentary Investigation (CPI) on electricity rates – that led to our being in the spotlight of the media and the public at large. Articles were published in the press suggesting that electricity rates had been miscalculated, resulting in consumers being overcharged. This had an adverse effect on public opinion in relation to utility companies in general. As a company committed to transparency in its relations with stakeholders, Light publicly stated its position and sought to clarify the issue to the public in advance, while the regulator (Aneel) and the Brazilian Association of Electricity Distributors (Abradee) defined their strategy. Other utility companies followed suit. Despite the clarity of our explanations, public opinion remained resistant. The outages Difficulties started with the heat wave that announced the advent of the summer season and increased temperatures to unusual levels, as early as October 2009. In view of the favorable prices, a shopping spree ensued and air-conditioning units which are heavy in electricity use, were the most sought after.

Between November 6 and 9 several energy outages occurred in a number of districts in Rio de Janeiro, most of these owing to an excessive working load. Hence, Light brought forward its Summer Plan – an array of preventive and emergency integrated actions designed to minimize the effects of storms, windstorms, and the greater demand typical of the summer season. A contingent of 1900 technicians was put on permanent stand-by, for preventive actions as well as for in any emergency situations. South Zone partially in the dark Supply went back to normal between November 19 and 22 despite the heavy rains of those days, with no suspicion of what was about to happen on the following day in the districts of Leblon, Lagoa, and Ipanema. A rupture in an underground cable in a flooded chamber left them in the dark for several hours.

Repairs were difficult; following the system’s alert and locating the spot, it had to be emptied and dried to proceed with the repair. Light could not run the risk of jeopardizing the distribution system's safety. Surrounded by a large concentration of retail businesses and homes, the system had to be disconnected in order to avoid greater damages. The teams mobilized for the repair worked on shifts around the clock to detect and solve the problem. The “Disque-Light” emergency number was going at full speed, with all the customer assistance positions busy during the 24 hours. Assistants received thousands of calls during the period and conveyed information at every moment on the grid repairs.

Aneel gave Light 48 hours to explain the incident. In one day only the press office received 700 complaints, when the normal monthly average is of 70. This volume is equal to the number on the day of the country-wide blackout on November 10 which affected 1.5 million people, as opposed to the 12,000 or 0.33% of the customer base in Light’s concession area on November 23. Transparency and back to work Light acknowledged the problem’s seriousness and was well aware from the start that the best alternative was transparency. While the press published incidents such as with D. Magdalena, 88 years and suffering from Alzheimer, who was unable to sleep all night Light © 2010. All rights reserved.

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at her home in the district of Tijuca owing to the heat, and merchants who lost their perishable goods, Light professional staff members were out in the streets working against the clock, the heat and fatigue to solve problems. At the same time, Disque-Light assistants did not fail to reply to any complaints, even from the most ill-tempered. In the midst of this rush and the cross-fire in the news, which aimed its criticism on the concessionaire, the Communications team and the technical team were subjected to a definite lesson: the importance of information and action at the same pace. Each problem-solving step by technicians was conveyed immediately to the Communications and Assistance teams. The manager of the technical area told that he had to show all his team members how important it was to describe each stage in the task, for everyone to speak the same language and to satisfy all the target publics.

Nobody shirked responsibility over the facts – starting by Light’s CEO José Luiz Alquéres, who attended interviews and gave the required explanations, assumed the deficiencies and difficulties. Light went as far as apologizing to Ipanema, Leblon, and Lagoa residents in a press release through key newspapers, in view of the proportions of the incident in those districts. As one-off outages took place almost at the same time in a number of districts in Rio de Janeiro and the greater metropolitan area due to other technica reasons, subsequently communities in those areas also received apologies by the Company through the newspapers. Wind, rain, and heat Defects in transformers and the electricity grids usually intensify in the summer, owing to an increase in consumption and the ensuing damages caused by rain and wind. In order to prevent such problems, every year Light deploys its Summer Plan to reinforce its teams in the streets, and to speed up the detection and solution of difficulties. In 2009 the Summer Plan was put in place on October 15, well before the advent of the crisis. For this season 1900 men were allocated, 30% above the number for the rest of the year. The maintenance team was increased by 50% in 2009, the emergency team by 30%, and the Disque-Light team by 23%.

Routine also changed: Light increased the frequency of its preventive inspections in underground chambers, held weekly routine overhead network inspections, using helicopters to fly over the entire concession area, in addition to reinforcing the daily preventive maintenance of all of its substations. By the end of the Summer Plan on April 15, there will emergency teams spread out in strategic locations in Rio de Janeiro as well as in the greater metropolitan area and the rest of the state, to meet emergency situations.

Rains and strong winds in conjunction with the high temperatures witnessed since late 2009, are enemies of electricity grids. Although Light was a step ahead, it was impossible to avoid the difficulties that led to interrupting electricity supply in the South Zone, with the event’s adverse repercussions. Nonetheless, Light’s immediate actions to correct the problem and its efforts to keep the public well and clearly informed of the repairs’ progress, were essential and were perceived by the population as a positive aspect.

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Education for conscious consumption [Medium materiality/impact issue 9: Educating customers on the economic use of electricity]

Promoting responsible use of electricity results in less waste, greater safety and ensures that customers’ consumption is aligned with what they can afford to pay. The company develops a series of educational initiatives promoting the rational use of electricity, which strengthen our institutional relationship with communities and create an environment of cooperation, where the company provides quality service and customers in turn honor their payments for these services. And nature is benefited as well. Light has prevented the emission of 2,700 tons of CO2 to the atmosphere through the energy efficiency projects developed in low income communities (See the Energy Efficiency section).

By October 2010, an estimated 80,000 homes will have been reached by our educational programs. Electrical safety and the risk of injury Educating customers on the proper and efficient use of electricity is vital, as there have been numerous incidents attributed to the intentional or inadvertent misuse of electricity. Light promotes awareness campaigns and provides guidance on electrical installation safety, how to prevent injuries – which can be aggravated by negligence – and customers’ responsibility for maintaining the electrica installations of their homes. We also promote campaigns against fighter kite flying and unmanned hot air balloons, and provide guidance on handling re-bars at construction sites near power lines.

Intentional abstraction of electricity is addressed in regular campaigns warning of the risks of illegal connections, a practice that can have serious consequences including injuries, burns, death by electrocution and damage to residential or commercial equipment and installations. These and other practices significantly affect the quality of service light provides to legally connected customers, not to mention the financial losses. In Rio de Janeiro alone, commercial losses deriving from theft of electricity amounted to R$ 700 million (see the Santa Marta case in this Chapter). In our health and safety education and communication programs, directed to people of all social classes, we encourage the economic use of electricity through practical, easily understood and easily implemented tips. In 2009, all of our customers received information on economic, safe and sustainable consumption on their electricity bills for February, April, October and December. Other customers were reached by our educational media campaigns, folders, booklets, consumption simulators, webs campaigns and field projects, such as the 'Efficient Community’ program. Guidance on the proper use of electricity and its risks and hazards is also provided on the company website (www.light.com.br/dicas), on Twitter (twitter.com/lightrio) and at Light’s 39 agencies, either personally or through pamphlets and banners. These recommendations include tips on how best to use electrical appliances (air conditioners, electric showers, refrigerators, washing machines, televisions), recommendations on preventing leakage of electricity, and information on the cost of elevators and escalators. In May and August, Light conducted a major campaign on these themes in the Rio Metro system, which included posters, leaflets and spots (audio in subway cars).

In 2010 we will maintain our awareness campaigns through internal channels (electricity bills, website home page, commercial agencies and Twitter) and ad hoc campaigns in external media (radio, websites and newspapers). Partnerships will be established t communicate consumption awareness themes in high circulation locations and publications. Corporate citizenship and social responsibility Light © 2010. All rights reserved.

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Within the Efficient Community project, which is part of the Energy Efficiency Program, Light develops a series of educational initiatives structured around the following concepts: teach others to teach others; sensitize to establish a closer relationship; communicate and mobilize to establish dialogue and engender ideas and feelings; and raise awareness of the benefits of being a legally connected customer (see the Energy Efficiency section). Light’s commitment to these communities began in 1979 with the "Favela Electrification Program" and grew through successive initiatives, such as the 'Program for Legalization of Informal Areas' (PRONAI), with more than US$ 90 million invested in 260 communities.

Coordinating with the federal, state and municipal governments, Light develops initiatives in highly complex areas to improve the power distribution system within the concept of corporate citizenship and social responsibility and seeking whenever possible to generate social gains, such as workforce training and employment for the residents of the communities [EC8]. The project field team consists mostly of community residents, making it flexible, adaptable and proactive. Interaction ‘Planeta Light’, a program within the ‘Community Efficiency' project, presented the concept of energy efficiency applied to the generation, transmission and distribution of electricity, reaching 4184 people by the end of 2009. Planeta Light visited the Providência Fair, the Light Culture Center and the Padre Miguel and Cidade de Deus districts in Rio de Janeiro, as well as the cities of Angra dos Reis and nova Iguaçu.

To us, the program has been a tremendous success. People were curious to see the road show truck that began touring in October 2009 with a variety of attractions, including a model of the power supply chain, videos about the company, miniature household appliances showing tips on how to save electricity, electricity bill interaction and games on safe use of electricity.

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Community Efficiency [SO1][EU23] [Medium materiality/impact issue 4: Franchise area development].

In 2008, the Government of Rio De Janeiro implemented a new public security and law enforcement program aiming to bring the police closer to the population and improve social services in these communities. Light embraced this cause and developed a comprehensive project in the Santa Marta Community, a hillside slum in Botafogo, working alongside the Pacification Police, whos mission is to regain State control over impoverished territories controlled by drug gangs. This project not only demonstrated our social commitment, but also helped solve numerous problems deriving from informal practices (more in Efforts to reduce losses).

In a collective effort involving the various spheres of government, the private sector and civil society, investments were made towar local development and better quality of life in the Santa Marta Community. Part of the R$ 4 million invested was related to the Efficient Community project, regulated by ANEEL; the other R$ 2.10 million were from company funds.

As a result of 11 months of intensive technical, educational and commercial services, average consumption per client dropped as much as 29%, from 297 kWh before the project to 211 kWh in the last quarter of 2009. On average, over 95% of the bills issued in the Santa Marta Community over the past six months have been paid, with 66% paid on time, which is significant considering tha the average for our overall franchise area is only 50% paid on time. This demonstrates the community’s recognition of the large amount of funds invested in a totally new distribution system with latest generation technology, including 21 new transformers and 33 km of shielded, safe cables, individual electronic meters, and 113 meter enclosures. Light swapped traditional lamps for economic lamps and replaced old refrigerators with new, more efficient models at no additional cost to local residents. It also refurbished residential facilities posing a risk of.

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However, the most emblematic benefit came not in the form of cables, wires or power quality, but as a sheet of paper. The electricity bills new customers received brought them more than information on consumption or an amount to be paid. They brough a notion of citizenship to many families who until then had never had an officially marked address or a title deed to their property. A many as three generations of families were found in absolute informality, with no documents, no address or any other form of registration. They were, for all purposes, invisible to statistical organizations and non-existent on city or country maps. They were citizens – thousands of them – waiting to exist.

Together with the Municipal Government of Rio de Janeiro, Light posted signs and nameplates identifying each of the streets and houses in the community and named another 75 streets so electricity bills could be properly addressed. The company also helped subscribing community members obtain title deeds to their property and personal documents such as IDs and taxpayer cards. 1,60 families now have an address, proof of address and dignity. “Full citizenship is a condition in which the population has access to basic public utility services. And electricity is an essential service. We are making a pact with the community, by which the client pays to receive a quality service. And this at a subsidized rate, so that people can pay. Having electricity is a token of citizenship,” says José Luiz Alquéres, our CEO.

Facts and Figures on the Santa Marta Project R$ 2,10 million invested in the following technical activities: ● ●

●

● ●

● ● ●

Unprotected medium-voltage lines replaced with a new, fully insulated 13.8kV system 3.2 km of armored cable for the new low-voltage system, with reinforced, theft-proof insulation, specially designed for limited spaces such as narrow streets and alleys. The formally overhead low-voltage system was installed beneath sidewalks or façades, significantly improving landscape quality and aesthetics [SO1]; 30.9 km of branch lines for service entrances 63 special multi-piece fiber utility poles capable of being transported and installed within tight space constraints and providing a more contemporary appearance [SO1] 19 self-protected transformers installed, doubling installed capacity Metering Systems installed in 113 tamper-proof cabinets 1,600 customers using electronic meters remotely monitored by Light’s Metering Control Center (CCM)

R$ 1 million invested as part of the Energy Efficiency Program, through the Efficient Community project, in the following activities

●

● ● ● ●

Census: collected data on 1,600 households an distributed/collected 956 social/economic questionnaires from community members Mapping and identification: Nameplates and number plates identifying all the streets and houses in the community 6,880 incandescent lamps replaced with fluorescent lamps (all residences) 653 inefficient refrigerators replaced with efficient models (42% of residences) Electrical installations rebuilt in 694 homes Light © 2010. All rights reserved.

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● ●

●

490 inefficient electrical showerheads replaced with efficient models Educational agents visited all households on a monthly basis informing customers of their actual consumption and teaching ways to reduce consumption to what each family can afford Information provided on the ‘Social Rate’ and the criteria for eligibility

How was all this possible? Little by little, Light developed a new approach to communication with consumers. Dialogue began at the Residents’ Association and found its way to each family's home. Leaflets specially designed to demonstrate, with total transparency, what each family stoo to gain through the project were distributed throughout the community. In addition, committee members were encouraged to express their views and ask questions to anyone at Light – including senior managers – in meetings held at the Santa Marta Samba School. Light trained educational agents from within the community to visit households and explain the new system, clarifying what was on the leaflets and explaining the actual advantages of paying for a quality public utility service. Santa Marta Project Timeline in 2009 January 15 – Residents Association members and local community leaders visit Light for a meeting with the manager and superintendent responsible

January 26 - Residents, community leaders, various institutions and the local Government Office meet at the local Pacification Polic base

February 3 – Light, President Luiz Inácio Lula da Silva, Governor Sérgio Cabral, Mayor Eduardo Paes and several ministers, state and municipal secretaries attend the inauguration of the Center for Technological and Professional Education (CETEP)

March 21 – Light’s Mobile Agency participates in a ‘Justice in Action’ event. Lawyers, social managers and service agents provide legal, educational, technical and commercial advice to the community March 28 - Approximately 300 residents attend the launch off the Efficient Community Project at the Santa Marta Samba School May 4 – Light CEO José Luiz Alquéres and Governor Sergio Cabral launch the first efficient home in the region, an apartment equipped with efficient equipment as a model of sustainable consumption July 9 – Light organizes a ‘cultural afternoon’ for 25 children in the community, including a performance by the ‘Music in the Museum’ Project and the Light Cultural Center road show August 21 – The Refrigerator Trade-in Program launch at the Santa Marta Samba School is attended by Mayor Eduardo Paes, Light CEO José Luiz Alquéres and 200 residents. August 24 to September 8 – 578 customers are serviced by the Light Mobile Agency during community service sessions at the Corumbá Square. December 13 – Celebrities participate in the Light Benefit Football Show and donate toys to children True success Light © 2010. All rights reserved.

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Light’s work in the Santa Marta slum – which is gradually evolving to where it will no longer be regarded as a slum through investments by the local and state governments in healthcare, security and urbanization – is a case in point, in which mutual fulfillmen of each player’s role can be seen as a measure of true success. An interviewed resident was able to define this precisely in a single phrase: “Now everyone can climb the streets in peace.”

Santa Marta has been given a breath of fresh air. People feel safer without the overhead jumble of wires and with houses safely lit. And what is more, power outages are no longer a constant occurrence In addition to preventing damage to electronic equipment, the project has eliminated commercial losses in the Santa Marta community. Light can now measure all the electricity delivered and the community has officially become a customer. The impact of this work can be seen in the interest expressed by various other communities in being benefited by the Efficient Community Project.

Light’s approach has become a reference for our future projects, in the Santa Marta and other communities. The activities to be conducted in 2010 in partnership with the government, private institutions and civil society will be gradual. The state government estimates that by the end of the current administration, in 2010, 100 slums will be under the protection of the police. Government studies on the deployment of pacification police to another 29 communities are currently underway. More power to Rio A large amount of power will be needed to make Rio de Janeiro ready to host the upcoming 2011 Military World Games, 2014 FIFA World Cup and 2016 Summer Olympics. The challenge for Light as the power distributor will be to ensure that each sports complex, the Olympic Village and the Media and Telecommunications Center have a superior quality, totally reliable power supply, which will require an annual investment of approximately R$ 700 million until 2016. The investments will be directed mainly to reinforcing our distribution system and providing new circuits to feed the event sites.

This will be a very challenging task that will also involve the Generation and Sustainability departments. These projects were already in our franchise area’s development agenda, which initially covered a period of five years but was extended to 2016 after Rio de Janeiro won the bid to host the 2016 Olympics. Light is attending meetings at various state organizations and associations [4.13]to anticipate market demands and structure our distribution and service systems. Strengthening our relations with these organizations has become increasingly important with the new demands related to the sports events Rio will soon host. Below is a list of organizations we regularly interact with: ACRJ – Associação Comercial do Rio de Janeiro. ADEMI RJ – Associação dos Dirigentes e Empresas do Mercado Imobiliário AD-Rio – Agencia de Desenvolvimento Econômico e Social do Est. do Rio de Janeiro AmCham – Câmara de Comércio Brasil-Estados Unidos – Rio de Janeiro CEDAE – Companhia Estadual de Água e Esgoto CODIN – Companhia de Desenvolvimento Industrial do Estado do Rio de Janeiro Light © 2010. All rights reserved.

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COPPE/UFRJ - Instituto Alberto Luiz Coimbra de Pós-graduação e Pesquisa de Engenharia FGV – Fundação Getulio Vargas FINEP – Financiadora de Estudos e Projetos FIRJAN – Federação das Indústrias do Estado do Rio de Janeiro SEDEIS – Secretaria de Estado de Desenvolvimento Econômico, Energia e Indústria e Serviços do Rio de Janeiro IBGE – Instituto Brasileiro de Geografia e Estatística IETS - Instituto de Estudos do Trabalho e Sociedade Prefeitura Municipal do Rio de Janeiro – Instituto Urbanístico Pereira Passos e Secretaria de Habitação PUC – Pontifícia Universidade Católica SINDISTAL – Sindicato das Indústrias de Instalações do Estado do Rio de Janeiro SINDUSCON - Sindicato das Indústrias de Construção Civil do Estado do Rio de Janeiro UERJ – Universidade do Estado do Rio de Janeiro Rio again on a growth path Light has actively participated in attracting investment to our franchise area [EC8]. Many large projects are underway besides the FIFA World Cup and Summer Olympics

Port Zone Revitalization This is a large municipal government project to rebuild the infrastructure and public urban spaces of the Port Zone. Within seven years, the region will be entirely revitalized to become the city’s economic and technological hub. Light will be responsible for improving the distribution system in this area, planned to be entirely underground. Public lighting improvements are also expected to be needed, which may generate business opportunities for Light Esco. Transportation infrastructure and new hotels are additional loads with high service potential. Rio de Janeiro Metropolitan Beltway This is another important transportation infrastructure project to be developed by the state of Rio de Janeiro over the coming decades. It will route traffic away from arterial streets and connect the Port of Sepetiba to the Rio de Janeiro Petrochemical Complex (COMPERJ) in Itaguaí. Light has attended meetings with the State Government and business stakeholders to plan the expansion of our distribution system in the beltway area, which is expected to become an industry cluster. Our objective is to plan ahead of future demands and prepare infrastructure to attract intensive capital to the Metropolitan Beltway area. Barra Metropolitan Center

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This project, currently underway and scheduled to be completed within five years, involves the construction of commercial buildings surrounded by residential buildings. A total load of 40 MW is expected, in an area slightly larger than 40 km², which means the project will require high power density.

São Cristovão District Revitalization This is an ongoing project to revitalize the old district of São Crisovão. Once one of the most prized districts in Rio de Janeiro both because of its location and because it was where the imperial family chose to establish residence, São Cristovão experienced rapid deterioration in the recent past. The first real estate developments have been a tremendous sales success and many applications for new connections have been made in the district. Light’s role is to respond to these applications quickly while maintaining the system expansion as planned. The municipal government has been a strong supporter by providing the needed infrastructure. Rio, the Call Center capital Light is supporting a municipal program to attract call center service providers to Rio de Janeiro. The program offers tax incentives to interested companies and provides support for the installation of needed infrastructure. The program basically covers areas adjacent to Avenida Brasil, which will also be a promising source of business. Rio Technology Park The Rio Technology Park will be built in Ilha do Fundão, in an area of approximately 100 m2. The park will initially host 15 internationally renowned companies, mostly linked to high-tech oil exploration. The expected load for the project is 13 MW.

International Events Studies, engineering, procurement and other arrangements are already underway in preparation for the 2011 Military World Games 2013 FIFA Confederations Cup, 2014 FIFA World Cup and 2016 Summer Olympics. Project schedules, work specifications and equipment specifications have already been prepared for each of these events. With a total planned investment of R$23 billion, these events – especially the 2014 FIFA World Cup and 2016 Summer Olympics – promise tremendous opportunities. They will generate significant additional electric load and consequently boost our revenues. However the most promising opportunities will be in the areas of services, such as substation construction and generator rental contacts, which Light Esco will pursue. The 2014 FIFA World Cup and 2016 Summer Olympics These two globally reaching sports events will certainly have a strong impact on Rio de Janeiro's electrical utility sector, as they will require significant development in all three components of the power grid: generation, transmission and distribution. Light will invest in implementing multiple redundancy in the transmission system, which delivers bulk electricity to the distribution systems. This means there will be multiple (redundant) paths available to carry electricity should one of them fail. The company has actively participated in the work of the Brazilian Olympic Committee, objectively mapping the issues to be addressed. We participated in the 2016 Legacy Conference organized by the private sector and hosted by the Rio de Janeiro Trade Association, helping define the legacy the Olympics can be expected to bring to the city.

The purpose of the 2016 Legacy Conference – attended by organizations representing civil society and the state government – was to determine how best to use the infrastructure and sports facilities to be built for the 2016 Summer Olympics. The priority was to reconcile the possibilities that the Summer Olympics will bring with the city's objectives. A new subway line to Barra da Tijuca, fo example, would meet the needs of both the city and the Summer Olympics. As a project already on the city’s strategic agenda, it could be leveraged as a legacy left by the Olympic Games to city.

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As regards power generation, the Rio de Janeiro system will prepare for the worst-case scenario – islanded operation – as in the Pan America Games. This means the State will have enough generation capacity to supply its own needs. The Paracambi SHP and Itaocara HPP, currently underway, will add to the state’s generation capacity. Sustainability will be an important business niche of the event. Hotels and sports facilities will be built within the ‘greenbuilding’ concept. Wind farms are also on the agenda and will contribute to the “green games” concept established in the Olympic plans. Environmental sustainability will also be seen in infrastructure projects such as the Guanabara Bay Depolluting Program.

Public and personal transportation will represent an additional opportunity for Light. The company expects that 2016 will see the city with its largest fleet of electrical vehicles in relative terms, including trains, buses and cars - yet another aspect of sustainability in the Summer Olympics.

Communication with the world from Rio de Janeiro will be intensive. All available means of transmitting data will be evaluated, including technologies that use the power system for this purpose. For these reasons, Light is investing in research and development on power line communication and electric vehicle technology. Guidelines for our participation in these two important areas of research will shortly be established.

Light’s electric vehicle research program is being developed by our R&D department with the Federal University of Rio de Janeiro (UERJ) and the National Institute for Energy Efficiency (INEE) as partners. The purpose of the program is to evaluate the market potential of power supply for the purpose of recharging electric vehicles, including cars, motorcycles and passenger and freight rail vehicles. Another purpose of the program is to estimate the number of vehicles and consumption in MWh, considering both growth under normal conditions and growth with Light incentives.

We intend to develop commercial and institutional incentives for growth in the use of electrically driven vehicles in Rio de Janeiro. The level of acceptance of this transportation option will also be estimated through exposure and opinion polls. Research on the introduction of recharge stations is also planned. Other key projects Also warranting mention, in addition to the core business activities described above, are the following large-scale projects underwa in the state of Rio de Janeiro, which will certainly attract other smaller companies and generate wealth in surrounding regions, increasing the purchasing power of the local populace. Companhia Siderúrgica do Atlântico (Thyssen Krupp) Companhia Siderúrgica Nacional Comperj (Petrobras) Rio-São Paulo High-Speed Train Rio Metro Port of Rio de Janeiro Tom Jobim International Airport Light © 2010. All rights reserved.

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Port of Itaguaí (4 new terminals) Light Institute: committed to Rio de Janeiro Revitalize plazas and streets; create education centers and build and maintain cultural facilities; invest in environmental projects, such as parks and reforesting programs; preserve Rio de Janeiro’s history; disseminate musical culture among Brazilian youth and develop audiences and appreciation for national culture.

These and other initiatives demonstrate our commitment to customers and society at large. It is for these initiatives that Light Institut (Instituto Light) was created. Its main mission is to improve the economic and social conditions of our distribution area and serve as an interface between Light and both consumers and society in discussions on solutions to urban problems hampering power supply services. Through Light Institute, we disseminate knowledge and strengthen our relationship with stakeholders. Citizens with access to culture and a higher developed metropolis help ensure electricity is used more economically and the company receives a more regular flow of revenue. Structured in 2007, Light Institute develops programs in our five dimensions of activity: urban, social, environmental, cultural and institutional.

Urban Dimension [EC8]: incentivizing urban development, urban planning and campaigns against informality A prominent street in the bygone history of Rio de Janeiro and formerly a symbol of modernization with its electric streetcars, the Rua Larga – today known as Avenida Marechal Floriano – is Light Institute's primary focus in the Urban dimension. Since 2008, Light Institute has been developing an urban revitalization project to improve the streetscape, which is home to the Itamaraty Palace and Colégio Pedro II – the city’s leading public education institution – and which in 1874 housed the first Normal School in Rio de Janeiro. Light has developed many initiatives in the area surrounding Rua Larga, including the ‘Rua Larga Business Association’ (Polo Empresarial da Nova Rua Larga), which gained official sanction when it was legitimized under this name by a municipal decree. The highlights of this project in 2009 are listed below: • Conducted a poll in partnership with Universidade Estácio de Sá identifying the expectations of association members, to support our planning of future initiatives in the area. • Inaugurated the Negrão de Lima Plaza, between Light’s headquarters and the Itamaraty Palace. • Restructured the contents and graphic design of the Folha da Rua Larga newspaper, which we began to publish in 2008.

• Conducted a cadastral survey (at a federal, state and municipal level) in partnership with the Municipal Department of Habitation. • Created a Historical Heritage Revitalization Group, in partnership with Sinduscon Rio, to discuss the obstacles and possible solutions for urban development in downtown Rio, especially the area surrounding Rua Larga.

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• Entered into a partnership with Companhia City de Desenvolvimento to prepare a Strategic Plan for Rua Larga. To implement the Strategic Plan, Light Institute will organize periodic meetings with municipal government authorities and historical and cultural heritage protection organizations to establish development targets. A plaza bordering Rua Alexandre Mackenzi and a Museum of Electricity, projects planned for 2010, will further improve the region surrounding Rua Larga. A cultural animation project in the Rua Larga region and a touring exhibit of the history of the region are other activities in Light Institute’s plans. Social Dimension: incentivizing science, history and literature.

• Museum of Electricity When the Museum of Electricity was created in 2007, our objective was to offer the state a cultural facility to complement school education on subjects related to electricity and the environment, and at the same time make the Museum an educational entertainment center and a venue for promoting education, science & technology, culture and recreation. The museum was also see as a way of contributing to the revitalization of Rua Larga and its surroundings, with the presence of a new stream of visitors. Through this initiative Light intends to demystify electricity and make this subject accessible to the public in general, especially students from public schools. The Museum’s themes will include power systems, efficient use of electricity and the environment. It will also raise awareness of subjects such as sustainability and customers’ responsibilities – paying bills on time, reporting illegal connections and consuming electricity economically.

The museum and its architecture were designed near the end of 2008 by a multidiscipline group led by the Light Institute, consisting of architects, scientists, museologists and communication and marketing specialists. The educational program began in 2009 with th launch of educational magazines and the website www.museulight.com.br.

In December 2009 we inaugurated the Negrão de Lima Plaza (Praça das Energias), through which visitors pass on their way to the Museum entrance. The plaza has been beautifully designed, with playground equipment on the theme of electricity. A cafeteria and restaurant will be added in 2012. Construction of the museum’s permanent exhibition area began in 2009 and is scheduled to be completed in 2010. Half of the equipment has already been purchased and some of the first experiments will be delivered early in 2010. Our estimate is that they will all be available by the end of next year. In 2010 the education program will be enhanced by additional courses and workshops for teachers; new content will be created for the website and student contests and awards will be launched. All activities related to the Museum of Electricity are scheduled to be completed in 2012. • Casa do Rio de Janeiro (“A House in Rio de Janeiro”) Two model houses will be built using sophisticated museological methods at the Light Culture Center, where visitors of all ages will be able to experience the ‘Rio of old’ in an absorbing and educational exhibit. The central theme is the development of urban services and their importance to quality of life, their influence on habits and customs, and their social, economic and cultural implications.

The museographic and museological design of the exhibit were completed in 2009. Historic and iconographic research is currently underway and scheduled to be completed in the first quarter of 2010, and construction is scheduled to begin in 2011. Within five years, students and teachers of all municipal schools and some state schools will be able to visit the project, following a pedagogica Light © 2010. All rights reserved.

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plan that will include courses and workshops for teachers, guided visits, monitor teams and distribution of educational materials to students.

• Alegria de Ler (“Joy of Reading”) Oriented to students and youth in the community surrounding our headquarters in downtown Rio de Janeiro, the Joy of Reading Project aims to spark students’ interest in reading and writing as a way of promoting the cultural and educational development of th population in the area. The Joy of Reading Project is aligned with our business policy and Light Institute's mission of helping improve the economic and social conditions of our distribution area. We believe that by contributing to the supplementary education of today's youth, we are developing adults who are more conscious and better prepared for a society based on fairer relations, and that a more balanced society can help companies such as Light to better relate with the public. Now in its third edition, the project has attracted approximately 3000 young students. The second edition, which ended in March 2009, resulted in the creation of the first community Library at Colégio Pedro II, open to all students in the region and from other community organizations. Another new feature of the second edition was the poetry and illustration contest organized under the theme “My Street”, involving six schools in the region. The contest was preceded by a course delivered by plastic artist Marcelo Frazão and culminated in June 2009 with the publishing of “Minha Rua – A Rua Larga vista pelas crianças”, a book containing poetry and illustrations expressing children’s perspectives of the charms and problems in their communities.

The third edition of the project, initiated in March 2009, included the official opening of the community Library and a second poetry and illustration contest (also preceded by a course delivered by Marcelo Frazão), as well as a series of visits by authors to schools in the region.

A considerable increase in the number of participating students in schools was observed in all the activities developed throughout th year. 92 students enrolled for the "My Street" contest against 61 in the previous edition – an increase of about 50%. Whereas in 2008 only one school and 50 students were visited by book authors, in 2009 the number of schools leaped to four and the number of students to 780. Environmental Dimension: promoting the preservation of the environment and rational use of energy • Ribeirão das Lajes Strategic Plan - Ribeirão das Lajes is home to our power generation complex and for this reason the Strategic Plan for the region is one of the main projects in our Environmental scope of activity. It includes draft projects and plans for better economic and environmental use of the area, updates to the complex’s geographic information base and action to address legal issues related to the reservoir. A preliminary study, completed in December 2009, covered the following projects and plans: Photogrammetric Restitution of the area, Forested area Management Plan, Reforesting Plan, Inn and Fishing Club Integration Plan, Fauna Screening and ReIntroduction Center, Environmental Education Center and Institutional Plan. São João Marcos Archeological and Environmental Park – Scheduled to be opened in 2010, the São João Marcos Archeological and Environmental Park is the first to be established in this important, historic population center and the only park to Light © 2010. All rights reserved.

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offer facilities for studying, researching, cleaning and preserving archeological artifacts. The project has brought a series of benefits both to the local community and to Light. The park is a milestone that has positively transformed our social-political relations with the community, which benefits from the development of tourism, education and consequently the economy. The advantages to us are better use of our natural and cultural heritage (the archeological facilities are within a protected area belonging to Light). Our goal is for the park to become self-sustainable within five years as newly implemented projects begin to attract paying visitors or guests from nearby inns to activities such as nautical sports, recreation and hiking. Restaurants, cafeterias, convenience and souvenir stores will also be available in the park.

An association of park supporters consisting of public and private institutions will also be created as an additional source of suppor

The next stage of the project (2010 to 2015) will be a continuation of current activities but with a greater focus on archaeology, ecology and recreational potential. The park will also host four large popular festivals every year. Cultural Dimension: protecting historical heritage, developing training courses and publications • The Vale do Paraíba Farm Inventory program, launched in 2008, was the foundation for a new project that will provide thirdsector organizations and the community in general with online access to a wealth of cultural information, drawing from local studies and research. Implementation of a Coffee Valley Revitalization Action Plan commenced in 2009 and is scheduled to be completed in 2010. The purpose of the plan is to develop specific products to revitalize the mid-Paraíba Fluminense River region. Planned actions include developing historical and general tourist products, training tourist guides, revitalizing and implementing historical and cultural attractions, strengthening the regional third sector, and implementing quality seals for farms deemed important to the historical heritage of this and other regions. Upon completion of the plan, a seminar will be held to share the accumulated knowledge with cultural organizations in the region, establish goals and discuss propositions. • Light Institute created easy-to-understand, highly informative courses on Rio de Janeiro's historical and physical constitution, centered on the themes Oceanography, the Rio de Janeiro Sky, Fauna and Flora.

• Through special publications, Light provides a record and description of the transformation Rio de Janeiro experienced during the period from the end of the 19th century to the beginning of the 20th century, and emphasizes the important role the company played during that period.

Grouped into separate series – Povos do Rio (Peoples of Rio), Rio: Verso e Prosa (Rio - Verse and Prose), Rio Antigo (OldenDay Rio), Fotografia Na História (Photography in History), Serviços Urbanos, Sua História e Organização (History and Organization of Urban Services) – many publications will be launched in 2010 2011: ●

Peoples of Rio. Three publications describing in detail the influence that three important migration waves – Jewish, Portuguese and Arab – had on the city. This series will be launched in 2010. Light © 2010. All rights reserved.

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Rio – Verse and Prose and Olden-Day Rio. This series, consisting of three books – “A Alma Encantadora das Ruas” (“The Charming Spirit of the Streets”), by João do Rio; “Memórias de um Sargento de Milícias” (“Memoirs of a Militia Sergeant”), by Manuel Antônio de Almeida; and “Casa Velha” (Relics of the Old House), by Machado de Assis – depicts Olden-Day Rio from the perspective of the great writers of the time. A bilingual edition (English and Portuguese) will be launched in 2010. Photography in History. This series provides a view into everyday life in Rio de Janeiro through photography. It includes the Malta Augusto Collection Guide, containing Augusto Malta's entire lifework. This series will be launched in 2011. History and Organization of Urban Services. Two books have already been published in this historical series on the development of urban services: “A Água do Rio” (“Water in Rio”), on the history of water supply services in Rio de Janeiro, and “A Evolução da Iluminação na Cidade do Rio de Janeiro – Contribuições Tecnológicas” (“The Evolvement of Street Lighting in Rio de Janeiro – Technological Contributions”). In 2010 another two publications will be issued: “O Abastecimento Alimentar do Rio Através da História” (“Food Supply in Rio throughout History”) and “A Evolução dos Serviços Urbanos no Rio de Janeiro na passagem do século XIX para o XX” (“The Evolvement of Urban Services in Ri de Janeiro at the Turn of the 19th Century”.) Other projects, such as the “Inventory of Historic Coffee Farms in Rio de Janeiro”, launched in 2009, and a book about the town of São João Marcos, scheduled to be launched in 2010, are intended to preserve the history of the state’s small towns Also falling under this category is the book “Rua Larga” launched last year, with chronicles and photographs of the region. The “Natural History Guide” to be launched in 2010 is an instrument for preparing Rio's residents for the environmental challenges of today. Light Institute also supports a continual updating and reformulation up the Houaiss Dictionary of Portuguese, a strategic part of our cultural geopolitics.

• The Light Musical Education Project introduces Brazilian youth to the universe of classical music and contributes to the creation o new audiences. In this recently initiated project, 20 and 30 students have been selected from schools and communities adjacent to Light's headquarters and from among our employees’ children to participate in a string orchestra and choir, respectively. Institutional Dimension [SO5]: Promoting effective public service The objective of Light Institute's institutional projects is to mobilize society to monitor the transparency, effectiveness and efficiency of government programs and public institutions.

