CESP COMPANHIA ENERGÉTICA DE SÃO PAULO CORPORATE TAXPAYER S ID (CNPJ): / COMPANY REGISTRY (NIRE):

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1 CESP COMPANHIA ENERGÉTICA DE SÃO PAULO CORPORATE TAXPAYER S ID (CNPJ): / COMPANY REGISTRY (NIRE): MANAGEMENT PROPOSAL FOR THE EXTRAORDINARY GENERAL MEETING The Board of Directors of CESP Companhia Energética de São Paulo ( Company ) hereby submits to the examination of its shareholders Management s Proposal regarding the matters to be resolved at the Extraordinary General Meeting to be held on October 14, 2011 at 3:00 p.m., pursuant to the Company s Bylaws and Law 6404/76: 1. Election of a member of the Board of Directors The controlling shareholder submits the election of the following representative of the employees to the Board of Directors, with a term of office until the Annual General Meeting of 2013: João Bosco Tosta 2. Election of members of the Fiscal Council The controlling shareholder nominates the following candidates to the Fiscal Council, with a term of office until the Annual General Meeting of 2012: Hélio Pilnik; Paulo Roberto Fares. 3. Amendments to the Bylaws Amendment to the Bylaws to include the following rules and changes: the inclusion of paragraph 3 of Article 26, inclusion of new wording for Article 40 and the renumbering of the current Article 40 as Article 41, in order to comply with the Mandatory Clauses in the BM&FBOVESPA New Level 1 Listing Rules. The documents related to the matters to be analyzed by the Extraordinary General Meeting are available to Shareholders at the Company s headquarters, as well as electronically on the Company s website and the website of the Brazilian Securities and Exchange Commission (CVM), as per Exhibit I Information on the candidates nominated for election to the Board of Directors and Fiscal Council, and Exhibit II Amendments to the Bylaws of this proposal, in accordance with CVM Instruction 481/2009. São Paulo, September 27, JOSÉ ANÍBAL PRERES DE PONTES Chairman of the Board of Directors 1/21

2 EXHIBIT I Information on the candidates nominated to the Board of Directors and Fiscal Council at the Extraordinary General Meeting of October 14, Items 12.6 to of the Reference Form instituted by CVM Rule 480/ Information on the candidates nominated to the Company s Board of Directors and Fiscal Council NAME AGE PROFESSION CANDIDATE FOR THE BOARD OF DIRECTORS DATE OF Taxpayer s ID ELECTIVE OFFICE INVESTITU TERM OF OFFICE (CPF) RE OTHER POSITIONS HELD IN THE COMPANY NOMINATED BY CONTROLLING SHAREHOLDER João Bosco Tosca 50 Lawyer Employees Representative on the Board of Directors To be defined Until the Annual General Meeting of 2013 Management Analyst Yes NAME AGE PROFESSION Taxpayer s ID (CPF) Hélio Pilnik 56 Economist Paulo Roberto Fares 54 Civil Engineer CANDIDATES FOR THE FISCAL COUNCIL DATE OF ELECTIVE OFFICE INVESTITU RE Sitting Member of the Board of Directors Deputy Member of the Board of Directors To be defined To be defined TERM OF OFFICE OTHER POSITIONS HELD IN THE COMPANY NOMINATED BY CONTROLLING SHAREHOLDER Until the Annual General Meeting of Yes Until the Annual General Meeting of Yes 2/21

3 12.8. Information on the candidates nominated to the Company s Board of Directors and Fiscal Council: a) Resumés: Board of Directors: JOÃO BOSCO TOSCA Mr. Tosca earned a degree in Law from AEMS (Associação de Ensino de Mato Grosso do Sul) in He joined CESP Companhia Energética de São Paulo in January 1982 as a Mill Maintenance Mechanic, a post in which he remained until January 1990, when he became an Electronics Technician until August Since September 2008, he has been a Management Analyst in charge of monitoring lawsuits in the Litigation Division. Sitting member of the Fiscal Council: HÉLIO PILNIK Mr. Pilnik earned a degree in Economics from the Armando Álvares Penteado Foundation in 1979 and completed post-graduate studies in Training for Electricity Sector Executives in 1997 at the Economics and Business Faculty of the University of São Paulo (FEA USP). From 1974 to 1998, he worked for Light Serviços de Eletricidade S.A., subsequently renamed Eletropaulo Eletricidade de São Paulo S.A., having held several managerial positions in the Procurement Division, Social Programs Department, Commercial Department, Real Estate Department and Materials Quality and Management Department. In 1998, he served as deputy member of the Fiscal Council of Bandeirante Energia S.A., and was one of the coordinators of the spin-off of Eletropaulo that initiated the privatization process. In the same year, he joined the Board of Trustees of the Fundação Patrimônio Histórico de Energia de São Paulo, and served as Project Coordinator until Between 2001 and 2004, he worked for CTEEP Companhia de Transmissão de Energia Elétrica Paulista, in the Assets and Procurement Departments. From January 2005 to March 2011, he held the positions of Management and Finance Coordinator and Finance Supervisor at the Butantã and Vila Mariana District Offices in São Paulo. He is currently the Coordinator of the Planning, Budget and Public Finance Sector Group of the São Paulo State Energy Secretariat. Deputy member of the Fiscal Council: PAULO ROBERTO FARES Mr. Fares earned a degree in Civil Engineering from the Mauá School of Engineering in 1981 and an MBA from the Dom Cabral Foundation in With ample experience in the hydraulic operation planning area, he worked for Eletropaulo Eletricidade de São Paulo S.A. from August 1982 to December 1997, where he held several positions, including positions Engineer, Coordinator, Division Manager, Department Manager, Advisor to the Executive Board and Executive Assistant of the Generation and Transmission Department. Due to Eletropaulo s spin-off in January 1998, Mr. Fares began working for EMAE Empresa Metropolitana de Águas e Energia S. A., holding the positions of Executive Assistant of the Technical Department from January 1998 to April 2000, Department Manager of the Maintenance and Operation of Elevator Plants from April to August 2000, and Assistant to the CEO from August 2000 to December Since then, he has served as Manager of the Executive Coordination Manager of EMAE s CEO Office. b) Criminal convictions, convictions in administrative processes of the Brazilian Securities and Exchange Commission (CVM) or final judgments, in the judicial or administrative spheres, 3/21

