Corporate Governance

In 2003, COPEL further improved its Corporate Governance practices to ensure corporate growth and to add value to its shareholders.

Our Corporate Governance practices were reinforced through a series of measures. A Policy of Disclosure of Relevant Information and a Policy of Negotiation of Company Stock were implemented, in compliance with CVM Instruction no. 358/02.

The functions of the Audit Committee and the Board of Directors were broadened. In February 2004, the Company's by-laws were amended in order to incorporate and reflect better governance: the number of executive officers was cut down from 8 to 6, while the Board of Directors was granted greater powers. COPEL's strategic plan includes the integration of BOVESPA's (the São Paulo Stock Exchange) Level 1 of Corporate Governance.

To complement its Code of Conduct COPEL has undertaken to adjust its corporate practices to the new regulations issued by the Securities and Exchange Commission (the Sarbanes-Oxley Act) by creating a Permanent Committee for the Disclosure of Relevant Acts and Facts, carrying out studies regarding the adjustment of the Audit Committee and mapping internal controls, among other measures.

So as to enforce the Company's Code of Conduct, a Conduct Evaluation Committee was appointed and began to operate as of April 2004. Composed by 9 members, this Committee is coordinated by a representative of civil society in order to ensure greater transparency to its actions in harmony with the principles of Corporate Governance.

All these measures aim to make corporate decisions more transparent and strategically direct the Company's operations towards the future.

COPEL's reunification

Our corporate restructuring was designed to revert COPEL to a vertically-integrated utility and thus reverse the unbundling carried out by the former administration in 2001, when five wholly-owned subsidiaries were created (Generation, Transmission, distribution, Telecommunications, and Partnerships).

The whole restructuring process was conducted internally with the participation and involvement of the Company staff. This has facilitated the implementation of the decisions made by the new administration and attested that our employees' esprit de corps accounts for a major difference between COPEL and other utilities.

To carry out our corporate restructuring several work groups were constituted to analyze each corporate function, comprising not only those related to the Company's core business (Power Generation, Transmission, and Distribution) but also to the market (Partnerships) and Telecommunications. Support functions were also examined, such as the ones pertaining to Administration, Finance, Accounting, Legal services, Auditing, Ombudsman, Environment, Corporate Secretarial services, Communications, Marketing, Public Relations, and Corporate Planning.

The general coordination of the corporate restructuring was incumbent upon the C.E.O., with the support and participation of the other Executive Officers, as the Company's top management were in total agreement with the purpose of reunifying COPEL.

Work was conducted by the Chief Administrative Officer, who personally coordinated the activities developed by the technical staff, composed by specialists in organizational restructuring.

About 300 employees were directly involved in the work carried out by the restructuring groups and over 3.000 were kept informed about the proposed changes, since responsibility, participatory work, and transparency are some of the distinguishing features of COPEL's current administration. Accordingly, each stage of the restructuring process was widely publicized within the Company through meetings and lectures promoted by the coordinator of the restructuring group, as well as through company newsletters and other corporate media.

As a consequence, COPEL is already operating as a vertically integrated utility, with support functions being carried out centrally and the ones to be performed in a decentralized manner having been normalized. Corporate regulations are being updated accordingly and competencies adjusted to improve the decision-making process in accordance with current needs.

 

Internal Audit

The Company's Internal Audit has an important role in our Corporate Governance and accounts for the improvement of routines, controls, process, systems, and all procedures that might help the Administration at all levels to improve the conduction of the Company's businesses.

Audit work during 2003 focused primarily on the requests by the new Company administration. Work was carried out mostly by a team of auditors from Ernst & Young Auditores Independentes, under an outsourced internal auditing service contract which expired in November 2003.

The restructuring process to unify the Company led COPEL's management to restore its in-house audit staff, a measure that took place still in 2003. The option of outsourcing auditing services was ruled out upon the expiration of the service agreement which had been in effect since 2000.

Our Internal Audit's duties are: to propose the general auditing plan, which must comprise the corporation, its business units and its partnerships; to establish auditing policies and guidelines; and to perform special auditing whenever required by an Executive Officer, or by the Board of Officers.