• In 2010 Light Institute will initiate a 12-month statistical and budget analysis program, dubbed the ‘Performance Indicator System Project’, approved within our Research & Development program. The originally planned project, “Studies on the Impact of Climat Change” failed to obtain approval by the regulator and was canceled. Light Culture Center Light is present in Rio's folklore, expressed through Carnival parade music and other popular forms of musical expression, and has had many accomplished artists among its employees. What better reason could there be to invest in a facility for disseminating culture and information, focusing on the intrinsic relationship between our history and the history of Rio de Janeiro? Founded in 1994 and managed by Light Institute since the end of 2009, the Light Culture Center experienced a cultural efflorescence until abou 1999, which returned in full force in 2006.

With a natural ability to draw audiences and integrated with company headquarters, the Light Culture Center is a historical and well preserved building in downtown Rio de Janeiro that promotes activities oriented to students from public and private schools (Light Culture Center for Students) and hosts musical and drama performances, expositions and thematic events for the public in general.

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In 2009, an amendment to the State Cultural Incentive Act – the mechanism through which Light provides consumers with access t quality performances and entertainment – forced the Light Culture Center to reduce its program content. Another unfavorable circumstance was the major restructuring of the building to accommodate the Museum of Electricity. The Grand Gallery was closed to allow construction work to begin on the Negrão Lima Plaza, and the Planeta Energia section was also closed for repairs. These circumstances, combined with the H1N1 flu outbreak, which forced schools to postpone classes and cancel excursions, further contributed to a decline in visitors. Still, 2009 was considered a successful year for the Light Culture Center. The Light Culture Center in numbers ●

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31,731 people came to see musical and drama performances with renowned actors and performers and exhibitions on a variety of themes in 2009. The Center’s cultural collection continued to attract researchers from across the country. 1,518 students and teachers from 44 learning institutions in Rio, and other casual visitors, participated in the Light Culture Center Program for Students, which includes a 3 1/2 hour visit monitored by interns, the Planeta Energia program, the “Roda do Tempo”, a history exhibit, the ‘Small Gallery’ and temporary exhibits. 11 concerts attracted a total of 1,677 people to the Music in the Museum Project, which aims to attract audiences and restore appreciation for Brazilian classical music. 16 musical performances bringing in a total of 2,072 people were hosted as part of the 'Musical Tuesdays’ project developed in partnership with the Viva Cazuza! Society. The objective is to perpetuate the memory of people who created trends and helped build part of Brazil's contemporary music history. 8 musical performances by accomplished Popular Brazilian Music (Música Popular Brasileira - MPB) artists attracted 1,552 people to the MPB 12:30 project at the Light Theater. 1,358 people turned up to watch 7 lunch-hour performances by Popular Brazilian Music artists as part of the Tempero Musical (“Musical Spice”) series. The "Light ao cair da tarde” (Light at Dusk) program, a series of 16 performances by nationally and internationally famous Jazz performers, mobilized 5,195 people. 3.388 people participated in the “Carnaval de Todos os Tempos” (Best Carnival of All Times) samba theme song contest. In the Light-sponsored “Saudades, Dolores Duran” project, a tribute to one of Brazil’s greatest performers and composers of all time, 18 musical performances attracted a total audience of 3,472 people. The ‘Tribute to Waldir Azevedo’, a former Light employee, featured 3 performances with an audience of 400 people, while 800 people visited an exhibit in tribute to the late musician. 900 people visited the ‘21 Anos sem o Velho Guerreiro’ exposition, a tribute to late TV host Abelardo Barbosa, better known as Chacrinha. The ‘Botequim da Rua Larga’ samba group, made up of Light employees, attracted 400 people to 2 performances during the year. Light sponsored the ‘Rindo à-toa’ comedy play with Chico Anysio and friends at the Light Theater, which attracted a total audience of 1,746 people.

Sponsorship: Our cultural sponsorship activities within the framework of state, municipal and federal social and cultural incentive policies, also ad value to the Light brand. In 2009 the company sponsored social, cultural, educational and sports projects amounting to R$ 36 million with funds derived from tax incentives and approximately R$ 7 million from the company's own funds, twice as much as last year. Our sponsorship activities in 2009 represented 1.16% of our EBITDA, which is significant in our sector. All projects submitted for sponsorship, regardless of their origin, are processed through an analysis and screening procedure. Light © 2010. All rights reserved.

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Priority is given to projects eligible to funds derived from state and federal tax incentives, within the limits defined by the current budget and senior management.

To us, investing in culture is also way of contributing to the social and economic activities of our distribution area and confirming our commitment to social responsibility. Projects submitted to Light are rated by a Sponsorship Committee on their alignment with our general guidelines and Sponsorship Policy, as well as on their institutional importance. A list of rated projects is then submitted to senior management for approval. Some projects are given permanent sponsorship because of their importance, such as the Biennial Book Fair, the Brazilian Orchestra, municipal festivals in our distribution area, and various competitions and courses.

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Paying your bills on time [Medium materiality/impact issue 5: Fighting default] Only 50% of our retail customers pay their bills on time. This places greater collection efficiency among our priorities for 2010. A specific mode of fighting default has been established for every type of customer - Retail, Large Private Customers and Public Organizations and Services. In 2009 priority was given to a) customers having the greatest impact on our revenue, b) recovering overdue balances and c) regular market discipline actions. As a result these efforts, our total annual collection rate rose to 97.3%. The R$ 7.86 billion in realized revenue last year breaks down as follows: Segment Retail Large private customers Government organizations and services Total

Amount

Percent of Revenue R$ 4.15 BN R$ 2.5 BN R$ 1.19 BN R$ 7.86 BN

53% 32% 15% 100%

In Retail, we maintain a rigid management policy for high-value bills, with individualized handling and special collection escalation systems. In 2009, 650,000 people were blacklisted by credit protection agencies. In order to increase the protesting of unpaid bills we established a partnership with the Rio de Janeiro Division of the Brazilian Institute for Investigation and Protest of Bills, to expand the use of taxpayer card (CPF) blacklisting. To incentivize our customers to settle their late bills, we launched an installment payment campaign throughout our distribution area. Light has also worked toward improving its disconnection selectivity system. A average 52.5 thousand customers were disconnected every month in 2009, against 70.5 thousand in 2008 and 44.3 thousand in 2007. In the residential segment, Light disconnected 581,209 customers in 2009, 787,675 in 2008 and 495,447 in 2007. [EU27].

For large private customers, in addition to using corporate taxpayer number blacklisting and bill protest procedures, Light has developed a policy of maintaining permanent contact and adopted rigorous disconnection dates in conformity with Aneel Resolution 456/00. Also important were our efforts to reach settlements in judicial collection proceedings, which helped us recover old debt and normalize the flow of payments (see the ‘Medium- and High-Voltage – Large Private Customers” item in the “Collection in numbers” box below). Our institutional interactions have enabled us to develop important negotiations in this respect. The Company has maintained a strong institutional presence in the federal, state and municipal spheres of government, within the bounds of our commitment to ethics. We actively follow legislative developments and defend our legitimate interests in National Congress, the Rio Legislative Chamber (ALERJ) and other municipal legislative bodies across the state. . Collection in numbers Retail Segment - 2009

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Cumulative collection rate: 93.1%, a 1.1 p.p decrease from 2008’s 94.2% Average monthly disconnections for non-payment: 52.5 thousand 650,000 people blacklisted by credit protection agencies. In December alone, even before the disconnections, 400 thousand CPF blacklisting notices sent due to the greater demand for loans for Christmas shopping Cumulative retail collection rate for the year: 102.4% for the largest retail bills (this includes monthly bills plus overdue bills paid in installments, involving approximately 30 thousand customers). This was achieved thanks to our rigid control over this portfolio.

Medium- and high-Voltage Segments - Large Private Customers ●

Cumulative collection rate: 100.4% (monthly bills plus renegotiated overdue bills).

Public Organizations and Services ●

●

With payments made ruinously on time, the cumulative collection rate (including collection of aged receivables) stood at 107.6% in 2009 . The State Water Supply and Sanitation Company (CEDAE) and Supervia (an urban train operator), which renegotiated thei debt in 2007, have honored their monthly bills and installment plans, with cumulative collection rates of 136.8% (Cedae) and 112.9% (Supervia).

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Recognized transparency [Medium materiality/impact issue 11: Commitment to transparency and disclosure] An important tool for disclosing information on corporate governance to society, the Light Sustainability Report, produced since 2007, is an example of how our Corporate Communication Policy keeps its commitment to honesty and transparency. Thanks to this commitment, the company won the Quality - Best Meeting Award 2009 from the São Paulo Association of Capital Market Investment Professionals (Apimec SP) as the company that best communicates with investors. Light seeks at all times to provide reliable and accurate information on its operations, economic/financial situation and social/environmental management. All Group communication – including institutional communication, marketing, advertising, promotions, sponsorship, press relations and public stance – is integrated and its contents aligned and unified based on Corporate Communication Policy. The document can be viewed at Light’s site (www.light.com.br) , on the Sustainability page. Light fosters an open relationship with the press and replies to all inquiries received from journalists. Teams are immediately dispatched to locations where reparation or special attention is required. Light's Communication Principles

Transparency - In relation to the most sensitive issues that affect society, the principles of absolute transparency and strict compliance with the Law underpin and give substance to all written, spoken or any other form of communication. Legal compliance - The Company strictly monitors internal and external legal issues, compliance with the laws in force, protection of rights in all their variety, and equality between people of all races, creeds and styles, making no form of discrimination or segregation. Respect for stakeholders – Light also refuses to use any form of communication that may cause discomfort or embarrassment to any stakeholders or that may affect the brand in all its facets. Light inflexibly imposes this principle on all communication agencies. Participation in councils and class organizations – Light subscribes to the Council on Ethics and Standardization (CENP), which regulates the advertising segments and their form of remuneration, and to the Broadcasting and Publishing Institute (IVC) with regard to the approval of the various communication vehicles, statistical use of audit data and metrics systems.

In all cases, Light maintains open and unimpeded communication to impart new and essential concepts to its various stakeholders. . [PR6] Noise in Communication Near the end of 2009, Light and, inevitably, part of the population of Rio de Janeiro were adversely affected by an extremely rare event: three consecutive faults in the underground interconnected systems of Copacabana and Leblon. On November 26, Light published a communiqué in the press apologizing to the consumers of the South Zone – the ones most affected by the serious technical problems experienced on November 23. The newspaper Extra, however, questioned Light's having apologized to the residents of the South Zone, but not to the lower class residents of the Baixada Fluminense and some districts of the North Zone. Extra went so far as to suggest the possibility discrimination against certain groups of the public. Obviously it wasn’t a matter of discrimination, but of company policy: to direct the communication to those most affected by the problem. To clarify these issues and abate the heated opinions, as well as to reaffirm Light's position, a second message was Light © 2010. All rights reserved.

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published clarifying these issues and mentioning the importance of Light being transparent in dealing with issues that directly affect customers (see the messages in this chapter and the box on Payment for Damages in the Light Service Quality section 6). This was the only episode during the year in which the company’s compliance with voluntary codes and regulations and its communication policy was called into question. [PR7]

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Working together with suppliers [Medium materiality/impact issue 12: Partnership with suppliers]

Light was the subject of a benchmarking study on Supplier Evaluation and Qualification that included visits by Chesf, Eletronorte, Furnas and Itaipu to the department responsible. Successful initiatives – such as the Supply Quality Awards given to 11 companies (out of a total of 1267) in 2009 during the 2nd Annual Supplier Conference and the Light Quality Assurance Certificates awarded recently to two suppliers that successfully certified their production processes jointly with Light – have attracted interest within the sector. These achievements are significant considering the exacting award criteria : suppliers must demonstrate their control of production processes and services, corporate or industrial quality and comprehensive documentation in all stages of supply.

Light's management procedures go beyond the awards; they include inspection of deliveries, evaluation of corporate or industrial quality, approvals, type tests, test witnessing, evaluation of materials returning from the field, monitoring of equipment salvaging activities, inspections, etc. Light plans to further develop alternative suppliers in 2010, which will include training and further Quality Assurance certification. Below are some of the initiatives and projects that have helped strengthen Light's relationship with suppliers.

2nd Annual Supplier Conference – Organized by Light's Procurement, Logistics and Supplier Quality Department, the 2nd Annual Supplier Conference addressed the challenges faced in our franchise area, the heavy investments the company has made in tamper proofing (shielding) distribution systems and other loss reduction efforts, as well as the Mobile Project, which will automate the issuing of work orders to field technicians. An innovation in 2009 was the Light Quality Assurance Certificate awarded to 2 companies who, jointly with Light, succeeded in certifying their production process, and thereby became exempt from product Quality inspection and monitoring for two years. The purpose of the quality assurance program is to ensure that a supplier can be trusted to produce and provide services and products with the desired quality, mitigating the risk of substandard quality or deliverie behind schedule. As the process matures, cost reductions will be obtained on quality and spare inventory.

To be eligible for certification, suppliers must undergo a rigorous performance evaluation process. If no receipt inspection nonconformities, user complaints or technical support or warranty calls are reported, the material and supplier in question are place in a trial skip-lot sampling regime. If good performance is maintained during the trial period, the supplier undergoes a final, thorough evaluation for quality assurance certification.

During the Annual Supplier Conference our Legal Department presented the new Draft Database, which will impart greater efficiency to the procurement process, while the Generation Department highlighted new projects such as the Itaocara Hydropower Plant scheduled to be placed into commercial operation in 2014, and the Lajes and Paracambi SHPs expected to be operational by 2011 and 2012, respectively. The importance of best sustainability practices in a number of areas – human rights, ethics, environment, labor and occupational safety – and Light’s Diversity Policy were also on the conference agenda. We expect the volume of materials and operating equipment to increase in 2010 to meet the demand created by our investment plan and service improvement efforts. I Exposupri - This three-day fair hosted by the Light Culture Center brought together companies providing materials and services Light © 2010. All rights reserved.

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to Brazil's largest national and multinational companies. The event featured 31 exhibits, 10 seminars and attracted 2000 visitors, including manufacturers, customers, researchers, students and employees. The fair was held under the theme ‘Sustainability across the energy supply chain”. and was an opportunity for us to strengthen our relations with our supply chain and for employees to refresh and update their knowledge. Zero Waste Project – Jointly developed by Light and Reluz Logística Reversa - a company specialized in salvaging materials removed from power transmission and distribution systems – the Zero Waste Project is designed to salvage or recycle materials in sustainable manner by applying the Three Rs dictum: Reduce, Reuse, Recycle.

Reluz runs a material recovery and waste disposal plant in an old warehouse in Barra do Piraí. Transformers, insulators and other materials are recovered and segregated for salvaging or processing. Materials considered unsalvageable are segregated for grinding Copper and aluminum are processed into briquettes for bar mills, while plastics are recycled by sandals manufacturers.

By recovering these materials, light consumes less natural resource volume and decreases its ecological footprint by sustainably disposing of the waste generated by power system operations. The project also generates employment and income for communities in our franchise area [EN2] [EN7]. Zero Waste Project in Numbers ● ●

R$ 2 million invested by Reluz, with another R$ 1 million projected for the first quarter of 2010 70 jobs created in Barra do Piraí, with another 100 direct and 300 indirect jobs expected for the first quarter of 2010.

Partners Light has established strategic partnership agreements with suppliers of transformers, utility poles, hardware, connectors and cables as part of the Zero Inventory project. Manufacturers maintain a strategic inventory reserve for Light, reducing lead time and ensurin that sufficient inventory is readily available for use. Suppliers of materials and operating equipment are increasing their production shifts and delaying collective vacations to meet our urgent demand for transformers and cables. Consumption has increased as a result of our underground system maintenance plan. Projects developed jointly with companies such as Air Time, Carrier and Climear have generated sales to energy efficiency and service companies, supporting Light Esco in its business. Other activities in 2009 Activity Light Business Round

2nd International Purchasing Conference

Description Period The Light Business Round involved the entire March procurement team and served as a venue for interaction among 178 small, local suppliers. Hosted at the Light Culture Center in partnership with the Brazilian Procurement Council (CBEC), the event was graced by the presence of the president and director general of IFPSM1, a federation of 43 purchasing associations based in Switzerland that also Light © 2010. All rights reserved.

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Inspections, evaluations, investigations and technical visits

provides cost management services to Peugeot Citroën in the MERCOSUR. Superintendent Nelson Monteiro presented the case "Light: Sustainability in the Integrated Supply Chain”.. Light’s quality team conducted approximately 290 technical visits to material suppliers in Rio de Janeiro and other states, each with a duration of three days. No objective evidence of child labor (HR6) and/or forced labor (HR7) was found at these suppliers. Critical suppliers (HR2) were targeted most by these inspections.

Activities sponsored by Light in 2009 2nd Meeting of Metals, This event involved 90 potential suppliers in Mechanical Engineering, Oil & the region of Três Rios (RJ). Many large Gas Suppliers suppliers were present, and 15 new suppliers were entered in our database. 2nd Printing Business Round 9th Oeste Export (International Organized by companies in the West Zone to Meeting on Foreign Trade and promote product and service suppliers in the Development) region and establish partnerships. Light captured 31 suppliers for our supplier database. Design Business Round An event that brought together 36 design offices.

May

August September

November

Contractors and significant suppliers (contract value exceeding R$ 1 million) [HR2] 2007 Contractors Suppliers with a contract value exceeding R$1 million 2008 Contractors Suppliers with a contract value exceeding R$1 million 2009 Contractors Suppliers with a contract value exceeding R$1 million

MaterialService 553 431 46 72 MaterialService 529 668 45 79 MaterialService 487 458 34 64

Total 984 118 Total 1197 124 Total 945 98

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Supplier distribution [EC6] Material % by Qty value 229 23% 224 35% 18 18%

Service

Total

% by % by State Qty value Qty value Rio de Janeiro 463 56% 692 46% São Paulo 177 33% 401 34% Paraná 10 1% 28 6% Rio Grande do Sul 11 3% 2 0% 13 1% Minas Gerais 25 3% 23 6% 48 5% Goiás 0 0% 1 0% 1 0% 2010 Targets Key targets established by the Procurement, Logistics and Supplier Quality Department for 2010 include further developing the Zero Waste Project and increasing the relative participation of suppliers based in Rio de Janeiro [EC6] , which in 2009 represented 46% by value. This is reasonable, but less than last year's 55%.

Finding local suppliers is a challenge because of the lesser number of industrial companies installed in Rio de Janeiro. Establishing partnerships with local suppliers is a way of enhancing the development of our franchise area by generating employment, income an greater retention of taxes within the State, in a virtuous cycle. 13 companies have recently presented their offerings to Light or begu invoicing services in Rio, while another 8 are being evaluated.

Another goal is to further develop the Quality Plan through tools such as the Quality Assurance Program (Supplier Evaluation, Counseling and Qualification); the Field Performance and Operating Condition Evaluation Laboratory (an R&D project that will enable us to improve our specifications and avoid the use of bad suppliers); Development of New Suppliers; and the Light Awards 10 quality-assured product families were developed with 4 suppliers in 2009. The product list includes fuses, light and heavy utility poles, fastening/support hardware and seals. This is part of an R&D project aimed at monitoring the performance of overhead and underground distribution system equipment and materials.

The importance of these activities is seen in their results, such as the suppliers which received Light Quality Assurance Certification in 2009. In relation to 2008, a slight improvement in product quality – which was already considered good – was observed in 2009 This contributed to the Nonconformity Rate announced in a recent KPI meeting being much lower than in previous years. Lead tim (from the supplier to our storage warehouses) fell 50%. Quality Assurance-Certified suppliers also saw a decrease in the number o rejection and rework events in their manufacturing processes, improving delivery reliability.

A reduction in quality costs was also announced during the KPI meeting. Although this has not reduced the prices of products supplied by quality assurance-certified suppliers, it does indicate potential for price reduction. Quality Assurance-Certified supplier also enable us to reduce spare inventory costs, as they can be relied on to deliver materials on time and as specified. Another goal is to select new and more competitive material and service suppliers. In 2009 Light evaluated and approved the products of six manufacturers in China, including conductor, lightning arrestor, porcelain and polymer insulator, and fuse switch manufacturers.

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Light also conducts reviews of price restatement formulas as part of a COGE Foundation Work Group consisting of electricity sector specialists. The purpose of these reviews is to update the prices of equipment and materials such as copper, aluminum, zinc and lead. Our Engineering and Supplier departments also participate in the development of products such as utility poles and environment-friendly polymer crossarms, which have been adopted for our aerial distribution systems.

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A generator of clean energy [Medium materiality/impact issue 15: Investing in expanding generation capacity]

Light Energia is developing new renewable generation projects to increase our production capacity and consolidate our position as a generator of “clean energy”. Hydropower projects (Paracambi and Lages SHPs and Itaorca HP) are currently underway, as well as wind power projects in Ceará, which will have an aggregate installed capacity of 34 MW and will be available for the upcoming wind power auctions.

Two auctions will be held in 2010 for reserve power from wind farms, which are required to be operational in 2013. If Light wins its bid in either of these auctions, we will diversify our energy base and have mutually supplementary wind and hydropower sources This could also generate carbon credits and will reaffirm our commitment sustainability. Implementing projects of this magnitude is no simple task; there are many variables that can affect our return on each project, such as location, capacity factor, wind turbine quality and wind data.

Light gives priority to renewable sources, environmental preservation and projects and facilities with the lowest possible impact on the environment. We also look for opportunities to implement compensatory social and economic programs in benefit of the affected communities. To ensure that all our partners and suppliers conduct themselves in the manner expected by the Company, our Code of Ethics, Social Responsibility Agreement, Basic Occupational Health and Safety Guidelines, and Environmental Commitment are appended to all our contracts [HR1]. Inside the new hydropower projects Paracambi Small Hydropower Plant. . Construction of this 25-MW hydro plant in Ribeirão das Lajes/RJ began near the end of 2009 and should be completed in October 2011. Resettlement of the families living within the reservoir area is currently underway; the 250 affected families are receiving social assistance, which includes visits to the immediately affected families and families living i the surroundings of the reservoir area to provide information about the project. Light is also conducting research to preserve the history of the area and gathering information on the social/economic characteristics of the population within the project’s area of influence to support our communication actions. In addition, we are supervising the resettlement processes and preparing a databas of potential labor resources for the project. 74 out of a total of 102 affected properties have been vacated [EU22].

A social/economic survey was conducted in the communities surrounding the Paracambi SHP project site to determine the social/economic profile, impressions and expectations of community members with regard to the project. The interviewed community members were also informed of the reason they would be moved out of the region [EU20]. After collecting this data, Light opted to compensate the relocated families financially. Light is amicably negotiating the relocation of each resident, seeking to reach an agreement that is satisfactory to both parties.

Lajes Small Hydropower Plant. Located in the Ribeirão das Lajes Complex, in Rio de Janeiro, and currently pending approval o its basic design, the Lajes SHP will have an installed capacity of 17 MW. Commercial operation is expected to begin in 2012.

Itaocara Hydroelectric Plant. This new hydro plant, with an installed capacity of 195 MW, will be built on the Paraíba do Sul, between Rio de Janeiro and Minas Gerais. Currently pending its environmental permit and design approval, the project should be in commercial operation by 2014. Light © 2010. All rights reserved.

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The number of properties affected and the number of people to be relocated is still being determined. From the data currently available, our estimate is that approximately 760 rural and 70 urban properties will be affected. The project will require resettlemen of an estimated 430 families, including 150 property owners, 200 non-owners , 38 families in São Sebastião da Cachoeira and 42 in Porto Velho do Cunha. Construction of the reservoir is expected to affect approximately 1500 people. Light is constantly present in the affected communities and in direct communication with local community members to provide information on project scheduling and its consequences. Not all municipalities surrounding the plant site are favorable to its construction - and Light has worked toward reversing this. One of the activities planned for the first quarter of 2010 is a series of seminars to answer questions and improve our relations with these communities. The seminars will also be a venue for presenting our Environmental Impact Study and the programs we are preparing to minimize and/or eliminate any impacts.

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Connected to the environment [Medium materiality/impact issue 18: Improving environmental practices and mitigating negative impacts]

In 2009 Light made significant progress in the area of environmental responsibility. Our reputation as an environmentally responsibl company has been strengthened by the expansion of our nature protection efforts and the concrete results we have achieved, including a 25% reduction in direct greenhouse gas emissions, and the creation and maintenance of 60.8 hectares of biodiversity corridors.

We have further improved the economic/financial, social and environmental balance of our activities through our newly created Sustainable Development and Franchise Department, which is responsible for our strategic environment management activities. The environmental agents to be trained in 2010 will be active in our operating activities, working under our Environment Management System (SGA). Light’s power generation, transmission and distribution activities are subject to our ISO 14001-compliant Environmental Policy, through which the company maintains its legal commitments and seeks to continually improve environmental practices. These health requirements are in place for a reason. The water from the Ribeirão das Lajes, the Piraí (Tocos Diversion) and the Paraíba do Sul (Paraíba–Piraí Diversion) provides the population not only with power supply, but also with water. 96% of the water consumed in the state of Rio de Janeiro flows through the turbines of the Lajes Complex.

The complex has an installed capacity of 855 MW, five generating plants, two pumped storage plants, two regulating reservoirs and six small reservoirs [EU1]. 11% of this water, or 5.5 m³/s, is ‘special class’ water from the Lajes Reservoir and requires only chlorination for consumption. [EN9] There is no consumptive use in our hydroelectric operations; the pumped water is entirely transported to the Guandu River watershed and used by the Nilo Peçanha, Fontes and Pereira Passos hydro plants.

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The Lajes Complex in Numbers Hydroelectric plants Fontes Nova Nilo Peçanha Pereira Passos Ilha dos Pombos Santa Branca Regulating reservoirs

Capacity (MW) 132 380 100 187 56 Usable volume (Mm3) 308 445

Santa Branca Lajes Learn More The hydroelectric potential of the Paraíba do Sul is also used upstream of the Lajes Complex by the Santa Branca HP, São Paulo state, and downstream by the Ilha dos Pimbos HP in Carmo, on the border with Minas Gerais.

The net output of our hydroelectric plants varies as a function of the amount of water stored in their source drainage basins. In 2009 the higher discharge rates of the Paraíba do Sul resulted in a 7.8% increase in output (4,695,076 MWh against 4,330,999 MWh in 2008), most notably from the Ilha dos Pombos HP [EU2]. The Availability Factor of each plant is calculated monthly by the Brazilian electrical power trading operator (CCEE). This calculation disregards unavailability due to external causes (environmental or transmission system issues). The Availability Factor compares the plant's availability over the past 60 months with a reference value defined according to the type of plant and the characteristics of its equipment.

The average value for each year [EU30] has been calculated based on the criteria established for the availability factor. Monthly availability varies depending on scheduled maintenance stops, which typically occur in May and October, when river discharge rate – and therefore power output rates – are lower. Average Plant Availability Factors [EU30] Average Availability/year Plant 2007 2008 2009 Fontes Nova 96% 97,50% 98,40% Nilo Peçanha 96,50% 92,10% 95,50% Pereira Passos 94,20% 97,70% 98,40% Ilha dos Pombos 93,60% 93,10% 96,90% Santa Branca 92,60% 95,30% 97,20% The Environmental Management System (EMS) Our EMS began operating in 2001, when six units were certified to ISO 140001. From 2007 to 2009, 154 new operations were certified, including 138 kV distribution lines, substations and commercial agencies. As a result, 76% of our activities are now covered by our environmental management system. Every few years all certified units undergo a re-certification process. In 2010, our scope of certification will be expanded to include at least another 20 operations.

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All our Hydroelectric Plants have Integrated Management Systems compliant with ISO 14001, ISO 9001 and OHSAS 180001 [PR1]. In December 2009, Light Energia’s Integrated Management System was audited by an independent certification body and was recommended for re-certification to NBR ISO 9001:08, ISO 14001:08 and OHSAS 18001:07. Our Environmental Management System has allowed us to improve the environmental aspects of our activities. Investment in our EMS has doubled over the past two years, confirming our perception of its benefits. Investments in 2010 should also increase by 10%, as from 2008 to 2009 [EN30]. Before the end of 2010, 45 employees will be trained as Environmental Agents. In addition to their routine activities, they will also be responsible for ensuring compliance with legal requirements, ISO 14001 and for the continual improvement of the company's environmental practices. Operations with polluting potential will have one or more agents to cover the entire organization. This new management method will enable us to optimize the management of nonconformities within the System's continual improvement process. Qualitative and quantitative management of any nonconformities is extremely important within the context of the EMS. The customization of the software program used to manage this information is expected to be completed by August 2010. [EN28] Total environmental protection expenditures and investments, by type [EN30] R$ thousand Nature of Investment 2007 2008 Substation and Power Line Maintenance and Safety 1.852 4.286 Internal environmental education 22 31 Environmental Projects 7.034 1.359 Environmental Permitting 9 143 Other - Consultancy, Seminars and Audits 60 21 EMS Implementation and Maintenance 925 1.582 Urban Tree Canopy 6.063 6.480 Replacement of Distribution Transformers (Ascarel) 3.458 0 Slope Stabilization 345 1.746 Plant removal 1.496 1.124 Legal compliance 41 Research and Development 699 1.235 Total 22.004 18.007

2009 4.585 60 1.311 465 42 1.839 7.035 0 1.875 1.411 498 844 19.965

EMERGENCY PREPAREDNESS To ensure we are prepared for any emergencies or potential incidents, Local Emergency Response Plans were prepared defining the action be taken to control, contain and mitigate these situations, both in internal and external activities, in order to prevent material, operational or personal damages, or damages to surrounding communities or to the environment.

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These procedures apply to all facilities, systems and organizations integrated with the Light EMS. Accidents and incidents are evaluated using the method described in the Emergency Report, under the Responsibility of the Emergency Response Organization (OCE) or Light's own staff (depending on where the emergency has occurred). This method consists of filling out an Emergency Report containing, as a minimum, information on the site of the incident, a description of the incident, how the incident was handled, any opportunities for improvement, the action required and deadlines. Generating and recording this information improves our knowledge management, provides inputs to our incident and accident history database and enables us to disseminate solutions which, due to their similarity, can be implemented preventively in other areas or processes.

Light also has a Corporate Crisis Management Plan. “Crisis” means any predictable or unpredictable event that threatens to harm our assets, our operations, our staff, our image or society, hampering our relationship with customers, employees, shareholders, suppliers, surrounding communities, public authorities, media, regulators and partners. A crisis can be generated by an operating event in water supply or electrical systems or by nonoperating events, such as social, financial or political crises. [EU21]. Materials management With the increase in system improvement (ex: cables and utility poles) and connection legalization activities in 2009, consumption of some of main materials and equipment used in power generation, transmission and distribution systems also increased. As indicated in the material quantities table below, consumption of utility poles increased by nearly 50% and cable consumption increased about 8% with the expansion of our system. Approximately 1000 km of conventional distribution systems have been replaced with the more compact and environmentally friendly spacer cable systems, which have no wooden crossarms and help reduce conflict with adjacent trees. [EN1] Materials used, by weight or volume [EN1]

Material / unit Transformers / pc. Concrete poles / pc Wooden poles and crossarms/ pc Meters / pc. Guard / pc Recloser Insulator / pc. Connectors, terminals and fittings / pc. Cable / kg Cable / m Mineral Oil / l

2007

2008

2009

4.984 8.256 32.434 143.937 21 208 75.181

6.731 10.601 46.574 152.731 23 140 158.824

8.480 20.902 2.440 153.767 36 193 298.643

2.132.910 36.041 6.587.034 103.806

2.811.380 41.689 9.671.017 124.046

3.390.717 38.846 10.403.461 12.353

For several years now Light has been salvaging defective equipment removed from the grid, such as transformers and meters [EN2]. The 'Zero Waste Project’ (Projeto Desperdício Zero) has expanded these efforts (more in the ‘Working with suppliers’ section of this Chapter). The equipment we salvage consists mostly of transformers, meters, switches, insulators and cables. Unsalvageable materials (scrap wood, aluminum, copper, iron, plastic, glass, steel, concrete and porcelain) are sent directly to industrial plants that use them as feedstocks, provided these plants have been approved by Light and have environmental permits. Light © 2010. All rights reserved.

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The main environmental gains of re-utilizing equipment and materials are the reduced the demand for natural resources and the lesse amount of waste disposed of in landfills. Amount of materials used that are recycled consumables [EN2]

SALVAGED Material / unit 2007 2008 2009 Transformers / pc. 1.343 919 1.383 Meters / pc. 14.137 46.409 21.947 Guard / pc. 18 21 12 Recloser / pc. 3 71 48 Sectionalizer / pc. 9 86 102 Waste management Light has two Class II (non hazardous) Waste Centers and six Class I (hazardous) Waste Centers in operation. The Class II Waste Centers are staffed by personnel responsible for segregating materials for recycling. In 2009 we initiated an R&D program called “Sustainable Solutions and Social/Environmental Practices in Waste Management.” The purpose of this program is to identify opportunities and create new practices for social/environmental management of the company's waste.

The first stage of the program consisted of identifying and quantifying the solid waste generated by the Rua Larga and Frei Caneca Units. In the second stage, an online social/environmental survey of employees and outsource personnel was conducted to determine their degree of understanding, participation and awareness of environmental issues and solutions, especially regarding the Light Waste Management Program. The survey was directed to a young and promising group of high school and university graduates, ages 21 to 23, all allocated at the Rua Larga unit. A profile of their responses is provided below: Opinions of young personnel ages 21 to 30 On overall environmental issues: Air, soil and water pollution are the main environmental issues of our time. The solution to these problems is to implement public policies and stricter, rigorously enforced laws and regulations. Companies are mostly responsible for environmental problems. Common citizens are the most capable of contributing to solve these problems.

On Light’s environmental activities: The company’s participation in solving social/environmental issues is satisfactory. The most well-known environmental projects are the Environment Week and Waste Segregation, in which they participate. Waste generated at the workplace is a source of income and employment. They are able to correctly identify recyclable materials, among which disposable cups are the most excessively consumed. It is everybody's responsibility to reduce the amount of waste at the workplace; however,

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reusing materials comes before reducing consumption.

Quantity of Class II waste materials received at the Rua Larga and Frei Caneca Waste Centers [EN22]

Type of Waste: Amount Method of Disposal Paper/Corrugated Cardboard (tonnes) 142.471 Recycling / Sale The main hazardous wastes (also Plastic (tonnes) 11.326 Recycling / Sale classified as Class I by NBR Glass (tonnes) 1.4 Recycling / Sale 10004) generated by our Metal (tonnes) 48.234 Recycling / Sale operations are insulating oils and Incandescent Bulbs (unit) 645 Recycling contaminated gravel or pads. Toner Cartridges (unit) 239 Cleaning/Recycling These and other Class I waste Washable Towels (pc) 37,930 Reuse materials are disposed of by specialized companies, using disposal methods approved by environmental authorities. In 2009, disposal of hazardous waste materials decreased, as they were retained in storage at our Waste Centers and are expected to be disposed of in 2010.

Light was a pioneer in the disposal of PCB (polychlorinated biphenyl). Electrical equipment containing PCB began to be removed from our systems in the 80s, when Interministry Resolution 019 was issued. From December 1989 to January 1997, contaminated equipment was exported for disposal as required by a resolution of the Brazilian Council for the Environment (CONAMA). From February 1997 to September 2001, contaminated materials were allowed to be kept in storage. In October 2001, incineration or decontamination became the standard method of disposal. Light’s waste management operations (Class I Waste Center), which also handle PCBs, were certified to ISO 14001 in June 2003. The company no longer has equipment insulated with PCB-based oi [EN24] No significant spill incidents have occurred in any of the Light Group companies over the past three years. [EN23]. Emissions Our GHG (greenhouse gas) inventory in 2009 [EN16][EN17] showed that the company’s direct emissions decreased 25% compared to 2008, exceeding the 6% target set for the year. Improvements to prevent leakage of SF6 (sulfur hexafluoride) gas from gas-insulated equipment were largely responsible for this result. The reduction in direct emissions was also helped by a 50% expansion of our ethanol-powered vehicle fleet from 2007 to 2009. [EN3][EN29] Reduced power consumption within the company's facilities also contributed to a reduction of indirect emissions. [EN16][EN4] Direct and indirect greenhouse gas emissions [EN16] CO2eq Emissions 2007 2008 (tonnes) Direct Indirect Direct Indirect Light SESA & ESCO 18.276 1.132 16.279 1.092 Light Energia 337 12 776 88 Total Light SA 18.613 1.144 17.055 1.180

2009 Direct 12.244 581 12.825

Indirect 815 49 864

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TYPE OF FUEL/ 2007 liter DIESEL 515.495 GASOLINE 1.165.421 ETHANOL 4.346 TOTAL 1.685.262

2008

2009

407.657 536.349 143.866 1.087.872

620.888 253.123 852.777 1.726.789

Direct energy consumption by primary source [EN4] Total electricity consumption (in 2007 2008 2009 kWh) 33.285.000 35.046.000 32.484.000

Additional sources of emissions, such as business flights, were taken into account in the 2009 Inventory and recorded under “other indirect emissions”. These types of emissions decreased 8% compared to 2008, largely reflecting the increased use of biofuels by our fleet and third-party machinery. [EN17] Other indirect greenhouse gas emissions (service providers) [EN17] CO2eq Emissions 2007 2008 2009 Light SESA & ESCO 10.452 12.472 11.054 Light Energia 280 163 568 Total Light SA 10.732 12.635 11.622 The direct emissions reduction target will remain at 6% in 2010. We will intensify our efforts to eliminate any SF6 gas leaks and intend to increase our efforts to contain contractors’ emissions, incentivizing them to adopt low-carbon practices. The recent increase in the price of biofuels such as ethanol will be a challenge and may result in higher consumption of fossil fuels (gasoline and diesel).