4 leading to suspension or inability to exercise professional activity or trade in the last 5 (five) years: Answer: The candidates nominated by the Controlling Shareholder for the election of members of the Board of Directors and Fiscal Council declare that they do not have any criminal convictions, convictions in administrative processes of the Brazilian Securities and Exchange Commission (CVM) or final judgments, in the judicial or administrative spheres, leading to suspension or inability to exercise their professional activity or trade in the last 5 (five) years Marital relationship, de facto marriage or kinship to the second degree with: a) members of the Company s Board of Directors and/or Fiscal Council: Answer: There is no marital relationship, de facto marriage or kinship to the second degree between the candidates nominated to the Board of Directors and Fiscal Council and the members of the Company s Board of Directors and Fiscal Council. b) (i) members of the Company s Board of Directors and Fiscal Council and (ii) members of the Board of Directors and Fiscal Council of direct or indirect subsidiaries of the Company: Answer: The Company has no subsidiaries. c) (i) members of the Board of Directors and Fiscal Council of the Company or its direct or indirect subsidiaries and (ii) direct or indirect controlling shareholders of the Company: Answer: There is no marital relationship, de facto marriage or kinship down to the second degree between the members of the Board of Directors and Fiscal Council of the Company, the candidates nominated for the election of members of the Board of Directors and Fiscal Council of the Company or its direct or indirect subsidiaries and the Company s direct or indirect controlling shareholders. d) (i) members of the Board of Directors and Fiscal Council of the Company and (ii) members of the Board of Directors and Fiscal Council of the direct or indirect parent companies of the Company: Answer: There is no marital relationship, de facto marriage or kinship down to the second degree between the members of the Board of Directors and Fiscal Council of the Company, the candidates nominated for election of the members of the Board of Directors and Fiscal Council and the members of the Board of Directors and Fiscal Council of direct and indirect parent companies of the Company Declare any relationships of subordination, service rendering or control maintained in the last 3 (three) fiscal years between members of the company s board of directors and: a) the company s direct or indirect subsidiaries: Answer: The Company has no subsidiaries. b) the company s direct or indirect controlling shareholder(s): Answer: HÉLIO PILNIK, nominated for the position of sitting member of the Fiscal Council, is Coordinator of the Planning, Budget and Public Finance Sector Group of the São Paulo State Energy Secretariat, which is indirectly associated with the controlling shareholder. 4/21

5 PAULO ROBERTO FARES, nominated for the position of deputy member of the Fiscal Council, has been Manager of the Executive Coordination of the CEO Office of EMAE Empresa Metropolitana de Água e Energia, a company that belongs to the controlling shareholder (São Paulo State Treasury Secretariat), since December c) information on any supplier, client, debtor or creditor of the company, its subsidiary(ies) or parent company of any of such persons: Answer: There are no relationships of subordination, service provision or control in the last 3 (three) fiscal years between the candidates nominated to the Company s Board of Directors and Fiscal Council and suppliers, clients, debtors or creditors of the Company or of subsidiaries or parent companies of any of such persons. 5/21

6 EXHIBIT II Amendments to the Bylaws Proposals and justifications of the amendments to the Company s Bylaws submitted to the Extraordinary General Meeting of October 14, 2011: Amendment to the Bylaws to include the following rules and changes: inclusion of paragraph 3 in Article 26, inclusion of new wording for Article 40 and renumbering of the current Article 40 to 41, to comply with the New Listing Rules of Level 1 Mandatory Clauses of BM&FBOVESPA. Bylaws in Effect Amendment Proposal Justification ARTICLE 26 The members of the statutory bodies shall be invested in their positions by means of the execution of the instrument of investiture drawn up in the respective book of minutes. Paragraph one The instrument of investiture shall be signed in the thirty (30) days following the election, under penalty of its inefficacy, except for a justification accepted by the body to which the member has been elected, and shall contain the indication of at least one domicile for the receipt of summonses and notifications of administrative and judicial proceedings, related to acts of its management, being allowed the change of the domicile indicated only by means of a written communication. Paragraph two The investiture shall be subject to the presentation of the declaration of assets and values, as provided for in the state legislation in force, which shall be annually updated and at the end of the term of office. ARTICLE 26 idem Paragraph one - idem Paragraph two idem Inclusion Paragraph three Paragraph three The investiture of the members of the board of directors and the board of executive officers shall be subject to prior signature of the Management s Statement of Agreement in accordance with the New Level 1 Listing Rules of the BM&FBOVESPA, as well as the applicable legal requirements. The wording follows the guidelines set forth in the Mandatory Clauses of the New Level 1 Listing Rules of the BM&FBOVESPA 6/21

