“To transform people’s relationship with energy aiming at a sustainable world”. With this vision as its yardstick, ENGIE Brasil Energia reached the end of 2016 commemorating a series of achievements despite a constantly challenging scenario. In a year marked in Brazil, by political instability and economic recession, the Company continued to pursue the process of strategic integration proposed by its controlling company — ENGIE.

As part of this process, in 2016, the Company adopted a new name and consequently a new logo. A bold and symbolic initiative representing adjustment to the structural changes that the sector is undergoing throughout the world. Changes, which have an impact on both energy generation as well as consumption, characterizing the so-called energy transition, shaping the sector’s future based around three key axes: decarbonization, decentralization and digitization.

Aware of the opportunities stemming from these transformations, ENGIE Brasil Energia’s has successfully met the challenge of maintaining and improving centralized energy generation and commercialization activities — which it has successfully executed since the beginning of its operations in Brazil —, while at the same time adapting its structure and organizational culture. The key objective of this adaptation is to reach and develop new markets with greater proximity to clients and consumers through the synergies existing between products and services.

Reformulated in 2016, the Company’s mission statement transmits precisely what we are aiming for: “Provide innovative and sustainable solutions in energy to people, companies and territories”. It was with this vision and in alignment with the new moment in business strategy that in July the succession process for ENGIE Brasil Energia’s Chief Executive Officer’s position was completed entirely according to plan. It was in this context that we obtained some important results, which signal the Company’s capacity to connect with the future as well as reiterating our corporate resilience built up over the years.

On the economic-financial front, we were able to report a 3.1% increase in net income to R$ 1,548.3 million in 2016, which following adjustments, will be distributed in full to the Company’s shareholders, subject to ratification by the Annual General Shareholders’ Meeting. Despite the continuing downturn in the Brazilian economy overall during the year, EBITDA margin widened by 1.5 p.p. from 47.8% in 2015 to 49.3% in 2016. This performance is due in large part to the combined effect of the Company’s strategy of long-term contracting - which sustained sales revenue in the face of a critical economic scenario - with low net debt during the year. Other factors contributing to the result were a reduction in fuel consumption for power generation - a reflection of reduced thermoelectricity dispatch; the drop in the volume of energy purchases for resale; and recognition of impaired thermal generation-related assets. It is worth pointing out that the GSF – Generation Scaling Factor – continued to affect ENGIE Brasil Energia’s results. Among other factors, this is due to the startup of commercial capacity at new plants under the Energy Reallocation Mechanism (MRE) - but where energy delivery capacity is still inadequate, - the reduction in load and of thermoelectricity generation for replenishing the reservoirs and finally, to the supply of the Northeast submarket in the light of restrictions on energy exchange with other submarkets.

In order to respond more efficiently to current and future challenges, we upgraded our organizational structure, remodeling areas and teams. An example of this was the Strategy and Regulation Officer, encompassing activities focused on synergetic improvements between our corporate objectives and the development of innovative solutions in energy. Under this new structure, initiatives involving Research and Development and Information Technology and Digitization of our products and processes become increasingly more relevant.

In 2016, we saw a practical example of innovation in practice with the unveiling of the Generation Operations Center (GOC) in Florianópolis (SC), a structure which allows us to control the Company’s plants on an automated and remote basis. Initially, we began operating three plants located in the Center-West region out of this new center in Santa Catarina: the Ponte de Pedra Hydroelectric Power Plant (HPP) and the José Gelázio da Rocha and Rondonópolis small hydroelectric plants (SHP). The outlook for the next few years is that other plants will be controlled eventually via GOC, thus reinforcing the automation of internal processes with a view to innovation and reduction in costs.

On another front and aligned with the strategy of decentralization, ENGIE Brasil Energia made its debut in the market for distributed generation by acquiring 50% of the equity of GD Brasil Energia Solar S.A. From this acquisition, ENGIE Geração Solar Distribuída S.A. was created, now one of the leaders in the segment in Brazil. Through the new subsidiary, an agreement was signed in November with the Santa Catarina energy distributor for the installation of photovoltaic systems in a thousand households in the state. Project feasibility is ensured under a program, which involves the distributor subsidizing part of the consumer’s investment. This action represents one more important step towards the Company taking a position in the vanguard of developments in the segment for distributed photovoltaic generation.

In the process of seeking greater proximity to the clients, we explored further the opportunities in the free market, increasing the number of agreements, dispersed among companies of different sizes and sectors. As a result, we added 83 new clients to the portfolio, representing an increase of 36.4% compared with 2015, and among them Rio de Janeiro’s Light Vehicle on Tracks (VLT), a modern and sustainable urban mobility project to which we supply renewable energy.