The company has planned a series of initiatives, within our ANEEL-regulated R&D program, to improve the methods of calculating greenhouse gas emissions from reservoirs. One such initiative is a joint project with other companies in the sector to propose a method for monitoring and evaluating greenhouse gas emissions from Brazil's hydroelectric plant reservoirs. In another three innovative projects planned within our R&D program, researchers will evaluate the dynamics of carbon and nutrients (P and N) in water- and sediment-dwelling organisms and develop methods of reducing emissions through the management and utilization of aquatic plant biomass extracted from the reservoirs during plant operation. [EN18][EN26]

Due to the nature of our activities, and as demonstrated in the previous Sustainability Report, Light produces no significant emission of ozone-depleting substances or other significant atmospheric emissions, such as NOx and SOx.[EN19] [EN20] Protected areas For over 100 years, Light has protected 19,000 ha of Atlantic Forest in the Lajes Complex, an area bordered by the municipalities of Piraí, Rio Claro, Mangaratiba and Itaguaí. This area is one of the few remaining well-preserved Atlantic Forest areas in the state of Rio de Janeiro which, according to IUCN and WWF, warrants every effort at preservation of its important habitat diversity. Home to an abundance of fauna and flora, this area is a known habitat of over 400 species of flowering plants, and new species are discovered every year. Light © 2010. All rights reserved.

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In addition to planting seedlings and maintaining forested areas as part of our Degraded Area Recovery Program (PRAD), Light works in partnership with CETAS/IBAMA biologists who release native animals, seized from smugglers, to the environment after a they have received veterinary care at CETAS. These actions help increase the diversity and genetic wealth of native fauna and flora ensuring the survival and presence of pollinators and seed dispersers, which help preserve the diversity of species in the endangered Atlantic Forests. [EN13] [EN26]

In addition to the Degraded Area Recovery Program (PRAD) nursery operating in Ribeirão das Lajes, we plan to create a Forest Nursery Network in 2010 to produce native Atlantic Forest species seedlings for the Tinguá-Bocaina Biodiversity Corridor, in the municipalities of Piraí and Rio Claro. [EN12][EN14][EN26] Owing to the nature of our generation, transmission and distribution operations, Light interacts with the numerous protected areas in our franchise area. A healthy relationship between Light and the organizations managing these areas has been a continual focus. None of our new projects are within areas of high biodiversity and therefore we have not been required to offset habitats [EU13]. Habitats protected or restored within the company, by location and size [EN13] PROTECTED SIZE RELATIVE LOCATION STATUS AREA (Km2) POSITION Reservatório de Mata do Amador Piraí (RJ) Operating 5 Santana Municipal Park Reservatório de Mata do Amador Piraí (RJ) Operating 6,36 Vigário Municipal Park Barra do Piraí UEL Santa Cecilia Operating 2,5 Paraíba do Sul PA (RJ) Mata do Amador UEL Vigário Piraí (RJ) Operating 0,01 Municipal Park Area with high Rio Claro (RJ) biodiversity Adjacent to Reservatório de Lajes Operating 30 Cunhambebe State Park and Alto Piraí Municipal Piraí (RJ) PA Adjacent to Cunhambebe Reservatório Rio Claro (RJ) Operating 0,36 State Park and Alto Piraí de Tocos Municipal PA UHE’s de Fontes Piraí (RJ) Operating 4 Adjacent to Guandu PA Engineering / PCH Lajes Piraí (RJ) 0,1 Guandu PA Constr Engineering / PCH Paracambi Paracambi (RJ) 4 Guandu PA Constr UHE Ilha dos Pombos Carmo (RJ) Operating 3,5 Paraíba do Sul PA Reservatório e UHE Santa Branca Operating 28 Paraíba do Sul PA Santa Branca (SP)

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UHE Ilha dos Pombos Carmo (RJ) Operating Reservatório de P. Coberta Piraí (RJ) Operating UHE Pereira Passos Linha de transmissão LTA's Nilo Peçanha Piraí (RJ) Operating Santa Cecília, NLPSCI Linha de transmissão Piraí, Volta Redonda, Barra LTA's Nilo Peçanha – Mansa, Resende Operating Santa Cabeça, NLP- e Itatiaia (RJ) Queluz e Areias SCA (SP)

Paraíba do Sul PA

1,07

Adjacent to Guandu PA

25,5

Mata do Amador Municipal Park

115

Adjacent to PARNA Bocaina

Habitats protected or restored within the company, by location and size[EN13] External Approval

Habitat

Size (ha)

Location

Lajes Reservoir

19.800

Rio Claro (RJ) Yes1 Piraí (RJ)

Status in 2008 Protected/Restored

Reforested Area – Ilha dos 63,5 Carmo (RJ) Restored Yes1 Pombos Rehabilitated Erosion and Santa Branca 135 Restored Yes1 Reforested Area - Santa Branca (SP) Reforested Area - Complexo de Barra do Piraí e 1.246 Restored Yes1 Lajes Piraí (RJ) Total Protected Area: 21.244,5 Total Restored Area 1.444,5 Legend: 1. INEA-RJ; 2. CETESB-SP Mitigation of environmental impacts The main impacts of power systems are the damming and modified hydrological regimes of rivers, in generation activities, and the suppression of urban or parkland vegetation, in transmission and distribution activities. In these times of climate change and pressur to reduce emissions, Light recognizes our departments involved in developing projects that have a direct influence on biodiversity must attach utter importance to managing vegetation in our franchise area.

Essential activities include the surveillance and maintenance of the power transmission and distribution rights of way, as they often cross protected areas (PA). The company has worked with the organizations coordinating these areas to improve our plans for response to environmental emergencies such as intentionally or inadvertently caused fire; soil, air and water pollution; clearing or tre felling. This process has been conducted concurrently with programs for raising awareness among local communities, restoring vegetation, recovering eroded areas, removing fire hazards and stabilizing slopes.

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Municipal Government of Rio de Janeiro, was a contribution to the harmonious coexistence between power distribution systems and urban tree canopy. In 2010, Light will continue to participate in the COGE Foundation’s Workgroup on Management of Vegetation Adjacent to Power Systems with two R&D projects: ‘New technologies for managing urban tree canopy adjacent to power distribution systems’ (which will investigate and apply plant growth inhibitor technology and urban tree trimming technology in the urban environment to improve efficiency and minimize environmental impacts) and ‘Development of an empirical model of vegetation growth based on climate conditions and electronic vegetation cataloging.” These projects have led Light to: ● ● ●

Prepare a plan for communication on tree trimming and other forms of vegetation management for the electric utility sector Certify our vegetation management workers to improve the quality of pruning services Publish a booklet and CD containing updated information on tree trimming near distribution and transmission lines – introducing new technologies, methods and techniques – as well as a New Manual on Vegetation Management Near Power Systems

Green figures Actions to mitigate the impacts of construction and operation of dams and hydropower plants in Light Energia’s generating system: ●

● ●

●

Planted and maintained 60.8 hectares of company-protected forest areas – exceeding the annual target of 50 ha - to expand the remaining areas of Atlantic Forest and create biodiversity corridors Released 62,000 larva of native fish species into the Paraíba do Sul watershed Released approximately 1,400 individuals of various native species captured from animal smugglers and cared for by Cetas/Ibama (Seropédica-RJ). Maintained Integrated Management System certification to NBR ISO 9001:08, ISO 14001:04 and OHSAS 18001:07.

With a focus on generating knowledge and innovation for sustainable environmental management, Light's R&D program funded various environment-related projects which, in addition to generating research data for Brazil, directly affect the quality of life of the population living in our franchise area. Light produces knowledge that is incorporated into our management practices and helps mitigate the environmental impacts caused our activities, improving our relations with stakeholders. Below are some of these projects: ●

●

MACROPHYTES - Sustainable Management of Aquatic Macrophytes in Light Energia’s Reservoirs – Phase II, executed by NEPEAM/UNESP (SP). A highlight of this project was the successful field testing of the use of aquatic plant biomass as an organic fertilizer in the Degraded Area Recovery and Reforestation Program (PRAD) BIOÁQUA - Water Quality, Biodiversity and Biomanipulation of Aquatic Communities in Ribeirão das Lajes, Santana and Vigário Reservoirs - Phase II, executed by NEL/UNIRIO (RJ). A highlight of this project was an evaluation of water and fish quality in Light’s reservoirs. Tests were performed to determine the presence of micro-pollutants, Cyanophyta infestations and toxins associated with these organisms PISCES - Evaluation of Environmental Quality and Monitoring of Light Reservoirs – Phase II, executed by LEP/UFRRJ Light © 2010. All rights reserved.

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●

(RJ). The highlights of this project were the installation of artificial shelters, creating safe areas for reproduction and growth o fish larva, and the use of remote sensing techniques and geo-processing to evaluate changes in land use in the reservoirs’ surroundings FISH LADDER - Development of a model for evaluating the effectiveness of the Ilha dos Pombos Hydro Plant fish ladder – Phase II, executed by LACTEC (PR). The highlights were the changes made to the Ilha dos Pombos HP fish ladder to decrease water velocity and create resting areas for fish, improving effectiveness

Awareness activities and their results In 2009, the cleaning supervisors at the Marechal Floriano (Downtown) and Rua Frei Caneca (Catumbi) facilities received training on environmental issues. In 2010 a second stage of training will be organized to introduce them to the organization’s waste segregation program, explaining each employee's importance in the process. Lessons learned and positive results will be replicated to other sites. To improve each commercial agency’s compliance with EMS requirements, approximately 63 third-party employees participated in a training course delivered by the Environment team. The course covered the environmental aspects and impacts related to their workplaces, procedures and standards to be followed, and Light’s Environmental Policy.

The Environment Week, coinciding with International Environment Day, mobilizes employees, contractors and the surrounding communities every year. A series of activities are organized to make this week a time of reflection. Below are some of the activities organized for the Environmental Education and Training Week of 2009. Environmental Education and Training Initiatives Activity

Target Public

Activities such as these have helpe raise awareness among Light Distribution of 500 native Atlantic Forest seedlings employees and, in combination wit Launch of online course on current themes: Climate change, Employees and service other consumption reduction conscious consumption, biodiversity, conservation of natural providers projects, including the installation o resources, waste management, etc. pressure reducing valves and Seminars on wildlife trafficking delivered by IBAMA automatic taps, have helped reduce Seminars/performances on the importance of preserving the Rio water consumption at the Paraíba do Sul river Public school students in workplace. In 2009, however, due Visit to the seedling nursery of Light’s degraded area recovery Piraí/RJ to major improvement projects program (PRAD) such as the floor repairs, Training of 25 new internal EMS auditors to improve the System construction of the gym and the review process Negrão de Lima Plaza (Praça das Internal Environmental Energias) generated a 7% increase Management System in water consumption [EN8]. The Course on interpreting ISO 14001 for new internal audits Monitors volume of water (sanitary and Seminar on Laws and Regulations, the Permitting Process and Substation and distribution industrial effluents) discarded by Environmental Crimes, delivered by expert lawyers line construction, operation Light is insignificant as its only and maintenance source is administrative activities. professionals [EN21][EN25]

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Water consumption at Light facilities. Total water withdrawal by source [EN8] Total water consumption (m3 per day)

2007 733

2008 629

2009 671

New energy sources Light SESA, as an electricity distributor, purchases electricity through auctions in the Regulated Contracting Environment (ACR). Since 70% of Brazil’s electricity is produced by hydroelectric plants, an Alternative Electric Energy Source Incentive Program (Proinfa) was instituted by Decree 5025/2004 with the objective of increasing the amount of electricity produced from diversified sources such as wind power, biomass and small hydroelectric plants (SHP) within the National Grid (Sistema Elétrico Interligado Nacional - SIN). The aim is to diversify Brazil's energy base to increase supply assurance and utilize regional and local potential Electricity purchased by Light SESA, broken down by primary source of energy [EU10] Source

Type of Plant/Contract Hydroelectric Power Plant Hydroelectric Thermal Power Plant Fossil fuels SHP Proinfa Wind power Biomass Total

2007 MWh 20.145.549 6.351.000 80.258 57.937 26.718.869

% 75,4 23,8 0,3 0,2 0,3 100

2008 MWh 18.105.083 6.546.283 123.219 88.950 128.851 24.992.385

% 72,4 26,2 0,5 0,4 0,5 100

2009 MWh 18.732.022 6.892.918 245.115 102.062 133.567 26.105.684

% 71,8 26,4 0,9 0,4 0,5 100

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Investing in people [Medium materiality/impact issue 14: The challenge of securing skilled labor]

A staff of professionals that mirrors the diversity of the communities we are present in is important to achieve better results. In 2009 the School of Electricians recently created by the Light Academy trained the first three women electricians to join our staff. We believe our future is intimately linked to the qualification and commitment of our employees. To ensure they are prepared to meet the challenges of a constantly changing society, we invest in training and development programs aligned with our values and needs.

The three recently hired electricians are now part of a qualified and closely integrated team of professionals that have earned the Company respect and admiration for excellence in service to customers and the community. That is why our Recruitment, Selection and Training Policy is given such importance and dedication. Investing in a consistent selection process and qualified labor is a way of meeting current and future needs – ours and of our field service providers – and promoting organizational renewal. Recruitment & Selection Our recruitment process is based on a position structure and aided by an information system for managing hires, transfers and promotions.

External Recruitment – Light’s recruitment and selection processes are focused on our franchise area, but open to candidates of all origins. The specific experience, competencies and business knowledge needed for executive and managerial positions may require us to extend the scope of our search to other regions. [EC7] Internal Recruitment – Selecting personnel from or own staff is a practice we encourage. In 2009, 263 internal promotion opportunities were used (representing 56.44% of the total number of vacancies filled), including 21 managerial vacancies. Women filled 26% of the available vacancies.

Light in the Future[EU14]– In addition to meeting the challenges each day brings, a company committed to sustainability needs to think about the future and anticipate the challenges to come. That is what we committed ourselves to do in 2009: despite the world economic crisis, we maintained our investments in developing our people and training young professionals through three initiatives: our Trainee Program, our Internship Program and our School of Electricians. Our capability building efforts are always linked to these initiatives to ensure the availability of adequate, skilled labor. The Light Trainee Program – In addition to stimulating organizational renewal, the program attracts and develops young professionals to work under the supervision of managers in strategic projects, preparing them t meet the future needs of the organization. Oriented to both internal staff and the public in general, the Light Trainee Program is compatible with our defined profile requirements and provides equal opportunities to employees, contractors and external candidates.

In 2009, 27 new talents were recruited to participate in an eight-month training process coordinated by the Light Academy. The training was designed to accelerate the learning curve by providing trainees with business insight, developing their competencies and allowing them to the opportunity to participate in real-life projects. The program’s retention rate in 2009 was 100%, exceeding the target established (80%) and the result for 2008 (86%). Light intends to continue the program in 2010. Light © 2010. All rights reserved.

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• Internship Program – The objectives of this program are to identify, attract and develop young professionals, offering technical/professional training to secondary and higher education students in their respective fields of knowledge. In 2009, 83 highe education and 18 secondary education students participated, or a total of 101 participating interns. Of this total, 18% have joined the company as employees. Interns are invited to join the company when they have completed their studies and vacancies are available.

• School of Electricians – Coordinated by the Light Academy, this program is designed to develop skilled labor to meet our needs and those of companies providing power recovery and (aerial and underground) distribution system maintenance services. Selected young electricians are awarded study grants during the two-month, 300-hour training program. After completing the program, the newly trained professionals can then be hired by us or our service providers. In 2009 two classes of 42 students were created and all were later hired by Light. One of the classes will perform power recovery and aerial system maintenance work and the other will service the underground system. Another two classes of 60 students are being trained for the underground system; the course is scheduled to be completed in March 2010. The number of students Light will hire is still undefined, but those for whom no vacancies are available in the Company will be hired by service providers.

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Light on the leading edge [Medium materiality/impact issue 16: Incentivizing Research & Development and technological innovation] A pioneering spirit is in Light’s DNA and can be clearly seen in the work of the professionals participating in our Research & Development program, in which experience is constantly exchanged among companies, universities, research centers, consultancy firms and across the electric utility sector. From an institutional perspective, the purpose of our R&D program is to transform the knowledge generated by the program into real-life benefits for the company and for society, the primary focus being to improve quality of service. The incentives our R&D program provides to scientific research motivate universities and research centers to broaden their participation and secure an important source of science and technology research funding, critical to supporting their structure and enhancing the training their students receive on subjects related to the R&D projects developed. The return on our investment comes in the form of dissertations, theses and papers. Our Strategic R&D Investment Plan is aligned with international trends in the power sector and our own corporate objectives; its thematic guidelines are convergent with the company's needs and growth targets. Our R&D projects are more than a means of innovation; they provide solutions that directly affect society and the Company when new services are launched or new social/environmental projects are implemented.

Before research results become new projects at Light, they are first filtered through analyses of the risks and feasibility of applying them in the market. The challenge is to innovate with projects that evolve from the state of the art. Projects introduced in the marke can also generate royalties for Light, which have an impact on electricity rates; consumers – the source of funding for the program – are benefited directly by lower electricity bills. Our R&D is now entering a new phase, embracing the entire innovation chain and bringing academia closer to the industry's production processes. Light not only funds academic research, but also drives industrial development by investing in projects that span the entire innovation chain – from applied research through prototypes and pilot runs to market placement. To guide our long-term R&D activities, Light has defined 19 areas of research linked to the themes specified by Aneel, ensuring they are aligned with our strategic objectives. Light's R&D Plan is available for reference on the company website (www.light.com.br) under Research & Development.

Light invested approximately R$ 97 million in R&D from 2000 to 2009, in compliance with the legal requirement to invest 0.2% of our operating revenue in R&D. In 2009, 94 projects were developed and 17 completed, generating technical papers presented in events organized by the Power Sector. Our R&D investment in 2009 was approximately R$ 20 million, twice as much as the legally required annual amount [EU8]. For a notion of what these figures represent compared to other companies, see the table below showing Aneel R&D investments up to the 2006/2007 cycle. R&D investments in the power sector (including Light’s R&D projects)

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Cycle

Total Resources Projects Programs (R$)

1998 1999 13 1999 2000 43 2000 2001 67 2001 2002 72 2002 2003 101 2003 2004 81 2004 2005 96 2005 2006 142 2006 2007 33 Total 648 Source: Aneel

164

439

535 672 602 600 917 314 4.306

Total Light Projects

1.331.213.176

18 22 21 28 38 213

Light Resources (R$) 2.526.000 7.325.000 8.977.000 8.247.000 11.533.000 9.387.000 11.373.202 18.782.739 78.150.941

In 2010, the company will implement an R&D management tool (SAGe) to establish indicators based on regulatory targets and measure how well the program is performing against our regulatory commitments. Below we describe some of vehicles used to communicate the results of our R&D projects. “Saber” Magazine – Launched in 2009, this is our first publication dedicated to presenting the results of our R&D projects, recognizing the work of researchers and highlighting our technology partnerships.

Generating value through innovation – Held in June 2009 under the motto “Investing in Ideas, the Future and You”, this event was organized to present our R&D program to employees, encourage greater participation and create a venue for presenting ideas exchanging knowledge and developing projects, as well to raise awareness of new R&D regulations. The result of this effort was an increased awareness of how R&D can be an opportunity to develop technological solutions and further the professional development of employees. R&D in Numbers [EU8] ●

● ● ●

R$ 97 million invested from 2000-2009, in compliance with regulatory requirements (ANEEL Resolution 300 requires companies to invest 0.2% of Net Operating Revenue) 94 projects developed in 2009 supported by a total investment of R$ 20 million, more than the mandatory annual amount 20 research organizations involved annually in R&D projects 5 external researchers involved in each project Light © 2010. All rights reserved.

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●

60 employees, on average, participating in each annual program

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Growing with Brazil [Medium materiality/impact issue 19: Competitive position in an electric utility sector growth scenario]

Now that the turbulence caused by the rationing crisis (2001/2002) and excessive indebtedness as a result of currency devaluation (2002/2003) has passed, Brazilian utilities have begun to strengthen and prepare themselves for a new phase: gains in efficiency and scale. Projections for the electric utility sector in Brazil indicate that the number of companies will decrease over the next few years, giving way to conglomerates operating in all segments of the industry. Not only will this produce gains of synergy and scale, but it will also reduce risk through diversification. The quickest companies to accomplish this solidification process will lead the next phase: consolidation. Light is fully prepared to engage in the acquisition process, be it in the distribution, generation, transmission or services market. As an example, there are plans to capture new renewable source generation projects (wind farms, SHPs, hydroelectric plants and biomass) to increase our installed capacity by 50% in two years. In the area of distribution, we will be alert to market developments and will analyze and participate in acquisitions of companies and/or distribution divisions that have synergies and potential to add value to the company, in order to expand our distribution market. The current challenge is to have the agility and enterprising mentality needed to compete and win bids in the consolidation process and seize the opportunities presenting themselves in the market, driven by the performance of the Brazilian economy. The company is participating intensively in a number of strategic planning forums in the power sector, and working with the executive and legislative branches of federal, state and municipal governments to define objectives and goals and formulate studies and proposals for infrastructure development. Also warranting note is the emphasis the company gives to ensuring the participation of a broad range of stakeholders in these processes, to ensure that their concerns are considered and that the solutions satisfy the interests of all parties Our proposals are formulated based on the need to satisfy the population’s energy requirements and on the principles of sustainability [EU19] .

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Commitment to sustainability [Medium materiality/impact issue 20: Commitment to sustainability]

Sustainability is incorporated in Light’s mission, demonstrating the company’s commitment to best practices of social/environmental responsibility and corporate sustainability, based on the triple bottom line concept: people, planet, profit.

Light has been a signatory of the Global Compact [4.12] since 2007 and has a commitment to report to the United Nations on concrete examples of progress or lessons learned in implementing the principles of the Pact, and to disseminate them to employees, shareholders, customers and suppliers. The company invests in the transparency of our activities, communication with stakeholders and engagement of employees. Raising employee awareness of all the impacts generated by our activities and the contributions they can make to improve sustainability is one of the main challenges Light faces. The online courses on the theme of sustainability to be delivered in 2010 to employees and managers will contribute to this awareness process.

A Social Responsibility Agreement was signed with the trade unions representing Light’s employees in 2004, and ratified in 2009. In 2009 Light conducted a racial and gender equality survey among employees. Light also maintains a set of policies that govern an corroborate our sustainability actions across our entire scope of activity, in line with our mission, as follows: ●

●

Corporate Social Policy of Light Group, created in 2007, with guidelines for alignment with the principles of the UN global compact, exercise of citizenship and ethics, support for the development of communities surrounding Light’s operations, development of solutions to urban issues that hamper the provision of services, and support to public initiatives. Workforce diversity policy, which addressed the inclusion of people with disabilities into Light’s staff and a commitment to pursue gender equality in our staff. Code of Ethics, formalized in 2003 and an integral part of employment contracts and agreements with service providers and suppliers Corporate Governance Manual, which sets down the principles applied in managing the company and ensures good corporate governance practices are employed Light Environmental Policy, addressing the preservation and conservation of the environment

In 2010 we intend to further develop our environmental strategy; expand our institutional activities to establish a yet closer relationship with employees, franchise holders and the sector in general; incentivize safe work practices; and participate in discussions toward regulatory improvements. Good Sustainability Practices With the support of the Brazilian Foundation for Sustainable Development (FBDS) and our Senior Management, in 2007 Light created a multi-disciplinary Work Group for Sustainability, which identified all the company's sustainability-related practices and prepared an action plan to fill in the identified gaps. This team became permanently responsible for monitoring these initiatives and consequently for improving the company's practices. Light © 2010. All rights reserved.

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The survey conducted by FBDS found that since our activities are intrinsically related to the development of our franchise area, we already have a number of best practices oriented to social, environmental and economic issues, though no specific sustainability management practices were identified. The findings of the survey were further confirmed by Light’s becoming a constituent of BM&FBovespa’s Corporate Sustainability Index in 2007.

As the first major step toward establishing sustainability management, Light chose to prepare a Sustainability Report based on the Global Reporting Initiative Guidelines (GRI G3), in replacement of our traditional Annual Report. Our first sustainability report, published in 2008 for financial year 2007, presented 65 performance indicators and was self-declared Level B (see the history of Light Sustainability Reports). Our sustainability report in 2009 achieved GRI G3 Application Level A by incorporating a materiality analysis and presenting all indicators considered essential to the company and stakeholders. Light also included the IBASE Social Audit and ETHOS Social Responsibility Checklist. In addition to these, the company publishes an Aneel-regulated Social/Environmental Responsibility report in two versions: one specifically for Light SESA – Light Serviços de Eletricidade S.A. and the other for Light Energia S.A.

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Electricity – a token of citizenship [SO1] [Medium materiality/impact issue 22: Closer relations with the community] The Efficient Community Project (Comunidade Eficiente), created within the Energy Efficiency Program (Programa de Eficiência Energética - PEE) and implemented in accordance with Aneel requirements, has benefited 286,000 customers in low income and socially vulnerable communities since its implementation in 2002. According to the 2000 Census, Rio de Janeiro has approximately 1,000 slums with approximately 1,000 inhabitants each. Following pacification by State law enforcers, Light conducts a detailed survey that includes topography, customer profile, losses, default, infrastructure investment requirements, etc. The project has three components: education (which includes the door-to-door efficient consumption campaigns described in the section on Education), equipment replacement and technical regularization. In our equipment replacement initiative, incandescent lamps are replaced with florescent lamps; old refrigerators are replaced with more efficient models; risky wiring is replaced, which includes installing new outlets, switches and breakers manufactured to NBR-12; and electric shower heads in households undergoing refurbishment are replaced with newer, more efficient models. Old materials and CFC gas are disposed of following environmental requirements. Rebuilding electrical installations is an important part of the equipment donation component, as it significantly reduces the risk of short circuits and fire. This provides greater safety to each family and the overall community, as well as savings on each family's electricity bill.

The third component - technical and commercial regularization - which focuses on reducing commercial losses, includes rebuilding electrical installations and distribution systems, installing service entrances free of cost and urbanization activities, such as our recent initiative to install street nameplates for easier identification of each location. These upgrades are provided free of cost to customers, who are benefited by less electricity losses from inefficient household appliances. Another benefit of becoming legally connected is that customers receive electricity bills in their name, enabling them to apply for loans from banks or retailers. In 2009 we changed our community outreach strategy to invest in greater quality rather than quantity, sometimes paying multiple visits to a single customer. We have now adopted a task force approach, where multiple community agents work as a group in a single location rather than spreading out to cover multiple locations. While reducing the number of serviced communities (see schedule below), this approach has enabled us to cover all the needs of a single location, working alongside the Pacification Police Units (see the Santa Marta case). Energy efficiency figures 2007 2008 Community service 85 57 Customers visited in education campaigns 85,000 46,729 Free service entrance installations 9,760 13,000 Donated florescent lamps 94,400 123,000 Donated efficient refrigerators 600 Light © 2010. All rights reserved.

2009 43 20,354 14,338 30,451 3,539 Pag.:147

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Rebuilt electrical installations Energy efficiency events Workers hired from communities

257 57 76

1,308 63 46

1,340 40 50

Note that because the sixth phase of the Efficient Community project began only in October 2009, the figures presented in this report do not adequately reflect the full magnitude of the investment. By the end of this phase, in October 2010, we will have distributed another 23,000 refrigerators (an average of 2,500 per month); rebuilt the electrical installations of 10 community institutions; replaced another 300,000 lamps; and legalized another 31,000 clandestine connections. Efficient Community Project – 6th Phase numbers to date Initiated in October 2009. ● ●

● ● ● ●

● ● ●

● ● ● ● ● ● ● ● ● ● ● ●

3,539 refrigerators with “A” efficiency ratings (15.8kWh/month) donated to customers in 2009. New refrigerators provide an average 67% reduction in energy consumption. Old refrigerators, often longer than 10 years in use, consume much more electricity than the more efficient models. Donated refrigerators reduce consumption by 67% on average, allowing customers to save more than R$ 120 per year on their electricity bills. The donated refrigerators represent a benefit of approximately R$ 564 thousand to the communities. 30,451 incandescent bulbs replaced with compact fluorescent lamps in community residences. Light bulb replacement represented a benefit of approximately R$ 970 thousand to the communities. The replaced light bulbs are mostly 60W and 100W (an average of 70W each). On average, three to six lamps were replaced per household. This alone, according to Aneel recommendations, reduces electricity consumption significantly. Electrical installations were rebuilt in 1,336 homes and 4 community institutions found to be at risk. 20,629 clandestine connections legalized. 1,600 class hours of training through Educational Games, consumption simulators and specific energy efficiency teaching methods, out of a total 3,600 hours planned for this phase. 551 ‘knowledge multipliers’ trained on energy efficiency games, out of a total of 7,000 planned for this phase. 1,076 visits to our Consumption Management webpage, 308 households given direction on connection legalization and/or income source opportunities; 463 attendees at our connection legalization and income opportunity workshops and seminars; 491 referrals to employment opportunities through the Connection Project; 6 large project launch events in different communities. Another 34 Project launches will take place in October 2010; 14.602 households reached by the 6 energy efficiency events; mobilized leadership and established street names and property boundaries in 27 areas ; 20,354 door-to-door educational visits 1,239 local community service sessions (10 sessions per day) 17 customers per session, on average 2,200 Community Communication posters and 51 banners.

Other highlights include the urban, social, institutional and cultural activities conducted by the Light Institute, another large investmen intended to draw us closer to our customers (more in Light Institute). committed to Rio de Janeiro.

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Solidity in the market [Medium materiality/impact issue 24: Light’s Image] Light has a solid image, symbolized by a logo dating back to 1928 which, after four modifications over the years, still retains a strong and enviable appeal in Rio Janeiro and even in São Paulo, though the company has had no presence in the latter state for some time.

The market's respect for the Light brand grew stronger under the management of Rio Minas Energia Participações (RME) and with the implementation of a Transformation Plan in 2006, which successfully improved the company’s economic sustainability. In December 2009, CEMIG announced an agreement to purchase the shares in Light S.A. held by Andrade Gutierrez Concessões S.A. and Fundo de Investimento em Participações PCP, the controlling shareholder of Equatorial Energia. The new share structure placed Light and Cemig among the largest electric utilities in the world, with over 11 million customers.

Light recognizes the need to improve customers’ perception of the relevance of the Company’s activities in its franchise area, especially in Rio de Janeiro and its surroundings. Improving our customer relations is part of a set of initiatives aimed at enhancing client focus, to be initiated in 2010. Our goal is to bring customers closer to the organization, include their wants and concerns in ou Strategic Plan for 2010-2013 and build a relationship of trust. First among our efforts to draw closer to customers was our Sustainability Report, which is based on the main issues raised in a stakeholder engagement process. Light seeks to combine excellence in service with best sustainability practices, which translate into better services and a relationship of trust and partnership with customers.

To provide excellence in service to customers, Light not only continually improves its services, but also invests in social initiatives that bring the company closer to stakeholders and create a positive image of the Company. We find an example of this in the distric of Madureira, where, on a 112 thousand square-meter plot of land donated by Light, a large recreation center – the largest in the North Zone of Rio Janeiro – is being built. This is our way of giving back to the community: transforming a privileged area of the district into a recreational facility and, at the same time, preventing people from living near the electrical hazards posed by power lines. This project is being developed in partnership with the local government, which will pay the cost of upgrading 2.77 km of power lines to the new spacer cable system in exchange for the donated real estate.

‘Parque Madureira' - including its cycling tracks, lagoons, landscaping, kiosks and recreation areas for children and adults - will be built at the expense of the local government and State Government. In 2011, when the park is inaugurated, local residents will have a different perception of Light: that of a company concerned with providing quality of life to the population. The issue raised in the stakeholder engagement process regarding the potential bad impression stakeholders may have of the company because of its association with Via Light – a roadway that bears this name in reference to the transmission towers nearby, but which is not actually managed by Light - will have been left behind, along with the outage episodes in Leblon, Ipanema, Lagoa and other districts, which generated an image crisis near the end of 2009. During this period, company received over 700 inquiries from the press. Still, the volume of positive articles from January to November 2009, estimated to be worth an advertising equivalent of R$ 80 million, outweighed the advertising equivalent value of negative articles – R$ 53 million. The positive results cannot, however, be thought to have displaced the negative impressions from stakeholders minds, nor do they exempt Light from its commitment to improving its services to the population in general. Light © 2010. All rights reserved.

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Searching for a better community agent [Low priority/impact items 21: Partnership between Light and Community Associations to train community agents] Since 2002 Light has been involved in the ongoing development of a project to use community agents to push through its educational initiatives with the objective of further strengthening its links with the communities in Rio de Janeiro. In order to avoid conflict and pressure, however, Light’s field operatives, all of whom are experienced in community activities, are not deployed in their own communities but rather in those with similar characteristics.

These individuals are trained to deal with, and give advice on, matters such as energy efficiency, the composition of electricity rates, the precautions to be taken in relation to the electricity grid (both on a daily basis or during construction or renovation) as well as conducting domestic electricity consumption simulations and other activities. Light’s policy, developed in five different stages, is to ensure the visibility and agility of this initiative by maintaining a suitably qualified group of agents in situ to work with their chosen communities.

On these occasions, the Company promotes the rational and safe use of electricity. As well as giving advice on the efficient use of electricity, the community agent also explains the importance of buying electrical appliances carrying the Procel energy saving seal o approval, the importance of using the refrigerator correctly (not placing hot food or liquids in uncovered containers in the refrigerato and ensuring that the door seal is in good condition), the importance of using the shower with the shower head on the “summer” setting and of correctly setting the operating time of the discharge valves on toilet flushing systems (given that greater water consumption equates to greater electricity consumption) and many other useful pieces of advice.

The initial stage of these community initiatives consists of a personal and institutional introduction, presentation of the Efficient Community Project and the registration of its inhabitants. This is followed by advice on the use of electricity, registration of applications for connection and the publicizing of other events promoted by Light. The objective is to ensure that both consumer an the company reap the benefits of correct and responsible use of electricity. The methodology employed in the training program is defined by Light and the training itself provided by the service provider entrusted with recruiting the community agents. In 2009, the four-day training course sought to cover subject matter which is later replicated by the agents in the field, through home visits, community clinics, events, lectures, etc.

The first day was given over to settling in the teams and the dynamics of training. On the second day the agents were introduced to the activity itself (the focus of the task, the clients, the principles adopted when dealing with clients and the showing of an institutiona video). This was followed by a module on the Company’s history and the Energy Efficiency Programs, a breakdown of the project’s activities (with timetables and targets) and two modules dealing specifically with electricity: the first on generation/transmission/distribution and the second on use, efficiency and safety. There was also a detailed presentation of all relevant didactic materials, manuals and folders, with the relevant explanations and the solution of any questions arising from them. On the third day, the training concentrated on the services to be provided within the communities, the paperwork and forms to be completed in relation to each activity and a general overview of the services provided. The fourth day was given over to practical training in the agent’s specific activities within the communities, with practical simulations of normal workday situations.

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Light has successfully trained 291 agents since the start of the project. Fifty community agents were working on the Efficient Community Program in 2009 and the same team will be retained until the conclusion of the sixth stage in October 2010.

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Precautions when sharing infrastructure [Low priority/impact items 23: Shared use of poles by public service concession holders]

The sharing of infrastructure by the electricity, telecommunications and oil sectors is governed by Aneel, Anatel and ANP Joint Resolution nº 001 of 24/11/99. In compliance with this resolution and its own Plan of Occupation, Light has placed its infrastructure at the disposal of the telecommunications and internet service providers.

