Since 2002, ISA CTEEP has been a member of BM&FBovespa’s Corporate Governance Level 1, and since 1999 it has participated in the American Depositary Receipts (ADRs) program - Rule 144A, in the United States.

The Company was the first organization in the electricity sector to obtain the International Quality Assurance certification granted by the IIA (Institute of Internal Auditors), which recognizes the quality of the internal audit departments of the companies.

In addition to complying with rules related to these Level 1 publicly-held companies, ISA CTEEP adopts distinguished governance practices such as:

Board of Directors is comprised of nine members (at Level 1, the minimum recommended is three, and at Level 2, minimum of five).

One of the advisors is a representative of collaborators, and the other represents minority shareholders.

Financial statements are made available in English on the Company’s website, a demand established only at Level 2 and New Market regulations.

It is part of the IGCT (Corporate Governance Index), where companies with differentiated corporate governance and relationship standards with shareholders and other stakeholders are listed.

Since 2002, the Company has a Relevant Action or Fact Disclosure Policy, approved by the Board of Directors that ensures the safety of disclosure and maintaining confidentiality about relevant information. Additionally, since 2014, the disclosure of a relevant action or fact may also take place through a news portal on the Internet, making all the information available.

The relationship between shareholders, the Board of Directors, Tax Council and Executive Board is guided by the Code of Corporate Governance and the Securities Trading Policy.

To ensure agility and assertiveness vis-à-vis of the challenges of the macroeconomic scenario and the changes in the electric sector, ISA CTEEP adopts a corporate governance model that aligns decision making with the best international practices.

In this model, the Board of Directors and the Executive Board have well-defined roles and responsibilities that are essential for conduction of business, the Fiscal Council inspects accounts, and committees advise the Board of Directors.

It is made up by eight members, one of whom is president, another is a vice-president, and six board members, among which one represents the minority shareholders and another represents collaborators.

The key assignments are: electing the members of Executive Board; inspecting business management; evaluating the Management Report, the Financial Statements, and Executive Board’s accounts; approving of economic-financial plans and budgets and execution plans of construction works prepared by the Executive Board, and choosing and dismissing Independent Auditors.

Aiming at assuring the conformity with the best practices of Corporate Governance, the President of ISA CTEEP Board of Directors does not belong to the Executive Board. Meetings are conducted in person, according to the meeting schedule or via electronic communications, whenever necessary.

Composition

President
Bernardo Vargas Gibsone

Vice-president
Fernando Augusto Rojas Pinto

Board Members
César Augusto Ramírez Rojas
Gustavo Carlos Marin Garat
Henry Medina González
Marcos Simas Parentoni (minority shareholder representative)
Samuel Elias de Souza (employee representative)
Carlos Alberto Rodriguez Lopes

This permanent body is composed of five directors and five alternates, with the participation of representatives of the minority shareholders.

Responsible for inspecting management acts and verifying compliance of their legal and statutory duties; give an opinion on Management Report; analyze trial balance and other financial statements prepared by the Company on a periodic basis; review and give an opinion on financial statements for the year..

Aiming at assuring the conformity with the best practices of Corporate Governance, the President of ISA CTEEP Board of Directors does not belong to the Executive Board. Meetings are conducted in person, according to the meeting schedule or via electronic communications, whenever necessary.

Composition

President
Manuel Domingues de Jesus and Pinho

Effective Members
Antonio Luiz de Campos Gurgel
Flavio Cesar Maia Luz
Rosangela da Silva
Egídio Schoenberger

Alternate members
João Henrique de Souza Brum
Luiz Flávio Cordeiro da Silva
Josino de Almeida Fonseca
Sônia Regina Jung
João Vicente Amato Torres

The governance model of ISA CTEEP prioritizes the administrative efficiency and the professionalization of its managers. Regarding this, committees have the crucial role of interacting with the Executive Board, preparing beforehand the topics to be discussed and approved by the Board of Directors.

Remuneration Committee

Main duties are: accompanying, analyzing and proposing to the Board of Directors themes related to remuneration of employees and officers; Board of Directors’ meetings; position and salaries; remuneration policy; variable remuneration; retained profit sharing (PLR); and collective labor agreements.

Para garantir o alinhamento das práticas de governança corporativa, o presidente do Conselho de Administração da ISA CTEEP não integra a Diretoria executiva. As reuniões são realizadas presencialmente, de acordo com o calendário ou via comunicação eletrônica, sempre que necessário.

Composition

Bernardo Vargas Gibsone

Henry Medina González

César Augusto Ramírez Rojas

Internal Audit Committee

It is composed of three members of the Board of Directors, the Company President, as a permanent guest, and the manager of the Internal Audit Department of ISA CTEEP, as technical secretary. is responsible for strengthening internal control system, risk management, and corporate governance practices.

Composition

César Augusto Ramírez Rojas

Henry Medina Gonzalez

Marcos Simas Parentoni

Reynaldo Passanezi Filho (permanent guest)

Silvio Luiz de Souza (technical secretary)

It is made up by four members, one of whom is a president, and three directors, elected by the Board of Directors for a period of three years. Considered as an important recommendation channel to the Board of Directors, it is responsible for business management and for the practice of all actions necessary to the regular operation of society.

Composition

CEO
Reynaldo Passanezi Filho

Institutional Relations Officer
Carlos Ribeiro

Financial and Investor Relations Director
Rinaldo Pecchio Junior

Chief Technical Officer
Celso Sebastião Cerchiari

Chief Projects Officer
Weberson Eduardo Guioto Abreu

The curriculum vitae for each member of the Board of Directors, Executive Board, Fiscal Council, and other Committees may be found on the 2016 Reference Form, available on the Securities Commission website (www. cvm.gov.br) or ISA CTEEP Investor Relations website (www.isacteep.com.br/ri).