 

Organizational Structure

Shareholding

In 2003 COPEL's share capital remained at R$ 2.9 billion, represented by 273,655 million shares with no par value distributed as follows: 145,031 million common shares (53.00%), 405 million Class A preferred shares (0.15%), and 128,217 million Class B preferred shares (46.85%).

Shareholding as of December 31st 2003 - Total

 

COPEL's operations

Generation

COPEL's generation business relies on 18 power plants (17 hydroelectric plants and one thermal facility), amounting to 4,550 MW of actual installed capacity. Some features of the Company's generation business in 2003 are shown below:

Power Plant Operation and Maintenance

As of 2003, over 99% of COPEL's installed capacity were controlled by the Generation Operation Center.

COPEL also conducted maintenance work in the step-up substation of the Governor Bento Munhoz da Rocha Neto Hydroelectric Power Plant to enhance the reliability of this facility, which is vital to the operation of Southern Brazil's transmission system.

Expansion of Power Generation

COPEL has conducted feasibility studies on the remaining hydropower potential in the main river basins in Paraná so as to identify opportunities for installation of mid-sized hydropower facilities.

To increase power supply to its own market, COPEL has developed studies both to install new small hydropower facilities and to upgrade old Company plants such as Apucaraninha and Cavernoso, as these projects require low capital expenditures and are economically attractive.

The Ventar Project involves the installation and operation of wind measuring stations and the processing and interpretation of the data they collect. The second stage of this project was implemented during 2003 to assess the wind power potential throughout Paraná and to identify the locations most suitable for the construction of wind power facilities in the State.

Owner's Engineering

In early 2003, the Company started providing owner's engineering to the Fundão-Santa Clara Hydropower Complex. Located on the Jordão River, this project comprises the Fundão and Santa Clara power plants, with a total installed capacity of 240 MW.

 

Transmission

System upgrades

In order to preserve its high standards of service, COPEL upgraded many facilities of its transmission system. Some of the recent improvements were: (i) construction of the Curitiba Industrial District Substation (rated 230 kV) to improve power supply to industrial loads in such an important area of the State, and (ii) completion of the 137-km long Bateias - Jaguariaíva line; and the 44.3-km long Cascavel - Ibema line.

Operation and transmission - Development of the Transmission System.

To increase the efficiency of routines associated with power transmission, COPEL carried out a range of upgrades based on recent technological breakthroughs, namely: (i) w ith the automation of an additional seven substations, COPEL reached the 100% rate of resource expansion in the Transmission System's substations and increased its reliability; (ii) maintenance management and online monitoring systems were developed to enhance the Transmission System performance; (iii) a videowall was set up in the control room of the System Operation Center as a flexible and time-saving tool for monitoring and diagnosing the status of COPEL's system.

COPEL's high level of technological development led the National System Operator (NSO) to engage the Company to carry out upgrades on the remote units of the Cascavel Oeste, Governador Parigot de Souza (GPS), Guaíra, Londrina, Maringá, and Ponta Grossa Norte substations.

 

Distribution

In 2003 COPEL connected 84,111 new customers, 67,094 of which were residential, 2,679 industrial, and 5,377 commercial customers. In December, the Company issued a total of 3,095,498 customer bills, an increase of 2.8% over the 3,011,387 bills issued in December 2002.

Our distribution business reaches 1,112 locations and employs 165,167 kilometers of distribution lines, 1,258,902 structures, 314,738 transformers, 6,629 MVA of installed transforming capacity, 225 substations, 1,420 MVA of installed substation capacity, and 143 automated substations. The Company serves 392 municipalities in Paraná and also the town of Porto União, in the State of Santa Catarina.

Quality of Supply

The main indicators of power supply quality are DEC (outage duration by consumer/year) and FEC (outage frequency by consumer/year). In 2003, COPEL had a DEC figure of 18h53min (against 16h20min in 2002) and a FEC figure of 16.54 outages (against 15.70 in 2002).