In order to bring these sharing agreements to fruition, Light initially takes steps to ensure that all the basic legal requirements permitting these companies to provide this type of service have been complied with (articles of association, homologation with Anee and others). Two essential criteria then follow: the technical viability of the proposed projects which is assessed by suitably qualified Light personnel and the availability of infrastructure. Given that the sharing of infrastructure involves considerable risk, the analysis of projects submitted should also involve checks on the technical responsibility of the companies concerned. No intervention within the grid may be carried out without Light’s consent and the companies should be capable of adopting the specific procedures as stipulated by Light for that purpose.

Light shall stay in constant touch with the companies sharing its infrastructure and shall keep them fully informed of any services that need to be carried out on the electricity distribution grid or of any requirement to comply with government requirements or requests Various initiatives intended to improve control over shared infrastructure have been in place since mid-2009, when re-registration o all the low-voltage grid’s clients began. This project, which is expected to run for three years, will provide field data on the corporate system based on geographical reference and will contribute to improvements in its management process.

Light currently shares its infrastructure with 30 companies that provide the following services: telecommunications; multimedia communications (SCM); specialized grid and circuit services; cable TV; audio, video and data transmission services; CCTV Traffic Monitoring Systems. Five public service entities also use Light’s infrastructure to support their operations.

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Training initiatives for the community [Low priority/impact items 27: Training of hired labor] Light’s commitment to provide vocational training within the communities is considered to be particularly important by all the interested parties and merits a separate chapter in this report (see Education for Responsible Use and Investing in People). An example of this is its Electricians’ School, which provides some 300 hours of training intended to produce qualified operatives to supply the demand for electricians in the energy recovery field and throughout both the Company’s and field services providers’ overhead and underground grids. Energy Efficiency Lectures and Workshops Light also holds workshops and gives lectures on energy efficiency at public institutions, schools, community courses, colleges and environmental organizations. The number of such events is defined according to the number of households in each community, with base parameter of one event per 600 households.

As many as five teachers from ten selected schools were trained on four-hour courses to teach subjects such as the growing scarcit of natural resources and the need for responsible consumer practices; the benefits of the Social Rate; energy conservation methods the importance of suitably dimensioned and maintained electrical installations; the suitable use of domestic electrical appliances and energy use and its conservation.

Light also produces educational stickers and fridge magnets to push home its energy efficiency message. It also uses the local media for this purpose, with educational spots broadcast from vehicles and Radio Poste. Banners and posters are also placed at strategic locations.

Community clinics are considered another educational tool at the project’s disposal. These are where consumers can obtain information and services, such as updating their client details, opening or amending accounts, and ascertaining technical and commercial requirements. Light can also use these clinics to conduct surveys on technical and commercial demand from which it ca identify clients eligible for standard donations of equipment and the installation of meters. Digital Education Digital education was another didactic tool used by Light to establish new consumer habits and change the prevailing informal mindset by providing bona-fide connections to the communities served.

Training exercises on Energy Efficiency using educational multimedia games help instructors who use information and communicatio technology to put across their message. Through partnerships, the Efficient Community project provides a center with IT resources and specialized methodology guidelines for consumption management purposes. Light’s target is to train 11,664 students through the use of educational games and multimedia and to have held 20 events in this field by October 2010.

Practical activities, such as lectures, clinics and workshops using digital tools to promote spaces dedicated to education and discussion are also considered in this part of the project. The project also considers debate on the culture of formalizing commercia work and service provision relations in the communities served in order to ensure their sustainability.

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Trimming of trees other than those interfering with grid infrastructure [Low priority/impact items 29: Trimming of trees other than those interfering with grid infrastructure]

In general, the area covered by Light’s concession contains a large number of trees. It is not uncommon for some of its 52,000 + kilometers of overhead lines to be occasionally affected by fallen branches, particularly during periods of strong wind and heavy rain. In order to guarantee the quality of the service provided, Light regularly carries out maintenance work on the grid, which often includes the pruning of trees that might otherwise hinder the performance of its equipment, having obtained consent to do so from the relevant environmental authorities. Light complies strictly with the relevant environmental legislation when carrying out this activity as the pruning of trees is usually the responsibility of local authorities in most of the municipalities within its concession area. In Rio de Janeiro, this task is the responsibility of the Parks and Gardens Foundation and Light’s involvement is restricted to the trimming of trees that affect its grid. Nevertheless, the Company maintains close ties with the public agencies responsible for these activities and works in partnership with them whenever requested to do so in order to assist in the maintenance of green areas. In any other circumstances the Company is forbidden by law to prune trees that don’t pose a threat to its overhead grid.

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Social and environmental management incentives [ Low priority/impact items 13: Promotion of social and environmental management by suppliers] Light has adopted a regular inspection and appraisal process which enables it to monitor its suppliers and ensure that they comply with the social and environmental practices it has adopted, as well as determining their ability to supply the goods required. In 2009 two hundred and ninety visits were made to suppliers’ premises, apart from inspections on products received and other quality control activities. Twenty assessments of a social and environmental nature were carried out, five more than the preceding year. This figure does not include the scrutiny of Light’s material suppliers and service providers to determine their ability to carry out their contracted activities. Collectively, these assessments provide a comprehensive and realistic overview of the Company’s supply base. These assessments, which on average affect 95% of Light’s suppliers, apply to 100% in the case of new installations or very old industrial appraisals and to existing suppliers wishing to expand their supply lines. This also applies to suppliers included in the Guaranteed Quality Program.

In the case of inspections of goods received and other such diligence exercises the subjects are not usually given time to prepare as they are notified of the proposed inspection no more than a week in advance – and what is seen is what really takes place. As a result, those suppliers using infant or slave labor and those adopting unacceptable environmental practices are immediately excluded from the Company’s grid of suppliers. Light uses a check-list drawn up in 2007 based upon the report issued by the Ethos Institute, which deals with the following topics: ● ●

●

Company values – Definition, Code of Ethics and its dissemination amongst its employees, service providers and suppliers; Company workforce - Work environment; benefits; teaching company employees new skills for internal relocation; discriminatory practices; facilities for the disabled and those with special needs; free access to representatives of trade unions training; Environment - Selective garbage collection; rational use of paper, electricity and water; suppliers and their sources that comply with these requirements; assessment and control of the impacts of their production and the education of employees and their dependants on environmental practices; Suppliers - Encourage and monitor supplier’s social responsibility initiatives; compliance with legislation and human rights directives; Clients – Respect for the company’s clients and effective communication with them; recording and treatment of clients’ complaints and suggestions to improve the service provided; accuracy, clarity and correction of information contained in material advertising or describing their products; precautions to ensure that their products do not adversely affect the health o their clients; Community - Impacts of the companies’ production, including residues; actions to encourage the social development of the communities in which they are located and voluntary work; Government and Society – Checks to verify participation in management discussion forums; checks on publicizing practices and benchmarking; checks on actions and transparency in political campaigns; checks on employee incentives to monitor government authorities and their efforts to improve public facilities (schools, health centers, etc) in their region. Light © 2010. All rights reserved.

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It should be emphasized that the Superintendence for Purchasing, Logistics and Quality of Suppliers applies the aforementioned criteria to all events, including the Annual Suppliers Meeting at ExpoSupri, when Contracting of Interested Parties and in all Compra-Rio events.

During the monthly meeting with new suppliers (and existing ones wishing to supply new products) at Light’s Purchasing Departmen a presentation is given to stress the need to comply with the Company’s social and environmental policies, including its Code of Ethics and its commitment to the environment, society and sustainability.

In the case of its service providers, the assessment procedure also includes those companies providing services to the grid as they account for the greatest volume of services provided to Light. Checks are also conducted as a result of requests from its clients, such as those relating to recycling companies, logistics providers, printers (billing) and vehicle recovery companies, amongst others.

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Financial soundness [Low priority/impact items 3: Necessity for secure financing] The close of 2009 saw Light in a comfortable cash position of approximately R$ 828 million, due to improved operational and financing results, which increased by R$ 40 million and R$ 20 million respectively when compared with the 2008 figures. Having considered the cash generation potential and the projected 2010 investment program there is no current requirement to seek any additional resources. Light’s current debt is below the limits agreed with the financial institutions and the market. Even so, the Company has the option to raise further funds on the market should any new investment proposals be forthcoming in the coming months. Having considered the cash generation potential and the projected 2010 investment program there is no current requirement to seek any additional resources. Light’s current debt is below the limits agreed with the financial institutions and the market. Even so, the Company has the option to raise further funds on the market should any new investment proposals be forthcoming in the coming months. Light’s gross debt on December 31 – 2009 stood at R$ 2,465.5 million, a 13.6% increase on the 2008 figure equivalent to a R$ 295.1 million variation. This increase can be attributed to the sixth issue of debentures and Light SESA’s R$ 145 million outlay to finance capital expenses in 2010-2011 with BNDES in December 2009. The Company’s net debt of R$ 1,637.1 million increased by 3.6% on the 2008 figure, primarily due to fund generation activities that took place in 2009. The net debt/EBITDA ratio stood at 1.4x in December 2009. Debt levels continue comfortable, with an average term to maturity of 3.6 years. The average cost of its debt in Brazilian R$ stood at 9.8% per annum, while the cost of the foreign exchange debt amounted to US$ + 5.3% per annum. Foreign exchange only accounted for 4.1% of the total debt in 2009 and when the extent of its hedge operations is considered the exposure to foreign exchange risks is reduced to 2.5% of the total. The hedge policy consists of protecting the outstanding cash outflow in the next 24 months (principal and interest) by a cashless swap, with first-rate financial institutions.

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Weights and Measures [Low priority/impact items 7: Limits imposed by ANEEL] The energy rate consists of two portions, “A” and “B”. Portion “A” relates to electricity generating and transmission costs and payment of charges incurred. Portion “B” relates to operational costs involving the provision of distribution services and the remuneration of investments. Costs relating to Portion A and their associated taxes are passed on directly to the consumer and the distributor has no influence over these items. Two mechanisms exist to readjust electricity rates: the Annual Readjustment and the Periodic Rate Review. In Light’s case, the Periodic Rate Review takes place every five years, at which time the value of the distribution concession holder’s Portion B is established. The efficient operational costs associated with the distribution service, the remuneration of prudent investments in the concession holder’s grid and the estimated increase in productivity due to the subsequent growth of its market and customer base (the “X” factor) are calculated.

In the case of the annual readjustments – with the sole exception of those that coincide with the five-yearly review – the value of Portion A is calculated using the variation of its components, whereas Portion B is calculated using the difference between the concession holder’s revenue and Portion A, subject to monetary correction and the deduction of the “X” Factor. Consequently, instead of the concession holder’s real costs being passed on to the consumer, only those associated with the efficient management of the energy distribution within the concession area may be billed. The calculation of these charges is based upon the criteria and methodology established by ANEEL and is subject to public consultations and hearings. The actual percentage of each component of Light’s rate, (manageable and non-manageable items) is as follows: Purchase of electricity ........................ 34.63% Transmission ................................... 5.45% Charges ........................................ 8.52% Taxes ........................................ 30.87% (Light has no control over this item) Distribution (Parcel B) ................. 20.53% (manageable costs) At an annual public meeting on February 02, 2010 ANEEL approved the amendment to the distribution companies’ concession agreements. This amendment changed the method for calculating the annual rate adjustment, in order to counter sector charges, preventing market variations occurring from February 2010 from generating undue revenue, on occasion for concessionaires, on occasion for consumers. The terms of the addendum shall be applied to the 2010 rate readjustment program.

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Light Esco: an example of energy efficiency [Low priority/impact items 26: Offer and disclosure of services and products portfolio to the market] For the last four years Light Esco, originally a company that provided energy conservation services has also been involved in the free market in an energy commercialization role. In addition to developing pioneering projects in the energy efficiency field, it also sells energy to some of the country’s biggest and most important free consumers, predominantly in the states of Sao Paulo and Rio de Janeiro.

Created in 2000, Light Esco’s corporate mission is to provide energy-related services at national level in two sectors: the energy commercialization sector – where its clients are the free or potentially free consumers, the energy generators and other energy commercialization operations; and energy and infrastructure services whose clients are companies interested in implementing energy efficiency projects to reduce their energy costs or who need to set up the infrastructure to use and manage utilities or to engage in the co-generation of energy. The company has a wide range of expertise in the development, installation, operation and maintenance of efficient utility systems: thermal energy for air-conditioning systems, co-generation of energy, water heating, steam, compressed air, renovation of water cooling plants and others. It is also experienced in spearheading mid to large scale energy efficiency projects for its clients in the public, industrial and commercial sectors.

Light Esco’s experience in commercializing services ranges from the initial economic/financial analysis of the potential benefits of the Free Market and/or the Alternative/Incentivized Source Market through to the commercialization of the end product, as well as the management of energy purchase and distribution system user contracts. The Company is currently engaged in the development of various initiatives intended to bring it even closer to its clients, through its active involvement in various energy-related entities, events and conferences.

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Human rights [Low priority/impact items 8: Human rights] Respect for Human Rights is the core principle upon which Light’s commitment to sustainability is based. As such, it prioritizes the repudiation and opposition to all matters relating to child or slave labor, discrimination in any shape or form and both moral and sexual harassment. A number of corporate instruments ensure that the Company fulfills its commitments in this regard, namely: the Corporate Social Policy, the Social Responsibility Accord, the Code of Ethics and the Diversity Policy.

As part of its commitment to sustainability, the Company regularly promotes Human Rights, not only through the internal communications media but also in the contracts its signs with its employees and other service providers. Complaints of infringement of the Code of Ethics are forwarded to the Ethics Committee for scrutiny (refer to the item “Ethics”). According to checks carried out at the premises of its suppliers, none of Light’s operations are at risk of employing infant and/or forced labor [HR6] and [HR7]. As a result of its open-door policy in relation to its trade union membership, none of Light’s operations pose any significant threat to the right of association and collective negotiation [HR5]. Lastly, as no indigenous settlements exist within its concession area there is no possibility of violating the rights of that section of the community [HR9] . The Ethics Committee has received seven sexual or moral harassment complaints over the past three years: Complaints of Infringements of the Code of Ethics

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Nature of complaint Moral harassment Sexual harassment

2007 2 -

2008 2 1

2009 2 -

In all the above cases the Committee investigated the facts and interacted with the complainant throughout proceedings until their final solution. In addition to the above specific complaints forwarded to the Ethics Committee, Light was also party to legal proceedings on six occasions answering allegations of moral harassment between 2007 and 2009 (three in 2007, two in 2008 and one in 2009). Two of the cases resulted in verdicts being handed down against the company and appeals have been lodged. The 2009 case was resolved by mutual agreement between the parties involved and currently awaits filing [HR4]. Light’s objective is to ensure that no infractions occur and to this end it constantly promotes its Code of Ethics, corporate values and its Program for the Reinforcement of Ethical Education.

On the issue of training its security personnel on matters relating to Human Rights, all of Light’s security operations were outsourced in 2009 and as such its own personnel are only responsible for overseeing the services provided by the contracted parties. Under the terms of the agreement with the security service providers, Light stipulates that all security personnel attend regular refresher courses, which should include instruction on the fundaments of human rights and all activities inherent to their duties in compliance with its Code of Ethics and all legal requirements [HR8].

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Earnings report

In a year when the captive sector grew 4.3%, driven by the residential and commercial segments, Light invested over half a billion Brazilian reais in improvements primarily directed towards making the electric system more reliable. Net income amounted to R$ 605 million in 2009 and EBITDA R$ 1.188 billion. Net revenue in the period amounted to R$ 5.4323 billion, up by 0.8% over 2008. Consolidated net revenue The growth in consolidated net revenue – R$ 5.4323 billion, up by 0.8% over 2008 – was primarily due to the performance of the captive sector, especially the residential segment, whose revenue rose by 3.3%. Significant growth was also achieved by the energy trading and services segment, which rose by 17.7% over 2008. Net revenue by segment is shown in the chart below.

Distribution Net distribution revenue amounted to R$ 5.1333 billion in 2009, 0.6% more than in 2008. The positive performance of the captive sector in the year, which contributes significantly to this figure, more than made up for the contraction in grid usage revenue. This contraction was due to the downturn in energy demand from free consumers, as a result of the effects of the economic crisis on thei business.

We point out that as the sales ratified by Aneel under its rate review process did not include energy and demand from the companies CSN, Valesul and CSA, due to their scheduled switch over to the high-voltage national grid, any change in the sales to these consumers has no effect on the distribution company’s net revenue. The downturn in consumption and demand by CSN and Valesul in relation to the amount projected for this year, was totally offset by the formation of a regulatory asset, distributed amongs other revenue accounts. Generation Net revenue in 2009 amounted to R$ 294.9 million, 3.2% less than in 2008. The revenue decrease in the year is primarily due to the lower prices in the spot market throughout 2009, as compared to the previous year. Sales Net revenue from sales amounted to R$ 92.3 million in the year, 17.7% more than in 2008, which demonstrates the progressive growth of this segment of the Company. The graph below presents the growth in total net revenue and net revenue by segment. Net revenue by segment – Captive R$ MM - :

Consolidated operating costs and expenses Operating costs and expenses rose by 8.4% in 2009, chiefly due to the costs and expenses of the distribution company, which rose by 7.8% over the previous year.

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In 2009 the stock option plan generated an expense of R$ 51.7 million in the personnel expenses of Light S.A. The executives wer entitled to 6,571,846 shares of the total options awarded. Options had been exercised by the end of 2009 equal to the purchase of 4,846,500 shares. The remainder was exercised in January 2010. The graph below denotes the performance of operational costs and expenses. Distribution In 2009 the energy distribution costs and expenses rose by 7.8% over 2008, as per the table below. This increase was primarily due to the 7.2% increase in uncontrollable costs and expenses. The 9.7% increase in controllable costs and expenses was chiefly due to the reversal of the provision for R$ 133.8 million in 2008. Uncontrollable costs and expenses Uncontrollable costs and expenses amounted to R$ 3.3028 billion in 2009, up by 7.2% over 2008, mainly due to readjustments of the existing energy acquisition contracts coupled with high energy purchases in the year.

Expenses incurred on energy purchases rose by 13.9%, chiefly due to the following factors: (i) readjustment of approximately 10% in the dollar rates charged by Itaipu in January 2009 (ii) appreciation of the dollar of 8.6%, based on the average end-of-month exchange rates in 2008 and 2009 (iii) increase of 18.3% in the average price charged by UTE Norte Fluminense (Norte Flu) due to the appreciation of the US dollar (iv) adjustment to the auction contracts of approximately 6.4% in November 2008, driven by inflation of 6.0% in the period (IPCA for November 2007 to October 2008) and by the inflow of new products from the first and second thermal (T-15) and hydroelectric (H-30) energy auction (v) the acquisition of energy at the 2009 adjustment auction (Marc to December 2009), at a cost of R$ 145.8/MWh in the year and (vi) the higher energy purchases. The average cost of purchased energy not including spot purchases was 10.7% higher than in 2008: R$ 106.8/MWh in 2009, compared to an average total energy purchase cost of R$ 96.5/MWh in 2008. Charges rose 104% in 2009 over 2008 (not including the effects of the CVA charges), principally due to the output of thermal power plants in 2008, resulting in increases in the system service charges (ESS) paid by distribution companies. The graph below shows the change in the purchased energy.

Controllable costs and expenses Controllable operating costs and expenses amounted to R$ 1.0901 billion in 2009. The 9.7% growth over 2008 was essentially du to the reversal of Braslight in 2008. If the non-recurrent effect of this reversal of the provision for actual losses were disregarded, the controllable costs and expenses would have fallen by 3.3% in 2009 over the previous year.

Personnel, material, services and other costs and expenses stood at R$ 504.0 million in the year, unchanged over 2008. This result was primarily due to the 7.0% cut in personnel costs and expenses, or R$ 13.3 million, brought about by the Company’s sound operational management; the recognition of R$ 6.7 million resulting from the lawsuit won by Light regarding the collection of undue social contributions to INCRA was also a contributing factor. The growth in the item “other” is primarily due to: (i) the agreement made with the local government of Rio de Janeiro, by which Light expensed inspection fines of R$ 5.3 million, which were offset against receivables of R$ 16.1 million and (ii) by the conduct commitment (TAC) relating to the nonperformance of quality indicators in 2007, worth R$ 4.3 million.

The provisions made in the year (allowance for doubtful accounts, provision for contingencies and others) amounted to R$ 306.0 million. The 52.2% increase over 2008 was mostly due to the reversal in 2008 of a provision made by Light amounting to R$ 133.8

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million. This provision had been made for the actual losses of the Braslight pension fund, which the Company sponsors. If this nonrecurrent effect were disregarded, the provisions made in 2009 would have fallen by 8.6% over the previous year. The allowance for doubtful accounts in 2009 totaled R$ 246.0 million. The amount is equal to 3.2% of the gross energy supply revenue, as compared to 3.3% in 2008 (R$ 235.8 million). Generation Light Energia recorded total costs and expenses of R$ 116.3 million in 2009, 5.3% less than in 2008. This reduction is largely due to the 17.1% reduction in the CUSD/CUST item, also related to the ending of the charge for using the high-voltage national grid.

Costs and expenses break down as follows in 2009: CUSD/CUST, 30.6%; personnel, 14.6%; outsourced services and materials, 11.7%; others and depreciation, 43.2%. The personnel, material, services and other costs was R$ 12.02/MWh in 2009, compared with the figure of R$ 11.72/MWh in 2008. Trade and services Costs and expenses amounted to R$ 71.4 million in the year. The 4.3% increase over the previous year was largely due to the increase in materials and services expenses of 98.7%, resulting from the delivery of more services. EBITDA The EBITDA in 2009 of R$ 1.188 billion contracted by 21.0% over the previous year. If the non-recurrent effects that diminished the EBITDA in 2008 were disregarded, the 2009 EBITDA would have fallen by 5.9% over 2008. This reduction is partly due to the reduction in the distribution company’s EBITDA, as a result of the rate review process in November 2008. The EBITDA margin in the year stood at 21.9%. The distribution segment’s EBITDA accounted for 82.0% of the consolidated total in the year, while the generation and trading segments accounted for 16.3% and 1.7% respectively (see the graph below presenting the change in EBITDA since 2006).

Distribution The EBITDA was R$ 1.0204 billion in 2009, down by 22.3% over 2008. The EBITDA margin was 21.9%. If the non-recurrent effects in 2008 were disregarded, the EBITDA would be 4.2% lower than in 2008, partly explicable by the decrease in the regulatory EBITDA caused by the latest rate review, ratified in November 2008, which determined the economies of scale made during cycle one (2003 through 2008) be credited in their entirety to consumers. Generation The generation EBITDA in 2009 of R$ 202.8 million contracted by 1.8% over 2008. This result was primarily due to the energy allocation strategies implemented in the past two years, which led to a decrease in net generation revenue. While the volume was more concentrated at the start of the year in 2008 – when spot prices were as high as R$ 500/MWh – there was no noticeable concentration in any period of 2009. Furthermore, prices were not as high, due to the availability of water in reservoirs and the economic crisis which put the brakes on energy consumption. The EBITDA margin in the year stood at 68.8%. Sales The EBITDA was R$ 21.5 million in 2009, up by 104.3% over 2008. This increase is explained by the operational performance of energy and services sales. The EBITDA margin in the period stood at 23.3%. The graph below presents EBITDA by activity.

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Consolidated financial income A financial loss was made of R$ 70.7 million in 2009, as compared to financial revenue of R$ 94.4 million the previous year. The difference was primarily due to the nonrecurrent effect of the reversal of the provision for the broadening of the PIS/COFINS calculation base, recorded at R$ 432.4 million, in 2008. If this reversal were disregarded, the financial income in 2009 would have been 79.1% greater than in 2008.

The financial revenue in the year of R$ 201.9 million was 25.3% less than in 2008, mostly impacted by: (i) the variance in the swap earnings, due to the appreciation of the Brazilian currency against the US dollar, along with a reduction in foreign-exchange exposure (ii) the lower yield on short-term investments, as a result of the lower CDI rate between the periods and (iii) the decrease in the item “others”, as a result of recognizing monetary restatement on PIS/COFINS credits on sector charges in 2008.

The financial expense of R$ 272.5 million rose by 55.2% over last year, largely due to: (i) the variance posted by Braslight, caused by the surplus in 2009 versus the deficit in 2008 (ii) the exchange variance of R$ 81.1 million in the balance of foreign-currency debt, due to the appreciation of the Brazilian currency against the dollar in 2009, as compared to the devaluation of the Brazilian currency in the previous year and (iii) entry into the REFIS tax debt financing program, which enabled the recognition of a net R$ 27.7 million generated by income and fine reductions. Consolidated net income The net income in 2009 of R$ 604.8 million contracted by 37.9% over the figure of R$ 974.5 million recorded in 2008. The nonrecurring effects in both years were as follows: (i) reversals of the provisions for PIS/COFINS, the actuarial loss of Braslight and exchange variance, generating impacts of R$ 285.4 million, R$ 133.8 million and R$ 137.5 million respectively in 2008 and (ii) recognition of non-recurrent tax credits, a benefit of entering the new REFIS program, and exchange variance, generating impacts o R$ 118.4 million, R$ 152.1 million and R$ 144.8 million respectively in 2009. If these effects were disregarded, the net income in 2009 would be R$ 479.2 million, 14.7% higher than in 2008. Indebtedness The Company’s gross debt rose by 13.6% over December 31, 2008, amounting to a rise of R$ 295.1 million. This growth is due to: (i) the 6th debentures issuance with an impact of R$ 296.0 million in the quarter and (ii) the disbursement of R$ 145 million by Light SESA under the 2010-11 CAPEX funding from BNDES, drawn on December 22, 2009.

The net debt of R$ 1.6371 billion rose by 3.6% over December 2008, chiefly due to the borrowing in 2009. The ratio between ne debt/EBITDA was 1.4 in December 2009.

Debt levels continued comfortable in 2009, with an average term to maturity of 3.6 years. The average cost of the local debt continued to fall, standing at 9.8% p.a. At the close of the year only 4.1% of the total debt was denominated in foreign currency an the length of the secured hedges meant the exposure to foreign currency risk fell to 2.5% of the projected total. The hedge policy consists of protecting the outstanding cash outflow in the next 24 months (principal and interest) by a cashless swap, with first-rate financial institutions. The graphs below present the change in net debt since 2006, the indexes and maturities: Debt - Debt Indexes: *Considerando HEDGE Cash flow Light’s cash generation was R$ 238.2 million in 2009, a significant increase of R$ 99.9 million over 2008. The cash balance at the

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end of 2009 was R$ 828.4 million, greater than in 2008 (R$ 590.1 million). The main reasons for the improvement in the cash position were: (i) the Company’s higher operating income, which amounted to R$ 1.3483 billion in 2009 against R$ 1.3080 billion in 2008 and (ii) the higher income from financing activities, excluding dividends, which generated R$ 90.0 million in 2009 against an expense of R$ 68.4 million in 2008 Cash allocated to investments in the year was virtually unchanged over the previous year (see the cash flow table). R$ MM Cash at beginning of period (1) Net Income Allowance Doubt.Acc. Depreciation and Amortization Net interest and monetary variance Braslight Monetary restatement

2009 590.1 604.8 246.3 304.9 175.7 18.2

2008 490.2 974.5 233.4 312.4 273.7 115.4

reversal of provisions Others Net Income on Cash Basis Working Capital Regulatory (CVA and Bolhas) Contingencies Taxes Others Cash Provided by Operating Activities (2) Capital increase Payment of dividends Funding obtained Repayments of loans and financings Financing Activities (3) Acquisition of shares Concession Investments Sale of Assets ?Investment activities (4) Cash at end of period (1+2+3+4) Cash generation (2+3+4)

61.6 125.3 1,536.8 (289.8) 108.2 (83.1) 109.2 (33.1) 1,348.3 (594.4) 579.4 (489.5) (504.4) (64.7) (573.4) 32.4 (605,7) 828.4 238.2

(350.3) 175.0 1,734.1 (214.6) (64.0) (90.9) (195.6) 139.0 1,308.0 5.5 (554.2) 264.5 (332.9) (617.2) (612.6) 21.6 (590.9) 590.1 99.9

Stock Performance

Light’s shares are listed at the BM&FBovespa’s New Market since July, 2005, in line with the best corporate governance practice and the principles of transparency and equity, in addition to granting special rights to minority shareholders. Light S.A. shares comprise the IBovespa, Itag, IGC, IEE, IBrX, and ISE indices. Light’s stock gained 33.6% and presented an average daily trading volume of R$ 15.7 million in 2009. The IEE yielded a gain of Light © 2010. All rights reserved.

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59% in this period. The performance of Light’s stock since the company was taken over by RME on August 10, 2006, versus Ibovespa and IEE can be seen in the graph below.

Dividends The board of directors meeting held February 10, 2010 approved the proposed dividend payment of R$ 432,340,207.20, or R$ 2.12 per share, to be taken from the earnings of FY 2009. This proposal equates to a payout of 75.24% of the adjusted net incom and a dividend yield of 8.14%, considering the share price at the close of trading on February 09, 2010. The proposal was submitted to the approval of the Annual General Meeting held 03/22/2010 and closed on 03/24/2010. The dividend date was 03/25/2010 and the amount was paid on 04/01/2010. Dividend payments since 2007 can be seen in the graph below:

Added value Direct economic value generated and distributed, including revenue, operational costs, employee compensation, donations and othe investments in the community, profits not paid out and payments to capital providers and governments (DVA) [EC1] DVA [EC1] ACCUMULATED DESCRIPTION 2009 2008 % 09/08 1

WEALTH PRODUCED8,654.344

8,260.085

4.8

Sales of goods, products and services8,641.045

8,238.648

4.9

13,299

21,437

-38.0

WEALTH CONSUMED3,936.150

3,596.250

9.5

Raw Materials consumed3,284.601 Material, outsourced services and other operating expenses 405,473

3,063.176

7.2

297,293

36.4

Loss of accounts receivable 246,076

235,781

4.4

GROSS ADDED VALUE (1 - 2)4,718.194 DEPRECIATION / 4 AMORTIZATION / DEPLETION 304,882 NET ADDED VALUE PRODUCED 5 BY THE ENTITY ( 3 - 4 )4,413.312 6 CAPITALIZATION OF EXPENSES 0 Personnel Financial charges

4,663.835

1.2

312,443

-2.4

4,351.392 0

1.4

Nonoperating 2

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7 TRANSFERRED ADDED VALUE 201,864 Equity in net income of subsidiaries and associated companies

270,149

-25.3

Financial income 201,864 NET ADDED VALUE - VAL ( 5 + 6 8 +7)4,615.176

270,149

-25.3

4,621.541

-0.1

#DIV/0!

APPROPRIATION OF VAL4,615.175 100,00% 4,621.541 100.00% EMPLOYMENT COMPENSATION 235,829 5,11% 226,552 4.90%

-0.1

GOVERNMENT (TAXES)3,469.722 75,18% 3,220.169 69.68% FINANCIAL CHARGES AND RENT 304,793 6,60% 200,367 4.34%

7.7

INTEREST ON OWN CAPITAL 172,491

3,74% 499,287 10.80%

4.1

52.1 -65.5

RETAINED EARNINGS 432,340 9,37% 475,166 10.28% -9.0 Investor relations One of the highlights of the Company’s performance in the share market in 2009 was the sale of 32,170,480 shares, consisting of 18,779,135 shares owned by BNDESPar and 13,391,345 shares owned by EDF. This sale, which provided greater liquidity to Light’s shares, generated a free float of 22.1% of the share capital.

Light’s work in investor relations received two important acknowledgements in 2009. One was third place in the 2009 edition of th “the best companies for shareholders”, awarded by the magazine Capital Aberto. Light received the award in the category ‘companies with a market value of between R$ 5 billion and R$ 15 billion’. The other acknowledgement was the “Best Meeting 2009” award given by APIMEC São Paulo. A qualified jury directed by the evaluations of investment professionals at each meeting, analyses items such as scope, content of the information, transparency, currentness of information and answers to analysts’ questions. (For further details about the investor relations awards see Chapter 2 – Main awards and acknowledgements).

A direct communications channel for clearing up doubts, and obtaining data and information is permanently available to stakeholder on the Light website – www.light.com.br/faleconosco - or through the e-mail ri@light.com.br[4.4]. Minority shareholders may also send suggestions or criticisms to the company board of directors by writing to the Deputy CEO and investor relations officer. A whole host of information about Light – historic operational and financial data, earnings releases, presentations made, company notices, material notices published etc. - are regularly disclosed in the investor relations site. 2009 Rate Adjustment On November 04, 2009, ANEEL approved the average adjustment of Light’s rates of 5.65% for the period commencing November 07, 2009, embracing all consumption sectors (residential, industrial, commercial, rural and others). Light © 2010. All rights reserved.

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The adjustment index valid for rates between November 07, 2009 and November 06, 2010 consists of two components: the structural component of 0.88%, which now comprises the rate, and the financial component, valid while this rate is effective, of 4.77%. 2009 Light Rate Review IRT Structural 0,88% Financial Surcharges 4,77% Total 5,65%

The rate adjustment process largely consists of passing through uncontrollable concession costs (energy purchased for supply to consumers, sector charges and transmission charges) to end consumers, as they are calculated in detail annually, either in a readjustment year or rate review. In accordance with the rules established in the concession agreements of the distribution concessionaires, in rate adjustment years the controllable costs absorb the variance of the IGPM minus the X factor, which passes through to consumers the concessionaire’s annual efficiency gains. The concession’s controllable costs are calculated in detail in rat review years only. In the case of Light, the 2nd cycle of the periodical rate review was provisional in 2008; the final result was ratified in October 2009.

The variance of uncontrollable costs (A Portion), including financial surcharges, of 7.1% was primarily due to the higher charges, in particular the Proinfa and high-voltage national grid charges, and the CVA energy for the past 12 months. The managerial costs (B Portion) fell by 2.1%, mainly due to the reduction in the IGPM price index. The rates were also impacted by 1.4% by the legal subsidies (low-income sector, special consumers and independent producers).

The average increase in energy bills was 3.40% from November 07, 2009. This was due to the exclusion of financial adjustments for the period November 07, 2008 to November 06, 2009 from the rates, associated with the recovery of rate discrepancies from past periods, which had a positive effect of 2.3% on the rate for that period. Sector agreement In March 2008 amortization commenced of the A Portion of the electric sector agreement¹, for the period January 01 to October 25, 2001. R$ 396.2 million out of a total R$ 373.2 million referring to variance of A portion items was amortized in the year. In accordance with ANEEL rules, the additional rate should be restated by the Selic interest rate until the end of the month in which the ratified amount was fully amortized. In the case of Light, the amortization terminated in June 2009. The amounts billed after the ratified amount of Portion A was amortized were recognized in the rate readjustment for 2009, amounting to R$23.0 million, and are being returned to the consumers. This amount is being recorded under Other Debits in the current liabilities. Another part of the revenue loss was recovered through the extraordinary rate replacement (RTE) in force until February 2008. The total loss in relatio to the ratified amount was R$ 291.4 million [EC4].

¹ Agreement entered in December 2001 by the government with the energy concessionaires and distribution companies (free energy), to restore the economic and financial equilibrium of existing contracts and to restore revenue relating to the period in which the Emergency Program to Reduce Electricity Consumption (PERCEE) was in force (Jul/2001 to Feb/2002).

The partial recovery of revenue losses from distribution companies and generation companies (free energy) occurred through the emergency rate replacement, awarded for the term of 74 months for the loss of free energy (terminating February 2008) until the ful amortization of the balance, in the case of the A portion (until July 2009).