After incorporating the Declaration of Human Rights of its controller and declaring its commitment to this issue in 2015, ISA CTEEP advanced the theme during 2016, through a self-diagnosis to identify areas and/or processes that could present risks related to violations in this issue, in the energy transmission activities of the company and its subsidiaries.

The evaluation took into account the Universal Declaration of Human Rights, the Global Reporting Initiative (GRI), and the Corporate Sustainability Index (ISE) of BM&FBovespa – in their issues relating to the theme. The result indicated opportunities for improvement both in internal processes and procedures and in the evaluation and monitoring of suppliers in relation to social and environmental aspects, as well as in the training of employees on human rights, since the theme has not been addressed in the Company’s training in recent years.G4-HR2, G4-HR7

Another important advance in relation to this theme that was also obtained in 2016 was the initial elaboration of a document with social and environmental guidelines – including human rights aspects – aimed at suppliers, which should continue to be developed throughout 2017.

In 2016, the Ethics Hotline did not receive any complaints relating to human rights violations (which involves issues such as discrimination, harassment, and child labor, among others). Considering other means of communication, the Company received one complaint relating to discrimination, which was analyzed and evaluated as “unfounded.” In this case, the parties were guided according to the Company’s operating premises, which can also be consulted in documents such as the Human Management Policy, Social Policy, and Code of Ethics.G4-HR3, G4-HR12

To minimize the impact of variables in the business administration and in the performance of its activities, ISA CTEEP adopts a model of Comprehensive Risk Management (GIR) that identifies the strategic, operational and surroundings risks.

This process is developed from the methodology of the COSO (Committee of Sponsoring Organizations of the Treadway Commission) and it considers the precautionary principle, in search of protection and value creation for the company and its stakeholders. Also considered are the guidelines established in standard ABNT NBR ISO 31000 (Risk Management Principles and Guidelines).

Since 2015, ISA CTEEP has a Corporate Policy for Comprehensive Risk Management of the ISA, that includes concepts and metrics for evaluation of events, seeking to standardize and enhance the understanding of the internal controls environmental. This work creates a risk matrix, that promotes a panoramic view of the risk groups and the details of the events, their causes and consequences, management measures, as well as measurement of the impacts on the Company.

The matrix is updated on a quarterly basis, with instance of monitoring determined for the levels of managers, executive board, and Internal Audit Committee; the latter includes the participation of two members of the Board of Directors. In this context, there is a determination of attributions, considering the classification of risk events, ranked as low, moderate, high, or priority.

In 2016, with the resumption of participation in Auctions, the Company expanded its business, applying Risk Management in Projects. In this evaluation, risk events should be identified, considering the stages of structuring (from portfolio offer to effective project structuring), execution (phases of project realization, including contracting and interactions with external agents, including government agents), and project operation (starting from the date of energization of the enterprise).

Due to the management advances prioritized in 2016, the integration of subsidiaries into the risk management processes was transferred to 2017. Thus, ISA CTEEP and its subsidiaries will operate under the same benchmark.

Environmental Risks

In the Integral Risk Management process, environmental aspects are evaluated within a specific Environmental (ENV) group, as well as in the context of other groups, such as: Equipment Failure (EF), Natural Phenomena (NP), Suppliers (SU) and Social (SO). Among the control measures existing in the environmental dimension are: containment of oil leaks; sensitization and training for employees and third party contractors (in engagements relating to construction, operation and maintenance); procedures for attending to environmental emergencies and emergency drills; and inspection of equipment and lines.

Anti-corruption Procedures

G4-SO3, G4-SO4, G4-SO5

The identification of risks relating to the issue of corruption is carried out according to a methodology parameterized by the ISA Group for Integral Management of Corporate Risks. The processes are analyzed by the Internal Audit Department, with the support of Strategy & Innovation, considering events included in a group called Fraud and Corruption Risk. The activities most vulnerable to fraud and corruption are those involving interaction with external stakeholders, including suppliers and public agencies; therefore, they are given priority in the Internal Audit assessment.

Although the subsidiaries do not yet have a structured process of corporate risk management, the advances in management practices at ISA CTEEP are a reflection of improvements in the processes of its subsidiaries, since the Organization’s supporting areas are integrated (Procurement, Human Resources, among others).

In its Code of Ethics, ISA CTEEP presents guidelines for combating fraud and corruption, as well as other issues, which help employees of the Company and its subsidiaries understand the desired conduct in interactions with other stakeholders.

As the Code was again revised, with the inclusion of topics relating to the processes of the System for Anti-Money Laundering and Terrorism Financing (SARLAFT), the Company conducted an internationalization campaign; provided a video guide, which was viewed by 592 employees (40% of the total work force); and issued communications directed to the members of the Internal Audit Committee, involving the CEO and Members of the Board of Directors. For 2017, a workshop on Brazil’s Anti-Corruption Act was scheduled for the CEO and Executive Board.

Confidential complaints about corruption and other issues can be submitted to the ISA CTEEP Ethics Hotline, whether by company employees or by the public at large. There is a process for referring and handling messages received, which includes disciplinary measures. In 2016, the Company engaged a consulting firm to review and enhance the preventive measures for compliance with the Anti-Corruption Act. In the same year, no complaints of corruption were registered through this channel, in relation to ISA CTEEP and its subsidiaries.