2003 Flowchart (in MWh)

Telecommunications

COPEL renders telecommunications services to all telecommunications operators in the State, and to several ISPs, state-owned and private corporations, thus placing Paraná at the forefront of the universalization of telecommunications. In 2003, these services generated around R$ 32 million in revenues, making their operation both profitable and self-sustainable. COPEL has contributed to lower prices and to improve the quality of the telecommunications services offered in Paraná, two factors that are essential to attract investments and create new jobs in the State.

The Company added 200 kilometers of fiber optics to its transmission network, another 14 towns to the list of 60 locations already served, and 600 kilometers of fiber optics to its urban access grids.

COPEL was acknowledged by Anuário Telecom magazine as Outstanding Company in the segment of Data Communications Services.

The Company had in Paraná, as of December 2003, a total of 3,300 kilometers of fiber optics, of which 2,700 were optical ground wires (OPGW) for overhead transmission lines, and 630 were self-supported optic cables (ADSS). COPEL's urban access grids, made up of self-supported optic cables on top of the distribution grids, amounted to 1,700 kilometers.

In sync with the governmental policies, COPEL has contributed to reducing the digital divide in Paraná by implementing a high-speed network which interconnected the State universities and made possible the preliminary launch, at the State's Institute of Education, of the Paraná Digital Program, to be extended to all State schools. In 2003, COPEL invested R$ 48 million to expand this network in order to meet the requirements of the first stage of the program.

COPEL's Fiber Optics Ring

Partnerships

COPEL's portfolio comprises interests in companies and consortia operating in different sectors, such as electricity, sanitation, services, gas supply, and telecommunications. The Company is currently reviewing its portfolio so as to concentrate investments on those interests which are aligned with its core business and its strategic frame of reference.

Projects in Operation

Power Sector

COPEL currently holds four partnerships in independent power producers in operation, constituted as special purpose companies (SPCs), amounting to a total of 637 MW of installed capacity, namely:

•  Dona Francisca Hydroelectric Power Plant: COPEL has a stake of 23.03% in Dona Francisca Energética S.A. (DFESA). The other partners are Gerdau S.A. (51.82%), Centrais Elétricas de Santa Catarina S.A. - CELESC (23.03%), and Desenvix (2.12%). DFESA is a corporation constituted in August 1998 to implement and run the Dona Francisca Hydroelectric Power Plant, located in the State of Rio Grande do Sul, whose concession originally belonged to Companhia Estadual de Energia Elétrica - CEEE. With an installed capacity of 125 MW and assured power of 80 MW/year, the facility entered commercial operation in February 2001.
•  Palmas Wind Power Plant (Centrais Eólicas do Paraná Ltda.): Resulting from a partnership between COPEL (30%) and Wobber Windpower Ind. e Com. Ltda. (70%), this plant has been operational since February 1999. It is composed of five 500 kW wind power generators, totaling 2.5 MW of installed capacity, located in the Horizonte area, at a distance of around 30 kilometers from the town of Palmas. The annual power yielded by this facility is estimated at 4,800 MWh.
•  Foz do Chopim Hydroelectric Power Plant: To exploit the remaining hydraulic potential of the Júlio de Mesquita Filho Hydroelectric Power Plant, on the Chopim River, COPEL (with a 35.77% interest) and DM Planejamento e Participações Ltda.( with a 64.23% interest) set up Foz do Chopim Energética Ltda. on January 7 th 1999. The facility has two generating units rated 14.8 MVA each, operating at a power factor of 0.92, for a total of 29.70 MW of installed capacity and 21.46 MWh/yr of assured power (as set by Agência Nacional de Energia Elétrica - ANEEL). In October 2003, the plant's operation license was renewed until October 2007.
•  Araucária Thermal Power Plant (UEG): The Araucária Thermal Power Plant is located in the town of Araucária, within Curitiba's metropolitan area, features 484.7 MW of installed capacity and runs on gas from Bolivia. The shareholders of this SPC are COPEL (with a 20% interest), El Paso Energy International do Brasil Ltda. (60%), and Petrobrás (20%). In May 2000, COPEL signed a power capacity purchase agreement with the Araucária Thermal Power Plant. In January 2003, the Company started renegotiating this contract. However, negotiations broke down as UEG Araucária notified COPEL of its appeal for arbitration to the Chamber of International Trade in Paris. To safeguard its rights, COPEL obtained from a Brazilian court of law an injunction determining that Araucária should not carry on the arbitration procedures. Despite this ruling, confirmed by a judgement issued on March 16 th 2004, COPEL was required to attend on February 20 th 2004 the first hearing of the arbitration process before the Chamber of International Trade, which on the occasion scheduled another hearing for April 15 th 2004.