7 ARTICLE 40 inclusion of new wording of current Article 40, now renumbered as Article 41 ARTICLE 40 Due to the Company s admission to the Level 1 special corporate governance listing segment of BM&FBOVESPA S.A. Securities, Commodities and Futures Exchange ( BM&FBOVESPA ), the company, its shareholders, management and members of the fiscal council are subject to the provisions set forth in the Level 1 Corporate Governance Listing Rules of the BM&FBOVESPA ( Level 1 Listing Rules ). The wording follows the guidelines set forth Mandatory Clauses of the New Level 1 Listing Rules of the BM&FBOVESPA The Company s Restated Bylaws, including the amendments submitted to the Extraordinary General Meeting of October 14, 2011: BYLAWS CHAPTER I NAME, DURATION, HEADQUARTERS AND PURPOSE ARTICLE 1 - The joint stock company operating under the name of CESP Companhia Energética de São Paulo, is an integral part of the indirect management of the State of São Paulo, governed by these bylaws, Law no. 6,404/76 and other applicable legal provisions. Paragraph one The company s duration term is undetermined. Paragraph two The company s headquarters is located in the Capital of the State of São Paulo. Paragraph three To the extent it is necessary for the achievement of the corporate purpose and in compliance with its operation area, the company may open, set up, keep, transfer or extinguish branches, premises, agencies, offices, representations or also appoint representatives, in compliance with the legal and regulatory provisions. ARTICLE 2 - The purpose of the company is: I II III to study, plan, project, construct and operate systems of production, processing, transportation and storage, distribution and trade of energy, especially electrical energy, resulting from the use of rivers and other sources, usually renewable natural sources; to study, plan, project, construct and operate dams and other undertakings, intended to the multiple use of water resources; to participate in projects focused on the industry and trade of energy, especially electrical energy, in addition to rendering services that, directly or indirectly, are related to this purpose; 7/21

8 IV V VI VII VIII to study, project, carry out plans and programs of research and development of new energy sources, especially renewable sources, directly or jointly with other entities; to study, prepare, carry out plans and programs aimed at the economic development of regions which the company deems interesting, be it directly or jointly with other state or private bodies, in addition to providing information and assistance which could help the private or state enterprise, aimed at the implementation of economic, cultural, assistance and social activities in those regions, for meeting its social role and helping the communities in which it operates; to study, project, carry out forestation and reforestation projects, trade and processing of trees, timber and byproducts from these activities; to conduct research, mining, exploit and use mineral resources, especially those with energetic capability; and to participate in other companies as a partner, shareholder or quotaholder. CHAPTER II CAPITAL STOCK AND SHARES ARTICLE 3 - The capital stock is five billion, nine hundred seventy-five million, four hundred thirty-three thousand, four hundred fifty-four reais and forty-three centavos (R$5,975,433,454.43) divided into three hundred twenty-seven million, five hundred two thousand, six hundred seventy-three (327,502,673) shares, being one hundred nine million, one hundred sixty-seven thousand, five hundred fifty-eight (109,167,558) single-class common shares, eight million, one hundred nineteen thousand, five hundred forty-eight (8,119,548) class A preferred shares and two hundred ten million, two hundred fifteen thousand, five hundred sixty-seven (210,215,567) class B preferred shares, all non-par registered shares. Sole paragraph - Regardless of statutory amendment, the capital stock may be increased up to the maximum limit of seventeen billion, nine hundred twenty-six million, three hundred thousand, three hundred sixty- three reais and twenty nine centavos (R$17,926,300,363.29), by means of resolution of the board of directors and listening before to the fiscal council. ARTICLE 4 - Each common share shall correspond to one vote in the resolutions of the general meeting. Sole paragraph The preferred shares shall not have voting rights, except as provided for in Article 40, but shall be entitled to: I - Class A preferred shares: a) priority in the redemption of capital, ex-premium in the event of dissolution of the company; b) non-cumulative annual priority dividend of ten percent (10%), calculated on the amount of the paid-up capital stock represented by class A preferred shares, to be apportioned among these shares; c) the right to appoint, jointly with the class B preferred shares, one member to the fiscal council and respective deputy member, selected among the owners of shares, in separate ballot; 8/21