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Investments R$ 563.8 million was invested in the year, including: investment in the development of distribution grids (new connections, higher capacity and corrective maintenance work) amounting to R$ 133.3 million, investments in improving quality and preventive maintenance work, amounting to R$ 64.7 million and investments in tamper proofing, electronic meters and eliminating fraud, amounting to R$ 164.9 million. Generation investment amounted to R$ 51.8 million and was mostly allocated to maintaining existing generating facilities. Investment in property, plant and equipment stood at R$ 652.3 million in 2009 and included: (i) the financial charges on the Company’s loans from financial institutions (ii) the effect of monetary restatement on the public utility used by the Itaocara Plant, stipulated in the Plant’s concession and (iii) inventory materials. The graph below presents Light’s investment since 2006. Investing in expanding generation capacity The following events refer to the development of projects carried out to expand Light’s generation capacity. ●

●

An agreement was entered into on October 29, 2009 to build the Paracambi SHP with the EPC Consortium consisting of th companies Orteng Equipamentos e Sistemas Ltda and Construtora Quebec Ltda. Construction work commenced in November and commercial start-up is forecast for October 2011. In November 2009 the Paracambi SHP project qualified for BNDES funding. Approval of the final terms of the funding is expected to occur in the second quarter of 2010. The procurement process was concluded in November for selecting the companies to build the new feeder 1, comprising the intake system of the future Lajes SHP. The contract was signed that month with the companies CONSTRUTECKMA Engenharia Ltda. and CONTEMAT Engenharia e Geotecnia S.A. Construction work commenced in December 2009 and is forecast for conclusion in August 2010. The basic engineering and environmental studies (EIA/RIMA) of the Itaocara hydroelectric plant will be ready at the start of 2010. These initiatives will make it possible for Aneel to approve the project and to proceed with the environmental licensing process, essential conditions on which the implementation of the venture depend. Light did not attend the 1st auction of reserve wind energy held in December 2009. However, two of the 7 projects being analysed on the occasion, with a view to the Company’s possible participation, have been approved by the board of directors for acquisition. The projects located in the municipality of Aracati/CE have a total installed capacity of 34 MW. Furthermore, this source of clean energy complies with Light’s sustainable practices. The acquisition process will be completed in 2010. In addition, the Company is looking into participating in the generation projects which will jointly ensure the installed generating capacity will grow by at least 50%.

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Annual Social Balance Sheet / 2009 1 - Calculation Base Net revenue (RL) Operating income (RO) Gross payroll (FPB)

2009 Amount (thousand reais) 2008 Amount (thousand reais) 5.432.306 5.386.644 825.734 1.286.074 222.243 229.153 Amount (R$ Amount (R$ 2 - Internal Social Indicators thousand) % of FPB % over RL thousand) % of FPB % over RL Meals 16.762 8% 0% 16.822 7% 0% Compulsory social charges 38.997 18% 1% 44.891 20% 1% Private pensions 6.559 3% 0% 8.960 4% 0% Health insurance 8.535 4% 0% 10.728 5% 0% Occupational health and safety 210 0% 0% 179 0% 0% Education 909 0% 0% 1.144 0% 0% Culture 0 0% 0% 0 0% 0% Professional training and development 5.117 2% 0% 2.953 1% 0% Crèches or crèche allowance 499 0% 0% 462 0% 0% Profit sharing 20.507 9% 0% 31.527 14% 1% Other 3.813 2% 0% 3.042 1% 0% Total - Internal social indicators 101.907 46% 2% 120.710 53% 2% Amount (R$ Amount (R$ 3 - External Social Indicators thousand) % over RO % over RL thousand) % over RO % over RL Education 2.165 0% 0% 2.043 0% 0% Culture 6.178 1% 0% 3.940 0% 0% Healthcare and sanitation 10.793 1% 0% 4.732 0% 0% Sports 837 0% 0% 0 0% 0% Combating hunger and food safety 0 0% 0% 0 0% 0% Other 25.502 3% 0% 11.666 1% 0% Total contributions to society 45.474 6% 1% 22.382 2% 0% Taxes (not including social charges) 2.731.688 331% 50% 2.737.124 209% 51% Total - External social indicators 2.777.162 336% 51% 2.759.506 211% 51% Amount (R$ Amount (R$ 4 - Environmental Indicators thousand) % over RO % over RL thousand) % over RO % over RL Investments related to company production / operation 19.966 2% 0% 18.005 1% 0% Investments in external programs and/or projects 0 0% 0% 0 0% 0% Total environmental investment 19.966 2% 0% 18.005 1% 0% As concerns establishment of annual targets to minimize waste, ( ) has no targets ( ) has no targets production/operation consumption ( ) performs 51 to 75% ( ) performs 51 to 75% Light © 2010. All rights reserved.

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in general and to use natural resources more efficiently, the company 5 - Workforce Indicators Number of employees at periodend Number of admissions in the period Number of outsourced employees Number of trainees Number of employees over 45 Number of women working at the company % management positions held by women Number of black people working at the company % management positions held by black people No of workers with handicaps or special needs 6 - Material information regarding corporate citizenship Ratio between the lowest and highest earners at the company Total number of occupational accidents

( ) performs 0 to 50% (X) performs 76 to 100%

2009

2008

3.694

3.732

269 7.689 101 1.359

270 6.415 105 1.504

854

830

21,40%

20,90%

1.006

1.381

15,20%

13,30%

173

147

2009

2010 Target

52,35

23 ( ) directors and managers

( ) The social and environmental ( X ) all directors ( X ) all ( ) directors ( ) direção projects implemented by the employees and employees company were defined by: managers ( ) directors ( ) directors ( ) all ( ) all ( X ) todos The occupational health and safety and ( X ) all + Cipa and employees employees (as) + Cipa standards were defined by: managers managers In respect of trade union freedom, ( ) follows ( ) follows (X) the right to collective bargaining ( ) does not ( X ) promotes ( ) does not the OIT the OIT promotes and and internal representation of get involved and follows OIT get involved rules rules follows OIT workers, the company: ( ) ( ) directors ( X ) all directors ( X ) all ( ) directors ( ) directors and employees and employees The private pension embraces: managers managers Light © 2010. All rights reserved.

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( ) directors

( ) directors and managers

( X ) all ( ) directors employees

( ) directors and managers

( X ) all employees

Profit-sharing embraces: When selecting suppliers the same ethical, social responsibility and ( ) are not ( ) are ( X ) are ( ) are not ( ) are ( X ) are environmental standards adopted considered suggested demanded considered suggested demanded by the company: In respect of employee ( x ) offers ( x ) offers ( ) does not ( ) gives ( ) does not ( ) gives participation in voluntary work organization and organization get involved support get involved support programs, the company: incentives/td> and incentives to the to the Total number of consumer company at Procon in the Courts company at Procon to the Courts complaints and criticism: 13.251 909 35.039 Cut by 10%Cut by 10% Cut by 15% % complaints and criticism at the at Procon at the at Procon resolved: company NA at the Courts company 100% in the Courts Added value to be distributed (in R$ thousand): In 2009: 4.615,175 In 2008: 4.621,541 75.18% government 5.11% collaborators 70% government 5% collaborators Distribution of Added Value 9.37% shareholders 6.60% third parties 10% shareholders 4% third parties (DVA): 3.74% retained 11% retained 7 - Further Information 0

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Financial Statements

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Balance sheets as of December 31, 2009 and 2008 (In thousands of reais) ASSETS Parent Company Notes 31/12/2009 31/12/2008 CURRENT Cash and cash equivalents Consumers, concessionaires and licensees Recoverable taxes Inventory Swap income receivable Dividends receivable Services rendered Prepaid expenses Other accounts receivable

6 7 8 32

9 10

NONCURRENT NONCURRENT ASSETS Consumers, concessionaires and licensees Recoverable taxes Swap income receivable Judicial deposits Prepaid expenses Other accounts receivable

Investments Property, plant and equipment Net intangible assets

7 8 32 9 10

11 12 13

Consolidated 31/12/2009 31/12/2008

14,584 774 432,340 175 20,212 468,085

40,256 284 499,638 135 167 540,480

828,372 1.362,365 675,881 14,369 4 131,902 260,502 100,016 3.373,411

590,126 1.350,832 836,504 18,603 6,671 57,500 383,291 107,879 3.351,406

2.859,457

2.764,479

5.986,748

6.110,559

152 152

121 121

297,798 820,843 200,520 37,779 8,725 1.365,665

292,594 1.109,566 4,413 194,200 129,435 26,420 1.756,628

2.858,627 678 3.327,542

2.764,358 3.304,959

20,388 4.319,087 281,608 9.360,159

13,615 4.059,358 280,958 9.461,965

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Balance Sheets as of December 31, 2009 and 2008 (In thousands of reais) LIABILITIES Parent Company Notes 31/12/2009 31/12/2008 CURRENT Trade payables Payroll Taxes Loans and Financing and Financial Charges Debentures and Financial Charges Dividends payable Estimated obligations Sector charges – Consumer Contributions Provision for contingencies Pension plan - other employee benefits Other debits Total NONCURRENT NON-CURRENT LIABILITIES Loans and Financing and Financial Charges Debentures and Financial Charges Taxes Provision for contingencies Pension plan and other employee benefits Other debits Total SHAREHOLDERS’ EQUITY Capital Profit Reserves Legal Reserve Profit Retention Capital Reserve Awarded options recognized Treasury Stock Retained earnings / (accumulated losses) Total

Consolidated 31/12/2009 31/12/2008

6,348 47 53 432,340 176 1,524 440,488

283 7 10 499,638 31 1,286 501,255

564,181 3,338 285,180 197,150 96,412 432,340 49,036 110,791 95,044 377,471 2.210,943

486,204 2,791 230,461 116,799 61,523 499,638 55,052 126,733 2,237 87,744 519,757 2.188,939

4.262,162

4.469,322

15 16 8 18 20 19

1.006,204 1.165,759 303,585 673,930 861,386 251,298 4.262,162

1.046,550 945,549 324,743 998,460 944,417 209,603 4.469,322

2.225,822 633,187 133,999 499,188 28,045 34,406 (6,361) 2.887,054 3.327,542

2.225,819 555,426 103,757 451,669 22,459 22,459 2.803,704 3.304,959

2.225,822 633,187 133,999 499,188 28,045 34,406 (6,361) 2.887,054 9.360,159

2.225,819 555,426 103,757 451,669 22,459 22,459 2.803,704 9.461,965

8 15 16

17 18 20 19

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Statement of income for the financial years ended December 31, 2009 and 2008 (In thousands of reais)

Notes OPERATING REVENUE Electricity sales to consumers Electricity sales to distributors Other revenue

GROSS OPERATING PROFIT OPERATING EXPENSES Sales

01/01/2009 to 31/12/2009

01/01/2008 to 31/12/2008

7.681,486

7.214,341

26 27

361,602 597,957 8.641,045

360,009 664,298 8.238,648

(2.080,591) (677,447) (448,148) (2,553) (3.208,739)

(1.949,018) (416,411) (484,004) (2,571) (2.852,004)

5.432,306

5.386,644

(3.284,601) (3.284,601)

(3.063,177) (3.063,177)

29 29 29

(112,204) (21,239) (119,373)

(141,964) (13,987) (120,526)

29 29

(247,305) (14,193) (514,314)

(275,887) (16,364) (568.728)

1.633,391

1.754,739

(322,389)

(315,476)

NET OPERATING REVENUE

OPERATING COST Personnel Materials Outsourced services Depreciation and amortization Other

Consolidated

Deductions from operating revenue ICMS Consumer charges 28 PIS/ COFINS Other

ELECTRICITY COST Electricity purchased for resale

Parent Company 01/01/2008 01/01/2009 to to 31/12/2009 31/12/2008

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General and administrative EQUITY IN NET INCOME OF SUBSIDIARIES AND ASSOCIATED COMPANIES FINANCIAL INCOME (EXPENSES) Revenue Expense

(56,701) (56,701)

(26,446) (26,446)

(427,904) (750,293)

(247,581) (563,057)

660,311

1.023,996

1,598 (316) 1,282

763 (384) 379

201,864 (272,527) (70,663)

270,149 (175,757) 94,392

38,144 (24,845) 13,299

30,188 (8,751) 21,437

604,892

997,929

825,734

1.307,511

(168,994)

(161,410)

(31,402)

(140,121)

604,892

997,929

625,338

1.005,980

(61)

(25)

(20,507)

(31,527)

604,831

997,904

604,831

974,453

2,96959

4,89327

2,96959

4,77828

203.675,160

203.933,778

203.675,160

203.933,778

31 31

OTHER OPERATING INCOME (EXPENSES) Revenue Expense NET INCOME BEFORE TAX AND PROFIT SHARES Current income and social contribution taxes Deferred income and social contribution taxes NET INCOME BEFORE PROFIT SHARING Profit Shares NET INCOME FOR THE YEAR Net income per share R$ Number of ExTreasury Shares

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Statements of changes in shareholders’ equity - parent company (In thousands of reais) PROFIT RESERVES CAPITAL RESERVES

CAPITAL BALANCES AT 31/12/07 Capital increase Dividends paid – profit reserve Adjustments for initial adoption of Law 11638/07 Awarded options recognized Net income for the year Allocation of income for the year Creation of the legal reserve Proposed dividends Creation of the profit retention reserve

LEGAL RESERVE

RETAINED EARNINGS (ACCUMULATED LOSSES)

PROFIT RETENTION

TOTAL

2.220,355

53.862

394.131

2.668,348

5,464

(350,766)

(40,067)

22,459

997,904

49,895

(49,895)

(499,638)

408,304

(408,304)

2.225,819

22,459

103,757

451,669

2.803,704

BALANCES AT 31/12/08 Capital increase

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Dividends paid – profit reserve Treasury Stock Awarded options recognized Awarded options exercised Net income for the year Allocation of income for the year Proposed dividends Creation of the legal reserve Creation of the profit retention reserve BALANCES AT 31/12/09

(94,730)

(6,361)

51,673

(39,726)

604,831

(432,340)

30,242

(30,242)

142,249

(142,249)

2.225,822

28,045

133,999

499,188

2.887,054

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Statements of changes in shareholders’ equity – consolidated (In thousands of reais) PROFIT RESERVES SHARE CAPITAL LEGAL PROFIT CAPITAL RESERVES RESERVE RETENTION BALANCES AT 31/12/07 Adjustments for initial adoption of Law 11638/07 Capital increase Dividends paid – profit reserve Awarded options recognized Net income for the year Allocation of income for the year Creation of the legal reserve Proposed dividends Creation of the profit retention reserve BALANCES AT 31/12/08 Capital increase Awarded options recognized Awarded options exercised Net income for the year Treasury Stock Dividends paid – profit reserve

RETAINED EARNINGS (ACCUMULATED TOTAL LOSSES)

2.220,355

53,862

417,582

- 2.691,799

(40,067) (40,067)

5,464

(350,766)

22,459

974,453

49,895

(49,895)

384,853

2.225,819

22,459

103,757

451,669

51,673

(39,726)

- (39,726)

604,831

(6,361)

(94,730)

5,464

- (350,766)

(499,638) (499,638) (384,853)

- 2.803,704

- (94,730)

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Annual Sustainability Report

Allocation of income for the year Creation of the legal reserve Proposed dividends Creation of the profit retention reserve BALANCES AT 31/12/09

30,242

142,249

2.225,822

28,045

133,999

499,188

(30,242)

(432,340) (432,340) (142,249)

- 2.887,054

Pag.:183

Annual Sustainability Report

Statement of cash flows for the financial years ended December 31, 2009 and 2008 (In thousands of reais) Parent Company 01/01/2009 to 01/01/2008 to 31/12/2009 31/12/2008 Operations Net income for the year Expenses (revenue) not affecting cash: Allowance for doubtful accounts Allowance for doubtful accounts – Free Energy Provision for (reversal of) losses on recovery of long term RTE Restatement of regulatory and contingent assets and liabilities Adjustment to present value of receivables Depreciation and amortization Equity in net income of subsidiaries and associated companies Net interest and monetary variance Income from the derecognition of PP&E Deferred income and social contribution taxes Charges and monetary variance on retirement obligations Reversal of PIS/COFINS rate increase and base gross-up Provisions in liabilities - contingencies Options awarded Other (Increase) Decrease in assets Consumers and concessionaires Recoverable taxes Services rendered Inventory Prepaid expenses (other) Dividends Received Regulatory Assets (CVA and Bolhas)

Consolidated 01/01/2009 to 01/01/2008 to 31/12/2009 31/12/2008

604,831

997,904

604,831

974,453

246,311

233,398

(595)

2,980

61,599

43,845

(19,072)

(10,830)

304,882

312,443

(660,311)

(1.023,996)

175,714

273,699

(13,103)

(12,974)

31,402

140,121

18,197

115,428

(432,359)

51,673 (3,807)

22,459 (3,633)

61,563 51,673 12,793 1.536,790

72,053 22,459 1.734,121

(490) 669,368 -

595,616 -

(250,002) 161,741 (74,402) 4,234 1,990 244,286

(205,021) (150,222) 2,717 (5,347) 16,990 (64,401)

Pag.:184

Annual Sustainability Report

Judicial deposits Other Increase (Decrease) in liabilities Trade payables Energy suppliers Salaries and payroll contributions Taxes and payroll contributions Memorandum Accounts - CVA Regulatory fees Contingencies Post-employment obligations Other

Cash provided by operating activities

(1,502) 667,376

(61) 595,555

(6,320) 53,187 134,714

(28,068) (7,015) (440,367)

6,065 184 43 (1,586) 4,706

(97) 4 3 177 27

37,654 (7,252) 5,469 (52,549) (106,988) (29,058) (76,774) (93,928) 11,179 (323,185)

(11,520) 4,528 4,017 (45,341) 8,899 (8,460) (62,867) (85,125) 210132 14,263

668,275

591,949

1.348,319

1.308,017

32,408

21,649

Investment activities Sale of assets Additions to property, plant and equipment Acquisition of shares Advances Consumer contributions Equity Interests Cash used in investing activities

(598,823)

(615,127)

(64,721) 1.530 (36,388) (99,579)

(64,721) 25.448 (605,688)

2,570 (590,908)

Financing activities Dividends paid Loans obtained Capital increase Amortization of loans and financings Cash used in financing activities

(594,368) (594,368)

(554,229) (554,229)

(594,368) 579,439 (489,456) (504,385)

(554,229) 264,507 5,464 332,936 (617,194)

Net cash variation

(25,672)

37,720

238,246

99,915

Statement of net cash variation At beginning of year At end of year Cash variation

40,256 14,584 (25,672)

2,536 40,256 37,720

590,126 828,372 238,246

490,211 590,126 99,915

Pag.:185

Annual Sustainability Report

Statement of added value for the financial years ended December 31, 2009 and 2008 (In thousands of reais) Parent Company 01/01/2009 to 01/01/2008 to 31/12/2009 31/12/2008 Revenue Sales of goods and services Other Revenue Allowance (Reversal of allowance) for doubtful accounts Consumables acquired from third parties Cost of goods and services sold Materials-Energy-Outsourced Services-Other Gross Added Value Retenções Depreciation, Amortization and Depletion Net Added Value Produced Transferred added value Equity in Net Income of Subsidiaries Financial Revenue Total added value to be distributed Distribution of Added Value Personnel Direct remuneration Benefits F.G.T.S. Other Taxes, Duties and Contributions Federal State Municipal Interest expenses Interest Rent

Consolidated 01/01/2009 to 01/01/2008 to 31/12/2009 31/12/2008

8.408,268 8.641,045 13,299

8.024,304 8.238,648 21,437

(246,076)

(235,781)

(2,010)

(1,683)

(3.690,074)

(3.360,469)

(3.284,601)

(3.063,176)

(2,010)

(1,683)

(405,473)

(297,293)

(2,010) -

(1,683) -

(4.718,194) (304,882)

(4.663,835) (312,443)

(304,882)

(312,443)

(2,010) 661,908

(1,683) 1.024,759

4.413,312 201,864

4.351,392 270,149

660,310

1.023,996

1,598

763

201,864

270,149

659,898

1.023,076

4.615,176

4.621,541

659,898 54,571 54,353 166 49 3 451 451 45 30 15

1.023,076 24,747 24,635 102 10 123 123 302 295 7

4.615,176 235,830 174,342 35,363 20,588 5,537 3.469,722 1.381,320 2.081,205 7,197 304,793 266,118 22,960

4.621,541 226,552 160,955 39,881 22,653 3,063 3.220,169 1.249,177 1.949,018 21,974 200,367 152,582 29,923

Pag.:186

Annual Sustainability Report

Other Interest earnings Dividends Retained earnings/loss for the year

604,831 432,340 172,491

997,904 499,638 498,266

15,715 604,831 432,340 172,491

17,862 974,453 499,638 474,815

Pag.:187

Annual Sustainability Report

Notes to the Financial Statements December 31, 2009 and 2008 1. Operations Light S.A.’s core activity is to hold equity interests in other companies, as partner or shareholder, and the direct or indirect exploration, as the case may be, of electric power services, including electric power generation and transmission, sale and distribution systems, as well as other related services. Light S.A. is a parent company of the following companies: Light Serviços de Eletricidade S.A. (Light SESA) – Publicly held company engaged in the distribution of electric power

Light Energia S.A. - (Light Energia) – Closely held company whose core activity is the study, planning, construction, operation and exploration of electric power generation, transmission and sales systems and related services

Light Esco Prestação de Serviços Ltda. - (Light Esco) – Company founded to provide services related to co-generation, engineering designs, management and solutions, such as improving efficiency and defining energy matrixes and sale of energy on the free market. The Extraordinary General Meeting held December 10, 2009 resolved to transform the limited company Light Esco Prestação de Serviços Ltda. into a joint-stock company. Itaocara Energia Ltda. - (Itaocara Energia) – Pre-operational company, primarily engaged in the exploration and production of electric power

Lightger S.A. (Light Ger) and Lighthidro Ltda. (Light Hidro) – Pre-operational companies both founded to participate in auctions for the concession, authorization and licenses for new plants. On December 24, 2008, Light Ger obtained the installation license tha authorizes the start of implementation works of the Paracambi small hydroelectric power plant (SHP). The Extraordinary General Meeting held August 27, 2009 resolved to transform the limited company Lightger Ltda. into a joint stock company.

Instituto Light para o Desenvolvimento Urbano e Social (Light Institute) – Founded to implement social and cultural projects, and t foster the economic and social development of cities, affirming the Company’s commitment to social responsibility. Light Group’s concessions and authorizations:

Concessions / authorizations Date of concession Date of authorization Generation, Transmission and Julho 1996 Junho 2026 Distribution PCH Paracambi Fevereiro 2001 Fevereiro 2031 Itaocara hydroelectric power plant Março 2001 Março 2036 2. Presentation of the Financial Statements The company-only and consolidated financial statements and the notes thereto are stated in thousands of reais and other currencies except when otherwise indicated, and were prepared in accordance with accounting practices adopted in Brazil, deriving from Brazilian corporate legislation, the pronouncements, instructions and interpretations issued by the Accounting Pronouncement Committee (“CPC”), the regulations established by the Brazilian Securities Commission (“CVM”) and the regulations established b Light © 2010. All rights reserved.

Pag.:188

Annual Sustainability Report

the Brazilian Electricity Regulatory Agency (“ANEEL”) according to the Accounting Guidelines of the Public Electricity Service, an in compliance with the accounting principles introduced by Laws 11638/07 and 11941/09. Given that the company is comprised primarily of interests in other corporations, the notes to the financial statements primarily reflect the accounting practices and breakdown of its subsidiaries’ accounts. The Board of Directors authorized the conclusion of these financial statements on February 10, 2010. 3. Description of Significant Accounting Practices Statement of income

Income and expenses are recognized on the accrual basis.

Revenue from all services rendered is recognized upon receipt. Electricity bills for all consumers are prepared monthly according to the reading calendar of meters. Unbilled revenue, corresponding to the period between the date of last reading and the end of the month, is estimated and recognized as revenue in the month the energy was consumed. Revenue is not recognized if there are uncertainties as to its realization. Accounting estimates

The preparation and disclosure of the financial statements requires Management to use estimates and assumptions when recording certain transactions that affect assets and liabilities, revenues and expenses. The actual results of these transactions, when realized in subsequent periods, could differ from these estimates. The Company and its subsidiaries review the estimates and assumptions at least once a year. The main estimates related to the financial statements refer to the recording of effects deriving from - allowance for doubtful accounts - provision for contingencies and supplementary pension plans - recovery of deferred income and social contribution taxes; and - market value of financial instruments. Financial revenue and expenses

These include interest rates, monetary and exchange variance incurred on rights and obligations subject to monetary restatement up to the reporting date and hedge gains/losses, which are appropriated to income according to the term of the contracts. Foreigncurrency assets and liabilities were translated into Brazilian reais at the exchange rate disclosed by the Brazilian Central Bank at the reporting date. The net effect of this restatement is reflected in the net income for the year.

Pag.:189

Annual Sustainability Report

Net income (loss) per share

This is determined taking into account the free float at the reporting date.

Non-derivative financial instruments

These include short-term investments, cash and cash equivalents, loans, financing and Debentures.

Loans, financing and debentures are stated at their amortized cost using the effective interest rate method, less any decreases in thei recoverable value and directly attributable transaction costs. Short-term investments are valued at fair value through profit and loss. Derivative financial instruments

The Company and its subsidiaries hold derivative financial instruments to hedge against risks related to foreign currencies and interest rates. The derivatives are initially recognized at fair value; attributable transaction costs are expensed as and when they are incurred. Following initial recognition, the derivatives are appraised at fair value and any changes are recorded in the income statement. Current and noncurrent assets

●

Consumers, concessionaires and licensees (Consumers) – These include the supply of electricity to consumers, billed and to be billed (estimate), default surcharges, interest deriving from late payment and renegotiation of consumers debts, restated where applicable and energy sold to other concessionaires due to electric power supply according to amounts made availabl within the scope of Electric Power Commercialization Chamber (“CCEE”) and credits related to various kinds of regulatory assets.

Present value is calculated for each renegotiation of consumer debt (financing in installments), based on interest rates that reflect the term and the risk of each transaction, at an average of 1% per month. The contra entry of the restatement of trade accounts receivable charged to the financial income/loss. The allowance for doubtful accounts is considered sufficient by management to cover any losses on the realization of the receivables. ●

Pag.:190

Annual Sustainability Report

●

and administrative storeroom) and those allocated to investments, classified in Non-Current Assets – Property, Plant and Equipment (works warehouse), are recorded at the average acquisition cost and do not exceed their replacement costs or realization values, from which the provision for losses is deducted, where applicable. Investments – permanent equity interests in subsidiaries are valued by the equity accounting method. Other investments are valued at the acquisition cost and monetarily restated until December 31, 1995, minus the provision for devaluation, where applicable. Property, plant and equipment are recorded at the cost of acquisition, formation or construction and monetarily restated until up to December 31, 1995, less accumulated depreciation. Other expenditure is capitalized only when there is an increase in the economic benefits to the item of property, plant and equipment. All other expenditure is recognized in the statement of income as an expense when incurred.

❍

❍ ❍

❍

●

PP&E in Service – AIS - This includes assets and facilities in view of the service awarded, registered and controlled by means of the Registration Unit - UC and the Addition and Retirement Unit - UAR by Assets Order - ODI, book accoun and date of transfer (capitalization) to PP&E in Service, as required by ANEEL. Depreciation - The depreciation is calculated by the straight-line method, based on the book balances recorded in the respective Registration Units – UC. Annual rates are determined in the chart attached to ANEEL Resolution 367 of June 02, 2009, based on the estimated useful life of the items, as disclosed in Note 12. PP&E in progress – AIC – This refers to assets and facilities under formation or construction. General Management Apportionment (RAG) - Part of administrative and general expenses, deriving from staff expenses, services rendered, leasing, rental and other, are appropriated on a monthly basis to PP&E and other orders in progress, according to the Accounting Guidelines published by ANEEL. Financial Charges - In view of provision in Accounting Instruction 6.3.10 of the Accounting Guidelines for the Electric Power Public Utility Service, enacted by ANEEL Resolution 444 of October 26, 2001 and CVM Resolution 577 of Jun 05, 2009, which revoked CVM Resolution 193 of July 11, 1996, interest rates, monetary variance and financial charges related to financing obtained from third parties, effectively used in PP&E in progress, were appropriated to the orders in progress.

Financial leases - Certain lease agreements transfer most of the risks and rewards of owning an asset to the Company and its subsidiaries. These agreements are classified as financial leases and the respective assets are recognized at fair value or the present value of the minimum payments stipulated in the agreement. The items recognized as assets are depreciated accordin to the rates of depreciation applicable to each group of assets in accordance with Note 12. The finance charges arising from the financial lease contracts are allocated to the income statement over the period of the contract, based on the amortized cost and effective interest rate methods. Intangible assets - The Company and its subsidiaries' intangible assets refer to assets acquired from third parties recorded at total acquisition cost net of the respective amortization expenses. Intangible assets with a defined useful life are amortized according to the straight-line method at the rate of 20% p.a. Impairment - The recoverable value of property, plant and equipment and intangible assets is tested for impairment at least annually if there are indications of devaluation. The recoverable value of intangible assets without a defined useful life is tested for impairment annually. Current and noncurrent liabilities - Stated at the known amounts or estimated, plus, when applicable, the corresponding charges and monetary and exchange variations incurred up to the balance sheet date. A provision is recognized in the balanc Light © 2010. All rights reserved.

Pag.:191

Annual Sustainability Report

●

sheet when the Company and its subsidiaries have a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are recorded utilizing the best estimates of the risk involved. Pension plan and post-employment benefits to employees - Costs of sponsoring pension plans and any plan deficits are recognized on the accrual basis and pursuant to CVM Resolution 371/00 and IBRACON NPC 26 based on actuarial calculations prepared by an independent actuary.

When the benefits of a plan are increased, the portion of the increase in the benefit related to past service of employees is recognized in the statement of income according to the straight-line method during the average period until the benefits are realized. If the criteria for obtaining these benefits are met immediately, the expenditure is recognized immediately in the statement of income. The Company and its subsidiaries recognize all the gains and losses arising from defined benefit plans directly in the income statement.

●

Share-based remuneration plan - The effects of the share-based remuneration plan are calculated based on the fair value of equity instruments granted and recognized in the balance sheets and statement of operations as the contractual conditions are met. Current and deferred income and social contribution taxes – Current and deferred income and social contribution taxes are calculated at a rate of 15%, plus a 10% surcharge over taxable income in excess of R$240 for income tax and 9% over taxable income for social contribution on net income and include the offsetting of tax loss carry forward and negative basis of social contribution limited to 30% of the taxable income.

The deferred tax assets resulting from tax loss carry forwards, negative basis of social contribution and temporary differences were recorded in accordance with CVM Instruction 371of June 27, 2002, and consider past profitability and expectations of future taxable income, based on a technical feasibility study approved by management.

As provided for by Law 11941/09, the Company and its subsidiaries adopted the Transitional Taxation Scheme (RTT) so that the amendments which changed the procedure for recognizing revenue, costs and expenses used to calculate the net income for the yea do not affect the calculation of the taxable income and social contribution calculation base of companies that opt for the Transitional Taxation Scheme – RTT. For tax purposes the accounting methods and criteria in force at December 31, 2007 should be used.

●

Provision for contingencies – These are recorded by means of evaluation and quantification of lawsuits. The probability of loss is rated as probable according to Management and its legal advisers. Recording of electric power purchase and sale transactions through the Electric Power Commercialization Chamber (“CCEE”) - The cost of energy purchased and supply revenues are recognized on the accrual basis based on information published by CCEE, which is in charge of determining the amount and quantities of purchases and sales made within a regulated environment, or by Management estimate, when this information is not available.

Pag.:192

Annual Sustainability Report

The consolidated financial statements include Light S.A. and its subsidiaries, as listed below: Percentage interest 2008 (%) 2007 (%) 100 100 100 100 100 100 100 100 100 100 100 100 100 100

Light SESA Light Energia Light Esco Light Ger Light Hidro Instituto Light Itaocara Energia

The accounting policies have been consistently applied in all the consolidated companies and are consistent with those used in the previous year.

These consolidated financial statements were prepared pursuant to the consolidation rules of Law 6404/76, as amended by Laws 11638/07 and 11941/09 and CVM Instruction 247/96. Inter-company interests, balances of accounts receivable and payable and intercompany expenses were accordingly eliminated. 5. Regulatory Assets and Liabilities Consolidated Noncurrent Current 31/12/2009 31/12/2008 31/12/2009 31/12/2008 Assets Consumers, Concessionaires and Licensees (note 7) Rate Readjustment - TUSD

6.511 6.511

67.977 67.977

Prepaid Expenses (note 9) CVA - (b) Other Regulatory - (c) Portion "A" - (a)

258.251 206.631 51.490 -

381.624 222.245 27.469 131.910

36.121 36.121 -

125.071 125.071 -

TOTAL ASSETS

264.632

449.601

36.121

125.071

Liabilities Trade payables (note 14) Free Energy – reimbursement to the generators

(54.185) (54.185)

Other Payables (note 19) CVA - (b) Other Regulatory - (c)

(39.780) (3.273) (17.895)

(160.661) (143.947) (16.714)

(14.793) (14.793) -

(1.719) (1.719) -

Pag.:193

Annual Sustainability Report

Portion "A" - (a) TOTAL LIABILITIES OVERALL NET TOTAL a) Rationing:

(18.612) (93.965) 170.667

(160.661) 288.940

(14.793) 21.328

(1.719) 123.352

The electric power distribution and generation companies’ revenue (free energy) for the rationing period is being recovered through the “Extraordinary Rate Recovery - RTE”, which expired for the billing of Light SESA’s lost revenue in February 2008. In June 2008, Light SESA wrote off the items related to the extraordinary rate recovery, free energy and its respective provisions worth R$291,448, which were not recorded within the 74-month term established by ANEEL in the Emergency Program to Reduce Electricity Consumption (PERCEE), without affecting the income. The Company maintains constant initiatives at both ANEEL and the courts in order to attempt to recover these losses.

Pursuant to the guidelines in ANEEL Order 4722 issued December 18, 2009, Distribution Concessionaires determine the amounts payable to the Generation Concessionaires according to the calculation established in Resolution 387 of January 12, 2010. The amount estimated was recorded under trade payables under the liabilities and charged to financial income/loss (see note 14). As of December 31, 2009 this amounted to R$54,185. Due to the expiry of the deadline for the RTE billing (Revenue Loss), the Variation in “Portion A” items (from January 1, 2001 to October 25, 2001) started to be recovered from March 2008 pursuant to ANEEL Directive Release 267/04.

In accordance with ANEEL rules, the additional rate should remain until the end of the month in which the ratified amount is fully amortized, duly restated by the Selic interest rate. In the case of Light SESA, the amortization terminated in June 2009. The amounts billed after the ratified amount of Portion A was amortized were recognized in the rate readjustment for 2009, amounting t R$23,003, and are being returned to the consumers. This amount is being recorded under Other Debits in the current liabilities. b) Memorandum account for Variance of Portion “A” Items - CVA Records the variance during and SELIC interest in the period between the annual rate adjustments for the purchase of energy; the rate for transportation of electric power from Itaipu; the Fuel Usage Quota – CCC; the Economic Development Account – CDE; System service charges – ESS; the rate for the use of transmission facilities of the national electric grid; and financial compensation for the use of water resources – CFURH and the Alternative Electricity Sources Incentive Program – PROINFA.

The amounts recorded under current (assets and liabilities) refer to amounts already ratified by ANEEL in November 2008, when the rate review was concluded. The amounts recorded under non-current represent the estimated formation of CVA to be ratified i the next rate adjustment (November 2010). CVA Breakdown Consolidated Assets Current 31/12/2009 31/12/2008 CVA Breakdown Fuel Usage Quota - CCC

141.650

Noncurrent 31/12/2009 31/12/2008 18.858

31.871 Pag.:194

Annual Sustainability Report

Energy Development Account - CDE Cost of electricity acquisition System Service Charges - ESS PROINFA Transportation of electric power from Itaipu Transportation of electric power to national grid TOTAL - CVA

158.226 10.970 25.431 984

73.145 2.620

268 3.885 633 324

75.419 14.200 825

11.020 206.631

4.830 222.245

12.153 36.121

2.756 125.071

Consolidated Liabilities Current 31/12/2009 31/12/2008 CVA Breakdown Fuel Usage Quota - CCC Energy Development Account - CDE Cost of electricity acquisition System Service Charges - ESS PROINFA TOTAL - CVA c) Other Regulatory Assets/Liabilities

(2.592) (681) (3.273)

Noncurrent 31/12/2009 31/12/2008

(30.863) (109.934) (3.150) (143.947)

(14.793) (14.793)

(1.664) (55) (1.719)

Finance costs transferred in the second rate review of the subsidiary Light SESA in accordance with Normative Resolution 905 of November 4, 2008, as per the table below: Assets Consolidated 31/12/2009 31/12/2008 Other Regulatory Assets Financial Adjustment TUSD Generating Companies Financial Adjustment Final Review Furnas Connection Involuntary Exposure Guarantees at Auction (CCEAR) Luz para Todos Program Review 2008 - Financial Items TOTAL

3.655 105 45.668 201 1.828 51.490

31/10/2009

27.033 174 113 149 27.469

Liabilities Consolidated 31/12/2009 31/12/2008

Ratified on

4.579 143 56.442 249 2.276 63.689 Ratified on 31/10/2009

Pag.:195

Annual Sustainability Report

Other Regulatory Liabilities Financial Adjustment TUSD Generating Companies Boundary Adjustment CVA in Process Onlending of energy overcontracting (art.38 of Decree 5163/04) TOTAL 6. Cash and cash equivalents

(10.119) (1.225) (369)

(977) -

(12.519) (1.504) (456)

(6.182) (17.195)

(15.737) (16.714)

(7.641) (22.120)

Parent Company Consolidated 31/12/2009 31/12/2008 31/12/2009 31/12/2008 12.027 40.206 801.233 549.097 2.557 50 27.139 41.029 14.584 40.256 828.372 590.126

Short-term investments Cash on hand Total

Parent Company 31/12/2009 31/12/2008 Interest-earning bank deposits: Rate Maturity CDB CDI Daily Overnight Fixed Daily Other CDI Daily Total 7. Consumers, Concessionaires And Licensees (Customers)

12.027 12.027

40.206 40.206

Consolidated 31/12/2009 31/12/2008 801.233 801.233

547.919 992 186 549.097

Consolidated 31/12/2009 31/12/2008 CURRENT Billed Sales Unbilled Sales Financing of debts (a)

Sales at CCEE Supply and charges related to the use of the electric grid Rate recoverable credits (note 5)

(-) Allowance for doubtful accounts

NONCURRENT Financing of debts (a)

1.678.167 286.170 153.421 2.117.758

1.729.885 260.361 140.874 2.131.120

1.001 54.946 6.511 62.458

613 52.412 67.977 121.002

(817.851) 1.362.365

(901.290) 1.350.832

297.798 297.798

292.594 292.594 Pag.:196

Annual Sustainability Report

a) The balances of financed debts are adjusted to present value, where applicable, pursuant to Law 11638/07. Present value is calculated for each renegotiation of consumer debt (financing in installments), based on interest rates that reflect the term and the risk of each transaction, at an average of 1% per month.