 

Gas Sector

Compagás - Compagás, a mixed capital utility, holds the concession to operate in piped natural gas distribution and commercialization in the State of Paraná. The State concession was granted to Compagás for 30 years starting on July 6 th 1994, and the company started operating commercially on October 1 st 1998. Its shareholders are COPEL (51.0%), Petrobras Gás S.A. - Gaspetro (24.5%), and Dutopar Participações Ltda. (24.5%). The concession provides for the exploitation by COMPAGÁS of piped gas supply and other related and similar operations, with exclusive distribution rights, to meet the needs of industrial, commercial, residential, institutional, transportation, and other customers requiring gas either as raw material or for power generation and other uses made possible by new technological developments. At the end of 2003, the company recorded 100 customers in the Curitiba Metropolitan Area and Ponta Grossa, relying on 409 km of distribution pipelines in operation. During 2003, COMPAGÁS recorded an average sales volume of 504,807 cubic meters of gas a day, out of which 454,822 m³/day were supplied to industrial customers, 46,769 m³/day to vehicular gas stations, and the remainder (3,216m³/day) to residential, commercial, and thermal power generation customers.

 

Telecommunications Sector

•  Sercomtel S/A Telecomunicações - Sercomtel is a corporation with headquarters in the city of Londrina, in the State of Paraná. Its share capital totals R$ 242.8 million, distributed among shareholders as follows: COPEL (45% of common shares and 45% of preferred shares), City of Londrina (55% of common shares and 31.8% of preferred shares), and Banestado S.A. Corretora (23.2% of preferred shares). Sercomtel offers fixed telephone services in the Londrina area, with 160,787 installed phone lines, 11 telephone stations, 2 public switches, and 45 remote stations, being the only Brazilian operator to have reached a 100% digital telephone network. Sercomtel's ratio of phone lines per 100 inhabitants is currently 30.05. It also has 4,034 payphones operating with inductive cards. The company is now engaged in expanding its optic fiber network. In December 1997, Sercomtel obtained ISO 9002 certification. In December 2001, it became the first telecom operator in Brazil to be certified by ANEEL as having met in advance the universalization goals set for December 2003. Such an accomplishment allowed Sercomtel to expand its operations to other regions, a move already under way.
•  Sercomtel Celular S/A - Sercomtel's share capital, amounting to R$ 40.8 million, belongs to the City of Londrina (with a stake of 55%) and to COPEL (with a stake of 45%). In May 1996, Sercomtel Celular became the first Latin American operator to offer TDMA digital cell phone services. The company currently relies on 39 TDMA radio stations to cover 100% of Londrina's urban and rural areas. In December 2003 Sercomtel Celular inaugurated its GSM system in area code 43, being the first utility to offer such a service. Sercomtel has 87,327 customers using TDMA technology and 18,397 customers using GSM technology, representing a ratio of 15.07 phone lines for each group of 100 inhabitants.
•  Onda - Onda Provedor de Serviços S.A. is an ISP owned by COPEL, with a 24.5% stake, Sercomtel, with 24.5%, Lanis, with 25.5%, and América Negócios, with 25.5%. It has enjoyed from its inception the competitive advantages of high speed and high reliability on account of the optic fiber network COPEL has implemented throughout the State for voice, image, and data transmission, in addition to ATM and VPDN. Onda's connection to the Internet has 8 Mbps of bandwidth, the fastest in Paraná. In the fourth quarter of 2003, Onda restated its corporate mission, which now reads: "To provide high safety levels for our customers' data so as to ensure reliability and continuity for their businesses." In addition, Onda conducted other activities involving (1) operational break-even, (2) reduction of communication costs, and (3) studies regarding ASP (Application Service Provider) solutions for the SOHO (small and home offices) and corporate markets with focus on security and business continuity, having launched the first Everest ASP Onda software.