9 d) the right to participate in capital increases resulted from the capitalization of reserves and profits, in equal conditions with the common shares and class B preferred shares; and e) shall be non-redeemable. II - Class B preferred shares: a) the right to receive an amount per share corresponding to one hundred percent (100%) of the amount paid per share to the selling controlling shareholder in the event of sale of the company control; b) the right to participate, in equal conditions with the common shares, in the mandatory dividend distribution attributed to these shares as provided for in these bylaws; c) right to appoint, jointly with the class A preferred shares, one member to the fiscal council and respective deputy member, selected in separate ballot; d) right to participate in capital increases resulted from the capitalization of reserves and profits, in equal conditions with the common shares and class A preferred shares; and e) shall be non-voting and shall not acquire this right even in the event of non-payment of dividends; and f) shall be non-redeemable. ARTICLE 5 - The shareholders, while complying with the legal provisions and the conditions set forth below, may convert their (i) class A preferred shares into common shares and into class B preferred shares of the company and (ii) common shares into class A preferred shares and into class B preferred shares of the company, in both cases provided that they are paid-up. The company s class B preferred shares cannot be converted. Paragraph one - In the event of conversion (i) of the class A preferred shares into common shares and (ii) common shares into class A preferred shares: I II III the conversions shall be carried out in periods above fifteen (15) consecutive days, to be determined by the board of directors; for the purpose of taking advantage of the benefit, the shareholders should have used all the rights relative to the shares owned and present, upon conversion, their identification documents; for each conversion period, the shareholders may request the conversion of until three percent (3%) of the capital stock and the amount of requests made shall not exceed five percent (5%) of the capital stock. Paragraph two - In the event of conversion (i) of class A preferred shares into class B preferred shares, and (ii) of common shares into class B preferred shares, the conversion shall be conducted at the ratio of one share owned for one new share converted, while complying with the limit of two thirds (2/3) of the total shares issued for non-voting or restricted voting preferred shares. 9/21

10 Paragraph three - It shall be incumbent upon the company s board of directors to determine the limits, terms and conditions for the exercise of the conversion rights set forth in this article, and it may perform all the acts needed for its implementation. Paragraph four - The company shall be able to authorize the depositary institution in charge of registering the book-entry shares to charge the shareholders, while complying with the limits determined by the Brazilian Securities and Exchange Commission - CVM, for the cost of transferring the ownership of the book-entry shares. CHAPTER III GENERAL MEETING ARTICLE 6 - The general meeting shall be called, instated and shall resolve pursuant to the law, on all the matters of the company s interest. Paragraph one - The general meeting shall also be called by the chairman of the board of directors, or by the majority of the board members in office. Paragraph two The general meeting shall be preferably chaired by the chairman of the board of directors or, in his absence, by any other attending board member; it is allowed to the chairman of the board of directors to appoint the board member who shall replace him in the chair of the general meeting. Paragraph three - The chairman of the general meeting shall choose, among the attendees, one or more secretaries, allowing the use of an own advisement in the company. Paragraph four The minutes of the general meeting shall be drawn up in the summary format, as provided for in article 130, paragraph 1, of Law no. 6,404/76. General Provisions CHAPTER IV MANAGEMENT OF THE COMPANY ARTICLE 7 - The company shall be managed by the board of directors and by the board of executive officers. CHAPTER V BOARD OF DIRECTORS ARTICLE 8 - The board of directors is the joint resolution body responsible for the company s superior guidance. Composition, investiture and term of office ARTICLE 9 - The board of directors shall be composed of at least three (3) and at most 15 members, elected by the general meeting, all with an unified term of office of two (2) years counted from the election date. Reelection is allowed. 10/21

11 Paragraph one The company s CEO shall integrate the board of directors, upon election of the general meeting. Paragraph two It shall be incumbent upon the general meeting which elects the board of directors to determine the total number of positions to be filled, within the maximum limit provided for in these bylaws, and appoint its chairman. The choice may not be on the company s CEO who shall also be elected as a board member. Paragraph three - The Board of Directors shall consist of, at least, twenty percent (20%) of independent members, who shall meet the requirements set forth in Paragraph 4 herein, who shall be announced as such at the General Meeting electing them. Paragraph four - The Independent Members must comply with the following requirements: (i) to have no relation with the Company other than equity interest and be a user of public utilities; (ii) not be a controlling shareholder, spouse or relative to the second degree of a controlling shareholder, not be or have been, three (3) years prior, linked to the Company or entity related to the controlling shareholder (excepting from this restriction persons related to public education and/or research institutions); (iii) have not been, in the last three (3) years, an employee or officer of the Company, of the controlling shareholder or of a Company controlled by the Company; (iv) not be a supplier or buyer, direct or indirect, of services and/or products of the Company, to such an extent that could lead to loss of independence; (v) not be an employee or manager of Company or entity supplying or buying services and/or products to the Company; (vi) not be spouse or relative to the second degree of any manager of the Company; and (vii) not receive any compensation from the Company other than as board member (excepting the earnings in cash from equity interest). Paragraph five - Whenever the compliance with the percentage referred to in Paragraph 3 of Article 9 herein leads to a fractionated number of board members, we shall: (i) round it up to the whole number, when the fraction is equal or higher than 0.5; or (ii) round it down to the whole number, when the fraction if lower than 0.5. ARTICLE 10 - It is ensured the participation of a representative of the employees in the board of directors, with a coincident term of office with the other board members. Paragraph one The board member representing the employees shall be chosen by the vote of the employees, in a direct election, reelection allowed for non-successive periods. Paragraph two - The internal regulation of the board of directors shall set forth eligibility requirements and other conditions for the exercise of the position of representative of the employees. ARTICLE 11 - The investiture in the position of board member is subject to the execution of the Instrument of Commitment before the State, by means of the Council of Defense of the Capitals of the State CODEC. Sole paragraph - The provisions in this article are not applied to the board member representing the employees, who has been elected by minority shareholders nor to who, notwithstanding elected by the State, is considered independent pursuant to these bylaws or the specific legislation ARTICLE 12 - The board member who receives free of charge from the State, on a fiduciary basis, any share issued by the company for the compliance with the requirement of article 146 of Law no. 6,404/76, is impeded 11/21