The allowance for doubtful accounts was made in an amount deemed sufficient to cover any losses in the realization of credits and i in accordance with ANEELs instructions summarized below:

Clients with material debts (large clients): - Individual analysis of the trade accounts receivable by consumption sector, deemed unlikely to be received.

For the other cases: - Residential consumers more than 90 days overdue - Commercial consumers more than 180 days overdue - Industrial and rural consumers, public sector, public lighting, public utilities and other – more than 360 days overdue.

Overdue and outstanding balances related to electric power billed to consumers and financed debts are distributed as follows:

Balances outstanding Residential Industrial Commercial Rural Public Authorities Public Lighting Public Service Billed Sales and renegotiated debts (Current and non-current)

148.915 24.296 130.502 521 34.839 4.506 268.337 611.916

31/12/2009 Overdue Overdue Overdue over 90 Total up to 90 days days 158.614 746.228 1.053.757 15.887 175.937 216.120 45.920 200.665 377.087 282 634 1.438 18.935 107.147 160.921 2.124 34.415 41.045 357 10.325 279.019 242.119 1.275.351 2.129.386

Total

Pag.:197

Annual Sustainability Report

days Residential 187.010 135.907 758.851 1.081.768 Industrial 27.127 17.671 196.919 241.717 Commercial 130.691 38.719 177.802 347.212 Rural 584 272 531 1.387 Public Authorities 27.355 19.330 95.172 141.857 Public Lighting 12.239 2.822 35.967 51.028 Public Service 274.160 2.544 21.680 298.384 Billed Sales and renegotiated debts (Current and non-current) 659.166 217.265 1.286.922 2.163.353 8. Taxes Parent Company Consolidated Assets Liabilities Assets Liabilities 31/12/200931/12/200831/12/200931/12/2008 31/12/200931/12/200831/12/200931/12/2008 CURRENT IRPJ and CSLL Tax Credits (a) 703 284 102.073 107.818 IRRF recoverable 11.522 11.522 IRRF payable 2 2 Deferred IRPJ and CSLL (b) 233.213 270.493 COFINS - PAES financing (Refis II) (c) 2.701 INSS - PAES financing (Refis II) (c) 8.272 Recoverable ICMS (f) 109.704 123.440 ICMS payable 5.561 15.166 Tax Financing Law 11941/09 (d) 21.685 Recoverable PIS/COFINS (g) 6.634 103.945 PIS/COFINS payable 57.420 51.112 Prepaid IRPJ / CSLL 71 181.364 204.552 Provision for IRPJ / CSLL - 188.835 143.394 Other 53 10 31.371 14.734 11.677 9.814 TOTAL 774 284 53 10 675.881 836.504 285.180 230.461 NONCURRENT Deferred IRPJ and Light © 2010. All rights reserved.

Pag.:198

Annual Sustainability Report

CSLL (b) 780.076 1.036.759 IRPJ and CSLL – Unrealized overseas profits (d) - 286.337 Tax Financing Law 11941/09 (d) - 303.585 PIS/COFINS PAES financing (Refis II) (c) 9.455 INSS - PAES financing (Refis II) (c) 28.951 Recoverable ICMS (f) 40.767 72.807 TOTAL 820.843 1.109.566 303.585 324.743 a) This balance consists of recoverable tax credits derived from withholdings on short-term investments and by government authorities amounting to R$22,951 and IR/CS prepayment credits for FYs 2007 and 2008 of R$79,122. The change in the amounts in the year is determined by the monthly restatement at the SELIC rate in the amount of R$24,726, the recording of new credits of R$125,077, net of offsetting in the year of R$155,548, of which R$23,356 consists of other taxes in the period and R$132,192 derives from the LIR/LOI write-off. b) The tax credits include amounts recoverable within 10 years, as set forth in CVM Instruction 371/02 and based on the assumption the credits will not expire. In order to justify these deferred tax credits, Light SESA restated, already taking into account realizations up to December 2009, the technical feasibility study approved by the Board of Directors and evaluated by the Audit Committee, based on the projections prepared in December 2008 and approved by the board of directors at the time. The feasibility study indicates the balance will be recovered within 4 years. The table below presents the deferred tax assets by estimated year of realization: 2010 2011 2012 2013 Total – Light S.A. and subsidiaries

233.213 269.392 222.629 288.055 1.013.289

Deferred assets are as follows: Consolidated 31/12/2009 31/12/2008 ASSETS AND LIABILITIES - CURRENT AND NONCURRENT IRPJ and CSLL - negative basis Allowance for doubtful accounts Provision for profit-sharing Light © 2010. All rights reserved.

463.694 274.865 8.916

770.681 300.922 11.288 Pag.:199

Annual Sustainability Report

Provisions for labor contingencies Provisions for tax contingencies Provisions for civil contingencies Effects of the adoption of Law 11638/07 Other provisions

55.642 61.027 87.289 19.328 41.762 1.012.523 1.012.523

(-) Provision for no recovery Total - Light SESA

56.007 136.060 94.932 19.967 31.592 1.421.449 (118.462) 1.302.987

IRPJ and CSLL negative basis - Light Energia S.A. and Light Esco S.A. 766 4.265 Total - Consolidated 1.013.289 1.307.252 c) Special Tax Debt Financing Program – PAES (REFIS II) – On December 28, 2009, the outstanding balance of the federal government’s PAES financing program was settled in full, corresponding to the outstanding amount informed by the Brazilian tax authorities – FRB of R$5,566. In respect of the PAES financing program for Social Security debts, the outstanding balance was refinanced under the new REFIS program – Law 11941/09, the figures and effects of which have been disclosed in the note below

d) New REFIS program (Law 11941/09) – On November 06, 2009, the board of directors of the subsidiary LIGHT SESA approved its entry into the tax financing and reduction program established by Law 11941/09.

The main benefits of entering the new Refis program were a reduction to the fines and interest of R$128,921, the possibility of using tax loss carry forwards to settle the remaining balance of the fines and interest, in addition to the dispersal of financed cash. The table below denotes the taxes that were included in the financing and the changes in the respective balances that have been provisioned for since the latest quarterly information (September 30, 2009). Balances at 09/30/2009 Offset of

Debit

PAES Social Security COFINS 1%

Amount Reduction Total Recording Additional Taxes Provision Restatement of Fine Debt Fine of Refinanced and and Fine and (Law Payable Contingencies Offsetting And included interest Provision interest Interest in REFIS 11941/09) (tax losses)

(32.009) -

(231.245)

1.323

(12.376)

(691)

(19.996)

9.559

(33.503) 16.706

(16.797)

44.962 (206.970) 106.853

(100.117) Pag.:200

Annual Sustainability Report

IRPJ and CSLL LIR/LOI (303.748) 130.612 - (27.643) 27.576 (173.202) 47.543 (125.659) Offset IRPJ not ratified (LIR/LOI) (7.012) (5.442) 1.851 (10.602) 3.590 (7.012) Offset COFINS not ratified (LIR/LOI) - (12.700) (10.420) 3.494 (19.626) 6.926 (12.700) Offset CSLL not ratified (LIR/LOI) (2.634) (2.044) 695 (3.982) 1.349 (2.634) CSLL (deduction JCP) (20.448) (45) (5.392) 6.553 (19.332) 12.797 (6.536) CSLL (stayed) (7.250) (13) (8.830) (5.319) 3.805 (17.606) 5.478 (12.129) CPMF (symbolic exchange transactions) (3.569) (2.659) 915 (5.314) 1.745 (3.569) IRPJ / CSLL Law 8200/91 (20.783) (63) (6.725) (23.518) 12.913 (38.176) 26.923 (11.254) INSS – quarterly basis (75.980) (321) 16.848 13.442 (46.011) 25.779 (20.232) INSS joint liability (208) (662) 163 (706) 374 (333) IRPJ (voluntary disclosure) (6.323) 1.150 (5.173) 2.781 (2.391) CSLL (stayed) (1.850) (5.428) 1.842 (5.435) 3.585 (1.850) (335.757) (355.914) 130.802 (43.319) (110.372) 128.921 (585.639) 262.42 (323.211) The table above shows that the amount of R$585,639 was initially included in the Refis program. Given that R$262,428 was offset against the tax loss carry forwards, the actual portion of the financing that will result in future cash payments is R$323,211. This debt of R$323,211 is being repaid over 29 installments to the PAES financing program for Social Security debts and other debts over 180 installments. These programs generated a gain in income of R$152,085, of which R$27,722 consists of financial income and R$124,363 consists of income and social contribution taxes. Light © 2010. All rights reserved.

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e) On February 20, 2003, Light SESA filed Writ of Mandamus 2003.51.01.005514-8 requesting an injunction that would release from the payment of income and social contribution taxes on: (i) profits earned by the companies LIR Energy Limited (LIR) and Light Overseas Investment Limited (LOI) before they are effectively available, in which case Article 74 (sole paragraph) of Provisional Measure 2158-35, of August 24, 2001 (MP 215835), for the periods 1996 to 2001, shall not apply

(ii) equity income from the companies LIR and LOI, where the rule established in article 7 of SRF IN 213 dated October 07, 2002 does not apply.

Due to its entry into the new REFIS program, as mentioned in the previous item, the Company will discontinue part of the writ of mandamus regarding when the tax is due (cash basis versus accrual basis), but will continue the dispute regarding the tax payable on equity income in the net income of subsidiaries, pursuant to the terms and deadlines of article 13 (4 and 5) and article 2 of PGFN/RFB joint ordinance 13 of November 19, 2009. f) The ICMS recovered as of December 31, 2009 includes R$34,675 (R$72,011 as of December 31, 2008) of credits resulting from the renegotiations of CEDAE debt in July and December 2006.

g) This includes offsettable tax credits deriving from alteration of the calculation bases for PIS and COFINS tax for the period from February/04 to April/08, in which certain sector-specific charges were deducted from the calculation bases for these taxes.

In relation to the period November 2005 through April 2008, the amount related to credits assessed is being transferred to consumers. The amount of R$11,622 (R$46,893 as of December 31, 2008) has therefore been recorded under other debits - see Note 19. Reconciliation of the effective and statutory rates of the provision for income and social contribution taxes:

Profit before income and social contribution taxes (LAIR) Profit shares Adjusted income basis for taxation Combined income and social contribution tax rate Income and social contribution taxes calculated at the statutory rates Income and social contribution tax effect on permanent additions and exclusions

Consolidated 31/12/2009 31/12/2008 825.734 1.307.511 (20.507) (31.527) 805.227 1.275.984 34% 34% (273.777) (433.835) 109.409 29.037

Income and social contribution tax effect on equity in the earnings of subsidiaries - LIR/LOI (87.463) 182.961 Offshore profits (52.582) (81.158) Deferred tax credits not recognized CVM 371/02 - Light S.A. (18.863) Reversal of Deferred IRPJ/CSLL Provision 118.462 Tax incentives s 4.332 1.895 Other 86 (431) Income and social contribution taxes in the income statement (200.396) (301.531) Light © 2010. All rights reserved.

Pag.:202

Annual Sustainability Report

Income and social contribution taxes in income Deferred Income and social contribution taxes in income

(168.994) (161.410) (31.402) (140.121) (200.396) (301.531)

9. Prepaid Expenses Parent Company Consolidated 31/12/2009 31/12/2008 31/12/2009 31/12/2008 CURRENT Overall Agreement for Electric Power Sector – Portion "A" (Note 5) CVA (note 5) Financial Components – IRT (Note 5) Other Total NONCURRENT CVA - (note 5) Other Total 10. Other accounts receivable

175 175

135 135

206.631 51.490 2.381 260.502

131.910 222.245 27.469 1.667 383.291

36.121 1.658 37.779

125.071 4.364 129.435

Parent Company 31/12/2009 31/12/2008

Consolidated 31/12/2009 31/12/2008

CURRENT Advance to Suppliers and Employees 31 30 20.395 11.835 Property rental 425 113 Subsidy to low-income segment 46 1.045 Public lighting fee 25.119 25.740 Reimbursable Expenditure 10.779 13.360 Subsidy to low-income segment (a) 15.256 49.926 Other receivables - ILP 18.634 18.634 Other 1.547 137 9.362 5.860 Total 20.212 167 100.016 107.879 NONCURRENT Assets and rights for disposal 7.229 11.597 Provision for CVA 13.329 Other 1.496 1.494 Total 8.725 26.420 a) R$3,373 of the amount recorded has been ratified by ANEEL but is still pending receipt, and R$11,883 is undergoing ratification. 11. Investments Parent Company Consolidated 31/12/2009 31/12/2008 31/12/2009 31/12/2008 Appraised by equity accounting: Light © 2010. All rights reserved.

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Annual Sustainability Report

Light SESA Light Energia S.A. Light Esco Prestação de Serviços Ltda Lightger S.A. (a) Lighthidro Ltda (a) Itaocara Energia (a) Subtotal

2.555.131 229.201 27.825 29.665 50 15.586 2.857.458

2.598.541 143.054 17.042 3.289 50 849 2.762.825

Accounted for at cost Income Assets Other Subtotal Total

1.169 1.169 2.858.627

1.533 1.533 2.764.358

3.796 11.297 5.295 20.388 20.388

3.796 7.097 2.722 13.615 13.615

(a)Preoperational company INFORMATION ABOUT SUBSIDIARY COMPANIES Light SESA Light Energia Light Esco Light Ger Light Hidro Instituto Light Itaocara Energia 31/12/2009 Ownership Interest (%) 100 100 100 100 100 100 100 Share capital paid in 2.082.365 77.422 7.584 23.791 50 300 17.294 Shareholders’ equity 2.555.131 229.201 27.825 29.665 50 15.586 Proposed dividends (402.149) (26.833) (3.358) Dividends Paid (481.564) (18.074) Additional dividends paid (169.729) Net income for the year 528.465 112.980 14.141 4.585 140 31/12/2008 Ownership Interest (%) 100 100 100 100 100 100 100 Share capital paid in 2.082.362 77.422 7.584 2.000 50 300 2.697 Shareholders’ equity 2.598.541 143.054 17.042 3.289 50 849 Dividends Paid (350.766) (41.387) Proposed dividends (481.564) (18.074) Net income for the year 918.164 76.101 6.280 Changes in Investments in Subsidiaries Light Light Light Light Light Itaocara Instituto Total SESA Energia Esco Ger Hidro Energia Light Balances at 12/31/2008 2.598.541 143.054 17.042 3.289 50 849 - 2.762.825 Capital increase 3 - 21.791 14.597 36.391 Aditional dividends paid (169.729) - (169.729) Proposed dividends (402.149) (26.833) (3.358) - (432.340) Equity in net income of

Pag.:204

Annual Sustainability Report

subsidiaries 528.465 Balances at 12/31/2009 2.555.131 12. Property, plant and equipment

112.980 229.201

14.141 4.585 27.825 29.665

140 15.586

- 660.311 - 2.857.458

Consolidated 31/12/2009

31/12/2008 PROPERTY, PLANT AND Accumulated EQUIPMENT Historic Cost Net Value Net Value Depreciation ACTIVITY Generation 954.298 (450.790) 503.508 520.701 Transmission 17.299 (7.936) 9.035 9.363 Distribution 6.246.514 (3.054.523) 3.191.991 3.128.891 Management 250.783 (159.695) 91.088 103.358 Sales 28.335 (15.832) 12.503 14.920 In Progress 7.497.229 (3.689.104) 3.808.125 3.777.233 Generation 121.109 121.109 64.561 Distribution 489.350 489.350 328.784 Management 80.550 80.550 44.451 Sales 2.703 2.703 1.631 In Progress 693.712 693.712 439.427 Total Property, plant and equipment 8.190.941 (3.689.104) 4.501.837 4.216.660 Special obligations linked to the concession (a) (189.986) 7.236 (182.750) (157.302) Total Property, plant and equipment 8.000.955 (3.681.868) 4.319.087 4.059.358 a)The balance of special obligations derives from the consumer’s financial income and appropriation of the Federal Government an federal, state and municipal funds to finance the work necessary to meet the electric power demand.

Consolidated 31/12/2009 31/12/2008 Consumer contributions 134.332 109.035 Consumer contribution depreciation (4.951) (702) Donations/subsidies for investments 37.721 37.639 Depreciation of donations/subsidies for investments (1.722) (253) Research and Development 17.933 11.662 Depreciation of research and development (563) (79) Total 182.750 157.302 Pursuant to ANEEL Regulatory Resolution 234, special obligations linked to the concession shall be amortized at the same property, plant and equipment depreciation rates, using an average rate from the second cycle of the periodic rate review (from November 2008 at Light SESA). The average amortization rate of special obligations is therefore 3.5% and was determined taking into account the distribution registration units. The change in property, plant and equipment was as follows: Consolidated Light © 2010. All rights reserved.

Pag.:205

Annual Sustainability Report

Balances at 31/12/2008

Additions

Writeoffs

Transfers between accounts

Balances at 31/12/2009

PP&E IN PROGRESS Cost Generation 949.107 7.517 (2.326) 949.107 Transmission 17.299 17.299 Distribution 6.024.520 309.878 (87.884) 6.024.520 Management 256.416 5.353 (10.987) 256.416 Sales 36.135 475 (8.274) 36.135 Total PP&E in Service - Cost 7.283.477 323.223 (109.471) 7.283.477 (-) Depreciation Generation (428.406) (23.496) 1.112 (428.406) Transmission (7.935) (329) (7.935) Distribution (2.895.629) (234.627) 75.733 (2.895.629) Management (153.060) (14.988) 8.353 (153.060) Sales (21.214) (2.294) 7.676 (21.214) Total PP&E in Service Depreciation (3.506.244) (275.734) 92.874 (3.506.244) PP&E IN PROGRESS Generation 64.561 71.121 (7.517) 64.561 Distribution 328.784 463.080 (1.111) (309.878) 328.784 Management 44.451 42.995 (5.353) 44.451 Sales 1.631 1.423 (475) 1.631 Total PP&E in progress 439.427 578.619 (1.111) (323.223) 439.427 TOTAL PROPERTY, PLANT 4.216.660 626.108 (17.708) (323.223) 4.216.660 AND EQUIPMENT (i) There are no assets or rights belonging to the Federal Government in use at the subsidiary Light SESA. (ii) PP&E in progress includes inventories of materials for projects totaling R$27,135 as of December 31, 2009 (R$53,990 as of December 31, 2008 and a provision for inventory loss of R$5,749 (R$1,488 as of December 31, 2008).

(iii) Part of the expenses on central management amounting to R$29,973 (R$23,026 in FY 2008) was capitalized in Property, Plan and Equipment in FY 2009, recorded as a transfer and expensed in the income statement with the period under operational expenses – general and administrative expenses. (iv)Annual depreciation rates In accordance with ANEEL Resolution 367 of June 02, 2009, the main depreciation rates are the following: Generation

(%) Distribution

(%) Sales

(%) Management

Buses

2,5 Capacitors bank

6,7 Buildings Equipment in

4,0 Buildings Equipment in

(%) Transmission System 4,0 conductor/td> Equipment in

(%) 2,5

Pag.:206

Annual Sustainability Report

Disconnector Buildings Intake equipment Intake structure Generator Engine group – generator Reservoirs, dams and water mains Local communication system Hydraulic turbine Average depreciation rate Generation 13. Intangible assets

3,0 Distribution keys 4,0 System conductor 3,7 Disconnector 4,0 Buildings 3,3 System structure

6,7 general 5,0 Vehicles 3,0 4,0 5,0

5,9 Meter

4,0

10,0 general 20,0 Vehicles

10,0 general 10,0 20,0 System structure 2,5 Reconnectors 4,3

2,0 Voltage regulator 4,8

6,7 Connector 2,5 Transformer Average depreciation rate/span> 3,8 Distribution

4,3 5,0 Average depreciation rate 4,9 Sales

Historic Cost

Average depreciation rate 11,3 Management

Average depreciation rate 11,3 Transmission

Consolidated 31/12/2009 Amortization Net Value Accumulated

4,8

31/12/2008 Net Value

Intangible assets Distribution Generation

183.413 5.799

(159.953) (5.666)

23.460 133

25.953 163

Management Sales In service

78.382 163.737 431.331

(57.916) (112.649) (336.184)

20.466 51.088 95.147

12.579 75.940 114.635

Distribution Generation Management Sales In Progress

13.285 115.728 56.946 502 186.461

13.091 117.658 35.146 428 166.323

Total Intangible Assets Net 617.792 (336.184) 281.608 280.958 Light Group classifies software as intangible assets, which are amortized at a rate of 20% p.a., in addition to easements, which are not depreciated as the entail the right to use certain areas of land, through which Transmission and Distribution Lines usually pass. The intangible generation assets in progress include R$115,651 referring to a remunerated publicly utility concession of Itaocara Energia Ltda., as described in note 19 (a). 14. Trade Payables

Pag.:207

Annual Sustainability Report

Parent Company Consolidated 31/12/2009 31/12/2008 31/12/2009 31/12/2008 CURRENT Sales at CCEE Electricity grid usage charge System service charges Free Energy – reimbursement of the generators (Note 5) (a) Energy auctions Binational Itaipu UTE Norte Fluminense Other

6.348 6.348

283 283

21.813 49.024 7.284 54.185 127.704 90.837 67.688 418.535 145.646 564.181

13.117 43.859 6.462 114.434 111.737 81.595 6.611 377.815 108.389 486.204

Materials and services Total a)Free Energy – Reimbursement to the Generators At an executive board meeting held December 15, 2009 ANEEL approved the method and procedures for calculating the balance of free energy and revenue losses of generators and distributors after the extraordinary rate recovery (RTE) stopped being included in supply rates. However, Resolution 387 of December 15, 2009, published January 12, 2010, concluded the calculation of the closing balances of the free energy and revenue losses and determined the agents’ reimbursements, calculated by the companies, to be validated by the agency. As a result of the aforesaid resolution, based on the new calculation method the Company determined the estimated payable of R$54,185, which considering the amount recorded as a financial expense affected the income statement by R$47,574. 15. Loans and Financing and Financial Charges Consolidated 31/12/2009

Date of Principal Financing Start date Entity TN - Par Bond 29/4/1996 TN Collateral Par Bond 29/4/1996 TN Discount Bond 29/4/1996 TN Collateral Discount Bond 29/4/1996

Currency/ Interest Index rate p.a.

Charges R$

CurrentNoncurrent Current Noncurrent -

Base date 12/31/2009 Amortization of Principal PR

Payment End Start method date

67.766

875

US$

Single 20242024

- (35.060)

U$ US$Treasury

Single 20242024

47.285

158

Libor + US$ 13/16

- (24.597)

U$ US$Treasury

Pag.:208

Annual Sustainability Report

TN - C. Bond 29/4/1996 TN - Debit. Conv. 29/4/1996 TN - Bib 26/4/1996 BNDES Imports 27/3/1998 KFW III , IV and V Tranche A/B/C 3/11/2000 Foreign Currency

5.760

20.161

443

8% Libor + US$ 7/8

6.452

9.678

209

628

US$

444

6% BNDES basket + - UMBNDES 4%

Libor + US$ 0.65%

1.439

14.304

85.861

1.548

Eletrobrás Various 1.212 CCB Bradesco 18/10/2007 BNDES FINEM 5/11/2007 82.616 BNDES FINEM direct 30/11/2009 BNDES FINEM + 1 30/11/2009 BNDES FINEM direct PSI 30/11/2009 Working Capital ABN Amro27/8/2008 80.000 RGR BNDES PROESCO12/12/2008 350 Sundry bank guarantees Local Currency 164.178 SWAP

US$

semiannual 20042014 semiannual 20042012 semiannual 19992013

4 Monthly 20002010

semiannual 20032010

2.596

450.000

8.381

309.808

1.715

Monthly 2013 2 to and a Ufir 5% 120Quarterly 2017 CDI + CDI 0.85% 6 Annual 20122017 TJLP + Tjlp 4.3% 57 Monthly 20092014

TJLP + Tjlp 2.58% 72 Mensal 20112017

59.765

TJLP + Tjlp 2.58% 72 Monthly 20112017

35.271

4.50% 101 Monthly 20112019

2.601 246

1.455

194

918.660 13.245 3.875

1.683

CDI + Cdi 0.95%

1 Annual 20092010

TJLP + Tjlp 2.5% 64 Monthly 20092014

Pag.:209

Annual Sustainability Report

Grand Total

178.482 1.004.521 18.668

1.683

Consolidated 31/12/2008 Date of Start date

Financing Entity TN - Par Bond 29/4/1996 TN Collateral Par Bond 29/4/1996 TN Discount Bond 29/4/1996 TN Collateral Discount Bond 29/4/1996

Currency/ Interest Index rate p.a.

Principal

Charges R$

Current Noncurrent

90.955

(43.507)

1.175

Single 20242024

U$ US$ Treasury

Single 20242024

Libor + US$ 13/16

Single 20242024

Single semiannual semiannual semiannual semiannual semiannual

511

(30.519)

TN - Flirb 29/4/1996 TN - C. Bond 29/4/1996 TN - Debit. Conv. 29/4/1996 TN - New Money 29/4/1996

1.159

7.731

34.790

726

8.660

21.650

248

1.142

TN - Bib 26/4/1996

281

1.124

1.791

597

4.399

1.932

Payment End Start method date

US$6,0000%

63.465

2.048

BNDES Imports 27/3/1998 Societe Generale II 20/7/2000 KFW III , IV, e V Tranche A/B/C 3/11/2000 Foreign

Base date 12/31/2008 Amortization of Principal

U$ US$ Treasury Libor + US$ 13/16

US$8,0000% Libor + US$ 7/8 Libor + US$ 7/8

US$6,0000% Cesta BNDES - Umbndes + 4% Libor + US$ 0.65%

Libor + US$ 0.65%

11 5

20242024 20032009 20042014 20042012 20012009 19992013

37 Monthly 20002010 semi6 annual 20032009

semiannual 20032010

Pag.:210

Annual Sustainability Report

Currency

27.211

140.487

2.724

Monthly 2013 2 to and a Ufir5,0000% 120Quarterly 2017 CDI + CDI 0.85% 10 Annual 20122017 TJLP + Tjlp 4.3% 66 Monthly 20092014

Eletrobrás Various 7.698 3.105 249 CCB Bradesco 18/10/2007 - 450.000 14.014 BNDES FINEM 5/11/2007 58.797 372.382 1.883 Working Capital CDI + ABN Amro27/8/2008 80.000 3.919 Cdi 0.95% 4 Annual 20092010 BNDES TJLP + PROESCO12/12/2008 20 576 Tjlp 2.5% 60 Monthly 20092014 Sundry bank guarantees 284 Local Currency 66.515 906.063 20.349 Grand Total 93.726 1.046.550 23.073 TN - National Treasury/em> PR - Remaining Instalments On November 06, 2009 Light SESA obtained consent from ANEEL for the financing contract with Banco Nacional de Desenvolvimento Econômico e Social (BNDES) worth R$510,871. These loans are part of the FINEM credit facilities to be used to expand and modernize the electric system. The contract was signed with the BNDES on November 30, 2009 and the first payment was released on December 28, 2009 in the amount of R$145,900 for Light SESA and R$8,900 for Light Energia.

In addition to the collateral presented in the table above, the loans are secured by other collateral worth R$35,015, an endorsemen from Light S.A. and receivables worth approximately R$60,091. The principal of loans and financing matures as follows (excluding financial charges): Consolidated 31/12/2009 Foreign currency

Local Currency 2009 2010 Total (current) 2010 2011

164.178 164.178 99.603

14.304 14.304 12.421

Total 178.482 178.482 112.024

31/12/2008 Local Foreign Currency currency 66.515 27.211 66.515 27.211 159.635 19.201 78.987 16.672

Total 93.726 93.726 178.836 95.659 Pag.:211

Annual Sustainability Report

2012 182.641 9.196 191.837 153.987 12.342 166.329 2013 182.628 5.970 188.598 153.973 8.012 161.985 2014 161.736 2.880 164.616 134.139 3.866 138.005 2015 99.397 99.397 75.133 75.133 2015 onwards 192.655 55.394 248.049 150.209 80.394 230.603 Total (noncurrent) 918.660 85.861 1.004.521 906.063 140.487 1.046.550 Total (current and noncurrent) 1.082.838 100.165 1.183.003 972.578 167.698 1.140.276 In percentage terms, the variation of major foreign currencies and economic indicators, which are used to adjust loans, financing an debentures, was as follows in the years:

USD EUR UMBNDES IGP-M CDI SELIC

31/12/2009 (25,49) (22,57) (25,66) (1,71) 9,87 9,92

31/12/2008 31,94 24,13 33,86 9,81 12,37 12,48

Covenants The funding of CCB Bradesco and the loans with ABN Amro and BNDES FINEM, classified as current and non-current, requires that the Company maintain certain debt ratios and interest coverage. In the year ended December 31, 2009, the Company and its subsidiaries are in compliance with all required debt covenants. 16. Debentures and Financial Charges Consolidated Base date 12/31/2009 31/12/2009 Currency/ Amortization of Principal Interest Date of Means of Principal (1) Charges R$ rate % p.a. End Index PR Start date Financing Entity Start date CurrentNoncurrentCurrentNoncurrent payment BNDES Debentures 1st 16/2/1998 7.676 - 381 Issuance Debentures 4th 30/6/2005 19 88 Issuance Debentures 5th 22/1/2007 68.221 869.647 17.730 Issuance Debentures 6th 01/06/2009 - 296.024 2.385 Issuance Local Currency 75.916 1.165.759 20.496 PR - Remaining Instalments

Tjlp

TJLP + 1 4%

semi2000 2010 annual

TJLP + 66 Monthly2009 2015 4% CDI + Cdi 17 Quarterly2008 2014 1,50% 115% do Cdi 1 Single2011 2011 CDI

Pag.:212

Annual Sustainability Report

Consolidated 31/12/2008 Amortization of Principal Currency/ Interest rate Means Date of Principal (1) Charges R$ % p.a. of End Index PR Start date Start date CurrentNoncurrentCurrentNoncurrent payment 31/12/2008

Financing Entity

BNDES TJLP + 4% Debentures 1st 16/2/1998 15.257 7.666 1.143 Tjlp 6Semestral2000 2010 a.a. Issuance Debentures 4th TJLP + 4% 30/6/2005 8 110 Tjlp 72 Mensal2009 2015 Issuance a.a. Debentures 5th CDI + 22/1/2007 18.311 937.773 26.804 Cdi 25Trimestral2008 2014 Issuance 1.50% Local Currency 33.576 945.549 27.947 PR - Remaining Installments The total principal is presented net of debenture issuance costs, pursuant to CVM resolution 556/08. These costs can be seen in th table below: 31/12/2009 Unappropriated Total Date Issued Amount incurred amount Cost Debentures 1st Issuance 1.062 8 1.070 Debentures 4th Issuance 7.444 24 7.468 Debentures 5th Issuance 5.316 7.132 12.448 Debentures 6th Issuance 1.315 3.976 5.291 TOTAL 15.137 11.140 26.277

Date Issued Debentures 1st Issuance Debentures 4th Issuance Debentures 5th Issuance

31/12/2008 Unappropriated Amount incurred amount

Total Cost

970

1.069

7.439

7.468

3.450

9.007

12.457

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Annual Sustainability Report

TOTAL 11.859 9.135 20.994 At the end of July 2009 Light SESA concluded its 6th simple, non-convertible debenture issuance. The issuance amounted to R$300,000, resulting in a net R$294,709 minus borrowing costs. This issue yields 115% of the CDI rate, as specified in the book building process. Issued on June 01, 2009 the debentures were approved by the CVM on July 21, 2009, with the company receiving the cash on July 24, 2009. This amortization will occur in a single payment on June 01, 2011. The debentures were used to accelerate the redemption of the 1st issuance of promissory notes by Light SESA, worth R$100,000, and to increase the Company’s working capital. The portions related to the principal of debentures have the following maturities (excluding financial charges): Local Currency 31/12/2009 75.916 75.916

31/12/2008 33.576 33.576 33.576

364.265 198.241 268.241 335.002 10 1.165.759 1.241.675

75.915 68.234 198.241 268.241 334.916 2 945.549 979.125

2009 2010 Total (current) 2010 2011 2012 2013 2014 2015 Total (noncurrent) Total

Covenants The 5th and 6th debenture issuances, recorded under current and non-current, require debt indicators and interest coverage be maintained. In the year ended December 31, 2009, the Company and its subsidiaries are in compliance with all required debt covenants. 17. Regulatory Charges - Consumer Contributions Consolidated Fuel Usage Quota (CCC) – 31/12/2009 31/12/2008This is a portion of rate revenu CURRENT paid by distribution companies Fuel Usage Quota – CCC 4.298 24.895to pay expenses on fuel used in Energy Development Account Quota – CDE 17.173 16.638insulated systems in order to Reversal Global Reserve Quota – RGR 5.359 6.428allow the electricity rates at Alternative Electricity Sources Incentive Program – PROINFA 10.792 5.369these locations to have levels Charges for emergency capacity and acquisition 73.169 73.403similar to those practiced in 110.791 126.733interconnected systems. Economic Development Account (CDE) – This aims at promoting the energy development of States and the competitiveness of energy produced from alternative sources, in the areas served by the interconnected systems, allowing the universalization of the electric power service. The amounts to be paid are also defined by ANEEL. Light © 2010. All rights reserved.

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Global Reversal Reserve (RGR) – This is a charge of the Brazilian electricity sector paid monthly by electric power concessionaires to provide funds for the reversal, expansion and improvement of the public electricity utility. Its annual value corresponds to 2.5% o concessionaire investments in electricity related assets, limited to 3.0% of their annual revenue.

Alternative Electricity Sources Incentive Program – PROINFA – Created by Law 10438/2002, Proinfa aims to foster the progressive use of alternative renewable energy sources such as small hydroelectric power stations (SHPs), wind farms and therma power plants. The cost of the program, whose energy is purchased by Eletrobrás, is paid by all end consumers (free and captive) o the National Interconnected System – SIN, except for low-income consumers with a monthly consumption equal to or less than 80 (kWh).

Emergency Capacity Charge and Emergency Acquisition Charge (ECE and EAE) – Operational, tax and administrative costs incurred by Comercializadora Brasileira de Energia Emergencial – CBEE to contract generation or power capacity, apportioned to the end electricity consumers served by the National Interconnected System in proportion to their individual consumption. 18. Provision for Contingencies Light S.A. and its subsidiaries are party to tax, labor and civil lawsuits and regulatory proceedings before the judicial and administrative courts. Management periodically assesses the risks of contingencies related to these proceedings, and based on the opinion of its legal advisers records a provision for risks when unfavorable decisions are probable and whose amounts are quantifiable. In addition, it does not record assets related to lawsuits with a less-than-probable chance of success, as they are considered uncertain. Provisions for contingencies are as follows: Consolidated Current Noncurrent 31/12/2009 31/12/2008 31/12/2009 31/12/2008 597 163.655 164.128 256.726 257.507 166.426 493.823 1.640 87.123 83.002 2.237 673.930 998.460

Labor Civil Tax Other Total

Liabilities Write-offs Balance at 31/12/2008 Additions Restatement Labor 164.128 18.399 Civil 257.507 53.352 Tax 493.823 371 Other 83.002 3.982 Total 998.460 76.104 18.1 Labor Contingencies

12.999 29.281 3.213 45.493

Payments (16.380) (57.875) (2.519) (76.774)

Reversals

Reversal Law

11.941/09 (2.492) (9.257) - (357.049) (555) (12.304) (357.049)

Balance at 31/12/2009 163.655 256.726 166.426 87.123 673.930

Deposits judicial 7.426 24.412 35.967 1.655 69.460

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There are approximately 3,680 labor claims in progress (4,088 as of December 31, 2008) in which the Company and its subsidiaries are defendants. These labor proceedings are mainly claiming the following: overtime; danger hazard allowance; equal pay; punitive damages; several/joint liability for employees of outsourced companies; difference of 40% fine of FGTS (Government Severance Indemnity Fund for Employees) derived from the adjustment due to understated inflation.