 

Sanitation Sector

•  Dominó Holding S/A - Dominó Holding S/A is owned by COPEL (with a 15% interest), Construtora Andrade Gutierrez S/A (27.5%), Opportunity Daleth S/A (27.5%), and Sanedo Ltda - Grupo Vivendi (30%), and holds 39.7% of the voting stock of SANEPAR (Paraná's Sanitation Company), a mixed capital company in which the State of Paraná has a controlling 60% interest and municipalities hold the remaining 0.29%. Sanepar was constituted on January 23 rd 1963 to provide basic sanitation services throughout the State of Paraná. Sanepar currently provides water collection, treatment, and supply, and sewage disposal in 342 out of the 399 Paraná municipalities. Sanepar provides treated water to 7.9 million (98.4% of Paraná's urban population) and sewage disposal services to 3.6 million people (44.6% of the State's urban population). The Company plans to invest heavily in sanitation to extend sewage disposal to 80% of the State's population until 2010, which is generally considered an excellent level of service under Brazilian standards.

 

Services Sector

•  Braspower: Braspower was set up under a partnership between COPEL (with a 49% interest) and Engevix Engenharia (51%) to offer the international market (Southeast Asia and China in particular) technologies developed in Brazil for power and infrastructure projects.
•  Escoelectric: Escoelectric is an energy service company (ESCO) constituted in December 1998 to provide specific and competitive multidisciplinary services to meet clients' needs with flexibility, quality, punctuality, and the best technology. It seeks to offer both technical and economic advantages and its organizational structure is composed of business divisions focusing on power management, operation and maintenance, commissioning and testing, and other services. Its shareholders are COPEL (with a 40% interest) and Lactec (60%).
•  COPEL Amec - COPEL Amec's shareholders are COPEL (with a 48% interest), Amec (47.5%), and Lactec (4.5%).Located in Curitiba, the company operates mainly on the Brazilian market by offering engineering services from planning and feasibility studies for infrastructure projects to EPC (Engineering, Procurement, and Construction) and Owner's Engineering, as well as technical and environmental projects and consulting. On August 27 th 2003, COPEL sent formal letters to its partners Lactec and Amec whereby it proposed to end the partnership. As of the date of this report, no formal reply had been received by COPEL.

 

Projects Under Way

Power Sector

COPEL participates in three hydroelectric power generation projects currently under way, whose concessions have been obtained through public bidding conducted by ANEEL. This participation should make available to COPEL an additional 1,450 MW of installed capacity in the forthcoming years.