12 from selling it or encumbering it to third parties, and he shall replace it immediately after he leaves the position, under penalty of undue appropriation. Vacancy and Substitutions ARTICLE 13 - In the event of vacancy of any position of board member before the end of the term of office, the general meeting shall be called to elect the substitute, who shall complete the term of office of the substituted person. Operation ARTICLE 14 - The board of directors shall meet, on an ordinary basis, once a month and, on an extraordinary basis, whenever necessary to the company s interests. Paragraph one - The meetings of the board of directors shall be called by its chairman, or by the majority of the board members in office, upon the submission of a written or electronic correspondence to all board members and also to the State, by means of the Council of Defense of the Capitals of the State - CODEC, at least ten (10) days in advance and the indication of the issues to be dealt with. Paragraph two The chairman of the board of directors shall supervise for the board members to receive individually, with the due advance in relation to the date of the meeting, the documentation with the necessary information to allow the discussion and resolution of the issues to be dealt with, including, when the case may be, the proposal of the board of executive officers and the technical and legal manifestations. Paragraph three The meetings of the board of directors shall be instated with the attendance of the majority of its members in office. The chair of the meeting is incumbent upon the chairman or, in his absence, upon other board member appointed by him. Paragraph four Upon reason of urgency, the chairman of the board of directors shall call the extraordinary meetings with any advance, being allowed their holding by means of telephone, videoconference or other qualified means of will manifestation of the absent board member, whose vote shall be considered valid for all purposes, with adverse effects to the subsequent drawing up and signature of the respective minutes. Paragraph five The board of directors shall resolve by majority vote of the attendees, prevailing, in the event of tie, the proposal with the vote of the board member who is chairing the meeting. Paragraph six - The meetings of the board of directors shall have as secretary whoever is appointed by their chairman and all resolutions shall be in minutes drawn up and registered in the company s records, submitting a copy of them to the State, by means of the Council of Defense of the Capitals of the State CODEC, in five (5) days counted from their approval. Paragraph seven Whenever there are resolutions destined to produce effects before third parties, the extract of the minutes shall be filed in the registration of commerce and published. Attributions ARTICLE 15 In addition to the attributions provided for by the law, it is also incumbent upon the board of directors: 12/21

13 I II III IV V VI VII VIII IX X XI XII XIII XIV XV XVI XVII XVIII XIX to approve the strategic planning with the action guidelines, result targets and performance evaluation indexes; to approve annual and multi-year programs, with indication of the respective projects; to approve budgets of expenditures and investment, with indication of sources and uses of funds; to follow the execution of the plans, programs, projects and budgets; definition of goals and priorities of public policies compatible with the company s operation area and its corporate purpose; to resolve on the policy of prices or tariffs of assets and services provided by the company, respecting the regulatory limit of the respective sector; to authorize the opening, installation and extinction of branches, premises, agencies, offices and representations; to resolve on the capital stock increase within the limit authorized by the bylaws, determining the respective subscription and payment conditions; to determine the maximum indebtedness limit of the company; to resolve on the issuance of simple debentures not convertible into shares and without real guarantee and, in relation to the other types of debentures, on the conditions mentioned in paragraph 1 of article 59 of Law no. 6,404/76; to resolve on the payment of interest on own capital or distribution of dividends due to the result for the year in progress or profit reserve, without adverse effects to the subsequent ratification of the general meeting; to propose to the general meeting the payment of interest on own capital or distribution of dividends due to the result for the fiscal year ended; to resolve on the personnel policy, including the determination of the staff, plan of positions and salaries, general conditions of collective negotiation; opening of a selective process to fill vacancies and Profit Sharing Program; to previously authorize the execution of any legal businesses involving acquisition, sale or encumbrance of assets, as well as assumption of obligations in general, when, in any case, the value of the transaction exceeds two percent (2%) of the capital stock; to approve the contracting of civil liability insurance in favor of the members of the statutory bodies, employees, agents and mandataries of the company; to grant leaves to the officers, in compliance with the pertinent regulation; to approve its internal regulation; to previously express itself about any proposal of the board of executive officers or issue to be submitted to the general meeting; to call the examination of any issue comprised in the competence of the board of executive officers and issue guidance on it of binding character. CHAPTER VI BOARD OF EXECUTIVE OFFICERS Composition and term of office ARTICLE 16 - The board of executive officers shall consist of five (5) members, with one chief executive officer, one financial and investor relations officer, one administrative officer, one engineering and construction officer, and one generation officer, with the attributions determined by the Internal Regulation, all with a unified term of office of two (2) years. Reelection is allowed. 13/21