In December 2007 the subsidiary Light SESA was served process regarding a civil action brought by the Office of the 1st District Public Prosecutor (MPT) for Labor Affairs, contesting the legality of outsourcing services related to the company's auxiliary activities and core and noncore business activities. A ruling in favor of the prosecutor's office was handed down on April 4, 2008. A stay was granted under the Ordinary Appeal lodged by Light SESA. On March 25, 2009, Light’s Ordinary Appeal was entertaine and accepted unanimously by the 8th Chamber of the Regional Labor Court. Light filed a review appeal, claiming there were no grounds for it to appear as a defendant. The MPT filed a motion for clarification which was not entertained. The MPT then filed a review appeal. On December 11, 2009 the rejection was published of the review appeal filed by Light and the MPT. Light SESA's chances of winning the appeal have been rated as ‘possible’ by the Company’s legal advisers. 18.2 Civil Contingencies The Company and its subsidiaries are defendants in approximately 39,506 civil legal proceedings (38,593 as of December 31, 2008), of which 14,947 are in the state and federal courts (11,763 as of December 31, 2008), among which are claims that can be accurately assessed amounting to R$747,873 (R$629,734 as of December 31, 2008) and 24,559 are in Special Civil Courts (26,830 as of December 31, 2008), with total claims amounting to R$377,124 (R$370,563 as of December 31, 2008). Civil Contingencies a) Civil proceedings b) Special civil court c) "Cruzado" Plan Total

Provisioned amount (probable loss) 31/12/2009 31/12/2008 129.153 117.880 29.555 33.783 98.018 105.844 256.726 257.507

a) a) The provision for the civil proceedings comprises lawsuits in which Light SESA is the defendant and where the claim will probably result in a loss in the opinion of the respective attorneys. The claims mainly involve alleged punitive and property damage as well as consumers challenging the amounts paid. The Company is also party to civil proceedings in which the chances of loss are rated as possible by the Company's legal advisors, meaning no provision has been established. The amount, currently assessed, represented by these claims is R$480,060 (R$358,383 as of December 31, 2008). Light SESA is also party to Public and Popula Civil Actions related to service rates, fees and charges, contracts, equipment, Plano Cruzado, interest and other matters. On December 31, 2009 management was unable to estimate the amounts involved in each of these actions based on the nature, scope and the chances of having to settle these claims, except for the public civil action mentioned in item “c” below.

On November 18, 2008, the Company and certain managers and shareholders were notified of a class action filed by an individual in the state of Minas Gerais, alleging irregularities in the acquisition of share control of Light S.A., among other things. The attorneys handling the case have rated as remote the chances of an unfavorable decision.

b) Lawsuits in the Special Civil Court are mostly related to matters regarding consumer relations, such as improper collection, undu power cut, power cut due to delinquency, grid problems, various irregularities, bill complaints, meter complaints and problems with ownership transfer. There is a limit of 40 minimum monthly wages for claims under procedural progress at the Special Civil Court. Provisions are based on the average of awards in the last 12 months. Light © 2010. All rights reserved.

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c) There are civil actions in which a number of industrial consumers have challenged, in court, the increases in electric power rates approved in 1986 by the National Department of Water and Electric Power (“Cruzado Plan”). The provision includes a public clas action under which the award is being settled. 18.3 Contingências Fiscais Provisions for tax contingencies are as follows: Tax Contingencies a) PIS/COFINS b) PIS/COFINS – RGR and CCC c) INSS – tax assessment d) INSS – quarterly basis e) Law 8200/91 f) ICMS g) Social Contribution h) CIDE i) Other Total

Provisioned amount (probable loss) 31/12/2009 31/12/2008 214.237 8.561 39.291 21.504 88.039 4.792 4.239 166.426

17.709 37.756 92.677 20.063 76.610 27.076 4.593 3.102 493.823

Following the enactment of Law 11941/2009 which provided for the financing of federal tax debts, Light SESA elected to include number of liabilities subject to judicial and administrative proceedings in this financing program. In addition to the proceedings below, the following cases have been included in the financing program. (i) Voluntary disclosure of IRPJ in February and March 2000 (ii) CPMF on symbolic exchange transactions (iii) IRPJ and CSLL on overseas profits, recorded as taxes payable (see note 8-d).

a) PIS/COFINS: Light SESA is party to two judicial proceedings concerning the application of these taxes under Law 9718/98, as follows: In the first proceeding Light SESA contested the changes introduced by this Law related to (i) the broadening of the calculation base for these taxes and (ii) the grossing up of the COFINS tax rate from 2% to 3%. The appeal filed by Light SESA before the Supreme Federal Court (STF) was rendered final and unappealable regarding the broadening of the calculation basis, declaring the unconstitutionality of Article 3 (1) of Law 9718/98, with the respective reversal of the provision taking place in the 2n quarter of 2008, in the amount of R$432,358, and credited to the “financial expenses” item. In the second case, Light SESA claims that the amounts charged in a Collection Letter issued by the Federal Internal Revenue Department are barred by statute of limitations. An injunction was granted suspending collection of these amounts. This injunction was upheld by the Regional Federal Court and is currently pending a decision by the Higher Courts. A ruling on the merits is yet to be handed down by the lower court, and the company's legal advisors believe that an unfavorable ruling is possible. Light SESA elected to include this proceeding in the new financing program (Law 11941/09), as per note 8.

b) PIS/COFINS – RGR and CCC: This contingency provision corresponds to the portion not included in the PAES financing arising from a dispute over a fine. Although unsuccessful in administrative proceedings, Light SESA has secured a favorable decisio in judicial proceedings and is awaiting a decision on an appeal by the government. This amount also includes a portion corresponding to the COFINS tax rate increase for the period from April 1999 to December 2000, which is currently subject to an

Pag.:217

Annual Sustainability Report

administrative dispute. Light SESA elected to withdraw this proceeding and included it in the financing program (Law 11941/09). c) INSS – Assessment Notices: In December 1999 the INSS issued tax assessment notices claiming that the subsidiary is responsible for withholding tax on the services of contractors and that the INSS contribution is payable on profit sharing. Light SESA elected to include one of the proceedings in the financing program, which is the proceeding that was already in the PAES program. The variance of the balance relates to monetary restatement of the other proceedings, as per note 8.

d) INSS – quarterly basis: Light SESA is contesting the legality of Law 7787/89, which increased the social security contribution rate on payroll, arguing that the law also changed the calculation base for social security contributions during the period from July to September 1989. Under preliminary awards, the amounts payable by the company as social security contributions were offset. Following the advice of legal advisors, company management established a provision for the entire amount stated in the tax assessment notices issued by the INSS. This contingency was included in the new financing program (Law 11941/09), as per note 8. e) Law 8200/91: The provision established is related to the fact that depreciation expenses for the financial years 1991 and 1992 were fully utilized, contrary to the provisions contained in Law 8200/91(3)(I). Rulings in favor of the company have been handed down by first and second level courts. The case is currently pending a decision on an appeal brought by the Government. This proceeding was included in the new financing program (Law 11941/09), as per note 8.

f) ICMS: This provision is mainly related to a judicial dispute over the applicability of State Law 3188/99, which restricted the manner of appropriating ICMS credits derived from the acquisition of fixed assets, requiring companies to appropriate these credits in portions, when this restriction is not provided in Supplementary Law 87/96. There are other tax assessment notices being disputed administratively and judicially. This provision is restated annually in January by the UFIR (Fiscal Reference Unit).

g) Social Contribution: This provision is related to (i) a dispute over the deduction of the amount paid to shareholders as interest on shareholders’ equity in 1996 from the calculation base for CSLL tax, in which an injunction and a writ of mandamus have been granted pending a ruling on the Government’s appeal; and (ii) failure to add to the CSLL calculation base amounts related to a PIS/COFINS provision, when the requirement to pay these amounts had been suspended. With the administrative proceeding reaching the end of its course, a tax enforcement has been filed and the Company made a full deposit of the disputed amount, as well as filing a motion to stay the enforcement. These proceedings were included in the new financing program (Law 11941/09), as per note 8.

h) Contribution for Intervention in the Economic Domain (CIDE): This refers to a provision related to CIDE and payments made to offshore companies for services. The lower and high court decisions were unfavorable, and Light SESA is awaiting a ruling on its appeals before the superior courts. Since December 2003 the subsidiary has been paying the amounts due. The Company and its subsidiaries are also party to tax, administrative and judicial proceedings in which the chances of loss are rated as possible by the Company's legal advisors, meaning no provision has been established. The amount quantifiable thus far in these proceedings is R$1,156,600 (R$752,700 as of December 31, 2008). See below the main tax proceedings rated as a possible loss or that had effects in FY 2009: (i) Light SESA was assessed by the Federal Internal Revenue Department for late performance of the notification to submit Light © 2010. All rights reserved.

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Annual Sustainability Report

computer files for the financial years 2003 through 2005. The contestation was rejected and the Voluntary Appeal filed by Light is currently awaiting judgment. The value of the assessment restated up to December 31, 2009 is R$240,200 (R$222,200 as of December 31, 2008).

(ii) ICMS (Aluvale) – This refers to tax enforcements disputing the deferral of ICMS on electricity supplies to the consumer ALUVALE, as this is a major industrial consumer of electricity. A motion to stay the enforcements was filed. The motions filed against three of the tax enforcements were rejected, and Light subsequently filed the respective appeals. As of December 31, 2009 these tax assessments involve an amount of R$168,800 (R$168,800 as of December 31, 2008).

(iii) IRRF – Disallowance of tax offset. Light was informed of a decision informing about the disallowance of offsetting IRRF credits over financial investments and IRRF of electricity bills paid by public authorities, which were offset due to the negative balance of IRPJ in 2002. As a result, Light filed a Contestation, which is pending judgment. The amount involved as of December 31, 2009 is R$179,800 (R$171,500 as of December 31, 2008). (iv) Other - In addition to these cases, there are several other judicial and administrative disputes that the legal advisers have rated as possible, including a) ICMS on low income subsidies (b) transfer of ICMS credit (company RHEEM) (c) Voluntary Disclosure of PIS, COFINS, IRPJ and CSLL (d) ISS on regulated services (e) non-ratification of the COFINS offset against the negative IRPJ balance (f) non-ratification of the COFINS offset against the negative CSLL balance in 1999 (g) non-ratification of the COFINS offset against the negative CSLL balance in 2002 and 2003 and (h) non-ratification of the COFINS offset against the negative CSLL balance in 1998 and 1999. The amount involved in these disputes as of December 31, 2009 is R$241,800 (R$140,900 as of December 31, 2008). (v) PIS/COFINS pass-through - As of December 31, 2009 Light SESA was party to 52 lawsuits (1 as of December 31, 2008) filed by business clients challenging PIS and COFINS transferred to electricity bills, claiming a refund of all unduly paid amounts. (vi) ITR/IPTU – Light SESA is also party to several disputes related to the Municipal Real Estate Tax (IPTU) and the Rural Land Tax (ITR), for which the chance of defeat has been rated as possible by its attorneys, meaning no provision has been made. The amount involved in these proceedings is R$290,300 according to the latest procedural statement. 18.4 Other Contingencies a) Administrative Regulatory Contingencies The Company draws your attention to the regulatory contingencies of its subsidiary Light SESA deriving from administrative disputes with ANEEL:

a.1) Low income - Audit Report RF-LIGHT-04/2007-SFE issued in August 2007 by ANEEL conducted between July 02, 2007 and July 13, 2007 questioned the awarding of the corporate rate for certain consumers in the period and considered part of the subsidies approved and received by Light SESA from Eletrobrás amounting to R$266,379 to be improper. On September 29, 2009 ANEEL sent Light official letter 552/2009-SFE stating that the aforesaid audit report has been suspended while it is reviewin the audit method. The Company recorded a provision of R$53,381 to cover the risk of having to refund part of the subsidy already received, as to date the regulatory agency has not stated its position (ANEEL).

a.2) ANEEL Assessment Notice no. 009/2005 – The notice was issued on March 15, 2005 on the grounds that Light SESA: (i) incorporated the subsidiaries LIR Energy Limited and Light Overseas Investments (R$1,144) without the prior consent of ANEEL Light © 2010. All rights reserved.

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(ii) conducted transactions with these companies without the consent of ANEEL – (R$2,287) and (iii) failed to comply with ANEEL’s instruction to cancel the transactions and cease the company's activities – (R$3,431). The company appealed and the fine related to item (iii) was cancelled and the fines related to items (i) and (ii) were upheld. The fine related to item (ii) has been paid. A writ of mandamus has been filed in relation to the fine referring to item (i) and a judicial deposit of R$1,655 has been made (principal restated by the SELIC interest rates until the date the deposit was made). After the decision delivered on November 23, 2007 refusing the writ of mandamus, the Motion of Clarification was filed, and subsequently rejected by decision rendered on December 17, 2007. Light SESA filed an appeal against the ruling on January 25, 2008, applying for a stay of the appeal. On September 10, 2008, a decision was rendered to which an appeal was filed for remanding purposes only. Finally, on September 17, 2008, Interlocutory Appeal 2008.0.00.046455-8 was filed, in order to obtain the stay of the appeal and to prevent the amount deposited in the lawsuit being released. The Interlocutory Appeal was distributed to the Federal Superior Court Judge, who has no yet issued an opinion on the interim relief application. The amount as of December 31, 2009 is R$2,137 (R$1,944 as of December 31, 2008).

a.3) Assessment Notice 095/2009-SFE - The notice was issued on November 30, 2009, with a fine of R$3,982, on the grounds that Light SESA had infringed DEC and FEC indicators of 14 groups of consumers in 2008, for which a provision was made. Ligh SESA submitted a defense against the Interlocutory appeal on December 14, 2009 and is waiting for ANEEL to state its position.

b) Environmental Contingencies The public civil action proposed by the Municipality of Barra do Piraí against the subsidiary Light SESA, in which the plaintiff is claiming the remediation and recovery of environmental damage caused by the construction of the Santa Cecília and Santana dams, as an integral part of the system for transporting water from the Rio Paraíba do Sul basin to the Rio Guandu basin, feeding the Fontes, Nilo Peçanha and Pereira Passos plants. The case is currently on hold as the parties are trying to reach an settlement. There is a collection lawsuit concerning this public civil action which alleges that certain obligations were not complied with during the construction of the Santa Cecília and Santana plants, particularly regarding the silting and reforestation of the region. The suggested case amount is R$900. The ruling of the lawsuit equally depends on an expert examination and it is not possible to estimate the value of a possible award. The sum of historical lawsuits is approximately R$16,000, and the chance of defeat for both cases is possible. The provision as of December 31, 2009 is R$6,000. Due to the vertical disintegration process, this provision has been recorded at Light Energia. 19. Total Other Debits Parent Company Consolidated 31/12/2009 31/12/2008 31/12/2009 31/12/2008 CURRENT Advance from customers 8.691 CVA (note 5) 3.273 143.947 Compensation for use of water resources 4.293 3.274 Energy Research Company – EPE 1.038 7.404 National Scientific and Technological Development Fund – 2.173 14.808 FNDCT Energy Efficiency Program - PEE 151.366 118.745 Research and Development Program – P&D 75.399 60.320 Portion "A" (note 5) 18.612 Light © 2010. All rights reserved.

Pag.:220

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Public Lighting Fee Other rate charges (note 5) Other debts - reimbursement to consumers (note 8-g) Other Total

1.524 1.524

1.286 1.286

51.402 17.895 11.622 31.707 377.471

40.917 16.714 46.893 66.735 519.757

NONCURRENT CVA (note 5) 14.793 1.719 Provision for regulatory liabilities - overcontracting of energy 41.083 7.684 Reversal reserve 69.933 69.933 Use of public asset - UBP (a) 115.651 117.583 Other 9.838 12.684 Total 251.298 209.603 a) According to concession agreement 12/2001, dated March 15, 2001, that regulates the use of the hydroelectric power plant located on the Paraíba do Sul river, in the municipalities of Itaocara and Aperibé, the subsidiary Itaocara Energia Ltda. shall pay the Federal Government, for using the public asset, as of the date of its start-up (forecast for 2013) through to the end of the concession, or while it is using the hydroelectric resources. Payments shall be made in monthly installments equivalent to 1/12 of the proposed annual payment of R$2,017, restated by the IGP-M variation or to any other index that may substitute it, should such an index be abolished (see Note 13). 20. Pension Plan and Other Employee Benefits Light Group companies sponsor Fundação de Seguridade Social – BRASLIGHT, a nonprofit closed, supplementary pension entity founded to provide retirement benefits to the Company’s employees and pension benefits to their dependents. BRASLIGHT was incorporated in April 1974 and has three plans - A, B and C – established in 1975, 1984 and 1998, respectively, with about 96% of the active participants of the other plans having migrated to Plan C. Plans A and B are of the Defined Benefit type and Plan C provides mixed benefits. All are currently in effect.

On October 2, 2001, the Supplementary Pensions Office approved an agreement for settling the technical deficit and refinancing unamortized reserves, which are being amortized over 300 monthly installments beginning July 2001. The installments were restated according to the variance of the IGP-DI price index until May 2009 (with a one month lag) and actuarial interest of 6% per annum. In June 2009 the restatement index was changed to the IPCA (with a one month lag) instead of the IGP-DI. Changes in net actuarial liabilities in the year were as follows: Total Consolidated Pension Plan on 12/31/2007 891.915 Amortization in the year (85.126) Restatement in the year 153.548 Deficit equalization adjustments 71.824 Transfer from noncurrent to current Pension Plan on 12/31/2008 1.032.161 Amortization in the year (93.928) Restatement in the year 66.813 Surplus equalization adjustments (a) (48.616) Light © 2010. All rights reserved.

Current 73.585 (85.126) 13.767 85.518 87.744 (93.928) 64.345 -

Noncurrent 818.330 139.781 71.824 (85.518) 944.417 2.468 (48.616) Pag.:221

Annual Sustainability Report

Transfer from noncurrent to current 36.883 (36.883) Pension Plan on 12/31/2009 956.430 95.044 861.386 (a) Braslight recorded an actuarial surplus of R$48,616 , which resulted in an increase of R$71,824 in the deficit settlement agreement to the same amount, recorded in the income statement for the year. The breakdown follows of the provision as of December 31, 2009 for the defined-benefit retirement plans and also additional retirement and/or pension commitments for death deriving from court settlements or decisions related to injured employees, considered at the present value of the actuarial liability and other information required by CVM Resolution 371/00: Consolidated 2009 Reconciliation of actuarial assets and liabilities Fair value of the plan’s assets Present value of actuarial liabilities with overdue rights Present value of actuarial liabilities with rights falling due Net assets (unsecured liabilities) Net liabilities, CVM 371/2000 Balance of the adjusted and recorded agreement, as per deficit equalization agreement Provision CVM 371 - actuarial gains and losses

1.277.715 (1.824.939) (402.477) (949.701) (949.701)

1.169.535 (1.580.734) (360.558) (771.757) (771.757)

(956.430) -

(1.032.161) -

2009 Breakdown of actuarial liabilities Net liabilities, CVM 371/2000 - opening Sponsor Contributions Gains and losses related to actuarial deficit Expense (revenue) recognized in the statement of income Net liabilities, CVM 371/2000 - closing

(771.757) 95.300 (182.731) (90.513) (949.701) 2010

Current service cost Interest cost Return on investments Expected contribution from employees Estimated expected cost

1.654 212.216 (114.886) (61) 98.923 2009

Actuarial assumptions Nominal interest rate (discount) at present value of the actuarial liabilities Expected yield rate over nominal plan assets Annual inflation rate Light © 2010. All rights reserved.

2008

10,77% 10,77% 4,50%

2008 (1.001.048) 85.784 228.750 (85.243) (771.757) 2009 1.650 210.680 (121.732) (85) 90.513 2008 12,36% 12,44% 4,33% Pag.:222

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Salary growth rate Adjustment index of continued benefits Capacity factor Revolving rate General mortality table Disability table (plans A/B) Disability table (plan C settled) Mortality table of disabled people Active participants Retirees and pensioners participants (1) Table without aggravation 21. Related-party Transactions The Company’s main shareholders are: ●

●

6,59% 4,50% 98,00% Baseado na idade AT - 83 (1) LIGHT - Forte LIGHT - Forte IAPB-57 3.638 5.727

4,96% 4,33% 98,00% Baseado na idade AT - 83 (1) LIGHT - Forte LIGHT - Forte IAPB-57 3.690 5.686

Controlling Group - Companhia Energética de Minas Gerais – CEMIG, Andrade Gutierrez Concessões, Luce Empreendimentos e Participações S.A. and Rio Minas Energia Participações S.A. (RME) – A company controlled by Equatorial Energia (see note 23). BNDESPAR

Direct and indirect interests in operating subsidiaries are outlined in Note 1. A summary of related-party transactions in FYs 2009 and 2008 is presented below: Consolidated Contracts Link to Light with the same Assets Liabilities Revenue Expense S.A. group (Objectives and Itemcharacteristics 31/12/200931/12/200831/12/200931/12/200831/12/200931/12/200831/12/200931/12/2008 of the agreement) Strategic contract CEMIG electricity sale (party of the agreement controlling between Light Parent SESA and Company) 1 CEMIG 2.407 2.596 - 100.237 88.416 Strategic

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contract CEMIG electricity (party of the purchase controlling agreement Parent betweenLight Company) Light Energia and CEMIG Strategic contract Collection of CEMIG distribution (party of the system usage controlling charges Parent between Light Company) SESA and CEMIG Strategic contract Commitment CEMIG to electric (party of the basic grid controlling usage charges Parent between Light Company) SESA and CEMIG Strategic contract Commitment CEMIG to electric (party of the basic grid controlling usage charge Parent s between Company) Light SESA and CEMIG Strategic contract Equatorial Electricity (part of the sale controlling commitment Parent between Light Company) Energia CEMAR* Loans

2.528

2.454

22.553

21.458

180

148

2.059

2.012

555

379

16.977

12.985

9.220

111

12.985

1.106

1.105

8.758

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Annual Sustainability Report

BNDES 7

FINEM Loans

394.139

433.062

43.188

446

2.397

898

8.057

24.066

1.201

2.767

1.812

596

110

107

118

473

59.806

59.811

35.284

956.430 1.032.161

18.197

225.371

BNDES 8

Credit Facility Loans Debentures 1st issue Non9 convertible Loans Pró Esco and Energy Efficiency 10 Project Loans Debentures 4th Issuance 11 Convertible Loans Credit Facility 12 - Direct Loans Credit Facility 13 - Direct + 1% Loans

BNDES

BNDES Credit Facility 14 - Direct PSI Pension Plan BRASLIGHT Fundação de (Part of Seguridade controlling Social group) 15 BRASLIGHT

* Company controlled by Equatorial Energia S.A. A summary of agreements executed with related parties is presented below: Contracts with Link to Light the same S.A. group

Original Value

Date of Terms of Balance Contractual Maturity or termination or end remaining Terms term date 31/12/2009

Pag.:225

Annual Sustainability Report

(Objectives and Item characteristics of the agreement) Strategic contract electricity sale agreement between Light SESA and 1 CEMIG Strategic contract electricity purchase agreement betweenLight Light Energia 2 and CEMIG Strategic contract Collection of distribution system usage charges between Light SESA and 3 CEMIG Strategic contract Commitment to electric basic grid usage charges between Light SESA and 4 CEMIG Strategic contract Commitment to electric basic grid

Data

CEMIG (party of the controlling Jan/2006 614.049 Parent Company)

CEMIG (party of the controlling Jan/2005 156.239 Parent Company)

CEMIG (party of the controlling Parent Company)

CEMIG (party of the controlling

Nov/2003

30% of balance Dec/2038

520.394

Prices charged in the market

remaining regulated

Dec/2013

N/A

77.265

Prices charged in the market regulated

Indefinite

N/A

180

Prices charged in the market regulated

Dec/2002

Indefinite

N/A

555

Prices charged in the market regulated

Dec/2002

Indefinite

N/A

Prices charged in the market Pag.:226

Annual Sustainability Report

usage charge s between Light SESA and CEMIG Strategic contract Electricity sale commitment between Light Energia CEMAR* Loans

Parent Company)

Equatorial (part of the controlling 61.214 Jan/2005 Parent Company)

BNDES 7

regulated

Dez/2013

N/A

30.783

regulated

549.331 Nov/2007 Sep/2014

N/A

394.139

TJLP + 4.3% a.a.

FINEM Loans Credit Facility Loans Debentures 1st issue Nonconvertible Loans Pró Esco and Energy Efficiency Project Loans Debentures 4th Issuance Convertible Loans Credit Facility - Direct Loans Credit Facility - Direct + 1% Loans Credit Facility

Prices charged in the market

BNDES

14.147 Mar/1999 Apr/2010

N/A

446

Cesta BNDES + 4% a.a.

BNDES

105.000 Jan/1998

Jan/2010

N/A

8.057

TJLP + 4% a.a.

Dec/2008

Oct/2014

N/A

1.812

TJLP + 2.5% a.a.

BNDES

767.252 Jun/2005

Jun/2015

N/A

107

TJLP + 4% a.a.

BNDES

57.630 Dec/2009 Apr/2017

N/A

59.806

TJLP + 2.58% a.a.

BNDES

57.630 Dec/2009 Apr/2017

N/A

59.811

TJLP + 1% + 2.58% a.a.

BNDES

30.640 Dec/2009 Sep/2019

N/A

35.284

4.5% a.a.

BNDES

596

Pag.:227

Annual Sustainability Report

- Direct PSI Pension Plan BRASLIGHT Fundação de (Part of Seguridade 535.052 Jun/2001 controlling Social group) BRASLIGHT

Jun/2026

N/A

956.430

IPCA+ 6% a.a

* Company controlled by Equatorial Energia S.A. Related-party transactions took place on an arm’s length basis. Additional information – agreements in progress: In order to realize its capacity of developing and implementing new generation projects and taking into account the recognized capacity in this area of its shareholder Companhia Energética de Minas Gerais – CEMIG – CEMIG, Light entered into an Agreement (Agreement) which, among other provisions, establishes that the parties will jointly prepare business plans for the development and implementation of energy generation projects (Generation Projects). The Agreement also determines that the parties will enter into specific agreements for each of the Generation Projects to be implemented and the Company’s interest, directly or by means of its subsidiaries, in each one of these consortia will be fifty-one percent (51%) and CEMIG’s interest, directly or by means of its subsidiaries, will be forty-nine percent (49%). With its portfolio already containing projects under development, by way of its subsidiaries, Lightger Ltda., Itaocara Energia Ltda. and Light Energia S.A., Light group is officially party to three consortium agreements with Cemig Geração e Transmissão S.A. (Cemig GT), a wholly-owned subsidiary of CEMIG, founded to explore hydroelectric ventures in the regions of Paracambi, Itaocara and Lajes, respectively.

All the aforesaid private agreements were entered into by the parties under suspensive covenants, meaning their effectiveness relies on obtaining all the required authorizations or endorsements from the regulatory authorities, including but not limited to ANEEL, the regulatory and inspection agency of electric power services. 22. D&O Compensation The overall annual compensation of the members of the Company’s board of directors and executive board was set at R$1,922 by the extraordinary general meeting held March 18, 2009, and amended to R$1,948 by the extraordinary general meeting held September 28, 2009. The extraordinary general meeting held December 22, 2009 increased this amount by R$270, from R$1,948 to R$2,218. The compensation paid to the Company’s directors and officers in 2009 including social charges and other benefits amounted to R$2,029. 23. Shareholders’ equity a) Capital As of December 31, 2009 the share capital of Light S.A. consists of 203,934,060 book-entry common shares with no par value (203,933,778 as of December 31, 2008), worth R$2,225,822 (R$2,225,819 as of December 31, 2008), as follows: 31/12/2009 31/12/2008 Number of % Number of % shares Interest shares Interest 106.304.597 52,12 106.304.597 52,12

Pag.:228

Annual Sustainability Report

RME Rio Minas Energia Participações S.A. (*) Lidil Comercial Ltda Andrade Gutierrez Concessões S.A. Companhia Energética de Minas Gerais S.A. Luce Empreendimentos e Participações S.A.

26.576.150 26.576.149 26.576.149 26.576.149

13,03 100.719.912 49,39 5.584.685 2,74 13,03 13,03 13,03 -

Other 97.629.463 47,88 97.629.181 47,88 BNDES Participações S.A. - BNDESPAR 49.776.782 24,41 68.555.918 33,62 EDF International S.A. - 13.391.345 6,57 Public 47.593.781 23,34 15.681.918 7,69 Treasury Stock 258.900 0,13 Grand Total 203.934.060 100,00 203.933.778 100,00 The board of directors meeting held May 08, 2009 approved the Company’s capital increase through the exercising of subscription bonus rights on April 03, 2009. This increase took place through the issuance of 282 book-entry common shares with no par value

Light S.A. is authorized to increase its capital up to the limit of 203,965,072 common shares through a Board of Directors resolution, regardless of amendments to the bylaws. However, this increase is to occur exclusively upon the exercising of the subscription bonuses issued, strictly pursuant to the terms thereof (Bylaws, Article 5 (2)). On July 14, 2009 the market was offered 29,470,480 shares of Light S.A., consisting of 16,079,135 shares owned by BNDESPAR and 13,391,345 shares owned by EDF. On August 11, 2009 Banco Itaú BBA, the lead banker, exercised all of its option to acquire a supplementary batch of 2,700,000 shares owned by BNDESPAR. A total 32,170,480 shares were therefore offered, consisting of 18,779,136 shares owned by BNDESPAR and 13,391,344 shares owned by EDF. The total shares sold were equal to 15.8% of the Company’s share capital.

On November 17, 2009 the takeover of Lidil Comercial Ltda by RME - Rio Minas Energia Participações S.A. was approved, on the exact terms of the Takeover Protocol. At this date RME held 100,719,912 shares of Light S.A., equal to an interest of 49.39 %, and the takeover of Lidil resulted in RME holding 106,304,597 shares, equal to an interest of 52.12 %.

On December 31, 2009 the shareholders of RME approved the unproportional spin-off of RME into three split-off parts, followed by the takeover of the split-off parts by Companhia Energética de Minas Gerais – CEMIG, Andrade Gutierrez Concessões S.A. AGC and Luce Empreendimentos e Participações S.A. This therefore resulted in CEMIG, AGC and LUCE each acquiring a direct interest of 13.03% in the share capital of Light S.A. The remaining interest of 13.03% in the share capital of Light S.A. is still held by RME, which is now a subsidiary of Equatorial Energia S.A.. b) Capital Reserves

Pursuant to CVM Resolution 562 issued on December 17, 2008, Light S.A. presented R$34,406 (R$22,459 as of December 31, 2008) under capital reserves in the shareholders’ equity related to the stock options awarded to certain executives, corresponding to the vesting period already incurred up to December 31, 2009 (see Note 37). Light © 2010. All rights reserved.

Pag.:229

Annual Sustainability Report

c) Profit Reserves Light S.A. has two profit reserves: - Legal Reserve – Recorded at 5% of net income for the year, pursuant to the existing legislation. - Profit Retention Reserve – This is recorded with the remaining Net Income of the year after allocations based on the capital budget approved by the Board of Directors, to be approved by the General Meeting. d) Treasury Stock

As per the company notice published on November 06, 2009, the Company approved the plan to acquire its own stock in order to comply with the Company’s long-term incentive plan. This consisted of buying stock call options meaning it was not necessary to issue new shares and consequently dilute the shareholders’ interests. As of December 31, 2009 the Treasury stock amounted to 258,900 shares, worth R$6,361. 24. Dividends a) Dividends paid The Annual General Meeting held March 18, 2009 approved the payment of dividends proposed by management of R$499,638 from the retained earnings in the balance sheet as of December 31, 2008, amounting to R$2.45 per share. The first installment of R$407,868 was paid on April 2, 2009 and the second of R$91,770 was paid on November 27, 2009. On November 06, 2009 the board of directors approved the payment of additional proposed dividends of R$94,730 from the retained earnings in the balance sheet as of December 31, 2008, amounting to R$0.46 per share. Dividends amounting to R$594,368 relating to the 2008 earnings were paid in 2009. b) Proposed dividends

At a meeting held February 10, 2010 the board of directors of Light S.A. proposed the payment of R$432,340 (R$2.12 per share based on the balance sheet as of December 31, 2009, to be approved at the general meeting:

Light S.A 2009 Net income for the Year 604.831 Legal Reserve (30.242) Adjusted Net Income 574.589 Minimum mandatory dividend 143.647 Proposed Dividends 432.340 25. Profit-sharing The Profit Sharing Program, implemented in 1997 is mainly connected with net income and consolidated EBITDA of the Company Payment is composed of two parts, one of them fixed and one variable. The Program has been improving over the years so as to enable greater employee commitment to improving the operational results of the Company and its subsidiaries.

Pag.:230

Annual Sustainability Report

On December 31, 2009 the profit sharing accrued balance for Light Group stood at R$20,507, with payment forecast for April 2010. 26. Energy Sales to Distributors and Consumers Consolidated (1)(2) R$ Number of Billed Sales GWh (1) 01.01 to 31.12 2009 2008 2009 2008 2009 2008 Residential 3.688.998 3.624.425 7.880 7.388 2.569.692 2.399.521 Industrial 11.749 12.164 1.857 1.875 405.557 405.692 Trade, services and other 271.768 269.088 6.074 5.852 1.852.986 1.803.793 Rural 11.072 10.904 50 49 9.357 9.440 Public sector 10.177 9.981 1.411 1.314 434.749 357.268 Public lighting 525 417 675 678 100.652 101.157 Public utility 1.300 1.382 1.071 1.068 213.616 214.956 Own comsuption 327 328 67 68 Billed Sales 3.995.916 3.928.689 19.084 18.292 5.586.609 5.291.827 ICMS - 2.069.067 1.935.264 Unbilled Sales 25.810 (12.750) TOTAL SUPPLY 3.995.916 3.928.689 19.084 18.292 7.681.486 7.214.341 Electric Power Auction - 4.676 4.053 332.516 333.068 Short-term energy 853 591 29.086 26.941 TOTAL SUPPLY - 5.529 4.644 361.602 360.009 OVERALL TOTAL 3.995.916 3.928.689 24.613 22.936 8.043.088 7.574.350 (1) Not audited by the independent auditors (2) Number of sales billed in December 2009, with and without consumption (3) Light SESA 27. Other Revenue Consolidated 01.01 to 31.12 2009 2008 Leases, rental and other 48.451 29.371 Income from grid usage 515.713 580.552 Service Provision Agreement 31.118 35.860 Taxed service 2.675 18.515 597.957 664.298 28. Consumer Charges (Deductions from Operating Revenue) Consolidated 01.01 to 31.12 2008 2008 CCC - Cash (177.422) (235.973) CCC - CVA (16.601) 209.107 CCC - CVA Amortization (175.382) (11.969) CDE - Cash (206.076) (199.656) CDE - CVA 1.217 (40.845) CDE - CVA Amortization 31.005 (11.020) Taxes Charged from Consumers - RGR (79.942) (72.792) Light © 2010. All rights reserved.

Pag.:231

Annual Sustainability Report

EPE - Energy Research Compan FNDCT - National Development Fund PEE - Energy Efficiency R&D - Research and Development

(5.685) (11.363) (25.835) (11.363) (677.447)

(5.683) (10.985) (25.367) (11.228) (416.411)

29. Operating Costs and Expenses Consolidated Operating Expenses Other revenue Selling General and Operation (expenses) Expenses Adm operational

Service Cost 01.01 to 31.12

Energy

Nature of the Expense Personnel and - (112.204) (11.820) Management Material - (21.239) (1.692) Outsourced Services - (119.373) (61.043) Electricity Purchased for Resale (Note 30) (3.284.601) Depreciation and - (247.305) (924) amortization Allowance for - (246.076) Doubtful Accounts Provision for Contingencies Other - (14.193) (834) Total (3.284.601) (514.314) (322.389) 30. Electricity Purchased for Resale

2009

2008

(127.332)

(251.356) (236.942)

(2.980) (93.689)

(25.911) (17.063) (274.105) (276.753)

- (3.284.601) (3.063.177)

(56.653)

(304.882) (312.443)

(246.076) (235.781)

(59.969)

(87.281) (427.904)

(59.969)

34.628

13.299 (89.009) (65.994) 13.299 (4.535.909) (4.173.525) Consolidated

01.01 to 31.12 Itaipu UTE Norte Fluminense Other Contracts and Electric Power Auctions CVA Spot Market Energy Grid Usage Charges Connection Charges National Electric System Operator (O.N.S.)