•  Campos Novos Hydroelectric Power Plant: At public auction 01/98 held by ANEEL on August 4 th 1998, Campos Novos Energia S.A. (ENERCAN) won the concession for the implementation and exploitation of the Campos Novos hydropower project, located on the Canoas River, in an area spreading across the towns of Campos Novos, Abdon Batista, Celso Ramos, and Anita Garibaldi, in the State of Santa Catarina. On September 30 th 1999, under a Federal Government decree, ENERCAN was granted a power generation concession (Concession Agreement 43/2000) with a renewable 35-year term. ENERCAN is a special purpose corporation constituted to build and operate the Campos Novos Hydroelectric Facility and its related transmission system. The facility will have 880 MW of installed capacity and 377.9 MW/year of assured power. It is scheduled to enter commercial operation in February 2006. ENERCAN is owned by CPFL Geração de Energia S.A. -CPFL-G (with a 48.72% interest), COPEL Participações S.A. (16.73%), Companhia Brasileira de Alumínio - CBA (16,00%), Companhia Níquel Tocantins - CNT (10.00%), Companhia Estadual de Energia Elétrica - CEEE (6.51%), and Centrais Elétricas de Santa Catarina S.A. - CELESC (2.03%). A loan agreement with BNDES has already been approved for R$ 620 million, and a US$ 75 million agreement is under negotiation with the IDB. In November 2003, COPEL signed a letter of intent to sell all its common shares (16.73%) to ENERCAN's current partners CBA and CNT. This transaction was submitted to ANEEL and approved under ANEEL's Resolution no. 53, dated February 17 th 2004. COPEL received for its stake in ENERCAN a down payment of R$ 17.7 million in November 2003 and a final payment of R$ 73.5 million on February 27 th 2004.
•  São Jerônimo - The São Jerônimo project comprises a future hydropower development on the Tibagi River, in the State of Paraná, located between the towns of Tamarana and São Jerônimo da Serra, having two generating units rated 165.5 MW each, for a total of 331 MW of installed capacity, and minimum assured power of 165.5 MW/yr. The project is being implemented under a concession for the use of public property won by the São Jerônimo consortium at ANEEL Auction 002/01 on October 3 rd 2001. COPEL has a 21% stake in São Jerônimo, which might increase significantly on account of a restructuring the consortium is undergoing due to the poor financial situation of one of its partners. The estimated expenditures on the plant amount to R$ 510 million and should be met by means of a project finance.
•  Santa Clara/Fundão - The Fundão-Santa Clara Power Complex is composed of two hydropower facilities on the Jordão River, in the State of Paraná: the Santa Clara Hydroelectric Power Plant and the Fundão Hydroelectric Power Plant, with a joint installed capacity of 238 MW (total assured power of 135.40 MW/year). The physical layout of the facilities includes another two small hydropower units with additional capacity of 5.9 MW. The concession was auctioned by ANEEL (Auction 002/2001) and awarded on October 25 th 2001 to Elejor - Centrais Elétricas do Rio Jordão S.A., a special purpose company constituted to implement the project and run it for 35 years, with an option to extend it for another 35 years as set forth by the ANEEL concession agreement. Elejor's common shares are held by COPEL (40%), Construtora Paineira (30%), and Triunfo Participações (30%). Eletrobrás holds all preferred shares. Total projected capital expenditures amount to R$ 458 million, of which R$ 270 million should come from a BNDES loan under negotiation. Commercial generation at the Santa Clara and the Fundão facilities is scheduled to begin in March 2005 and July 2006, respectively. On December 18 th 2003, COPEL signed a stock purchase agreement with Triunfo Participações to acquire Trinfo's 30% interest in ELEJOR, thus increasing the Company's stake from 40% to 70% of the plant's common shares. Upon signature, COPEL made a down payment of R$ 7.4 million. According to the agreement, this transaction shall be effective upon approval by ANEEL and by the Council for Economic Law (CADE). COPEL shall then make a final R$ 30 million payment and make available to Triunfo Participações 16,005,668 kWh. The transaction also involves R$ 300 thousand for the transfer of equipment (cranes) under evaluation by COPEL.

 

Projects Under Study

In association with private-sector companies, COPEL has conducted several technical, economic, and environmental feasibility studies comprising 11 small hydropower projects held by different consortia with a joint installed capacity of about 160 MW.

 

Structural Areas

In 2003 COPEL focused intensely on the activities of Auditing, Communications and Marketing, Information Technology, Service Logistics, Research & Development, and Corporate Security, which pervade all the Company's businesses and ensure permanent identity, synergy, and compliance with the Company's strategic frame of reference.

Communications and Marketing Policy

The Marketing Coordination accounts for the systematic interaction between COPEL and its external and internal publics and designs the Company's advertising and public relations policies. It reports to the Chief Executive Officer and comprises eight areas: (i)Marketing planning and control; (ii) Customer Communications; (iii) Marketing research and information; (iv) Endomarketing; (v) Cultural marketing; (vi) Event management; (vii) Journalism; and (viii) Management support.

In 2003, COPEL was often in the spotlight because of its internal restructuring, the reestablishment of its economic-financial balance, the strategic reorientation of its policy to meet the State's social demands, and the debates over the new rules to be enacted for the Brazilian power industry. Thus in 2003 our Journalism staff had an active, permanent and outstanding performance in fulfilling its duties within the sector.

Cultural marketing also had a marked performance in 2003. One of the most important cultural marketing activities carried out under the Rouanet Law tax breaks was the "Iluminando Gerações" project, a traveling theater set up on a Company truck to perform at schools. In addition, the Energy Museum, in Curitiba, was visited by around 17 thousand schoolchildren.