14 Vacancy and Substitutions ARTICLE 17 - In the absences or temporary impediments of any officer, the chief executive officer shall appoint another member of the board of executive officers to cumulate the functions. Sole paragraph In his absences and temporary impediments, the chief executive officer shall be substituted by an officer appointed by him and, if there is not appointment, by the officer responsible for the financial area. Operation ARTICLE 18 - The board of executive officers shall meet, on an ordinary basis, at least twice a month and, on an extraordinary basis, by call of the chief executive officer or of any other two officers. Paragraph one The meetings of the joint board of executive officers shall be instated with the attendance of at least half of the officers in office, considering approved the matter with the agreement of the majority of the attendees; in the event of tie, it will prevail the proposal counting on the vote of the chief executive officer. Paragraph two - The resolutions of the board of executive officers shall be in minutes drawn up in the company s records and signed by all attendees. Paragraph three Where urgency demands, the chief executive officer may convene extraordinary meetings at whatever prior notice, which meetings may be held through teleconference, videoconference or any other valid means allowing an absent officer to cast his vote. Any vote so cast shall be valid for all legal purposes, as shall the relevant minutes of any such meeting thereafter be reduced in writing and signed as appropriate. Attributions ARTICLE 19 - In addition to the attributions defined in law, it is incumbent upon the joint board of executive officers: I to prepare and submit to the approval of the board of directors: a) the bases and guidelines for the preparation of the strategic plan, as well of the annual and multiyear programs; b) the strategic plan, as well as the respective multi-year plans and annual programs of expenditures and investments of the company with the respective projects; c) the costing and investment budgets of the company, with the indication of the sources and uses of funds, as well as their changes; d) the performance result evaluation of the company s activities; e) quarterly reports of the company jointly with the trial balance sheets and other financial statements; f) annually, the draft of the management report, jointly with the balance sheet and other financial statements and respective explanatory notes, with the report of independent auditors and of the fiscal council and the proposal of allocation of the result for the year; g) the Internal Regulation of the board of executive officers and the regulations of the company; h) proposal to increase the capital and amend the bylaws, after listening to the fiscal council, when the case may be; i) proposal of the personnel policy; II to approve: 14/21

15 a) the technical-economic evaluation criteria for the investment projects, with the respective delegation plans of responsibility for their execution and implementation; b) the plan of accounts; c) the company s annual insurance plan; d) residually, within the statutory limits, everything related to activities of the company and which is not of private competence of the chief executive officer, of the board of directors or of the general meeting. III to authorize, in compliance with the limits and guidelines set forth by the law and by the board of directors: a) acts of resignation or judicial or extrajudicial transaction, to end litigations or dependencies, determining limits of value for the delegation of the practice of these acts; b) execution of any legal businesses involving acquisition, sale or encumbrance of assets, as well as assumption of obligations in general, when the value of the transaction exceeds any of the limits below and is lower than two percent (2%) of the capital stock: - for Real Estate Rental - R$120 thousand; - Immobilization Order - R$300 thousand; - Deactivation Order - R$200 thousand; - Biding - limit value of the Price Capture R$650 thousand; - Execution of a contract related to an agreement and commercialization of the utilization of the facilities and telecommunication system of CESP - R$150 thousand; - Agreement in Judicial Proceedings - R$400 thousand, and - for sale of real estate, financings with national and international entities and trips abroad - any value, in compliance with the mandatory submission to the board of directors when the value is equal or higher than two percent (2%) of the capital stock, pursuant to subsection XIV of article 15 of these bylaws. ARTICLE 20 - It is incumbent upon the chief executive officer: I II III IV V VI VII VIII IX oversee all businesses of the Company; be responsible for enforcing any policy approved by the Board of Directors; to represent the company, actively and passively, in court or out of it, constituting for this purpose to receive initial summonses and notifications, observing the provisions in Article 21 herein; to institutionally represent the company in its relations with public authorities, private entities in third parties in general; to call and chair the meetings of the board of executive officers; to coordinate the activities of the board of executive officers; to issue acts and resolutions to consolidate the resolutions of the board of executive officers or resulting from them. to coordinate the company s ordinary management, including the implementation of the guidelines and the compliance with the resolutions taken by the general meeting, by the board of directors and by the joint board of executive officers; to coordinate the activities of the other officers. Representation of the company ARTICLE 21 - The company undertakes before third parties (i) for the signature of two officers, one necessarily the chief executive officer or the officer responsible for the financial area; (ii) for the signature of 15/21

