DISCLOSURE POLICY MATERIAL INFORMATION AND INSIDER CONFIDENTIALITY GUIDELINES

I – DEFINITIONS AND APPLICATION

1.                  The definitions below refer to terms as they are referred to in their proper noun form:  

Stock Markets – Refers to the São Paulo Stock Exchange - Bolsa de Valores de São Paulo – Bovespa and all other securities exchanges in which the Company maintains traded securities.   

Company – Refers to Espírito Santo Centrais Elétricas S/A -ESCELSA

Compliance Officer – An officer of the Company designated to monitor Disclosure Policy compliance. 

CVM – Refers to the Brazilian Securities Exchange Commission - Comissão de Valores Mobiliários.

Investor Relations Director – Refers to the Director of the Company designated to execute related functions as per CVM regulations.

Material Information – Refers to decisions made by controlling shareholders, General Shareholders Meetings or management of the Company, events or initiatives of administrative, technical, commercial or financial in nature that impact or that are related to the Company’s business activities, which may have a reasonable impact on:  

(i)                   market prices of the Company’s traded securities;

(ii)                 an investor’s decision to buy, sell or maintain a position in the Company’s securities; or

(iii)                a decision on the part of investors to exercise rights attributed to the Company’s securities.  An exemplary summary of what constitutes material information is outlined in Article 2 of CVM Instruction 358/2002.   

Insider – Refers to an individual that is privy to Material information prior to its disclosure to the Stock Exchanges, CVM and General Public.

Related Parties – Refers to the Company, its controlling shareholders (direct or indirect), members of management, members of the board of directors, audit committee and all other consulting bodies created as per the Company’s by-laws, managers and employees, subsidiaries and/or subsidiaries under common control and their respective controlling shareholders, members of management and consulting bodies, service providers and other professionals (particularly financial institutions hired by the Company), that have agreed to the terms of the Disclosure Policy and are bound by the terms and conditions described herein.

Disclosure Policy – Refers to the Disclosure Policy for Material Information and the Insider Guidelines.

Terms and Conditions Agreement – Refers to the formal agreement signed by Related Parties and recognized by the Company as confirmation that such parties confirm their knowledge and understanding of the terms and conditions of the Disclosure Policy and assume responsibility to adhere to its guidelines and seek to ensure compliance by individuals within their realm of responsibility, including subsidiaries, affiliates or jointly-controlled companies, spouses, dependents, both direct and indirect.

Securities – Refer to shares, debentures, bonds, subscription rights, promissory notes issued by the Company, certificates of deposit of such Securities, futures contracts and derivative instruments of any such Securities.    

2.                  Individuals that are obligated to sign the Terms and Conditions Agreement and thereby become Related Parties for the purposes defined herein include: the Controlling shareholders, members of management, members of the board of directors, audit committee and all other consulting bodies created as per the Company’s by-laws, managers and employees of the Company that have frequent Access to Material Information and other parties that the Company deems necessary.

3.      The Company will maintain at its headquarters an updated list of the Related Parties with corresponding profiles of such individuals, including position or function, residential address and Federal Registration Number (Cadastro Nacional de Pessoas Físicas and/or Pessoas Jurídicas).

II – OBJECTIVE

 4.      The objective of this Disclosure Policy is to set forth the rules which will govern the duties of the Investor Relations Director and the other Related Parties with respect to the disclosure of Material Information, including the preservation of confidentiality of such information until properly and amply disclosed to the public.  The Disclosure Policy was prepared as per the guidelines set forth by capital markets regulations.

5.    Any questions related to the Disclosure Policy, applicable CVM regulations and/or whether certain information must be publicly disclosed should be addressed to the Compliance Officer appointed by the Company’s Management.  

III - DUTIES AND RESPONSIBILITIES

6.      The responsibilities of the Company’s Investor Relations Director are:

(i)         to disclose Material Information related to the Company’s business activities, or as such considered relevant, to the CVM and Stock Markets, immediately upon the substantiation of such information;

(ii)        to seek to amply disclose the Material Information simultaneously to the Stock Markets and to all markets where the Company’ securities are traded, as well as the general public.

7.      Material Information is to be communicated to the CVM and the Stock Exchanges in writing, through a clear and precise description of the data and information involved, and wherever possible, is to include numerical data.      

8.     Material information is to be disclosed to the general public through an announcement published in newspapers previously designated by the Company for this purpose.  The announcement may be a summarized version of the Material Information, as long as it is accompanied by the Internet address where the complete version of the Material Information may be located, in the same format as was provided to the CVM and Stock Markets. 

9.      In the event that Material Information is disclosed through other means, including to the media, or in meetings with investors, analysts or select groups either in Brazil or abroad, such Material Information will be disclosed simultaneously to the CVM, Stock Exchanges and general public.

10.      Any Related Party that gains knowledge of information that may be considered to be Material in nature should immediately bring such information to the attention of the Investor Relations Director.  

11.      Related Parties that are not Insiders who become privy to Material Information that has been neglected to be disclosed by the Company must communicate such information to the CVM.

12.       To the extent possible, all Material Information is to be disclosed either prior to or following the close of trading hours of the Stock Markets.  In the event that trading hours of the respective markets do not coincide, disclosure will follow the hours of the Brazilian Stock Markets.  

IV - EXCEPTIONS TO IMMEDIATE DISCLOSURE OF MATERIAL INFORMATION

13.      Material Information may be withheld from the public if it is deemed that its disclosure may subject the Company to risk or damage.  

14.     The Company may elect to submit certain Material Information to review by the CVM regarding its disclosure to the public if it is deemed that its disclosure may subject the Company to risk or damage.

15.       In the event that Material Information becomes available to individuals other than (i) Insiders; and/or (ii) those that chose to maintain such Material Information confidential, or in the event that the Company’s securities experience significant price or trading volume volatility, the Investor Relations Director is to take all means necessary to disclose such Material Information to the CVM, Stock Exchanges and general public.    

V - INSIDER RESPONSIBILITY FOR MATERIAL INFORMATION

16.      Related Parties that are Insiders are to preserve the confidentiality of undisclosed Material Information until such information has been disclosed to the general public, ensuring that individuals under their direct responsibility maintain such information in the same confidentiality.  

17.       Material Information is to be considered undisclosed until it is made public through the official channels used by the Company for disclosure of Material Information as per applicable regulations.   

18.      Related Parties who are Insiders are not to discuss Material Information in public places. Such Insiders should only discuss matters related to Material Information with outsiders on a need-to-know basis.

19.       Any violation observed with respect to this Disclosure Policy should be communicated immediately to the Company’s Compliance Officer.

20.      In the event that a Related Party verifies that Material Information has become available to individuals other than (i) Insiders; and/or (ii) those that chose to maintain such Material Information confidential, or in the event that the Company’s securities experience significant price or trading volume volatility, such fact must be communicated to the Compliance Officer.

VI – LIABILITY

21.    Related Parties that violate any portion of this Disclosure Policy will be held liable for all subsequent damages to the Company and/or to other Related Parties in the event that the damage is proven to be related to such violation.