In 2003, the endomarketing sector was set up to introduce a new concept in terms of relationship between the Administration and the employees and also to familiarize the employees' relatives with the reality of the Company.

The endomarketing function aims to spread institutional ideas whereby work relationships are tightened and strengthened. One of its primary attributions is to foster greater integration among the employees and between the employees and the company management, as well as to coordinate internal communications processes. In line with the corporate strategic frame of reference, the organizational culture, and the institutional actions, endomarketing helps the Company to achieve its goals and to attain greater productivity.

In September 2003, the "COPEL - Glad to Meet You" Program was implemented to improve the integration and personal relations between our board of officers and the corporate staff. Under this program the C.E.O. and the other officers went on tours of Company facilities to meet with employees. Breakfast meetings, special appointments for employees with the Company management, and guided tours of COPEL's facilities for employees' relatives also took place throughout the year. This program was also offered to the attendees of the Program for Integration of New Employees.

For 2004, two new programs were established. The first is the "COPEL Within Reach" Program ("COPEL sem Distâncias"), which will be a new version of the "COPEL - Glad to Meet You" Program, to bridge physical and hierarchical gaps, reduce diversity and stress the importance of each employee for the Company. The other is the "Energy of Our Talents" Program, conceived to be a management tool to acknowledge and foster the development of employees' natural and professional skills. This program shall recognize people with outstanding performance in the areas of technology, arts and culture, and other fields of interest.

The marketing information sector coordinated the National Survey of Residential Customer Satisfaction, promoted by the Brazilian Association of Power Distribution Utilities (ABRADEE) and conducted with the participation of 44 companies of the Brazilian power sector. It also coordinated a similar survey of South American utilities conducted by Comisión de Integración Energética Regional - CIER.

More than any other company in the State, COPEL interacts monthly with over 3 million customers through their electricity bills. Its Call Center, which records about 600 thousand incoming calls a month, is reopening branches throughout the State to improve COPEL's relations with its customers.

By means of these actions, COPEL has sought to accomplish its marketing mission of understanding and better serving its customers. For 2004, COPEL's Marketing Coordination plans to develop an intranet portal and a news office, to update, complement, and organize its photo collection, and to digitize its internal communications archives.

 

Information Technology

As part of the process to reunify COPEL, the Information Technology functions have been concentrated into a single Superintendency charged with:

•  integrating IT into the Company's strategic level by adjusting it to meet COPEL's higher needs with focus on projects that add greater value to the corporate strategies; and
•  updating IT with modern management tools and reviewing its procedures, personnel training, and methodologies for management of change.

Under these guidelines, priority has been given to projects with major impact on the Company's strategies. Thus IT efforts were initially focused on: (i) implementing corporate management and customer management systems; (ii) fostering the use of free software; (iii) expanding the application of geoprocessing technology; (iv) taking advantage of mobile computing; (v) speeding up the process of Company purchases; and (vii) implementing systems to support engineering and commercial routines, among others.

Corporate Management (ERP) and Customer Management Systems

These are the most important IT projects as they are essential to the corporate strategies, which emphasize the pursuit of operational efficiency. Their purpose is to replace current systems so as to allow the Company to improve its internal procedures and to consolidate its reputation for excellence in the Brazilian power sector.

Transformation of IT procedures

This project aims to improve the way the IT Superintendency operates and to increase IT efficiency and effectiveness by adopting procedures acknowledged worldwide as benchmarks. The main results of this work can be summarized as: effective demand-management, whose goal is to adjust the IT projects to the corporate strategies by stressing work by businesses and processes; and reinforcement of the philosophy of Management of Projects and by Projects to ensure quality results.

Free Software

In order to test new technologies, COPEL has appointed seven work/project groups to validate free software. These groups evaluate the use of open source software in all platforms - from desktops to mainframes.

Mobile Computing

With the purpose of increasing productivity and cutting costs while enhancing operational reliability, COPEL has consolidated the use of portable equipment (PDAs and Pen Tablets) on the field, which makes possible two-way messaging between electricians and Operation Centers for the performance of services in real time.