16 one officer and one attorney-in-fact, pursuant to the powers in the respective power of attorney; (iii) for the signature of two attorneys-in-fact, pursuant to the powers in the respective power of attorney; (iv) for the signature of one attorney-in-fact, pursuant to the powers in the respective power of attorney, in this case exclusively for the practice of specific acts. Sole paragraph The powers of attorney shall be granted by a public instrument, with determined validity term, and shall specify the powers granted; only the powers of attorney for the jurisdiction in general shall have an undetermined term. CHAPTER VII FISCAL COUNCIL ARTICLE 22 The company shall have a permanent fiscal council, with the competences and attributions provided for by the law. Sole paragraph The Audit Committee shall, in addition to any other duties assigned by law thereto, review and discuss any proposal for or suggested designation or removal of independent auditors prior to their designation to the Board of Directors, as well as monitor any audit work that may be performed. ARTICLE 23 The fiscal council shall consist of at least three (3) and at most five (5) sitting members, and equal number of deputy members, annually elected by the annual general meeting. Reelection is allowed. Sole paragraph In the event of vacancy or impediment of a sitting member, the respective deputy member shall take over the position. ARTICLE 24 - The fiscal council shall meet, on an ordinary basis, once a month and, on an extraordinary basis, whenever called by any of its members or by the board of executive officers, drawing up the minutes in the company s records. Compensation, Leaves and Loss of Position CHAPTER VIII COMMON RULES TO THE STATUTORY BODIES ARTICLE 25 The members of the statutory bodies shall prove, upon presentation of a resume to the Council of Defense of the Capitals of the State CODEC, that they have professional, technical or administrative capacity, experience compatible with the position, moral capacity and immaculate reputation. Sole paragraph The provisions in this article are only applied to members elected by the controlling shareholder. ARTICLE 26 The members of the statutory bodies shall be invested in their positions by means of the execution of the instrument of investiture drawn up in the respective book of minutes. Paragraph one - The instrument of investiture shall be signed in the thirty (30) days following the election, under penalty of its inefficacy, except for a justification accepted by the body to which the member has been elected, and shall contain the indication of at least one domicile for the receipt of summonses and notifications 16/21

17 of administrative and judicial proceedings, related to acts of its management, being allowed the change of the domicile indicated only by means of a written communication. Paragraph two The investiture shall be subject to to the presentation of the declaration of assets and values, as provided for in the state legislation in force, which shall be annually updated and at the end of the term of office. Paragraph three The investiture of the members of the board of directors and the board of executive officers shall be subject to prior signature of the Management s Statement of Agreement in accordance with the New Level 1 Listing Rules of the BM&FBOVESPA, as well as the applicable legal requirements. ARTICLE 27 Except in the assumption of resignation or dismissal, it is considered automatically postponed the term of office of the members of the statutory bodies, until the election of the respective substitutes. Remuneration and Licenses ARTICLE 28 - The compensation of the members of the statutory bodies shall be determined by the general meeting and there shall be no accumulation of earnings or any advantages due to the substitutions occurring due to vacancy, absences or temporary impediments, pursuant to these bylaws. Sole paragraph It is allowed to the officer, who on the date of the investiture belongs to the staff of employees of the company, to opt for the respective salary. ARTICLE 29 - The officers shall request to the board of directors removal for unpaid leave, as long as for a term not longer than three (3) months, which shall be recorded in minutes. CHAPTER IX FISCAL YEAR AND FINANCIAL STATEMENTS PROFITS, RESERVES AND DISTRIBUTION OF RESULTS ARTICLE 30 - The fiscal year shall coincide with the civil year ended, which the board of executive officers will cause the preparation of the financial statements provided for by the law. Paragraph one - The company shall, starting from the fiscal year beginning on January 1, 2010, to disclose, in English, the financial statements, management report and explanatory notes in full, prepared according to the Brazilian Corporate Law, along with the supplementary explanatory note stating the reconciliation of the year results and shareholders equity ascertained according to the Brazilian generally accepted accounting principles and the IFRS or US GAAP, as the case may be, emphasizing the main differences between the accounting practices employed, and the report of independent auditors. Paragraph two - The disclosure of the financial statements, referred to in Paragraph 4 herein shall take place until, at most, four (4) months following the end of the respective fiscal year. ARTICLE 31 - The net income of the fiscal year, after deductions set forth in law, shall be appropriated as follows: I five percent (5%) shall be applied, before any other deduction, in the formation of the legal reserve, until the limit of twenty percent (20%) of the capital stock; 17/21

18 II III IV V from the balance shall be appropriated an amount for the payment of the priority dividend for the class A preferred shares, as set forth in Article 4, subsection I, letter b; from the balance shall be appropriated an amount for the payment of the mandatory annual dividend for the common and class B preferred shares, corresponding to ten percent (10%) of the total paid-up capital stock represented by these shares, to be apportioned evenly among them; from the balance, until twenty percent (20%) may be appropriated as per the resolution at the general meeting to be invested in the expansion of the activities set forth in Article 2 herein, until the limit of ten percent (10%) of the capital stock; the balance shall be appropriated following the resolution of the general meeting, after deducting the withheld amounts provided for by the law, and, in the event of distribution of the remaining balance for the common and class A and B preferred shares, this distribution shall be conducted in equal conditions. Sole paragraph - The payment of interest as remuneration on own capital may be deducted from the total dividends to be paid, in accordance with the current legislation. ARTICLE 32 The common shares shall be entitled to the minimum mandatory dividend corresponding to twenty five percent (25%) of the net income for the year, after the deductions determined or admitted in law. Paragraph one The class A preferred shares shall be entitled to the non-cumulative annual priority dividend of ten percent (10%), calculated on the value of the paid-up capital stock represented by class A preferred shares to be proportionally divided among them. Paragraph two The class B preferred shares shall be entitled to participate in equal conditions with the common shares in the distribution of the mandatory dividend pursuant to the caput of this Article. Paragraph three The mandatory dividend shall be paid by the company as interest on own capital. Paragraph four - The company may draw up interim or intercalary balance sheets for purposes of distribution of dividends or payment of interest own on capital. CHAPTER X WINDING-UP ARTICLE 33 - The company shall be wound up in the cases provided for by the law, and it shall be incumbent upon the general meeting, if applicable, to determine the winding-up process and to appoint the liquidator, determining its compensation. 18/21