GWh(1) 2009 2008 5.647 5.731 6.351 6.368 13.527 12.593 1.363 800 26.888 25.492

R$ 2009 (630.975) (935.536) (1.256.844) 47.599 (65.877) (408.011) (19.044) (15.913) (3.284.601)

2008 543.108 793.105 1.007.065 118.200 210.310 364.015 16.345 11.029 3.063.177

Consolidated Pag.:232

Annual Sustainability Report

01.01 to 31.12

2009

REVENUES Arrears charges on energy bills and financed debts Swap transactions Interest and monetary variance on financed debts Earnings on investments Restatement of charges on CVA accounts and Portion A Restatement of charges on rate margin recovery Restatement of charges on free energy transactions Restatement of tax credits Other EXPENSE Charges on loans and financing – MN Charges on loans and financing – ME Braslight surplus adjustment Monetary variance - MN Exchange variance – ME Swap transactions Charges and monetary variance on Braslight actuarial liability Bank expenses Restatement of provision for contingencies Charges on free energy transactions Charges on regulatory liabilities Reversal of the Provision for PIS/COFINS on financial revenue Adjustment of accounts receivable to present value Restatement of tax liabilities Interest and fines on Taxes Financing - Interest and fines reduction Law 11941 / 09 Financing - Other interest and fines Law 11941 / 09 Other

2008

2009

2008

1.571

704

61.197

69.902

(10.308)

12.909

24.744

75.944

68.751

31.831

30.667

6.254

3.154

27 1.598

59 763

33.007 10.193 201.864

44.965 8.803 270.149

(184.560) (10.726) 48.615 (22) 44.698 (7.554)

(201.035) (17.319) (65) (36.450) 1.610

(66.813)

(225.371)

(286) -

(90) -

(6.409) (45.036) (47.575) (14.170)

(5.314) (59.893) (4.756) (19.271)

432.358

19.072

10.830

(23.392) (4.577)

(45.018) -

128.921

(101.199)

(30) (316)

(294) (384)

(1.800) (272.527)

(6.063) (175.757)

Pag.:233

Annual Sustainability Report

NET FINANCIAL INCOME 1.282 379 (70.663) 32. Financial Instruments The book and market values of financial instrument assets and liabilities have been compared below:

94.392

Consolidated 31/12/2009 31/12/2008 Recorded Market Recorded Market ASSETS

Short-term investments (note 6) Account receivable (note 7) Swaps

801.233 1.660.163 4 2.461.400

549.097 1.643.426 11.083 2.203.607

564.181 1.183.003 1.241.675 5.558 2.994.417

564.181 1.195.561 1.241.675 5.558 3.006.975

486.204 1.140.276 979.125 2.605.605

486.204 1.152.761 979.125 2.618.090

LIABILITIES

Trade payables (note 14) Loans and financing (note 15) Debentures (note 16) Swaps (note 15) a) Policy for utilization of derivatives

The derivative instruments policy, approved by the Board of Directors, determines the debt service protection (principal plus interest and commissions) denominated in foreign currency to mature within 24 months, forbidding any utilization for speculative purposes, whether in derivatives or any other risk assets

In line with this policy, the Company and its subsidiaries do not have futures contracts, options, swaptions, swaps with get-out clauses, flexible options, derivatives embedded in other products, operations structured with derivatives and “exotic derivatives”. In addition, the table above shows that the only derivative instrument used by the Company and its subsidiaries is the non-cash currency swap (USD versus CDI), whose Contractual Notional Value corresponds to the amount of foreign-currency debt service maturing within 24 months, in line with the policy for the utilization of the aforementioned derivatives. b) Risk management and objectives achieved

The management of these derivative instruments is done through operating strategies, aimed at liquidity, profitability and security. The control policy consists of permanently inspecting the policy compliance in the utilization of derivatives, as well as to monitor the rates contracted against those used in the market. c) Classification and valuation of financial instruments: Light © 2010. All rights reserved.

Pag.:234

Annual Sustainability Report

See the following considerations regarding the calculation of market value: ●

●

Accounts receivable: Consumers, concessionaires and licensees (consumers) are classified as “loans and receivables” and ar recorded at their original values, subject to the provision for losses and present value adjustment, when applicable. Trade payables: are measured by the amortized cost method and therefore recognized at their original value. In line with the guidelines in CPC 03, these financial instruments have been classified as “financial liabilities not measured at fair value". Loans and financing: measured at the amortized cost method. The market values were calculated using interest rates applicable to instruments of similar nature, terms and risks, or based on the market quotations of these securities. The marke values of BNDES financing are similar to the book values, since there are no similar instruments, with comparable maturities and interest rates. In the case of the debentures, book and market values are identical, as there is no liquid trading market fo these debentures as an accurate benchmark in the market calculation. These financial instruments have been classified as “financial liabilities not measured at fair value". Swaps: measured at market value. The determination of market value used available information in the market and usual pricing methodology: the face value (notional) evaluation for long position (in U.S. dollars) until maturity and discounted at present value of clean coupon rates, published in the bulletins of the Future and Commodities Exchange – BM&F Bovespa.

Note that the estimated realization values of the financial assets and liabilities were determined through information available in the market and appropriate valuation methodologies. However, considerable judgment was required in the interpretation of the market data to estimate the most adequate realization value. Consequently, the estimates used and presented below do not necessarily indicate the values that could be realized in the current exchange market. d) Risk Factors During the normal course of business, the Company and its subsidiaries are exposed to market risks related to exchange and interest rate variance, as shown in the table below: Debt breakdown (excluding financial charges): Consolidated 31/12/2009 31/12/2008 R$ % R$ % USD 99.721 4,1 165.310 7,8 BNDES Basket of Currencies 444 2.388 0,1 Foreign Currency (current and non-current) 100.165 4,1 167.698 7,9 CDI 1.763.892 72,7 1.486.084 70,1 TJLP 521.542 21,5 454.816 21,5 Other 39.079 1,7 10.803 0,5 Local currency (current and non-current) 2.324.513 95,9 1.951.703 92,1 Overall Total (current and non-current) 2.424.678 100,0 2.119.401 100,0 As of December 31, 2009, according to the table above, the foreign-currency denominated debt is R$100,165 or 4.13% of the debt principal.

Pag.:235

Annual Sustainability Report

Financial derivative instruments (swaps) were contracted for the amount of foreign-currency debt service maturing within 24 months, whose notional value as of December 31, 2009 stood at USD23,318, according to the derivative instruments policy approved by the Board of Directors If we deduct this amount from the total foreign-currency denominated debt, the foreign exchange exposure therefore represents 2.48% of the total debt. We accordingly make a few comments and analyses about the risk factors impacting the business of Light Group companies: ●

Exchange rate risk

Considering that a portion of Light SESA’s loans and financing is denominated in foreign currency, the company uses derivative financial instruments (swaps) to hedge the service associated with these debts (principal plus interest and commission) maturing within 24 months. Derivative operations yielded a loss of R$1,671 in the fourth quarter of 2009 (gain of R$12,228 in the fourth quarter of 2008) and a loss of R$17,862 in 2009 (gain of R$11,144 in 2008). The net fair value of swap operations as of December 31, 2009 is a negative R$5,554 (positive R$11,084 as of December 31, 2008), as shown below:

Institution

Light Receivable

Unibanco

US$+4.42%

Unibanco

US$+4.32%

Unibanco

US$+4.32%

Unibanco

US$+4.32%

Unibanco

US$+4.53%

Unibanco

US$+4.32%

Unibanco

US$+4.45%

Citibank

US$+2.80%

Citibank

US$+2.80%

Citibank

US$+2.80%

Itaú

US$+2.20%

Light Start date Payable 100% CDI 100% CDI 100% CDI 100% CDI 100% CDI 100% CDI 100% CDI 100% CDI 100% CDI 100% CDI 100% CDI

Date of Maturity

Fair Value Notional Value Fair Value Fair Value Dec/09 (R$) Contracted Dec/09 Dec/09 (R$) (USD) (R$) Asset Liability Balance

25/08/08

15/01/10

(1)

25/08/08

17/02/10

25/08/08

10/03/10

(1)

25/08/08

15/03/10

25/08/08

12/04/10

5.889

25/08/08

15/04/10

25/08/08

15/06/10

426

10/02/09

10/09/09

(48)

10/02/09

11/10/10

5.512

(3.580)

10/02/09

27/12/10

376

(245)

18/06/09

10/03/11

(20)

Pag.:236

Annual Sustainability Report

Citibank

US$+2.33%

Itaú

US$+2.30%

Itaú

US$+2.79%

100% 18/06/09 CDI 100% 10/09/09 CDI 100% 09/10/09 CDI

12/04/11

5.436

(1.554)

12/09/11

(8)

11/10/11

5.273

(101)

Totais 23.318 4 (5.558) (5.554) The amount recorded has been measured at fair value as of December 31, 2009. All operations with derivative financial instrument have been registered at clearing houses for the custody and financial settlement of securities and there is no margin deposited in guarantee. Operations have no initial cost. The sensitivity analysis for foreign exchange and interest rate fluctuations is presented below, showing any impacts on financial income/loss of the Company and its subsidiaries.

The methodology used in the “Probable Scenario” was to consider the same behavior of foreign exchange and interest rates verified at December 31, 2009, maintaining steady liabilities, derivatives and financial investments at this date. It is worth highlighting that, as it refers to a sensitivity analysis of the impact on the 2009 financial income, the balances of the debt and investments as of Decembe 31, 2009 and the projection of charges and yields on these balances. Note that the debt and derivatives balances will perform in accordance with their respective contracts, and the balance of short-term investments will fluctuate according to the needs or available funds of the Company and its subsidiaries. Exchange Rate Devaluation Risk Operation FINANCIAL LIABILITIES Par Bond Discount Bond C. Bond Debit.Conv. New Money Bib Bndes - Financ. Import KfW DERIVATIVES Swaps Reference financial assets and

Risk USD USD USD USD USD USD Basket USD USD

R$ thousand Scenario (I): Probable Scenario (II) Scenario (III) (8.917) (4.066) (36.405) (63.894) (1.685) (12.793) (21.520) (2.496) (7.585) (13.485) (585) (10.639) (18.781) (131) (4.696) (8.808) (50) (266) (483) (9) (37) (65) (26) (389) (752) (2.760) 8.002 18.763

liabilities R$/US$ Quote (End of the year)

1,7412

+25%

+50%

2,1765

2,6118

Pag.:237

Annual Sustainability Report

Exchange Rate Appreciation Risk Operation

Risk

FINANCIAL LIABILITIES Par Bond Discount Bond C. Bond Debit.Conv. Bib Bndes - Financ. Import KfW

USD USD USD USD USD Basket USD

DERIVATIVES Swaps Reference financial assets and

R$ thousand Scenario (I): Probable Scenario (II) Scenario (III) (8.917) 18.574 46.061 (4.066) 4.661 13.388 (1.685) 4.216 10.116 (2.496) 5.647 13.789 (585) 3.527 7.638 (50) 166 382 (9) 19 2.470 (26) 338 701 (2.760) (13.521) (24.283)

USD -25%

-50%

liabilities R$/US$ Quote (End of the year) 1,7412 1,3059 0,8706 In the table above it is possible to identify that despite partial hedge against foreign-currency debt (only limited to debt service maturing within 24 months), as R$/USD exchange rate increases, the financial expense of liabilities also increases but financial revenue of derivatives also partially offsets this negative impact and vice-versa. Cash is thereby hedged due to the derivatives policy of the Company and its subsidiaries. ●

Interest rate risk

This risk derives from impact of interest rates changes not only over financial expense associated with loans and financing of subsidiaries, but also over financial revenues deriving from financial investments. The derivatives policy approved by the Board of Directors does not comprise the contracting of instruments against such risk. However, the Company and its subsidiaries do continuously monitor the market interest rates in order to assess any requirement to use derivatives to protect themselves against the risk of variation to these rates. See below the sensitivity analysis of the interest rate risk, evidencing the effects on income of changes in the scenarios: Risk of Interest Rates Rise R$ thousand Risk Scenario (I): Probable Scenario (II) Scenario (III) CDI 70.756 88.446 106.135

Operation FINANCIAL ASSETS Interest-earning bank deposits FINANCIAL LIABILITIES Debentures 5th Issuance CCB Bradesco CCB Bco ABN Amro Banking S/A

CDI CDI CDI

(219.596) (91.545) (41.378) (4.811)

(268.383) (113.019) (51.558) (5.965)

(318.146) (134.937) (61.948) (7.134) Pag.:238

Annual Sustainability Report

Debentures 1st Issuance Debentures 4th Issuance FINEM BNDES 2006-2008 FINEM BNDES 2009-2010 FINEM BNDES 2009-2010 TJLP+1 PROESCO Debentures 6th Issuance DERIVATIVES Swaps Reference for FINANCIAL ASSETS CDI (% end of year) Reference for FINANCIAL LIABILITIES CDI (% end of year) TJLP (% end of year)

TJLP TJLP TJLP TJLP TJLP TJLP CDI CDI

(8) (13) (40.996) (5.201) (5.807) (156) (29.681) (2.760)

8,55% 8,55% 6,00%

(10) (15) (47.190) (6.144) (6.750) (184) (37.548) (3.775)

(11) (18) (53.475) (7.101) (7.708) (213) (45.601) (4.791)

+25% 10,69% +25% 10,69% 7,50%

+50% 12,83% +50% 12,83% 9,00%

Risk of Interest Rates Drop R$ thousand Risk Scenario (I): Probable Scenario (II) Scenario (III) CDI 70.756 53.067 35.378

Operation FINANCIAL ASSETS Interest-earning bank deposits FINANCIAL LIABILITIES Debentures 5th Issuance CCB Bradesco CCB Bco ABN Amro Banking S/A Debentures 1st Issuance Debentures 4th Issuance FINEM BNDES 2006-2008 FINEM BNDES 2009-2010 FINEM BNDES 2009-2010 TJLP+1 PROESCO Debentures 6th Issuance DERIVATIVES Swaps Reference for FINANCIAL ASSETS CDI (% end of year) Reference for FINANCIAL LIABILITIES CDI (% end of year) TJLP (% end of year) ●

CDI CDI CDI TJLP TJLP TJLP TJLP TJLP TJLP CDI CDI

(219.596) (91.545) (41.378) (4.811) (8) (13) (40.996) (5.201) (5.807) (156) (29.681) (2.760)

8,55% 8,55% 6,00%

(171.766) (70.504) (31.403) (3.673) (7) (11) (34.893) (4.271) (4.878) (128) (21.998) (1.744)

(124.873) (49.889) (21.631) (2.550) (6) (9) (28.879) (3.355) (3.962) (100) (14.492) (729)

-25% 6,41% -25% 6,41% 4,50%

-50% 4,28% -50% 4,28% 3,00%

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This arises from the possibility of the Company and its subsidiaries suffering losses due to the default of their counterparties or of financial institutions where they have funds or financial investments. To mitigate these risks, the Company and its subsidiaries have a policy of analyzing the financial position of their counterparties, as well as defining credit limits and constantly monitoring outstanding accounts. With respect to financial institutions, the Company and its subsidiaries only conduct transactions with low risk financial institutions, as assessed by rating agencies. 33. Insurance Coverage As of December 31, 2009 and 2008, Light Group had insurance covering its main assets as follows:

Operational Risk Insurance – this covers property damage caused to buildings, machinery and equipment, furniture and fixtures as a result of fire, explosion, rubbish, flooding, earthquake, loss of machinery and electric damages. All assets of Light Group are insured for operational risks with all-risks coverage, except for transmission and distribution lines. D&O Civil Liability Insurance - Protects executives from losses and damages resulting from activities as Board members, Officers and managers of the Company. Civil Liability and Blanket Insurance – this covers the payment of indemnity should the Company be liable on a civil basis under an unappealable decision or an agreement authorized by an insurance company related to indemnity for involuntary damages, physical damages to individuals and/or property damages caused to third parties and related to pollution, contamination or sudden leakage. International Transportation Insurance – covers shipments of cargo/equipment, Financial Guarantee Insurance – Sale of Energy (8 insurance policies) and Insurance against Fire on Leased Properties. The risk assumptions adopted, given their nature, are not part of an audit, and accordingly were not examined by our independent auditors. Insurance coverage as of December 31, 2009 is considered sufficient by Management, as summarized below: Effective Term Amount RISKS From To Insured Directors & 10/8/2009 10/8/2010 US$20.000 Officers (D&O) Civil and General 25/9/2009 25/9/2010 R$20.000 Liabilities Operating 31/10/2009 31/10/2010 R$ 3.572.187 Risks* * The maximum limit of indemnification (MLI) is R$300,000 34. Environmental Matters Light’s environmental initiatives include the following: Light © 2010. All rights reserved.

Premium US$ 81

R$452 R$1,632

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- Reduction of Greenhouse Gas (GHG) Emissions (1): Light started a survey of greenhouse gases related to its activities in 2006. The results were used to establish a target for reducing emissions between 2008 and 2009 which was met. - Waste Management (1): Specialist companies are hired to guarantee the correct disposal of waste generated by Light, including hazardous and recyclable waste. The maintenance of the generation facilities includes a contract with a specialist company that supplies washable and reusable towels instead of paper towels, which reduced the volume of waste generated by oil and grease at the sites by up to 60%. The contaminated towels are collected by the hired company and undergo a washing process certified by the environmental authority. - Environmental Management System (SGA) and Integrated Management System (SGI) (1): Light S.A. currently has 213 sites certified by ISO 14001, a standard which establishes environmental management criteria. Light Energia has three certifications – quality, health and safety and the environment. The ventures certified in environmental management systems (SGA) electricity substations, overhead power lines (138 kV), commercial agencies, hydroelectric power stations and others. Light’s SGA enables the managing of environmental matters and impacts, as well as the compliance with the applicable legal requirements, the raising of employee awareness and staff training, among others. Maintaining a system of this magnitude requires a series of investments to avoid possible nonconformities. - Degraded Area Recovery Program (1): Starting in 1992, this program has an annual target of 50 hectares of plantation and 300 hectares of maintenance of planted areas surrounding the reservoirs of Light, directly contributing to local and regional biodiversity. In 2009 Light exceeded these targets, by planting 60 hectares and maintaining 337 hectares of reforested area and surviving forest of Mata Atlântica. - Handling of aquatic macrophytes (1): The aquatic vegetarian beside the reservoirs could cause serious problems to energy generation, the control of flooding and multiple water usage, and requires substantial investment to control population growth. - Restocking of Rivers and Reservoirs Program (1): Light has undertaken a commitment towards the Rio de Janeiro State environment Department to recover the stock of fish in the Paraíba do Sul river. The project drawn up by the State Environmental Department – INEA stipulates the release of one million fry, 200,000 of which shall be supplied by Light. In 2009 Light released 75,000 fry into the Paraíba do Sul river.

- Social and Environmental Responsibility (1): Light takes education seriously and for many years has been funding environmental education projects and elementary and technical schools in municipalities in its concession area. The Social and Environmental Inclusion Project is one such initiative, and is carried out in partnership with the Education Department of Piraí-RJ, and researchers from UNESP, UNIRIO, UFRRJ, FIOCRUZ and CETAS/IBAMA (Seropédica-RJ) which consists of bringing together lecturers, students and employees of Escola de Lajes and company staff and the community. This provides opportunities to get to know the local environmental resources available and to disseminate sustainable initiatives, focusing on the environmental safeguards required to prevent water pollution and global warming. These initiatives have helped keep Light in the ISE Bovespa portfolio since 2007.

In FY 2009 the amount of R$19,121 was invested in these projects, among others, of which R$6,821 was allocated to investment projects and R$12,300 in operating expenses. Light © 2010. All rights reserved.

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(1) Information not audited by the independent auditors. 35. Statement of Income by Company Light 01.01 a 31.12 Light SESA Light SA Energia OPERATING 8.290.323 330.905 REVENUE Billed Sales 7.655.676 Unbilled Sales 25.810 Supply – Electric Power 17.152 324.814 Other 591.685 6.091 REVENUE (3.157.073) (36.046) DEDUCTIONS Billed Sales -ICMS (2.069.067) Consumer charges (662.995) (14.452) PIS (77.249) (3.849) COFINS (346.907) (17.731) COFINS - CVA 977 Amortization Other (1.832) (14) NET OPERATING 5.133.250 294.859 REVENUE OPERATING EXPENSES AND COSTS (4.381.102) (114.814) (56.701)

Personnel (178.017) (16.926) (54.675) Material (14.582) (840) Outsourced Services (253.747) (12.742) (1.653) Energy Purchased (3.284.735) (35.533) Depreciation (280.074) (24.196) Provisions (306.034) (11) Other (63.913) (24.566) (373) Equity in net income of subsidiaries and - 660.311 associated companies FINANCIAL INCOME/LOSS (68.710) (9.017) 1.282 Financial Revenue 203.310 10.500 1.598 Financial Expense (272.020) (19.517) (316) NET INCOME

Light 2009 2008 Other Eliminations ESCO Consolidated Consolidated 107.966

(88.149)

8.641.045

8.238.648

80.686 27.280

(61.050) (27.099)

7.655.676 25.810 361.602 597.957

7.227.091 (12.750) 360.009 664.298

(15.620)

- (3.208.739) (2.852.004)

(11.524) (604) (2.785)

- (2.080.591) (1.949.018) (677.447) (416.411) (81.702) (84.036) (367.423) (405.160)

977

5.192

(707)

(2.553)

(2.571)

92.346

(88.149)

5.432.306

5.386.644

(71.441)

88.149 (4.535.909) (4.173.525)

(1.738) (10.489) (5.963) (52.123) (612) (516)

(251.356) (236.942) (25.911) (17.063) (274.105) (276.753) 87.790 (3.284.601) (3.063.177) (304.882) (312.443) (306.045) (201.153) 359 (89.009) (65.994)

(660.311)

975 4.807 1.146 4.875 (171) (68)

(19.565) 19.565

(70.663) 201.864 (272.527)

94.392 344.638 (250.246)

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BEFORE TAX 683.438 171.028 604.892 21.880 4.807 (660.311) Social Contributions 11.375 (15.415) - (1.029) (19) Income Tax (147.765) (41.256) - (6.224) (63) INCOME AFTER TAXES 547.048 114.357 604.892 14.627 4.725 (660.311) Employee profit sharing (18.583) (1.377) (61) (486) NET INCOME 528.465 112.980 604.831 14.141 4.725 (660.311) 36. Rate Adjustment (Not audited by the independent auditors)

825.734 (5.088) (195.308)

1.307.511 (77.742) (223.789)

625.338 (20.507) 604.831

1.005.980 (31.527) 974.453

a) Final Rate Review

The rate review of the second cycle was finalized in 2009 and ratified by Resolution 891/09, determining a rise of 2.06%. This review established the final values of the Reference company at R$583,381, the Xe component of 0.00%, based on the overall investment of R$1,819,805 for the rate cycle. A new method for calculating non-technical losses was also defined, which now applies to the low-voltage sector The reference percentage for year 1 (November 2008 to October 2009) is 38.98% and for Year 5 (November 2012 to October 2013) is 31.82%. The approval of the aforesaid changes resulted in an increase in Light’s required revenue from R$5,203,007 to R$5,207,727, which resulted in the recognition of a positive financial component of R$4,580, incorporated in the rates of Light in the rate adjustment for November 2009. b) Rate Adjustment

At a public meeting held on November 4, 2009, ANEEL approved the average adjustment of Light’s rates of 5.65% for the period commencing November 07, 2009, embracing all consumption sectors (residential, industrial, commercial, rural and others). The adjustment index valid for rates between November 07, 2009 and November 06, 2010 consists of two components: the structural component of 0.88% and the financial component, valid while this rate is effective, of 4.77%.

2009 Light Rate Review Light’s end consumers faced an average increase in IRT Structural 0,88%their electricity bills of 3.31%. This was due to the Financial Surcharges 4,77%exclusion of financial adjustments for the period Total 5,65%November 07, 2008 to November 06, 2009 from the rates, associated with the recovery of rate discrepancies from past periods, which had a positive effect of 2.3% on the rate for that period. The application of the rate adjustment method meant its effects were segregated for low-voltage and high-voltage consumers. The table below presents the average adjustment for each voltage level calculated by ANEEL. Voltage level Low Voltage (Residential)

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A4 A3a A2 Average Value 37. Long-term Incentive Plan a) Stock Option Incentive Plan

3,23% 3,79% 6,29% 3,31%

The eligible beneficiaries of the Stock Option Plan are the Company’s current executive officers, providing they have not been appointed by the Board of Directors to be part of the Long-Term Incentive Plan under “Phantom Options”. Options granted under the plan amount to 6,917,733, equal to 3.4% of total shares issued by the Company, and the strike price to be paid by the holders is R$21.49 per Option, minus any amounts paid per share to shareholders as dividends, interest on capital or capital reductions. These options can be fully exercised, on a single occasion, between August 10, 2010 and August 10, 2011 at the latest. The equity instruments were measured at fair value on the granting date, based on the respective market price of these instruments. The pricing model used to measure the market price was Black & Scholes. For this calculation, assumptions were used the Management deemed as appropriate, considering the volatility of a previous year to the granting date, the strike price provided for in the plan, as reported above, and the market price on the granting date.

On November 06, 2009 the executives entitled to the plan were invited to take up new positions at Light S.A. and Light Serviços de Eletricidade S.A., stepping down from their existing positions. Item 10 of the plan stipulated that, in the event of contractual severance before the end of the grace period, the beneficiaries may exercise up to 95% of their options, depending on the remaining period of their contract in relation to the vesting period. The executives were entitled to 95% (6,571,846 shares) of the total options awarded (6,917,733 shares).

As of December 31, 2009 the executives had exercised 4,846,500 shares and the remaining 1,725,346 were exercised by January 26, 2010. In order to meet this obligation resulting from exercising options by its executives, the Company purchased shares in the market, keeping them as treasury stock until it had settled the obligations. b) “Phantom Options” Incentive Plan

The Company provisioned for R$4,132 (R$4,346 as of December 31, 2008) related to the vesting period incurred in 2009, which it charged to personnel expenses. 38. Subsequent Events a) Capital payment of Lightcom Comercializadora de Energia S.A. In January 2010 Light S.A. paid in capital of R$1,000 to incorporate its wholly owned subsidiary Lightcom Comercializadora de Energia S.A., a company founded to buy, sell, import and export energy and general consultancy services in the free and regulated energy markets. b) Closure of Lir Energy Limited Light © 2010. All rights reserved.

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Lir Energy Limited was closed on January 29, 2010, through the liquidation of all its assets and liabilities. c) Application of technical pronouncements issued in 2009. The accounting pronouncements committee issued and the CVM approved a number of accounting pronouncements in the course of 2009, aligned with the International financial reporting standards issued by the IASB – International Accounting Standards Board, effective for financial years commencing January 01, 2010, and backdated to 2009 for the purpose of comparison. The Company is in the process of evaluating the possible effects of implementing the issued technical pronouncements and has provisionally concluded that the main effects will derive from the implementation of Technical Interpretation ICPC 01– Concession Agreements, which establishes the general principles for recognizing and measuring the obligations and rights under the concession agreements. ICPC 01 stipulates that remuneration received or receivable by the concessionaire should be recorded at fair value, corresponding to rights over a financial asset and/or intangible assets. Considering the complexity of the amendments required by this technical interpretation, the Company is in the process of evaluating its effects on its financial statements while monitoring the discussions and debates in the market, especially at accounting trade associations and agencies and the regulatory authorities. d) Amendment of the Distribution Companies’ Agreements At an annual public meeting on February 02, 2010 ANEEL approved the amendment to the distribution companies’ concession agreements. This amendment changed the method for calculating the annual rate adjustment, in order to counter sector charges, preventing market variations occurring from February 2010 from generating gains, which sometimes benefit concessionaires and sometimes consumers. We point out that the proposal presented by ANEEL is being analysed by Light. We also point out that if signed by Light, the implementation of this amendment will occur as from the rate adjustment in November 2010.

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Audit Committee Report

In accordance with the legislation and company bylaws, at a meeting today the audit committee of LIGHT S.A. examined the annua management report and the accompanying financial statements, consisting of the balance sheets, statement of income for the year, statement of changes in shareholders’ equity, cash flows and added value, in addition to the respective notes, all of which referred t the financial year ended December 31, 2009. In addition to examining said financial statements, we also relied on document analyses and, substantially, on information and clarifications provided to the audit committee members in the course of the year by the independent auditors and company management.

Based on our examinations and the unqualified report issued by KPMG Auditores Independentes, dated February 10, 2010, this audit committee has unanimously concluded that these documents have been fairly presented and are suitable for the appreciation o the annual general meeting. Rio de Janeiro, February 10, 2010 Eduardo Grande Bittencourt Chairman Ari Barcelos da Silva Aristóteles Luiz Menezes Vasconcellos Drummond Isabel da Silva Ramos Kemmelmeier Maurício Wanderley Estanislau da Costa

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Independent auditors' report The Board of Directors and Shareholders of Light S.A. Rio de Janeiro

1. We have examined the accompanying balance sheets of Light S.A. (“Company”) and the consolidated balance sheets of the Company and its subsidiaries as of December 31, 2009 and 2008 and the related statements of income, changes in shareholders’ equity and statements of cash flows and added value for the financial years then ended, which are the responsibility of its management. Our responsibility is to express an opinion on these financial statements.

2. Our audit was conducted in accordance with auditing standards generally accepted in Brazil and included: (a) planning of the audit work, considering the materiality of the balances, the volume of transactions and the accounting systems and internal accounting controls of the Company and its subsidiaries; (b) verification, on a test basis, of the evidence and records which support the amounts and accounting information disclosed; and (c) evaluation of the most significant accounting policies and estimates adopted by Company management and its subsidiaries, as well as the presentation of the financial statements taken as a whole.

3. In our opinion, the aforementioned financial statements present fairly, in all material respects, the financial position of Light S.A. and the consolidated financial position of the Company and its subsidiaries as of December 31, 2009 and 2008 and the results of it operations, changes in its shareholders’ equity and changes in its cash flow and added value for the years then ended, in conformity with accounting practices adopted in Brazil.

4. The financial statements of Fundação de Seguridade Social Braslight for the financial year ended December 31, 2009 were audited by other independent auditors, who issued an opinion on them dated January 21, 2010, with an emphasis of matter paragraph regarding the balance of R$137,317,000 of tax credits originating from the tax exemption claim filed by the Entity, which is now final and unappealable, which management estimates can be offset in approximately nine years against taxes to be paid in subsequent years. The future realization of the asset depends on the ongoing tax compensation process with the Brazilian tax authorities, which was suspended in September 2005. If this suspension is maintained, the Entity may have to provision for the asset. This asset that guarantees the Entity’s actuarial reserves was deducted from the calculation of the sponsoring subsidiaries’ actuarial deficit, as required by CVM Resolution 371/00. If a provision is made for this amount, the Company’s liabilities may have to be adjusted proportionately.

Rio de Janeiro, February 10, 2010 KPMG Auditores Independentes CRC-SP-14.428/O-6-F-RJ Vânia Andrade de Souza Accountant CRC-RJ-057.497/O-2

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Corporate Information Board of Directors Serving Members Statutory Audit Committee Deputies Sérgio Alair Barroso Serving Members Luiz Fernando Rolla Djalma Bastosde Morais Ari Barcelos da Silva João Batista Zolini Carneiro Eduardo Borges de Andrade Isabel da Silva Ramos João Pedro Amado Andrade Ricardo Coutinho de Sena Kemmelmeier Paulo Roberto Reckziegel Carlos Augusto Leone Piani Eduardo Grande Bittencourt Guedes Firmino Ferreira Sampaio Neto Maurício Wanderley E.da Costa Ana Marta Horta Veloso Aldo Floris Aristóteles L. M. V Drummond Paulo Jerônimo Bandeira de Carlos Roberto Teixeira Junger Executive Officers Deputies Mello Pedrosa Elvio Lima Gaspar José Luiz Alquéres - CEO Eduardo Gomes Santos Lauro Alberto de Luca Jose Luiz Silva Ronnie Vaz Moreira Leonardo George de Magalhães Ricardo Simonsen Ruy Flaks Schneider Executive and Investor Ricardo Genton Peixoto Joaquim Dias de Castro Relations Vice-President Márcio Cunha Cavour P. Carmen Lúcia Claussen Kanter Paulo Henrique Siqueira Born - Sustainable Development andAlmeida Almir José dos Santos Concessions Officer João Procópio Campos Loures Ana Silvia Corso Matte - Personnel Officer Vale Luiz Fernando de Almeida Guimarães - Generation Officer Gustavo César de Alencar - Network Officer Roberto Manoel Guedes Alcoforado - Operations and Clients Vice-President Paulo Roberto Ribeiro Pinto - New Businesses and Institutional Officer Luiz Claudio Salles Cristofaro* - Legal Officer * Not included in the By-Laws Customer Advisory Board Directors Entities 1. Álvaro Prati de Aguiar / Tatiana Lauria Silva FIRJAN 2. Walcyr Borges / Marly Rosa Machado FIRJAN 3. Carlos Eduardo Dair Coutinho / Leopoldo Eugênio Erthal FAERJ 4. Erardo L. da Fonseca/Robson Teixeira de Souza OCERJ 5. Renato Vasconcellos/José Octávio Knaack Campos ACRJ 6. Antônio Florêncio de Queiroz Júnior/Nilton Pereira FECOMERCIO 7. Eduardo Novais de Souza/Paulo César dos Santos Oliveira FAMERJ 8. Hércules Ferreira/José Carlos de Souza FAF-Rio 9. Rossino de Castro/Edson Ribeiro Magalhães Silva FAFERJ 10. Silvio Carlos Santos Ferreira/ Luiz Carlos Gonçalves da Silva RIOLUZ 11. Emy Guimarães de Lemos/Sidney do Valle Costa CEDAE 12. Luiz Antonio de Almeida e Silva SEDEIS Light © 2010. All rights reserved.

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13. Eduardo Ramos da Paixão 14. Walmir Ribeiro Pinheiro Júnior/ Valéria Barbosa Gomes 15. Moisés Henrique Szawarciman / Maurício Marques de Oliveira 16. Francisco Paulino Campelo / Firmino Figueiredo de Almeida Mota 17. Nelson Janot Marinho Sede[2.4] Av. Marechal Floriano, 168 CEP 20080-002 Centro Rio de Janeiro – RJ – Brasil Tel.: (55 21) 2211 7171 Site: www.light.com.br CNPJ no 03.378.521/0001-75 Inscrição Estadual n° 33.300.263.161 Finances and Investor Relations Managing director: Ricardo Levy IR Manager: Cristina Guedes Phones.: (55 21) 2211 2728 (55 21) 2211 2660 (55 21) 2211 2650 E-mail: ri@light.com.br Book-entered shares system Banco Bradesco S/A Rua Yara, s/n.º CEP 06028-100 – Cidade de Deus – Osasco – SP – Brasil Tel: (55 11) 3684 2044 Fax: (55 11) 3684 4080 E-mail: 4010.acoes@bradesco.com.br Independent Auditors KMPG Auditores Independentes Securities Market São Paulo Stock Exchange (Bovespa) Stock symbol: LIGT 3 (common shares) Reporting Jornal do Commercio Diário Oficial do Rio de Janeiro Coordination of the Sustainability Report Public Division Carlos Alberto Piazza Timo Iaria Planning, Environment and Innovation Department

AEMERJ UERJ PUC PROCON - RJ Honorary Member

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Paulo Mauricio Senra e Regiane Monteiro de Abreu Planning and Content Light Sustainability Workgroup Jordana Garcia Brazilian Foundation for Sustainable Development (FBDS) Clarissa Lins Fabiana Moreno Iaci Lomonaco Communications Report Alvaro Almeida Pablo Barros Maurette Brandt Roberta Maia Creation and Coordination Division Ana Laet Com. Design: Ana Laet Cecília Costa João Doria Coordination: Alida Bhering Editing Leandro Collares Daniela Rocha (Selênia Serviços) Photography Rogério Reis Bruno Veiga/Tyba Mabel Feres (photo of executive officers) Graphic design Minister Online Report Planning and Content: Light / FBDS / Communications Report Creation and Programming: Comunique-se Video Production: Benedito Lado B Subtitles: Video Shake

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