Electronic Bidding

By implementing an electronic or live bidding, COPEL's Purchase System - under the responsibility of COPEL's Logistics of Supply Superintendency -- has become a national reference. The automatic generation of public bidding notices on the COPEL website (used to communicate with suppliers), together with added functionality to support the bidding sessions, the integration of different relevant systems, the training of electronic or live bidding operators, and a partnership with Banco do Brasil have ensured satisfaction for all participants and provided annual savings of up R$ 6 million to COPEL.

Environment

In 2003 COPEL started to develop systems for Environmental Education and Management of Master Environmental Plans and Permanent Protection Areas. These systems employ geo-processing technology and integrate COPEL's strategic plan for setting up an Environmental Management System (EMS). The organization and structure of the EM systems were acknowledged worldwide as COPEL was awarded the Special Achievement in Geographic Information Systems at the United States' Environmental Systems Research Institute (ESRI) User Conference, in 2003.

Automation of Substations

By the end of 2003 COPEL had 169 automated distribution substations and switching stations at 34.5/13.8 kV (64% of the total), which represents 85.8% of all power lines supplying the Company's customers. Information Technology helped the Company to achieve an index of 100% of automated transmission substations.

 

Service Logistics

Real Estate Management

In 2003 COPEL established a Real Estate Management Unit charged with managing the Company's real estate to ensure that (i) all its property is duly registered and with the legal papers in order; and (ii) property taxes are compatible with its market value. This unit also helps solve problems involving denunciation of new distribution works (embargos de novas obras de distribuição) and purchases land for future buildings.

Fleet Management

Management of company vehicles has been centralized under a new unit responsible for proposing vehicle utilization, maintenance and renovation policies. Some projects are worth mentioning:

•  Electronic record of vehicle utilization - this project under way aims to replace the current manual record by an electronic one.
•  Fleet adjustment: two subprojects are being developed to adjust load compartments in middle size light trucks with or without rotating ladders in order to optimize vehicle utilization by replacing conventional bodies by especially designed equipment (body and load compartment adapted to the requirements of the service to be provided).
•  Repair Truck: COPEL has implemented a repair truck to fix hydraulic equipment in its vehicles spread throughout the State so as to ensure fleet operational reliability and availability.

Research and Development

Under Law 9,991/2000, COPEL is required to invest 1% of its annual Net Operating Revenues in Research & Development. Such investment is distributed as follows: 0.5% in the Energy Efficiency Program (EEP), which comprises power saving, energy diagnostics, public lighting bulb replacement and other programs concerning the rational use of electricity; 0.25% in the National Scientific and Technological Development Fund, which accepts projects for the development of the power sector and is managed by FINEP; and 0.25% in its own R&D program.

The distribution area recorded 20 R&D projects, in which R$ 6,775,975.15 were invested in 2002/2003. In this same period, three transmission projects were under way, all of them developed by Lactec, accounting for R$ 581,749.84 in expenditures. Other six studies are being reviewed by ANEEL. COPEL also carried out 14 power generation R&D projects with an overall expenditure of R$ 4.2 million.

Among these, two projects involving the use of hydrogen for power and heat generation through fuel cells stand out: the study on Fuel Cell and Natural Gas Use in Power Generation, to assess the feasibility of this technology to generate power and heat; and the study on Power Generation from Ethanol: Fuel Cell Integrated Reformer, to obtain hydrogen from ethanol (a renewable fuel, whose most effective production technology is held by Brazil), in lieu of fossil fuels. This research could make the use of fuel cells for power generation feasible in Brazil.

COPEL also carries out R&D through LACTEC and CETIS, two non-profit organizations established to foster self-sustained economic, scientific, technological, and social development, help protect the environment and fight poverty. Both organizations carry out R&D either individually or in association with other public or private institutions.

 

Corporate Security

In 2003 COPEL created a Corporate Security Coordination reporting to its Chief Corporate Management Officer. This unit is responsible for planning, coordinating and monitoring all activities in connection with the security of Company assets and providing assistance to the Board of Officers concerning corporate security issues.