19 CHAPTER XI ARBITRATION COURT ARTICLE 34 - The company, its shareholders, management and the members of the fiscal council undertake to resolve, through arbitration, before the Market Arbitration Panel of the São Paulo Stock Exchange BOVESPA, in accordance with its respective Arbitration Regulation, all and any controversy or disagreement that may arise among them, related to or resulted from, especially, the application, validity, efficiency, interpretation, breach and its effect, of the provisions contained in Law no. 6,404/76, in the bylaws of the company, in the rules issued by the Brazilian Monetary Council, by the Brazilian Central Bank and by the Brazilian Securities and Exchange Commission, in addition to the other rules applicable to the regular business of the capital markets in general, and also those included in the Level 1 Special Corporate Governance Practices of the São Paulo Stock Exchange - BOVESPA, in the Arbitration Regulation of the Market Arbitration Panel and the Instrument of Adoption of the Level 1 Special Corporate Governance Practices. Sole paragraph The resolutions taken by the controlling shareholder of the company, be it by means of vote at the general meeting, be it by decision of the management, aimed at the guiding of the company s businesses, pursuant to Article 238 of Law no. 6,404/76, are understood as a means of exercising unavailable rights and shall not be subject to the arbitration procedures set forth in the caput herein. CHAPTER XII DEFENSE MECHANISM ARTICLE 35 - The company shall ensure to the members of the statutory bodies, by means of its legal department or hired professional, the technical defense in judicial and administrative proceedings, proposed during or after the respective terms of office, by acts related to the exercise of their functions. Paragraph one - The same protection shall, upon specific authorization of the board of directors, be extended to the employees, agents and mandataries of the company. Paragraph two - When the company does not appoint, when due, a professional to assume the defense, the interested person shall hire him on his own account, being entitled to the reimbursement of the respective attorney s fees in a reasonable amount, if he is at the end acquitted or discharged of responsibility. Paragraph three - In addition to ensuring technical defense, the company shall bear court costs, other legal fees of any kind, administrative expenses and posting of bond to guarantee payment of court costs. Paragraph four - In the event of a representative being convicted or held accountable, with a final and unappealable decision, he shall reimburse to the company the amounts effectively disbursed, except when proved he acted in good faith and aimed at the social interest. Paragraph five - The company may hire insurance in favor of the members of the statutory bodies, employees, agents and mandataries, for the coverage of liabilities resulting from the exercise of their functions. CHAPTER XIII 19/21

20 HEAD OF LEGAL SERVICES Article 36 - In view of Article 101 of the Constitution of the State of São Paulo, as regulated by State Decree of January 19, 2011, the hiring of the lawyer to head the Company s legal services department should be preceded by approval of the State Attorney General, according to criteria that consider qualification, competence and professional experience. Article 37 - The Company should arrange for a direct dialog between its lawyers and the State Attorney General or another State Attorney appointed by him, to ensure uniform and coordinated operations, within the limits established by Article 101 of the State Constitution, while observing the duties and rights inherent to the profession. CHAPTER XIV GENERAL PROVISIONS ARTICLE 38 Until April 30 of each year, the company shall publish its table of positions and functions, taken and vacant, related to the previous year, in compliance with the provisions in paragraph 5, of article 115, of the State Constitution. ARTICLE 39 - The company participates in the São Paulo Stock Exchange s Level 1 of Corporate Governance ( Level 1 ) and can only leave this level to register its shares for trading outside Level 1 or due to a corporate restructuring process whereby the resulting company is not classified to hold the same Level of Corporate Governance, upon (i) the prior approval at the General Meeting and (ii) notice to the São Paulo Stock Exchange (BOVESPA) in writing within thirty (30) days prior. ARTICLE 40 - Due to the Company s admission to the Level 1 special corporate governance listing segment of BM&FBOVESPA S.A. Securities, Commodities and Futures Exchange ( BM&FBOVESPA ), the company, its shareholders, management and members of the fiscal council are subject to the provisions set forth in the Level 1 Corporate Governance Listing Rules of the BM&FBOVESPA ( Level 1 Listing Rules ). ARTICLE 41 (Renumbered) - The provisions in (A) paragraphs 3, 4 and 5 of Article 9, (B) Article 34 and (C) herein shall only be amended by favorable vote of more than half of the total capital stock of the company or for the purpose of incorporating possible alterations to the Regulations of the São Paulo Stock Exchange - BOVESPA regarding special corporate governance practice levels. These Bylaws, originally approved at the Extraordinary General Meeting held on October 27, 1977 (Minutes filed at the Board of Trade of the State of São Paulo (JUCESP) under no /77 on November 8, 1977), were consolidated by the Extraordinary General Meeting held on September 16, 1994 (Minutes filed at the Board of Trade of the State of São Paulo (JUCESP) under no /94 on September 27, /21